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The world’s largest oilfield services provider Schlumberger Ltd. (SLB - Analyst Report) expects its first-quarter 2014 earnings per share (EPS) to be higher year over year. The bullishness of the company stems from higher market share and an improving cost structure.

The company in a smart move targeted state-owned and independent energy companies that are spending significantly to develop shale and other resources around the world, rather than multinational energy companies, most of which are cutting spending.

In the fourth quarter, the company’s earnings of $1.35 per share increased approximately 30% year over year from $1.04. The results were boosted by the company’s strong international exposure and focus on execution and integration capabilities. Also, the results were ahead of the Zacks Consensus Estimate of $1.33.

Looking forward, Schlumberger’s optimism on rising rig count activity will likely lead to increased international spending on exploration, higher production and stepped up activity in the U.S. Gulf of Mexico. The company also expects steady growth in the key regions of Sub-Sahara Africa, Russia, the Middle East, China and Australia.

Schlumberger generates about two-thirds of its revenues internationally, marking the highest ratio among the biggest oilfield service providers, which includes Halliburton Company (HAL - Analyst Report). Schlumberger’s strength also lies in effective implementation, strong contracts and new technologies.

The oilfield services behemoth believes that strong leverage to the deepwater segment will help it to perform well over the coming years. While the company makes most of its money outside North America, it bears the brunt of industry-wide weakness in U.S. hydraulic fracturing services as well as softness in the land coiled-tubing business.

Schlumberger currently carries a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months.

Meanwhile, one can consider better-ranked players in the energy sector like Helmerich & Payne Inc. (HP - Analyst Report) and Patterson-uti Energy Inc. (PTEN - Analyst Report). All the stocks sport a Zacks Rank #1 (Strong Buy).


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