Schlumberger Q3 profit slumps as oil downturn drags on

[HOUSTON] Schlumberger Ltd, the world's largest oilfield services provider, said profit fell as the effects of a global crude market crash settled in past the first year. Third-quarter net income declined to US$989 million, or 78 cents a share, from US$1.95 billion, or US$1.49, a year earlier, the Houston- and Paris-based company said in a statement Thursday. Excluding one-time items, the per-share result was 1 cent more than the 77-cent average of 37 analysts' estimates compiled by Bloomberg.

"What you have is a North American market that continues to deteriorate, despite what most companies thought in July would be a flat to maybe slightly up second half," James West, an analyst at Evercore-ISI in New York, said in an interview before the results were released. "On the international side, there appears to be some acceleration to the downward side as well." The global energy industry has had to slash more than US$100 billion in spending and 200,000 jobs to keep pace with crude prices that have tumbled by more than half since June 2014. More pain is expected into next year as the industry awaits further production declines in an oversupplied market.

Fourth-quarter demand for the services of Schlumberger and its peers may be the worst for a three-month period since the downturn began "given that North America is probably going to fall off a cliff somewhere around the holiday season," said West, who rates the shares a buy and owns none.

Even as the number of rigs drilling for oil in the US has fallen to a five-year low, more are expected to lose work as short-term contracts expire and explorers look to make further costs cuts.

"Current well economics don't justify the deployment of fresh drilling capital, even after factoring in efficiency gains and 30 per cent-lower well costs," Andrew Cosgrove and William Foiles, analysts at Bloomberg Intelligence, wrote in an Oct 12 report.

The earnings statement was released after the close of regular trading in New York. The shares have fallen about 11 per cent this year.

Schlumberger provides services including drilling wells, hydraulic fracturing and mapping underground oil pockets for energy producers. Its two largest competitors, Halliburton Co and Baker Hughes Inc, agreed to merge last year. They are scheduled to report earnings next week.

BLOOMBERG