"Nonetheless, it's encouraging that Schlumberger has actually traded higher since its earnings release. This strongly suggests that the negative news was already priced into Schlumberger's stock; no one really believed the earnings estimates published prior to the release.

"And there's a light at the end of the tunnel: The severe decline in global oil exploration and development spending spells falling oil supplies. What's interesting is that Gould believes that this cycle doesn't compare directly with prior downturns.

"Specifically, it appears that companies are reacting faster to the decline than in prior cycles; in other words, rather than maintaining their E&P spending for a few quarters to see what path commodity prices take, producers are aggressively cutting their plans and budgets.

"It could be that this is at least partly due to the global credit crunch. Because most smaller producers can't borrow money at favorable rates (or quite possibly at all), they're actually unable to spend more than their cash flow. Troubled credit markets are, in effect, forcing their hands sooner.

"What this means is that the decline in activity is happening faster. This spells a sharp downturn for Schlumberger and its competitors in the short term. But looking out six or nine months into the future, this downturn in spending likely spells a massive decline in production.

"My view is that this down-cycle will take the shape of a V. We're already seeing the left side of that V as exploration and production activity shuts down.

"But as demand begins to return in the latter half of 2009, supply will be falling rapidly--the current downturn is sowing the seeds for a quick recovery as soon as demand stabilizes.

"While Schlumberger clearly faces some near-term headwinds, the stock's positive reaction to a downbeat conference call suggests that 'news' is already in the stock. Longer term, Schlumberger is the technology leader in the oil services market and is well placed to benefit from the coming upturn.

"All investors should have exposure to this best-of-breed oil services name. I'm maintaining my buy recommendation on Schlumberger, a mainstay in the growth-oriented Wildcatters Portfolio."

Steven Halpern's TheStockAdvisors.com offers a daily look at the latest market commentary and favorite stock picks and investment ideas from the nation's leading financial newsletter advisors.