Schlumberger First-Quarter Profit Jumps 63%

Oilfield services provider Schlumberger said Friday its profit spiked 63% in the first quarter, boosted by strong revenue growth in international markets and continued high demand for its seismic services.

The company's shares rose $2.31, or more than 3%, to $76.63 in early trading on the New York Stock Exchange.

Net income rose to $1.18 billion, or 96 cents a share, from $722.5 million, or 59 cents a share, a year ago.

Operating revenue jumped to $5.46 billion from $4.24 billion a year ago and $5.35 billion in the fourth quarter of 2006. Oilfield services revenue of $4.76 billion increased 28% year-over-year, while revenue at the company's WesternGeco seismic arm rose 33% to $706 million.

On average, analysts surveyed by Thomson Financial were looking for profit of 91 cents a share on revenue of $5.4 billion.

In a statement, Chairman and Chief Executive Andrew Gould said results were driven by accelerated international activity in Europe, Africa, the Middle East and Asia. In North America, moderate seasonal growth in Canada and strong exploration activity in Alaska partly offset slowing onshore activity in the United States and a change in the types of services used on the U.S. Gulf Coast.

The company also reported strong revenue in Latin America as negotiations with the Venezuelan national oil company for certain rig management and engineering contracts were completed, allowing Schlumberger to recognize previously deferred revenue.

The company said it benefited from a drop in natural gas storage levels related to the late winter cold snap in North America, but warned that new equipment capacity, particularly in pressure pumping, will limit service pricing power to some extent.

Demand remained strong for its seismic services, as the increasingly difficult task of finding and gaining access to new reservoirs takes oil companies into deeper waters and rugged, more complex terrain.

"However, in the second quarter, a number of scheduled dry dock inspections and vessel transits will momentarily slow WesternGeco growth," said Gould, noting the commissioning of a new seismic vessel in May will help business.

Schlumberger credited the late 2006 OPEC supply cuts, coupled with stronger demand and continuing weak non-OPEC supply performance, for causing a significant rebound in oil prices.

"We continue to believe the most fragile element of current supply projections is the age of the existing production base and the consequent failure of current activity levels to slow decline rates," Gould said. "This environment, coupled with delays in the increasingly complex projects that operators are undertaking, means the supply response to create adequate levels of spare production will take longer than we originally anticipated."