Summary
Schlumberger reported third-quarter revenue of $5.43 billion compared with $7.26 billion in the third quarter of 2008. Quarterly sequential results were about the same. Oilfield Service revenue was down 22% year on year while Western Geco was down 48%. CEO Andrew Gould predicted that the remainder of 2009 could show modest gas drilling improvement but flat pricing. He saw no significant oil service activity increase until late 2010. New liquefied natural gas (LNG) will keep prices low.
Analysis
Financial and activity reports from the major internationals are focused on their particular areas of operation and thus present a somewhat skewed outlook. By reading them all, it is possible to make a fair assessment of future international activity. These same reports by independent oil companies paint a different picture. While exceptions exist, the independents are cutting budgets and laying behind the log, waiting for better days. Schlumberger operates in every geographical region of the world and provides a suite of oilfield services and geophysical surveys to a great multitude of clients, major, independent and national oil and gas companies. Thus their reports show an accurate picture of the state of the entire oil and gas industry. That picture, while improved over the last year still reveals considerable uncertainty as regards exploration and production decisions by heads of all companies. In a companion release to the earnings statement, the company stressed that much of their recent revenue improvement is the result of their relentless dedication to research and development. Recently Schlumberger opened a new reservoir completion manufacturing center in Dammam, Saudi Arabia. In Brazil, the company has agreed with the Federal University of Rio de Janeiro to conduct research activity or the deep-water pre-salt environment where potential production problems loom large. In the U.S., Schlumberger and National Oilwell Varco formed a joint venture to provide high-speed drill string telemetry. Some recent contract awards were only possible because of superior state-of-the-science technology particularly in wire line logging operations in highly deviated well bores. A new sonic-while-drilling service coupled with their PowerDrive rotary steerable was deployed in the Marcellus, Haynesville and Woodford shale plays. None of the above is to suggest that Schlumberger's competitors are lagging in their efforts. All of the service companies, Halliburton, Baker Hughes, Weatherford International as well as EXCO in the United Kingdom are fiercely racing the clock trying to come out with the next generation of high technology whether it be rock bit design, new fracturing and propping techniques or improved perforation tools. Adversity provides the proving ground for new methods to lower costs, a paramount consideration today, especially in the shale gas drilling market. Schlumberger can operate in markets where other service companies fear to tread. Thus their financial and operational reports cover more ground and give a more accurate picture of the worldwide market for oilfield and geophysical services. Significantly, seismic revenue was down almost 50%, not a good omen for future activity. The company's Q-4 and full year 2009 reports are certain to be must-reads for oil and gas executives all around the world.
