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Schlumberger expects 'supercycle' as demand lifts profit above forecast

The exterior of a Schlumberger Corporation building is pictured in West Houston

By Arunima Kumar and Liz Hampton

(Reuters) - Schlumberger beat expectations with a rise in fourth-quarter profit on Friday as higher crude and natural gas prices drove demand for the world's largest oilfield services company.

Oil prices surged about 50% last year and are trading at seven-year highs on a COVID-19 vaccine-fueled demand recovery and tight supplies. The global rig count was 1,563 at the end of the fourth quarter, up around 42% from a year ago, Baker Hughes data shows.

"Absent any further COVID-related disruption, oil demand is expected to exceed pre-pandemic levels before the end of the year and to further strengthen in 2023," Schlumberger Chief Executive Olivier Le Peuch said.

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Current market conditions are "strikingly similar to those experienced during the last industry supercycle", he added.

Schlumberger expects 2022 capital spending of between $1.9 billion and $2 billion, versus just under $1.7 billion in 2021, and plans to increase spending in North America by at least 20%, Le Peuch said on a call with investors.

Schlumberger shares were down 1.75% as Brent oil futures fell about 1.45% to $87.14 a barrel.

Wall Street analysts said the results were positive, with the exception of a decision to keep its dividend flat after the company generated around $1.3 billion in free cash flow for the quarter and $3 billion for the full year 2021.

"There was an expectation of a dividend raise. I believe they will raise the dividend once the leverage targets are met," said James West, a senior managing director with Evercore ISI.

Schlumberger's fourth-quarter adjusted net income rose to $587 million, or 41 cents per share, above Wall Street estimates of 39 cents per share, according to Refinitiv IBES. The company beat last year's fourth-quarter earnings of $309 million, or 22 cents per share.

Fourth-quarter revenue of $6.23 billion also topped analysts' forecast of $6.09 billion.

GRAPHIC - Schlumberger's revenue on recovery mode

https://graphics.reuters.com/SCHLUMBERGER-RESULTS/GRAPH/mypmnbejgvr/chart.png

In North America, strong offshore and land drilling activity and an uptick in exploration data licensing for the U.S. Gulf of Mexico and Permian Basin drove a 13% sequential jump in revenue.

Schlumberger also said it sold $109 million in shares of Liberty Oilfield Services during the quarter, bringing its stake to 31%. Last year, it closed on the sale of its U.S. fracking business to Liberty in exchange for a 37% equity stake.

(Reporting by Arunima Kumar in Bengaluru; Editing by Amy Caren Daniel, Mark Porter, Paul Simao and Alexander Smith)