- Worldwide revenue of $5.3 billion decreased 2%
sequentially
- International revenue of $4.1 billion decreased 1%
sequentially
- North America revenue of $1.2 billion decreased 2%
sequentially
- GAAP loss per share, including charges and credits of $0.22 per
share, was $0.06
- EPS, excluding charges and credits, was $0.16
- Cash flow from operations was $479 million and free cash flow
was $226 million
- Board approved quarterly cash dividend of $0.125 per share
Schlumberger Limited (NYSE: SLB) today reported results for the
third quarter of 2020.
Third-Quarter Results (Stated in millions, except per share
amounts)
Three Months Ended Change Sept. 30,
2020 Jun. 30, 2020 Sept. 30, 2019
Sequential
Year-on-year Revenue
$5,258
$5,356
$8,541
-2%
-38%
Income (loss) before taxes - GAAP basis
$(54)
$(3,627)
$(11,971)
n/m
n/m
Adjusted EBITDA*
$1,018
$838
$1,773
21%
-43%
Adjusted EBITDA margin*
19.4%
15.6%
20.8%
371 bps
-140 bps
Pretax segment operating income*
$575
$396
$1,096
45%
-48%
Pretax segment operating margin*
10.9%
7.4%
12.8%
355 bps
-190 bps
Net income (loss) - GAAP basis
$(82)
$(3,434)
$(11,383)
n/m
n/m
Net income, excluding charges & credits*
$228
$69
$596
231%
-62%
Diluted EPS (loss per share) - GAAP basis
$(0.06)
$(2.47)
$(8.22)
n/m
n/m
Diluted EPS, excluding charges & credits*
$0.16
$0.05
$0.43
220%
-63%
North America revenue
$1,157
$1,183
$2,850
-2%
-59%
International revenue
$4,091
$4,138
$5,629
-1%
-27%
*These are non-GAAP financial measures. See sections titled
"Charges & Credits", "Segments", and "Supplemental Information"
for details. n/m = not meaningful
Schlumberger CEO Olivier Le Peuch commented, “Our results in the
third quarter clearly demonstrate our focus on execution, returns,
and customer performance. Margins expanded sequentially while
pretax segment operating income and adjusted EBITDA grew 45% and
21%, respectively, highlighting notable progress in the reset of
our earnings power and further demonstrating our execution
capabilities as we transition to our new organization.
“Through this cycle, we are leading technology innovation for
our customers and reinventing ourselves to deliver a return above
our cost of capital through the combination of capital stewardship,
margin expansion, and free cash flow generation.
“In North America, we have exhibited capital discipline, and are
high-grading and rationalizing our portfolio, with a focus on
reduced volatility of earnings and less capital-intensive
businesses as demonstrated by two key milestones we achieved during
the quarter. The first is the agreement to combine our OneStim®
pressure pumping business with Liberty Oilfield Services Inc. The
second is an agreement to divest our low-flow artificial lift
business in a cash transaction.
“Internationally, our fit-for-basin approach continues to extend
our leadership position built on the largest and most diverse
footprint in the industry. Despite the rig count decline during the
quarter, we have experienced significant new technology uptake,
achieved new performance benchmarks for our customers, and captured
higher performance incentives on multiple projects. In addition,
our international business continues to generate resilient,
accretive margins and significant free cash flow. Upon the close of
the two North America transactions, we expect our international
revenue to represent more than 80% of consolidated revenue, up from
an average of approximately 65% over the past decade. The
combination of our fit-for-basin strategy, digital technology
innovation, and scale puts us in the best position to leverage the
anticipated shift of spending growth toward the international
market.
“Third-quarter revenue declined 2% sequentially, as North
America revenue was 2% lower and international revenue declined 1%.
In North America land, increased completions activity on drilled
but uncompleted (DUC) wells was offset by reduced drilling in US
land. North America offshore was affected by reduced rig activity,
lower multiclient seismic license sales, and hurricane
disruption.
“International revenue was driven by higher activity in Latin
America, boosted by the resumption of production in our Asset
Performance Solutions (APS) projects in Ecuador and increased
seasonal summer activity in the North Sea and Russia. These
increases were offset by the effects of rig count declines and
extended COVID-19 disruptions in Africa and in the Middle East
& Asia.
Third-Quarter Revenue by Segment (Stated in millions)
Three Months Ended Change Sept. 30, 2020 Jun.
30, 2020 Sept. 30, 2019
Sequential Year-on-year
Reservoir Characterization
$1,010
$1,052
$1,651
-4%
-39%
Drilling
1,519
1,731
2,469
-12%
-38%
Production
1,801
1,615
3,153
12%
-43%
Cameron
965
1,015
1,363
-5%
-29%
Other
(37)
(57)
(95)
n/m
n/m
$5,258
$5,356
$8,541
-2%
-38%
n/m = not meaningful Certain prior period amounts have been
reclassified to conform to the current period presentation.
“Sequentially, by business segment, third-quarter Production
revenue increased 12%, driven by the gradual recovery in DUC well
completions activity in US land and the resumption of APS
production in Ecuador, which was further boosted by digital
technology, improving project performance and efficiency. Reservoir
Characterization, Drilling, and Cameron decreased 4%, 12%, and 5%,
respectively, due to lower WesternGeco® multiclient seismic license
sales, the US land drilling activity decline, hurricane disruption
in the US Gulf of Mexico, and persistent COVID-19 disruptions
internationally.
“Our cost-reduction program, which will permanently remove $1.5
billion of structural costs on an annual basis, is progressing
well. We expect to realize the vast majority of these savings as we
exit this year. This represents a critical step toward our
intermediate goal of restoring 2019 adjusted EBITDA margins before
the end of 2021.
“I am extremely proud of our operational and financial
performance during the quarter, as we continue to build the
foundation of our future success.
“As we look to the fourth quarter, we expect to continue to
benefit from the effectiveness of our strategy, disciplined
approach to North America, and broad strength of our international
business, as reflected in our third-quarter results. In North
America, the conditions are set for continued momentum, with
improving DUC well completion activity in US land and a modest
drilling resumption in the US and Canada. International activity is
steady following the budget resets completed in the third quarter
and activity will be affected by the seasonal decline in the
Northern Hemisphere, partly offset by muted year-end product and
multiclient license sales.
“Overall internationally, we view the next two quarters as a
period of transition for our industry at the trough of this cycle.
Improving demand recovery supported by various government measures
to stimulate economic activity and continued supply discipline from
the major producers set the conditions for a long-term activity
rebound. However, while the global lockdowns are evolving and
vaccine development is progressing, the near-term recovery remains
fragile owing to potential subsequent waves of COVID-19 that could
pose a significant risk to this outlook.
“Therefore, in this flattening near-term activity outlook, we
will continue to execute on a path toward restoring our 2019
adjusted EBITDA margins and generating robust free cash
flow—through our restructuring measures, the high-grading of our
portfolio, and the further strengthening of our broad international
portfolio.
“As our industry emerges from this trough, the ability to
deliver new performance benchmarks—to innovate and collaborate in
every basin—will define success for the coming decades.
Schlumberger will lead this innovation and the path to recovery.
Our performance and returns-focused strategy will allow us to
capitalize upon the emerging growth cycle and deliver
industry-leading returns, through our capital stewardship,
fit-for-basin technology, digital leadership, and a unique talent
pool supporting our global execution. In addition, we are
accelerating the expansion of our New Energy portfolio as we
develop avenues to contribute to the sustainable energy mix of the
future, leveraging our technology, expertise, and execution
platform to reduce our environmental impacts while helping our
customers reach their environmental goals.
“The crisis has served as a catalyst for reinventing
Schlumberger. We are executing our performance strategy and are
determined to continue taking bold actions to secure resilience and
reposition ourselves as clear leaders—both in performance measured
by our customers and in returns measured by our shareholders.”
Other Events
During the third quarter, Schlumberger issued $500 million of
1.400% Senior Notes due 2025 and $350 million of 2.650% Senior
Notes due 2030.
On August 31, 2020, Schlumberger and Liberty Oilfield Services
Inc. (Liberty) signed an agreement for the contribution to Liberty
of OneStim, Schlumberger’s onshore hydraulic fracturing business in
the United States and Canada, including its pressure pumping,
pumpdown perforating, and Permian frac sand businesses, in exchange
for a 37% equity interest in Liberty. The transaction is expected
to close in the fourth quarter of 2020 and is subject to Liberty
stockholder approval and other customary closing conditions.
On October 15, 2020, Schlumberger’s Board of Directors approved
a quarterly cash dividend of $0.125 per share of outstanding common
stock, payable on January 14, 2021 to stockholders of record on
December 2, 2020.
Consolidated Revenue by Area
(Stated in millions)
Three Months Ended Change
Sept. 30, 2020 Jun. 30, 2020 Sept. 30, 2019
Sequential Year-on-year North America
$1,157
$1,183
$2,850
-2%
-59%
Latin America
707
543
1,014
30%
-30%
Europe/CIS/Africa
1,397
1,449
2,062
-4%
-32%
Middle East & Asia
1,987
2,146
2,553
-7%
-22%
Other
10
35
62
n/m
n/m
$5,258
$5,356
$8,541
-2%
-38%
North America revenue
$1,157
$1,183
$2,850
-2%
-59%
International revenue
$4,091
$4,138
$5,629
-1%
-27%
n/m = not meaningful Certain prior period amounts have been
reclassified to conform to the current period presentation.
North America
North America area consolidated revenue of $1.2 billion
was 2% lower sequentially. On land, an uptick in DUC well
completions was partially offset by reduced drilling activity.
OneStim fracturing revenue grew on higher fleet utilization driven
by a US-market stage count increase of more than 30% as customers
worked on their DUCs in the Permian and in the resilient gas basins
in the Haynesville. Land drilling activity was lower as the average
US land rig count declined 29% sequentially, though the rig count
had increased slightly by quarter end. In addition, sales in
Surface Systems and Valves & Process Systems, mainly on land,
decreased sequentially due to reduced drilling activity. North
America offshore revenue decreased 13% sequentially due to the
combination of reduced rig count, lower WesternGeco multiclient
seismic license sales, and hurricane disruption.
International
Consolidated revenue in the Latin America area of $707
million increased 30% sequentially, primarily due to the resumption
of production in our APS projects in Ecuador. Argentina revenue
increased as activity rebounded following the easing of COVID-19
lockdown restrictions while revenue in both Mexico and Brazil
declined.
Europe/CIS/Africa area consolidated revenue of $1.4
billion decreased 4% sequentially as increased seasonal summer
activity in the North Sea and Russia was offset by rig count
declines and extended COVID-19 disruptions in Africa and the
Caspian region. Resilient activity in Russia and the North Sea was
driven by summer drilling and pressure pumping activity campaigns,
partially offset by disruptions and delays in Kazakhstan and in
Sakhalin. The seasonal activity increase in the Northern
Hemisphere, however, was offset by a significant drop in activity
in Sub-Sahara Africa from COVID-19 disruptions, reduced rig count,
and project delays.
Consolidated revenue in the Middle East & Asia area
of $2.0 billion decreased 7% sequentially, primarily due to
extended COVID-19 disruptions and project delays in Asia and as
customers reduced spending and activity due to budget adjustments,
particularly in the Middle East.
Reservoir Characterization
(Stated in millions)
Three Months Ended Change
Sept. 30, 2020 Jun. 30, 2020 Sept. 30, 2019
Sequential Year-on-year Revenue
$1,010
$1,052
$1,651
-4%
-39%
Pretax operating income
$169
$185
$360
-9%
-53%
Pretax operating margin
16.7%
17.6%
21.8%
-90 bps
-512 bps
Certain prior period amounts have been reclassified to
conform to the current period presentation.
Reservoir Characterization revenue of $1.0 billion, 85% of which
came from the international markets, decreased 4% sequentially.
North America and international revenues declined 14% and 2%,
respectively. This was mainly due to lower WesternGeco multiclient
seismic license sales in North America offshore. Revenue was also
lower in the Middle East due to reduced WesternGeco activity as a
result of a completed project and lower Testing Services activity
due to project cancellations and delays. Sequentially, Wireline
activity was essentially flat while Software Integrated Solutions
(SIS) revenue was higher.
Reservoir Characterization pretax operating margin of 17%
contracted 90 basis points (bps) sequentially due to lower sales of
WesternGeco multiclient seismic licenses, which impacted North
America margin, while international margin was flat
sequentially.
Drilling
(Stated in millions)
Three Months Ended Change
Sept. 30, 2020 Jun. 30, 2020 Sept. 30, 2019
Sequential Year-on-year Revenue
$1,519
$1,731
$2,469
-12%
-38%
Pretax operating income
$144
$165
$306
-13%
-53%
Pretax operating margin
9.5%
9.6%
12.4%
-9 bps
-292 bps
Drilling revenue of $1.5 billion, 83% of which came from the
international markets, decreased 12% sequentially. North America
and international revenues declined 16% and 11%, respectively. The
revenue decline in North America was primarily due to lower
activity in US land as rig count dropped 29%, along with rig count
reductions and activity disruptions in the US Gulf of Mexico due to
a more active hurricane season. In addition, extended COVID-19
disruptions caused drilling activities to be suspended or deferred
in several international GeoMarkets.
Sequentially, Drilling pretax operating margin of 10% was
essentially flat, despite the significant revenue decline. Margin
was resilient both in North America and internationally supported
by prompt cost reduction measures.
Production
(Stated in millions)
Three Months Ended Change
Sept. 30, 2020 Jun. 30, 2020 Sept. 30, 2019
Sequential Year-on-year Revenue
$1,801
$1,615
$3,153
12%
-43%
Pretax operating income
$227
$25
$288
816%
-21%
Pretax operating margin
12.6%
1.5%
9.1%
1,107 bps
347 bps
Production revenue of $1.8 billion, 74% of which came from the
international markets, increased 12% sequentially. North America
and international revenues increased 13% and 11%, respectively.
This was driven primarily by the gradual recovery in DUC well
completions activity in US land and the resumption of APS
production in Ecuador, which was further boosted by digital
technology, improving project performance and efficiency. OneStim
revenue grew more than 50% sequentially as US-market stage counts
increased by more than 30%. Artificial Lift Solutions revenue
increased, also benefitting from the US land recovery. These
increases were offset by international declines in Well Services
and Completions revenue, resulting from lower spending and activity
due to customer budget adjustments, particularly in the Middle
East, and from extended COVID-19 lockdown disruption across several
GeoMarkets.
Production pretax operating margin of 13% expanded by 1,107 bps
sequentially, posting a 108% incremental operating margin. The
margin expansion was due to the resumption of production in our APS
projects in Ecuador and improved profitability across each of
Completions, Artificial Lift Solutions, and Well Services,
supported by cost reduction measures. OneStim margin improved due
to better operating leverage as revenue increased by more than 50%.
Margins improved both in North America and internationally.
Cameron
(Stated in millions)
Three Months Ended Change
Sept. 30, 2020 Jun. 30, 2020 Sept. 30, 2019
Sequential Year-on-year Revenue
$965
$1,015
$1,363
-5%
-29%
Pretax operating income
$60
$80
$173
-25%
-65%
Pretax operating margin
6.3%
7.9%
12.7%
-162 bps
-644 bps
Certain prior period amounts have been reclassified to
conform to the current period presentation.
Cameron revenue of $965 million, 67% of which came from the
international markets, decreased 5% sequentially. This was
primarily due to revenue declines in the long-cycle businesses of
OneSubsea® and Drilling Systems, driven by projects ending in Asia
and Europe, coupled with the extended COVID-19 disruptions. Despite
lower equipment sales in North America, the short-cycle businesses
of Surface Systems and Valves & Process Systems were resilient,
driven by growth internationally.
Cameron pretax operating margin of 6% declined by 162 bps
sequentially. The margin contraction was primarily due to the
unfavorable mix where contribution from the long-cycle businesses
of OneSubsea and Drilling Systems was lower due to reduced
activity. The margins of the short-cycle businesses of Surface
Systems and Valves & Process Systems were flat.
Quarterly Highlights
During the quarter, Schlumberger continued to deploy innovative
technology and digital enablement to help move the industry toward
safer and more efficient operations with lower environmental
impact. Schlumberger’s digital platform for the industry continued
to gain adoption, as Schlumberger helped customers at various
stages of their digital journeys:
- Kuwait Oil Company (KOC) awarded Schlumberger a five-year
contract for the ability to implement digital solutions, including
the Petrel* E&P software platform and other petrotechnical
domain applications. The contract, valued at USD 109 million,
furthers KOC’s objective to deploy best-in-class software solutions
that increase asset team efficiency while reducing overall cost per
barrel. KOC seeks to improve cross-discipline collaboration between
geosciences, reservoir engineering, production engineering, and
drilling to facilitate better investment decisions based on a clear
understanding of opportunities and risks.
- Suncor Energy signed a multiyear agreement to use the
Schlumberger DELFI* cognitive E&P environment for the
multidomain integration of reservoir engineering, production, and
geomechanics in Canada’s large-scale unconventional thermal
reservoirs. The agreement includes a heavy oil research and
development collaboration for Schlumberger to develop new digital
technologies for these complex environments.
- The Angolan Agência Nacional de Petróleo, Gás e Biocombustíveis
(ANPG) issued a contract award to Schlumberger for the agency’s
first-ever digital transformation project. ANPG’s vision is to move
to a cloud-based platform to improve the efficiency and performance
of oil and gas exploration activities in Angola. The project
comprises a technology landscape review, digital readiness
evaluation, and an implementation roadmap. A Schlumberger digital
transformation consulting team will conduct the reviews and then
define a path to advance the digitalization of ANPG, enabled by the
Schlumberger DELFI environment.
New technology, workflows, and digitally enabled
hardware—including artificial intelligence (AI) and internet of
things (IoT) solutions at the edge—continue to positively impact
our internal delivery, our performance for customers, and the
environment:
- In Ecuador, Schlumberger accelerated adoption of digital
solutions through its integrated business model by implementing
Agora* edge AI and IoT solutions on its own APS project. By
combining digital technologies within an integrated environment,
production performance was increased while operational and
environmental footprint were reduced. To solve production
challenges with high gas/oil ratio wells, Agora solutions were used
to deliver an automated electrical submersible pump (ESP)
gas-handling process. Using a securely connected, solar-powered
skid running predictive AI at the edge to optimize well and ESP
performance, production was increased 30% in wells connected by the
Agora solution, while reducing field crew visits to these wells by
97%—an example of the performance made possible by combining
digital and integration.
- Offshore Malaysia, PETRONAS Carigali Sdn Bhd (PCSB), a
subsidiary of PETRONAS, has deployed the Agora platform on mature
assets to improve its wellsite safety and productivity while
reducing greenhouse gas emissions. By using an
artificial-intelligence-based video analytics solution, PCSB has
achieved a step change in safety and productivity with zero
facilities modification. This solution has enabled mature assets to
be successfully digitalized. An Agora platform gateway connected to
an edge-empowered camera and stand-alone sensors reduced human
exposure in the field while providing continuous access to critical
equipment data.
- In Saudi Arabia, the DrillPlan* well construction planning and
DrillOps* automation well delivery solutions surpassed 63,000 ft
drilled, achieving a key milestone for our Integrated Well
Construction LSTK operations. The on-bottom rate of penetration
(ROP) with AutoROP* was 17% higher than previous wells drilled by
the same rigs' field average. Furthermore, DrillOps controlled the
preconnection, reaming, and backreaming operations, significantly
reducing nonproductive time, optimized well delivery time, and
contributed to a 30% improvement in on-bottom ROP and shoe-to-shoe
run in a recent section of a horizontal well.
- Onshore Thailand, Schlumberger used Performance Live* digitally
connected service on four rigs for PTT Exploration and Production
Plc., Ltd. (PTTEP), reducing crew HSE exposure while sustaining
improved ROP. To overcome pandemic-related operational challenges
while maintaining drilling execution, Performance Live service
enabled PTTEP to conduct most analytical tasks from an office
rather than at the wellsite, resulting in a wellsite crew reduction
of 50% during directional drilling operations. When combined with
upgraded and optimized bottomhole assembly tools with digitally
connected capability, Performance Live service also helped PTTEP
consistently achieve ROP in excess of 1,500 ft/d.
- In Brazil, Drilling & Measurements deployed TerraSphere*
high-definition dual-imaging-while-drilling service for the first
time in the country to log presalt carbonates for Total.
TerraSphere service enabled acquisition of high-definition borehole
images—while drilling—de-risking the logging operations on depleted
and complex reservoirs. This technology enables well completion
optimization and unprecedented reservoir characterization detail
for Total’s Lapa field development.
- In the US Gulf of Mexico, Byron Energy began production from
its SM58 G1 well, crediting a WesternGeco data enrichment
initiative with leading to the successful discovery in 2019. The
well, which is producing 19.4 MMcf/d of gas and 385 bbl/d of
condensate, was drilled on a prospect identified using a velocity
model combined with reverse time migration technology. Byron has
identified other prospects on the SM58 block using the same
exploration dataset.
During the quarter, Schlumberger was awarded a variety of
contracts, particularly internationally. Operators are engaging
Schlumberger to employ capital-efficient, shorter-cycle methods to
enhance recovery and generate more value from their assets:
- OneSubsea has been awarded an engineering, procurement, and
construction (EPC) contract by BHP Petroleum (BHP) for a subsea
boosting system to increase recovery from the deepwater Shenzi
Field in the US Gulf of Mexico. The Shenzi Field, located
approximately 190 km offshore Louisiana, began producing in 2009.
The multiphase boosting system will enable a significant drawdown
on existing wells to facilitate increased production from the
field. The boosting system, rated at 3.6 MW, is a compact,
reliable, and capital-efficient solution to increase BHP’s value
from this proven asset.
- In Scandinavia, Schlumberger secured a contract for stimulation
vessel services. The three-year contract includes optional
extensions through 2026 to provide stimulation services in the
Greater Ekofisk Area in the North Sea. Service delivery following
the initial award combined with key technologies are assessed to
reduce costs and improve efficiency.
- In Oman, Occidental of Oman, Inc. awarded Schlumberger a
multiyear contract for the supply of artificial lift production
systems and services for the Mukhaizna Oil Field. As part of our
commitment to in-country value, we will train and support our local
Omani services partner to deliver our fit-for-purpose artificial
lift solutions.
In addition to these awards, Schlumberger received contracts
from operators focused on efficient development as well as
improving production and recovery to achieve their long-term
goals:
- The Kingdom of Bahrain awarded a performance-based extension
contract to a joint team of Tatweer Petroleum and Schlumberger
Integrated Performance Management for 15 wells following the
success of the pilot project in the Awali Field. This joint
engagement integrates services across subsurface, drilling, and
hydraulic fracturing to unlock the potential of a key reservoir in
the field using fit-for-purpose technologies, including advanced
logging and core analysis, extreme extended-reach wells, and
fracture stimulation techniques.
- In Indonesia, Schlumberger was awarded a three-year contract
with an optional one-year extension for drilling operations by
Pertamina Hulu Mahakam (PHM). This award follows Schlumberger’s
previous success in one of PHM’s mature fields, increasing
production and reducing total system cost through enhanced drilling
performance. The new award includes integrated delivery of
performance-focused technologies—such as StethoScope* formation
pressure-while-drilling service and PowerDrive Orbit G2 vorteX*
motorized rotary steerable system—which will be coupled with a cost
optimization strategy tailored to the field.
Financial Tables
Condensed Consolidated
Statement of Loss
(Stated in millions, except per
share amounts)
Third Quarter
Nine Months
Periods Ended September 30,
2020
2019
2020
2019
Revenue
$5,258
$8,541
$18,069
$24,689
Interest and other income
22
21
94
61
Expenses Cost of revenue
4,624
7,385
16,172
21,594
Research & engineering
137
176
452
527
General & administrative
85
120
293
345
Impairments & other (1)
350
12,692
12,596
12,692
Interest
138
160
419
462
Loss before taxes (1)
$(54
)
$(11,971
)
$(11,769
)
$(10,870
)
Tax (benefit) expense (1)
19
(598
)
(901
)
(420
)
Net loss (1)
$(73
)
$(11,373
)
$(10,868
)
$(10,450
)
Net income attributable to noncontrolling interests
9
10
24
20
Net loss attributable to Schlumberger (1)
$(82
)
$(11,383
)
$(10,892
)
$(10,470
)
Diluted loss per share of Schlumberger (1)
$(0.06
)
$(8.22
)
$(7.84
)
$(7.56
)
Average shares outstanding
1,391
1,385
1,389
1,385
Average shares outstanding assuming dilution
1,391
1,385
1,389
1,385
Depreciation & amortization included in expenses (2)
$587
$900
$1,983
$2,741
(1)
See section entitled “Charges &
Credits” for details.
(2)
Includes depreciation of property, plant
and equipment and amortization of intangible assets, multiclient
seismic data costs, and APS investments.
Condensed Consolidated Balance Sheet
(Stated in millions)
Sept. 30,
Dec. 31,
Assets
2020
2019
Current Assets Cash and short-term investments
$3,837
$2,167
Receivables
5,552
7,747
Other current assets
4,826
5,616
14,215
15,530
Fixed assets
7,396
9,270
Multiclient seismic data
344
568
Goodwill
12,968
16,042
Intangible assets
3,573
7,089
Deferred taxes
33
-
Other assets
5,537
7,813
$44,066
$56,312
Liabilities and Equity Current Liabilities Accounts payable
and accrued liabilities
$9,201
$10,663
Estimated liability for taxes on income
974
1,209
Short-term borrowings and current portion of long-term debt
1,292
524
Dividends payable
184
702
11,651
13,098
Long-term debt
16,471
14,770
Deferred taxes
-
491
Postretirement benefits
854
967
Other liabilities
2,721
2,810
31,697
32,136
Equity
12,369
24,176
$44,066
$56,312
Liquidity
(Stated in millions)
Components of Liquidity Sept. 30,2020 Jun. 30,2020 Dec. 31,2019
Sept. 30,2019 Cash and short-term investments
$3,837
$3,589
$2,167
$2,292
Short-term borrowings and current portion of long-term debt
(1,292
)
(603
)
(524
)
(340
)
Long-term debt
(16,471
)
(16,763
)
(14,770
)
(16,333
)
Net Debt (1)
$(13,926
)
$(13,777
)
$(13,127
)
$(14,381
)
Details of changes in liquidity follow:
Nine
Third
Nine
Months
Quarter
Months
Periods Ended September 30,
2020
2020
2019
Net loss before noncontrolling interests
$(10,868
)
$(73
)
$(10,450
)
Impairment and other charges, net of tax
11,539
310
11,979
671
237
1,529
Depreciation and amortization (2)
1,983
587
2,741
Stock-based compensation expense
318
105
329
Change in working capital
(822
)
(399
)
(1,340
)
Other
(84
)
(51
)
(80
)
Cash flow from operations (3)
2,066
479
3,179
Capital expenditures
(858
)
(200
)
(1,230
)
APS investments
(252
)
(28
)
(526
)
Multiclient seismic data capitalized
(86
)
(25
)
(181
)
Free cash flow (4)
870
226
1,242
Dividends paid
(1,560
)
(174
)
(2,077
)
Stock repurchase program
(26
)
-
(278
)
Business acquisitions and investments, net of cash acquired plus
debt assumed
(33
)
(3
)
(21
)
Net proceeds from divestitures
325
17
-
Other
(375
)
(215
)
27
Increase in Net Debt
(799
)
(149
)
(1,107
)
Net Debt, beginning of period
(13,127
)
(13,777
)
(13,274
)
Net Debt, end of period
$(13,926
)
$(13,926
)
$(14,381
)
(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 APS investments.
(3)
Includes severance payments of $699
million and $273 million during the nine months and third quarter
ended September 30, 2020, respectively; and $104 million and $33
million during the nine months and third quarter ended September
30, 2019, respectively.
(4)
“Free cash flow” represents cash flow from
operations less capital expenditures, APS 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
third-quarter 2020 earnings release also includes non-GAAP
financial measures (as defined under the SEC’s Regulation G). In
addition to the non-GAAP financial measures discussed under
“Liquidity”, net income (loss), excluding charges & credits, as
well as measures derived from it (including diluted EPS, excluding
charges & credits; Schlumberger net income (loss), excluding
charges & credits; effective tax rate, excluding charges &
credits; and adjusted EBITDA) 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 certain of these non-GAAP measures
to the comparable GAAP measures. For a reconciliation of adjusted
EBITDA to the comparable GAAP measure, please refer to the section
titled “Supplemental Information” (item 14).
(Stated in millions, except per
share amounts)
Third Quarter 2020
Pretax
Tax
Noncont. Interests
Net
Diluted EPS
Schlumberger net loss (GAAP basis)
$(54
)
$19
$9
$(82
)
$(0.06
)
Facility exit charges
254
39
-
215
0.15
Workforce reductions
63
-
-
63
0.05
Other
33
1
-
32
0.02
Schlumberger net income, excluding charges & credits
$296
$59
$9
$228
$0.16
Second Quarter 2020 Pretax Tax Noncont.Interests Net
DilutedEPS * Schlumberger net loss (GAAP basis)
$(3,627
)
$(199
)
$6
$(3,434
)
$(2.47
)
Workforce reductions
1,021
71
-
950
0.68
Asset performance solutions investments
730
15
-
715
0.52
Fixed asset impairments
666
52
-
614
0.44
Inventory write-downs
603
49
-
554
0.40
Right-of-use asset impairments
311
67
-
244
0.18
Costs associated with exiting certain activities
205
(25
)
-
230
0.17
Multiclient seismic data impairment
156
2
-
154
0.11
Repurchase of bonds
40
2
-
38
0.03
Postretirement benefits curtailment gain
(69
)
(16
)
-
(53
)
(0.04
)
Other
61
4
-
57
0.04
Schlumberger net income, excluding charges & credits
$97
$22
$6
$69
$0.05
*
Does not add due to rounding.
(Stated in millions, except per
share amounts)
Third Quarter 2019 Pretax Tax Noncont.Interests Net
DilutedEPS Schlumberger net loss (GAAP basis)
$(11,971
)
$(598
)
$10
$(11,383
)
$(8.22
)
Goodwill
8,828
43
-
8,785
6.34
North America pressure pumping
1,575
344
-
1,231
0.89
Intangible assets
1,085
248
-
837
0.60
Other North America-related
310
53
-
257
0.19
Asset performance solutions investments
294
-
-
294
0.21
Equity-method investments
231
12
-
219
0.16
Argentina
127
-
-
127
0.09
Other
242
13
-
229
0.17
Schlumberger net income, excluding charges & credits
$721
$115
$10
$596
$0.43
Nine Months 2020 Pretax Tax Noncont.Interests Net
DilutedEPS * Schlumberger net loss (GAAP basis)
$(11,769
)
$(901
)
$24
$(10,892
)
$(7.84
)
Goodwill
3,070
-
-
3,070
2.21
Intangible assets
3,321
815
-
2,506
1.80
Asset performance solutions investments
1,994
11
-
1,983
1.43
Workforce reductions
1,286
78
-
1,208
0.87
Fixed asset impairments
666
52
-
614
0.44
Inventory write-downs
603
49
-
554
0.40
North America pressure pumping impairment
587
133
-
454
0.33
Right-of-use asset impairments
311
67
-
244
0.18
Facility exit charges
254
39
-
215
0.15
Costs associated with exiting certain activities
205
(25
)
-
230
0.17
Multiclient seismic data impairment
156
2
-
154
0.11
Repurchase of bonds
40
2
-
38
0.03
Postretirement benefits curtailment gain
(69
)
(16
)
-
(53
)
(0.04
)
Other
172
14
-
158
0.11
Valuation allowance
-
(164
)
-
164
0.12
Schlumberger net income, excluding charges & credits
$827
$156
$24
$647
$0.46
*
Does not add due to rounding.
(Stated in millions, except per
share amounts)
Nine Months 2019 Pretax Tax Noncont.Interests Net
DilutedEPS * Schlumberger net loss (GAAP basis)
$(10,870
)
$(420
)
$20
$(10,470
)
$(7.56
)
Goodwill
8,828
43
-
8,785
6.34
North America pressure pumping
1,575
344
-
1,231
0.89
Intangible assets
1,085
248
-
837
0.60
Other North America-related
310
53
-
257
0.19
Asset performance solutions investments
294
-
-
294
0.21
Equity-method investments
231
12
-
219
0.16
Argentina
127
-
-
127
0.09
Other
242
13
-
229
0.17
Schlumberger net income, excluding charges & credits
$1,822
$293
$20
$1,509
$1.08
* Does not add due to rounding.
There were no charges or credits during the first six months of
2019.
Segments
(Stated in millions)
Three Months Ended Sept. 30,
2020 Jun. 30, 2020 Sept. 30, 2019
Revenue
Income(Loss)BeforeTaxes Revenue Income(Loss)BeforeTaxes
Revenue Income(Loss)BeforeTaxes Reservoir Characterization
$1,010
$169
$1,052
$185
$1,651
$360
Drilling
1,519
144
1,731
165
2,469
306
Production
1,801
227
1,615
25
3,153
288
Cameron
965
60
1,015
80
1,363
173
Eliminations & other
(37
)
(25
)
(57
)
(59
)
(95
)
(31
)
Pretax segment operating income
575
396
1,096
Corporate & other
(151
)
(169
)
(231
)
Interest income(1)
3
7
7
Interest expense(1)
(131
)
(137
)
(151
)
Charges & credits(2)
(350
)
(3,724
)
(12,692
)
$5,258
$(54
)
$5,356
$(3,627
)
$8,541
$(11,971
)
(Stated in millions)
Nine Months Ended Sept. 30, 2020
Sept. 30, 2019
Revenue Income(Loss)BeforeTaxes
Revenue Income(Loss)BeforeTaxes Reservoir Characterization
$3,372
$538
$4,669
$959
Drilling
5,540
594
7,275
914
Production
6,119
464
9,120
740
Cameron
3,235
262
3,949
486
Eliminations & other
(197
)
(111
)
(324
)
(127
)
Pretax segment operating income
1,747
2,972
Corporate & other
(549
)
(742
)
Interest income(1)
26
25
Interest expense(1)
(397
)
(433
)
Charges & credits(2)
(12,596
)
(12,692
)
$18,069
$(11,769
)
$24,689
$(10,870
)
(1)
Excludes interest included in the segment
results.
(2)
See section entitled “Charges &
Credits” for details.
Prior period amounts have been reclassified to the current
period presentation.
Supplemental Information
1)
What is the capital investment guidance
for the full year 2020?
Capital investment (comprised of capex,
multiclient, and APS investments) for the full year 2020 is
expected to be approximately $1.5 billion, which is approximately
45% lower than 2019. Capex is expected to be approximately $1.1
billion in 2020 as compared to $1.7 billion in 2019. APS
investments are expected to be approximately $300 million in 2020
as compared to $781 million in 2019.
2)
What were the cash flow from operations
and free cash flow for the third quarter of 2020?
Cash flow from operations for the third
quarter of 2020 was $479 million. Free cash flow for the third
quarter of 2020 was $226 million, despite making $273 million of
severance payments during the quarter.
3)
What was included in “Interest and
other income” for the third quarter of 2020?
“Interest and other income” for the third
quarter of 2020 was $22 million. This amount consisted of earnings
of equity method investments of $19 million and interest income of
$3 million.
4)
How did interest income and interest
expense change during the third quarter of 2020?
Interest income of $3 million for the
third quarter of 2020 decreased $4 million sequentially. Interest
expense of $138 million increased $6 million sequentially.
5)
What is the difference between
Schlumberger’s consolidated income (loss) before taxes and pretax
segment operating income?
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 third quarter of 2020?
The ETR for the third quarter of 2020,
calculated in accordance with GAAP, was -35.1% as compared to 5.5%
for the second quarter of 2020. Excluding charges and credits, the
ETR for the third quarter of 2020 was 19.9% as compared to 22.6%
for the second quarter of 2020.
7)
How many shares of common stock were
outstanding as of September 30, 2020 and how did this change from
the end of the previous quarter?
There were 1.392 billion shares of common
stock outstanding as of September 30, 2020 and 1.388 billion as of
June 30, 2020.
(Stated in millions)
Shares outstanding at June 30, 2020
1,388
Shares issued under employee stock purchase plan
4
Vesting of restricted stock
-
Stock repurchase program
-
Shares outstanding at September 30, 2020
1,392
8)
What was the weighted average number of
shares outstanding during the third quarter of 2020 and second
quarter of 2020? 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 1.391 billion during the third quarter of 2020 and
1.388 billion during the second quarter of 2020.
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)
Third Quarter2020 Second Quarter2020
Weighted average shares outstanding
1,391
1,388
Unvested restricted stock
18
15
Average shares outstanding, assuming dilution
1,409
1,403
9)
What was the unamortized balance of
Schlumberger’s investment in APS projects at September 30,
2020?
The unamortized balance of Schlumberger’s
investments in APS projects was approximately $1.7 billion at
September 30, 2020 and $1.8 billion at June 30, 2020. These amounts
are included within Other Assets in Schlumberger’s Condensed
Consolidated Balance Sheet.
10)
What are the components of depreciation
and amortization expense for the third quarter of 2020 and the
second quarter of 2020?
The components of depreciation and
amortization expense for the third quarter of 2020 and second
quarter of 2020 were as follows:
(Stated in millions)
Third Quarter2020 Second Quarter2020
Depreciation of fixed assets
$385
$417
Amortization of intangible assets
79
80
Amortization of APS investments
87
58
Amortization of multiclient seismic data costs capitalized
36
49
$587
$604
11)
What was the amount of WesternGeco
multiclient sales in the third quarter of 2020?
Multiclient sales, including transfer
fees, were $41 million in the third quarter of 2020 and $71 million
in the second quarter of 2020.
12)
What was the WesternGeco backlog at the
end of the third quarter of 2020?
The WesternGeco backlog, which is based on
signed contracts with customers, was $223 million at the end of the
third quarter of 2020. It was $248 million at the end of the second
quarter of 2020.
13)
What was the book-to-bill ratio for
Cameron’s long-cycle businesses? What were the orders and backlog
for Cameron’s OneSubsea and Drilling Systems businesses?
The book-to-bill ratio for the Cameron
long-cycle businesses was 0.6. The OneSubsea and Drilling Systems
orders and backlog were as follows:
(Stated in millions)
Orders Third Quarter2020 Second
Quarter2020 OneSubsea
$200
$277
Drilling Systems
$98
$95
Backlog (at the end of period) OneSubsea
$2,079
$2,139
Drilling Systems
$398
$457
14)
What was Schlumberger’s adjusted EBITDA
in the third quarter of 2020, the second quarter of 2020, and third
quarter of 2019?
Schlumberger’s adjusted EBITDA was $1.018
billion in the third quarter of 2020, $838 million in the second
quarter of 2020, and $1.773 billion in the third quarter of 2019,
and was calculated as follows:
(Stated in millions)
Third Quarter2020 Second Quarter2020
Third Quarter2019 Net loss attributable to Schlumberger
$(82
)
$(3,434
)
$(11,383
)
Net income attributable to noncontrolling interests
9
6
10
Tax (benefit) expense
19
(199
)
(598
)
Loss before taxes
$(54
)
$(3,627
)
$(11,971
)
Charges & credits
350
3,724
12,692
Depreciation and amortization
587
604
900
Interest expense
138
144
160
Interest income
(3
)
(7
)
(8
)
Adjusted EBITDA
$1,018
$838
$1,773
Adjusted EBITDA represents income before
taxes excluding charges & credits, depreciation and
amortization, interest expense, and interest income. Management
believes that adjusted EBITDA is an important profitability measure
for Schlumberger and that it allows investors and management to
more efficiently evaluate Schlumberger’s operations period over
period and to identify operating trends that could otherwise be
masked. Adjusted EBITDA is also used by management as a performance
measure in determining certain incentive compensation. Adjusted
EBITDA should be considered in addition to, not as a substitute for
or superior to, other measures of financial performance prepared in
accordance with GAAP.
15)
What are the components of the $350
million of charges recorded during the third quarter of
2020?
The components of the $350 million net
pretax charge are as follows (in millions):
Facility exit charges
$254
Workforce reductions
63
Other
33
$350
About Schlumberger
Schlumberger is the world's leading provider of technology and
digital solutions for reservoir characterization, drilling,
production, and processing to the energy industry. With product
sales and services in more than 120 countries and employing
approximately 82,000 people as of the end of third quarter of 2020
who represent over 170 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 sustainably.
Schlumberger Limited has executive offices in Paris, Houston,
London, and The Hague, and reported revenues of $32.92 billion in
2019. 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 Friday, October 16, 2020. 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 (844) 721-7241 within North America,
or +1 (409) 207-6955 outside North America, approximately 10
minutes prior to the call’s scheduled start time, and provide the
access code 4013483. At the conclusion of the conference call, an
audio replay will be available until November 16, 2020 by dialing
+1 (866) 207-1041 within North America, or +1 (402) 970-0847
outside North America, and providing the access code 3336191. 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 website until November
16, 2020.
This third-quarter 2020 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 product lines (and for specified
products or geographic areas within each product line); oil and
natural gas demand and production growth; oil and natural gas
prices; pricing; Schlumberger’s response to, and preparedness for,
the COVID-19 pandemic and other widespread health emergencies;
access to raw materials; improvements in operating procedures and
technology; capital expenditures by Schlumberger and the oil and
gas industry; the business strategies of Schlumberger and
Schlumberger’s customers; Schlumberger’s digital strategy;
Schlumberger’s strategy for its North America operations; the
expected benefits of, or timing to complete, the proposed OneStim
transaction and the divestiture of Schlumberger’s low-flow
artificial lift business; Schlumberger’s restructuring efforts and
charges recorded as a result of such efforts; our effective tax
rate; Schlumberger’s APS projects, joint ventures, and alliances;
future global economic and geopolitical conditions; and future
results of operations, such as margin levels. These statements are
subject to risks and uncertainties, including, but not limited to,
changing 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; the
results of operations and financial condition of Schlumberger’s
customers and suppliers, particularly during extended periods of
low prices for crude oil and natural gas; Schlumberger’s inability
to achieve its financial and performance targets and other
forecasts and expectations; Schlumberger’s inability to
sufficiently monetize assets; the extent of future charges; general
economic, geopolitical, and business conditions in key regions of
the world; foreign currency risk; pricing pressure; weather and
seasonal factors; unfavorable effects of health pandemics;
availability and cost of raw materials; operational modifications,
delays, or cancellations; challenges in Schlumberger’s supply
chain; production declines; Schlumberger’s inability to recognize
intended benefits from its business strategies and initiatives,
such as digital or new energy; as well as its restructuring and
structural cost reduction plans; 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; the competitiveness of alternative energy sources or
product substitutes; and other risks and uncertainties detailed in
this third-quarter 2020 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. Statements in this third-quarter
2020 earnings release are made as of the date of this release, and
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/20201016005317/en/
For more information, contact
Ndubuisi Maduemezia – Vice President of Investor Relations,
Schlumberger Limited Joy V. Domingo – Director of Investor
Relations, Schlumberger Limited Office +1 (713) 375-3535
investor-relations@slb.com
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