Schlumberger posts profit gain for first quarter as revenue tops estimates

By Ciara Linnane

International revenue for the oil-services company rose 18% to offset softness in North America, CEO says

Schlumberger Ltd.'s stock fell 2.1% Friday after the oil-services company posted first-quarter earnings that showed profit matched consensus, while revenue beat it.

The company (SLB) had net income of $1.068 billion, or 74 cents a share, in the quarter, up from $934 million, or 65 cents a share, in the year-earlier period. Adjusted for one-time items, earnings per share came to 75 cents, matching the FactSet consensus.

Revenue rose 13% to $8.707 billion, just ahead of the $8.696 billion FactSet consensus.

Peter McNally, global sector lead for industrials, materials and energy at investment company Third Bridge, said after talking to industry experts that the numbers were largely in line with expectations.

The two issues facing Schlumberger for the rest of the year relate to the Middle East, which is the company's largest source of revenue. Restraint by the Organization of the Petroleum Exporting Countries has created spare capacity in oil production, dampening the outlook for some project development. Geopolitical tensions in the region are also creating uncertainty, although oil prices have strengthened since the start of the year.

"Overall, it was a solid but unspectacular quarter from Schlumberger. The company is delivering where it needs to, and it finds itself in a solid financial position," McNally said.

After the close of the quarter, Schlumberger announced an agreement to buy chemical- and drilling-technologies company ChampionX Corp. in an all-stock deal valued at about $7.8 billion.

The deal "will bolster our production and recovery portfolio," Chief Executive Olivier Le Peuch said in the earnings statement.

That deal came after the almost $400 million acquisition of 80% of carbon-capture company Aker Carbon Capture in March. The company is planning to contribute its own carbon-capture business to the new entity and take advantage of the demand for emissions reductions.

International revenue rose 18% in the quarter to compensate for softness in North America, where revenue fell 6%, Le Peuch said. The Middle East and Asia markets were especially strong, with growth of 29%, while Europe and Africa grew 18%, he said.

The company's core business - reservoir performance, well construction and production systems - saw revenue grow 13% and margins expand by more than 200 basis points, he said.

"This growth was supported by investments in long-cycle developments and production capacity expansions, particularly in the Middle East & Asia and Latin America," he said.

For the second quarter, Schlumberger is expecting a seasonal rebound in the Northern Hemisphere and robust activity internationally, led by the Middle East, Asia and Africa.

"The oil-and-gas industry continues to benefit from strong market fundamentals driven by a growing demand outlook," he said.

As the cycle persists, "we expect operators to increase their investments in production and reservoir recovery, with the goal of maximizing the efficiency and longevity of their producing assets. This will result in operating expenditures becoming an increasing part of global upstream spending over time," Le Peuch said.

The company is still expecting to return $7 billion to shareholders in 2024 and 2025.

The stock has fallen 3.1% in the year to date, while the S&P 500 has gained 5%.

-Ciara Linnane

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04-19-24 1030ET

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