HOUSTON - Oilfield services provider Schlumberger Ltd. opened the earnings season for oil-sector companies Friday, reporting a 22 percent rise in fourth-quarter profit but failing to meet Wall Street expectations.
Its share price fell almost 4 percent Friday, continuing a recent trend that has sent the stock down almost 20 percent since the start of the year.
Fourth-quarter results were driven by demand in the Eastern Hemisphere and Latin America, but North American profits disappointed.
What's more, Schlumberger chairman and chief executive Andrew Gould gave a cautious near-term outlook, and analysts said the news doesn't bode well for others in the services sector.
"Shorter-term growth presents a more complex picture than the immediate past," Gould said in conference call with analysts.
Schlumberger reported a net profit of $1.38 billion, or $1.12 per share, compared to a year-earlier profit of $1.13 billion, or 92 cents per share. Revenue rose to $6.25 billion from $5.35 billion a year earlier.
Analysts surveyed by Thomson Financial on average expected a profit of $1.13 per share on revenue of $6.14 billion.
However, Tudor Pickering Holt & Co. Securities noted the company's results benefited by 4 cents from an asset sale and tax-rate help, so the figure comparable to the Wall Street estimate was $1.08 a share.
Schlumberger "is the best in the business ... but doesn't feel like it right now," Tudor Pickering said in a note.
Its shares fell $2.99, or 3.6 percent, to $79.52 Friday.
The company, which helps oil and natural gas companies extract hydrocarbons through a variety of services, equipment and expertise, said lower pricing in U.S. land operations and seasonal weather factors contributed to less-than-satisfactory margins in the fourth quarter.
In a note, Raymond James & Associates said North American margins were about 25 percent in the most-recent quarter, well off Raymond James' forecast of 31 percent.
Schlumberger said absent any severe weather for the remainder of winter, natural gas drilling is not expected to vary greatly from recent levels.
On a positive note, the company said land activity outside North America is expected to remain strong, as is global seismic exploration.
"Within this context, technology that assists our customers in mitigating risk in exploration and development projects, increasing recovery factors and improving operational efficiency will remain at a premium," Gould said.
He also presented a more positive long-term outlook, saying the significant number of exploration licenses awarded in the past three years, an expanding rig fleet and increased capital spending budgets are "clear indicators of future growth."
"It is our view that only a global economic recession that lowers demand can flatten this trend," Gould said.
The company said revenue at its oilfield services division amounted to $5.4 billion in the fourth quarter, up 18 percent from a year ago. Sales rose 40 percent in Latin America and 30 percent in the Middle East and Asia but fell 7 percent in North America.
WesternGeco, the company's seismic arm, posted revenue of $798 million in the fourth quarter, 11 percent higher than the fourth quarter of 2006. WesternGeco gathers seismic data that's used by oil companies as they explore for new oil and natural gas deposits and monitor production from existing wells.
But analysts said margins at both divisions were disappointing.
Schlumberger has benefited in recent quarters from strong demand because of high oil prices, which reached $100 a barrel last month. Its stock price rose more than 50 percent last year.
But the stock has dipped of late, along with others in the sector, amid fears a slowing economy could diminish demand for oil.
For all of 2007, Schlumberger said net income rose to $5.18 billion, or $4.20 a share, versus $3.71 billion, or $3.01 a share, in 2006. Revenue increased to $23.3 billion from $19.2 billion a year ago.
Schlumberger rival Halliburton Co. is scheduled to report fourth-quarter results Jan. 28. U.S. oil majors begin reporting next week, with ConocoPhillips slated to release results Wednesday.
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