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Schlumberger Profit Falls Short, Unveils $8B Buyback

Schlumberger, the world's largest oilfield services company, posted a first-quarter profit that fell short of expectations Friday, but a positive outlook boosted shares more than 5 percent.

Schlumberger
Schlumberger

After several years of robust growth, Schlumberger and peers like Halliburton have seen slower growth in North America as overcapacity in markets like pressure pumping weighed on prices.

But on a conference call with analysts, Schlumberger Chief Executive Andrew Gould forecast significant growth, especially in North America, in the second half of the year, and said he was "very comfortable" with Wall Street estimates for 2008.

"There was a question about the company's international margin progression in the first quarter," said Kurt Hallead, an analyst with RBC Capital Markets. "But his (Gould's) comments about the full-year outlook helped put it to rest."

Earlier, Schlumberger reported net income increased to $1.34 billion, or $1.09 per share, from $1.18 billion, or 96 cents per share, a year earlier.

Excluding discontinued operations, profit was $1.06, below the Reuters Estimates consensus figure of $1.12 per share.

The shortfall was due to a drop in income in its WesternGeco seismic business, stormy weather in the North Sea and higher start-up costs from a project in Mexico.

For the full year, analysts, on average, expect Schlumberger to report a profit of $4.81 per share, according to Reuters Estimates.

Revenue in the latest quarter was $6.29 billion, up from $5.46 billion a year earlier.

North American revenue rose 3 percent to $1.42 billion, while pretax operating income fell 16 percent to $363 million.

In Europe, Russia and Africa, revenue rose 24 percent to $1.9 billion, while pretax operating income climbed 16 percent to $500 million.

First-quarter revenue in the company's WesternGeco seismic unit was $676 million, down 4 percent from a year earlier. Pretax operating income fell 26 percent to $196 million.

Looking ahead to the second quarter, Gould said he expects "a number" of expenses at WesternGeco in the second quarter related to dry-docking and vessel transit.

"I've tried to convey that seismic is going to be lumpy," Gould said on the call.

But the company repeated its view that current levels of spending on exploration and production are insufficient to stem the decline of worldwide energy reserves.

Schlumberger also said its board of directors approved a new $8 billion stock buyback plan on Thursday.

Shares of Schlumberger rose $5 to $100.30 on the New York Stock Exchange.

So far this year the stock is down about 3 percent, compared with a 25 percent gain in the Philadelphia Stock Exchange index of oil services companies.