Schlumberger beats on 3Q EPS but misses on revenue as oil market seen tightening

Oilfield services conglomerate Schlumberger Ltd (NYSE:SLB) reported on Friday a slight beat on earnings but posted a miss on third-quarter revenue while forecasting better returns for the company and a further tightening in the oil market’s supply and demand outlook going forward which would drive oil prices higher.

The company said earnings per share came in at $0.46, marginally higher than the expected consensus of $0.45 and the year-ago level of $0.42. Quarterly revenue reached $8.5 billion, below the consensus of $8.58 billion but above the $7.91 billion in the year-ago quarter.

Shares of the company were up 4% to $60.69 in morning trade.

“In North America, sequential growth remained positive but slowed from the rates of previous quarters as takeaway constraints in the Permian impacted hydraulic fracturing activity. Offshore North America, drilling activity was impacted by scheduled platform maintenance and planned workover operations, the combination of which led to a less favorable activity mix for Schlumberger,” said company chairman and CEO Paal Kibsgaard.

The outlook for the business though in the coming months appears positive.

“Looking at pricing and contracts, we continued to see improvements in terms and conditions and basic rates for selected contracts in the international markets. However, this has yet to make a significant impact on our results,” Kibsgaard said.

“Still, we expect to fully deploy our remaining excess international equipment capacity by the end of the year. As a result, we anticipate pricing discussions to accelerate in the coming quarters as the certainty of products and services supply will become more important for our customers,” he added.

READ: Schlumberger falls short of 2Q revenue estimate due to sluggish international business

The company said the outlook for the crude market appears tighter and this affects oil prices in the future.

“From a macro perspective, the oil market continued to tighten in the third quarter as seen by a further draw in global oil inventories and a significant increase in oil prices despite continued strong production from the US and increasing output from key OPEC countries,” Schlumberger said.

“Global spare capacity is now less than 2%. The tightening supply and demand balance is driven by accelerating decline rates in the international production base and is further exacerbated by the ongoing reduction in Venezuelan and Iranian exports. Geopolitical events and their impact on supply are also becoming an increasing oil market consideration as the challenging security situation in several key countries could affect activity and production going forward, the company added. 

Schlumberger is the world’s largest oilfield services company and is a leading provider of technology for reservoir characterization, drilling, production, and processing to the oil and gas industry.

The company is based in Houston, Texas.

Reporting by Rene Pastor, contactable on [email protected]

Story by ProactiveInvestors