- Worldwide revenue of $7.9 billion
decreased 4% sequentially, but increased 1% year-on-year
- International revenue of $5.0 billion
decreased 5% sequentially, but increased 3% year-on-year
- North America revenue of $2.7 billion
decreased 3% sequentially and 3% year-on-year
- Pretax operating income of $908 million
decreased 6% sequentially and 7% year-on-year
- EPS was $0.30
- Cash flow from operations was $326
million
- Quarterly cash dividend of $0.50 per
share was approved
Schlumberger Limited (NYSE: SLB) today reported results for the
first quarter of 2019.
(Stated in millions, except per share amounts)
Three
Months Ended Change Mar. 31, 2019 Dec. 31, 2018
Mar. 31, 2018
Sequential Year-on-year Revenue
$7,879 $8,180 $7,829
-4% 1% Pretax operating
income
$908 $967 $974
-6% -7% Pretax operating
margin
11.5 % 11.8 % 12.4 %
-30 bps -91
bps Net income - GAAP basis
$421 $538 $525
-22%
-20% Net income, excluding charges & credits*
$421 $498 $525
-15% -20% Diluted EPS - GAAP
basis
$0.30 $0.39 $0.38
-23% -21% Diluted EPS,
excluding charges & credits*
$0.30 $0.36 $0.38
-17% -21% North America revenue
$2,738
$2,820 $2,835
-3% -3% International revenue
$5,037 $5,283 $4,883
-5% 3% North
America revenue, excluding Cameron
$2,178 $2,265 $2,285
-4% -5% International revenue, excluding Cameron
$4,469 $4,581 $4,147
-2% 8% *These are
non-GAAP financial measures. See section titled "Charges &
Credits" for details.
Schlumberger Chairman and CEO Paal Kibsgaard commented,
“First-quarter revenue of $7.9 billion declined 4% sequentially,
reflecting the expected reduction in North America land activity
and seasonally lower international activity in the Northern
Hemisphere. In addition, reduced software, product, and multiclient
seismic license sales following the fourth-quarter increase and
lower Cameron long-cycle project deliveries contributed to the
sequential decline. Improved sequential activity in Latin America
marginally offset these declines.
“Looking beyond the headline numbers for the quarter, our
international business results were strong, with Reservoir
Characterization, Drilling, and Production combining to deliver
year-on-year revenue growth of 8%, tracking our expectation of high
single-digit growth in the international markets in 2019.
“In North America, first-quarter revenue was 3% lower
sequentially as expected, driven by softer pricing and lower
activity for both our hydraulic fracturing- and drilling-related
businesses, while revenue from our artificial lift product line was
flat sequentially. Offshore revenue in North America was slightly
down sequentially with increased wireline activity in the US Gulf
of Mexico offset by lower multiclient seismic license sales.
Cameron revenue in North America was marginally up
sequentially.
“By business segment, first-quarter revenue for Reservoir
Characterization fell 7% sequentially due to seasonally lower sales
of software and multiclient seismic licenses. Drilling revenue
declined 3% sequentially due to reduced winter activity in the
Northern Hemisphere, but increased 12% year-on-year on strong
growth from Integrated Drilling Services (IDS) projects in several
GeoMarkets. Production revenue was 2% lower sequentially, driven by
decreased OneStim® revenue in North America and reduced
artificial lift sales in the international markets. Cameron revenue
declined 7% sequentially, mostly due to lower project deliveries
from the long-cycle businesses of OneSubsea® and Drilling
Systems following strong year-end sales of the previous
quarter.
“From a macro perspective, we expect the oil market sentiments
to steadily improve over the course of 2019, supported by a solid
demand outlook combined with the OPEC and Russia production cuts
taking full effect, slowing shale oil production growth in North
America, and a further weakening of the international production
base as the impact of four years of underinvestment becomes
increasingly evident.
“We also continue to see clear signs that E&P investments
are starting to normalize as the industry heads toward a more
sustainable financial stewardship of the global resource base.
Directionally, this means that higher investments in the
international markets are required simply to keep production flat,
while North America land is set for lower investments with a likely
downward adjustment to the current production growth outlook.
“Our view of the international markets is consistent with recent
third-party spending surveys, suggesting that E&P investments
will increase by 7 to 8% in 2019, supported by a higher rig count
and a rise in the number of customer project FIDs. In line with
this, offshore development activity plans continue to strengthen,
with subsea tree awards reaching their highest level since 2013
last year. We are also seeing the start of a return to exploration
activity on renewed interest in reserves replacement. Notably, new
discoveries in 2018 were at the lowest level since 2000.
“Conversely in North America land, the higher cost of capital,
lower borrowing capacity, and investors looking for increased
returns suggest that future E&P investment levels will likely
be dictated by free cash flow. We therefore see E&P investments
in North America land down 10% in 2019. In addition, rising
technical challenges—from parent-child well interference, step-outs
from core acreage, and limited growth in lateral length and
proppant per stage—all point to more moderate growth in US shale
oil production in the coming years.
“The normalization of global E&P spending, with increased
international market investments and a reduction in North America
land capex, represents a positive market shift for Schlumberger and
the welcome return of a very familiar opportunity set, given our
unmatched global strength. We have further extended our global
leadership position with the efforts and investments we have made
in recent years of modernizing our execution platform, expanding
our technology offering, driving digital and technology-system
innovation, evolving our business models, and strengthening our
global footprint. In addition, after enduring four years of major
pricing concessions in support of our international customers, we
see the recovery of international service and product pricing and
improving our own financial returns as a major business
priority—firmly supported by increasing activity levels, little to
no spare equipment capacity, and prudent deployment of new capital.
Furthermore, the foundation for our 2019 business plan is a clear
commitment to generate sufficient cash flow to cover our business
needs without increasing net debt.”
Other Events
During the quarter, Schlumberger repurchased 2.3 million shares
of its common stock at an average price of $42.79 per share, for a
total purchase price of $98 million.
On February 19, 2019, Schlumberger and Rockwell Automation
announced they had entered into an agreement to create a new joint
venture, Sensia, the first fully integrated digital oilfield
automation solutions provider. Sensia will operate as an
independent entity, with Rockwell Automation owning 53% and
Schlumberger owning 47% of the joint venture. Rockwell Automation
will make a $250 million payment to Schlumberger at closing. The
transaction is expected to close in the summer of 2019, subject to
regulatory approvals and other customary closing conditions.
On April 17, 2019, Schlumberger’s Board of Directors approved a
quarterly cash dividend of $0.50 per share of outstanding common
stock, payable on July 12, 2019 to stockholders of record on June
5, 2019.
Consolidated Revenue by Area
(Stated in millions)
Three Months Ended
Change Mar. 31, 2019 Dec. 31,
2018 Mar. 31, 2018
Sequential
Year-on-year North America
$2,738 $2,820 $2,835
-3% -3% Latin America
992 978 870
1%
14% Europe/CIS/Africa
1,707 1,842 1,713
-7%
-
Middle East & Asia
2,338 2,464 2,300
-5%
2% Other
104
76 111
n/m n/m $7,879 $8,180 $7,829
-4%
1% North America revenue
$2,738 $2,820 $2,835
-3% -3% International revenue
$5,037 $5,283
$4,883
-5% 3% North America revenue, excluding
Cameron
$2,178 $2,265 $2,285
-4% -5%
International revenue, excluding Cameron
$4,469 $4,581
$4,147
-2% 8% n/m = not meaningful
First-quarter revenue of $7.9 billion decreased 4% sequentially,
as North America revenue of $2.7 billion declined 3%, while
international revenue of $5.0 billion decreased 5% primarily due to
seasonality.
North America
North America area consolidated revenue of $2.7 billion
was 3% lower sequentially due to lower pricing and activity for
both our hydraulic fracturing- and drilling-related businesses,
while revenue from our artificial lift product line was flat
sequentially. Although the volume of pressure pumping activity
increased due to the seasonal winter activity ramp-up in Canada,
well completion activity was impacted by softer pricing. Offshore
revenue in North America was slightly down sequentially with
increased wireline activity in the US Gulf of Mexico offset by
lower multiclient seismic license sales. Cameron revenue in North
America was marginally up sequentially.
International
Consolidated revenue in the Latin America area of $1.0
billion increased 1% sequentially from double-digit revenue growth
in the Mexico & Central America GeoMarket due to high offshore
exploration-led activity for the IOCs, increased IDS work, and
higher multiclient seismic license sales. In the Latin America
North GeoMarket, mainly in Ecuador, revenue increased from higher
Schlumberger Production Management (SPM) activity and increased
production. In the Latin America South GeoMarket, revenue increased
slightly due to increased hydraulic fracturing activity for
unconventional resources in Argentina and additional production
from an SPM project. The increase in area revenue was partially
offset by lower Cameron activity in Brazil.
Europe/CIS/Africa area consolidated revenue of $1.7
billion decreased 7% sequentially primarily due to the winter
activity reduction in the Russia & Central Asia GeoMarket that
impacted all product lines. Activity was also lower in the UK &
Continental Europe and the Norway & Denmark GeoMarkets,
exacerbated by weather and maintenance-related delays. Revenue in
the Sub-Sahara Africa GeoMarket fell slightly sequentially due to
reduced product sales in Mozambique and Angola and limited, but
growing, exploration activity. Software Integrated Solutions (SIS)
software sales were lower across the area, while Cameron revenue
also declined, mainly in Europe.
Consolidated revenue in the Middle East & Asia area
of $2.3 billion decreased 5% sequentially, primarily from lower
revenue in the Eastern Middle East GeoMarket due to lower IDS
project activity in Iraq and reduced hydraulic fracturing activity
in Oman. Revenue in the Northern Middle East GeoMarket was lower
due to decreased product and SIS software sales in Egypt and Kuwait
but was partially offset by higher services activity in Qatar.
Lump-sum turnkey (LSTK) project revenue in Saudi Arabia continued
to grow but was offset by weather-related delays to land seismic
operations. Revenue in the Far East Asia & Australia GeoMarket
decreased due to winter weather in China and the slowing of
activity in Australia during the cyclone season. Cameron revenue in
the area was lower primarily due to decreased activity in the
Eastern Middle East and Northern Middle East GeoMarkets. The
decrease in area revenue was partially offset by higher IDS project
activity in India.
Reservoir Characterization
(Stated in millions)
Three Months Ended
Change Mar. 31, 2019 Dec. 31,
2018 Mar. 31, 2018
Sequential
Year-on-year Revenue
$1,543 $1,651 $1,559
-7%
-1% Pretax operating income
$293 $364 $306
-20% -4% Pretax operating margin
19.0 %
22.0 % 19.7 %
-308 bps -69 bps
Reservoir Characterization revenue of $1.5 billion, of which 81%
came from the international markets, decreased 7% sequentially.
This was driven by the effects of the seasonal decline in Wireline
activity in Russia and reduced multiclient seismic license sales in
the US Gulf of Mexico. Lower SIS software sales, mainly in the
Europe/CIS/Africa and the Middle East & Asia areas, also
contributed to the revenue decline. Testing Services and
OneSurface® revenues were essentially flat compared with the
previous quarter.
Reservoir Characterization pretax operating margin of 19% was
308 bps lower sequentially due to seasonally lower revenue from
Wireline activity in the Russia & Central Asia GeoMarket and
decreased overall sales of SIS software and WesternGeco®
multiclient seismic licenses.
In the first quarter, Reservoir Characterization performance was
supported by multiple contract awards and the application of
technology and domain expertise to improve operational
performance.
Apache Egypt awarded Schlumberger a two-year contract with an
optional two-year extension for the provision of formation
evaluation services in 11 exploration wells in Western Egypt. The
technologies to be deployed include the MDT* modular formation
dynamics tester, Litho Scanner* high-definition spectroscopy
service, and FMI-HD* high-definition formation microimager.
In Indonesia, Integrated Services Management (ISM) delivered the
first three wells of a 15-well campaign ahead of schedule and under
budget. Close collaboration with the customer enabled ISM to deploy
technologies from multiple product lines, which improved
operational efficiency and helped the customer drill an average of
70 m per day.
In Mexico, PEMEX awarded WesternGeco a 14,000-km2 processing and
reimaging project that requires integration of more than 20
datasets acquired in the Campeche Basin in the southern Gulf of
Mexico over a 20-year period. The surveys were conducted by several
companies, including WesternGeco, and applied various technologies
such as wide-azimuth, narrow-azimuth, and ocean-bottom cable. The
project will create an integrated earth model to help PEMEX focus
on deep targets and provide a greater understanding of the complex
subsalt reservoirs in the prolific Campeche Basin. The award
follows recent multiclient wide-azimuth and proprietary Q-Seabed*
multicomponent seabed seismic system surveys that WesternGeco
executed for PEMEX.
In Mexico, Schlumberger and Shell signed an agreement to license
a large WesternGeco dataset from the Campeche and Perdido areas.
The agreement includes acquisition of new multiclient surveys in
these areas using third-party vessels, as well as licensing
existing data. To meet Shell’s timeline for its plans in offshore
Mexico, WesternGeco will also perform advanced high-resolution
reimaging on subsets of data in parallel with data processing to
aid Shell in optimizing drilling locations. In 2018, Shell won 9 of
the 19 offshore Gulf of Mexico oil and gas blocks awarded in
Mexico’s bid round 2.4. Through this collaboration with
WesternGeco, Shell says it is reinforcing its commitment to bring
technology and rapid progress to its Mexico exploration
program.
Since the launch of the DELFI* cognitive E&P environment at
the SIS Global Forum in 2017, Woodside has worked closely with
Schlumberger to implement its digital strategy across all E&P
workflows. A memorandum of understanding (MOU) was signed in
January with Schlumberger, as Woodside’s partner of choice, for
early access to new digital technology solutions, helping Woodside
to lead the industry in cloud-enabled digital technology deployment
and R&D innovation across all domains.
OMV and Schlumberger signed an MOU to evaluate potential
collaboration models for digital solutions. The strategic
partnership will help OMV accelerate the deployment of its digital
transformation by leveraging Schlumberger digital technology that
is currently available as well as digital technology that is still
in development.
MODEC Offshore Production Systems (Singapore) Pte. Ltd. awarded
Schlumberger two contracts for the supply of oil separation and
treatment equipment and CO2 gas processing equipment for floating
production storage and offloading (FPSO) vessels offshore Brazil.
These contracts include the provision of the OneSurface CONSEPT
ICD* separator inlet cyclone device, electrostatic oil dehydrators
and desalters, and CYNARA* acid gas removal membrane systems.
Drilling
(Stated in millions)
Three Months Ended
Change Mar. 31, 2019 Dec. 31,
2018 Mar. 31, 2018
Sequential
Year-on-year Revenue
$2,387 $2,461 $2,126
-3%
12% Pretax operating income
$307 $318 $293
-3%
5% Pretax operating margin
12.9 % 12.9 % 13.8
%
-6 bps -90 bps
Drilling revenue of $2.4 billion, of which 74% came from the
international markets, decreased 3% sequentially. This was driven
by seasonally lower international drilling activity, mainly in the
Northern Hemisphere, that primarily impacted M-I SWACO and Bits
& Drilling Tools. Land Rigs revenue declined as projects were
completed in Iraq and Australia. Directional drilling revenue in
North America land was also lower as the rig count fell 7%
sequentially. These declines were partially offset by higher
revenue from IDS contracts in Mexico, Saudi Arabia, and India.
Drilling pretax operating margin of 13% was essentially flat
sequentially despite the drop in revenue.
Drilling performance benefitted from IDS contract awards and the
deployment of drilling technologies to reduce operating costs and
improve performance.
In the Norwegian sector of the North Sea, IDS used a combination
of technologies in three wells to help Equinor increase the average
meters drilled per day by 29% compared with similar offset wells,
reducing operational cost by $4.9 million per well. These
challenging wells typically require multiple runs to replace
drilling tools compromised by severe shock and vibration. Close
collaboration with the customer and the drilling contractor enabled
the savings through more robust well design, reduced flat time, and
more efficient drilling tools and services. Schlumberger
technologies, including the PowerDrive Xceed* ruggedized rotary
steerable system and GeoSphere* reservoir mapping-while-drilling
service, played an important role in achieving the time savings of
6.7 days per well.
MOL Norge AS awarded Schlumberger an IDS contract for two
exploration wells with an optional two-well extension in the
Norwegian sector of the North Sea. Operations are expected to begin
in the first half of 2019 and include the deployment of the
DigiScope* slimhole measurements-while-drilling service, Quanta
Geo* photorealistic reservoir geology service, and Saturn* 3D
radial probe.
In Iraq, Basra Oil Company awarded Schlumberger a two-year IDS
contract with an optional one-year extension to drill 40 wells in
the Majnoon Field. Operations are expected to begin in the second
half of 2019.
Borr Drilling and OPEX Perforadora S.A. de C.V. have been
awarded a contract for nine offshore development wells in the
Mexico sector of the Gulf of Mexico. Schlumberger has been selected
to provide integrated drilling services and deliver end-to-end well
solutions on the newbuild jackups, Grid and Gersemi. The two-year
contract is expected to start mid-2019.
In Libya, Drilling & Measurements used GeoSphere reservoir
mapping-while-drilling service for Arabian Gulf Oil Company to
drill a sidetrack from a nonproducing well. The GeoSphere service
enabled real-time adjustments to the well trajectory to avoid the
oil/water contact zone, which led to production of 3,000 bbl/d.
In Kuwait, Bits & Drilling Tools used Direct XCD* drillable
alloy casing bit technology to help Kuwait Oil Company improve
drilling performance in a challenging well section. The formation
comprises collapsing shale and fractured limestone that often lead
to loss of the bottomhole assembly and multiple cement plugs to
control drilling fluid losses. Direct XCD bit technology was able
to drill through the section in a single run, reducing drilling
time from 49 to 12 days by eliminating additional trips and cement
plugs.
In the Permian Basin, Drilling & Measurements used the
PowerDrive Orbit* rotary steerable system for Diamondback Energy,
Inc. to increase drilling efficiency. In one well, the rate of
penetration (ROP) increased by 42% compared with an offset well
drilled from the same pad with conventional tools. The customer
established a new lateral length record of 13,319 ft—which was the
most cost-efficient well drilled to date—and similar performance
was delivered in the next two wells on the pad.
In Oklahoma, Apache Corporation used EnduroBlade 360* rolling
diamond element bit in the SCOOP Play. The rolling diamond elements
helped reduce drilling time in interbedded sections of sandstone,
limestone, and shale that cause severe drillbit wear, reducing the
ROP. The EnduroBlade 360 bit helped Apache reduce drilling time in
the well by 66 hours compared with the fastest offset well drilled
from the same pad.
Production
(Stated in millions)
Three Months Ended
Change Mar. 31, 2019 Dec. 31,
2018 Mar. 31, 2018
Sequential
Year-on-year Revenue
$2,890 $2,936 $2,956
-2%
-2% Pretax operating income
$217 $198 $217
10%
-
Pretax operating margin
7.5 % 6.8 % 7.3 %
76
bps 18 bps
Production revenue of $2.9 billion, of which 52% came from the
international markets, declined 2% sequentially due to lower
revenue from the OneStim business in North America land and lower
Artificial Lift Solutions revenue internationally, mainly in
Russia, Ecuador, and India. Although the volume of pressure pumping
activity increased due to the seasonal winter activity ramp-up in
Canada, revenue was impacted by softer pricing. These declines were
partially offset by increased SPM activity in Canada, Ecuador, and
Argentina—boosted by higher production.
Production pretax operating margin of 8% was essentially flat
sequentially despite the drop in revenue.
Production performance was strengthened by increasing deployment
of innovative fracturing-related technologies in North America and
its take-up by operators in several international basins.
In North America, OneStim continued to deploy several new
technologies to increase operational efficiency and stimulation
effectiveness in hydraulic fracturing operations.
- At the surface, the automated
stimulation delivery platform includes a new automated pump control
system, which has already been deployed for more than 30 customers
across all basins in North America land. In addition, the new
MonoFlex* dual-connection fracturing fluid delivery technology
significantly reduces rig-up and rig-down time by 90% and limits
HSE risks with only two connections—a reduction compared to the 12
to 30 connections required for conventional systems.
- Downhole, innovative stimulation
technologies have improved effectiveness and production for
operators, especially in the context of parent-child wells. The
downhole suite of Kinetix Shale* reservoir-centric
stimulation-to-production software, BroadBand Shield*
fracture-geometry control service, and WellWatcher Stim*
stimulation monitoring service have enabled operators to avoid
parent-child well interference using an engineered far-field
diversion workflow in combination with other technologies.
- To maximize stimulation effectiveness
in cemented horizontal wells, OneStim has introduced Fulcrum*
cement-conveyed frac performance technology. The technology is
designed to improve fracturing performance in wells where the
casing is poorly centralized or well conditions limit mud removal
techniques. Fulcrum technology has seen rapid adoption, enabling
operators to increase liquids production up to 41%. In the first
quarter of 2019, Fulcrum technology was used in the completion of
85 horizontal wells across the Permian, South Texas, Midcontinent,
and North East regions.
In Oklahoma, OneStim used FracXion* fully composite frac plug
and ReacXion* dissolvable frac plug technology in an extended-reach
lateral to help a customer reduce operating costs in the SCOOP
Play. Using FracXion and ReacXion plugs in the last 1,524 m of this
3,048-m well rather than conventional plugs for the entire well
eliminated the cost associated with mechanical intervention
operations.
In Serbia, Well Services used Broadband Shield fracture-geometry
control service for NIS-Gazprom Neft Serbia. Three fracturing
treatments were executed with the BroadBand Shield service,
specifically designed to contain the fracture in the producing zone
and prevent breakthrough to the water zone below. As a result of
the use of BroadBand Shield service diversion pills, fracture
geometries were successfully contained in the target zones,
resulting in a multifold oil production increase without increasing
the water cut.
Cameron
(Stated in millions)
Three Months Ended
Change Mar. 31, 2019 Dec. 31,
2018 Mar. 31, 2018
Sequential
Year-on-year Revenue
$1,174 $1,265 $1,310
-7%
-10% Pretax operating income
$137 $127 $166
8%
-18% Pretax operating margin
11.6 % 10.0 %
12.7 %
161 bps -102 bps
Cameron revenue of $1.2 billion, of which 48% came from
international markets, fell 7% sequentially due to lower project
deliveries from the long-cycle businesses of OneSubsea and Drilling
Systems following the high year-end sales of the previous quarter,
primarily in the international areas. Cameron revenue in North
America, however, was marginally up sequentially. OneSubsea revenue
was lower in the Sub-Sahara Africa, North Middle East, North
Africa, and Russia & Central Asia GeoMarkets. Drilling Systems
declined following higher delivery of products and services
offshore North America in the previous quarter. Surface Systems
revenue declined from lower activity in Australia, India, and Asia
while Valves & Measurement revenue was higher sequentially due
to increased demand from distributors in North America.
Cameron pretax operating margin of 12% was 161 bps higher
sequentially despite the revenue decline due to improved
profitability in OneSubsea and Drilling Systems, and higher sales
volumes and improved pricing in Valves & Measurement.
In the first quarter, Cameron won several contracts for
integrated subsea production systems, subsea environmental
monitoring, and the provision of valves and BOP stacks and
controls.
Woodside awarded OneSubsea a two-year contract to deliver an
integrated gas production system for the Julimar Development Phase
2 offshore Australia. OneSubsea Capital-Efficient Solutions reduce
project cycle time and overall cost and are now an integral part of
all customer projects.
In addition, Woodside awarded two contracts for front-end
engineering and design (FEED) activities to the Subsea Integration
Alliance. One contract is to undertake engineering studies for the
subsea umbilical risers and flowlines (SURF) related to the
development of the Scarborough resource offshore Australia. The
other FEED contract is for a stand-alone FPSO facility for the SNE
Field Development Phase 1 offshore Senegal, with first oil expected
in 2022.
Valves & Measurement received an award for the provision of
GROVE* valves to be used in pipeline infrastructure in the Permian
Basin. Valves deployed in the Permian are supported by the new
Cameron V&M service facility in Midland, Texas, which repairs,
refurbishes, and tests valves on site as well as inline
troubleshooting and remediation services in the field.
Seadrill awarded Drilling Systems a contract for the upgrade of
primary and secondary BOP stacks and controls on the West Mira
offshore drilling rig. These upgrades will prepare the stacks for
use in the North Sea, and the work is expected to begin in the
third quarter of 2019.
Financial Tables
Condensed Consolidated Statement of Income (Stated in
millions, except per share amounts) Three
Months Periods Ended March 31,
2019
2018 Revenue
$7,879 $7,829 Interest and
other income
14 42 Expenses Cost of revenue
6,952
6,802 Research & engineering
173 172 General &
administrative
112 111 Interest
147
143 Income before taxes
$509 $643 Tax expense
79 113 Net income attributable
to Schlumberger
$430 $530 Net income attributable to
noncontrolling interests
9 5 Net
income attributable to Schlumberger
$421
$525 Diluted earnings per share of
Schlumberger
$0.30 $0.38
Average shares outstanding
1,385 1,385 Average shares
outstanding assuming dilution
1,397
1,394 Depreciation & amortization included in
expenses (1)
$903 $874
(1) Includes depreciation of property, plant and
equipment and amortization of intangible assets, multiclient
seismic data costs, and SPM investments.
Condensed
Consolidated Balance Sheet (Stated in millions)
Mar. 31, Dec. 31, Assets
2019 2018 Current Assets Cash and short-term
investments
$2,155 $2,777 Receivables
8,171 7,881
Other current assets
5,447 5,073
15,773 15,731 Fixed assets
11,533 11,679 Multiclient
seismic data
584 601 Goodwill
24,945 24,931
Intangible assets
8,611 8,727 Other assets
8,875 8,838
$70,321 $70,507 Liabilities and Equity
Current Liabilities
Accounts payable and accrued liabilities
$9,702 $10,223
Estimated liability for taxes on income
1,194 1,155
Short-term borrowings and current portion
of long-term debt
99 1,407 Dividends payable
702
701
11,697 13,486 Long-term debt
16,449 14,644
Deferred taxes
1,375 1,441 Postretirement benefits
1,136 1,153 Other liabilities
3,140
3,197
33,797 33,921 Equity
36,524 36,586
$70,321 $70,507
Liquidity
(Stated in millions)
Mar. 31, Dec. 31,
Mar. 31,
Components of Liquidity
2019 2018 2018
Cash and short-term investments
$2,155 $2,777 $4,165
Short-term borrowings and current portion of long-term debt
(99) (1,407) (4,586) Long-term debt
(16,449) (14,644)
(13,526) Net Debt (1)
$(14,393) $(13,274) $(13,947)
Details of changes in liquidity follow:
Three Three
Months Months Periods Ended March 31,
2019 2018 Net income
before noncontrolling interests
$430 $530 Depreciation and
amortization (2)
903 874 Stock-based compensation expense
108 90 Change in working capital
(1,048) (836) Other
(67) (90)
Cash flow from operations (3)
$326
$568 Capital expenditures
(413) (454) SPM investments
(151) (240) Multiclient seismic data capitalized
(45)
(26)
Free cash flow (4)
(283) (152) Dividends
paid
(692) (692) Stock repurchase program
(98) (97)
Proceeds from employee stock plans
106 127
(967)
(814) Business acquisitions and investments, net of cash
acquired plus debt assumed
(5) (13) Other
(147) (10)
(Increase) decrease in Net Debt
(1,119) (837) Net Debt,
beginning of period
(13,274) (13,110) Net Debt, end of
period
$(14,393) $(13,947) (1) “Net Debt”
represents gross debt less cash, short-term investments and fixed
income investments, held to maturity. Management believes that Net
Debt provides useful information regarding the level of
Schlumberger’s indebtedness by reflecting cash and investments that
could be used to repay debt. Net Debt is a non-GAAP financial
measure that should be considered in addition to, not as a
substitute for or superior to, total debt. (2) Includes
depreciation of property, plant and equipment and amortization of
intangible assets, multiclient seismic data costs and SPM
investments. (3) Includes severance payments of $48 million and $76
million during the three months ended March 31, 2019 and 2018,
respectively. (4) “Free cash flow” represents cash flow from
operations less capital expenditures, SPM investments and
multiclient seismic data costs capitalized. Management believes
that free cash flow is an important liquidity measure for the
company and that it is useful to investors and management as a
measure of Schlumberger’s ability to generate cash. Once business
needs and obligations are met, this cash can be used to reinvest in
the company for future growth or to return to shareholders through
dividend payments or share repurchases. Free cash flow does not
represent the residual cash flow available for discretionary
expenditures. Free cash flow is a non-GAAP financial measure that
should be considered in addition to, not as substitute for or
superior to, cash flow from operations.
Charges & Credits
In addition to financial results determined in accordance with
US generally accepted accounting principles (GAAP), this
first-quarter 2019 earnings release also includes non-GAAP
financial measures (as defined under the SEC’s Regulation G). Net
income, excluding charges & credits, as well as measures
derived from it (including diluted EPS, excluding charges &
credits; Schlumberger net income, excluding charges & credits;
and effective tax rate, excluding charges & credits) are
non-GAAP financial measures. Management believes that the exclusion
of charges & credits from these financial measures enables it
to evaluate more effectively Schlumberger’s operations period over
period and to identify operating trends that could otherwise be
masked by the excluded items. These measures are also used by
management as performance measures in determining certain incentive
compensation. The foregoing non-GAAP financial measures should be
considered in addition to, not as a substitute for or superior to,
other measures of financial performance prepared in accordance with
GAAP. The following is a reconciliation of these non-GAAP measures
to the comparable GAAP measures.
(Stated in millions, except per share amounts)
Fourth Quarter 2018 Noncont.
Diluted Pretax Tax
Interests Net EPS Schlumberger
net income (GAAP basis) $648 $100 $10 $538 $0.39 Gain on sale of
marine seismic acquisition business (215) (19) - (196) (0.14) Asset
impairments 172 16 - 156
0.11 Schlumberger net income, excluding charges &
credits $605 $97 $10 $498
$0.36
There were no charges or credits during the first quarter of
2019 and 2018.
Segments
(Stated in millions)
Three Months Ended
Mar. 31, 2019 Dec. 31, 2018 Mar.
31, 2018
Income Income
Income
Before Before Before
Revenue
Taxes Revenue Taxes Revenue Taxes Reservoir Characterization
$1,543 $293 $1,651 $364 $1,559 $306 Drilling
2,387 307 2,461 318 2,126 293 Production
2,890
217 2,936 198 2,956 217 Cameron
1,174 137
1,265 127 1,310 166 Eliminations & other
(115)
(46) (133) (40) (122) (8) Pretax operating income
908
967 974 Corporate & other
(273) (238) (225) Interest
income(1)
10 8 25 Interest expense(1)
(136) (132)
(131) Charges & credits
- 43 -
$7,879 $509 $8,180 $648 $7,829 $643 (1)
Excludes interest included in the segment results.
Supplemental Information
1)
What is the capex guidance for the full
year 2019?
Capex (excluding multiclient and SPM investments) for the full year
2019 is still expected to be approximately $1.5 to $1.7 billion,
compared to $2.2 billion that was spent in 2018.
2)
What were the cash flow from operations
and free cash flow for the first quarter of 2019?
Cash flow from operations for the first quarter of 2019 was $326
million. Free cash flow for the first quarter of 2019 was negative
$283 million.
3)
What was included in “Interest and
other income” for the first quarter of 2019?
“Interest and other income” for the first quarter of 2019 was $14
million. This amount consisted of earnings of equity method
investments of $3 million and interest income of $11 million.
4)
How did interest income and interest
expense change during the first quarter of 2019?
Interest income of $11 million for the first quarter of 2019 was $1
million higher sequentially. Interest expense of $147 million
increased $5 million sequentially.
5)
What is the difference between pretax
operating income and Schlumberger’s consolidated income before
taxes?
The difference principally consists of
corporate items, charges and credits, and interest income and
interest expense not allocated to the segments as well as
stock-based compensation expense, amortization expense associated
with certain intangible assets, certain centrally managed
initiatives, and other nonoperating items.
6)
What was the effective tax rate (ETR)
for the first quarter of 2019?
The ETR for the first quarter of 2019, calculated in accordance
with GAAP, was 15.5% as compared to 15.4% for the fourth quarter of
2018. Excluding charges and credits, the ETR for the fourth quarter
of 2018 was 16.0%. There were no charges and credits in the first
quarter of 2019.
7)
How many shares of common stock were
outstanding as of March 31, 2019 and how did this change from the
end of the previous quarter?
There were 1.385 billion shares of common stock outstanding as of
March 31, 2019. The following table shows the change in the number
of shares outstanding from December 31, 2018 to March 31, 2019.
(Stated in millions) Shares outstanding at
December 31, 2018 1,383 Shares issued to optionees, less
shares exchanged - Vesting of restricted stock 1 Shares issued
under employee stock purchase plan 3 Stock repurchase program (2 )
Shares outstanding at March 31, 2019 1,385
8)
What was the weighted average number of
shares outstanding during the first quarter of 2019 and fourth
quarter of 2018, and how does this reconcile to the average number
of shares outstanding, assuming dilution used in the calculation of
diluted earnings per share, excluding charges and credits?
The weighted average number of shares outstanding was 1.385 billion
during both the first quarter of 2019 and the fourth quarter of
2018. The following is a reconciliation of the weighted
average shares outstanding to the average number of shares
outstanding, assuming dilution, used in the calculation of diluted
earnings per share, excluding charges and credits.
(Stated in millions)
First Quarter
Fourth Quarter
2019
2018 Weighted average shares outstanding
1,385
1,384 Assumed exercise of stock options
-
-
Unvested restricted stock
12
8 Average shares outstanding, assuming dilution
1,397
1,392
9)
What are Schlumberger Production
Management (SPM) projects and how does Schlumberger recognize
revenue from these projects?
SPM projects are focused on developing and comanaging production on
behalf of Schlumberger customers under long-term agreements.
Schlumberger will invest its own services, products, and in some
cases, cash, into the field development activities and operations.
Although in certain arrangements, Schlumberger recognizes revenue
and is paid for a portion of the services or products it provides,
generally Schlumberger will not be paid at the time of providing
its services or upon delivery of its products. Instead,
Schlumberger recognizes revenue and is compensated based upon cash
flow generated or on a fee-per-barrel basis. This may include
certain arrangements whereby Schlumberger is only compensated based
upon incremental production it helps deliver above a mutually
agreed baseline.
10)
How are Schlumberger products and
services that are invested in SPM projects accounted for?
Revenue and the related costs are recorded within the respective
Schlumberger segment for services and products that each segment
provides to Schlumberger’s SPM projects. This revenue (which is
based on arms-length pricing) and the related profit is then
eliminated through an intercompany adjustment that is included
within the “Eliminations & other” line (Note that the
“Eliminations & other” line includes other items in addition to
the SPM eliminations). The direct cost associated with providing
Schlumberger services or products to SPM projects is then
capitalized on the balance sheet. These capitalized
investments, which may be in the form of cash as well as the
previously mentioned direct costs, are expensed in the income
statement as the related production is achieved and associated
revenue is recognized. This amortization expense is based on the
units of production method, whereby each unit is assigned a
pro-rata portion of the unamortized costs based on total estimated
production. SPM revenue along with the amortization of the
capitalized investments and other operating costs incurred in the
period are reflected within the Production segment.
11)
What was the unamortized balance of
Schlumberger’s investment in SPM projects at March 31, 2019 and how
did it change in terms of investment and amortization when compared
to December 31, 2018?
The unamortized balance of Schlumberger’s investments in SPM
projects was approximately $4.2 billion at March 31, 2019 and at
December 31, 2018. These amounts are included within Other Assets
in Schlumberger’s Condensed Consolidated Balance Sheet. The change
in the unamortized balance of Schlumberger’s investment in SPM
projects was as follows: (Stated in millions)
Balance at December 31, 2018 $ 4,201 SPM investments 151
Amortization of SPM investment (170 ) Other 10
Balance at March 31, 2019 $ 4,192
12)
What was the amount of WesternGeco
multiclient sales in the first quarter of 2019?
Multiclient sales, including transfer fees, were $131 million in
the first quarter of 2019 and $176 million in the fourth quarter of
2018.
13)
What was the WesternGeco backlog at the
end of the first quarter of 2019?
The WesternGeco backlog, which is based on
signed contracts with customers, was $228 million at the end of the
first quarter of 2019. It was $343 million at the end of the fourth
quarter of 2018.
14)
What were the orders and backlog for
Cameron’s OneSubsea and Drilling Systems businesses?
The OneSubsea and Drilling Systems orders
and backlog were as follows:
(Stated in millions)
Orders
First Quarter2019
Fourth Quarter2018
OneSubsea
$511 $611 Drilling Systems
$232 $196
Backlog (at the end of period) OneSubsea
$2,096
$1,903 Drilling Systems
$530 $495
About Schlumberger
Schlumberger is the world's leading provider of technology for
reservoir characterization, drilling, production, and processing to
the oil and gas industry. With product sales and services in more
than 120 countries and employing approximately 100,000 people who
represent over 140 nationalities, Schlumberger supplies the
industry's most comprehensive range of products and services, from
exploration through production, and integrated pore-to-pipeline
solutions that optimize hydrocarbon recovery to deliver reservoir
performance.
Schlumberger Limited has executive offices in Paris, Houston,
London, and The Hague, and reported revenues of $32.82 billion in
2018. For more information, visit www.slb.com.
*Mark of Schlumberger or Schlumberger companies.
Notes
Schlumberger will hold a conference call to discuss the earnings
press release and business outlook on Thursday, April 18, 2019. The
call is scheduled to begin at 8:30 a.m. US Eastern Time. To access
the call, which is open to the public, please contact the
conference call operator at +1 (800) 288-8967 within North America,
or +1 (612) 333-4911 outside North America, approximately 10
minutes prior to the call’s scheduled start time. Ask for the
“Schlumberger Earnings Conference Call.” At the conclusion of the
conference call, an audio replay will be available until May 18,
2019 by dialing +1 (800) 475-6701 within North America, or +1 (320)
365-3844 outside North America, and providing the access code
464084. The conference call will be webcast simultaneously at
www.slb.com/irwebcast on a listen-only basis. A replay of the
webcast will also be available at the same web site until May 18,
2019.
This first-quarter 2019 earnings release, as well as other
statements we make, contain “forward-looking statements” within the
meaning of the federal securities laws, which include any
statements that are not historical facts, such as our forecasts or
expectations regarding business outlook; growth for Schlumberger as
a whole and for each of its segments (and for specified products or
geographic areas within each segment); oil and natural gas demand
and production growth; oil and natural gas prices; improvements in
operating procedures and technology, including our transformation
program; capital expenditures by Schlumberger and the oil and gas
industry; the business strategies of Schlumberger’s customers; our
effective tax rate; Schlumberger’s SPM projects, joint ventures and
alliances; future global economic conditions; and future results of
operations. These statements are subject to risks and
uncertainties, including, but not limited to, global economic
conditions; changes in exploration and production spending by
Schlumberger’s customers and changes in the level of oil and
natural gas exploration and development; general economic,
political and business conditions in key regions of the world;
foreign currency risk; pricing pressure; weather and seasonal
factors; operational modifications, delays or cancellations;
production declines; changes in government regulations and
regulatory requirements, including those related to offshore oil
and gas exploration, radioactive sources, explosives, chemicals,
hydraulic fracturing services and climate-related initiatives; the
inability of technology to meet new challenges in exploration; and
other risks and uncertainties detailed in this first-quarter 2019
earnings release and our most recent Forms 10-K, 10-Q, and 8-K
filed with or furnished to the Securities and Exchange Commission.
If one or more of these or other risks or uncertainties materialize
(or the consequences of any such development changes), or should
our underlying assumptions prove incorrect, actual outcomes may
vary materially from those reflected in our forward-looking
statements. Schlumberger disclaims any intention or obligation to
update publicly or revise such statements, whether as a result of
new information, future events or otherwise.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190418005312/en/
Simon Farrant – Vice President of Investor Relations,
Schlumberger LimitedJoy V. Domingo – Manager of Investor Relations,
Schlumberger LimitedOffice +1 (713)
375-3535investor-relations@slb.com
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