Schlumberger profit falls on oil slump, beats estimate

HOUSTON — Oil field service company Schlumberger’s net income fell nearly 30 percent in the second quarter compared to the same period last year, as oil drilling activity tumbled through the ongoing energy bust.

The firm, with main offices in Houston, Paris and The Hague, saw its net income fall to $1.1 billion, or 88 cents a share, in the second quarter, down from $1.6 billion, or $1.21 a share, in the April-June period in 2014. Revenue fell from $12 billion to $9 billion.

The company said it took a $390 million pre-tax charge after it cut its headcount by about 11,000 employees in the first quarter. It had previously cut 9,000 jobs in the fourth quarter for a total of 20,000 jobs, about 15 percent of its workforce. The company now has 108,000 employees.

“We cannot comment on our plans going forward,” Schlumberger spokesman Joao Felix said in an email.

Schlumberger beat Wall Street’s estimate of the company’s earnings-per-share of 79 cents. The company’s shares surged $1.11 in after-hours trading to $85 a share on the New York Stock Exchange.

The company’s earnings show how much worse the American drilling slump got in the second quarter, as its sequential North American revenues fell from $3.2 billion in the first quarter to $2.4 billion in the second quarter, about 25 percent.

In the Middle East and Asia, sales declined but not quite as dramatically. They fell to $2.6 billion from $2.7 billion sequentially, or 4 percent, as the region kept drills spinning and crude production high in Saudi Arabia, Iraq and elsewhere. In Latin America, revenues fell 7 percent and in Europe and Africa, they dropped 5 percent.

The North American land rig count fell 40 percent in the second quarter and prices for oil field equipment and services took a hit, Schlumberger CEO Paal Kibsgaard said in a written statement.

“Despite the much more challenging market conditions,” Kibsgaard said, the company’s operating margins “were maintained at levels well above the previous downturns as we continued to proactively manage costs and resources, carefully navigate the commercial landscape, and further accelerate our transformation program.”

The company saw 10.2 percent pretax operating margins in North America and 24.5 percent in overseas markets, he said, even though the decline in drilling activity was much more severe than during the oil-price bust of 2009.

Sales in Schlumberger’s drilling and exploration services units declined 11 percent and 5 percent, but its production-equipment business dropped 18 percent sequentially because North American oil companies cut deep into the back-end work that brings newly drilled wells into production.

Looking to the second half of 2015, Kibsgaard said, “our visibility still remains limited.”

“In terms of oil supply, the first signs of flattening North American production have appeared while OPEC marketed supply has been increased one again,” he said.

But crude production outside of North America and the 12-member Organization of Petroleum Exporting Countries fell in Brazil and Mexico and is expected to continue to decline as budget cuts impact the industry overseas, he said. Global oil demand, he said, appears to be strong enough to absorb excess supply even with the advent of Iranian oil in coming months.

“We believe that the North American rig count may be touching the bottom, and that a slow increase in both land drilling and completion activity could occur in the second half of the year,” Kibsgaard said. Overseas, oil exploration will probably continue to be low, with low spending on developing new projects.

“In this challenging market, we remain focused on the things we can control, which include our cost and resource base, the effective deployment of our technology and expertise, and the quality and integrity of the products and services we provide to our customers,” he said.

Schlumberger repurchased 5.8 million shares for $520 million.