Schlumberger to take 4Q earnings hit; North America weakness cited

Oil field services firm Schlumberger Ltd. says it will take a fourth-quarter earnings hit because of operational delays in Europe and Africa and weaker than expected activity in North America.

It said Friday it estimates the combined impact from both issues to affect its earnings per share by 5 cents to 7 cents.

Company shares fell $4.16, or 5.7 percent, to $68.40 in morning trading. Shares of other oil field services firms, including Halliburton and Baker Hughes, also were lower.

The company said that in the Europe and Africa area it is seeingĀ  continued contractual delays combined with higher than usual seasonal slowdowns in activity. In North America, activity is weaker than anticipated on land in the U.S. and Western Canada, the company said.

Schlumberger plans to discuss its fourth-quarter earnings results on Jan. 18.

Morningstar analyst Stephen Ellis said in a note to clients that the news from Schlumberger was downbeat, and he indicated other big names in the industry could be affected.

“Given the lackluster international results the industry reported in 2012, the gradually weaker prospects for oil demand in Europe and China and its eventual negative impact on oil prices, we’ve been concerned that drilling activity would slow, and incorporated this scenario into our base scenario for the industry,” he said.

He said Schlumberger, given its industry-leading international exposure, is the most exposed to these headwinds.

“It appears that this scenario is now front and center, and we don’t see the international environment improving in 2013, which indicates that more international downside and further reductions in consensus expectations for 2013 is needed,” Ellis said.

Ellis said that as far as North America is concerned, he doesn’t think drilling activity will pick up substantially prior to the second half of 2013. Still, he said that North America is a better region for oil field services firms to be exposed compared to overseas.

“Halliburton remains highly attractive, while internationally focused names like Schlumberger are less compelling,” he said.The world’s biggest oil field services firm is coming off a solid third quarter in which it reported a 9 percent increase in profit thanks to careful spending, international growth and steady price hikes on sales of new technology.

But at the time, it also warned that uncertainty surrounding the outlook for the global economy could weigh on future results. It said it had plans to deal with any headwinds in North America.

Schlumberger, with offices in Houston, Paris and The Hague, services the oil and gas industry from exploration through production with technology, project management and other offerings.