The world’s largest oilfield services provider Schlumberger Ltd. (SLB) reported adjusted fourth quarter 2013 earnings of $1.35 per share (excluding special items), beating the Zacks Consensus Estimate of $1.33.
Also, the quarter’s bottom line increased from $1.04 per share earned a year ago. The results were boosted by the company’s strong international exposure, focus on execution and integration capabilities.
Full-year 2013 earnings from continuing operations were $4.75 a share, lagging the Zacks Consensus Estimate of $4.77 but improving from $4.01 per share earned last year.
During the quarter, income from continuing operations, excluding charges, was $1.79 billion, up approximately 28% year over year.
Forth quarter total revenue of $11.9 billion was in line with the Zacks Consensus Estimate and up 7.4% from the year-earlier level of $11.1 billion.
Total revenue for 2013 was $45.3 billion, reflecting an increase of 8.5% from the year-earlier level of $41.7 billion. The top line for the year lagged the Zacks Consensus Estimate of $45.4 billion by 0.3%.
Fourth Quarter Highlights
Of the total revenue, International Area revenues were $8.1 billion while North America Area revenues were $3.60 billion.
All the three business segments – Reservoir Characterization Group, Drilling Group and Production Group – registered growth.
Reservoir Characterization Group: This segment posted revenues of $3.25 billion, up 1% sequentially. Pre-tax operating income was $1.03 billion, which increased 16% year over year and 5% from the prior quarter.
Drilling Group: Revenues recorded by this group were $4.50 billion, which improved 2% sequentially. Pre-tax operating income was $880 million, up 28% year over year but down 2% sequentially.
Production Group: The revenues for this group climbed 5% sequentially to $4.22 billion. Pre-tax operating income was $730 million, up 26% year over year and 3% sequentially.
Financials
As of Dec 31, 2013, the company had approximately $8.4 billion in cash and short-term investments and $10.4 billion in long-term debt. In the reported quarter, Schlumberger repurchased 11.9 million shares of its common stock at an average price of $89.67 for a
Our Take
Looking forward, Schlumberger’s optimism on rising rig count activity will likely lead to increased international spending on exploration, higher production and stepped up activity in the U.S. Gulf of Mexico. The company also expects steady growth in the key regions of Sub-Sahara Africa, Russia, the Middle East, China and Australia.
Schlumberger generates about two-thirds of its revenues internationally, marking the highest ratio among the biggest oilfield service providers, which include Halliburton Company (HAL) and Baker Hughes Inc. (BHI). Schlumberger’s strength also lies in effective implementation, strong contracts and new technologies.
The oilfield services behemoth believes that strong leverage to the deepwater segment will help it to perform well over the coming years. While the company makes most of its money outside North America, it bears the brunt of industry-wide weakness in U.S. hydraulic fracturing services as well as softness in the land coiled-tubing business.
Schlumberger currently holds a Zacks Rank #3 (Hold). Zacks Ranked #1 (Strong Buy) NGL Energy Partners LP (NGL), however, holds value for the short term.
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