A pullback in the Gulf of Mexico from exploration to development, as well as a dramatic decline in onshore activity, could push a recovery in North American activity to the end of the year or later, Schlumberger Ltd. CEO Paal Kibsgaard said Friday.

The No. 1 oilfield services operator in the world was the first among its peers to unveil second quarter results. It had begun an all-out effort long before the slump in oil prices to streamline operations, a prescient decision that helped alleviate some of the hurt felt by industry since late last year. Second quarter results actually met or surpassed Wall Street expectations. However, it’s going be awhile before the industry is back on track, especially in North America, Kibsgaard told analysts during a conference call.

Second quarter revenues overall fell 12% sequentially, “driven by the dramatic decline in North American land activity, as the rig count dropped by a further 40% and as pricing erosion continued in both North America and the international areas,” he said. North America revenue fell 27% from the first quarter, while international revenue was down 5% “as customer budget cuts and pricing concessions impacted results for a full quarter.”

In the onshore, “pricing has fallen to unsustainable levels in some basins, leading to pressure pumping equipment being stacked and crews reassigned.” However, Schlumberger is keeping its powder dry in “other basins” and has maintained hydraulic fracturing fleets “in pursuit of market share and new technology opportunities.”

Schlumberger now is forecasting North American exploration and production (E&P) investments to drop by more than 35% from 2014 because of lower land activity and increased pricing pressures.

“We believe that the North American rig count may now be touching the bottom, and that a slow increase in both land drilling and completion activity could occur in the second half of the year,” said the CEO. However, “visibility remains limited” through the rest of this year. He declined to offer any outlook for 2016.

The company doesn’t expect to see “any upward adjustment to existing 2015 budgets, but see a continuation of first-half trends with low exploration activity, tight management of development-related spend, and continued pricing pressure.”

Net income was about $1.12 million (88 cents/share) in 2Q2015, versus $1.59 million ($1.21) in the year-ago period.

Second quarter results for North America weren’t pretty, although they were better than some analysts had predicted. Revenues fell 27% from the first quarter and were down by more than one-third (36%) year/year.

“In the U.S. and Western Canada, revenue fell on lower pressure pumping activity and persistent pricing pressure as the land rig count dropped 40%, exacerbated by the early onset of the Canadian spring break-up,” Kibsgaard said. “In the U.S. Gulf of Mexico, revenue declined as the deepwater rig count decreased and activity shifted from exploration to development and completion.”

North America pretax operating margin fell 268 basis points (bp) sequentially to 10.2% “on decreased pressure pumping activity and pricing weakness on land,” he said.

Results overall are better than during the 2009 downturn because of the company’s streamlining efforts over the past two years, Kibsgaard told analysts. In the first half of 2015, year/year revenue dropped 26% in North America, which is more severe than the 24% decline of the same period during the 2009 downturn.

“In spite of this, the decremental margin was 37%, which represents a marked improvement over the 72% posted for the same period in the previous downturn,” he said. Decremental operating margin is equal to the ratio of the change in pretax operating income over the change in revenue.

“Pretax operating margin in the first half of 2015 declined by 648 bp year/year, less than half of the 1,487 bp fall reported for the first half of 2009,” Kibsgaard said. “The strength of this performance was underpinned by prompt cost and resource management, the growing effects of the transformation program, strong new technology sales and efficient supply chain management.

The Production Group, which includes pressure pumping services, saw revenues fall 18% sequentially because of “the unprecedented drop in both activity and pricing” in North America’s onshore. Drilling Group revenues sequentially fell 11% and Reservoir Characterization Group revenues dropped by 5%.

The market is challenging, said Kibsgaard, but management is focused on the things it can control, “which include our cost and resource base, the effective deployment of our technology and expertise, and the quality and integrity of the products and services we provide to our customers.”

Tudor, Pickering, Holt & Co. (TPH) analysts were among those encouraged by Schlumberger (SLB) results and said the company is “one of the few oil service names we were comfortable would at least meet Street estimates…and they delivered on that front.” Second quarter results “won’t be the trough in earnings,” as margins “likely face a little pressure from here, revenues may as well,” but North American “erosion should at least slow its pace quarter/quarter.”

The fall-off in North American revenues was “on top of our forecast,” TPH said. “The greater offshore weighting for SLB versus peers helps the comparison, but more importantly, the swift cost structure changes, as well as SLB’s willingness to stack equipment rather than pursue work at unacceptable return levels, is showing up in the results.”

U.S. pressure pumping “is the biggest variable moving this segment’s results around, and thus the 23% quarter/quarter decremental margins…are impressive,” TPH said. During the first quarter, U.S. land revenue represented half of the decline from the fourth quarter of 2014, “and in 2Q2015, it was more than 80% of the decline, yet margins fell just 180 bp to 12.8%. We think this shows SLB’s discipline to date and willingness to stack equipment as margins/returns reached levels unacceptable to the company.”