Schlumberger income rises on robust Middle East, Asia demand

A sign tower reaches toward the sky at the entrance to Schlumberger's Sugar Land campus. (AP file photo/Pat Sullivan)

A sign tower reaches toward the sky at the entrance to Schlumberger’s Sugar Land campus. (AP file photo/Pat Sullivan)

HOUSTON – Schlumberger Ltd.’s profit rose 28 percent in the fourth quarter on high drilling activity and demand for oilfield services in the Middle East and Asia, as well as an improving offshore business in a resurgent Gulf of Mexico.

Fourth quarter revenue increased 7.5 percent year over year for the Houston oilfield services giant, led by sales in Saudi Arabia and the United Arab Emirate as the company’s international revenue set a record and grew by $3.2 billion, up 18 percent over the same period the year before. Schlumberger’s net income reached $1.8 billion and revenue rose to $11.9 billion in the fourth quarter.

The company’s deep-water business saw demand climb in Latin American countries like Argentina and Ecuador and in Sub-Saharan Africa and the Middle East, as well as in the Gulf of Mexico. Schlumberger’s land business in North American, where it supplies equipment and drilling rigs to oil companies, continued to see low pricing on an oversupply of equipment in the market, but increased technology sales  and market share gains led to $400 million in revenue growth in the region.

Integrated oil companies and independent producers have shifted their investment muscle to the Middle East and Asia where many deep-water projects have garnered demand for drillers and oilfield services companies. Meanwhile, capital spending on exploration and production activity in North America fell almost flat in 2013.

North American revenues rose 3 percent to $13.9 billion in 2013, and the company expects to see deep-water activity in the Gulf to keep growing after the company its offshore sales climb 18 percent last year, Schlumberger CEO Paal Kibsgaard said during a conference call with investors Friday. Drilling activity increased as the Gulf rig count grew 12 percent throughout last year, but the North American land market remained a challenge, the company said.

“The main challenge is still pricing, and we saw further downward pressure in the fourth quarter,” he said. “There is still a significant oversupply of horsepower, and we don’t expect that to change. I think we’ll see more of the same in North America” in 2014.

However, the company expects to pick up market share in hydraulic fracturing technology and to grow its artificial lift sales after making key acquisitions in 2013, he said. Rig pricing rose 5 percent in North America last year, as well, he added. Overall, North American land revenue dipped 2 percent in 2013.

Exploration and production spending, the biggest driver of sales for oilfield service companies, is expected to rise 6 percent globally, though international markets should see the bulk of that increase, Kibsgaard said.

In the Middle East, Schlumberger is moving additional resources into Saudi Arabia to keep up with demand, and in Iraq — where a local protest in the country’s southern region hampered business in November — activity is back to normal, Kibsgaard said. He added the company’s activity was also hampered by typical fourth-quarter seasonal slowdowns in North America, Russia, China and other markets.

Economic growth in the U.S. and improvements in Europe will likely offset slowing growth in developing economies and keep oil prices afloat in 2014, and oil markets will be well supplied because of continued growth in North American production, Kibsgaard said.

Schlumberger shares rose 1 percent to $89.48 in early trading Friday.