Earnings from continuing operations before special charges were 48 cents a share. Revenue rose 12 percent to $2.88 billion.

Oil companies around the world have increased their drilling efforts as crude oil and natural gas prices have soared and industrial demand has remains healthy.

Schlumberger has sold off most of its non-oilfield services businesses, strengthening its balance sheet so much in the process that its board of directors has approved a program to buy back up to 15 million shares by December 2006.

Growth in drilling operations in Russia and the Caspian Sea and across Asia and the Middle East were especially encouraging signs for Schlumberger, with North America also performing well.

"The growing realization that at current levels of demand very little spare oil production capacity exists will ensure continued strong growth over the coming quarters," Chairman and Chief Executive Andrew Gould said in a statement.

Halliburton Co. (HAL.N: Quote, Profile, Research) , the No. 2 oil field services company, also reported quarterly results on Friday, posting a net loss as one-time charges outweighed the benefits of government contract work in Iraq and robust drilling activity.

FAVORABLE OUTLOOK

Analyst Kurt Hallead of RBC Capital Markets expects the favorable conditions to last "at the very minimum through year-end, and I think there's going to be a lot of carry-over into 2005."

"Excluding Schlumberger and Halliburton today, we have had nine oil service companies reporting to date, and seven have seen their earnings estimates revised higher," he said. Hallead has an "outperform" rating on Schlumberger shares and does not own any. Schlumberger's oil field services business posted a 15 percent rise in pretax operating income in the second quarter, to $454 million, and forecast that recent U.S. contract awards should increase pricing further in the coming quarters. The company's WesternGeco seismic exploration joint venture with Baker Hughes Inc. (BHI.N: Quote, Profile, Research) posted operating income of $15 million compared with a year-earlier loss, helped by lower amortization costs, improvements in Europe, and savings related to restructuring steps it took last year.

Prabhas Panigrahi, an analyst with EKN Inc. believes Schlumberger is well positioned placed to take advantage of the industry's growth areas.

"More than any other company, they have the biggest exposure to non-U.S. operations, particularly growth areas like the Middle East, Caspian, West Africa and Asia. This is where growth is likely to come from," he said.

In addition, "as the industry gravitates toward deeper water, harsher environments and complex field development, this is where the oil future lies. And this is where Schlumberger's technology offerings will be in great demand, where they will make money," he said.

Shares of Schlumberger were off 45 cents at $63.81 in early trading on the New York Stock Exchange. During the second quarter, the shares fell less than 1 percent, compared with a nearly 4 percent rise in the Philadelphia Oilfield Services Index.