Schlumberger said Thursday that earnings increased 40 percent in the first quarter as higher oil prices encouraged a rise in drilling activity around the world.
The Houston company, which provides a range of services to help companies find and produce oil and gas, also offered a full-year outlook that buoyed investors. Shares rose more than 2 percent.
Schlumberger said it already has seen drilling activity increase in the Gulf of Mexico and the Middle East. Company officials said the industry will have to ramp up operations even more to maintain ample supplies while Libya's 1.5 million barrels of daily exports is off the market. Japan also will be looking to import more oil and natural gas as it recovers from the March earthquake and tsunami.
"The exploration and production industry has begun to respond and, absent a further leg to the recession, will have to substantially increase investment to maintain a comfortable supply cushion in an era of political uncertainty," Chairman and CEO Andrew Gould said.
During the next six months, increased activity "will reach levels where resources will become constrained," Gould said. That means companies like Schlumberger should be able to increase contract prices further, Argus Research analyst Phil Weiss said.
"They're unequivocally positive about the rest of the year," Weiss said. "They're expecting oil prices to stay at these levels."
The price of oil rose 17 percent in first quarter on top of a 14 percent increase in the final three months of 2010. That's spurred more drilling and, in turn, more demand from drillers for the services provided by Schlumberger and rival Halliburton Co.
Schlumberger offers imaging and monitoring services of underground oil reservoirs through its WesternGeco business. The company said demand for those services will remain elevated if oil prices stay high. Oil is currently selling for around $112 per barrel.
Schlumberger reported net income of $944 million, or 69 cents per share, for the first three months of the year. That compares with $672 million, or 56 cents per share, in the same part of 2010.
Revenue increased 56 percent to $8.72 billion. The results include revenue from equipment maker Smith International Inc., which Schlumberger acquired for $11 billion last August.
Excluding special charges, Schlumberger earned $972 million, or 71 cents per share. The results missed Wall Street expectations of income of 76 cents per share on sales of $8.83 billion, according to FactSet.
Halliburton's first-quarter earnings more than doubled to $511 million.
Schlumberger shares rose $2.17, or 2.5 percent, to $90.06 in afternoon trading.