It's hard to judge whether it was general market queasiness or just rough treatment for a stock that had run up about 85% in the past year. Either way, Schlumberger (NYSE:SLB) paid for exceeding earnings expectations Monday with an amazing 11% share price drubbing.

Leading off earnings season for the energy sector, Schlumberger reported net income of $1.35 billion, up 35% year over year from $1 billion in the third quarter of 2006. The diluted per share figure was $1.09, versus $0.81. Revenue reached $5.93 billion, up from $4.95 billion a year ago.

Looking at the company's two operating units, the bigger Schlumberger Oilfield Services sector increased its revenue by 19% and its pre-tax operating income by 23%, while WesternGeco, the seismic arm, raised its revenues 20% and its operating income by 32%. At first blush, that doesn't seem like anything to get particularly worked up over.

Geographically, all of the company's operating areas were strong, except for North America. There, a sequential improvement in the Canadian rig count was more than offset by a negative triple play of days lost in the Gulf of Mexico because of hurricane precautions, pressure-pumping pricing erosion, and a maintenance-related exploration pullback in Alaska.

As always, company CEO Andrew Gould had a number of meaningful comments about the global energy picture, including:

  • Third-quarter results reflected especially strong growth in activity in Latin America, Russia, China, and Indonesia.
  • "The North American natural gas supply will require sustained activity to combat production decline(s)."
  • "Global demand for oil remains strong while non-OPEC production continues to disappoint."
  • "Production decline rates in mature areas and continuing project delays will inhibit non-OPEC supply increases ..."

There's little in those thoughts to warm the cockles of any energy-investing Fool's heart, but the picture being painted clearly is realistic. It also may not bode particularly well for the likes of Halliburton (NYSE:HAL), Baker Hughes (NYSE:BHI), and Weatherford (NYSE:WFT), when they report quarterly results in the early part of this week.

So Fools, I continue to believe that in the intermediate- and long-term, the oilfield services companies will reward investors significantly. In the very near term, however, resorting to an occasional Dramamine tablet might be in order.

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