SLB Schlumberger Ltd

Schlumberger Ltd.'s (SLB) earnings rose 38% as a result of strong oil-drilling activity in the U.S. and abroad, but the company warned that its booming North American profits are likely to cool amid changes in the industry.

Schlumberger on Friday posted a profit of $1.3 billion, or 97 cents a share, up from $944 million, or 69 cents a share, a year earlier. Excluding items such as merger and acquisitions, earnings rose to 98 cents from 71 cents, on revenue of $10.61 billion. Analysts polled by Thomson Reuters had forecast earnings of 97 cents a share on revenue of $10.55 billion.

The better-than-expected results were driven by higher-than-forecast revenue in the eastern hemisphere, and more profit than anticipated in all international regions, James Crandell, an analyst at Dahlman Rose & Co. said in a research note. Schlumberger shares soared, trading up 4.53% at $72.96.

Schlumberger executives, however, warned that the profit margins for the company's North American business, which was a major engine of the company's growth during the recent shale-oil boom, are beginning to decline. Decade-low prices for natural gas are pushing companies to abandon natural-gas drilling for more-profitable oil areas. This has created transportation and transition costs, as well as causing lost working time, for oilfield-service companies such as Schlumberger which have to move crews of workers around. Rival Halliburton Co. (HAL), the second-largest oilfield company after Schlumberger, made a similar warning during its earnings report Wednesday.

Prices for pressure-pumping services, a key component of hydraulic-fracturing operations in shale fields, are continuing to weaken amid this transition, Schlumberger Chief Executive Paal Kibsgaard said during a conference call to discuss the earnings. Kibsgaard added that the oil-rich basins toward which producers are flocking require more work than do natural-gas fields, but at lower pressures and with less horsepower. That dynamic is "going to contribute to oversupply of horsepower," and the reduction of pressure-pumping prices in the second quarter "is a given," he said.

But the effect of the drop in North America margins is being offset by higher margins in the U.S. Gulf of Mexico, which has returned to pre-drilling-moratorium levels, Kibsgaard said. On Wednesday, Halliburton also said it was optimistic about the deep-water oil-services business, which is expected to grow 20% by 2015.

Schlumberger's oilfield-services revenue from North America was off 3.2% from the fourth quarter, reflecting the seasonal slowdown in product, software and multiclient sales. The company said North America revenue was flat sequentially, excluding seasonal sales effects.

Schlumberger has predicted oil consumption and oilfield activity will continue to grow through 2012, driven by relatively high energy prices and large oil companies expanding their reserves. The company's international performance has also been improving as political tensions eased in key geographies, such as Libya, where Schlumberger resumed activity during the fourth quarter.

In Argentina, where the government has moved to seize YPF S.A. (YPF, YPFD.BA), Schlumberger hasn't seen any effect on its operations, although there is "short-term uncertainty," Kibsgaard said. "We are still positive in the medium [and] long term in Argentina," he said. "There's going to be a strong need for our expertise."

Some analysts have said they expect international oilfield-service companies such as Schlumberger and Halliburton to benefit from the Argentine government's move, as it may need help from them to be able to develop the seized fields.

-By Angel Gonzalez, Dow Jones Newswires; 713-547-9214;angel.gonzalez@dowjones.com

--Isabel Ordonez and Melodie Warner contributed to this article.

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