Oilfield services leader Schlumberger Ltd reported slightly better-than-expected quarterly earnings on Friday but warned North American natural gas activity would remain weak until late 2010.
Oil field service companies have been hurt as oil and gas producers have slashed spending this year. Firmer oil prices have helped stabilize spending in some regions, but natural gas prices globally have been too low to prompt companies to drill new wells.
We consider that world gas markets are oversupplied and will remain so for some time absent any strong recovery in industrial demand, Schlumberger Chairman and Chief Executive Andrew Gould said in a statement.
Third-quarter net profit sank to $789 million, or 65 cents per share, from $1.54 billion, or $1.25 a share, a year earlier.
The latest results beat analysts' average earnings forecast by 2 cents per share, according to Thomson Reuters I/B/E/S.
The beat seems to be partially driven by cost-cutting they did, which enabled them to have slightly better margins, said Mark Brown, an analyst at Pritchard Capital
Like others in the sector, Schlumberger cut thousands of jobs this year amid the weak market conditions.
Quarterly revenue slumped by 25 percent to $5.43 billion, about in line with analysts' average forecast of $5.48 billion.
Oil field services revenue sank 22 percent to $4.95 billion.
The company's WesternGeco seismic technology arm saw revenue slide 48 percent to $463 billion and operating profit fall 83 percent, largely due to a shift in customers orders to the second quarter from the third, Brown said.
A modest increase in the number of rigs drilling for natural gas in North America could not stem a 45 percent decline in Schlumberger's North American oil field services revenue.
In North America, we feel the current slight recovery in drilling is fragile and not likely to significantly improve service activity and pricing until late 2010, Gould said.
Schlumberger has a broader international reach than many of its competitors and is not as reliant on the North American market as companies such as Halliburton Co , which reported a 61 percent drop in quarterly profit last week.
Still, Schlumberger's revenue in Europe, Africa and the former Soviet states fell by 18 percent from a year earlier, triple the decline in Latin America revenue.
Middle East and Asia revenue fell by 17 percent, the company said.
Schlumberger shares rose 0.5 percent in premarket trade to $69.00.
(Reporting by Matt Daily and Christopher Kaufman in New York and Braden Reddall in San Francisco; Editing by Lisa Von Ahn and John Wallace)