Bloomberg News

Schlumberger Profit Misses Estimates on Mideast Income Drop

October 21, 2011

(Updates with closing share price in sixth paragraph.)

Oct. 21 (Bloomberg) -- Schlumberger Ltd., the world’s largest oilfield-services provider, reported third-quarter profit that failed to meet analysts’ estimates as income from the Middle East and Asia declined.

Net income fell to $1.3 billion, or 96 cents a share, from $1.73 billion, or $1.38, a year earlier, Houston- and Paris- based Schlumberger said in a statement today. Last year’s quarterly result included one-time gains from Schlumberger’s purchase of Smith International Inc.

Excluding merger and acquisition costs, the company earned 98 cents a share, 3 cents less than the average of 27 analysts’ estimates compiled by Bloomberg. Sales climbed 49 percent to $10.2 billion, about $3 million less than analysts’ estimates.

“The real miss versus our estimates was in the Middle East and Asia,” said John Lawrence, an analyst at Tudor, Pickering, Holt & Co. in Houston, who rates the shares a “buy” and owns none. “They were moving some crews around on the seismic side in the Middle East.”

The Middle East and Asia region generated $2 billion in revenue, a $75 million decline from the second quarter. Lawrence said the 22 percent operating margin was less than the 25.5 percent he was expecting from the region.

Schlumberger, which has 31 buy and five hold ratings from analysts, fell 1 percent to $67.38 at the close in New York. Before today, the shares had dropped 18 percent this year.

Estimates ‘Somewhat’ Optimistic

The company’s expected to post fourth-quarter earnings of $1.20 per share, according to the average of 23 analysts’ estimates.

“The current estimates that we see are somewhat on the optimistic side,” Chief Executive Officer Paal Kibsgaard told analysts and investors today on an earnings conference call.

The company’s region that includes Europe, Africa and Russia continue to be “burdened” by costs in and around Libya, Chief Financial Officer Simon Ayat said on the call. Schlumberger expects to resume “some activity” in the country in the fourth quarter after work there remained shut down during the period ending in September.

Oil Demand Outlook

Oil prices in New York had the largest quarterly drop since the 2008 financial crisis, tumbling to a one-year low as signs of slowing growth in China, the U.S. and Germany heightened concern that fuel demand will weaken. Futures contracts have dropped 24 percent from a high of $113.93 a barrel on April 29.

“The current financial turmoil has already resulted in a lower outlook for oil demand growth in 2012, although demand growth is still expected to exceed that of 2011,” Kibsgaard said on the call. “Recent production data, as well as forward projections, indicate that there is a tight cushion of excess oil supply that will continue to support activity.”

Provided there is no major impact from the European debt crisis on its business, which Schlumberger hasn’t seen yet, the company has “quite a positive outlook on the international markets,” Kibsgaard said.

Halliburton Co., the world’s second-largest services provider, reported adjusted earnings on Oct. 17 that beat analysts’ estimates by 3 cents.

--Editors: Jasmina Kelemen, Charles Siler

To contact the reporter on this story: {David Wethe} in Houston at dwethe@bloomberg.net

To contact the editor responsible for this story: Susan Warren at susanwarren@bloomberg.net


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