Schlumberger Limited (NYSE:SLB) today reported second-quarter
2014 revenue of $12.05 billion versus $11.24 billion in the first
quarter of 2014, and $11.18 billion in the second quarter of 2013.
Second-quarter revenue was up 7% sequentially and increased 8%
year-on-year with International Area revenue of $8.09 billion
growing $604 million, or 8% sequentially, while North America Area
revenue of $3.89 billion increased $205 million, or 6%
sequentially.
Income from continuing operations attributable to Schlumberger,
excluding charges and credits, was $1.80 billion—an increase of 13%
sequentially and an increase of 17% year-on-year. Diluted
earnings-per-share from continuing operations, excluding charges
and credits, was $1.37 versus $1.21 in the previous quarter, and
$1.15 in the second quarter of 2013.
Pretax operating income in the second quarter reached $2.62
billion, up 11% sequentially and 15% year-on-year. International
pretax operating income of $1.94 billion increased 14%
sequentially, while North America pretax operating income of $700
million increased 3% sequentially.
Pretax operating margin in the second quarter was 21.7%
reflecting 39% incremental operating margins year-on-year.
International pretax operating margin was 24.0% while North America
pretax operating margin was 18.0%.
Schlumberger CEO Paal Kibsgaard commented, “Strong Schlumberger
second-quarter results were driven by significantly higher activity
both offshore and in key land markets. Growth was strongest
internationally as activity rebounded in a number of regions but
North America was also markedly higher with strength offshore and
extremely solid progress on land in spite of the Canadian spring
break-up. All Areas and all Groups recorded growth, underpinned by
the strength of our execution and the penetration of our new
technology.
Geographical results were led by Europe/CIS/Africa where Russia
recovered markedly from the effects of a harsh winter and where
Norway benefited from an active start to the summer seismic season.
In Middle East and Asia, further growth from key markets in Saudi
Arabia and Australia was amplified by stronger activity—both
seismic and drilling—in the United Arab Emirates GeoMarket* as well
as growing seismic operations in Qatar. In North America,
double-digit growth in US Land from increased rig count, efficiency
gains and market share improvements more than overcame the effects
of what proved to be a rapid spring break-up in Canada while
offshore activity in the US Gulf of Mexico rebounded as rigs
returned to drilling. Latin America benefited from strong growth in
Argentina, Colombia and Venezuela but overall results were impacted
by lower activity in Mexico, while revenue in the Brazil GeoMarket
was flat sequentially.
Technology-fueled growth was strongest for Reservoir
Characterization Group products and services as demand for Wireline
services increased as drilling activity rebounded in Russia and
Norway while seismic activity grew in the North Sea and the Middle
East. Within the Drilling Group, M-I SWACO saw strong international
activity in Russia, Sub-Saharan Africa and Latin America. Drilling
& Measurements improved on increased drilling in North America
and Russia. Production Group Technologies grew as industry pressure
pumping utilization improved on land in the US and as Completions
sales expanded internationally. New technology sales remained
strong across all Groups to offer opportunities for higher pricing
although overall pricing levels remained competitive.
The overall global economic outlook continues to be mixed as the
US recovery from the effects of the unusually harsh winter coupled
with a weaker forecast in Brazil, anemic growth in the Eurozone,
and stabilizing GDP in China produce a slightly more cautious
short-term GDP growth outlook. The fundamentals for a slow and
steady recovery, however, remain intact. On the other hand, the gap
between oil supply and demand is tightening on stronger demand and
lower non-OPEC supply leading to narrower spare capacity and
consequent support for oil prices that modulate customer spend.
Natural gas markets on the other hand appear comfortably supplied
with little upward pressure on prices.
We believe that this outlook will be slow to change and that the
scenario for growth that we unveiled at our investor conference in
New York last month is highly realistic. The opportunities that new
technologies offer in response to customer challenges coupled with
greater integration will lead to clearly differentiated financial
growth that can only be augmented by the gains that increased
reliability and efficiency will provide. In this environment,
Schlumberger will continue to outperform.”
Highlights
The second-quarter results benefited from a number of
integration successes and contract wins that demonstrated the value
and differentiation that Schlumberger integrated services,
technologies and processes provide.
For example in Oman, BP awarded Schlumberger a five-year
contract for the supply of drilling and completion products and
services in the Khazzan Field Development project. The contract is
expected to be worth $400 million over the contract period, and
includes the application of innovative Schlumberger drilling and
hydraulic stimulation technology to help unlock the resource
potential in the challenging tight gas, low porosity
reservoirs.
Earlier in the year in Russia, GazpromNeft and Schlumberger
signed a technology collaboration agreement aimed at increasing the
efficiency of the planned Bazhenov shale development project in the
southern part of the giant Priobskoe oilfield in Western Siberia.
The companies will work together on improving business processes
and sharing of key resources including petrotechnical and
scientific expertise, unconventional resource knowledge, and field
equipment and assets. An integrated approach will be used for
reservoir characterization, well construction, and well completion
techniques, including the planning, execution and evaluation of
hydraulic fracturing using microseismic measurements. Through this
technical collaboration with Schlumberger, GazpromNeft plans to
develop tailored workflows for Bazhenov shale development and
define technical specifications for the pilot project.
Other Events
During the quarter, Schlumberger repurchased 11.53 million
shares of its common stock at an average price of $101.85 per share
for a total purchase price of $1.17 billion.
During the quarter, Schlumberger completed the purchase of 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.
North America
North America revenue of $3.89 billion increased 6%
sequentially—with North America offshore revenue up 8% after a
rebound in drilling activity despite a soft quarter for multiclient
seismic sales. US land posted double-digit revenue growth on a 5%
increase in rig count combined with improved efficiency and market
share gains that was partially offset by the seasonal decline in
activity in Western Canada following the spring break-up.
Despite the effects of the seasonal spring break-up in Western
Canada and pressure pumping commodity inflation, North America
pretax operating margin declined by only 53 basis points (bps) to
18.0%.
During the second quarter, new technologies helped meet customer
challenges in North America in increasing drilling efficiency,
assuring wellbore integrity and improving well production.
In unconventional resource development in North America for
example, ThruBit* logging services to characterize and evaluate
reservoir quality in horizontal wells have doubled market
penetration over the past two years. In one unconventional play,
ThruBit logging data helped increase well perforation efficiency by
28% compared to a standard approach in which only 64% percent of
the perforations contributed. ThruBit technology, acquired in 2011
and now developed into a complete set of openhole measurements,
offers unique through-the-bit deployment that enables simultaneous
well conditioning and logging operations without slowing the
drilling process.
Elsewhere in US land, Well Intervention deployed LIVE* digital
slickline services for Devon Energy to diagnose production issues
in a mature well with a complex downhole design. The real-time
capability of the LIVE services, using enhanced mechanical
slickline combined with production logging tools, efficiently
identified downhole equipment characteristics, fluid levels and
flow entry points enabling timely remediation decisions. In
addition, the versatility of the LIVE services allowed for
perforating during the same operation, eliminating the need to call
out additional equipment and saving the customer several days in
workover operations.
In Western Oklahoma, a Drilling Tools & Remedial Neyrfor*
turbodrilling system was deployed to increase drilling efficiency.
After the operator drilled 2,700 ft of wellbore using a
conventional motor over 10 drillbit trips, Neyrfor technology was
used to successfully drill the remaining 1,300 ft of wellbore in
only one trip. The improved drilling performance eliminated the
risk associated with unnecessary bit trips and resulted in a rig
time saving for the customer of four days.
International Areas
The Europe/CIS/Africa Area led the sequential International
Area increase with revenue of $3.27 billion increasing 13% as
activity levels rebounded in Russia and Norway and exploration
increased in Sub-Saharan Africa.
Middle East & Asia Area revenue of $2.97 billion increased
4% sequentially as exploration and drilling activity strengthened
in Australia and development activity improved offshore China. In
addition, growth continued in Saudi Arabia and seismic activity
increased in the United Arab Emirates and Qatar GeoMarkets.
Latin America revenue of $1.85 billion grew 5% sequentially
on robust activity in Colombia and Venezuela across all
Technologies, including Schlumberger Production Management (SPM).
This increase, however, was partially offset by a continued drop in
rig count and activity in Mexico, while the revenue in the Brazil
GeoMarket was flat sequentially.
Sequentially, International Area pretax operating margin of
24.0% increased 122 bps after posting incremental operating margins
of 39%. Middle East & Asia improved 151 bps sequentially to
reach 27.8%, Europe/CIS/Africa increased by 180 bps to 22.1%, while
Latin America was relatively flat with the previous quarter at
21.2%.
The expansion in international margins was due to seasonal
activity rebounds in Russia combined with strong results in
Sub-Saharan Africa and the Middle East & Asia Area. Increased
high-margin exploration and deepwater activities also helped boost
sequential incremental operating margins.
A series of contract awards for new technology and service
integration across the portfolio underscored continuing
international market penetration.
These included the successful execution of an integrated
services project for Slavneft-Krasnoyarskneftegas in the naturally
fractured Refey carbonate formation with abnormally low formation
pressure in the East Siberian Kuyumbinskoye oilfield in Russia. The
project included project management coordination with drilling
engineering support, drill bits, drilling fluids and liner hangars
as well as directional drilling, measurement while drilling,
cementing, casing running, fishing, mud logging and wireline
services. The integrated services approach enabled the efficient
drilling of a horizontal well of 3,485-m total depth, including a
1,000-m horizontal section, in 78 days or 12 days ahead of plan.
The performance marks a new drilling benchmark in the geologically
complex Refey formation.
In Brunei, WesternGeco was awarded a contract by Brunei Shell
Petroleum Company Sdn Bhd to acquire a survey over approximately
1,500 km2 using IsoMetrix* marine seismic technology on the
offshore Punyit field. IsoMetrix technology was selected due to its
ability to acquire data in a challenging area of very shallow water
where other techniques were not possible.
WesternGeco was also awarded a contract by Total E&P Qatar
to acquire a 388-km2 4D seismic survey to aid in production
monitoring of the Al Khalij field in the Arabian Gulf,
approximately 100 km offshore Qatar. The multivessel survey will
use Q-Marine Solid* streamer technology and undershooting
techniques to ensure full coverage of the complex carbonate
reservoir.
And in Equatorial Guinea, Noble Energy awarded WesternGeco a
1,700-km2 survey in the Douala Basin using the Amazon Warrior, the
world’s only purpose-built seismic vessel. This will be the first
commercial project for the new vessel. The high-resolution 3D
survey will also include Q-Marine Solid streamer technology, the
ObliQ* sliding-notch broadband acquisition and imaging technique,
and dual vessel undershooting of two installations located within
the field boundaries.
Last, in China PetroChina awarded Schlumberger Information
Solutions (SIS) a multiyear petrophysical software, maintenance and
training services contract. The award features the sale of Techlog*
wellbore software platform and includes maintenance and training
services for three years. The Techlog platform will enable
standardization of petrophysical and geological well data analysis
across the customer’s business units. The contract award was based
on the proven SIS track record in delivering industry leading
software and technical support services.
Reservoir Characterization Group
Second-quarter revenue of $3.10 billion increased 9%
sequentially and grew 1% year-on-year. Pretax operating income of
$918 million was 18% higher sequentially, and increased 1%
year-on-year. Sequentially, the revenue increase was driven
primarily by increased use of Wireline services as a result of
stronger drilling activity in the US Gulf of Mexico and the
seasonal rebound in activity in Russia and Norway. WesternGeco
revenue increased sequentially from the return of marine vessels to
the North Sea for the summer season. SIS revenue also increased
from higher software sales and support.
Pretax operating margin of 29.7% increased 233 bps sequentially
after posting incremental operating margins of 57% on higher
WesternGeco vessel utilization, robust high-margin software sales,
and stronger Wireline activities.
During the second quarter, a number of new Reservoir
Characterization Group technologies helped meet customer challenges
in reducing sub-surface risk, characterizing complex reservoirs and
improving well production and reservoir recovery.
In Abu Dhabi, Wireline Saturn* 3D Radial Probe technology was
deployed for ADMA-OPCO to obtain oil and water samples in an
appraisal well in the offshore Nasr field. The larger flow area
offered by the Saturn elliptical probe design led to improvements
in operational efficiency with the acquisition of fluid samples
over eight intervals, and enabled the customer to save up to 30% in
fluid sampling time compared with conventional methods.
Offshore India, Wireline Saturn 3D Radial Probe technology was
also deployed for Reliance Industries Limited to obtain reservoir
measurements in a deepwater exploration well in a low-mobility
sandstone reservoir in the East coast of India. Saturn technology
allowed quality formation fluid sampling at mobilities as low as
0.03 mD/cP in about a quarter of the time required by conventional
formation testing methods. As a result, the customer was able to
make a timely decision on the well’s completion design and save
approximately 28 hours of rig time.
Elsewhere in India, a Wireline Flow Scanner* well production
logging system conveyed by MaxTRAC* downhole wireline tractor
technology was deployed for Oil and Natural Gas Corporation Limited
in a challenging horizontal well with an intelligent completion in
the high temperature Mumbai High South field. Flow Scanner
technology enabled the customer to assess production rates from a
new zone important to the field development plan.
In Australia, Wireline technologies were used for BHP Billiton
to assess reservoir quality and to determine the depositional
environment of the Mungaroo Formation in the North Carnarvon Basin.
In one 12 1/4-in wellbore, the NGI* nonconductive-mud geological
imager service acquired high-resolution borehole images in
oil-based drilling fluid along a 2,000-m interval to support
formation evaluation of the targeted reservoirs. In addition,
XL-Rock* large-volume rotary sidewall coring technology was used to
successfully retrieve 244 cores over five runs with recovery of
over 97%.
And in Kuwait, Schlumberger PetroTechnical Services carried out
a multiwell petrophysical evaluation study for the Kuwait Oil
Company in the Ahmadi formation in the Great Burgan field. SIS
Techlog wellbore software was used by petrophysical domain experts
to generate interpretation workflows based on field data acquired
from 290 wells. The results of this study enabled the customer to
reduce subsurface uncertainties, and develop a focused data
acquisition plan to solve reservoir challenges as new wells are
drilled in the field.
Drilling Group
Second-quarter revenue of $4.65 billion was up 7% sequentially
and grew 10% year-on-year. Pretax operating income of $981 million
was 11% higher sequentially, and increased 23% year-on-year.
Sequentially, revenue increased primarily on strong
international activity for M-I SWACO technologies, mainly in
Russia, Sub-Saharan Africa and Latin America. In addition, Drilling
& Measurements grew in North America and Russia while Drilling
Tools & Remedial services posted strong equipment sales. Rig
revenue from Saxon also contributed to sequential growth.
Sequentially, pretax operating margin grew 74 bps to 21.1% after
posting incremental operating margins of 31% from increased
higher-margin activities for Drilling & Measurements in North
America and in a number of international Areas.
During the second quarter, new Drilling Group technologies
boosted performance through improving drilling efficiency, assuring
wellbore integrity and optimizing well placement.
In China, Drilling & Measurements technologies were used for
PetroChina-Shell to improve horizontal well drilling efficiency in
a tight gas project in the Chang Bei field. The combination of
PowerDrive* rotary steerable, TeleScope* high-speed
telemetry-while-drilling, and geoVISION* imaging-while-drilling
technologies together with well placement services enabled each
well to be drilled more than 20 days ahead of the drilling plan.
Overall, seven wells were drilled approximately 150 days ahead of
plan, which enabled PetroChina-Shell to save approximately $12
million in well construction costs. In addition, four wells were
considered best-in-class and two wells achieved the top-quartile
based on service delivery and cost savings to the customer.
In Turkmenistan, Turkmengeology State Corporation awarded
Schlumberger an integrated services contract for drilling 10
development wells in the Galkynysh field, one of the largest gas
fields in the world. The contract covers the first phase of the
field development, and includes drilling motors, drill bits,
drilling fluids, and cementing services.
Offshore Brazil, Drilling & Measurements technologies were
deployed for Shell to increase reliability and drilling efficiency
in the deviated 17 1/2-in top-hole sections of deepwater wells in
the Campos basin. Customized PowerDrive Xceed* rotary steerable
technology was used to drill directional wells more reliably in
extremely challenging and riser-less environments. As a result, the
technology drilled an unprecedented four deviated wells in a row,
over a total distance of 2,600 m. This significant improvement in
reliability led to a zero operational failure rate. Customized
Xceed technology helped eliminate two planned drillstring trips
back to surface, enabling Shell to save two days of rig time or
approximately $3 million. In addition, Drilling & Measurements
delivered increased efficiency and enabled the customer to execute
the seven-well drilling campaign 18 days ahead of plan.
In Oman, Smith drillbit technology helped Petroleum Development
Oman (PDO) set new records in the 12 1/4-in sections of exploration
wells drilled in the Harmal fields. A Smith bit with ONYX* cutter
technology customized using the IDEAS* integrated drillbit design
platform achieved the best footage drilled in 24 hours. ONYX cutter
technology also enabled drilling from casing shoe to casing point
in a single run for the first time, with an outstanding average
rate of penetration of 20 m/hr.
Offshore Azerbaijan, M-I SWACO, working through AZERI M-I, a
joint venture between Schlumberger and SOCAR, used the ULTRADRIL*
high performance water-based fluid system to enhance shale
stability and improve rate of penetration while drilling a well in
the Gum Deniz field for BEOC. The combination of ULTRADRIL and
ULTRAHIB*, ULTRACAP* and ULTRAFREE* inhibitor systems resulted in a
high-performance fluid that enabled the well to be drilled with no
fluid losses. As a result of using M-I SWACO fluid systems, the
customer benefited from savings in rig time and chemical costs
totaling $1 million.
Production Group
Second-quarter revenue of $4.34 billion increased 6%
sequentially, and grew 11% year-on-year. Pretax operating income of
$725 million declined 2% sequentially but increased 16%
year-on-year. Despite the seasonal decline in Western Canada as a
result of the spring break-up, the Group posted overall sequential
growth due to improving industry utilization of pressure pumping
capacity in US land, strong international Well Services activity,
increasing Well Intervention coiled tubing activity worldwide, and
strong international sales of Completions products.
Pretax operating margin of 16.7% decreased 123 bps sequentially
but improved 75 bps year-on-year. Sequentially, margin declined
primarily due to the Canadian spring break-up and pressure pumping
commodity inflation.
New Production Group technologies helped meet a number of
customer challenges during the second quarter in driving
operational efficiency, accelerating production and maximizing
reservoir recovery.
In Mexico, Well Services combined the BroadBand Sequence*
fracturing technique with Mangrove* reservoir-centric stimulation
design and SIS Petrel* E&P software for Pemex to optimize
horizontal well completions and prove commercial reserves in the
Pimienta shale play. A three-well campaign led to stabilized
production which enabled qualification of proven reserves. In
addition, stimulation treatment time was reduced by 65% compared to
previously completed wells.
In Russia, PetroStim, a Schlumberger company, completed a
six-stage fracturing treatment in a horizontal well using Well
Services HiWAY* flow-channel technology for Gazpromneft-Khantos in
the South-Priobskoe oil field. HiWAY technology enabled a 45%
reduction in proppant consumption which contributed to increased
operational efficiency and a reduction in overall well completion
cost. Also, well productivity benefited from using HiWAY technology
with its increased fracture conductivity and enhanced cleanup. As a
result, the well’s production increased by over 15%.
New technologies were also introduced on SPM integrated
projects.
In Colombia for example, Well Intervention deployed LIVE digital
slickline technology for Alianza Casabe to better understand and
improve the performance of water injection wells in the Casabe
onshore field. LIVE technology was able to monitor the water
injection pressure, temperature and flow rate in real time while
operating the control valves, enabling intervention times to be
reduced by 90% and minimizing the associated deferred injection and
production volumes.
And in Ecuador, Schlumberger Production Group technologies
executed the first dual-selective multizone completion in a
Consorcio Shushufindi well, providing services to PetroAmazonas.
The well was completed with the IntelliZone Compact* modular
multizonal management system in conjunction with the AN-1200
electrical submersible pump, an industry first. This efficient
combination of Schlumberger technologies enabled production from
two different zones, improving the recovery factor while reducing
completion operational time by 40% compared to plan, and
potentially reducing operational cost by 55% on future well
interventions.
Financial Tables
Condensed Consolidated Statement of Income
(Stated in millions, except per share amounts)
Second Quarter Six Months Periods Ended June 30,
2014 2013
2014 2013
Revenue
$ 12,054 $ 11,182
$
23,294 $ 21,752 Interest and other income, net
64 30
141 63 Gain on formation of OneSubsea(1)
- 1,028
- 1,028 Expenses Cost of revenue
9,269 8,712
18,018 17,118 Research & engineering
309 293
593 585 General & administrative
123 100
228 196 Impairment & other(1)
- 364
- 456
Interest
90 98
193 197
Income before taxes
2,327 2,673
4,403 4,291 Taxes on
income(1)
506 449
974 855
Income from continuing operations
1,821 2,224
3,429
3,436 Loss from discontinued operations
(205 ) (124 )
(205
) (69 ) Net income
1,616 2,100
3,224 3,367 Net income attributable to noncontrolling
interests
21 5
37 13 Net
income attributable to Schlumberger
$
1,595 $ 2,095
$
3,187 $ 3,354 Schlumberger
amounts attributable to: Income from continuing operations(1)
$ 1,800 $ 2,219
$ 3,392 $ 3,423 Loss
from discontinued operations
(205
) (124 )
(205 )
(69 ) Net income
$ 1,595
$ 2,095
$ 3,187
$ 3,354 Diluted earnings per share of
Schlumberger Income from continuing operations(1)
$
1.37 $ 1.66
$ 2.58 $ 2.56 Loss from
discontinued operations
(0.16 )
(0.09 )
(0.16 )
(0.05 ) Net income
$ 1.21
$ 1.57
$ 2.42 $
2.51 Average shares outstanding
1,300 1,327
1,303 1,329 Average shares outstanding assuming dilution
1,315 1,336
1,316 1,339
Depreciation & amortization included in expenses(2)
$ 995 $ 960
$ 1,996 $ 1,903
(1) See page 11 for details of charges and credits.
(2) Includes depreciation of property, plant and equipment and
amortization of intangible assets, multiclient seismic data costs
and SPM investments.
Condensed Consolidated Balance
Sheet
(Stated in millions)
Jun. 30,
Dec. 31, Assets
2014 2013 Current
Assets Cash and short-term investments
$ 6,699 $
8,370 Receivables
12,251 11,497 Other current assets
6,464 6,358
25,414 26,225
Fixed income investments, held to maturity
480 363 Fixed
assets
15,743 15,096 Multiclient seismic data
727 667
Goodwill
15,220 14,706 Other intangible assets
4,738
4,709 Other assets
5,764
5,334
$ 68,086 $ 67,100
Liabilities and Equity
Current Liabilities Accounts payable and accrued liabilities
$ 8,692 $ 8,837 Estimated liability for taxes on
income
1,529 1,490 Short-term borrowings and current portion
of long-term debt
1,505 2,783 Dividend payable
525 415
12,251 13,525 Long-term
debt
11,740 10,393 Postretirement benefits
699 670
Deferred taxes
1,656 1,708 Other liabilities
1,038 1,169
27,384 27,465 Equity
40,702 39,635
$ 68,086 $ 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 follow:
(Stated in millions) Periods Ended June
30,
Six
Months
2014
SecondQuarter
2014
Six
Months
2013
Income from continuing operations before noncontrolling
interests $ 3,429 $ 1,821 $ 3,436 Gain on formation of OneSubsea -
- (1,028 ) Impairment of equity method investments and currency
devaluation loss in Venezuela - - 456 Depreciation and
amortization(1) 1,997 996 1,903 Pension and other postretirement
benefits expense 190 104 255 Stock-based compensation expense 162
85 168 Pension and other postretirement benefits funding (127 ) (55
) (231 ) Increase in working capital (1,090 ) (292 ) (1,213 ) Other
(342 ) (279 ) 49
Cash flow from
operations 4,219 2,380
3,795 Capital expenditures
(1,786 ) (922 ) (1,800 ) SPM investments (377 ) (175 ) (367 )
Multiclient seismic data capitalized (154 ) (72 )
(222 )
Free cash flow(2)
1,902
1,211 1,406 Stock
repurchase program (2,074 ) (1,175 ) (692 ) Dividends paid (932 )
(522 ) (781 ) Proceeds from employee stock plans 492
212 189
(612 )
(274 ) 122
Business acquisitions and investments, net of cash and debt
acquired (964 ) (725 ) (717 ) Other (47 ) (14 )
92 Increase in Net Debt (1,623 ) (1,013 ) (503 ) Net
Debt, Beginning of period (4,443 ) (5,053 )
(5,111 ) Net Debt, June 30th $ (6,066 ) $ (6,066 ) $ (5,614 )
Components of Net Debt
Jun. 30,2014
Mar. 31,2014
Dec. 31,2013
Jun. 30,2013
Cash and short-term investments $ 6,699 $ 7,078 $ 8,370 $ 5,925
Fixed income investments, held to maturity 480 358 363 417
Short-term borrowings and current portion of long-term debt (1,505
) (1,369 ) (2,783 ) (2,858 ) Long-term debt (11,740 )
(11,120 ) (10,393 ) (9,098 ) $ (6,066 ) $ (5,053 ) $
(4,443 ) $ (5,614 )
(1) Includes depreciation of property,
plant and equipment and amortization of intangible assets,
multiclient seismic data costs and SPM investments.
(2) "Free Cash Flow" represents cash flow
from operations less capital expenditures, SPM investments and
multiclient seismic data capitalized. Management believes that this
is an important measure because it represents funds available to
reduce debt and pursue opportunities that enhance shareholder value
such as making acquisitions, and returning cash to shareholders
through stock repurchases and dividends.
Charges & Credits
In addition to financial results
determined in accordance with US generally accepted accounting
principles (GAAP), this Second-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)
Second Quarter 2013 Pretax Tax
Noncont.Interest
Net
DilutedEPS
Income Statement Classification Schlumberger income from continuing
operations, as reported $ 2,673 $ 449 $ 5 $ 2,219 $ 1.66 Gain on
formation of OneSubsea joint venture (1,028 ) - - (1,028 ) (0.77 )
Gain on formation of OneSubsea Impairment of equity method
investments 364 19 - 345
0.26 Impairment & other Schlumberger income from
continuing operations, excluding charges & credits $ 2,009
$ 468 $ 5 $ 1,536 $ 1.15
First
Quarter 2013 Pretax Tax
Noncont.Interest
Net
DilutedEPS
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
Six Months 2013 Pretax Tax
Noncont.Interest
Net
DilutedEPS
Income Statement Classification Schlumberger income from continuing
operations, as reported $ 4,291 $ 855 $ 13 $ 3,423 $ 2.56 Currency
devaluation loss in Venezuela 92 - - 92 0.07 Impairment & other
Gain on formation of OneSubsea joint venture (1,028 ) - - (1,028 )
(0.77 ) Gain on formation of OneSubsea Impairment of equity method
investments 364 19 - 345
0.26 Impairment & other Schlumberger income from
continuing operations, excluding charges & credits $ 3,719
$ 874 $ 13 $ 2,832 $ 2.12
There were no charges or credits recorded
in continuing operations during the first six months of 2014.
Product Groups (Stated in millions)
Three Months Ended Jun. 30, 2014
Mar. 31, 2014 Jun. 30, 2013
Revenue
Income Before
Taxes
Revenue
IncomeBeforeTaxes
Revenue
IncomeBeforeTaxes
Reservoir Characterization
$ 3,095 $
918 $ 2,852 $ 779 $ 3,067 $ 912 Drilling
4,653
981 4,331 881 4,239 800 Production
4,344 725
4,116 737 3,926 625 Eliminations & other
(38 )
(3 ) (60 ) (29 ) (50 ) (59 )
Pretax operating income
2,621 2,368 2,278 Corporate &
other
- (216 ) - (201 ) - (181 ) Interest
income(1)
- 8 - 7 - 4 Interest expense(1)
-
(86 ) - (97 ) - (92 ) Charges & credits
- - - -
- 664
$ 12,054
$ 2,327 $ 11,239 $ 2,077
$ 11,182 $ 2,673
Geographic
Areas (Stated in millions)
Three Months Ended
Jun. 30, 2014 Mar. 31, 2014 Jun. 30, 2013
Revenue
Income Before
Taxes
Revenue
IncomeBeforeTaxes
Revenue
IncomeBeforeTaxes
North America
$ 3,888 $ 700 $ 3,684 $
683 $ 3,357 $ 662 Latin America
1,852 393 1,758 371
1,913 394 Europe/CIS/Africa
3,268 723 2,881 585 3,137
644 Middle East & Asia
2,966 826 2,845 749 2,655
654 Eliminations & other
80 (21 )
71 (20 ) 120 (76 ) Pretax operating income
2,621 2,368 2,278 Corporate & other
- (216
) - (201 ) - (181 ) Interest income(1)
- 8 - 7
- 4 Interest expense(1)
- (86 ) - (97 ) - (92
) Charges & credits
- -
- - - 664
$ 12,054 $ 2,327 $
11,239 $ 2,077 $ 11,182 $ 2,673
(1) Excludes interest included in the
Product Groups and Geographic Areas results.
Product
Groups (Stated in millions)
Six Months Ended
Jun. 30, 2014 Jun. 30, 2013
Revenue
Income Before
Taxes
Revenue
IncomeBeforeTaxes
Reservoir Characterization
$ 5,947 $
1,698 $ 5,868 $ 1,641 Drilling
8,984 1,861
8,301 1,525 Production
8,460 1,462 7,684 1,181
Eliminations & other
(97 ) (32
) (101 ) (104 ) Pretax operating income
4,989
4,243 Corporate & other
- (417 ) - (348 )
Interest income(1)
- 15 - 9 Interest expense(1)
- (183 ) - (185 ) Charges & credits
- - - 572
$ 23,294 $ 4,404
$ 21,752 $ 4,291
Geographic Areas (Stated in millions)
Six Months
Ended Jun. 30, 2014 Jun. 30, 2013
Revenue
Income Before
Taxes
Revenue
IncomeBeforeTaxes
North America
$ 7,572 $ 1,383 $ 6,647 $
1,289 Latin America
3,610 764 3,817 765
Europe/CIS/Africa
6,149 1,308 6,000 1,153 Middle East
& Asia
5,811 1,575 5,049 1,201 Eliminations &
other
152 (41 ) 239 (165 )
Pretax operating income
4,989 4,243 Corporate & other
- (417 ) - (348 ) Interest income(1)
-
15 - 9 Interest expense(1)
- (183 ) -
(185 ) Charges & credits
- -
- 572
$ 23,294
$ 4,404 $ 21,752 $ 4,291
(1) Excludes interest included in the
Product Groups and Geographic Areas results.
Supplemental Information
1)
What were the pretax operating income
margin and incremental operating margin for the first six months of
2014?
The pretax operating income margin was 21.4% and the incremental
operating margin was 48.4% during the first six months of 2014.
2)
What was the free cash flow as a
percentage of income from continuing operations before
noncontrolling interests during the first six months of
2014?
Free cash flow as a percentage of income from continuing operations
before noncontrolling interests was 55.5% in the first six months
of 2014.
3)
What is the capex guidance for the full
year 2014?
Schlumberger capex (excluding multiclient and SPM investments) is
expected to be $3.8 billion for 2014. Capex for the full year of
2013 was $3.9 billion.
4)
What was included in “Interest and
other income, net” for the second quarter of 2014?
“Interest and other income, net” of $64 million for the second
quarter of 2014 consisted of equity in net earnings of affiliated
companies of $51 million and interest income of $13 million.
5)
How did interest income and interest
expense change during the second quarter of 2014?
Interest income of $13 million increased
$1 million sequentially. Interest expense of $90 million decreased
$12 million sequentially.
6)
What is the difference between the
“Pretax operating income” and Schlumberger’s consolidated income
before taxes?
The difference consisted of such items as corporate expenses and
interest income and interest expense not allocated to the segments,
as well as interest on postretirement medical benefits, stock-based
compensation expense and the amortization expense associated with
certain intangible assets.
7)
What was the effective tax rate (ETR)
for the second quarter of 2014?
The ETR for the second quarter of 2014 was 21.7% and 22.6% in the
first quarter of 2014.
8)
What were multiclient sales in the
second quarter of 2014?
Multiclient sales, including transfer fees, were $133 million in
the second quarter of 2014.
9)
What was the WesternGeco backlog at the
end of the second quarter of 2014?
WesternGeco backlog, which is based on signed contracts with
customers, was $913 million at the end of the second quarter of
2014.
10)
What was the loss from discontinued
operations in the second quarter of 2014?
As previously disclosed, in 2009 United States officials began a
grand jury investigation and an associated regulatory inquiry, both
related to certain historical Schlumberger operations in specified
countries that are subject to United States trade and economic
sanctions. Schlumberger continues to cooperate and has been
discussing the resolution of this matter with the governmental
authorities. During the latter part of the second quarter of 2014
these discussions progressed to a point whereby Schlumberger
determined that it was appropriate to increase its liability for
this contingency. Accordingly, Schlumberger recorded a $205 million
charge during the second quarter of 2014 within Loss from
discontinued operations. However, no certainty exists that a
settlement will be reached or if so, the amount of any such
settlement. Therefore, the ultimate loss could be greater or less
than the amount accrued.
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
approximately 126,000 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,
London 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.
Notes
Schlumberger will hold a conference call to discuss the above
announcement and business outlook on Friday, July 18, 2014. The
call is scheduled to begin at 7:00 a.m. (US Central Time), 8:00
a.m. (Eastern Time), 2:00 p.m. (Paris Time). To access the call,
which is open to the public, please contact the conference call
operator at +1-800-230-1059 within North America, or
+1-612-234-9959 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 August 18, 2014 by dialing
+1-800-475-6701 within North America, or +1-320-365-3844 outside of
North America, and providing the access code 325481.
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.
This document, the second-quarter 2014 earnings release and
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; capital
expenditures by Schlumberger and the oil and gas industry; the
business strategies of Schlumberger’s customers; future global
economic conditions; and future results of operations. These
statements are subject to risks and uncertainties, including, but
not limited to, global economic conditions; changes in exploration
and production spending by Schlumberger’s customers and changes in
the level of oil and natural gas exploration and development;
general economic, political and business conditions in key regions
of the world, including in Russia and the Ukraine; pricing erosion;
weather and seasonal factors; operational delays; 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 our second-quarter 2014
earnings release, our most recent Form 10-K and other filings that
we make with the Securities and Exchange Commission. If one or more
of these or other risks or uncertainties materialize (or the
consequences of such a 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.
Schlumberger LimitedSimon Farrant – Schlumberger Limited, Vice
President of Investor RelationsJoy V. Domingo – Schlumberger
Limited, Manager of Investor RelationsOffice +1 (713)
375-3535investor-relations@slb.com
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