Schlumberger Is Going Where No Oilfield Service Company Will Tread

NEW YORK (TheStreet) - Oilfield-services titan Schlumberger (SLB) is targeting growth even as the biggest oil companies are cutting back on their spending.

In its recent quarterly results, Schlumberger's first-quarter revenue came up short of analysts' estimates, but the company delivered on earnings. The company's competitive advantage lies in its large global footprint which remains unparalleled in the industry.

This advantage fueled the company's overall margin expansion despite weakness in North America. The same advantage could drive Schlumberger's growth in the coming years as state-owned oil companies continue to spend billions of dollars even as oil majors cut back on capital spending.

Year-to-date, Schlumberger shares have gained 14%, currently trading at $101, easily outperforming the broader oilfield services industry as represented by the Market Vectors Oil Service ETF (OIH) and the iShares U.S. Oil Equipment & Services ETF (IEZ).

In the first quarter, Schlumberger's revenue climbed 6.3% from the same quarter last year to $11.23 billion while income from the continuing operations rose 32.6% to $1.60 billion, or $1.21 per share. Analysts, on the other hand, were expecting earnings of $1.20 per share from revenues of $11.49 billion.

In North America, Schlumberger reported a 12% revenue growth to $3.68 billion. The lower prices for pressure pumping services for onshore drilling and operational delays at the Gulf of Mexico had an adverse impact on the pretax operating margins which fell 53 basis points.

However, unlike its rivals, Schlumberger has little exposure to North America. The company gets a third of its revenues from this region as opposed to its two biggest competitors, Halliburton (HAL) and Baker Hughes (BHI), which generate nearly 50% of their revenues from North America.

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