Schlumberger beats profit estimates as international drilling ramps up

Schlumberger posted its highest profit in seven years as overseas drillers put oil and gas rigs back to work, following North America’s lead amid tight global supplies. 

The world’s biggest oil-services provider joined smaller rival Baker Hughes Co. in predicting an international sales expansion over the final three months of the year. Schlumberger’s third-quarter adjusted net income rose to $907 million, the highest since 2015. The shares rose two per cent in pre-market trading.

“We delivered another quarter of double-digit revenue growth and margin expansion, as the pace of growth in our international business stepped up significantly, complementing already robust levels of activity in North America,” chief executive officer Olivier Le Peuch said Friday in a statement announcing the results. “We expect to deliver sequential revenue growth and margin expansion in the fourth quarter.”

Schlumberger and its peers are cashing in as the energy industry’s multiyear expansion outpaces available supplies of labour and equipment in the world’s oil and gas fields. As a result of the higher service prices, drillers are expected to boost spending by double digits globally next year, Baker Hughes told investors this week.

More global oil and natural gas investment is needed to rebalance markets and rebuild spare capacity, Le Peuch said.

“All of these are exacerbated by geopolitics and increasing instances of supply disruptions,” he said. “These dynamics and the urgency to restore balance are resulting in a supply-led upcycle.”

Though the invasion of Ukraine has thrown global energy markets into disarray, Schlumberger hasn’t gone as far as rivals Baker Hughes and Halliburton Co. in disengaging from Russia. Le Peuch has said the company’s unique corporate structure gives it flexibility to work in Russia while fully complying with US and EU sanctions. The company, based in Houston and Paris, has $400 million in unpaid bills stranded in Russia as the country’s international isolation deepens, it said in late July.

Schlumberger, which is an industry bellwether because of its unmatched global footprint and extensive international order book, previously forecast its biggest jump in annual sales in more than a decade. While the international rig count remains 25 per cent lower than three years ago, the company’s sales have already topped revenue from that period.

“This comparison highlights the significant gains we have made in strengthening our market participation and our continued growth potential as rigs mobilize internationally in the quarters to come,” Le Peuch said.

Shares of Baker Hughes surged on Wednesday as the company affirmed analysts’ estimates that earnings per share will jump 50 per cent in the fourth quarter from the current one. Halliburton, the world’s biggest frack-services provider, will round out earnings for the Big 3 oilfield contractors when it reports on Oct. 25.

© 2022 Bloomberg L.P.

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