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Schlumberger names new CEO as North American business faces softer demand

Stock MarketsJul 19, 2019 03:33PM ET
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© Reuters. Schlumberger names new CEO as North American business faces softer demand

By Nishara Karuvalli Pathikkal and Liz Hampton

(Reuters) - Oilfield firm Schlumberger NV (N:SLB) on Friday named Chief Operating Officer Olivier Le Peuch as chief executive as the company looks to shore up its world-leading position in oil and gas technology services.

The oilfield services provider also posted higher-than-expected second-quarter revenue and a year-over-year profit increase, as demand in international markets countered weakness in North America.

Its earnings of 35 cents a share were in line with analysts' expectations, but shares fell as much as 3% in early trading amid forecasts for continued soft demand for oilfield services in North America.

"North America remains a challenging environment," Le Peuch told investors on Friday during a conference call, pointing to softer pricing and an overcapacity of equipment, particularly in hydraulic fracturing.

Le Peuch, 55, said Wall Street estimates of a 42 cent-per-share third-quarter profit were achievable, but added there was "no visible upside." The company earned 46 cents a share a year earlier.

Byron Pope, an oilfield analyst at investment firm Tudor, Pickering, Holt & Co said Le Peuch, who takes over Aug. 1, did not say how his strategy would deviate from that of outgoing CEO Paal Kibsgaard, adding that disappointing drilling margins initially could have sent shares lower.

Mark Papa, an investor who built EOG Resources (NYSE:EOG) into one of the most profitable U.S. shale companies, will become non-executive chairman, replacing Kibsgaard, 52, the company said. Kibsgaard signaled that finance chief Simon Ayat will retire, without setting a date.

Schlumberger will pay Kibsgaard $2 million annually for the next three years to provide transition consulting services, the company said.

Le Peuch will receive a $1.4 million salary increase on his base pay of $1 million, according to a regulatory filing. He will be eligible for a bonus of 150% of his base salary, and share grants valued at roughly $10.5 million.

In 2018, Kibsgaard's total compensation was $16.2 million, down from $20.8 million the year prior, according to a February proxy statement.

Schlumberger has benefited from a modest uptick in international markets since 2018 after a prolonged slump in oil prices. But its earnings have been hampered by heavy investments and softer demand for some services.

International revenue rose 8% year-over-year to $5.46 billion in the quarter, but revenue in North America fell 11%, to $2.8 billion.

Under Le Peuch, the company will continue to move away from capital intensive projects, such as its Schlumberger Production Management (SPM) unit. It also aims to sell some of its SPM investments in Canada and Argentina, executives said. Ayat said the company is in the process of divesting three businesses that could generate proceeds of around $1 billion.

Net income rose about 14% to $492 million in the second quarter. Excluding items, the company earned 35 cents per share, in line with Wall Street estimates.

The Houston-based company reported revenue of $8.27 billion, beating estimates of $8.11 billion.

Schlumberger names new CEO as North American business faces softer demand
 

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