Tags: Schlumberger | SLB | BHI | oil

Schlumberger Firing on All Cylinders

By    |   Tuesday, 16 Aug 2011 02:37 PM

Crude oil prices have dropped about 25 percent from their spring high. But at a recent level of $85.40 per barrel they remain 26 percent above year-ago levels. That creates an outstanding backdrop for Schlumberger (SLB), the world’s largest oilfield services provider. Its profit soared 64 percent in the second quarter, to $1.34 billion from $818 million a year earlier. Revenue jumped 62 percent to $9.62 billion.

Higher oil prices have led to more drilling, which means more need for Schlumberger’s products. The average number of active oil and gas rigs around the world climbed 15 percent in the second quarter from a year earlier, to 3,163, according to Schlumberger competitor Baker Hughes (BHI).

Onshore drilling in the United States and deepwater drilling elsewhere fueled Schlumberger’s strong performance. Saudi Arabia, which boosted production to prevent oil prices from spiraling out of control, particularly helped Schlumberger’s results.

"None of the other countries are executing with the speed of Saudi. So yes, it's going to come, but it's not there yet," CEO Andrew Gould said on a conference call to discuss the company’s earnings. Strong activity in Iraq, the North Sea, and East Asia also is keeping Schlumberger humming.

Deepwater expectations

Gould expressed particular optimism about deepwater drilling. "There have never been so many deepwater rigs on order,” he said. “So to the extent that we have exploration success in deepwater. . . I think that the exploration cycle can be a lot more sustained than it was last time,” before the financial crisis and BP’s Deepwater Horizon accident. Demand is outstripping supply for oil services, Gould said.

Analysts are bullish too. "Schlumberger offers the best play on the international . . . and deepwater markets, which should slowly start to improve later this year, with greater gains in 2012," UBS analyst Angie Sedita wrote in a note to investors. The company next reports around Oct. 21.

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Crude oil prices have dropped about 25 percent from their spring high. But at a recent level of $85.40 per barrel they remain 26 percent above year-ago levels. That creates an outstanding backdrop for Schlumberger (SLB), the world s largest oilfield services provider. Its...
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Tuesday, 16 Aug 2011 02:37 PM
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