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Schlumberger, Baker Forecast Gloomy 4Q Results

December 24, 2012
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Schlumberger Ltd. and Baker Hughes Inc. both expect fourth quarter profits to be lower than anticipated, in part because of a slowdown in North American drilling activity.

"North America activity is weaker than anticipated on land in the U.S. and Western Canada," Schlumberger officials said. The Europe/Commonwealth of Independent States/Africa area also is impacting profits because of "continued contractual delays combined with higher-than-usual seasonal slowdowns in activity."

Schlumberger now expects combined earnings per shale to be impacted by 5-7 cents in the fourth quarter, which ends Dec. 31. The operator is planning to issue its quarterly results on Jan. 18.

On the Schlumberger news, analysts at Dahlman Rose cut their 4Q2012 earnings forecast for the company to $1.07/share from $1.13. Zacks Investment Research analysts have a consensus estimate of $1.14/share, noting that year-ago quarterly profits were $1.11/share and the projected growth rate stands at 2.5% for the quarter. For 2012, Zacks consensus estimate is $4.23, which represents a year/year growth rate of 15.6%.

Last week, Baker said its North American revenue and profit margins "are expected to be lower than previous expectations due to weaker than anticipated onshore activity and further price erosion within pressure pumping operations. As a result, North America operating profit before tax margin is now expected to be between 8.5% and 9.5%" in 4Q2012, compared to 11.7% in 3Q2012.

Zacks analysts said in a note weak natural gas prices were affecting demand for gas-directed activity in North American (NAM).

"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 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 -- Halliburton Co. and Baker Hughes Inc. -- are also experiencing slower activity level in North America."

Earlier this month Baker, which tracks global rig counts, said U.S. rigs declined while international rigs showed gains in November. The international rig count for last month was 1,267, up eight from 1,259 counted in October and up 82 from 1,185 counted in November 2011.

"The average U.S. rig count for November was 1,809, down 25 from the 1,834 counted in October and down 202 from the 2,011 counted in November 2011," Baker said. "The average Canadian rig count for November 2012 was 384, up 19 from the 365...in October 2012 and down 103 from the 487 counted in November 2011."

Worldwide, the rig count for November was 3,460, up two from the 3,458 counted in October and down 223 from the 3,683 counted in November 2011.

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