NEW YORK/SAN FRANCISCO (Reuters) - Schlumberger Ltd said on Friday its profits sank and warned of spending cuts by customers in 2009, but its stock bounced off 3-1/2-year lows and rose more than 5 percent as investors expect the oilfield services leader to weather the turmoil well.
SCHLUMBERGER (SLB.NY)had already warned last month that its 2008 profit would fall short of Wall Street estimates as the sharp declines in energy prices since July prompted oil and gas producers to rein in spending on new projects.
Analysts at Tudor Pickering Holt said in a research note that while the results from the industry bellwether were not good, they were not a "disaster."
Longdley Zephirin, oil services analyst at Zephirin Group Inc, said the market welcomed Schlumberger's traditionally careful approach to the downturn. "Their general tone hasn't changed in recent quarters," he said. "Investors have reacted positively that Schlumberger will continue to be one of the top technology companies... after this thing blows off."
Energy analysts have forecast spending by oil and gas producers would drop by one-fifth or more in 2009 as companies move to conserve cash, and Schlumberger echoed that sentiment.
"We expect 2009 activity to weaken across the board with the most significant declines occurring in North American gas drilling, Russian oil production enhancement and in mature offshore basins," Chief Executive Andrew Gould said in a statement.
Gould told investors on a conference call that the company was cutting 5,000 jobs worldwide, and did not rule out more cuts in the first half of 2009, if necessary. The company said on Friday it employs 87,000 people in about 80 countries.
The company reported a net profit of $1.15 billion, or 95 cents per share, down from $1.38 billion, or $1.12 per share, although revenue rose nearly 10 percent to $6.87 billion.
Excluding charges and credits, the Houston-based company earned $1.24 billion, or $1.03 per share, slightly below analysts' forecasts for $1.04 per share, on revenue of $6.84 billion, according to Reuters Estimates.
Gould said most new oil and gas fields were not economical to develop at current low prices, and it would take time for inflation that has driven up exploration and production costs in recent years to abate.
Still, he said, despite heavy spending by producers to develop new resources in recent years, the supply situation has not improved much and the cuts in investments hitting the industry now would "sow the seeds of strong rebound."
Schlumberger reiterated that it was taking actions to cut its workforce, and said it had written off assets, including payments it was due from a client suffering from liquidity issues. It did not name the client.
Those charges cut fourth-quarter earnings by 8 cents per share.
Its WesternGeco seismic business, which measures prospective oil and gas reservoirs, posted a 68 percent drop in profit to $88 million and 25 percent drop in revenue to $599 million, but saw is backlog of work reach a record $1.77 billion.
The oilfield services business saw its pretax profit rise 4 percent to $1.6 billion in the quarter from a year ago, while revenue climbed 15 percent.
Shares of Schlumberger rose 5.2 percent to $39.21 in early trade, jumping from their lowest level since mid-2005 hit before the bell.
(Reporting by Matt Daily and Braden Reddall; Editing by Steve Orlofsky, Dave Zimmerman)
