To say that 2014 was a roller-coaster ride for energy companies would be an understatement. As a technology services provider to the energy industry, Schlumberger (NYSE:SLB) suffered due to the collapse in energy companies, but to a lesser extent than pure-play oil and gas companies. In my last review of Schlumberger after its third-quarter earnings, I highlighted declining oil prices as a major reason why the stock could fall.

The rationale was that if oil prices declined, even though Schlumberger itself would not be directly affected, this would nevertheless compel Big Oil to slash capital expenditures. This would put Schlumberger's technology services square in the cross-hairs. Unfortunately, this came to pass, and Schlumberger's stock is hurting as a result. At $80 apiece, Schlumberger shares are down 15% in the past three months.

Investors got a reprieve, however, when Schlumberger reported better-than-expected fourth-quarter earnings. While operating conditions remain challenged, Schlumberger maintained its reputation as a strong business. The company took the necessary steps to keep profits afloat during a very tough time, and announced it will return a lot more cash to shareholders next year. Here is a rundown of Schlumberger's mixed earnings report.

Cost cuts to keep earnings afloat
Schlumberger's core business suffered last quarter, which comes as no surprise. Still, the company managed to post 7% year-on-year revenue growth. This was because of Schlumberger's innovative services, which help oil and gas companies become more efficient. Schlumberger was also helped by resumed exploration and production activity in the Gulf of Mexico. However, earnings per share collapsed 84% compared to the third quarter, due largely to significant charges taken in the fourth quarter. Specifically, Schlumberger is cutting jobs and capital spending, to help earnings in upcoming quarters.

Management hopes first-quarter 2015 profits will be boosted by significant cost cuts, believed to be necessary due to declining commodity prices. Schlumberger's expects capital spending will total $3 billion this year, down $1 billion from last year's budget. In addition, Schlumberger booked a $296 million charge last quarter due to workforce reductions, which will further help reduce the company's cost structure this quarter and beyond.

Excluding these charges, Schlumberger's adjusted earnings per share rose 11% year-on-year to $1.50 per share. This beat analyst estimates, which called for $1.45 per share, according to average expectations compiled by Thomson Reuters.

North American operations excelled last quarter, but don't get used to it
Schlumberger's fourth-quarter results were aided significantly by its North American business. Revenue in North America jumped 19% last quarter, year-over-year. This handily beat Schlumberger's 1% revenue growth in its international business. But this performance came before the impacts of oil's massive decline were felt. Going forward, management stated on the ensuing earnings call that Schlumberger's operations outside North America are likely to outperform. Schlumberger, which generates about two-thirds of its revenue from outside North America, stated in its earnings call that North American onshore and offshore development is likely to be hit much harder in future quarters by the fallout in the energy industry.

The reason for this is that a significant portion of shale developments in North America are unprofitable at $50 oil, whereas this is not necessarily the case when it comes to Schlumberger's international fields. For example, Schlumberger is heavily involved in Middle East energy production, where costs are much lower. This is why management is relatively optimistic about international conditions than in North America.

Cash returns should appease investors until business conditions improve
Along with its earnings, management announced a fresh round of cash returns to shareholders. First, Schlumberger is increasing the quarterly dividend by 25%, which is a very significant increase in light of the carnage rippling through the energy market. This makes the fifth consecutive year in which Schlumberger has increased its dividend, and its payout has doubled in that time. Thanks to its declining stock price, Schlumberger now offers a 2.5% dividend yield, which is about 50 basis points higher than the average yield of the stock market as a whole.

In addition, Schlumberger also returns cash to shareholders through share repurchases. Last quarter, the company utilized about $1.1 billion for buybacks, which is about in-line with its quarterly buybacks over the past year. The one key advantage of Schlumberger's ongoing share buyback program is that it can now take advantage of its declining stock price. When Schlumberger buys back shares at lower prices, each dollar spent repurchases more shares than it would when the stock price is higher.

The key takeaway is that financial results looked good last quarter, excluding restructuring and other charges, but it takes time for the rapid collapse in oil prices to hit the financial statements. This is why management is aggressively cutting costs now, to help blunt the blow in the first and second quarters. In addition, growing cash returns could help keep investors happy until business trends improve.