By Braden Reddall and Matt Daily
SAN FRANCISCO/NEW YORK (Reuters) - SCHLUMBERGER (SLB.NY)Ltd
The impact of oil prices losing half their value in three months, after peaking at $147 in July, has forced the entire industry to reassess plans for the next year, though Schlumberger said it was too early to be specific.
Chief Executive Andrew Gould, with some caution, predicted spending by its customers overall would be higher in 2009, but growth would be slower.
"It is so dynamic -- in two weeks' time it could be completely different," he told analysts on a conference call.
Shares of the company, already down a third in the last month, were off 7 percent at midday Friday, dragging down shares of rivals despite a rise in crude oil prices.
The problems facing indebted energy producers have been typified by leading U.S. natural gas producer Chesapeake Energy Corp
Gould described a worst-case scenario in which a collapse in energy demand prompted a flurry of mergers and acquisitions among Schlumberger customers, who would then halt production until prices recovered.
But a key difference between this and previous downturns is the tightness of global energy supply, he said, meaning prices should bounce back quicker.
"To the extent that they actually shut everything down, which they may well do, the recovery is going to be all the stronger at the first sign that the demand is picking up again," Gould said.
SPENT HEAVILY
The weaker market conditions come on the heels of a quarter when crude oil prices surged to record levels, peaking at $147 per barrel in July.
That helped boost Schlumberger's third-quarter profit by 13 percent, it said on Friday, as energy producers spent heavily to capture the high prices. The results met Wall Street expectations.
But both crude oil and natural gas prices have since fallen by more than 50 percent, raising investors' fears of slashed spending on exploration and production projects.
Brisk natural gas drilling activity across North America in the third quarter helped offset damage from hurricanes that ripped through Gulf of Mexico oil and gas operations, but gas producers were already beginning to pare back operations.
Schlumberger and peers such as Halliburton Co
In anticipation of slower customer spending, Gould said Schlumberger would look at its own capital expenditure plan for the second half of 2009 "very closely" in the next few months.
Shares of Schlumberger at midday were at $49.47, after earlier falling to $45.25, their lowest since November 2005.
Gould said there were some cash-strapped smaller rivals offering to sell the industry leader their assets.
"We are getting more phone calls than we were three months ago," he said. "But there's not an avalanche of distressed people calling or sending people round to sell us stuff."
The company was largely unconcerned about customers short of credit breaking contracts, which often allowed for variation in production levels as an alternative. "The operators don't break contracts, they shut down rigs," Gould said.
PROFIT ON TARGET
At Schlumberger, third-quarter net profit rose to $1.53 billion, or $1.25 per share, from $1.35 billion, or $1.09 per share, a year earlier. The results met analysts' average forecast, according to Reuters Estimates.
Revenue increased 22 percent to $7.26 billion. Analysts were expecting $7 billion.
Operating profit at the oilfield services arm rose 13 percent to $1.7 billion, while the WesternGeco seismic unit, which measures underground oil and gas reservoirs, saw earnings climb 16 percent to $355 million.
With its relatively lower exposure to the struggling North American natural gas market, Schlumberger looks well placed, analysts at Pritchard Capital Partners said. But the company's stock valuation of nearly 10 times estimated 2009 earnings is already nearly twice that of rivals.
Pritchard said in a note on Thursday that Halliburton and Baker Hughes offered qualities similar to Schlumberger, but both were at more attractive 2009 multiples of about 5.
(Editing by Brian Moss and Lisa Von Ahn)
