Schlumberger Ltd. (SLB) predicted that 2009 will be grim for the oilfield services sector as the industry leader reported its first year-on-year decline in net income since 2003.

Oil and gas producers are slashing spending on oilfield services faster and deeper than in past downturns, Chief Executive Andrew Gould said Friday in a conference call. That could mean a quick recovery as well - but he declined to put an end date on the sector's worst slump in at least a decade. Schlumberger is the largest oilfield service company by market capitalization. The company and its competitors perform much of the work involved in preparing oil and gas wells for production, as well as boosting output from older fields.

"These cycles ... are getting much sharper in their amplitude and shorter in their duration," Gould said. "Of course, that depends on the general economy."

Schlumberger's fourth-quarter net income of $1.15 billion, or 95 cents a share, down from $1.38 billion, or $1.12 a share, a year earlier. The quarter included an 8-cent charge for job cuts. Revenue increased 9.9% to $6.87 billion.

Analysts gave an average estimate of $1.05 a share on revenue of $6.99 billion, according to Thomson Reuters. Schlumberger shares were recently up 5.8% at $39.42, as investors were already anticipating weak earnings from oilfield services companies

"This shouldn't be a surprise to anyone at this point," wrote Bill Herbert, an analyst with Simmons & Co. in Houston.

 
   The Downturn Deepens

Oilfield services companies have anticipated that their fortunes would decline along with oil prices, which have dropped from above $145 a barrel in July to about $45 a barrel on Friday. Natural gas prices also hit a two-year low this week. The biggest declines this year will come from the U.S., Canada and Russia, Gould said. Oil and gas fields in those countries are older and less profitable for producers, as they require constant work to maintain output.

Gould said he expects customers to ask Schlumberger to charge lower prices in exchange for extra work or longer contracts. National oil companies in particular may stretch large projects out over a longer period, but are extremely unlikely to cancel deals signed when oil prices were rising, Gould said.

"Our customers, they're not going to break contracts," he said.

Schlumberger was among the first oilfield-services companies to respond to the slowdown, warning in December that 2008 profit would be below analysts' expectations. The company is in the midst of laying off about 1,000 workers in North America, or 5% of that region's work force. It's also cutting some of its 65,000 overseas workers, though exact figures aren't yet available.

The company may reduce its workforce again in the first half of the year, and will decide on a possible third cut in April or May, Gould said.

Halliburton Co. (HAL) and Weatherford International Ltd. (WFT), two of Schlumberger's biggest competitors, report earnings on Monday.

-By Brian Baskin, Dow Jones Newswires; 201-938-2062; brian.baskin@dowjones.com

(Shirleen Dorman contributed to this article)

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