14/12/2012 16:23:00

UPDATE: Schlumberger Warns on 4Q Earnings

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--Schlumberger expects Q4 EPS to Be 5c-7c lower than expected

--The company cited international contract delays and weak North American activity

--Schlumberger's international presence has shielded it from a drilling slowdown in North America

(Updates with analyst comments, additional details)

By Alison Sider and Saabira Chaudhuri

Schlumberger Ltd. (SLB) will take a hit on its fourth-quarter earnings from contractual delays in its international operations and weaker-than-expected North America activity.

The world's largest oilfield-services provider said it expects the fourth quarter earnings to be five-cents to seven-cents lower than they would have been otherwise, citing delays in Europe, the Commonwealth of Independent States and in Africa, as well as from higher-than-usual seasonal slowdowns in activity.

Analysts polled by Thomson Reuters recently expected per-share earnings of $1.13 for the fourth quarter. Friday's announcement prompted a selloff, which shares of Schlumberger off 5.73% at $68.40.

Schlumberger's massive international presence has thus far insulated it from the downturn in North American activity. The company reported a profit of $1.42 billion, or $1.07 per share during the third quarter.

But Simmons analysts wrote in a client note Friday that Schlumberger's announcement didn't come as too much of a shock--international oil companies shouldn't be expected to increase spending by as much in 2013 as they did this year.

"The rate of growth in '12 will be difficult to match due to the absence of surplus cash flow generation for international oil companies and ongoing introspection in Brazil."

The Simmons analysts wrote they expect Schlumberger's international revenue to grow in 2013, "but matching this year's top-line surge is a challenge."

Schlumberger also cited weaker than anticipated land drilling activity in the U.S. and western Canada as a factor lowering expectations for fourth quarter earnings. There are 187 fewer rigs operating in the U.S. than there were a year ago, and 98 fewer in Canada, according to the Baker Hughes rig count conducted Dec. 7.

Last quarter Schlumberger's margins in North America held up somewhat better than some analysts had expected.

Rival oilield services companies Halliburton Co. (HAL) and Baker Hughes Inc. (BHI) have seen profits drop as exploration and production companies have pulled back on drilling activity in North America in an effort to stretch capital budgets through the end of the year. These companies' margins have been compressed in North America as demand for services in natural gas fields has declined relative to drilling in oil rich areas, where drilling is more expensive.

Write to Alison Sider at alison.sider@dowjones.com and Saabira Chaudhuri at saabira.chaudhuri@dowjones.com

Subscribe to WSJ: http://online.wsj.com?mod=djnwires

(END) Dow Jones Newswires

December 14, 2012 11:23 ET (16:23 GMT)

Copyright (c) 2012 Dow Jones & Company, Inc.

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