Oilfield services leader Schlumberger
Schlumberger shares rose as much as 4 percent to their highest level in six weeks, even though Chief Executive Officer Paal Kibsgaard warned that analysts' first-quarter profit expectations were on the optimistic side.
A similar warning from the new CEO three months ago knocked 10 cents off estimates for the fourth quarter. The current average first-quarter earnings estimate for Schlumberger is $1.07 per share, according to Thomson Reuters I/B/E/S.
The International Energy Agency cut its oil demand forecast this week, saying the possibility of a credit crunch in Europe could set off a recession that would cut energy consumption.
European gloom also weighed on the minds of the management at General Electric Co
Oilfield service companies have benefited from strong oil prices, which have prompted their energy-producing customers to hike spending by about 10 percent this year, according to a survey by Barclays Capital.
Against this backdrop, we are planning for growth in 2012, although we are building significant flexibility into our plans, given the uncertainties, Kibsgaard said on a conference call.
So while Schlumberger expects 2012 capital spending to rise 12 percent to nearly $4.5 billion this year, it said it was building the required flexibility into those plans.
This is code for throttling back on spending, at a minimum, if warranted, according to Simmons & Co analyst Bill Herbert.
Fourth-quarter net profit rose to $1.4 billion, or $1.05 per share, from $1.0 billion, or 76 cents per share, a year earlier. Excluding one-time items, earnings per share of $1.11 topped the $1.09 that analysts on average were expecting.
Revenue rose 21 percent to $11 billion.
North American growth was driven by work in the deepwater Gulf of Mexico, where activity is increasing after the 2010 BP Plc
Kibsgaard expects about a deepwater rig per month, on average, to move in to the Gulf of Mexico in 2012, with the rig count there topping the level seen prior to the BP disaster later in the year.
Offshore activity in Africa and land business in the Middle East and North Africa were also strong, the company said.
Analysts at Pritchard Capital said positive talk on Iraq was a surprise, given recent chatter about activity there. We think these results internationally augur well for other companies with large exposure outside North America, specifically Weatherford
Schlumberger rivals Halliburton Co
Schlumberger said recent price increases that helped the onshore business in North America had slowed from the third quarter, but it was sticking with its plans to build more hydraulic fracturing capacity, for now.
U.S. drilling activity has exploded in recent years as the development of shale rock formations through fracking has surged, which has been a boon for Schlumberger, Halliburton and Baker Hughes.
But that drilling has also led to a glut of natural gas and pushed prices for the fuel to its lowest levels in a decade, raising expectations that such activity will decline.
Kibsgaard said he expected the onshore North American rig count to remain about flat this year, with growth in oil basins offsetting the decline in natural gas drilling.
Shares of Schlumberger were up 1.9 percent at $74.23 in morning training after rising as high as $75.75 earlier in the session.
(Reporting by Matt Daily in New York, Krishna N Das in Bangalore and Braden Reddall in San Francisco; Editing by Lisa Von Ahn)