Smith 3rd-quarter profit declines on weak demand

Smith International posts 3rd-quarter profit decline on weak demand, prices

• On 1:05 pm EDT, Thursday October 29, 2009

HOUSTON (AP) -- Oilfield services Smith International Inc. said Thursday its third-quarter profit tumbled, falling well-below Wall Street's expectations, largely due to a weak natural gas market and prices.

The Houston company earned $7 million, or 3 cents per share, in the July-September period. That's down 97 percent from $209.8 million, or $1 per share, in the prior-year period.

Quarterly revenue fell 34 percent to $1.88 billion, from $2.85 billion, a year earlier.

Analysts surveyed by Thomson Reuters, on average, expected a profit of 15 cents per share on revenue of $1.91 billion.

The recession has crushed demand for natural gas, sending prices lower. At the same time, natural gas companies have been unlocking previously hard-to-get to gas, creating a glut that also contributes to the decline in gas prices.

Furthermore, lower activity levels created excess capacity in the U.S. land drilling market and that led the company to discount a number of its services during the quarter.

"Our operating results for the third quarter reflected a challenging U.S. environment but displayed signs of stabilization towards the end of the quarter," said CEO John Yearwood, in a statement.

The company said it expects a more favorable industry environment during 2010.

In afternoon trading, shares fell 73 cents, or 2.4 percent, to $29.27.

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