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Gold/Mining/Energy : Big Dog's Boom Boom Room

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To: Broken_Clock who wrote (99430)4/19/2008 8:13:07 AM
From: Dennis Roth   of 205752
 
Schlumberger, Ltd. (SLB): First Take: 1Q2008 misses by $0.05, but announces $8 bn buyback
Goldman Sachs Note
Stock rating: Buy
Coverage view: Neutral
Price: US$95.30
April 18, 2008 United States

News
This morning, SLB reported 1Q2008 EPS from continuing ops of $1.06, which was $0.05 below ours and the Street estimate of $1.11. There was also an additional $0.03 from discontinued ops bringing total EPS to $1.09. A lower tax rate helped EPS by $0.02. Overall, the Street had widely been expecting a miss given management's recent comments that weather delays in North Sea, startup costs in Mexico and timing delays of seismic sales would impact 1Q2008. While we believe these issues are largely non-recurring, the stock likely underperforms today, especially given its recent run (up 18% since March 20). This should be tempered by SLB's announcement that it would buyback $8 bn of stock before 2011 and its comments that growth should strengthen as the year progresses. Revenues of $6.29 billion were 0.7% below our $6.33 billion estimate. SLB reported 2% better than expected revenues in Oilfield services, highlighted by 5% and 7% better in North America and Europe/CIS/W. Africa. WesternGeco revenues were 18% below our expectations, mainly due to timing delays associated with new multi-client sales. Operating income was 8% below expectations, mainly due to the temporary weakness in WesternGeco, where operating income fell 36%. Our 12-month price target is under review.

Analysis
It had been widely expected that SLB would have a weak 1Q2008, but it is appears that the underlying business remains quite strong and we expect a bullish outlook from management on North America and International business on the conference call. Investors will likely focus most on Western Geco backlog (down 17%) and margins (down 500 bps).

Implications
While a SLB miss is probably not great for the sector, overall North America was better than expected, which is positive for HAL, BJS, WFT and OIS. Most of the shortfall was related to the seismic business which is not as impactful to most other companies in the space.
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