TIDMSCL
Schlumberger Limited (NYSE: SLB) today reported results for the
second quarter of 2019.
(Stated in millions, except per share amounts)
Three Months Ended Change
Jun. 30, 2019 Mar. 31, 2019 Jun. 30, 2018 Sequential Year-on-year
Revenue $8,269 $7,879 $8,303 5% 0%
Pretax segment operating income $968 $908 $1,094 7% -12%
Pretax segment operating margin 11.7% 11.5% 13.2% 17 bps -148 bps
Net income - GAAP basis $492 $421 $430 17% 14%
Net income, excluding charges & credits* $492 $421 $594 17% -17%
Diluted EPS - GAAP basis $0.35 $0.30 $0.31 17% 13%
Diluted EPS, excluding charges & credits* $0.35 $0.30 $0.43 17% -19%
North America revenue $2,801 $2,738 $3,139 2% -11%
International revenue $5,463 $5,037 $5,065 8% 8%
North America revenue, excluding Cameron $2,243 $2,178 $2,546 3% -12%
International revenue, excluding Cameron $4,761 $4,469 $4,387 7% 9%
*These are non-GAAP financial measures. See section titled "Charges & Credits" for details.
Schlumberger Chairman and CEO Paal Kibsgaard commented,
"Second-quarter revenue of $8.3 billion increased 5% sequentially,
driven by our international business that grew 8% and showed
continued signs of a broad upturn in E&P investment and
activity. International rig counts increased 6% sequentially and 5%
year-over-year. In contrast, North America land revenue grew 1%
sequentially while North America offshore revenue increased
10%.
"During the first half of 2019, excluding Cameron, international
revenue increased 8% year-over-year while North America land
revenue declined 12% year-over-year. These results reflect the
normalization in global E&P spend that we were anticipating as
international investment increases in response to the accelerating
decline in the mature production base, and North America land
investment decreases due to E&P operator cash flow constraints.
Double-digit year-over-year growth during the first half of 2019
was posted in the Mexico & Central America, Latin America
North, Sub-Sahara Africa, and Far East Asia & Australia
GeoMarkets while high, single-digit growth was seen in the United
Kingdom & Continental Europe, Eastern Middle East, and South
& East Asia GeoMarkets. Our results, therefore, continue to
match our expectations of high, single-digit growth across our
international business in 2019.
"During the second quarter, sequential international growth was
led by the Europe/CIS/Africa area, where revenue increased
sequentially by 11% driven by activity that strengthened beyond the
seasonal recovery in the Russia & Central Asia and United
Kingdom & Continental Europe GeoMarkets. Sequential
international growth was also driven by a 19% improvement in the
Far East Asia & Australia GeoMarket and a 12% increase in the
Latin America area while revenue in the Middle East region grew
3%.
"In North America land, despite the impact of the spring breakup
in Canada, OneStim® activity was higher, which was offset by weak
hydraulic fracturing pricing and a general decrease in drilling
activity. Offshore North America revenue increased from stronger
exploration-led activity driven mainly by WesternGeco® multiclient
seismic license sales.
"By business segment, sequential growth in the second quarter
was led by a 7% increase in revenue in Reservoir Characterization
followed by a 6% increase in Production on higher international
activity that exceeded the strength of the seasonal rebounds
following winter in the Northern Hemisphere. The higher
international activity benefited Wireline, WesternGeco, Well
Services, Completions, Schlumberger Production Management (SPM),
and Artificial Lift Solutions. Cameron revenue increased 5%
sequentially from higher OneSubsea® and Surface Systems activity,
primarily in the international markets. Drilling revenue increased
1% sequentially as international growth was partially offset by
weakness in activity in North America land.
"From a macro perspective, we expect oil market sentiments to
remain balanced. The oil demand forecast for 2019 has been reduced
slightly on trade war fears and current global geopolitical
tensions, but we do not anticipate a change in the structural
demand outlook for the mid-term. On the supply side, we continue to
see US shale oil as the only near- to medium-term source of global
production growth, albeit at a slowing growth rate, as E&P
operators continue to transition from an emphasis on growth to a
focus on cash and returns, with consequent restraining effects on
investment levels. These effects, combined with the decision by
OPEC and Russia to extend production cuts through the first quarter
of 2020, are likely to keep oil prices range bound around present
levels. Although the markets are well supplied from production
added by projects that were sanctioned before 2015, this added
supply will begin to fall in 2020 and create risk for the future as
the decline rates in many mature production basins become an
increasingly significant challenge. In addition, while the number
of new projects we expect to receive final investment decision
(FID) approval in 2019 is likely to increase again for the fourth
consecutive year, their size and number account for supply
additions far below the required global annual production
replacement rates. We therefore maintain our view that
international E&P investment will grow 7% to 8% in 2019,
further supported by the increase in international rig count. In
contrast, spending in North America land is tracking our
expectations of a 10% decline this year.
"The increasing international market investment and a reduction
in North America land capex represent a positive market shift for
Schlumberger and the welcome return of a very familiar opportunity
set. With our unmatched global strength, our modernized execution
platform, and our expanded technology portfolio now ready for broad
digital implementation, we are well positioned to generate superior
earnings growth, margin expansion, and free cash flow in the
emerging international upcycle."
Other Events
Schlumberger announced today that its Board of Directors has
appointed Olivier Le Peuch as its Chief Executive Officer, and
member of the Schlumberger Board, effective August 1, 2019. Mr. Le
Peuch succeeds Paal Kibsgaard, who will retire as Chief Executive
Officer effective that same date. Also effective August 1, Mr.
Kibsgaard will step down as Chairman of the Board and retire as a
member of the Board of Directors. Mr. Kibsgaard will retire after
more than 22 years of service to the Company, including eight years
as CEO and four years as Chairman. Effective the same date, Mark G.
Papa, a current non-independent director, will become non-executive
Chairman of the Board. Peter Currie will continue to serve as the
Board's Lead Independent Director.
During the quarter, Schlumberger repurchased 2.5 million shares
of its common stock at an average price of $40.12 per share, for a
total purchase price of $101 million.
On April 28, 2019, Saudi Arabia's Industrialization and Energy
Services Company (TAQA) announced that Arabian Drilling Company
(ADC)-a joint venture between TAQA and Schlumberger-agreed to
acquire Schlumberger's Middle East onshore drilling rigs business
in Kuwait, Oman, Iraq, and Pakistan for $415 million. Schlumberger
and TAQA formed the ADC joint venture in 1964, with Schlumberger
owning 49% while TAQA owns 51%. The transaction is expected to
close in the second half of 2019, subject to regulatory approvals
and other customary closing conditions.
On May 14, 2019, Schlumberger and Wellbore Integrity Solutions
(WIS), an affiliate of Rhône Capital, announced that they had
entered into an agreement for WIS to acquire the Schlumberger
businesses and associated assets of DRILCO, Thomas Tools, and
Fishing & Remedial services. The transaction is valued at
approximately $400 million and is expected to close by year-end
2019, subject to regulatory approvals and other customary closing
conditions.
On July 17, 2019, Schlumberger's Board of Directors approved a
quarterly cash dividend of $0.50 per share of outstanding common
stock, payable on October 11, 2019 to stockholders of record on
September 4, 2019.
Consolidated Revenue by Area
(Stated in millions)
Three Months Ended Change
Jun. 30, 2019 Mar. 31, 2019 Jun. 30, 2018 Sequential Year-on-year
North America $2,801 $2,738 $3,139 2% -11%
Latin America 1,115 992 919 12% 21%
Europe/CIS/Africa 1,896 1,707 1,784 11% 6%
Middle East 2,452 2,338 2,362 5% 4%
& Asia
Other 5 104 99 n/m n/m
$8,269 $7,879 $8,303 5% 0%
North America $2,801 $2,738 $3,139 2% -11%
revenue
International $5,463 $5,037 $5,065 8% 8%
revenue
North America $2,243 $2,178 $2,546 3% -12%
revenue,
excluding Cameron
International $4,761 $4,469 $4,387 7% 9%
revenue,
excluding Cameron
n/m
= not meaningful
Second-quarter revenue of $8.3 billion increased 5% sequentially
with North America revenue of $2.8 billion increasing 2% while
international revenue of $5.5 billion increased 8%.
North America
North America areaconsolidated revenue of $2.8 billion was 2%
higher sequentially despite the impact of the spring breakup in
Canada. In North America land, OneStim revenue was up 3%
sequentially as improved hydraulic fracturing fleet utilization on
increased market demand was partly offset by continued pricing
weakness. North America land drilling revenue decreased in line
with rig count reductions while Cameron revenue was marginally down
sequentially. Offshore North America revenue increased due to
higher exploration activity led by WesternGecomulticlient seismic
license sales.
International
Consolidated revenue in the Latin America areaof $1.1 billion
increased 12% sequentially from double-digit revenue growth in the
Mexico & Central America GeoMarket due to high offshore
exploration-led activity for the IOCs and increased Integrated
Drilling Services (IDS) onshore activity. In the Latin America
North GeoMarket, revenue was driven by higher SPM activity and
increased production, mainly in Ecuador. In the Latin America South
GeoMarket, revenue was higher due to increased Cameron revenue,
primarily from sales of OneSubsea and Surface Systems
equipment.
Europe/CIS/Africa area consolidated revenue of $1.9 billion
increased 11% sequentially, driven by activity that strengthened
beyond the impact of the seasonal recovery in the Northern
Hemisphere, leading to double-digit sequential growth in the Russia
& Central Asia and United Kingdom & Continental Europe
GeoMarkets. This primarily benefited Wireline, Well Services,
Drilling & Measurements, IDS, and M-I SWACO. Revenue increased
in the Sub-Sahara Africa GeoMarket-particularly in West Africa,
Nigeria, Angola, Gabon, and Equatorial Guinea-as rig counts
climbed, well intervention activity increased, and new integrated
drilling projects began. Cameron revenue was higher in the area due
to increased OneSubsea and Surface Systems equipment sales, mainly
in the United Kingdom & Continental Europe, Norway &
Denmark, North Africa, and Russia & Central Asia
GeoMarkets.
Consolidated revenue in the Middle East & Asia area of $2.5
billion increased 5% sequentially, led by double-digit sequential
revenue growth in the Far East Asia & Australia GeoMarket,
particularly in China and Australia. This benefited Drilling &
Measurements, Well Services, Wireline, Testing Services, and M-I
SWACO. Growth was primarily driven by increased drilling activity
offshore Australia and Indonesia as well as by the seasonal
recovery in China. In Saudi Arabia, stronger Wireline and
Completions activity was partially offset by lower revenue from
Well Services, IDS, and land seismic acquisition surveys. In the
Eastern Middle East GeoMarket, revenue was flat as higher Cameron
activity was offset by lower IDS revenue following project
completions in Iraq. Revenue in the South & East Asia GeoMarket
decreased sequentially as reduced IDS activity in India and lower
Cameron activity were partially offset by higher exploration and
drilling work in Myanmar, Malaysia, and Thailand. The increased
OneSubsea and Surface Systems equipment sales in the Saudi Arabia
& Bahrain, Eastern Middle East, and Far East Asia &
Australia GeoMarkets also contributed to the area's growth.
Reservoir Characterization
(Stated in millions)
Three Months Ended Change
Jun. 30, 2019 Mar. 31, 2019 Jun. 30, 2018 Sequential Year-on-year
Revenue $1,649 $1,543 $1,640 7% 1%
Pretax operating $326 $293 $350 11% -7%
income
Pretax operating 19.8% 19.0% 21.3% 81 bps -153 bps
margin
Reservoir Characterization revenue of $1.6 billion, of which 80%
came from the international markets, increased 7% sequentially due
to higher activity beyond the seasonal rebounds from winter in the
Northern Hemisphere. Growth was driven by higher offshore
exploration activity benefiting Wireline and Testing Services in
the United Kingdom & Continental Europe, Russia & Central
Asia, Saudi Arabia & Bahrain, and Far East Asia & Australia
GeoMarkets. The increase in Reservoir Characterization revenue was
also driven by higher WesternGeco multiclient seismic license sales
in the Mexico Bay of Campeche and the US Gulf of Mexico. Software
Integrated Solutions (SIS) revenue was also higher in the Russia
& Central Asia and the South & East Asia GeoMarkets.
Reservoir Characterization pretax operating margin of 20% was 81
basis points (bps) higher sequentially due to the seasonal recovery
in higher-margin Wireline activity and stronger WesternGeco
multiclient seismic license sales.
Reservoir Characterization performance was supported by multiple
software as a service (SaaS) contracts for the DELFI* cognitive
E&P environment and the expansion of this environment into
other domains. This included contracts for the DrillPlan* coherent
well construction planning solution and the introduction of the
GAIA* digital subsurface platform, which enables exploration teams
to rapidly discover and access basin-scale data and manage their
exploration opportunities in the DELFI environment.
In Malaysia, SIS was awarded a SaaS contract by Hibiscus
Petroleum for use of the DELFI cognitive E&P environment.
In Pennsylvania, Huntley & Huntley Energy Exploration, LLC
awarded Schlumberger a contract for the provision of the DrillPlan
solution. Several DrillPlan solution workflows will be integrated
into the customer's standard planning processes to improve
engineering quality and collaboration with third-party service
providers.
Offshore Angola, Wireline used formation-testing-while-tripping
(FTWT) technology in an exploration well for Eni and reduced
operating costs by $10 million. This is the result of decreasing
rig time more than two weeks compared with standard drillstem
testing (DST) operations. Combined with the InSitu Fluid Analyzer*
real-time downhole fluid analysis system and Saturn* 3D radial
probe, FTWT technology helped confirm the presence of oil and
estimate the reservoir's productivity index. The customer was able
to confirm the reservoir's potential and book additional oil
reserves.
Qatar Petroleum awarded Schlumberger a five-year contract for
the provision of well testing, DST, and downhole data acquisition
using MUZIC* wireless telemetry technology.
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.
In Brazil, Petrobras signed a two-and-half-year contract with
WesternGeco to reimage towed marine streamer and ocean bottom
seismic data collected in the Santos, Campos, and Espirito Santo
Basins. Advanced imaging technologies, including full waveform
inversion, will be used to derive the high-resolution velocity and
anisotrophy models needed to characterize these deepwater
basins.
Drilling
(Stated in millions)
Three Months Ended Change
Jun. 30, 2019 Mar. 31, 2019 Jun. 30, 2018 Sequential Year-on-year
Revenue $2,421 $2,387 $2,234 1% 8%
Pretax operating $300 $307 $289 -2% 4%
income
Pretax operating 12.4% 12.9% 12.9% -45 bps -53 bps
margin
Drilling revenue of $2.4 billion, of which 75% came from the
international markets, increased 1% sequentially. Stronger
international activity beyond the seasonal rebounds in the Northern
Hemisphere was supported by the international rig count increase of
6%, but growth was offset by reduced shale drilling activity in
North America land as the US land rig count declined 5%.
International growth was driven by higher activity benefiting M-I
SWACO and Drilling & Measurements in the United Kingdom &
Continental Europe, Russia & Central Asia, Mexico & Central
America, and Far East Asia & Australia GeoMarkets. IDS revenue
was lower sequentially as higher onshore IDS activity in the Mexico
& Central America GeoMarket was more than offset by reduced
project activity in India and the completion of a project in
Iraq.
Drilling pretax operating margin of 12% declined 45 bps
sequentially as margin improvements for Drilling & Measurements
and M-I SWACO in the Europe/CIS/Africa area and the Far East Asia
& Australia GeoMarket were more than offset by lower margins
from IDS projects in the Middle East region.
Drilling performance benefited from contract awards and the
deployment of drilling systems and fluids technologies.
Lundin Norway AS awarded Schlumberger a four-year IDS contract
valued at $115 million, with an optional four-year extension,
covering operations in the Norwegian North Sea. Contract scope
includes production and injection wells in the Solveig Field,
infill wells at the Edvard Grieg Field, and well construction
services for drilling exploration and appraisal wells on the
Norwegian Continental Shelf.
QGC Shell Australia awarded Schlumberger a three-year contract
for the provision of four drilling rigs for the Surat Basin.
Operations began in February 2019.
In the Permian Basin, Drilling & Measurements used
PowerDrive Orbit* rotary steerable system for Diamondback Energy,
Inc. to increase the rate of penetration (ROP) in a lateral well
section by 13% compared with the previous drilling record in the
same field. The PowerDrive Orbit system drilled the 13,351-ft
lateral in 2.9 days at an average ROP of 189 ft/hr, drilling 5,287
ft in the first 24 hours.
In the Middle East, Schlumberger was awarded a two-year contract
for the provision of the RHELIANT* thermally stable, flat-rheology
drilling fluid system. The RHELIANT system, which works in a wide
range of temperatures, is particularly well adapted to the
high-performance, oil-based mud business in certain regions of the
Middle East, enabling control of equivalent circulating density and
hydraulics as well as improved hole cleaning.
Production
(Stated in millions)
Three Months Ended Change
Jun. 30, 2019 Mar. 31, 2019 Jun. 30, 2018 Sequential Year-on-year
Revenue $3,077 $2,890 $3,253 6% -5%
Pretax operating $235 $217 $316 8% -26%
income
Pretax operating 7.6% 7.5% 9.7% 13 bps -207 bps
margin
Production revenue of $3.1 billion, of which 54% came from the
international markets, increased 6% sequentially driven primarily
by higher international activity for Well Services in the Russia
& Central Asia, Far East Asia & Australia, and United
Kingdom & Continental Europe GeoMarkets. Increased artificial
lift sales across the international areas, higher intelligent
completions activity in Saudi Arabia, and increased SPM project
activity mainly in Ecuador, all contributed to the increase in
Production revenue. In North America land, despite the impact of
the spring breakup in Canada, Production revenue was up 3%
sequentially driven by higher cementing activity and improved
OneStim hydraulic fracturing fleet utilization on increased market
demand. These effects, however, were partially offset by softer
hydraulic fracturing pricing.
Production pretax operating margin of 8% was essentially flat
sequentially as the improvement in international margin from higher
activity was offset by the effects of pricing pressure in North
America land.
Production revenue was strengthened by increasing deployment of
new fracturing technologies in North America land that improved
completions performance and increased wellsite efficiency through
automation. In addition, international contract awards and the
deployment of innovative artificial lift and completions
technologies helped maximize production in horizontal wells and
improve recovery in low-productivity zones.
In South Texas, OneStim deployed WellWatcher Stim* stimulation
monitoring service and BroadBand Shield* fracture-geometry control
service for Freedom Oil & Gas to avoid parent-child well
interference effects. Additionally, Kinetix* reservoir-centric
stimulation-to-production software was used for the far field
diverter design to optimize the completions schedule. Together,
these technologies enabled the operator to improve production
targets for the completed wells and on future completions.
In North America land, StimCommander Pumps* automated and
intelligent rate and pressure control technology has now been used
in all major shale plays, totaling more than 29,000 stages and
51,000 pumping hours. Fully automating the pumps makes rate control
more efficient, which minimizes equipment failures and reduces
downtime on location. One customer has converted all of its
Schlumberger fleets to StimCommander Pumps control, with more than
5,000 stages successfully placed, resulting in reduced downtime for
maintenance and improved fuel economy.
In Canada, Artificial Lift Solutions introduced HEAL SystemsT
technology for Longshore Resources to overcome multiphase slug flow
challenges in producing their horizontal wells in the Charlie Lake
Field. Three HEAL systems enabled more than 25,000 BOE of
incremental production in the first 100 days after
installation.
Offshore Thailand, Completions introduced autonomous inflow
control devices (AICDs) for KrisEnergy to control water production
and increase hydrocarbon recovery in the heavy oil Wassana Field.
The AICD design helps reduce the water and gas flow rates while
enabling oil to exit the device with a pressure drop similar to a
passive ICD. Consequently, low-productivity zones produce more oil
than they would with the use of normal screen completions, thereby
optimizing oil production.
MODEC Offshore Production Systems (Singapore) Pte. Ltd. awarded
Schlumberger a contract for the provision of seawater treatment and
produced-water systems for a floating production, storage, and
offloading (FPSO) vessel for use in the Area 1 block offshore
Mexico.
Cameron
(Stated in millions)
Three Months Ended Change
Jun. 30, 2019 Mar. 31, 2019 Jun. 30, 2018 Sequential Year-on-year
Revenue $1,237 $1,174 $1,295 5% -4%
Pretax operating $156 $137 $166 14% -6%
income
Pretax operating 12.6% 11.6% 12.8% 94 bps -26 bps
margin
Cameron revenue of $1.2 billion, of which 57% came from
international markets, increased 5% sequentially driven by higher
international revenue for OneSubsea, Surface Systems, and Drilling
Systems while Valves & Measurement declined due to reduced
activity in North America. By geography, international revenue grew
24% sequentially while North America revenue was essentially
flat.
Cameron pretax operating margin of 13% increased by 94 bps
sequentially as improved profitability in OneSubsea and Surface
Systems was partially offset by reduced margin in Drilling
Systems.
In the second quarter, Cameron won long-term product and service
contracts for subsea equipment, valves, and actuators, as well as
the provision of subsea compression and managed pressure drilling
(MPD) systems.
Chevron U.S.A. Inc. (Chevron) awarded OneSubsea a 20-year subsea
equipment and services master contract for subsea development
projects in the Gulf of Mexico. Combining this master contract with
a preapproved catalog of standard subsea equipment will enable
Chevron to decrease operating costs in its subsea projects. The
provision of a OneSubsea custom catalog of equipment will also
include innovative technologies that meet Chevron's project
requirements, including high-temperature projects or high-pressure
projects requiring equipment that can withstand up to 20,000
psi.
Shell Global Solutions awarded Schlumberger a contract for the
provision of the OneSubsea wet compression concept to increase gas
recovery in the Ormen Lange Field in the Norwegian North Sea. Two
subsea compression stations will be installed 120 km from shore at
a water depth of 850 m.
In the United States, Stena Drilling purchased a Schlumberger
MPD system. The deepwater package solution comprises an integrated
riser joint, surface manifolds, a single control system and
umbilical, and other associated equipment. Delivery is expected in
Q4 2019.
Valves & Measurement was awarded a four-year service
contract by one of the largest production sharing agreement
companies in Kazakhstan. This flange machining agreement will
provide the customer with improved control over processes and costs
by keeping multiple services under one vendor.
In Far East Asia, Valves & Measurement worked closely with a
major oil and gas company to develop a long-range plan to minimize
turnaround risks associated with planned and unplanned shutdowns of
an LNG facility. Close collaboration with the customer helped
optimize the selection and amount of critical spare equipment
needed onsite. This included the provision of ORBIT* rising stem
ball valves and LEDEEN* actuators in alignment with the customer's
commercial needs.
Financial Tables
Condensed Consolidated Statement of Income
(Stated in millions, except per share amounts)
Second Quarter Six Months
Periods Ended June 30, 2019 2018 2019 2018
Revenue $8,269 $8,303 $16,149 $16,131
Interest and other income 25 40 39 82
Expenses
Cost of revenue 7,252 7,179 14,209 13,980
Research & engineering 179 175 351 347
General & administrative 114 114 225 225
Impairments & other(1) - 184 - 184
Interest 156 144 302 287
Income before taxes $593 $547 $1,101 $1,190
Tax expense(1) 99 106 178 219
Net income(1) $494 $441 $923 $971
Net income attributable to 2 11 10 16
noncontrolling interests
Net income attributable to Schlumberger(1) $492 $430 $913 $955
Diluted earnings per share of Schlumberger(1) $0.35 $0.31 $0.65 $0.69
Average shares outstanding 1,384 1,384 1,385 1,385
Average shares outstanding assuming dilution 1,395 1,392 1,396 1,393
Depreciation & amortization $938 $876 $1,841 $1,750
included in expenses(2)
(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 SPM
investments.
Condensed Consolidated Balance Sheet
(Stated in millions)
Jun. 30, Dec. 31,
Assets 2019 2018
Current Assets
Cash and short-term investments $2,348 $2,777
Receivables 8,471 7,881
Other current assets 5,514 5,073
16,333 15,731
Fixed assets 11,359 11,679
Multiclient seismic data 577 601
Goodwill 24,950 24,931
Intangible assets 8,485 8,727
Other assets 8,887 8,838
$70,591 $70,507
Liabilities and Equity
Current Liabilities
Accounts payable and accrued liabilities $9,851 $10,223
Estimated liability for taxes on income 1,123 1,155
Short-term borrowings and current portion
of long-term debt 98 1,407
Dividends payable 701 701
11,773 13,486
Long-term debt 16,978 14,644
Deferred taxes 1,330 1,441
Postretirement benefits 1,119 1,153
Other liabilities 3,118 3,197
34,318 33,921
Equity 36,273 36,586
$70,591 $70,507
Liquidity
(Stated in millions)
Components of Jun. 30,2019 Mar. 31,2019 Dec. 31,2018 Jun. 30,2018
Liquidity
Cash $2,348 $2,155 $2,777 $3,049
and short-term
investments
Short-term (98) (99) (1,407) (3,736)
borrowings
and current
portion of
long-term
debt
Long-term debt (16,978) (16,449) (14,644) (13,865)
Net Debt(1) $(14,728) $(14,393) $(13,274) $(14,552)
Details of
changes in
liquidity
follow:
Six Second Six
Months Quarter Months
Periods Ended 2019 2019 2018
June 30,
Net income $923 $494 $971
before
noncontrolling
interests
Impairment - - 164
and other
charges, net of
tax
before
noncontrolling
interests
$923 $494 $1,135
Depreciation and 1,841 938 1,750
amortization(2)
Stock-based 194 86 176
compensation
expense
Change in (1,460) (412) (1,338)
working
capital
Other (64) 2 (168)
Cash flow from $1,434 $1,108 $1,555
operations (3)
Capital (817) (404) (974)
expenditures
SPM investments (332) (181) (434)
Multiclient (109) (64) (47)
seismic
data capitalized
Free cash 176 459 100
flow (4)
Dividends paid (1,385) (693) (1,385)
Stock repurchase (199) (101) (200)
program
Proceeds from 106 - 133
employee
stock plans
Business (17) (12) (47)
acquisitions
and investments,
net of cash
acquired
plus debt
assumed
Other (135) 12 (43)
Increase in (1,454) (335) (1,442)
Net Debt
Net (13,274) (14,393) (13,110)
Debt, beginning
of period
Net Debt, end $(14,728) $(14,728) $(14,552)
of period
(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 $71 million and $23
million during the six months and second quarter
ended June 30, 2019, respectively, and $160 million
during the six months ended June 30, 2018.
(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
second-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)
Second Quarter 2018
Pretax Tax Noncont. Net Diluted
Interests EPS
Schlumberger net income (GAAP basis) $547 $106 $11 $430 $0.31
Workforce reductions 184 20 - 164 0.12
Schlumberger net income, excluding $731 $126 $11 $594 $0.43
charges & credits
Six Months 2018
Pretax Tax Noncont. Net Diluted
Interests EPS *
Schlumberger net income (GAAP basis) $1,190 $219 $16 $955 $0.69
Workforce reductions 184 20 - 164 0.12
Schlumberger net income, excluding $1,374 $239 $16 $1,119 $0.80
charges & credits
* Does not add due to rounding.
There were no charges or credits recorded
during the first six months of 2019.
Segments
(Stated in millions)
Three Months Ended
Jun. 30, 2019 Mar. 31, 2019 Jun. 30, 2018
Revenue IncomeBeforeTaxes Revenue Income Revenue Income
Before Before
Taxes Taxes
Reservoir $1,649 $326 $1,543 $293 $1,640 $350
Characterization
Drilling 2,421 300 2,387 307 2,234 289
Production 3,077 235 2,890 217 3,253 316
Cameron 1,237 156 1,174 137 1,295 166
Eliminations (115) (49) (115) (46) (119) (27)
& other
Pretax segment 968 908 1,094
operating
income
Corporate & other (238) (273) (239)
Interest income(1) 9 10 11
Interest expense(1) (146) (136) (135)
Charges & credits - - (184)
$8,269 $593 $7,879 $509 $8,303 $547
(Stated in millions)
Six Months Ended
Jun. 30, 2019 Jun. 30, 2018
Revenue IncomeBeforeTaxes Revenue Income
Before
Taxes
Reservoir $3,192 $619 $3,199 $656
Characterization
Drilling 4,808 608 4,360 582
Production 5,967 453 6,209 533
Cameron 2,412 292 2,605 332
Eliminations (230) (96) (242) (35)
& other
Pretax segment 1,876 2,068
operating
income
Corporate & other (511) (464)
Interest income(1) 18 36
Interest expense(1) (282) (266)
Charges & credits - (184)
$16,149 $1,101 $16,131 $1,190
(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 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 second quarter of 2019?
Cash flow from operations for the second
quarter of 2019 was $1.1 billion.
Free cash flow for the second quarter of 2019 was $0.5 billion.
3) What was included in "Interest and other
income" for the second quarter of 2019?
"Interest and other income" for the second quarter
of 2019 was $25 million. This amount consisted
of earnings of equity method investments of $14
million and interest income of $11 million.
4) How did interest income and interest expense
change during the second quarter of 2019?
Interest income of $11 million for the second
quarter of 2019 was $1 million lower
sequentially. Interest expense of $156 million
increased $9 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 second quarter of 2019?
The ETR for the second quarter of 2019 was 16.7% as
compared to 15.5% for the first quarter of 2019.
7) How many shares of common stock were outstanding as of June 30, 2019
and how did this change from the end of the previous quarter?
There were 1.383 billion shares of common stock outstanding
as of June 30, 2019. The following table
shows the change in the number of shares outstanding
from March 31, 2019 to June 30, 2019.
(Stated in millions)
Shares outstanding at March 31, 2019 1,385
Shares issued to optionees, less shares exchanged -
Vesting of restricted stock -
Stock repurchase program (2)
Shares outstanding at June 30, 2019 1,383
8) What was the weighted average number of shares outstanding during the
second quarter of 2019 and first quarter of 2019, and how does
this reconcile to the average number of shares outstanding, assuming
dilution used in the calculation of diluted earnings per share?
The weighted average number of shares outstanding
was 1.384 billion during the
second quarter of 2019 and 1.385 billion
during the first quarter of 2019.
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.
(Stated in millions)
Second Quarter2019 First Quarter
2019
Weighted average shares 1,384 1,385
outstanding
Assumed exercise - -
of stock options
Unvested restricted stock 11 12
Average shares outstanding, 1,395 1,397
assuming dilution
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 June 30, 2019
and how did it change in terms of investment and
amortization when compared to March 31, 2019?
The unamortized balance of Schlumberger's investments
in SPM projects was approximately $4.2
billion at both June 30, 2019 and at March 31, 2019. 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 March 31, 2019 $4,192
SPM investments 181
Amortization of SPM investment (189)
Other 22
Balance at June 30, 2019 $4,206
12) What was the amount of WesternGeco multiclient
sales in the second quarter of 2019?
Multiclient sales, including transfer fees,
were $181 million in the second
quarter of 2019 and $131 million in the first quarter of 2019.
13) What was the WesternGeco backlog at the
end of the second quarter of 2019?
The WesternGeco backlog, which is based on signed contracts
with customers, was $312 million at the
end of the second quarter of 2019. It was $228 million
at the end of the first quarter of 2019.
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 Second Quarter2019 First Quarter
2019
OneSubsea $428 $511
Drilling Systems $196 $232
Backlog(at the end of period)
OneSubsea $2,170 $2,096
Drilling Systems $541 $530
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 Friday, July 19, 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 August 19,
2019 by dialing +1 (800) 475-6701 within North America, or +1 (320)
365-3844 outside North America, and providing the access code
468337. 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 August
19, 2019.
This second-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 second-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.
Simon Farrant - Vice President of Investor Relations,
Schlumberger LimitedJoy V. Domingo - Director of Investor
Relations, Schlumberger LimitedOffice +1 (713)
375-3535investor-relations@slb.com
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