The world's largest oilfield services provider
) expects its fourth quarter to be hit by delays in international
markets and a slowdown in drilling activity in North America
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Weak natural gas prices have affected the demand for gas-directed
activity in North America. In fact, NAM activity is slower than
expected on land in the U.S. and in Western Canada. As
Schlumberger has broad exposure in this region, its share prices
may be depressed going forward. This market already registered
deterioration in growth and profitability in the third quarter,
although in line with market expectations, due to continued
decline in gas-based activity.
Hydraulic fracturing-related work continues to face difficulty
from overcapacity and will likely continue to decline this year.
The company's near-term outlook on U.S. land also remains subdued
with lingering weakness in pressure pumping. The second-largest
member of the oilfield services contingent -
) - and
Baker Hughes Inc
) are also experiencing slower activity level in North America.
Schlumberger also stated that continued contractual delays along
with higher-than-typical seasonal activity slowdown in the
Europe/CIS/Africa region will hurt its earnings by approximately
5 to 7 cents per share. During the third quarter,
Europe/CIS/Africa generated $2.99 billion of sales, the second
highest segmental contribution to the total.
During the third quarter, although Schlumberger experienced
activity disruption due to Hurricane Isaac, its Gulf of Mexico
(GoM) performance remained well in line with its expectation. The
business remained highly accretive to the quarterly results even
with the Isaac shutdown. The GoM operation is expected to be
gradually more accretive to the company's results in North
America, in particular WesternGeco.
For the to-be-reported quarter, the Zacks Consensus Estimate is
$1.14 a share. With the year-ago profit level at $1.11 per share,
the projected growth rate stands at 2.5% for the fourth quarter.
For 2012, the Zacks Consensus Estimate is $4.23, which represents
a year-over-year growth rate of 15.6%.
Schlumberger carries a Zacks #3 Rank (short-term Hold rating).
Longer term, we maintain our Neutral recommendation on the