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What Did Schlumberger Limited. (SLB)’s Results Say to Energy Investors?

Schlumberger Limited. (NYSE:SLB), the big enchilada of oil-field services, did more than simply kick off reporting season for this industry as last week came to a close. In the process, the company demonstrated once again the benefits of participating in worldwide oil and gas operations.

Schlumberger Limited. (NYSE:SLB)

The numbers
For the quarter, Schlumberger Limited. (NYSE:SLB) recorded earnings of $2.1 billion, or $1.57 per share, an increase from $1.4 billion, or $1.05 per share in the second quarter of 2012. Without one-time items, however, the most recent quarter’s per-share number was $1.15, or $0.05 higher than the consensus among analysts.

Looking at Schlumberger Limited. (NYSE:SLB)’s income statement, the most significant one-time item involved a gain of more than $1 billion on the formation with Cameron International Corporation (NYSE:CAM) of OneSubsea, a joint venture whose charter is the provision of solutions for the subsea market. Schlumberger has a 40% interest in the partnership — which was finalized at quarter’s end — to Cameron’s 60%.

Schlumberger Limited. (NYSE:SLB) was joined in reporting Friday by Baker Hughes Incorporated (NYSE:BHI). However, the smaller company slid below year-ago results and missed on analysts’ expectations. As such, while Schlumberger’s shares rose by 5.4% on the day, Baker Hughes Incorporated (NYSE:BHI)’s dipped by 2.6%.

In addition to its solid quarterly results, an announcement that its board had approved a $10 billion, five-year, buyback program also boosted Schlumberger Limited. (NYSE:SLB)’s share price. An existing $8 billion buyback program will be completed during the current quarter.

The geographic variables
From an all-important geographic perspective, all of the regions in which the company operates contributed to an overall 8% increase in revenues to $11.18 billion. Given the regional variances in activity levels and the lingering slowdown in U.S. onshore activity, it’s significant that Schlumberger Limited. (NYSE:SLB) generates less than a third of its revenue in North America, considerably below the other major services providers.

The company’s overall pre-tax margin rose by 70 basis points. However, the North American margin, at 19.7%, was below the year-ago 20.5%. Conversely, the Middle East and Asia region generated a margin that catapulted to 24.6%, compared with 21.3% for the comparable quarter of 2012. That region benefited from increased drilling activity in China and Australia, along with continued strength in Saudi Arabia and Iraq.

Precisely what does Schlumberger do for its customers?
Schlumberger does a far better job than its peers of providing a look at the sorts of projects in which it’s involved. One result is an improved perception of the significant role the company plays in the production of oil and gas globally. For instance:

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