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Two oil services giants continue to pump out big operating profits.



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fell shy of revenue estimates -- and the latter actually posted a net loss -- both companies reported a surge in second-quarter operating profits as business picked up due to high energy prices. Schlumberger saw revenue increase 13% to $2.86 billion, and earnings per share jump an even higher 23% to 48 cents, in the latest period. Still, Wall Street was looking for slightly larger numbers on both the company's top and bottom lines.

Thus, Schlumberger's stock slipped 1.4% to $63.38 on Friday morning.

But Bob Howard, the author of investment newsletter

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, viewed the drop as a fresh buying opportunity. Howard, who recommends the stock to his clients but doesn't own it himself, insists that better times still lie ahead for the oil services giant.

"The biggest change will happen when the big boys at


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, etc., are convinced that energy prices are going to stay high," Howard said. "It is happening more and more, but the best is yet to come. That is why you can buy Schlumberger here and still get in at a decent beginning of the upswing."

Schlumberger itself was similarly upbeat.

"North America pricing moved up satisfactorily in the quarter," CEO Andrew Gould stated. "The growing realization that at current levels of demand, very little spare oil production capacity exists will ensure continued strong growth over the coming quarters."

Halliburton posted strong results for its oil services division as well. But Halliburton's controversial KBR unit -- best known for its giant contracts in Iraq -- continued to drag down the company's overall performance. Halliburton reported that second-quarter revenue surged 38% to $5 billion due primarily to its government projects in the Middle East. But it also posted another big charge on a KBR project in Brazil that pushed company-wide results into the red.

Excluding the special charge, however, Halliburton posted second-quarter earnings of 34 cents a share that beat the consensus estimate by a penny. Nevertheless, the company's stock slipped 20 cents to $30.84 late Friday morning.

Like many, Massachusetts investment strategist Peter Cohan found himself dwelling on KBR's typically poor performance.

"I would almost say that Halliburton shouldn't even be in the engineering and construction business," he said. "It's a money-loser for them. And who needs all the headaches?"

Some analysts predict that Halliburton will actually shed its KBR unit after settling asbestos litigation that has hung over the division for years. If so, Cohan says, Halliburton will emerge as a very different company.

"It would probably be two-thirds smaller," he said, "but it would be profitable -- which is good."

Schlumberger has already exited a number of noncore businesses so that it can focus on its real strength in oil services. Some would be happy to see Halliburton do the same.

Cohan, for one, sees a threat to that strategy only if energy prices -- and thus drilling activity -- sharply decline. He points out that energy has always been a cyclical business that will probably remain so. But he says that demand is mounting along with unrest in particularly oil-rich nations. Thus, he doesn't foresee a near-term shift "absent a totally unexpected breakout of worldwide peace and harmony."

"Now is a good time to be focused on oil services," he concluded. "I don't know how long that time is going to last. ... It seems like it would take a miracle for all of the factors

contributing to high energy prices to actually go away."