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Schlumberger Expects Markets Recovery in Late 2017

Source: Reuters 1/20/2017, Location: North America

Schlumberger NV said that it does not expect a "dramatic" short-term recovery in international markets, compared with North America where shale producers are already ramping up drilling activity.

The world's No.1 oilfield services provider reported a more-than-8-percent drop in fourth-quarter revenue as strong activity in the Middle East and North America was offset by weakness in Latin America, Europe, Russia and Africa.

"Our international business is currently like a highly-compressed coiled spring," Chief Executive Paal Kibsgaard said on an analyst call.

"Activity levels in key market segments such as exploration and deepwater are at record lows and although we do not expect a dramatic short-term recovery, the trends can only be positive from this point on."

With crude oil prices on the rise, oil companies have begun to ramp up exploration and production spending, particularly in North American shale fields, after two years of budget cuts.

However, Kibsgaard expects a global increase to unfold only later this year – a view that Edward Jones analyst Rob Desai agreed with.

"The end of 2017 is when you start to see things really improve in international markets," Desai said.

Schlumberger's earnings from international markets, including Mexico, Venezuela, Brazil, Sub-Sahara Africa, China and onshore Russia, in the fourth quarter of 2016 was more than 70 percent lesser than its earnings in the fourth quarter of 2014, when oil prices began to slump.

The company is far more reliant on markets outside North America than its rivals Halliburton Co and Baker Hughes Inc.

Schlumberger gets only a quarter of its revenue from North America, while Halliburton gets more than 40 percent.

Schlumberger's fourth-quarter revenue from North America rose 4 percent to $1.77 billion compared with the third quarter.

Desai said he had expected a 6 percent increase, given the roughly 22 percent rise in average U.S. rig count in the period.

Schlumberger's revenue growth in international markets was slower, rising 1 percent to $5.28 billion from the third to the fourth quarter.

Net loss attributable to Schlumberger fell to $204 million, or 15 cents per share, in the three months ended Dec. 31, from $1.02 billion, or 81 cents per share, a year earlier.

Excluding one-time items, Schlumberger earned 27 cents per share, in-line with analysts' average estimate, according to Thomson Reuters I/B/E/S.

Total revenue was $7.11 billion, edging past analysts' estimate of $7.07 billion.

Schlumberger's shares were down 1.7 percent at $85.73 in morning trading.



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