Markets & Finance

Schlumberger Pumps Out Higher Profits


Shares of the oilfield services giant surged Friday after it said it expected "significant" growth in 2007

Talk about black gold: shares of Schlumberger Ltd (SLB) soared on Jan. 19 after the world's largest provider oilfield services said fourth-quarter profit beat analyst expectations and it expected "significant" growth in 2007.

The company, based in Houston (Tex.), said profit rose a whopping 71% to $1.13 billion, or 92 cents a share, from $660 million in the year-earlier period. Analysts had expected per-share profits of about 84 cents. Sales jumped 33% to $5.35 billion from $4.02 billion.

After hitting a high of $77 last summer, the price of crude has plunged by more than 50%, dropping below $50 a barrel in trading at the New York Mercantile Exchange on Jan 18.

But that hasn't stopped oil companies from upping spending to boost reserves. That trend will continue, said Schlumberger Chief Executive Andrew Gould in a statement, adding that the days of cheap energy "have ended."

"While we remain of the opinion that there is no overall shortage of oil and gas reserves, the world is realizing that...new and higher sustained levels of investment are necessary to meet demand and guarantee future supplies," Gould said.

Schlumberger's breadth of services, which range from seismic technology to oilfield project management, mean it's well placed to take advantage of the resurgence in exploration activity in the petroleum industry. The company said it expects to see significant growth this year, especially in the Eastern Hemisphere, for exploration, development, and production enhancement-related services.

Sales at the oilfield services unit rose 30% to $4.63 billion, with pretax profits up 55% to $1.3 billion. Schlumberger's WesternGeco seismic arm saw revenues soar 55% to $721 million, while pretax profits more than doubled to $273 million.

Investors rushed to buy the stock on the news, sending Schlumberger shares up 4.4% to $60.45 in morning trading on the New York Stock Exchange.

Norton is a BusinessWeek.com correspondent in London.

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