Schlumberger Escapes The Earnings Hangman (SLB, OIH)

Schlumberger Limited (NYSE: SLB) has managed to beat earnings and probably put some fears to rest in the oil services businesses.  Many key companies in this sector have seen their shares battered and many of these are down considerably from their yearly highs.  The oil services giant said that revenue was $10.61 billion versus a Thomson Reuters consensus of $10.55 billion in sales.  Net income $1.31 billion and its earnings came to $0.98 per share against estimates of $0.97 per share.

Keep in mind that Schlumberger is a whopping 19.98% weighting in the key oil services ETF of Market Vectors Oil Services ETF (AMEX: OIH).  As goes Schlumberger, so goes the ETF.  At $39.65, this ETF has traded in a range of $37.25 to $45.14 over the last 52-weeks.

Oilfield Services revenues were $9.92 billion and that is down 4% sequentially but up 22% year over year; and pretax operating income of $1.94 billion was down 10% sequentially but increased 33% year-on-year.  The company’s distribution revenue of $713 million was up 4% sequentially and 19% year-on-year.

The company noted that the revenue drop was a part of the normal seasonal slowdown in product, software and multiclient sales.  Excluding seasonal sales effects, North America revenue was called flat sequentially.  Another change is that the move of rigs on land and service capacity from gas-rich to liquids-rich basins accelerated. Offshore, increased drilling and deepwater exploration activity in the US Gulf of Mexico contributed positively to results.  The company remains cautious about North America.  Land activity was said to have remained strong in the Middle East and North Africa.  On contracts, Schlumberger also noted that pricing sentiments are starting to move upwards and it went to note that the risk of a double-dip global recession has declined.

Oil companies rarely give formal guidance but the report noted, “We maintain our positive view on the international markets and expect the rig count to grow by more than 10% in 2012 through strength in exploration and deepwater activity as well as in key land markets.”

Schlumberger spent $324 million in the quarter to repurchase 4.4 million shares of its common stock at an average price of $74.01 per share.

Shares closed at $69.80 on Thursday and the 52-week trading range is $54.79 to $95.53.

JON C. OGG