Schlumberger Ltd (SLB), the leading technology company in the oilfield-services sector, is scheduled to report the third quarter results on Friday, October 23, 2009. In the last two quarters, the company's actual earnings exceeded the market's consensus significantly.
Analysts estimates for the quarter ending September 2009 (Q3) range from a low of $0.58 to a high of $0.73, with a consensus of $0.628. For the fiscal quarter ending September 2009, the consensus EPS forecast has increased over the past week from $0.625 to $0.628 (0.48%) and increased over the past month from $0.627 to $0.628 (0.16%). Of the 26 analysts making quarterly forecasts, 5 raised and 4 lowered their forecast.
For the last three years, the company's third quarter revenues trended up over second quarter revenues. I believe the trend will continue as the demand for oilfield-services has been growing as oil prices have been firming up.
Like many oil-services companies, Schlumberger struggled during the economic downturn as sluggish demand in North America and a drop in the price of crude oil futures ate into profits. In the second quarter press conference, the company said that the worst was over. So, I also agree with the other analysts who are forecasting increased revenue and EPS for the company. But, there is a significant probability that Schlumberger Ltd could report lower net income as its competitor Halliburton Co. (HAL) posted a sharp decline in third-quarter profit, largely hurt by continued pricing pressures in North America.
Going forward, a backlog of uncompleted natural gas wells could prove to be a boon for oilfield-services companies -- and help keep natural gas prices down should demand for the fuel improve. Halliburton Co. (HAL) Chief Executive David Lesar said last week that producers have left between 1,300 and 1,500 wells unfinished in North America. The rush to complete unfinished wells could boost service company activity, as it is the most expensive stage in the drilling process, accounting for roughly half the cost of a natural gas well.
In its weekly release on Friday, Baker Hughes Inc. (BHI) reported a slight dip in the number of rigs searching for oil and gas in the U.S., as producers restricted their drilling activities in response to the current supply overhang in the natural gas market. So, completing thousands of wells could also help pad natural gas supplies next year, even if the rig count remains low.
For the fiscal year ending December 2009, the consensus EPS forecast has remained the same over the past week at $2.670 and increased over the past month from $2.665 to $2.670 (0.19%). Of the 26 analysts making yearly forecasts, 6 raised and 4 lowered their forecast.
The company's stock closed Tuesday at $69.16, compared to the 52 week range of $35.05 and $71.1. I guess the stock is slightly overvalued at the current levels.
