Schlumberger Ltd. (NYSE: SLB – $80.47) the world’s largest oilfield services provider, reported a quarterly profit that topped analysts’ expectations as more oil producers put rigs back to work in North America. But, Schlumberger said there were no “material movements” on pricing during the period. For the quarter, excluding results from Cameron International Corp, which Schlumberger acquired earlier this year, third-quarter land-based revenue in North America rose 14% from the second quarter. The company, which derives more than three-fourths of its revenue from international operations, said there were early signs of recovery in most parts of the world following a two-year slump in oil prices that put the brakes on global drilling activity. Schlumberger said it expects “solid growth” in the Middle East and Russia in 2017 on a full-year basis, adding that it was also seeing an uptick in investment and activity in Latin America, Europe and Africa. Excluding charges related to the Cameron merger and integration costs, SLB earned $0.25 per share, above the analysts’ average estimate of $0.22, but well below the $0.78 earned in the third quarter last year. Revenue fell 17% to $7.02 billion, shy of analysts’ estimates of $7.08 billion.
Schlumberger believes it may be able to achieve $1 billion in synergies from the Cameron purchase within three years. The company also has decent leverage to the next upturn in the business cycle as labor costs – the biggest expense for many oilfield service companies – have been sharply reduced, with more than one-third of the workforce downsized in the past two years. That said, these high-quality shares remain a nice fit for conservative accounts looking for a candidate with strong long-term comeback potential. The stock also yields 2.4%, at current levels.