By David Wethe
Jan. 23 (Bloomberg) -- Schlumberger Ltd., the world’s largest oilfield-services provider, said fourth-quarter profit fell 17 percent as a collapse in petroleum prices slowed exploration spending by customers. The company said job cuts “concern” 5,000 people worldwide.
Net income dropped to $1.15 billion, or 95 cents a share, from $1.38 billion, or $1.12, a year earlier, Schlumberger said today in a statement. Excluding costs associated with job cuts and a write-off related to a customer with “liquidity issues,” profit was 1 cent below the average estimate of 24 analysts surveyed by Bloomberg.
Commodity prices have plummeted as recessions in some of world’s largest economies sapped demand. Oil futures in New York fell 35 percent in the fourth quarter from a year earlier to average $59.08 a barrel, while gas dropped 13 percent. Chief Executive Officer Andrew Gould said exploration will weaken further in 2009 as lower prices are unable to sustain development.
“It is a good sign that they’re coming front and center and acknowledging things have gotten a lot worse,” Mark Brown, an analyst at Pritchard Capital Partners in New York who rates the shares a “buy” and doesn’t own any, said in a telephone interview. “We had to get this negative news out there.”
Gould said on a conference call with analysts that a November decision on job cuts “concerns” 5,000 people worldwide, without elaborating. Schlumberger said Jan. 7 that it cut 1,000 jobs in North America.
Spending to Drop
Spending by companies around the world on oil and natural- gas exploration is expected to drop 12 percent in 2009 to $400 billion, according to a Dec. 19 report by analysts James Crandell and James West of Barclays Capital Research.
Capital spending this year will be about $3 billion, Chief Financial Officer Simon Ayat said on the call. Of that, $2.2 billion will be spent on oilfield services and $800 million will be spent on the seismic business.
“At current prices, most of the new categories of hydrocarbon resources are not economic to develop,” Gould said in the statement. “We expect 2009 activity to weaken across the board with the most significant declines occurring in North American gas drilling, Russian oil production enhancement and in mature offshore basins.”
Sales Rise
Sales advanced 9.9 percent to $6.87 billion in the fourth quarter. Revenue from Schlumberger’s core oilfield-services business gained 15 percent from a year earlier to $6.26 billion. Revenue at WesternGeco, the company’s seismic-mapping business, fell 25 percent to $599 million. Sales jumped 18 percent in Latin America.
The cut in exploration and production spending by Russia, one of Schlumberger’s biggest markets, is one of the things that hurt the service provider in the fourth quarter, Byron Pope, an analyst at Tudor, Pickering, Holt & Co. in Houston, said in a telephone interview. Pope has a “hold” rating on the shares and doesn’t own any.
Russia is part of Schlumberger’s largest regional market, which includes Europe and Africa. While that group reported fourth-quarter revenue of $2.05 billion, up 16 percent from a year earlier, sales slipped 5 percent from the third quarter.
That market will be down in 2009, Gould said on the call while the Latin American market will be flat.
Schlumberger rose $1.15, or 3.1 percent, to $38.42 as of 9:39 a.m. in New York Stock Exchange composite trading. The shares, which have 16 buy, eight hold and one sell rating from analysts, dropped 46 percent during the fourth quarter.
Halliburton Co., the world’s second-largest oilfield- services provider, is scheduled to report earnings Jan. 26. Baker Hughes Inc., the third-biggest oilfield contractor, plans to report its fourth-quarter results Jan. 28.
To contact the reporter on this story: David Wethe in Houston at dwethe@bloomberg.net.
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