SLB Schlumberger Ltd

By Christopher M. Matthews and Austen Hufford 

The chief executive of Schlumberger Ltd. expressed cautious optimism Friday that a two-year downturn that ravaged the world-wide energy industry has reached its bottom and recovery is on the way.

The world's largest oil-field services company posted a fourth-quarter loss of $204 million Friday, markedly lower than the loss of $1 billion it reported for the period a year earlier.

Chief Executive Paal Kibsgaard said energy prices and production were both poised to increase in 2017, led by shale drillers in North America. But he warned that a ramp-up in offshore projects and international production could take longer to materialize.

"It should be up from here in basically all markets...but the pace and scope of the recovery from here is uncertain," Mr. Kibsgaard said during the company's earnings call.

Schlumberger and other companies in the oil-field-services sector have been hurt by weak demand from oil and natural gas producers for services such as drilling and completing oil-and-gas wells due to a two-year decline in energy prices. Analysts often look to energy service companies as a barometer for the overall health of the industry.

During 2016, energy prices rose and then stabilized. Though a recovery remains tenuous, after oil prices plunged from over $100 a barrel in the summer of 2014 to less than $30 a year ago, they are now hovering around $55 a barrel.

Mr. Kibsgaard said that as 2017 begins, increased revenues and cash flow will be driven by North American land production, particularly in the oil-rich Permian shale basin in West Texas. Shale companies have put more than 90 additional rigs back into the field in recent weeks, after a November agreement by Russia and the Organization of the Petroleum Exporting Countries to curb global output boosted oil prices.

Some shale producers have found a way to eke out profits during the downturn, often at the expense of service companies who were forced to swallow pricing concessions. Mr. Kibsgaard said that the company had begun renegotiating prices with clients. Revenue on land in the U.S.increased 4% to $1.76 billion, driven both on volume and on a modest pricing recovery in the fourth quarter on land projects, the company said in its earnings statement. North American offshore drilling posted a loss, the company said.

"The direction [service companies] all need to go is that we need to recover some of the pricing concessions that we've given," Mr. Kibsgaard said.

In the international markets, Mr. Kibsgaard referred to the company's capabilities as a "tightly coiled spring." He said he expected recovery in markets outside the U.S., but warned that over the last two years, production had largely come from the completion of existing wells and global supplies are dwindling. The only way to reverse that trend will be capital expenditure from international oil producers, he said.

Mr. Kibsgaard said that company has limited spare capacity for many of its assets, particularly offshore resources. He said the company would redeploy those assets to projects that are financially viable and where they are guaranteed to receive payment.

"We aren't going to incur the cost unless there is an adequate financial return," he said.

In all, Schlumberger reported a fourth-quarter loss of $204 million, or 15 cents a share, compared with a loss of $1.02 billion, or 81 cents a share, a year earlier.

Schlumberger said Friday that it took a $536 million restructuring charge, largely related to workforce reduction and facility closure, but added that it didn't anticipate any significant cost-cutting measures in 2017.

The company also took $139 million in charges relating to its $12.7 billion purchase of rival Cameron International Corp. and a currency devaluation in Egypt. For the year, Schlumberger expects $2.2 billion in capital expenditures, compared with $2.1 billion last year.

Excluding items such as acquisition-related charges, Schlumberger's adjusted per-share earnings were 27 cents. Revenue declined 8.2% to $7.11 billion. Analysts polled by Thomson Reuters had expected adjusted per-share profit of 27 cents and revenue of $7.07 billion.

In its production unit, its largest, revenue fell 17% to $2.18 billion. In its reservoir-characterization unit, revenue fell 23% to $1.7 billion, and in its drilling unit revenue fell 32% to $2.01 billion

The company's stock fell slightly Friday morning to $86.51 from an open of $87.12.

Write to Christopher M. Matthews at christopher.matthews@wsj.com and Austen Hufford at austen.hufford@wsj.com

(END) Dow Jones Newswires

January 20, 2017 11:57 ET (16:57 GMT)

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