This column was originally published on RealMoney on Oct. 21 at 3:56 p.m. EDT. It's being republished as a bonus for TheStreet.com readers.

Though oil and gas stocks are feeling the pinch of lower commodity prices, this week's earnings and outlooks for energy companies paint a very different picture.

Earlier this week, after Lufkin Industries ( LUFK) reported a solid quarter and gave a rosy outlook, its shares bucked the sloppy energy stock trend and worked higher. That provided some hope that earnings will matter this quarter.

On Friday, Schlumberger ( SLB) announced a solid quarter, but the stock was soft as traders focused on crude oil trading below $60 a barrel.

That is important in the short term and will remain important until we find a new base for the price of crude and natural gas. However, once the markets find a new base -- likely somewhere in the $50s -- fundamentals will again become important, and then energy stocks are likely to be a value investor's friend.

Schlumberger Speeds Up

Usually soft-spoken and conservative, Schlumberger CEO Andrew Gould was sanguine about the company's future. "Third-quarter activity strengthened on a global basis as exploration and production activity continued to grow rapidly worldwide," Gould said in his earnings comments. "The industry response to the current lack of an oil supply cushion and the long-term need to increase supplies of natural gas is under way but is still far from reaching a peak."

The company posted earnings of 86 cents a share for the third quarter, in line with expectations. However, the company's results were stronger than the number suggests given Schlumberger said hurricanes Katrina and Rita resulted in an opportunity cost of 6 cents a share in third-quarter earnings.

Moreover, Gould's comments about the future appear very positive, suggesting Schlumberger will likely post double-digit growth for the balance of the decade as the world attempts to cope with accelerating production declines and the need for more stability in hydrocarbon supply. The strength will likely be universal. Growth will be spread from longtime markets such as the Gulf of Mexico and the North Sea to emerging markets in the Eastern Hemisphere and Latin America.

A Different Cycle

The sustainable growth described by Gould is important, because it suggests something I have discussed in these pages before: This energy cycle will likely be longer in duration than previous cycles.

On the supply side, natural gas and oil production depletion is more significant than in previous cycles, as the "low-hanging fruit" has been picked. Remember, we have more than doubled the number of rigs drilling for natural gas in North America in the past year, and net natural gas production has been slow to respond.

On the demand side, while high prices may have curtailed some demand, economic growth combined with strong demand from China, India and other developing regions will continue to pressure the market for more hydrocarbon supply. Until increased drilling and new technology bring us new supply, the markets will remain tight, and oilfield activity will remain strong.

Stormy Results

One other important note from the Schlumberger call: The company said the impact of Katrina and Rita will carry into the fourth quarter, costing 3 cents to 4 cents.

That type of talk will likely come from just about every exploration and energy service company with exposure to the Gulf of Mexico and, as with Schlumberger, it will affect earnings. While those opportunity costs are real, they also should be considered when looking at the overall strength of the energy markets.

While the real number for Schlumberger was 86 cents for the quarter (it's wrong to adjust that number for the lost profit from the storms), the lost opportunities are not lost forever. Rather, they are mostly delayed. Future demand for drilling rigs, oilfield services and other energy-related products is not only sustainable but is likely to grow into the coming year.

Also, as Schlumberger and Noble ( NE) both indicated on their conference calls Friday morning, as cash levels rise, even after reinvestment in the business, companies are likely to increase dividends and accelerate share buybacks, a move that will only enhance shareholder value in the coming months.

Patience

There have been a lot of crosscurrents in the last two weeks that have likely affected energy equity prices. The decline in commodity prices, liquidations at Refco ( RFXCQ), large sellers of the integrated oil providers with prints that didn't hold, concerns over economic growth and interest rates and general market malaise have all contributed to the pain heaped on energy investors.

While the economic issues are worth watching, the other issues appear more transient, and are unlikely to have an impact on longer-term fundamentals. The short-term volatility stemming from these issues could last another few days or several weeks. However, with earnings coming next week from scores of energy companies, numbers should matter. And if they do, energy stocks are going to look cheaper than they have looked in at least a year.

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At time of publication, Edmonds was long Schlumberger, although holdings can change at any time.

Christopher S. Edmonds is partner and managing director of research at Pritchard Capital Partners, a New Orleans energy investment firm. He is based in Atlanta. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. While Edmonds cannot provide investment advice or recommendations, he appreciates your feedback; click here to send him an email.

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