Schlumberger Limited
Schlumberger Limited (NYSE:SLB) today reported first-quarter
2014 revenue from continuing operations of $11.24 billion versus
$11.91 billion in the fourth quarter of 2013, and $10.57 billion in
the first quarter of 2013.
Income from continuing operations attributable to Schlumberger,
excluding charges and credits, was $1.59 billion—a decrease of 11%
sequentially but an increase of 23% year-on-year. Diluted
earnings-per-share from continuing operations, excluding charges
and credits, was $1.21 versus $1.35 in the previous quarter, and
$0.97 in the first quarter of 2013.
Schlumberger recorded charges of $0.09 per share in the fourth
quarter of 2013 and of $0.07 per share in the first quarter of
2013. Schlumberger did not record any charges or credits in the
first quarter of 2014.
Oilfield Services revenue of $11.24 billion decreased 6%
sequentially, but increased 6% year-on-year. Oilfield Services
pretax operating income of $2.37 billion decreased 9% sequentially,
but increased 21% year-on-year.
Schlumberger CEO Paal Kibsgaard commented, “Growing new
technology sales and expanding integration activity drove our
first-quarter results despite the severe winter weather that
impacted operations in Russia, China and North America. While the
sequential results displayed the usual drop in product, software
and multiclient license sales following strong year-end figures,
our solid year-on-year growth rates were led by the Middle East
& Asia and North America Areas although all geographies
benefitted from an increasing focus on operational excellence and
efficiency.
Internationally, performance was led by further growth in key
markets in Saudi Arabia, the United Arab Emirates and the
deepwaters of Australia, as well as by strength in sub-Saharan
Africa, project work in Ecuador and shale-related activity in
Argentina. Land activity in North America was robust on the back of
increased service intensity, market share gains and new technology
uptake, in spite of winter weather headwinds and pressure pumping
competitive pricing. North America offshore declined slightly on
operational delays and extended workover activities.
In terms of pricing, we saw little change in general trends, but
new technology at premium pricing continued to penetrate the market
and contributed to operating margin results, particularly when
combined with the best-in-class service quality. Our overall
performance in this area was further supported by our engineering,
manufacturing and sustaining organization that continues to deliver
new and innovative products to our field operations, with strong
‘out-of-box’ performance.
The fundamentals of the global economic recovery remain intact
in spite of the unusually harsh winter weather in parts of the
Northern Hemisphere, some signs of a slowdown in growth in China,
and the unsettled situation in Ukraine. These factors, however, are
likely temporary in nature and the oil markets continue to be
tighter than once anticipated, driven by strong demand trends,
lower spare capacity figures and a fall in OECD stocks. Supply
continues to grow in North America, while other areas are
struggling to meet their production targets. In the US, natural gas
trends were boosted by winter temperatures, but supply and demand
is expected to normalize over the coming months.
As a result, we continue to believe that our customers’
well-related spend will increase north of 6% in 2014, and that the
spend growth rates will be relatively evenly split between the
international and North American markets, driven by the independent
and national oil companies. We therefore remain positive on the
year to come, with our broad geographical footprint, balanced
technology portfolio and agile organization providing both
protection from potential market disturbances, and the ability to
capitalize on market opportunities.”
Other Events
- During the quarter, Schlumberger
repurchased 9.96 million shares of its common stock at an average
price of $90.31 per share for a total purchase price of $899
million.
- On March 13, 2014, Schlumberger
announced that it had entered into an agreement to purchase the
remaining shares of SES Holdings Limited (“Saxon”), a Calgary-based
provider of international land drilling services, from First
Reserve and certain members of Saxon management. Saxon currently
operates a fleet of 87 rigs (70 drilling and 17 workover) in 10
countries, and provides support services to an additional 35 rigs
worldwide. The transaction is subject to customary closing
conditions, including the receipt of regulatory approvals.
Oilfield Services
First-quarter revenue of $11.24 billion decreased 6%
sequentially, but increased 6% year-on-year. International
Area revenue of $7.48 billion grew $322 million, or 5%
year-on-year, while North America Area revenue of $3.68
billion increased $394 million, or 12% year-on-year. The strong
year-end product, software and multiclient sales
experienced in the fourth quarter of 2013 accounted for almost half
of the sequential decline in revenue. The rest of the
sequential decline was due
to seasonal weather-related activity slowdowns in
Russia and China; the completion of marine seismic surveys in
Brazil, Norway, Malaysia and in the Caspian Sea; and contract and
operational delays in Brazil and Mexico. However, these
sequential effects were partly offset by strong pressure
pumping activity in US Land and Canada, which was partially muted
by severe winter weather.
Given the significant impact that year-end and seasonality
factors had on sequential performance, the following paragraphs
focus on year-on-year growth unless otherwise noted.
North America Area revenue of $3.68 billion
increased 12%. Although land activity was temporarily disrupted by
severe winter weather, overall robust results were driven by
increased service intensity, market share gains, and new technology
uptake in a pressure pumping market where pricing remained
competitive. Land revenue also grew from the expanding artificial
lift business. North America offshore declined marginally due to
operational delays and extended workover activity.
International revenue increased 5% led by
the Middle East &
Asia Area with revenue of $2.84 billion
growing 19%, mainly from strong activity in Saudi Arabia
and the United Arab Emirates and by robust drilling activity and
technology uptake in Southeast Asia and deepwater Australia.
Europe/CIS/Africa Area revenue of $2.88 billion
increased 1%, led by the Central West Africa GeoMarket
on strong development and exploration activity and
by Norway from market share gains in drilling services. Russia and
Central Asia region revenue increased slightly as growing activity
in the Arctic and the Caspian Sea was offset by activity disruption
from the severe winter weather and the impact of the weaker Russian
ruble. The Area revenue for the first quarter reflects the absence
of the results of the Framo subsea business that was transferred to
the OneSubsea™ joint venture at the end of the second quarter of
2013. Excluding the effect of this business transfer, the revenue
for the Europe/CIS/Africa Area grew 3%. Latin America
Area revenue of $1.76 billion declined 8%, mainly due
to significantly lower activity and pricing in Brazil coupled with
reduced rig count in Mexico due to budgetary spend. These effects,
however, were partially offset by increased work in the
Schlumberger Project Management (SPM) Shushufindi project in
Ecuador and strong activity in the Vaca Muerta shale in
Argentina.
By segment, Reservoir Characterization Group revenue of
$2.85 billion increased $51 million, or 2%, led by Wireline and
Testing Services driven by offshore exploration and by Schlumberger
Information Solutions (SIS) on increased software sales across all
International Areas. WesternGeco declined on lower marine vessel
fleet utilization and reduced multiclient sales. Drilling
Group revenue of $4.33 billion increased $269 million, or 7%,
led by robust demand for Drilling & Measurements and M-I SWACO
technologies in Saudi Arabia, Australia and in the Southeast Asia
region. Production Group revenue of $4.12 billion increased
$357 million, or 10%, with double-digit growth posted by Well
Services pressure pumping technologies in North America land and
increased SPM activity.
First-quarter pretax operating income of $2.37 billion decreased
9% sequentially, but increased 21% year-on-year.
International pretax operating income of $1.71 billion
increased $278 million, or 20% year-on-year, while North
America pretax operating income of $683 million increased $56
million, or 9% year-on-year.
Sequentially, pretax operating margin slipped by 80 basis points
(bps) to 21.1% due to year-end and seasonality effects. The
first-quarter’s margin dilution, which was due to typical year-end
and seasonal winter weather effects, was 127 bps.
International margin declined slightly by 73 bps to 22.8%,
while North America margin decreased 107 bps to settle at
18.5%.
Year-on-year, pretax operating margin increased by 248 bps as
International pretax operating margin expanded by 286 bps
while North America pretax operating margin dipped 53 bps.
Middle East & Asia posted a 349 bps year-on-year margin
improvement to reach 26.3%, Europe/CIS/Africa increased by
253 bps to 20.3%, and Latin America improved by 160 bps to
21.1%. The slight decline in North America margin was mainly
due to pricing weakness on land for Well Services pressure pumping
technologies and drilling delays offshore in the US Gulf of Mexico.
The robust expansion in International margin was driven by
the uptake of new technology, the strong focus on cost and resource
management, and the continued margin-accretive contribution of
integration-related activities.
Year-on-year by segment, Reservoir Characterization Group
pretax operating margin expanded 129 bps to 27.3% due to improved
profitability in Wireline and Testing Services and increased SIS
software sales while the pretax operating margin of the Drilling
Group increased 249 bps to 20.3% from increased technology
integration, higher margins posted by Drilling & Measurements,
and improved profitability in Integrated Project Management (IPM)
project activity. Production Group pretax operating margin
increased 313 bps to 17.9% due mainly to improved cost efficiencies
and new technology sales in Well Services and Completions, although
the effect of this was partially offset by contract rollover
pricing.
Overall Schlumberger performance during the first quarter was
marked by a number of technology highlights that were driven by
efficiency, reliability and service integration.
In China, Drilling Group Technologies were deployed for
ConocoPhillips China to improve drilling efficiency and obtain
reliable reservoir pressure measurements in an offshore well in the
Peng Lai 19-3 oilfield in the Bohai Bay. The combination of
Drilling & Measurements PowerDrive Xceed* and PowerDrive
vorteX* rotary steerable technologies with the C-Link IMAG
communication system delivered precise well trajectory control,
increased rate of penetration (ROP), and improved hole cleaning. In
addition, the M-I SWACO ULTRADRIL* high performance water-based
fluid system was used to enhance shale stability and ROP, which
further improved overall drilling efficiency. As a result, record
ROPs were achieved for both 12 1/4-in and 8 1/2-in sections with an
overall 22% improvement from the previous record. Also, in the 8
1/2-in section, StethoScope* formation pressure-while-drilling
technology secured real-time pressure measurements to predict pore
pressure trends in the reservoir. Overall, this combination of
Schlumberger technologies provided the customer with enhanced
formation evaluation, high quality execution with zero NPT, and a
total AFE savings of four days.
In Mexico, Pemex has awarded Schlumberger three multiyear
integrated project contracts valued collectively at over $1.9
billion, representing the largest combined award in the recently
concluded Mega Tender. Schlumberger is the only service provider to
secure a contract in each project including the ongoing integrated
project activity in the South Region, and continued activity in
Pemex North Region. The award was based on commercial terms, QHSE,
and the Schlumberger proven technology track record in Mexico in
the deep complex well environments in the South, along with
efficient drilling processes and associated services in past
projects. In addition, Schlumberger has started executing a
four-year contract for deepwater integrated services, offshore
Mexico, valued at over $240 million. The first deepwater well under
this contract started in March 2014.
In Norway, Schlumberger has been awarded an integrated well
construction services contract by Det norske oljeselskap ASA for
exploration drilling and development of the Ivar Aasen field in the
northern part of the North Sea, west of the Johan Sverdrup field.
The five-year contract with two optional periods of one year each
includes the provision of the full suite of well construction
services from exploration to development. This award was based on
the fully integrated technology solution offered by Schlumberger in
terms of technical and financial performance with the objective to
deliver safe and efficient operations. Schlumberger will also be an
integral part of the well construction process, delivering services
on a contract that maximizes the potential gains from technology
innovation, reliability and process efficiency.
Offshore Thailand, Schlumberger conducted an industry first
seismic-while-drilling survey for Salamander Energy. Drilling &
Measurements seismicVISION* seismic-while-drilling technology was
used in a walkabove seismic survey to obtain real-time velocity
information and seismic imaging. A combination of Wireline
Q-Borehole* integrated borehole seismic, SWINGS* seismic navigation
and positioning, and WesternGeco TRISOR* acoustic source
technologies was deployed with remote shooting from the drilling
rig using radio technology to fire the guns and transmit data from
the boat source. A total of 53 consecutive real-time seismic levels
were used to update the time-depth conversion, enabling the
drillbit to be placed on the seismic map. In addition, memory data
provided over 100 consecutive seismic levels for final seismic
imaging. The Schlumberger technologies provided operational
efficiency and helped the operator reduce drilling uncertainty,
which facilitated the successful drilling of the well to the
planned total depth.
In Russia, PetroStim, a Schlumberger company, conducted a
Microseismic Services StimMAP* hydraulic fracture mapping service
for a major Russian oil company in West Siberia. Four hydraulic
fracturing stages were conducted in a horizontal treatment
well and monitored from a nearby observation well, using
Wireline VSI* versatile seismic imager technology with 3-component
downhole sensors. The directions of fracture growth were clearly
detected for all stages, despite low formation permeability and
reduced pumping rates. Overall, more than 400 microseismic events
were detected with the statistical confidence required for good
microseismic interpretation, enabling the customer to reduce
uncertainty in drilling and field development planning, and
potentially saving significant cost.
Reservoir Characterization Group
First-quarter revenue of $2.85 billion decreased 14%
sequentially, but grew 2% year-on-year. Sequential declines were
primarily due to lower WesternGeco multiclient and SIS software
sales following their strong year-end highs. Year-on-year revenue
growth was led by Wireline and Testing Services driven by offshore
exploration, and by SIS on increased software sales across all
International Areas. WesternGeco, however, declined on lower marine
vessel fleet utilization and reduced multiclient sales.
Pretax operating income of $779 million was 24% lower
sequentially, but increased 7% year-on-year. Pretax operating
margin of 27.3% decreased 384 bps sequentially due to the
seasonally lower WesternGeco multiclient and SIS software sales.
Year-on-year, pretax operating margin expanded by 129 bps due to
improved profitability in Wireline and increased SIS software
sales.
A number of key technology successes and new contract awards
contributed to Reservoir Characterization Group performance during
the first quarter.
In Norway, Statoil Petroleum AS, acting as operator on behalf of
a partner group of 33 oil and gas companies, has awarded
WesternGeco a large joint seismic acquisition and data processing
project consisting of three 3D surveys totalling approximately
8,000 km2 in the south-eastern Barents Sea on the Norwegian
continental shelf (NCS). This is the first new area on the NCS to
be opened since 1994. The multivessel project will use ObliQ*
sliding-notch broadband acquisition and imaging technology, which
would include data being processed on board the vessels.
In the North Sea, BP has awarded WesternGeco a multiproject
contract for streamer acquisition in the 2014-2015 North Sea season
to include a 220-km2 4D monitor survey with undershoot over the
Tambar field in Norway followed by a 1,000-km2 3D survey in West of
Shetlands. The undershoot allows data to be collected beneath
obstructions such as production facilities. This award follows a
previous contract completed in 2013 and has an option to extend to
2016.
Kuwait Gulf Oil Company (KGOC) and Saudi Arabian Chevron Inc.
have awarded WesternGeco a contract for a 4,612-km2 3D seismic
survey covering the full extent of the onshore Partitioned Zone
(PZ), an area between the Kingdom of Saudi Arabia and Kuwait
operated by Wafra Joint Operations. A UniQ* integrated
point-receiver land seismic system with over 150,000 channels will
be used for the project, making this the world’s second-largest
land seismic survey ever conducted in terms of channel count.
In the UK sector of the North Sea, Chevron has awarded
WesternGeco a “Q-on-Q” 4D monitor survey over the Alba field, a
complex acquisition project that will be acquired by the Amazon
Warrior using Q-Marine* Seismic and DSC* dynamic spread control
technologies to ensure survey repeatability. The award also
includes three comprehensive data processing projects where 4D
processing of four data vintages will be performed, along with a
full 3D prestack depth migration of the 2014 data. WesternGeco has
a long history of working with Chevron in the Alba field.
In Libya, Wireline technologies were introduced for WAHA OIL
COMPANY to support characterization of the main Nubian Sandstone
reservoir. The CMR-Plus* logging tool helped resolve low
resistivity pay above the primary reservoir, while CMR MRF* fluid
characterization indicated that the reservoir was oil-wet,
impacting future development plans. The ECS* elemental capture
spectroscopy sonde quantified the mineralogy and porosity
estimation of clay and calcite volumes. The combination of OBMI*
oil-base microimager and UBI* ultrasonic borehole imager
technologies enabled WAHA to perform a full geological
interpretation with a saving of more than 10 hours of rig time.
High-fidelity shear anisotropy from the Sonic Scanner* acoustic
scanning platform combined with high-resolution UBI and OBMI images
provided fracture-stress characterization of the tight fractured
reservoir.
In Kurdistan, Wireline Saturn* 3D Radial Probe technology was
deployed for OMV to obtain high quality oil samples in a vertical
exploration well in the BinaBawi field. The larger flow area
offered by the Saturn elliptical probe design led to improvements
in operational efficiency with the acquisition of four fluid
samples in two different intervals, including one fluid
identification profile, and enabled the customer to save up to 50%
in fluid sampling time compared with conventional sampling
methods.
In Trinidad and Tobago, Wireline MDT* modular formation dynamics
tester technology with dual-packer elements was deployed in a well
for Centrica Energy to obtain reliable permeability data. The “mini
drillstem test” covered four intervals, and was conducted in a
single logging run which enabled the customer to save approximately
seven days of rig time compared with a conventional well test. In
addition, the combination of Rt Scanner* triaxial induction, Sonic
Scanner acoustic scanning, Dielectric Scanner* multifrequency
dielectric dispersion, and OBMI oil-base microimager technologies
was used to characterize the reservoir.
In Kazakhstan, a Wireline Platform Express* integrated wireline
tool was used for Altius Petroleum International B.V. to acquire
logs in shallow wells in the onshore Akzhar field. The selection of
Schlumberger as the single service provider for openhole logging
acquisition and interpretation services enabled Altius Petroleum
International to stay within budget for 38 wells and decrease the
turn-around time for information delivery by 50%. As a result of
this timely information, the customer was able to avoid unnecessary
costs associated with well cementing and casing preparation.
The National Oil Corporation of Kenya (National Oil) has signed
a collaboration agreement with Schlumberger for a 9,500-km 2D
long-offset multiclient seismic survey, covering an extensive
deepwater area offshore Kenya. The agreement uses Schlumberger
Reservoir Characterization Group technologies to acquire, process
and interpret the data in collaboration with National Oil to
provide knowledge transfer and help develop technical staff. The
survey will be acquired using Q-Marine Solid* streamer and ObliQ
sliding-notch broadband technologies. Schlumberger PetroTechnical
Services will use Omega* seismic data processing software for
imaging and processing, and the SIS Petrel* E&P software
platform for interpretation and geological modelling. The agreement
also includes support services to enhance National Oil’s integrated
data management and information systems infrastructure.
In India, Wireline Flow Scanner* well production logging and
MaxTRAC* downhole wireline tractor systems were run for Oil and
Natural Gas Corporation Limited (ONGC) to acquire production
profiling information in a challenging high temperature horizontal
well in the Mumbai High South offshore field. The MaxTRAC tractor
successfully conveyed the Flow Scanner tool to total depth over a
producing interval that contained an intelligent completion. The
reliable downhole production rate measurements acquired enabled the
customer to make critical field development decisions.
Drilling Group
First-quarter revenue of $4.33 billion decreased 2%
sequentially, but grew 7% year-on-year. Revenue decreased
sequentially due to a decline in M-I SWACO product sales following
a strong 2013 year-end high. Year-on-year, revenue increased by
$269 million, led by robust growth in Drilling & Measurements
technologies as drilling activity strengthened in Saudi Arabia,
Iraq, Norway, China, Australia and the Southeast Asia region.
Pretax operating income of $881 million was flat sequentially,
but increased 22% year-on-year. Pretax operating margin of 20.3%
increased 51 bps sequentially as a result of better pricing from a
higher-technology mix for Drilling & Measurements services,
mainly in the Middle East & Asia Area, as well as from improved
profitability in IPM projects. Year-on-year, pretax operating
margin expanded 249 bps from increased technology integration,
better margins at Drilling & Measurements, and improved
profitability in IPM project activity.
First-quarter performance was marked by technology integration
and service efficiency across all the Drilling Group product
lines.
In China, Drilling & Measurements technologies established
well drilling records for Shell in the shale gas play project in
the Sichuan province. PowerDrive Archer* high build rate rotary
steerable system technology proved its reliability with a record
309 hours of continuous operation and helped overcome high
formation dips during the placement of a challenging horizontal
well. In addition, the MicroScope* resistivity- and
imaging-while-drilling service delivered high quality imaging
information over a record reservoir section of 2,043 m. In another
well, PowerDrive vorteX rotary steerable system broke the drilling
footage record for the field and delivered an overall 92% drilling
performance improvement compared with offset wells. As a result,
Drilling & Measurement technologies have so far delivered one
top-quartile and four best-in-class wells, based on service
delivery and cost savings to the customer.
Also in China, Drilling & Measurements technologies were
deployed for CNOOC Panyu Operating Company to drill horizontal
wells in the mature Panyu oilfield which has an average field water
cut of 91%. A combination of PowerDrive Archer high build rate
rotary steerable, PowerDrive Xceed rotary steerable, PeriScope* bed
boundary mapping, EcoScope†* multifunction logging-while-drilling,
and adnVISION* azimuthal density neutron technologies delivered
increased drilling efficiency and enabled the wells to be placed in
the optimum position to drain the remaining hydrocarbon. This
technology combination successfully drilled a total of 25
horizontal wells, and helped reverse the field’s declining
production trend, resulting in 68% higher oil production compared
to the initial plan, and 45% cumulative incremental oil versus
forecast.
In Russia, Drilling & Measurements technologies were used
for VSNK-Rosneft Oil Company to drill a challenging horizontal well
in East Siberia's unconventional Yurubcheno-Tohomskoe field. The
combination of ImPulse* integrated measurement while drilling,
adnVISION azimuthal density neutron and SonicScope* multipole
sonic-while-drilling technologies provided the quality measurements
needed for formation fracture characterization. In addition, the
Schlumberger logging-while-drilling technologies provided
efficiency improvements enabling the customer to save three days of
rig time and the associated cost.
In Egypt, Schlumberger Stinger* conical diamond element
technology helped BAPETCO, a joint venture between Shell and the
Egyptian General Petroleum Cooperation, achieve back-to-back top
quartile drilling performance in wells in the Obayed field. In the
8 1/2-in section of the first well, Smith customized
polycrystalline diamond compact (PDC) bits with Stinger technology
increased ROP over 30% compared to the field’s best offsets. In the
second well’s 8 1/2-in section, the ROP using Stinger technology
matched that of the best field performer, and the section was
drilled to total depth, replacing two conventional bits and
increasing the footage drilled by 45%. The combination of Stinger
technology and computational-fluid-dynamics-validated hydraulics
also delivered new drilling records for the longest and fastest
runs in the Obayed field.
In US land, Schlumberger Drilling Group Technologies enabled
Cimarex Energy Co. to achieve record drilling times on wells in the
Delaware Basin. Drilling & Measurements PowerDrive Archer high
build rate rotary steerable system technology, with a customized
abrasion-resistant Smith PDC bit and M-I SWACO DUO-VIS* viscosifier
technology, drilled a record well in the Second Bone Spring sand
interval in just over eight days, or two-and-a-half days less than
the previous best well and four days less than the median for the
area. This technology combination resulted in a saving of $170,000
over the previous best well and $260,000 over the median for the
area.
Also in US land, Smith drillbit technology allowed LINN Energy
LLC to reduce the average number of bits used to drill the lateral
sections in their Anadarko Basin wells. A customized six-blade
Smith PDC bit with ONYX 360* cutter technology drilled an entire 8
3/4-in interval without irreparably damaging a drill bit for the
first time in this formation. As a result of ONYX 360 cutter
technology, the laterals were drilled efficiently with an
approximate rig time and bit cost saving of more than $85,000 per
well.
Elsewhere in US land, Schlumberger SHARC*
high-abrasion-resistance PDC bits helped Murex Petroleum
Corporation achieve record drilling performance in a well in the
Williston basin. The SHARC bit technology in combination with one
other customized Smith PDC bit, drilled a well from surface casing
to a total depth of 18,835 ft using only three bits, one each in
the vertical, the curve and the lateral sections. In addition, the
average rate of penetration was 15% faster than the best offset
well in the field, resulting in a $100,000 well cost saving.
In US land, M-I SWACO deployed RHE-USE* chemically enhanced
technology for Noble Energy to remove low-gravity solids from
non-aqueous drilling fluids used to drill wells in the Northeast
basin. As a result of using RHE-USE technology, the customer
reduced base oil and barite usage, eliminated drilling solids
transfer equipment and reduced mud and transport costs resulting in
a total savings of $200,000 compared to conventional solids control
fluid pads.
In the US Gulf of Mexico, Well Services introduced the
MudSCRUB-SX* stable microemulsion oil-base mud removal system on a
deepwater well for a major customer offshore Louisiana. The
applications of the MudSCRUB-SX system included the placement of a
plug in the well's 20-in casing, and a plug set during a 16-in shoe
squeeze operation to isolate a weak drill-out formation. The
combination of the MudSCRUB-SX system's proprietary formulation and
Well Services plug placement software resulted in excellent hole
cleaning and reduced fluid contamination. This optimum slurry
performance enabled the customer to save the cost and time
associated with the additional additives and multiple pumping
stages typically used in traditional mud removal treatments, as
well as the potential remedial time associated with subsequent
cementing operations.
In Poland, Drilling & Measurements PowerDrive Archer high
build rate rotary steerable system technology was used for BNK
Petroleum in the Gapowo B-1 horizontal well to drill over-pressured
Lower Silurian and Ordovician shales. PowerDrive Archer technology
enabled the well to be landed as per plan, overcoming challenges
faced by conventional drilling methods in achieving the necessary
build-up rates. In the same well, the PowerDrive X6* rotary
steerable system was deployed to drill the longest lateral section
to date, in a single run, on a shale gas well in Poland. In
addition, real-time gamma ray images from the geoVISION*
imaging-while-drilling service confirmed the formation structure in
the lateral section, which allowed the wellbore to be steered and
maintained within the target zones to maximize contact with the
shale reservoir.
Production Group
First-quarter revenue of $4.12 billion decreased 2%
sequentially, and grew 10% year-on-year. The sequential decline was
primarily due to lower Completions and Artificial Lift product
sales following their strong year-end highs. Well Services pressure
pumping technologies were higher due to increased service intensity
in US land despite severe winter disruption and contract rollover
pricing. Revenue in Well Services was also higher due to peak
winter activity in Western Canada.
Year-on-year, revenue increased by $357 million led by
double-digit growth in Well Services pressure pumping technologies
in North America land. SPM revenue grew by more than 50% as
projects in Latin America continued to progress ahead of work
plans.
Pretax operating income of $737 million was 1% higher
sequentially and increased 33% year-on-year. Pretax operating
margin of 17.9% increased 60 bps sequentially on improved
profitability for Well Services and Well Intervention Technologies,
both in North America land and in the International Areas. This
improvement is due to peak winter activity in Western Canada as
well as from operational efficiencies in US land, although this was
muted by continued pricing weakness in US land.
Year-on-year, pretax operating margin expanded 313 bps mainly
from improved cost efficiencies and new technology sales in Well
Services and Completions, although the effect of this was partially
offset by contract rollover pricing.
A number of technology innovation, integration, process
efficiency and reliability highlights across the Production Group
marked the first quarter.
In West Texas, a combination of Schlumberger technologies was
used for Clayton Williams to optimize well stimulation in their
Upper Wolfcamp shale target. Well Services Mangrove*
reservoir-centric stimulation design software using Wireline
ThruBit* logging services including spectral gamma ray, enabled
peak 30-day production rates in the new wells to increase more than
100% compared to previously completed wells in the play. Clayton
Williams attributes the production improvement to the Mangrove
workflow along with the high quality openhole logging data obtained
in the laterals.
In China, Well Services HiWAY* flow-channel fracturing
technology was used for PetroChina Changqing Oil Company in two
vertical pilot wells in the Sulige gas field in the Ordos basin.
Historically, wells drilled in the field’s tight and
under-pressurized reservoirs have delivered only marginal
production. As a result of HiWAY treatment, the initial production
of each well exceeded the average production of offset vertical
wells by a factor of three-and-a-half and was equivalent to the
average production of offset horizontal wells. This application of
HiWAY technology provided the customer with the savings associated
with reduced water and proppant use along with increased viability
of marginal targets not possible with conventional fracturing
treatments.
In China, Well Services StimMORE* fiber-laden diversion fluid
technology was used for CNPC Tarim Oilfield Company in the
hydraulic fracturing of extreme high-pressure, high-temperature
tight-gas wells in the Kuche field in the Tarim basin. An
integrated approach, comprising reservoir understanding combined
with the use of StimMORE diversion technology, helped maximize the
hydraulic fracture’s surface area contact with the reservoir and
wellbore. In total, eight wells have been successfully treated with
StimMORE technology, and post-job average well production rates
were 60% higher than the average of offset wells stimulated with
conventional methods in the same field.
In Kazakhstan, Well Services completed the first ten-stage
stimulation campaign for Karachaganak Petroleum Operating B.V. on a
horizontal well in the Karachaganak field. The operation included
five acid-fracturing and five matrix-acidizing treatments in a
naturally fractured carbonate, and was executed in 28 days which is
more than two times faster than previous campaigns on similar wells
in the same field. In addition, initial post stimulation clean-up
and well flow-back indicated it to be top quartile producer in the
field among a total of 90 producing wells.
In the US Gulf of Mexico, Well Intervention deployed LIVE*
digital slickline services for Walter Oil & Gas on a rigless
zonal isolation and recompletion operation. The LIVE services
combined real-time correlation and perforating capabilities with an
efficient lightweight, smaller footprint solution to execute a
successful intervention within the limitations of the platform’s
crane and deck space.
Also in the US Gulf of Mexico, Well Services PressureNET* lost
circulation technology was incorporated for the first time into a
weighted spacer fluid, and pumped ahead of a cement system
containing CemNET* advanced fiber technology to control losses
while setting the production liner in a well. This combination of
Well Services technologies provided reliable cement coverage across
all critical zones and avoided a potential $2.7 million in remedial
work for the deepwater customer.
In Australia, Schlumberger Completions has been awarded a
contract worth $40 million by INPEX. The contract covers the upper
and intermediate completions for the first 20 wells in Phase I of
the upcoming Ichthys development. The project scope includes
high-producer gas wells that require state-of-the-art high-alloy,
large-bore completions.
In Brazil, Schlumberger Artificial Lift has been awarded a
performance-based contract worth approximately $50 million by
Petrobras to supply, install and monitor electric submersible pump
systems in six subsea wells in the offshore Parque Das Baleias
field. The five-year contract was based on the proven Schlumberger
track record in supplying high-reliability REDA Maximus* electric
submersible pump technology in the extremely challenging Brazil
deepwater and ultra-deepwater environments.
Financial Tables
Condensed
Consolidated Statement of Income (Stated in millions, except
per share amounts) Three Months Periods Ended March 31,
2014 2013
Revenue
$ 11,239 $ 10,570 Interest and other
income, net
76 33 Expenses Cost of revenue
8,745
8,409 Research & engineering
284 292 General &
administrative
106 95 Impairment & other(1)
- 92
Interest
103
98 Income before taxes
2,077 1,617
Taxes on income(1)
469
406 Income from continuing operations
1,608 1,211 Income from discontinued operations
- 56
Net income
1,608 1,267 Net income attributable to
noncontrolling interests
16 8 Net income attributable to
Schlumberger
$ 1,592
$ 1,259 Schlumberger amounts
attributable to: Income from continuing operations(1)
$
1,592 $ 1,203 Income from discontinued operations
- 56
Net income
$ 1,592
$ 1,259 Diluted earnings per share of
Schlumberger Income from continuing operations(1)
$
1.21 $ 0.90 Income from discontinued operations
-
0.04 Net income
$ 1.21
$ 0.94 Average shares outstanding
1,306 1,330 Average shares outstanding assuming dilution
1,318
1,340 Depreciation & amortization included
in expenses(2)
$ 932
$ 896
(1) See page 13 for details of charges and
credits.
(2) Including multiclient seismic data
costs
Condensed Consolidated Balance Sheet
(Stated in millions)
Mar. 31, Dec. 31, Assets
2014 2013 Current Assets Cash and
short-term investments
$ 7,078 $ 8,370 Receivables
11,680 11,497 Other current assets
6,595 6,358
25,353 26,225 Fixed income investments, held to maturity
358 363 Fixed assets
15,114 15,096 Multiclient
seismic data
696 667 Goodwill
14,832 14,706 Other
intangible assets
4,713 4,709 Other assets
5,651 5,334
$ 66,717
$ 67,100 Liabilities and Equity
Current
Liabilities Accounts payable and accrued liabilities
$
8,272 $ 8,837 Estimated liability for taxes on income
1,731 1,490 Short-term borrowings and current portion of
long-term debt
1,369 2,783 Dividend payable
527 415
11,899 13,525 Long-term debt
11,120 10,393
Postretirement benefits
663 670 Deferred taxes
1,708
1,708 Other liabilities
1,147 1,169
26,537 27,465
Equity
40,180
39,635
$ 66,717 $ 67,100
Net Debt
“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. Details of
changes in Net Debt for the first quarter follow:
(Stated in millions)
Three Months
2014 Net Debt, January 1, 2014
$
(4,443
)
Income from continuing operations
1,592 Depreciation and
amortization
932 Pension and other postretirement benefits
expense
86 Stock-based compensation expense
77
Pension and other postretirement benefits funding
(72
) Increase in working capital
(870 ) Capital
expenditures
(864 ) Multiclient seismic data
capitalized
(82 ) Dividends paid
(410 )
Proceeds from employee stock plans
280 Stock repurchase
program
(899 ) Business acquisitions and investments,
net of cash and debt acquired
(239 ) Other
(121 ) Currency effect on net debt
(20
) Net Debt, March 31, 2014
$
(5,053
)
Mar. 31, Dec. 31, Components of Net Debt
2014 2013
Cash and short-term investments
$ 7,078 $ 8,370 Fixed
income investments, held to maturity
358 363 Short-term
borrowings and current portion of long-term debt
(1,369
) (2,783 ) Long-term debt
(11,120 )
(10,393 )
$
(5,053
)
$ (4,443 )
Charges & Credits
In addition to financial results determined in accordance with
US generally accepted accounting principles (GAAP), this
First-Quarter Press Release also includes non-GAAP financial
measures (as defined under the SEC’s Regulation G). The following
is a reconciliation of these non-GAAP measures to the comparable
GAAP measures:
(Stated in millions, except per share amounts)
Fourth Quarter 2013 Noncont. Diluted Pretax
Tax
Interest Net
EPS Income Statement Classification Schlumberger income from
continuing operations, as reported $ 2,170 $ 487 $ 19 $ 1,664 $
1.26 Provision for accounts receivable 152
30 -
122
0.09 Cost of revenue Schlumberger income from continuing
operations, excluding charges & credits $ 2,322
$ 517 $ 19
$ 1,786 $ 1.35
First Quarter 2013 Noncont. Diluted Pretax
Tax Interest
Net EPS Income
Statement Classification Schlumberger income from continuing
operations, as reported $ 1,618 $ 406 $ 9 $ 1,203 $ 0.90 Currency
devaluation loss in Venezuela 92
- -
92 0.07 Impairment
& other Schlumberger income from continuing operations,
excluding charges & credits $ 1,710
$ 406 $ 9 $
1,295 $ 0.97
There were no charges or credits recorded during the first
quarter of 2014.
Product Groups (Stated in millions)
Three Months Ended Mar. 31, 2014 Dec. 31, 2013 Mar.
31, 2013
Revenue
Income Before
Taxes
Revenue
IncomeBeforeTaxes
Revenue
IncomeBeforeTaxes
Oilfield Services Reservoir Characterization
$ 2,852
$ 779 $ 3,306 $ 1,031 $ 2,801 $ 729 Drilling
4,331 881 4,440 880 4,062 725 Production
4,116
737 4,219 730 3,759 555 Eliminations & other
(60 ) (29 ) (59 )
(37 ) (52 ) (44 )
11,239 2,368 11,906
2,604 10,570 1,965 Corporate & other
- (201
) - (197 ) - (169 ) Interest income(1)
- 7 - 7
- 6 Interest expense(1)
- (97 ) - (92 ) - (93
) Charges & credits
- -
- (152 ) - (92 )
$ 11,239 $ 2,077 $ 11,906
$ 2,170 $ 10,570 $ 1,617
Geographic Areas (Stated in millions)
Three Months
Ended Mar. 31, 2014 Dec. 31, 2013 Mar. 31, 2013
Revenue
Income Before
Taxes
Revenue
IncomeBeforeTaxes
Revenue
IncomeBeforeTaxes
Oilfield Services North America
$ 3,684 $
683 $ 3,649 $ 716 $ 3,290 $ 627 Latin America
1,758
371 2,003 425 1,904 371 Europe/CIS/Africa
2,881
585 3,225 726 2,863 509 Middle East & Asia
2,845
749 2,923 766 2,394 547 Eliminations & other
71 (20 ) 106
(29 ) 119 (89 )
11,239
2,368 11,906 2,604 10,570 1,965 Corporate & other
- (201 ) - (197 ) - (169 ) Interest income(1)
- 7 - 7 - 6 Interest expense(1)
- (97
) - (92 ) - (93 ) Charges & credits
-
- - (152 )
- (92 )
$ 11,239 $
2,077 $ 11,906 $ 2,170 $ 10,570
$ 1,617
(1) Excludes interest included in the
Product Groups and Geographic Areas Results.
About Schlumberger
Schlumberger is the world’s leading supplier of technology,
integrated project management and information solutions to
customers working in the oil and gas industry worldwide. Employing
123,000 people representing over 140 nationalities and working in
more than 85 countries, Schlumberger provides the industry’s widest
range of products and services from exploration through
production.
Schlumberger Limited has principal offices in Paris, Houston and
The Hague, and reported revenues from continuing operations of
$45.27 billion in 2013. For more information, visit
www.slb.com.
*Mark of Schlumberger or of Schlumberger Companies.
†Japan Oil, Gas and Metals National Corporation (JOGMEC),
formerly Japan National Oil Corporation (JNOC), and Schlumberger
collaborated on a research project to develop LWD technology. The
EcoScope and NeoScope services use technology that resulted from
this collaboration.
Notes
Schlumberger will hold a conference call to discuss the above
announcement and business outlook on Thursday, April 17, 2014. The
call is scheduled to begin at 7:00 a.m. US Central Time (CT), 8:00
a.m. Eastern Time (ET), 2:00 pm (Paris time). To access the call,
which is open to the public, please contact the conference call
operator at +1-866-269-9609 within North America, or
+1-612-332-0923 outside of North America, approximately 10 minutes
prior to the call’s scheduled start time. Ask for the “Schlumberger
Earnings Conference Call.” At the conclusion of the conference
call, an audio replay will be available until May 17, 2014 by
dialing 1-800-475-6701 within North America, or +1-320-365-3844
outside of North America, and providing the access code 316978.
The conference call will be webcast simultaneously at
www.slb.com/irwebcast on a listen-only basis. Please log in 15
minutes ahead of time to test your browser and register for the
call. A replay of the webcast will also be available at the same
web site.
Supplemental information in the form of a question and answer
document on this press release and financial information is
available at www.slb.com/ir.
Schlumberger LimitedSimon Farrant – Vice President Investor
RelationsJoy V. Domingo – Manager of Investor RelationsOffice +1
(713) 375-3535investor-relations@slb.com
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