Calling the oil services industry a huge disappointment in 2012 would be a gross understatement. This is despite the strong bets placed by many industry experts at the beginning of the year. Now that 2013 has arrived, investors are back at the booth placing their wagers on better improvement.
Schlumberger Limited. (NYSE:SLB) is one of the names on which many have begun to lay their money. The stock is up almost 10% during the past three months and while this company is far from a sure thing, Schlumberger is the best in the sector. But this distinction was not enough to overcome pricing weakness and soft demand in North America.
Schlumberger Limited. (NYSE:SLB) has had to rely on international business to offset a host of North American struggles, including an excess of pressure pumping equipment, all of which contributed to a subpar third-quarter report. Then, in December, the company sent a note to investors advising that earnings could be adversely affected by as much as $0.07 per share due to prolonged contractual delays in the Europe/CIS/Africa area.
Essentially, the Street was prepared for the worst. But with revenue advancing 5% sequentially, Schlumberger managed to post results that were “less bad” than expected. Oil service revenue arrived at $11.17 billion — growing 8% year over year. Granted, this is far from breathtaking. But it was enough to beat Street estimates of $10.82.
Plus Schlumberger Limited. (NYSE:SLB)’s results created a bit more separation from chief rival Halliburton Company (NYSE:HAL). Then again, Halliburton also deserves its share of credit. Despite low expectations, the company beat Street projections on both top and bottom lines by posting $7.3 billion in revenue and earning $0.67 per share.
Nonetheless, there is a noticeable difference in performance when comparing these two companies. For instance, not only did Schlumberger advanced revenue roughly 2% more sequentially than Halliburton Company (NYSE:HAL), but it was almost 6% more year over year. Does this mean that Schlumberger is executing better? It’s hard to argue against it. Does it also mean that Schlumberger is gaining market share? If so, how much does it matter?
Although it appears that Halliburton Company (NYSE:HAL) is lagging behind, the company is nonetheless posting record revenue results. This is despite the lower rate of growth. Essentially, yes, Schlumberger is doing well. In fact, I will go far to say that it’s doing better, by comparison. But Schlumberger Limited. (NYSE:SLB) is not necessarily winning more business over Halliburton. The playing field or, in this case, the oil field is leveled in terms of profits. In this sector, the bottom line is critical.
Schlumberger posted net income of $1.08 per share, topping Street estimates by one penny. Although operating income grew 1% sequentially, it arrived flat year over year. Plus, income from continuing operations was not that exciting. Not only did it arrive flat sequentially, but it represented a 3% decline year over year.
Meanwhile, although Halliburton Company (NYSE:HAL) didn’t fare any better on the bottom line, the company still posted net income of $981 million. This means it was enough to advance sequentially by 3% and arrived flat year over year. So, from that standpoint, although Schlumberger is winning on the top line, Halliburton is outperforming on the bottom line. But this does not necessarily mean that one is better than the other. The race is clearly too close to call.