Schlumberger Posts Higher Earnings - Analyst Blog
19 Abril 2013 - 8:10AM
Zacks
The world’s largest oilfield
services provider Schlumberger Ltd. (SLB) reported
adjusted first quarter 2013 earnings of $1.01 per share (excluding
special items), beating the Zacks Consensus Estimate of 99 cents
with ease.
Also, the quarter’s results increased from 96 cents per share
earned in the year-earlier quarter. The results were boosted by the
company’s strong international exposure, focus on execution and
integration capabilities.
Income from continuing operations, excluding charges, was $1.35
billion, up approximately 4% year over year.
Total revenue of $10.7 billion was up 7.6% from the year-earlier
level of $9.9 billion and was in line with the Zacks Consensus
Estimate.
First Quarter Highlights
Oilfield Services: Segmental revenues were up approximately 8% year
over year at $10.7 billion in the first quarter. Pre-tax operating
income of more than $2.0 billion increased 4% year over year.
All groups – Reservoir Characterization, Drilling Group and
Production Group – registered a sequential fall or remained flat.
The sequential downfall was due to the strong year-end product,
software and multiclient sales experienced in the fourth quarter of
2012. Seasonal activity slowdowns in the North Sea, Russia and
China, weather-related work delays in the Brunei, Malaysia &
Philippines and Australasia GeoMarkets, and lower pricing as a
result of excess capacity in US land also contributed to the
sequential decline. However, these sequential effects were
partially offset by strong exploration and drilling activity in
Angola, and strong winter project activity in Western Canada &
Alaska.
Reservoir Characterization: This group posted revenue of $2.8
billion in the first quarter, up 9% year over year. Pre-tax
operating income was $758 million, which increased 13% from the
prior-year quarter.
Drilling Group: First quarter revenues recorded by this group was
$4.1 billion, which improved 9% annually. Pre-tax operating income
was $741 million, up 13% year over year.
Production Group: The revenue for the quarter recorded by this
group was $3.8 billion, which climbed 7% annually. Pre-tax
operating income was $573 million, down 8% year-over-year.
Financials
As of Mar 31, 2013, the company had approximately $5.6 billion in
cash and short-term investments and $8.1 billion in long-term debt,
representing a debt-to-capitalization ratio of 23.7%. In the
reported quarter, Schlumberger repurchased 2.5 million shares of
its common stock at an average price of $77.63 for a total purchase
price of $193 million.
Our Take
Looking forward, Schlumberger’s overall outlook for 2013 remains
largely unchanged from its earlier projections. The company remains
unperturbed despite the main economies including China, the U.S.
and the Eurozone witnessing mixed fortunes in the first quarter.
Schlumberger expects its international spending on exploration and
production to climb 10% this year and activity to increase in the
U.S. Gulf of Mexico. The company also expects steady growth in key
regions that include Sub-Sahara Africa, Russia, the Middle East,
China and Australia. On the flipside, lower-than-expected rig
activity and continuing pricing weakness is keeping the management
apprehensive about its North American operations.
Schlumberger generates about two-thirds of its revenues
internationally, marking the highest ratio among the biggest
oilfield service providers, which include Halliburton
Company (HAL) and Baker Hughes Inc.
(BHI). Schlumberger’s strength also lies in effective
implementation, strong contracts and new technologies.
The oilfield services behemoth believes that strong leverage to the
deepwater segment will help it perform well over the coming years.
While the company makes most of its money outside North America, it
suffers from the industry-wide weakness in U.S. hydraulic
fracturing services as well as softness in the land coiled-tubing
business.
Schlumberger currently holds a Zacks Rank #3 (Hold) and is expected
to perform in line with the broader market over the next few
months. However, there are other better performing sector stocks,
like Zacks Ranked #1 Range Resources Corporation
(RRC), that are likely to outperform the market.
BAKER-HUGHES (BHI): Free Stock Analysis Report
HALLIBURTON CO (HAL): Free Stock Analysis Report
RANGE RESOURCES (RRC): Free Stock Analysis Report
SCHLUMBERGER LT (SLB): Free Stock Analysis Report
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