Thursday, January 20, 2011

Schlumberger (NYSE: SLB): Q4 Earnings Preview 2010

Schlumberger Limited (NYSE: SLB), the largest oilfield services provider, is scheduled to release its fourth-quarter earnings before the opening bell on Friday, January 21, 2011. Analysts, on average, expect the company to report earnings of 77 cents per share on revenue of $8.70 billion. In the year ago period, the company reported earnings of 67 cents cents per share on revenue of $5.74 billion.

Schlumberger Limited and its subsidiaries supply technology, integrated project management, and information solutions to the oil and gas industry worldwide.

In the preceding third-quarter, the Houston, Texas-based company's net income was $1.73 billion, or $1.38 a share, compared to $787 million, or 65 cents a share, in the year-earlier quarter. On an adjusted basis, the company earned 70 cents a share in the latest quarter. Revenue rose to $6.85 billion from $5.43 billion. Analysts, on average, expected the company to report earnings of 70 cents per share on revenue of $6.83 billion.

During the third quarter, the company continued to feel the effect of the deepwater drilling moratorium in the U.S. Gulf of Mexico. The company said that the moratorium resulted in a reduction of its Q3 earnings of approximately $0.02 to $0.03 per share. At its last earnings call in October, the company said that the earnings effect of the moratorium in the fourth quarter is estimated to be approximately $0.04 to $0.05 per share. Although the Obama administration lifted a moratorium on deep-water drilling last October, regulators have not approved any new exploratory wells the ban would have blocked. The company expects the fourth quarter to show continued strong activity in North America on land.

Schlumberger’s North American business is expected to benefit from a revival in oil drilling in service-intensive areas. The current North American fundamentals are certainly robust. Internationally, the company continues to experience gradual improvement, with strong results in Russia, the North Sea and Caspian. Further, among SLB's emerging market clients, Brazil looks especially promising for future work. The company's size -- which dwarfs its nearest competitors: Halliburton (NYSE: HAL), Baker Hughes (NYSE: BHI), and Weatherford (NYSE: WFT) -- makes it a key companion for some of the largest oil companies in the world and helps produce the most attractive profit margins when business booms.

Meanwhile, the company’s integration of the former Smith International is going relatively smoothly and is expected to generate cost efficiencies and potential revenue efficiencies as a result.

In terms of stock performance, Schlumberger shares have gained nearly 25 percent over the past year.

Full Disclosure: None.
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