Schlumberger NV Earnings Call Nuggets: Oil Market Fundamentals and International Activity Growth

Schlumberger NV (NYSE:SLB) recently reported its first quarter earnings and discussed the following topics in its earnings conference call.

Oil Market Fundamentals

J. David Anderson – JPMorgan: So, oil price weakness has really been weighing on these energy stocks lately. I know you touched on in your remarks there. But when you look at the fundamentals of the oil market right now, has anything changed really kind of as you’ve been looking at the fundamentals? Has anything kind of getting you concerned regarding your outlook or is it really basically the same as you saw it 90 days ago?

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Paal Kibsgaard – CEO: Well, at this stage, we haven’t really changed our outlook. We have obviously seen the recent drop in Brent prices which is mainly driven by the macro numbers, the recent macro numbers and also, seasonally lower demand. But we still expect very strong support around $100 per barrel as the amounts pick up from the seasonal low in Q2. So, overall, we have not really changed our view at this stage?

J. David Anderson – JPMorgan: Are any markets out there particularly vulnerable you think to a slowdown or is there still more than enough cushion here that you don’t really get too concerned here?

Paal Kibsgaard – CEO: No, I’m not overly concerned. I think with the level that you see both on WTI and Brent at this stage, I think at current levels both the international activity as well as North American liquids activity is pretty solid at these levels.

J. David Anderson – JPMorgan: And could you just touch on a little bit more on the Middle East just expand some of your comments there. Last quarter, I believe, you said you expected the rig count to get to about 170 rigs. Do you still think that? Is it higher or is it lower than that and also, if you could touch on how much of the incremental demand is coming from unconventional gas?

Paal Kibsgaard – CEO: Well, if you look at the Q1 performance in Saudi, that was, as I mentioned, quite strong for us and the total rigs at the end of the quarter was now up to 140. We’re still maintaining the number of 170 rigs by year-end. So, really no change to the Saudi outlook. It’s progressing pretty much in line with what we were expecting. And what was the second part of your question?

J. David Anderson – JPMorgan: I was just curious as to how much of that incremental demand that you’re seeing is going to go towards unconventional gas or the tight gas that they are going for these days.

Paal Kibsgaard – CEO: So, I would say, in 2013 that is still going to be quite limited. There are pilots ongoing which we’re involved with. But in terms of overall rig count and activity level, these are still quite small in the overall picture in Saudi. So, not a significant part in 2013.

International Activity Growth

James West – Barclays Capital: Paal, one quick question and a follow-up which may be a little bit longer, but do you still expect 10 percentage type international activity growth this year?

Paal Kibsgaard – CEO: Yes. So that’s roughly where we see it. No real change to what we said in January, about 10% increase in international E&P spend.

James West – Barclays Capital: And as a follow-up, so if we think about international pricing, you obviously cited six quarters of increased revenue per rig. One of your competitors this morning cited Saudi and the ramp-up there as a potential catalyst to create an inflection point. I know one of your other competitors has talked recently about this is the time now to raise pricing. Are you seeing evidence from the competition in the market? I know you guys have been trying to push pricing for a while here. Are you seeing evidence that your competitors are now onboard with this and starting to push price internationally?

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Paal Kibsgaard – CEO: Well, in fairness, I haven’t seen any significant change in behavior. I think we have moved from the nonsense pricing that we saw a few years back. But apart from that, no dramatic change in behavior from the main players as far as we’ve seen. We have continually been able to drive revenue per rig which is kind of the overall pricing indicator. That has to do with new technology sales. It has to do with the efficiency and it has to do with the overall quality of our operations. But in terms of bid pricing, other than testing pricing on small and medium sized bids with reasonable success there hasn’t been any dramatic change and we still don’t foresee any major inflection in 2013 based on where we stand today.

A Closer Look: Schlumberger NV Earnings Cheat Sheet>>