TIDMSCL
Schlumberger Limited (NYSE: SLB) today reported results for
full-year 2019 and the fourth quarter of 2019.
Full-Year Results (Stated in millions, except per share amounts)
Twelve Months Ended Change
Dec. 31, 2019 Dec. 31, 2018 Year-on-year
Revenue $32,917 $32,815 0%
Income (loss) before taxes - GAAP basis $(10,418 ) $2,624 n/m
Pretax segment operating income* $3,978 $4,187 -5%
Pretax segment operating margin* 12.1 % 12.8 % -68 bps
Net income (loss) - GAAP basis $(10,137 ) $2,138 n/m
Net income, excluding charges & credits* $2,054 $2,261 -9%
Diluted EPS (loss per share) - GAAP basis $(7.32 ) $1.53 n/m
Diluted EPS, excluding charges and credits* $1.47 $1.62 -9%
Full-Year Revenue by Area
North America $10,843 11,984 -10%
Latin America 4,149 3,745 11%
Europe/CIS/Africa 7,683 7,158 7%
Middle East & Asia 10,017 9,543 5%
Other 225 385 n/m
$32,917 $32,815 0%
North America revenue $10,843 $11,984 -10%
International revenue $21,849 $20,446 7%
North America revenue, excluding Cameron $8,525 $9,556 -11%
International revenue, excluding Cameron $18,874 $17,439 8%
*These are non-GAAP financial measures. See section titled "Charges & Credits" for details.
n/m = not meaningful
Schlumberger CEO Olivier Le Peuch commented, "Full-year revenue
for 2019 was $32.9 billion, a level essentially flat with 2018.
Overall performance was positive-particularly in the international
markets-and we generated $2.7 billion in free cash flow, which was
a remarkable achievement under these market conditions. Full-year
pretax segment operating margin of 12%, however, was slightly down
year-on-year.
"International revenue, excluding Cameron, grew 8% and was
consistent with our expectations of high single-digit growth. Most
of our international GeoMarkets benefited from these favorable
market conditions, and almost half of them registered double-digit,
year-on-year revenue growth driven by exploration activity,
offshore operations, and acceleration of the industry's digital
transformation. Compared with the first half of 2019, international
pretax segment operating margin improved by 100 basis points (bps)
in the second half of the year-a firm step toward our strategic
target of margin expansion.
"In contrast, after two years of strong growth, North American
revenue fell sharply, driven largely by the land market weakness
affecting our OneStim® pressure pumping business, as customers
reached their budget limits earlier in the year and remained highly
disciplined on capital spend.
(Stated in millions)
Full-Year Revenue Twelve Months Ended Change
by Segment
Dec. 31, 2019 Dec. 31, 2018 Year-on-year
Reservoir $6,312 6,173 2%
Characterization
Drilling 9,721 9,250 5%
Production 11,987 12,394 -3%
Cameron 5,336 5,520 -3%
Other (439 ) (522 ) n/m
$32,917 $32,815 0%
n/m = not meaningful
"Among the business segments, Drilling and Reservoir
Characterization revenue benefited from their international market
exposure, while Production and Cameron contracted year-on-year due
to weakness in the North America land market.
"During the year, we recognized material pretax charges driven
by market conditions, particularly in North America. As these
charges were largely noncash and primarily related to goodwill,
intangible assets, and fixed assets, they did not impede our
ability to generate strong cash flow as we demonstrated in the
second half of the year.
"We ended the year building on the strength of our international
franchise, driven by the breadth of the international recovery,
after four consecutive years of declining revenue. We initiated our
scale-to-fit strategy in North America land amid continued
challenging market conditions, removed structural costs to protect
margins, and accelerated technology-access business models and
asset-light operations transformation.
"The year 2019 marked the beginning of a new chapter for
Schlumberger. As we move forward, our vision is to define and drive
high performance sustainably-operationally and financially. Simply
put, we want to be the performance partner of choice for the
benefit of our customers and our industry. Our strategy has
favorably positioned Schlumberger to achieve margin expansion,
increase return on capital, and grow free cash flow.
Fourth-Quarter Results (Stated in millions, except per share amounts)
Three Months Ended Change
Dec. 31, 2019 Sept. 30, 2019 Dec. 31, 2018 Sequential Year-on-year
Revenue $8,228 $8,541 $8,180 -4% 1%
Income (loss) before taxes - GAAP basis $452 $(11,971 ) $648 n/m -30%
Pretax segment operating income* $1,006 $1,096 $967 -8% 4%
Pretax segment operating margin* 12.2 % 12.8 % 11.8 % -60 bps 40 bps
Net income (loss) - GAAP basis $333 $(11,383 ) $538 n/m -38%
Net income, excluding charges & credits* $545 $596 $498 -9% 9%
Diluted EPS (loss per share) - GAAP basis $0.24 $(8.22 ) $0.39 n/m -38%
Diluted EPS, excluding charges & credits* $0.39 $0.43 $0.36 -9% 8%
North America revenue $2,454 $2,850 $2,820 -14% -13%
International revenue $5,721 $5,629 $5,284 2% 8%
North America revenue, excluding Cameron $1,907 $2,261 $2,235 -16% -15%
International revenue, excluding Cameron $4,892 $4,857 $4,526 1% 8%
*These are non-GAAP financial measures. See sections titled "Charges & Credits" and "Segments" for details.
n/m = not meaningful
"Fourth quarter revenue of $8.2 billion was 4% lower
sequentially. International revenue of $5.7 billion grew 2%
sequentially and 8% year-on-year. North America revenue of $2.5
billion, however, dropped 14% sequentially due to customer budget
exhaustion and cash flow constraints.
"Sequential international growth was led by the Middle East
& Asia area, where revenue increased 5% driven by higher
year-end product sales in Kuwait, Iraq, and Oman; delivery of
additional lump-sum-turnkey (LSTK) wells in Saudi Arabia; and
increased Well Services activity in Qatar. Latin America revenue
grew 1% due to stronger WesternGeco® multiclient seismic license
sales in the Mexico Bay of Campeche, while revenue in the
Europe/CIS/Africa area only declined 2% given the mild winter
slowdown of activity in the Northern Hemisphere that was partially
mitigated by strong year-end product sales and Software Integrated
Solutions (SIS) digital software sales.
Fourth-Quarter (Stated in millions)
Revenue
by Segment
Three Months Ended Change
Dec. 31, 2019 Sept. 30, 2019 Dec. 31, 2018 Sequential Year-on-year
Reservoir $1,643 $1,651 $1,571 -1% 5%
Characterization
Drilling 2,442 2,470 2,461 -1% -1%
Production 2,867 3,153 2,936 -9% -2%
Cameron 1,387 1,363 1,345 2% 3%
Other (110 ) (96 ) (133 ) n/m n/m
$8,228 $8,541 $8,180 -4% 1%
n/m = not meaningful
"Production revenue declined 9% sequentially primarily due to
the 33% sequential drop in OneStim revenue as we continued to
right-size our hydraulic fracturing capacity by stacking more
fleets in the face of lower demand. This is part of the
scale-to-fit strategy we are deploying in North America
land-rationalizing our business portfolio to achieve improved
returns and better profitability. Drilling and Reservoir
Characterization revenue each decreased 1% sequentially due to the
end of summer campaigns in the North Sea and Russia. These effects,
however, were partially offset by increased drilling activity in
the Middle East & Asia area and stronger SIS digital software
sales across several GeoMarkets. Cameron revenue increased 2%
sequentially from higher OneSubsea®, Surface Systems, and Drilling
Systems sales-primarily in the international markets.
"I'm very pleased with our operational and financial results as
we closed 2019, and I'm encouraged by the sustained international
activity growth, although conditions in North America land became
more challenging. Fourth-quarter EPS of $0.39, excluding charges
and credits, was sequentially lower, but was 8% higher than the
same quarter last year. Pretax segment operating margin declined
sequentially on seasonal effects but improved when compared to the
same quarter last year. This quarter delivered the first sequential
growth in international margin in any fourth quarter since 2014. We
are therefore confident we have turned the corner, particularly as
we have now seen sequential international margin growth for the
last three quarters as a result of our discipline and focus on
execution performance. Meanwhile, in North America land, we
minimized the margin dilution from lower activity by implementing
our scale-to-fit strategy, acting decisively in reducing capacity,
and restructuring our operations.
"In addition, we generated significant cashflow from operations
as we ended the year, leveraging our capital stewardship program.
We also completed two major milestones during the quarter: the
formation of the Sensia joint venture and the divestiture of our
Drilling Tools business. The proceeds from these transactions
further supported the significant reduction of our net debt during
the quarter.
"From a macro perspective, we ended the year with 2020 oil
demand growth sentiment turning positive as uncertainty reduced
following the progress made toward a US-China trade deal. The fall
in the North America production growth estimate of between 400,000
to 800,000 bpd should continue to support the thesis for
international investment. The recent escalation of geopolitical
risk should set the floor for the oil price going forward. In the
near term, we expect the OPEC+ production cuts agreed upon in
December 2019 to limit investment and activity, particularly in the
Middle East and Russia, during the first half of 2020. As the year
progresses, the effect of slowing North America production growth
is likely to cause tightness in the market and further stimulate
international operators to step up their investments in the second
half of the year and beyond.
"Based on this, we expect 2020 E&P capex spending growth
rate in the international markets to be in the mid-single-digit
range. We would therefore expect our international portfolio
revenue to grow at the same pace or higher, excluding the effects
of the Sensia and Drilling Tools transactions. The carved-out
businesses in these transactions accounted for approximately 2% of
our global revenue in 2019. International revenue growth will be
more heavily weighted to the second half of the year with
increasing offshore activity, improving activity mix from the early
deepwater growth cycle, and increasing exploration work toward the
end of the year and into 2021.
"In North America, we are continuing to scale-to-fit our
organization and portfolio by repurposing or exiting
underperforming business units, focusing on asset-light operations,
and expanding our technology access business models. In alignment
with our stated strategy, we are cautiously optimistic that the
high-grading of our portfolio will promote margin expansion and the
improvement of returns in the North America land market. It has
also led to the closing of a significant number of facilities and,
unfortunately, workforce reductions.
"After a strong free cash flow performance in the second half of
2019, we are confident in our ability to further improve cash flow
generation in 2020. Our focus on improved margins, capital
stewardship, and careful management of working capital will
continue to underpin our ability to generate improved free cash
flow.
"All in all, we finished the year with a very solid quarter,
aligned with our performance vision and our focus on returns. I am
very pleased with the results, and I'm proud of the Schlumberger
team that delivered this performance."
Other Events
On December 10, 2019, Schlumberger announced that Simon Ayat,
Executive Vice President and Chief Financial Officer, will step
down effective January 22, 2020. Mr. Ayat, who joined the Company
in 1982, will remain with Schlumberger as Senior Strategic Advisor
to the Chief Executive Officer for a period of two years. Mr.
Stephane Biguet, our current Vice President of Finance and a
24-year Schlumberger veteran, will succeed Mr. Ayat as Executive
Vice President and Chief Financial Officer.
On October 1, 2019, Schlumberger and Rockwell Automation closed
Sensia, their previously announced joint venture. Rockwell
Automation owns 53% of the joint venture and Schlumberger owns 47%.
At closing, Rockwell Automation made a $238 million cash payment,
net of working capital adjustments, to Schlumberger.
On December 31, 2019, Schlumberger completed the sale of the
businesses and associated assets of DRILCO, Thomas Tools, and
Fishing & Remedial Services and received net cash proceeds of
$348 million.
During the fourth quarter, Schlumberger repurchased $1.1 billion
of its outstanding notes, which comprise $416 million of its
outstanding 3.00% Notes due 2020; $126 million of its outstanding
4.50% Notes due 2021; $500 million of its outstanding 4.20% Notes
due 2021; and $106 million of its 3.60% Senior Notes due 2022.
On January 17, 2020, Schlumberger's Board of Directors approved
a quarterly cash dividend of $0.50 per share of outstanding common
stock, payable on April 9, 2020 to stockholders of record on
February 12, 2020.
Consolidated Revenue by Area
(Stated in millions)
Three Months Ended Change
Dec. 31, 2019 Sept. 30, 2019 Dec. 31, 2018 Sequential Year-on-year
North America $2,454 $2,850 $2,820 -14% -13%
Latin America 1,028 1,014 978 1% 5%
Europe/CIS/Africa 2,018 2,062 1,842 -2% 10%
Middle East & Asia 2,675 2,553 2,464 5% 9%
Other 53 62 76 n/m n/m
$8,228 $8,541 $8,180 -4% 1%
North America revenue $2,454 $2,850 $2,820 -14% -13%
International revenue $5,721 $5,629 $5,284 2% 8%
North America revenue, $1,907 $2,261 $2,235 -16% -15%
excluding Cameron
International revenue, $4,892 $4,857 $4,526 1% 8%
excluding Cameron
n/m = not meaningful
Certain prior period amounts have been reclassified
to conform to the current period presentation.
Fourth-quarter revenue of $8.2 billion decreased 4%
sequentially. North America revenue of $2.5 billion decreased 14%
while international revenue of $5.7 billion increased 2%.
North America
North America area consolidated revenue of $2.5 billion was 14%
lower sequentially. The sequential decline was driven by lower
activity and pricing for our OneStim and Drilling businesses in
North America land due to expected customer budget limitations and
cash flow constraints. North America land revenue declined 19%
sequentially while North America offshore revenue grew by 3%.
OneStim revenue dropped 33% sequentially as we continued to
right-size our hydraulic fracturing capacity by stacking more
fleets in the face of lower demand. This is part of the
scale-to-fit strategy we are deploying in North America
land-rationalizing our business portfolio to achieve improved
returns and better profitability.
International
Consolidated revenue in the Latin America area of $1.0 billion
increased 1% sequentially. This was due primarily to higher
WesternGeco multiclient seismic license sales in the Mexico Bay of
Campeche, partially offset by lower revenue in Argentina on reduced
drilling and well services activity. Revenue in Ecuador declined
slightly from production shut-ins caused by civil unrest that
occurred at the beginning of the quarter. Cameron revenue was
higher on increased Surface Systems sales in the Mexico &
Central America GeoMarket.
Europe/CIS/Africa area consolidated revenue of $2.0 billion
decreased 2% sequentially. This was driven by the winter slowdown
of wireline and well services activity following the end of summer
campaigns in the North Sea and Russia, partially offset by
increased SIS digital software sales and Artificial Lift Solutions
product sales across the area. Higher revenue in the Sub-Sahara
Africa and North Africa GeoMarkets from new project startups also
helped mitigate the seasonal decline of activity in the Northern
Hemisphere. Cameron revenue was higher on increased Valves &
Process Systems (VPS) sales in Russia and increased OneSubsea
project and service activity in Norway.
Consolidated revenue in the Middle East & Asia area of $2.7
billion increased 5% sequentially. This was driven by increased
Middle East revenue from higher Completions, Artificial Lift
Solutions, and M-I SWACO product sales in Kuwait, Iraq, and Oman;
delivery of additional LSTK wells in Saudi Arabia; and increased
Well Services activity in Qatar. Revenues in the South & East
Asia and Far East Asia & Australia GeoMarkets were also higher
sequentially from increased SIS digital software and Completions
product sales. Cameron revenue was higher from increased OneSubsea
activity in India.
Reservoir Characterization
(Stated in millions)
Three Months Ended Change
Dec. 31, 2019 Sept. 30, 2019 Dec. 31, 2018 Sequential Year-on-year
Revenue $1,643 $1,651 $1,571 -1% 5%
Pretax operating $368 $360 $360 2% 2%
income
Pretax operating 22.4 % 21.8 % 22.9 % 59 bps -48 bps
margin
Reservoir Characterization revenue of $1.6 billion, 83% of which
came from the international markets, decreased 1% sequentially
following the end of the summer campaigns for wireline and testing
activity in the North Sea and Russia, where the mild winter did not
significantly disrupt activity. This decline was partially offset
by higher SIS digital software sales across several GeoMarkets.
WesternGeco multiclient seismic license sales were also lower as
increased sales in the Mexico Bay of Campeche were more than offset
by reduced activity in the US Gulf of Mexico.
Reservoir Characterization pretax operating margin of 22%
increased 59 bps sequentially due to increased SIS digital software
sales. The margin expansion was partially offset by the seasonal
decline in Wireline revenue and reduced multiclient seismic
licensing activity.
Drilling
(Stated in millions)
Three Months Ended Change
Dec. 31, 2019 Sept. 30, 2019 Dec. 31, 2018 Sequential Year-on-year
Revenue $2,442 $2,470 $2,461 -1% -1%
Pretax operating $303 $305 $318 -1% -5%
income
Pretax operating 12.4 % 12.4 % 12.9 % 5 bps -51 bps
margin
Drilling revenue of $2.4 billion, 76% of which came from the
international markets, decreased 1% sequentially due to the end of
the summer drilling campaign in Russia and lower drilling activity
in North America land largely impacting M-I SWACO and Bits &
Drilling Tools. These declines were partially offset by increased
drilling activity in the Middle East & Asia area, mainly from
the delivery of additional LSTK wells in Saudi Arabia.
Drilling pretax operating margin of 12% was flat sequentially as
margin improvements from drilling projects in the Middle East were
offset by the seasonally lower margins in Russia and lower drilling
margins in North America land.
Production
(Stated in millions)
Three Months Ended Change
Dec. 31, 2019 Sept. 30, 2019 Dec. 31, 2018 Sequential Year-on-year
Revenue $2,867 $3,153 $2,936 -9% -2%
Pretax operating $253 $288 $198 -12% 27%
income
Pretax operating 8.8 % 9.1 % 6.8 % -32 bps 205 bps
margin
Production revenue of $2.9 billion, of which 61% came from the
international markets, declined 9% sequentially. This was driven by
OneStim revenue, which dropped 33% sequentially as we continued to
right-size our hydraulic fracturing capacity by stacking more
fleets in the face of lower demand. This is part of the deployment
of our scale-to-fit strategy in North America land-rationalizing
our business portfolio to achieve improved returns and better
profitability. In addition, sand and proppant supply revenue also
declined. These declines, however, were partially offset by
increased international completions activity in Kuwait, Oman, and
the South & East Asia GeoMarket. Higher project activity for
Asset Performance Solutions (APS), formerly known as Schlumberger
Production Management (SPM), contributed positively to the quarter
despite the temporary production shut-in issues in Ecuador.
Production pretax operating margin of 9% contracted by 32 bps
sequentially due to lower OneStim activity, partially offset by
strength in international margins from higher activity.
Cameron
(Stated in millions)
Three Months Ended Change
Dec. 31, 2019 Sept. 30, 2019 Dec. 31, 2018 Sequential Year-on-year
Revenue $1,387 $1,363 $1,345 2% 3%
Pretax operating $126 $173 $131 -27% -4%
income
Pretax operating 9.1 % 12.7 % 9.8 % -359 bps -64 bps
margin
Cameron revenue of $1.4 billion, of which 60% came from
international markets, increased 2% sequentially from higher
OneSubsea, Surface Systems, and Drilling Systems revenue-primarily
in the international markets. VPS was lower sequentially due to the
reduced North America land activity and as a result of contributing
the VPS measurement business to the Sensia joint venture. By
geography, international revenue grew 7% sequentially, primarily on
strong growth in the Norway & Denmark and Far East &
Australia GeoMarkets, while North America revenue declined by 7% on
weak land activity.
Cameron pretax operating margin of 9% contracted by 359 bps
sequentially, driven largely by reduced margins in the OneSubsea
project portfolio. Lower North America land activity also resulted
in reduced margins, particularly for VPS and Surface Systems.
Quarterly Highlights
The combination of unique Schlumberger team and technology
performance, centered on customer and industry challenges, delivers
the potential for market and financial outperformance. Within this
vision, the deployment of fit-for-basin technology and business
models creates differentiation for Schlumberger. Examples of this
during the quarter include:
-- In Norway, Schlumberger, Aker BP, and StimWell Services created a Well Intervention and Stimulation Alliance, entering into a 5+5-year tripartite agreement. Through collaboration, innovative technologies, and digitization, the newly formed alliance endeavors to completely transform conventional intervention operations with clear targets for propelling hydrocarbon production on new and existing assets on the Norwegian Continental Shelf. The alliance focus will span interventions operations, with Schlumberger as partner for wireline logging, perforation, and well stimulation through digital slickline, coiled tubing, and flowback operations on Aker BP's fixed installations, and StimWell as partner for the provision of fracturing services, using vessel-based stimulation services. An early success for the alliance was the execution of the single-trip, multifrac operation at the Valhall Field running a world's-first type of stimulation methodology with coiled tubing in an offshore environment, resulting in significant time savings.
-- In Kuwait and for the first time in the Middle East, Drilling & Measurements deployed GeoSphere HD* reservoir mapping-while-drilling service for Kuwait Oil Company. This service enabled mapping oil/water contact at a 40-ft total vertical depth from the tool measuring point while drilling. The technology has proved that it will reduce operating costs for similar wells by $550,000 per well in the Umm Gudair Field by eliminating the need for drilling pilot holes to confirm the oil/water contact zones.
-- In US land, Bits & Drilling Tools collaborated with Matador Resources to increase the drilling rate of penetration (ROP) in the West Texas Wolfcamp A Formation. Given Matador's specific directional application needs, Smith Bits designed a 6.75-in SHARC* high-abrasion-resistance PDC drill bit for the lateral section using the IDEAS* integrated dynamic design and analysis platform to ensure a fit-for-basin bit design and provide optimal ROP and durability. This enabled the customer to reduce drilling time in the 2-mile lateral section by more than 50% compared with their average 2-mile lateral section performance.
OneSubsea integrated subsea production, multiphase boosting, and
gas compression are industry-leading technologies that help improve
customer performance. These technologies are also enabling Subsea
Integration Alliance (SIA) to expand its global business with
awards for engineering, procurement, and construction (EPC)
contracts. SIA brings together field development planning, project
delivery, and total lifecycle solutions under an extensive
technology and services portfolio. Examples of subsea technology
and integration for the quarter include:
-- A/S Norske Shell awarded OneSubsea a frame agreement for an engineering, procurement, construction, and installation (EPCI) contract for the supply of a subsea multiphase compression system for the Ormen Lange Field in the Norwegian Sea. Through the EPCI contract, SIA will install a subsea multiphase compression system that uses the industry's only subsea multiphase compression technology. In the first phase of the project, OneSubsea will do the engineering and design of the complete system. Following the final investment decision by the license group, the complete scope of the EPCI will be executed.
-- Chevron U.S.A. Inc. awarded OneSubsea an EPC contract for the supply of an integrated subsea production and multiphase boosting system for the Anchor Field in the US Gulf of Mexico. The contract includes vertical monobore production trees and multiphase flowmeters rated up to 20,000 psi. Also included are production manifolds and an integrated manifold multiphase pump station rated to 16,500 psi as well as subsea controls and distribution. This is the first 20,000-psi subsea production system contract in the industry.
-- Woodside awarded SIA an EPCI contract for the Sangomar Field Development project offshore Senegal. The project includes the development of the deepwater Sangomar oil field, which is located 100 km south of Dakar. Project work scope includes the EPCI of subsea production systems and a subsea umbilical, riser, and flowline system. The development will include 23 wells in a water depth between 650 m and 1,400 m. Offshore installation activities are scheduled from 2021 to 2023 and first oil production is expected in early 2023. Through this contract, OneSubsea will supply a portfolio of standard systems, including 23 wellhead systems, 11 subsea production trees, 10 water injection trees, two gas injection trees, topside controls, and intervention tools and life-of-field support.
Schlumberger achieved new milestones in the digital
transformation of E&P processes and workflows during the
quarter. The DELFI* cognitive E&P environment will be further
enhanced by best-in-class artificial intelligence, empowering our
customers to draw actionable insights and make faster decisions.
Examples of this include:
-- Schlumberger and Dataiku entered into an exclusive technology partnership that will enable the E&P industry to build and deploy its own artificial intelligence solutions across the full breadth of its upstream workflows within the DELFI environment. The partnership will deliver unprecedented capabilities to petrotechnical domain experts by bridging the gap between machine learning and domain expertise to enable better insights. As a result, the upstream industry will have access to an innovation platform where customers can accelerate the deployment of new solutions across their organizations.
-- Schlumberger and ExxonMobil are jointly working on the deployment of digital drilling solutions around planning, execution, and continuous improvement through learning. As the first step in this journey, ExxonMobil has agreed to a commercial deployment of DrillPlan* coherent well construction planning solution in ExxonMobil's unconventional operations. The agreement is expected to enable increased efficiency, procedural adherence, and consistency in well construction through digital well planning in the DELFI environment using the DrillPlan solution workflows.
In December, Schlumberger became the first company in upstream
E&P services to commit to setting a science-based target to
reduce its greenhouse gas emissions, as defined by the Science
Based Targets initiative. Calculated using expertise from
Schlumberger's extensive scientific community, Schlumberger's
science-based target will align with the goals of the United
Nations Paris Agreement.
Financial Tables
Condensed Consolidated
Statement
of Income (Loss)
(Stated in millions,
except
per share amounts)
Fourth Quarter Twelve Months
Periods Ended 2019 2018 2019 2018
December 31,
Revenue $8,228 $8,180 $32,917 $32,815
Interest and 25 31 86 149
other income
Gain on formation 247 - 247 -
of Sensia(1)
Gain on sale of - 215 - 215
business(1)
Expenses
Cost of revenue 7,127 7,172 28,720 28,478
Research & engineering 190 178 717 702
General 129 114 474 444
& administrative
Impairments & other(1) 456 172 13,148 356
Interest 146 142 609 575
Income (loss) $452 $648 $(10,418 ) $2,624
before taxes
Tax (benefit) 109 100 (311 ) 447
expense(1)
Net income (loss)(1) $343 $548 $(10,107 ) $2,177
Net income attributable 10 10 30 39
to
noncontrolling
interests
Net income (loss) $333 $538 $(10,137 ) $2,138
attributable
to Schlumberger(1)
Diluted earnings $0.24 $0.39 $(7.32 ) $1.53
(loss) per
share
of Schlumberger(1)
Average shares 1,384 1,384 1,385 1,385
outstanding
Average shares 1,396 1,392 1,385 1,393
outstanding
assuming dilution
Depreciation & $848 $919 $3,589 $3,556
amortization
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 APS investments.
Condensed Consolidated Balance Sheet
(Stated in millions)
Dec. 31, Dec. 31,
Assets 2019 2018
Current Assets
Cash and short-term investments $2,167 $2,777
Receivables 7,747 7,881
Other current assets 5,616 5,073
15,530 15,731
Fixed assets 9,270 11,679
Multiclient seismic data 568 601
Goodwill 16,042 24,931
Intangible assets 7,089 8,727
Other assets 7,813 8,838
$56,312 $70,507
Liabilities and Equity
Current Liabilities
Accounts payable and $10,663 $10,223
accrued liabilities
Estimated liability for 1,209 1,155
taxes on income
Short-term borrowings
and current portion
of long-term debt 524 1,407
Dividends payable 702 701
13,098 13,486
Long-term debt 14,770 14,644
Deferred taxes 491 1,441
Postretirement benefits 967 1,153
Other liabilities 2,810 3,197
32,136 33,921
Equity 24,176 36,586
$56,312 $70,507
Liquidity
(Stated in
millions)
Components Dec. 31,2019 Sept. 30,2019 Dec. 31,2018
of
Liquidity
Cash $2,167 $2,292 $2,777
and
short-term
investments
Short-term (524 ) (340 ) (1,407 )
borrowings
and
current
portion of
long-term
debt
Long-term (14,770 ) (16,333 ) (14,644 )
debt
Net $(13,127 ) $(14,381 ) $(13,274 )
Debt(1)
Details of
changes in
liquidity
follow:
Twelve Fourth Twelve
Months Quarter Months
Periods 2019 2019 2018
Ended
December
31,
Net income $(10,107 ) $343 $2,177
(loss)
before
noncontrolling
interests
Impairment 12,396 417 320
and other
charges,
net
of tax
Gain (205 ) (205 ) -
on
formation
of
Sensia,
net
of tax
Gain on - - (196 )
sale
of
WesternGeco
marine
seismic
business,
net of tax
$2,084 $555 $2,301
Depreciation 3,589 848 3,556
and
amortization(2)
Stock-based 405 76 345
compensation
expense
Change in (551 ) 789 (442 )
working
capital
Other (96 ) (16 ) (47 )
Cash flow $5,431 $2,252 $5,713
from
operations
(3)
Capital (1,724 ) (494 ) (2,160 )
expenditures
APS (781 ) (255 ) (981 )
investments
Multiclient (231 ) (50 ) (100 )
seismic
data
capitalized
Free cash 2,695 1,453 2,472
flow (4)
Dividends (2,769 ) (692 ) (2,770 )
paid
Stock (278 ) - (400 )
repurchase
program
Proceeds 219 - 261
from
employee
stock
plans
Net 586 586 579
proceeds
from
divestiture
and
formation
of Sensia
Business (23 ) (2 ) (292 )
acquisitions
and
investments,
net of
cash
acquired
plus debt
assumed
Other (283 ) (91 ) (14 )
Increase 147 1,254 (164 )
(decrease)
in Net
Debt
Net (13,274 ) (14,381 ) (13,110 )
Debt,
beginning
of period
Net Debt, $(13,127 ) $(13,127 ) $(13,274 )
end
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 APS investments.
(3) Includes severance payments of $128 million and $24 million
during the twelve months and fourth quarter ended
December 31, 2019, respectively; and $340 million during
the twelve months ended December 31, 2018.
(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 full-year
and fourth-quarter 2019 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 above 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; and effective tax rate, excluding charges
& credits) are non-GAAP financial measures. Management believes
that the exclusion of charges & credits from these financial
measures enables it to evaluate more effectively Schlumberger's
operations period over period and to identify operating trends that
could otherwise be masked by the excluded items. These measures are
also used by management as performance measures in determining
certain incentive compensation. The foregoing non-GAAP financial
measures should be considered in addition to, not as a substitute
for or superior to, other measures of financial performance
prepared in accordance with GAAP. The following is a reconciliation
of these non-GAAP measures to the comparable GAAP measures.
(Stated in
millions,
except
per share
amounts)
Fourth Quarter 2019
Pretax Tax Noncont.Interests Net DilutedEPS *
Schlumberger $452 $109 $10 $333 $0.24
net income
(GAAP basis)
North 225 51 - 174 0.12
America
restructuring
Other 104 (33 ) - 137 0.10
restructuring
Workforce 68 8 - 60 0.04
reductions
Pension 37 8 - 29 0.02
settlement
accounting
Repurchase 22 5 - 17 0.01
of Notes
Gain (247 ) (42 ) - (205 ) (0.15 )
on formation
of Sensia
Schlumberger $661 $106 $10 $545 $0.39
net income,
excluding
charges &
credits
Third Quarter 2019
Pretax Tax Noncont.Interests Net DilutedEPS
Schlumberger $(11,971 ) $(598 ) $10 $(11,383 ) $(8.22 )
net income
(loss) (GAAP
basis)
Goodwill 8,828 43 - 8,785 6.34
impairment
North America 1,575 344 - 1,231 0.89
pressure
pumping
Intangible 1,085 248 - 837 0.60
assets
impairment
Other 310 53 - 257 0.19
North
America-related
Asset 294 - - 294 0.21
Performance
Solutions
Equity-method 231 12 - 219 0.16
investments
Argentina 127 - - 127 0.09
Other 242 13 - 229 0.17
Schlumberger $721 $115 $10 $596 $0.43
net income,
excluding
charges &
credits
Fourth Quarter 2018
Pretax Tax Noncont.Interests Net DilutedEPS
Schlumberger $648 $100 $10 $538 $0.39
net income
(GAAP basis)
Gain on sale of (215 ) (19 ) - (196 ) (0.14 )
marine seismic
acquisition
business
Asset 172 16 - 156 0.11
impairments
Schlumberger $605 $97 $10 $498 $0.36
net income,
excluding
charges &
credits
* Does not
add due
to rounding.
(Stated in
millions,
except
per share
amounts)
Twelve Months 2019
Pretax Tax Noncont.Interests Net DilutedEPS *
Schlumberger $(10,418 ) $(311 ) $30 $(10,137 ) $(7.32 )
net income
(loss) (GAAP
basis)
Fourth Quarter
North 225 51 - 174 0.13
America
restructuring
Other 104 (33 ) - 137 0.10
restructuring
Workforce 68 8 - 60 0.04
reductions
Pension 37 8 - 29 0.02
settlement
accounting
Repurchase 22 5 - 17 0.01
of bonds
Gain (247 ) (42 ) - (205 ) (0.15 )
on formation
of Sensia
Third Quarter
Goodwill 8,828 43 - 8,785 6.34
impairment
North America 1,575 344 - 1,231 0.89
pressure
pumping
Intangible 1,085 248 - 837 0.60
assets
impairment
Other 310 53 - 257 0.19
North
America-related
Asset 294 - - 294 0.21
Performance
Solutions
Equity-method 231 12 - 219 0.16
investments
Argentina 127 - - 127 0.09
Other 242 13 - 229 0.17
Schlumberger $2,483 $399 $30 $2,054 $1.47
net income,
excluding
charges &
credits
Twelve Months 2018
Pretax Tax Noncont.Interests Net * DilutedEPS
Schlumberger $2,624 $447 $39 $2,138 $1.53
net income
(GAAP basis)
Gain on sale of (215 ) (19 ) - (196 ) (0.14 )
marine seismic
acquisition
business
Impairment
& other:
Workforce 184 20 - 164 0.12
reductions
Asset 172 16 - 156 0.11
impairments
Schlumberger $2,765 $464 $39 $2,261 $1.62
net income,
excluding
charges &
credits
* Does not
add due
to rounding.
Segments
(Stated in millions)
Three Months Ended
Dec. 31, 2019 Sept. 30, 2019 Dec. 31, 2018
Revenue IncomeBeforeTaxes Revenue Income Revenue Income
(Loss) Before
Before Taxes
Taxes
Reservoir $1,643 $368 $1,651 $360 $1,571 $360
Characterization
Drilling 2,442 303 2,470 305 2,461 318
Production 2,867 253 3,153 288 2,936 198
Cameron 1,387 126 1,363 173 1,345 131
Eliminations (111 ) (44 ) (96 ) (30 ) (133 ) (40 )
& other
Pretax segment 1,006 1,096 967
operating
income
Corporate (215 ) (231 ) (238 )
& other
Interest 8 7 8
income(1)
Interest (138 ) (151 ) (132 )
expense(1)
Charges (209 ) (12,692 ) 43
& credits(2)
$8,228 $452 $8,541 $(11,971 ) $8,180 $648
(Stated in
millions)
Twelve Months Ended
Dec. 31, 2019 Dec. 31, 2018
Revenue Income(Loss)BeforeTaxes Revenue IncomeBeforeTaxes
Reservoir $6,312 $1,327 $6,173 $1,347
Characterization
Drilling 9,721 1,216 9,250 1,239
Production 11,987 993 12,394 1,052
Cameron 5,336 613 5,520 653
Eliminations (439 ) (171 ) (522 ) (104 )
& other
Pretax segment 3,978 4,187
operating
income
Corporate & other (957 ) (937 )
Interest income(1) 33 52
Interest expense(1) (571 ) (537 )
Charges (12,901 ) (141 )
& credits(2)
$32,917 $(10,418 ) $32,815 $2,624
(1) Excludes interest included in the segment results.
(2) See section entitled "Charges & Credits" for details.
Certain prior period amounts have been reclassified to the
current period presentation.
Supplemental Information
1) What is the capex guidance for the full year 2020?
Capex (excluding multiclient and APS
investments) for the full year 2020
is expected to be approximately $1.7
billion, the same level as in 2019.
2) What were the cash flow from operations and free
cash flow for the fourth quarter of 2019?
Cash flow from operations for the fourth
quarter of 2019 was $2.3 billion.
Free cash flow for the fourth quarter of 2019 was $1.5 billion.
3) What were the cash flow from operations and
free cash flow for the full year of 2019?
Cash flow from operations for the full year of 2019 was $5.4 billion.
Free cash flow for the full year of 2019 was $2.7 billion,
including $128 million of severance payments. However, this
excludes $238 million of net cash proceeds that were
received in connection with the formation of the Sensia joint
venture and $348 million of net cash proceeds received from
the divestiture of the businesses and associated assets of
DRILCO, Thomas Tools, and Fishing & Remedial Services.
4) What was included in "Interest and other
income" for the fourth quarter of 2019?
"Interest and other income" for the fourth quarter
of 2019 was $25 million. This amount consisted
of earnings of equity method investments of $15
million and interest income of $10 million.
5) How did interest income and interest expense
change during the fourth quarter of 2019?
Interest income of $10 million for the fourth
quarter of 2019 increased $2 million
sequentially. Interest expense of $146 million
decreased $14 million sequentially.
6) 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.
7) What was the effective tax rate (ETR) for the fourth quarter of 2019?
The ETR for the fourth quarter of 2019, calculated in accordance
with GAAP, was 24.0% as compared to 5.0% for the third quarter
of 2019. Excluding charges and credits, the ETR for both
the fourth quarter and third quarter of 2019 was 16.0%.
8) How many shares of common stock were outstanding as of December 31,
2019 and how did this change from the end of the previous quarter?
There were 1.385 billion shares of common stock outstanding
as of December 31, 2019. The following table
shows the change in the number of shares outstanding
from September 30, 2019 to December 31, 2019.
(Stated in millions)
Shares outstanding at September 30, 2019 1,384
Shares issued under employee -
stock purchase plan
Vesting of restricted stock 1
Stock repurchase program -
Shares outstanding at December 31, 2019 1,385
9) What was the weighted average number of
shares outstanding during the fourth
quarter of 2019 and third quarter of 2019? 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 1.384 billion during the
fourth quarter of 2019 and 1.385 billion
during the third 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, excluding charges and credits.
(Stated in millions)
Fourth Quarter2019 Third Quarter2019
Weighted average shares 1,384 1,385
outstanding
Assumed exercise - -
of stock options
Unvested restricted stock 12 11
Average shares outstanding, 1,396 1,396
assuming dilution
10) What was the unamortized balance of Schlumberger's
investment in APS projects at December 31, 2019
and how did it change in terms of investment and amortization
when compared to September 30, 2019?
The unamortized balance of Schlumberger's investments
in APS projects was approximately $3.7 billion
at December 31, 2019 and $3.9 billion at September
30, 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 APS projects was as follows:
(Stated in millions)
Balance at September 30, 2019 $3,903
APS investments 255
Impairment -
Amortization of APS investment (184 )
Other (250 )
Balance at December 31, 2019 $3,724
11) What was the amount of WesternGeco multiclient
sales in the fourth quarter of 2019?
Multiclient sales, including transfer fees,
were $175 million in the fourth
quarter of 2019 and $200 million in the third quarter of 2019.
12) What was the WesternGeco backlog at the
end of the fourth quarter of 2019?
The WesternGeco backlog, which is based on signed contracts
with customers, was $324 million at the
end of the fourth quarter of 2019. It was $321 million
at the end of the third quarter of 2019.
13) 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 Fourth Quarter2019 Third Quarter2019
OneSubsea $785 $320
Drilling Systems $170 $163
Backlog (at the end of period)
OneSubsea $2,222 $1,822
Drilling Systems $433 $496
14) What are the components of the $209 million of charges and
credits recorded during the fourth quarter of 2019?
The components of the $209 million net pretax
charge are as follows (in millions):
North America-related(a) $225
Other restructuring(b) 104
Workforce reductions(c) 68
Pension settlement accounting(d) 37
Repurchase of Notes(e) 22
Gain on formation of Sensia(f) (247)
$209
(a) Consists of $225 million associated with facility closures and costs
to exit certain activities in North America. These charges included
$123 million relating to fixed assets;
$55 million of right-of-use assets
under operating leases; and $47 million of other exit costs.
(b) Primarily relates to restructuring certain activities
outside of North America. Includes $68
million associated with assets to be divested
and $36 million of facility closure costs.
(c) Represents severance associated with streamlining Schlumberger's
operations and exiting certain activities.
(d) Certain of Schlumberger's defined benefit pension plans
offered former Schlumberger employees, who had
not yet commenced receiving their pension benefits,
an opportunity to receive a lump sum payout
of their vested pension benefit. These transactions
had no cash impact on Schlumberger but did
result in a non-cash pension settlement charge
of $37 million in the fourth quarter of 2019.
(e) Schlumberger repurchased certain Senior Notes
which resulted in a $22 million charge.
(f) Schlumberger recorded a $247 million gain in connection
with the formation of the Sensia joint venture.
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 105,000 people 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, January 17, 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 February 17, 2020 by dialing
+1 (866) 207-1041 within North America, or +1 (402) 970-0847
outside North America, and providing the access code 5581807. 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 February
17, 2020.
This full-year and fourth-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
and Schlumberger's customers; our effective tax rate;
Schlumberger's APS projects, joint ventures and alliances;
Schlumberger's greenhouse gas emissions targets and progress
against those targets; future global economic and geopolitical
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 full-year and
fourth-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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January 17, 2020 06:50 ET (11:50 GMT)
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