By Arunima Kumar and Liz Hampton
(Reuters) -Top oilfield firm provider SLB beat Wall Street estimates for first-quarter profit on Friday, as elevated crude prices and tight supplies increased demand for its services and equipment.
Global oil prices averaged $81.24 a barrel in the January-March quarter, down nearly 20% from a year earlier but still well above a level where oil and gas producers can drill profitably.
Brent futures were trading around $81.50 a barrel on Friday, up half a percent.
A recent decision by OPEC+ producer countries to support commodity prices through an output cut is providing operators with increased confidence, said SLB CEO Olivier Le Peuch said in a statement.
“The international and offshore markets continue to experience a strong resurgence of activity driven by resilient long-cycle development and capacity expansion projects,” he said.
Quarterly revenue in SLB’s international business grew by 29% year-on-year to $5.97 billion, while North American revenue was up 32% over that period to $1.7 billion.
SLB expects to post its highest revenue ever in the Middle East, Le Peuch told investors during a call.
Le Peuch warned the North American land market could see activity plateau in 2023 due to lower natural gas prices and capital restraint by private E&P operators. The company lowered its outlook for North American growth this year, due primarily to weakness in natural gas markets, which are down about 50% this year.
SLB shares were down about 2.8% in early trading to $50.51.
Wall Street analysts generally viewed the results as positive, pointing to the earnings beat.
“SLB continues to see positive pricing as performance differentiates, technology adoption increases, contract terms are adjusted to offset inflation, and service capacity continues to tighten in key international markets,” wrote analysts for Piper Sandler in a note on Friday.
The company reported free cash flow of negative $265 million for the quarter, which it said was seasonally normal.
SLB anticipates mid- to high-single digit revenue growth this quarter, with margins to increase by 50 to 100 basis points.
It reported net income, excluding items, of 63 cents per share, for the three months ended March 31, compared with 60 cents expected by analysts, according to Refinitiv data.
(Reporting by Arunima Kumar in Bengaluru and Liz Hampton in Denver; Editing by Sriraj Kalluvila, Chizu Nomiyama, Emelia Sithole-Matarise and Marguerita Choy)
