Oilfield service companies say unrest lowers profits

Forbes.com-Reuters, 04.22.03, 8:41 PM ET By Erwin Seba

HOUSTON, April 22 (Reuters) - Two of the world's largest oilfield services companies on Tuesday said strong North American drilling activity helped offset lower international demand caused by political turmoil in oil-rich Nigeria and Venezuela. Baker Hughes Inc (nyse: BHI - news - people), the No. 3 oilfield services company, reported first-quarter earnings that rose 33 percent on the strength of North American drilling activity spurred by big natural gas demand. Schlumberger Ltd (nyse: SLB - news - people), the largest oilfield services company in the world, said North American activity was strong, but not enough to offset lower international revenues and weaker demand at its seismic and information technology units. The company's first quarter earnings fell 14 percent over the first quarter of 2002. Schlumberger, headquartered in Paris and New York, reported net income of $149 million, or 26 cents per share, compared with $172.5 million, or 30 cents per share, a year ago. Analysts had projected earnings per share in a range of 29 cents to 19 cents, with a mean of 24 cents, according to Thomson First Call. Schlumberger said operating revenue rose 2.5 percent to $3.34 billion in the quarter, compared with $3.26 billion in the year-ago period. Houston-based Baker Hughes said net income in the first quarter increased to $44.5 million or 13 cents a share, from $33.3 million or 10 cents a share, in the same period a year ago. Baker Hughes said it expects to meet Wall Street's earnings expectations for the second quarter and full year. "Investors have been waiting for companies like Baker Hughes to voice their optimism," said analyst James Wicklund of Banc of America Securities. "They don't seem to be irrationally exuberant." Baker Hughes on April 11 cut its first-quarter earnings guidance down to the 13-cent range from nearly 20 cents, blaming disruptions in the lucrative drilling markets in Nigeria and Venezuela. On generally accepted accounting principles (GAAP) basis, Baker Hughes' first-quarter profit was $47.4 million or 14 cents a share, compared to $70.6 million or 21 cents per share. Analysts on average expected the company to post earnings of 14 cents a share, according to research firm Thomson First Call. Schlumberger, however, was more cautious in its outlook, saying only that rising demand for oilfield services in North America is likely to continue. Activity levels outside North America "will remain uncertain until the global economic environment improves the outlook for energy demand," the company said in a statement.