3 Key Geographies for Schlumberger Limited. (SLB) in 2013

When leading global oil-field service provider Schlumberger Limited. (NYSE:SLB) reported earnings last week, the company pointed to three prominent areas of focus for 2013. It saw the Gulf of Mexico, Saudi Arabia, and China as the key geographies driving its results over the coming year. If the company’s results fall short this year, it’ll be due to unforeseen weakness it experiences in these markets.

Gulf of Mexico
North American revenue was up 4% in 2012 with the Gulf of Mexico driving very strong performance for the company. The continued onshore weakness has been more than offset with by strong activity in the Gulf, with deepwater drilling activity reaching pre-Macondo levels. Schlumberger sees both drilling-related and seismic activities in the Gulf being strong in 2013.

This is outlook is important for Baker Hughes Incorporated (NYSE:BHI) and Halliburton Company (NYSE:HAL) as North America represents more than half of each company’s revenue.  Last quarter Halliburton saw its North American revenue fall 5% due to both pricing pressure and activity moderation.  However, the company is focused on maintaining its leadership position in North America while strengthening its margins internationally and growing its share in global unconventional drilling. Meanwhile, Baker Hughes is committed to winning in the Gulf of Mexico as its onshore business continues to be challenged.

Saudi Arabia
Schlumberger is expecting the rig count in Saudi Arabia to grow from 134 to 160, as the company expects strong activity by Saudi Aramco in the region. It sees continued strength onshore over the coming year. Looking toward offshore activity, Schlumberger sees continued shallow-water exploration, along with Saudi Aramco starting a deepwater rig in the Red Sea.

China
Schlumberger is beginning to focus more on onshore unconventional opportunities in China after the company made several strategic moves in the country last year. The company has a balanced business with any seasonal slowdowns on land being more than offset by increased activity in the South China Sea and Bohai Bay. Schlumberger has a very strong position in the Bohai Bay, but it’s looking to grow beyond that through joint ventures onshore to gain more of an entrance into China’s land marketplace. Its ability to succeed onshore in China will be a key area to watch.

Drilling even deeper
In each of these geographies Schlumberger is looking to have its growth driven by its deepwater activities. Last November, the company announced that it was entering into a joint venture with Cameron International Corporation (NYSE:CAM) , which is likely to have a significant effect on its deepwater capabilities. With the OneSubsea venture, Schlumberger would contribute its subsea business and $600 million in cash for a 40% stake in the venture, which will be managed by Cameron. Schlumberger hopes the venture provides it with a much more significant entry into the overall subsea business, and that it will be an important future growth driver.