Contract drillers and related oilfield service companies appear headed for better times after apparently bottoming out in the 2004 second quarter, according to a Petroleum News survey based on Thompson-First Call earnings estimates for the final two quarters of the year.
The survey, which included 16 major drilling and oilfield service companies, indicates that profits for the just completed third quarter could rise about 22 percent from the prior quarter and increase roughly 33 percent compared to last year’s third quarter.
Moreover, profits for this year’s fourth quarter could rise another 22 percent over the third quarter, according to First Call consensus estimates.
A consensus estimate represents the average earnings of all industry analysts polled on a particular company. Individual estimates can be higher or lower than the consensus and tend to change as the reporting season approaches. And estimates generally exclude one-time charges against earnings and other special items.
The expected improvement in earnings during the last half of 2004 could be largely attributed to stronger rig utilization and improving day rates.
Contract drillers included in the survey were Transocean, Diamond Offshore Drilling, GlobalSantaFe, Rowan, Ensco International, Parker Drilling, Grey Wolf and Noble.
Oilfield service companies represented in the survey were Halliburton, Schlumberger, Baker Hughes, Smith International, Weatherford International, Varco International and McDermott International.
Only one driller expected to post loss
Among the eight drilling contractors surveyed, only Parker Drilling was expected to post an earnings loss for the 2004 third quarter.
But even Parker’s expected shortfall of 2 cents per share would be an improvement over the 6 cents per share the company lost in the prior quarter and the 11 cents per share loss it suffered in the year-ago period. Also, Parker was expected to climb out of the red in the final quarter of the year with a gain of around 1 cent per share.
First Call estimates also show that four other drilling companies could climb back into the profit column in the 2004 third quarter after posting losses in the previous quarter.
Diamond Offshore could earn 5 cents per share in the third quarter after posting losses of 8 cents per share in the second quarter and 9 cents per share a year earlier. Moreover, the company’s fourth quarter profit this year could more than triple to 16 cents per share from the prior quarter.
GlobalSantaFe’s earnings could rocket from a loss of 1 cent per share in this year’s second quarter to a gain of 12 cents per share in the third quarter and to 20 cents per share in the fourth quarter. The company earned 6 cents per share in the year-ago third quarter.
Analysts’ consensus has Rowan earning 13 cents per share in the 2004 third quarter, following a loss of 2 cents per share in the previous quarter and a positive 12 cents per share a year earlier. The company’s profit is expected to further improve to 15 cents per share in this year’s fourth quarter.
U.S. land driller Grey Wolf also was expected to emerge in the 2004 third quarter with around 1 cent per share in profit following a loss of 1 cent per share in the second quarter and a loss of 4 cents per share in the year-ago second quarter. The company was expected to earn around 2 cents per share in this year’s final quarter.
Ensco is expected to earn 15 cents per share in the 2004 third quarter, down from the 18 cents per share the company earned in last year’s third quarter. However, this year’s third-quarter results should reflect an improvement of 3 cents per share from the previous quarter. And the company is expected to further improve to around 22 cents per share in this year’s final quarter.
Noble’s expected profit of 28 cents per share in the 2004 third quarter would be well below the 40 cents per share the company earned in last year’s third quarter, but would reflect a slight improvement over the prior quarter’s 26 cents per share. And Noble’s profit was expected to improve to 38 cents per share in this year’s final quarter.
Earnings improvements expected from most service companies
Among the major oilfield service companies, Halliburton was expected to report around 36 cents per share in the 2004 third quarter, a slight improvement from the prior quarter’s 34 cents per share and the 32 cents per share it earned in last year’s third quarter. Halliburton’s profit was expected to further improve to 38 cents per share in this year’s fourth quarter.
Schlumberger also should report improved earnings across the board, starting with 54 cents per share in the 2004 third quarter vs. 48 cents per share in the prior quarter and 41 cents per share in the comparable year-ago quarter. The company is expected to earn 58 cents per share in this year’s fourth quarter.
Baker Hughes also should step up the ladder with 39 cents per share in the 2004 third quarter compared to 35 cents in the prior quarter and 27 cents per share a year earlier. Profit should further improve to around 42 cents per share in the 2004 fourth quarter. Smith International was expected to post similar results of 51 cents per share in the 2004 third quarter compared to 47 cents per share in the previous quarter and 35 cents in the year-ago quarter. Earnings are expected to further improve to 56 cents per share in this year’s final quarter.
Weatherford could see around 45 cents per share in this year’s third quarter vs. 40 cents per share in the previous quarter and 24 cents per share a year earlier. The company is expected to earn about 51 cents per share in the 2004 fourth quarter.
Varco should report a profit of around 28 cents per share in the 2004 third quarter. That would be up from 23 cents per share in the previous quarter and slightly up from 27 cents per share in the year-ago quarter. The company is expected to earn about 31 cents per share in this year’s final quarter.
Pride International’s profit for 2004 third quarter was expected to be about 6 cents per share, flat to the previous quarter and down from the 12 cents the company earned in the 2003 third quarter. Pride’s 2004 fourth quarter profit was expected to erode to about 4 cents per share.
McDermott’s expected 2004 third-quarter profit of 9 cents per share would be down considerably from the 23 cents per share it earned in the previous quarter, but up from 3 cents per share in the year-ago period. The company was expected to earn about 9 cents per share in the 2004 fourth quarter.
