SLB tops Q3 earnings estimates on strong global oil drilling activity
HOUSTON, Oct 20 (Reuters) - Top oil services company SLB beat quarterly profit estimates on Friday as rising oil demand boosted its international drilling and oilfield equipment sales, offsetting weaker demand in North America.
The Houston-based company, formerly called Schlumberger, gets about 80% of its revenue from non-U.S. markets and its business has benefited from growth in exploration and production, especially in the Middle East. The region accounts for about 30% of its overall revenue, according to Morgan Stanley.
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Its shares fell 4% in early trading on Friday as investors worried about the Israel-Gaza conflict spreading in the region and the potential impact on its operations in the region.
SLB CEO Olivier Le Peuch downplayed the risk to its business, saying its customers are investing for the long term. SLB expects to book record revenue in the region this year.
"The effect of Middle East and offshore will continue to give us the favorable backdrop," Le Peuch said. "The oil and gas industry continues to benefit from a multi-year growth cycle that has shifted to the international and offshore markets."
SLB is moving to resume work in Venezuela following the relaxation of U.S. sanctions there, he said.
Oil spending is accelerating as producers continue to invest in long-cycle developments, production capacity expansions, and enhanced gas production, he said.
International revenue rose 12% to $6.6 billion in the third quarter, compared with a year earlier. North America revenue climbed 6%, but declined sequentially due to reduced drilling activity in the onshore U.S. and the Gulf of Mexico.
In the near-term, North America could continue to disappoint due to lower natural gas prices and higher costs, said Longdley Zephrin of The Zephrin Group. Strength in the Middle East and Asia is not sustainable, he added.
SLB repeated its full-year financial targets, and said it would expand fourth quarter revenue at a high single-digit percentage rate.
Net income, excluding items, was 78 cents per share, for the three months ended Sept. 30, compared with the average analysts' estimate of 77 cents per share, according to LSEG data.
SLB also said it closed a joint venture deal with Aker Solutions and Subsea7 to form OneSubsea, which will focus on subsea production and reserves.
(Reporting by Arunima Kumar in Bengaluru; Editing by Anil D'Silva and Marguerita Choy)