Early this morning, oil firm Schlumberger (NYSE: SLB) reported earnings of 78 cents per share -- which was considerably lower than last year's same-quarter results of $1.09 per share. While the results were worse than a year ago, SLB managed to top the consensus estimate by three cents. Quarterly revenue totaled $6.0 billion, which was off from last year's revenue of $6.29 billion.

SLB, which is the world's largest oilfield services company, attributed the lower results to a slump in energy demand, which forced customers to reduce activity and search for price reductions. The company also noted that the rate of decline in its oilfield services division dropped considerably compared to the fourth quarter, thanks mainly to a sharp drop in the firm's North American natural gas rig count. SLB stated, "Our visibility on 2009 has not materially changed from the end of the fourth quarter."

"Many experts believe that oil prices are at unsustainably low prices now, and they expect a sharp rise in the commodity price as supply and demand come back into line again," says turnaround expert George Putnam.

In The Turnaround Letter, he suggests, "If oil does begin to rise again, the oilfield service stocks could rebound sharply." Here, he takes a look at large cap plays on a rebound within the oilfield services sector.

"We all know that oil prices have fallen dramatically from their highs in the summer of 2008. But different types of oil-related stocks have reacted quite differently to the price change in the underlying commodity.

"For example, while oil itself has dropped nearly 70% from its 12-month high, the stock of the largest integrated oil company, Exxon-Mobil (NYSE: XOM), is down only 26%, less than the stock market as a whole.

"Valuations for even the best-placed, most well-established companies in the energy space are sitting at levels unseen since the late 1990s when oil prices collapsed to around $10 per barrel," says energy sector specialist Elliott Gue.

Here, the editor of The Energy Strategist looks at Schlumberger (NYSE: SLB), noting, "The firm active in just about every imaginable market and I regard the company as a top-notch indicator of ongoing trends in the oil services business."

"It's clear that there's been some slowing in demand, and the credit crunch has had an impact on the fundamental business. But the reaction in the stock market over the past three months goes well beyond even a worst-case scenario.

"Bottom line: Many energy-related stocks are pricing in a severe recession and recent action in the broader markets is reminiscent of sentiment characteristically seen near market lows. The short-term outlook for the energy patch is much better now than it was during the bear market in 1998 and 2002.

"I regard Schlumberger as a top-notch indicator of ongoing trends in the oil services business and, more broadly, international oil and gas drilling activity. I always pay close attention to what Schlumberger has to say in its conference calls and, as usual, this quarter's call was instructive.

So, why does Goldman prefer RIG to HAL? The former is more strongly levered to oil than the latter -- and, going forward, the analysts expect strong fundamentals and heightened oil prices to support "oilier" stocks. In a note to clients, Goldman said, "... we continue to expect a healthy oil-services spending environment through 2010, supported by low reinvestment rates and secular trends to more complex, high-margin drilling services."

Despite the bullish "buy" ratings on both securities, Goldman tempered its optimism by trimming its price targets on the duo. HAL's forecast was slashed from $63 to $58, while RIG's was trimmed from $189 to $178. The new price targets represent a 44.5% premium from HAL's closing price yesterday, and a 47% increase from RIG's Thursday settlement.

"Our 'Forecasts Focus List' contains only two energy stocks, both of which are in the oil services sector: Oceaneering International (NYSE: OII) and Transocean (NYSE: RIG)," says blue chip advisor Richard Moroney.

The editor of Dow Theory Forecasts says, "While stocks in the equipment and services group tend to move with oil prices in the near term, their profits depend more on exploration spending than on commodity prices."

"Concerns about slowing demand for crude oil and re?ned products both in the U.S. and overseas have many investors worried. But investors in the equipment and services group should not panic.

"Most producers continue to spend aggressively. And U.S. crude-oil inventories remain well below the average for this time of year, with fewer than 20 days of supply in storage.

"Demand for offshore-drilling services remains strong, giving Transocean excellent growth potential. Consensus estimates project per-share profits will rise 69% in 2008 and 15% in 2009. Transocean, the world's largest offshore drilling contractor, operates in every major drilling region.

"A combination of tight global rig supplies and the ongoing discovery of new offshore reserves have driven rig lease rates higher and kept Transocean's fleet busy. The company's largest, most expensive rigs are 95% sold out for 2009, and the backlog is growing.

Expro, which is a UK oil services company, is a hot property. The company recently agreed to a £1.6 billion buyout from a group of private equity firms, which include Candover Partners, Goldman Sachs Capital Partners (NYSE: GS) and Alpinvest Partners N.V.

Now, Halliburton (NYSE: HAL) is making a play for Expro. The offer is £1.71 billion (which comes to about $3.38 billion).

Of course, high crude prices are driving the deal. What's more, Halliburton needs to expand its international footprint as the US business languishes. Another benefit: Expro has some key technologies that allow for deep drilling capabilities.

But, in light of the quick changes in the oil landscape – as well as the possibility of other suitors coming to the table – we are likely to see more bids for Expro.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates MergerBook.com.

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