Schlumberger, first of the major oilfield services companies to weigh in with 2004 fourth-quarter earnings, says the current business climate for the upstream industry is the most favorable the company has witnessed since the early 1970s.
“The signs are almost everywhere,” Andrew Gould, Schlumberger’s chief executive officer, said in a Jan. 25 conference call with analysts. “And encouragingly, there is a healthy mix of both short-term and long-term activity.”
Fourth-quarter activity was so strong it resulted in record levels of oilfield services revenue and operating income for Schlumberger. The company reported revenue growth in every region of the world, with U.S onshore, Canada, Mexico, Russia, West Africa, India and Saudi Arabia posting the highest increases. Double-digit growth was experienced by all service technology segments, the company said.
North America up 7 percent
North America alone posted 2004 fourth-quarter revenue of $847 million, up 7 percent from the previous quarter and up 25 percent from a year earlier. Operating profit of $157 million jumped 32 percent sequentially and 48 percent year-over-year.
Schlumberger attributed North American revenue growth in the 2004 fourth quarter to increased activity in Canada and the resumption of drilling on the U.S. Gulf Coast following weather-related slowdowns in the prior quarter. In addition to the strength of the drilling activity, market share gains and higher pricing also contributed to the increase, the company said.
“The upstream industry is now really focused on the need to build additional supply capacity in both oil and gas,” Gould told analysts. “It is as true of gas drilling in North America as it is with oil production … in the fields of western Siberia. At the same time an unprecedented effort is under way to maintain or increase production of oil and gas in mature areas.”
Schlumberger’s overall operating revenues for the 2004 fourth quarter came in at $3.07 billion, up 6 percent from the previous quarter and up 17 percent compared to the fourth quarter of 2003. Net income was $351 million or 59 cents per share in the fourth quarter, versus 50 cents per share in the prior quarter and 31 cents in the year-ago period, up an impressive 90 percent year-over-year.
Oilfield services revenues up 5 percent
Oilfield services revenues alone in the 2004 fourth quarter registered a record $2.73 billion, an increase of 5 percent from the previous quarter and an increase of 18 percent compared to the same quarter last year. Pretax income of $483 million increased 10 percent sequentially and 15 percent year-over-year.
Gould said that increasing exploration budgets are resulting in strong increases in both marine and land activity.
“An increasing number of deepwater development projects and major LNG developments are under way or being sanctioned for development,” he added.
In fact, the company is so bullish on the future that its board of directors recently approved a generous 12 percent dividend increase for its stockholders. With an economic recession and resulting drop in oil demand behind industry, Gould said, “it’s difficult to see how the current upside cycle can be cut short. What we have seen since June only serves to confirm this point of view.”
He noted that seismic spending, which has been under pressure the past several years, has returned to its historic correlation with exploration and production spending. For example, Schlumberger’s seismic company, WesternGeco, posted 2004 fourth-quarter revenues of $333 million, an 11 percent increase over the previous quarter and an 8 percent increase over the same period last year.
“Strong market fundamentals, our extensive technology portfolio and unique global workforce make us ideally placed to grow in this environment,” Gould said.
