OT ? - Oilfield Trio Seen Reporting Lackluster Quarter -

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Friday January 21, 1:10 pm Eastern Time

Oilfield trio seen reporting lackluster quarter

By Andrew Kelly

HOUSTON, Jan 21 (Reuters) - The world's top three oilfield service companies are expected to report lackluster earnings for the fourth quarter, but analysts said investor sentiment towards the group will depend more on whether a widely anticipated recovery materializes as the current year unfolds.

Schlumberger Ltd. (NYSE:SLB - news), Halliburton Co. (NYSE:HAL - news) and Baker Hughes Inc. (NYSE:BHI - news) are all expected to report a sharp year-over-year decline in fourth-quarter earnings, according to consensus estimates compiled by First Call/Thomson Financial.

Furthermore, Dallas-based Halliburton will be the only one of the trio to report a modest sequential earnings increase compared with the third quarter, if the estimates turn out to be correct.

``The fourth quarter results are not going to be anything to write home about,'' said Dan Pickering, an analyst with Simmons & Co. ``The focus is really going to be when is the turn coming?''

Pickering said he saw greater upside potential this year for some of the U.S. exploration sector's small capitalization stocks. The Big Three have greater exposure to international markets where recovery is expected to lag North America.

The big oilfield service companies, which provide anything from drill bits to seismic data to help oil companies find and recover hydrocarbons, have not yet benefited from the dramatic rise in world oil prices to recent highs of nearly $30 a barrel.

However, their share prices rose last year in anticipation that higher oil prices would eventually lead oil companies to increase exploration and production spending to the benefit of the oilfield service sector.

There is evidence this process is already under way in North America and analysts and industry executives expect it to spread to other regions of the world and support a gradual improvement in oilfield service earnings this year.

``I think you will see an improvement in the numbers as we go forward over the next couple of quarters,'' said James Stone, an analyst with Schroder & Co.

The smaller players could see stock price appreciation of 30 to 40 percent compared with gains of 20 to 30 percent for Schlumberger, Halliburton and Baker Hughes, Pickering said.

``We tend to look more toward the offshore drilling companies and some of the mid and small cap service and equipment companies as likely to outperform the larger caps,'' he said.

Stone said he too believed that smaller companies like Weatherford International Inc. (NYSE:WFT - news) and Nabors Industries Inc. (AMEX:NBR - news) offered a better trade-off between risks and rewards.

``We continue to believe that Weatherford is extremely attractive in the low $40s and that Nabors is very attractive in the low $30s,'' Stone said.

Analysts said oilfield service companies could prosper even if oil prices eventually fall back to around $20 a barrel, although this could put a drag on stock prices as investor sentiment towards the group cooled.

``It would affect psychology, but it would be a short-term effect because $20 crude is still well within the comfort zone for the oilfield services companies' customers,'' said Pickering. ``The exploration and production guys (still) have a lot of cashflow at $20 a barrel.''

Stone said any correction in stock prices would be a good buying opportunity, adding that as the industry recovers he expects many of the stocks within the sector to beat the highs they set in 1997 before oil prices started to fall.

FIRST CALL/THOMSON FINANCIAL CONSENSUS EARNINGS ESTIMATES Company Q4 99 Q4 98 Yr 00 Yr 99 Schlumberger $0.23 $0.67 $1.24 $1.02 Halliburton $0.15 $0.20 $1.06 $0.65 Baker Hughes -$0.03 $0.14 $0.49 $0.19



-- snooze button (alarmclock_2000@yahoo.com), January 21, 2000

Answers

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