Contract drillers and other oilfield service companies established a clear pattern of improving earnings in the final quarter of 2004 as profits rose an estimated 22 percent on average from the previous quarter and a whopping 163 percent vs. a year ago.
Conclusions were based on a Petroleum News survey of Thompson-First Call analysts’ consensus estimates for 17 leading companies in the sector.
The survey also indicated that sector profits could increase another 15 percent in the 2005 first quarter compared to the just-completed 2004 fourth quarter.
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 2004 fourth quarter could be largely attributed to stronger rig utilization and improving day rates. Contract drillers included in the survey are Transocean, Diamond Offshore Drilling, GlobalSantaFe, Rowan, Ensco International, Parker Drilling, Grey Wolf, Nabors Industries and Noble. Oilfield service companies represented in the survey are Halliburton, Schlumberger, Baker Hughes, Smith International, Weatherford International, Varco International, Pride International and McDermott International.
All 10 of the drilling companies in the survey should report improved earnings in the recent quarter, according to First Call consensus estimates. Offshore drillers showed the strongest improvements.
Diamond expected to lead drillers
Diamond is expected to lead the pack with net income of about 14 cents per share in the 2004 fourth quarter compared to just 2 cents per share in the 2004 third quarter and 1 cent per share a year ago.
GlobalSantaFe also is expected to show strong improvement with net income of 19 cents per share in the 2004 fourth quarter compared to 10 cents per share in the previous quarter and 10 cents per share for the same period last year.
Noble also is expected to report impressive improvement in earnings of 37 cents per share in the 2004 fourth quarter. That compares to 23 cents per share in the 2004 third quarter and 23 cents per share in the 2003 fourth quarter.
Ensco is expected to report a profit of about 22 cents per share for the year’s final quarter compared to 17 cents per share in the prior quarter and 18 cents per share for the year-ago period.
Rowan’s profit for the 2004 fourth quarter should come in around 18 cents per share vs. 15 cents per share for the previous quarter and 5 cents per share for the same quarter last year.
Transocean, the world’s largest offshore driller, is expected to post a 2004 fourth-quarter profit of 9 cents per share, a slight improvement over 2004 third-quarter earnings of 8 cents per share and year-ago earnings of 7 cents per share.
Land driller Grey Wolf is expected to weigh in with net income of 4 cents per share in the 2004 fourth quarter, also a slight improvement over prior quarter net income of 3 cents per share. The company broke even in the year-ago quarter.
Even big land operator Parker Drilling, which lost 25 cents per share in the 2004 third quarter, is expected to trim its losses to 9 cents per share in the final quarter of the year. The company also lost 9 cents per share a year ago.
Halliburton expected to be up
Among the oilfield service companies included in the survey, Halliburton, despite expensive asbestos settlements and continuing troubles in Iraq, is expected to report net income of about 47 cents per share in the 2004 fourth quarter, compared to 39 cents per share in the prior quarter and 34 cents per share in the year-ago quarter.
Schlumberger, another giant oilfield service company, should post a 2004 fourth-quarter profit of about 56 cents per share compared to 52 cents per share in the 2004 third quarter and 50 cents per share in the 2003 fourth quarter.
Baker Hughes could see a profit of 45 cents per share in the 2004 fourth quarter. That would compare to 41 cents per share in the previous quarter and 32 cents per share a year ago.
Smith’s 2004 fourth-quarter profit is expected to rise to 57 cents per share from 51 cents in the previous quarter and from 41 cents in the same quarter last year.
Weatherford also is expected to report improved net income of 54 cents per share in the 2004 fourth quarter compared to 49 cents per share in the 2004 third quarter and 36 cents per share a year earlier.
However, McDermott, Pride and Varco apparently did not perform as well as their fellow service companies, according to First Call earnings estimates.
McDermott’s profit for the 2004 fourth quarter is expected to drop to 9 cents per share from 16 cents per share in the previous quarter. However, the company did score a victory in the recent quarter when compared to the $1.12 per share loss it suffered in last year’s fourth quarter.
Pride’s net income is expected to slip to 4 cents per share in the 2004 fourth quarter from 7 cents per share in the previous quarter. For the same period last year, the company earned 3 cents per share.
Varco is expected to earn 34 cents per share in the 2004 fourth quarter compared to 34 cents per share in the 2004 third quarter and 20 cents per share in the 2003 fourth quarter.
Nabors Industries is expected to report 2004 fourth-quarter earnings of 62 cents per share compared to 48 cents per share in the 2004 third quarter and 42 cents per share in the 2003 fourth quarter.
