Schlumberger Tops Q4 Profit Forecast, Sees Improving Oil Demand in 2020

Schlumberger said Friday that the recently-signed U.S.-China trade deal, as well as rising geopolitical tensions, would likely set a floor for oil prices in 2020 and lift near-term demand.

Schlumberger NV  (SLB) - Get Report posted stronger-than-expected fourth quarter earnings Friday as profit margins improved, but held its 2020 capex plans steady as the oil services company's biggest customers continue to trim drilling investments.

Schlumberger said adjusted earnings for the three months ending in December came in at 39 cents per share, up 8.3% from the same period last year and 2 cents ahead of the Street consensus forecast. Group revenues, Schlumberger said, were essentially flat to last year at $8.2 billion, coming in just ahead of analysts' forecasts of an $8.15 billion tally, thanks to an 8.3% gain in international sales that offset "challenging conditions" in North America.

Schlumberger said its pre-tax operating margin improved 40 basis points from the fourth quarter of last year to 12.8%, even as U.S. crude prices fell from a peak of $77 per barrel in September 2018 to around $63 by the end of last year. Capex in 2020, Schlumberger said, is expected to be around $1.7 billion, matching last year's total.

"Overall performance was positive—particularly in the international markets—and we generated $2.7 billion in free cash flow, which was a remarkable achievement under these market conditions," CEO Olivier Le Peuch. "Full-year pretax segment operating margin of 12%, however, was slightly down year-on-year."

“In contrast, after two years of strong growth, North American revenue fell sharply, driven largely by the land market weakness affecting our OneStim pressure pumping business, as customers reached their budget limits earlier in the year and remained highly disciplined on capital spend," he added. 

Schlumberger shares were marked 1.6% higher in early trading Friday following the earnings release to change hands at $39.54 each, a move that still leaves the stock nursing a negative return over the past six months.