The world's largest oilfield services provider
) expects its first quarter drilling activity in North America
(NAM) to be weaker than its anticipation. The news hit the
Schlumberger stocks by 3.85% on Monday, Mar 18.
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The company said that lower-than-expected U.S. drilling activity
has resulted to an unclear outlook for the North America land
market for the to-be-reported quarter. Although Schlumberger's
asset deployment recovered from a holiday slowdown and the costs
of its key hydraulic fracturing constituents (like guar) were
lower, it continues to expect negative pricing pressure in many
product lines for the first quarter.
Because of Schlumberger's far-reaching international presence and
deep-water exploration, it faces less North America exposure than
Baker Hughes Inc.
Weak natural gas prices, arising out of hydraulic fracturing
technique, have affected the demand for gas-directed activity in
North America. Importantly, fourth quarter 2012 results have
already registered deterioration in growth and profitability from
the North American market.
In the international arena, although Schlumberger experienced a
choppy fourth quarter due to transitory issues, activity levels
are expected to enjoy growth throughout 2013. The company also
aims at double-digit earnings growth for this year, provided
North America land activity and pricing levels are up to its
expectations. The earnings assumption also takes into account a
proper solution in Venezuela, where the company registered a
major slowdown in payment collection last quarter.
The company is aiming for continued international improvement
underpinned by Saudi Arabia, Iraq, Russia, China and Africa for
the coming quarters. In the Gulf of Mexico, however, the activity
level remains temporarily affected by the substitution of subsea
connector bolts on some rigs in the region. The U.S. controllers
notified the rig contractors last month about the inspection of
the bolts over there after the spill.
For the first quarter, the Zacks Consensus Estimate is $1.00 a
share. With the year-ago profit level at 98 cents per share, the
projected growth rate stands at 2.5% for the first quarter. For
2013, the Zacks Consensus Estimate is $4.73, which represents a
year-over-year growth rate of 13.5%.
Schlumberger shares currently retain a Zacks Rank #3, which
translates into a short-term Hold rating. However, Zacks Ranked
#1 (Strong Buy) oilfield service provider
) appears to hold more promise for the next one to three months.