Schlumberger Earnings Just Meet Estimates (SLB, HAL, WFT, OIH)

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Schlumberger N.V. (NYSE:SLB) reported third quarter earnings this morning and the short story is there were no surprises. Like competitors Halliburton Co. (NYSE:HAL) and Weatherford International Ltd. (NYSE:WFT), onshore drilling for shale gas more than made up for declines in offshore work in the Gulf of Mexico that was halted following the blow-out of a BP plc (NYSE:BP) well that killed 11 people and spewed millions of barrels of crude oil into the Gulf.

Schlumberger reported diluted EPS of $0.70, excluding charges and credits, compared with $0.65 in the same period a year ago. Revenue totaled $6.85 billion compared with $5.43 billion in the year-ago quarter and $5.94 billion in the 2010 second quarter. Analysts had been expecting EPS of $0.69 on revenue of $6.83 billion.

Adding in the effect of Schlumberger’s acquistion of Smith International, EPS totaled $1.38. The M-I SWACO portion of Smith contributed $0.98 in EPS, offset by restructuring and merger charges of $0.30/share, resulting in the $0.68 boost to EPS. Schlumberger already owned 40% of M-I SWACO at the time of the merger with Smith.

On a pro-forma basis, Schlumberger’s revenues from the Smith acquisition totaled $2.34 billion in the quarter, and pre-tax operating income from Smith totaled $229 million. On the revenue side, Schlumberger’s reported $6.85 billion is reduced to $4.51 billion, about $1 billion less than the third quarter of 2009.

The deal with Smith closed in late August, so Schlumberger only realized one month’s revenue from the deal. Of the reported $6.85 billion in revenue, $810 million came from former Smith operations. Compared with the same period a year ago, and backing out the effects of the Smith merger, Schlumberger’s revenue increased by about $100 million.

The company offered no new guidance, but did say that demand for oil in 2011 will increase as long as the global economy doesn’t deteriorate further. Strong onshore drilling activity in North America is also expected to continue, but Schlumberger doesn’t see a “rapid return” to offshore drilling in the Gulf of Mexico due to new rules that still need to be clarified and implemented.

Shares in Schlumberger are up about 3% in pre-open trading. Halliburton shares and the Oil Services HOLDRs ETF (NYSE:OIH) are also both trading up less than 1% in pre-open activity.

Paul Ausick