Schlumberger Joins Service Rivals in Lackluster Comeback

(Bloomberg) -- Schlumberger followed its rivals in reporting disappointing third-quarter earnings results this week, leaving the world’s biggest oilfield contractors to embark on a longer path to rebuilding investor trust.  

The No. 1 company that helps explorers map underground pockets of oil and drill new wells reported a slight sales miss in the third quarter, with weakness coming from the Middle East and Asia. It also forecast growth in the final three months of the year that’s lower than expected. Shares fell 2% in New York on Friday. 

This week’s results from the biggest hired hands of the oil patch “haven’t exactly been inspiring,” Luke Lemoine, an analyst at Capital One Securities Inc., said Friday in a telephone interview. “It’s almost like people were waiting for Schlumberger to be the savior at the end of week, so maybe some fresh dollars are just exiting because you’re not getting that raise for the fourth quarter or 2022 at this point.”

The oil-services sector appears to be struggling to resume the kind of growth investors are seeking. The hired hands of the oil patch are facing rising costs of raw materials and clients who are locking in record cash flow while pushing back on higher service pricing. Plus, oilfield contractors are still trying to catch up to exploration companies that are sending juicier profits backs to shareholders.

“As a sector, we’re still in trust rebuilding mode,” David Anderson, an analyst at Barclays, said Friday in a telephone interview. “We’ve have five-plus years of really disappointing results and really tough markets.”

Schlumberger on a conference call Friday with analysts and investors forecast sequential sales growth in the fourth quarter to be similar to what it saw in the third, which is less than what analysts are expecting. Baker Hughes Co. and Halliburton Co. also left investors largely underwhelmed this week with profits and forecasts that did little to raise the bar from three months earlier after facing setbacks from Hurricane Ida.

Schlumberger reported sales of $5.85 billion, it said Friday in a statement, missing the $5.94 billion average estimate of analysts in a Bloomberg survey. Schlumberger posted a profit before one-time items of 36 cents a share, merely matching estimates.

Among rivals, Schlumberger has the largest exposure to overseas activity, generating roughly 80% of sales outside the U.S. and Canada. As publicly traded U.S. oil explorers continue to show austerity through subdued output growth, the biggest oilfield contractors have been pivoting to more international work. 

Global Activity

Revenue expanded similarly in its international and North American regions, each growing 4% compared to the second quarter. The biggest miss came in its largest individual region, the Middle East and Asia, where Schlumberger generated $2 billion in sales, lower than the $2.14 billion expected, according to data compiled by Bloomberg.

Schlumberger announced a dividend of 12.5 cents a share, holding steady from previous levels. Baker Hughes posted lower-than-expected earnings on Wednesday while smaller rival Halliburton just met expectations. 

Still, Schlumberger reaffirmed forecasts for growth, saying it’s on track to achieve a double-digit sales expansion for the second half of this year. Chief Executive Officer Olivier Le Peuch, who earlier this year called for the possibility of a “super cycle” in the industry, said he sees an “exceptional growth cycle” ahead.

“The industry macro fundamentals have visibly strengthened this year, particularly in recent weeks -- with demand recovery, oil and gas commodity prices at recent highs, low inventory levels, and encouraging trends in pandemic containment efforts,” Le Peuch said a statement Friday. “These favorable conditions are expected to materially drive investment over the next few years -- particularly internationally -- and result in exceptional multiyear capital spending growth globally, both on land and offshore.”

Schlumberger, which has 25 “buy” ratings from analysts, five holds and one sell, has boosted shares by more than 50% this year.

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