Schlumberger tops earnings estimates, but expects oil sector to see supply challenges this year

French oil giant Schlumberger Ltd. SLB, -1.37% said Friday it had net income of $525 million, or 38 cents a share, in the first quarter, after a loss of $2.255 billion, or $1.63 a share, in the year-earlier period. Adjusted per-share earnings came to 38 cents, ahead of the FactSet consensus of 37 cents. Revenue fell to $7.829 billion from $8.179 billion, also ahead of the FactSet consensus of $7.811 billion. “Our results in the first quarter of 2018 largely reflected transitory factors, with seasonal reductions in activity in the Northern Hemisphere and planned project startup costs including the equipment mobilization, reactivation, and redeployment associated with recent contract wins,” Chief Executive Paal Kibsgaard said in a statement. The company’s international businesses started the year with the Middle East, North Sea and Russia all in line with expectations, while strength in Asia was offset by weakness in Latin America and Africa. Looking ahead, Kibsgaard said the lack of stock build in the first quarter, combined with OPEC and Russia-led production cuts left the oil market in balance. But after three years of underinvestment in exploration and production spending, the global production base is showing signs of weakening. “With Libya and Nigeria producing at near-full capacity, Venezuelan production in free fall, the potential of new sanctions against Iran, and rising geopolitical risks, the only major sources of short-term supply growth to address global production decline and strong worldwide demand are Saudi Arabia, Kuwait, the UAE, Russia, and the US shale oil industry,” he said. But with US shale showing signs of production challenges, its likely that the industry will face supply challenges and E&P spending will need to be increased. Shares were down 0.1% premarket, and have fallen 8% in the last 12 months, while the S&P 500 SPX, -0.29% has gained 14%.