- Worldwide revenue of $7.5 billion decreased 9% sequentially and
5% year-on-year
- International revenue of $5.1 billion decreased 10%
sequentially, but increased 2% year-on-year
- North America revenue of $2.3 billion decreased 7% sequentially
and 17% year-on-year
- GAAP loss per share, including charges of $5.57 per share, was
$5.32
- EPS, excluding charges, was $0.25
- Cash flow from operations was $784 million and free cash flow
was $179 million
- Board approved quarterly cash dividend of $0.125 per share
Regulatory News:
Schlumberger Limited (NYSE: SLB) today reported results for the
first quarter of 2020.
First-Quarter Results (Stated in millions, except per share
amounts)
Three Months Ended Change Mar. 31,
2020 Dec. 31, 2019 Mar. 31, 2019
Sequential
Year-on-year Revenue
$7,455
$8,228
$7,879
-9%
-5%
Income (loss) before taxes - GAAP basis
$(8,089)
$452
$509
n/m
n/m
Pretax segment operating income*
$776
$1,006
$908
-23%
-15%
Pretax segment operating margin*
10.4%
12.2%
11.5%
-181 bps
-112 bps
Net income (loss) - GAAP basis
$(7,376)
$333
$421
n/m
n/m
Net income, excluding charges & credits*
$351
$545
$421
-36%
-17%
Diluted EPS (loss per share) - GAAP basis
$(5.32)
$0.24
$0.30
n/m
n/m
Diluted EPS, excluding charges & credits*
$0.25
$0.39
$0.30
-36%
-17%
North America revenue
$2,279
$2,454
$2,738
-7%
-17%
International revenue
$5,121
$5,721
$5,037
-10%
2%
North America revenue, excluding Cameron
$1,773
$1,907
$2,157
-7%
-18%
International revenue, excluding Cameron
$4,395
$4,892
$4,416
-10%
-
*These are non-GAAP financial measures.
See sections titled "Charges & Credits" and "Segments" for
details.
n/m = not meaningful
Schlumberger CEO Olivier Le Peuch commented, “First-quarter
revenue of $7.5 billion declined 9% sequentially and 5%
year-on-year as the unprecedented global health and economic crisis
sparked by the COVID-19 pandemic increasingly impacted industry
activity during the quarter. The effect of this was amplified late
in the quarter by a new battle for market share between the world’s
largest oil producers. This double black swan event created
simultaneous shocks in oil supply and demand resulting in the most
challenging environment for the industry in many decades.
“Customer spending and drilling activity in North America
declined as oil prices slipped early in the quarter before falling
abruptly in March. This resulted in a 7% sequential decrease in
North America revenue to $2.3 billion as we accelerated our land
strategy to high-grade our portfolio and resized our operational
footprint. International activity, expected to be seasonally lower
sequentially, suffered from COVID-19-related activity disruptions
and initial customer spending cuts in response to falling oil
prices. International revenue of $5.1 billion declined 10%
sequentially.
“The sequential international revenue decline was led by lower
winter activity in the Europe/CIS/Africa area, particularly in the
Russia & Central Asia and the United Kingdom & Continental
Europe GeoMarkets. Latin America area revenue also decreased,
mainly due to reduced WesternGeco® multiclient seismic license
sales. Middle East & Asia area revenue declined on lower
product sales following strong year-end sales and a seasonal
decline in activity. COVID-19-related activity disruptions during
the quarter impacted our operations, particularly in China,
Malaysia, Iraq, Italy, Romania, the United Kingdom, Gabon,
Mozambique, Congo, Nigeria, Angola, and offshore North America.
“Looking beyond the sequential results for the quarter, our
international business showed some resilience with year-on-year
growth of 2% against the backdrop of an increasingly difficult
operating environment. Growth was driven by six GeoMarkets—Russia
& Central Asia, Saudi Arabia & Bahrain, Far East Asia &
Australia, Northern Middle East, Latin America North, and Norway
& Denmark. Despite the challenging environment, cash flow
performance during the quarter was strong as we generated $784
million of cash flow from operations. This was more than double
what we generated in the same quarter last year.
First-Quarter Revenue by Segment (Stated in millions)
Three Months Ended Change Mar. 31, 2020 Dec.
31, 2019 Mar. 31, 2019
Sequential Year-on-year
Reservoir Characterization
$1,311
$1,643
$1,459
-20%
-10%
Drilling
2,291
2,442
2,387
-6%
-4%
Production
2,703
2,867
2,890
-6%
-6%
Cameron
1,254
1,387
1,259
-10%
0%
Other
(104)
($111)
(116)
n/m
n/m
$7,455
$8,228
$7,879
-9%
-5%
n/m = not meaningful
Certain prior period amounts have been
reclassified to conform to the current period presentation.
“By business segment, first-quarter revenue for Reservoir
Characterization fell 20% sequentially, due to seasonally lower
sales of software and multiclient seismic licenses and reduced
winter activity in the Northern Hemisphere. Customers began to cut
both discretionary spending and activity toward the end of the
quarter, significantly reducing exploration activity in several
GeoMarkets. Drilling revenue declined 6% sequentially, mostly due
to seasonal effects in the Northern Hemisphere. Production revenue
also declined 6% sequentially, driven by lower Well Services
activity and weaker Artificial Lift Solutions sales in the
international markets, while OneStim® revenue grew 2% sequentially.
Cameron revenue declined 10% sequentially, mostly due to lower
revenue in Surface Systems and Valves & Process Systems from
reduced North America land activity, while OneSubsea® revenue
decreased due to lower project deliveries following the strong
year-end sales of the previous quarter.
“The first quarter results include an $8.5 billion pretax charge
primarily relating to the impairment of goodwill, intangible
assets, and other long-lived assets. This charge, which is almost
entirely non-cash, was driven by the significant decline in market
valuations during March 2020.
“The operating environment that has now emerged is characterized
by simultaneous shocks to both supply and demand. The spread of
COVID-19 has caused more than 50 countries to implement lockdown
measures affecting three billion people. Worldwide economic
activity is falling sharply, and oil demand destruction is leading
to an unprecedented supply-demand imbalance in the range of 20–30
million bbl/d. This is translating to near term uncertainties in
activity and budget projections.
“At this time, customer feedback and our analysis indicate
global capex spend is expected to decline by about 20% in 2020,
with the largest share of the reduction affecting North America,
which is estimated to drop by about 40%. In contrast, international
E&P capex is expected to decline by about 15%. As it relates to
customers, Independents are expected to decrease their spending
faster than IOCs, while NOCs have reduced the least to this point
but might adjust following the recent OPEC+ agreement. FID
sanctions are expected to fall back to trough levels of 2015, which
would indicate project delays to 2021 and beyond.
“In this environment—the duration of which remains uncertain—we
have planned for a range of scenarios and have taken a number of
actions. To protect our workforce in the wake of COVID-19, we have
taken the steps necessary to keep our people safe by supporting
those affected, mandating that as many employees and contractors as
possible work from home, and monitoring those who cannot do so and
are required to be present at work. To reinforce our cost control
and cash discipline, we are reducing our structural and variable
costs, and restructuring our organization to match activity where
necessary, including furloughing personnel, cutting salaries,
lowering headcount, and closing facilities. In addition, our Board
of Directors and executive officers have voluntarily agreed to
reductions in their cash compensation. We have reduced our capital
investment program by more than 30% and will allocate resources to
the more resilient markets while remaining focused on capital
stewardship and maintaining our commitment to a strong balance
sheet.
“We are also leveraging three factors of our market
differentiation. In North America, we have accelerated our land
strategy to high-grade our portfolio and resize our operational
footprint. Globally, we have emphasized our executional capability,
operational resilience, and organizational agility. In new
technology, we are using to the greatest extent the capabilities we
have developed to support remote operations and are focusing on our
digital strategy.
“In view of the uncertainty of the depth and extent of the
contraction in oil demand due to the COVID-19 pandemic combined
with the weaker commodity price environment, we have turned our
strategic focus to cash conservation and protecting our balance
sheet. We have therefore taken the prudent decision to reduce our
dividend by 75%. The revised dividend supports Schlumberger’s value
proposition through a balanced approach of shareholder
distributions and organic investment, while providing the
flexibility to weather the uncertain environment. This decision
reflects our focus on our capital stewardship program as well as
our commitment to maintain both a strong liquidity position and a
strong investment grade credit rating that provides privileged
access to the financial markets.
“The enormity of the task ahead will require levels of response
and depths of resilience that have yet to be fully realized. Our
immediate actions have been focused on those things we can control
in protecting our business in an uncertain industry and global
environment. We will continue to take the steps necessary to
protect the safety and health of our people and pursue our desire
to be the performance partner of choice for our customers. The
future of our industry poses difficult challenges—for people and
for the environment—but in challenge lies opportunity. Backed by
the resilience and performance of our people, technology
leadership, and financial strength, we believe we are well-placed
to succeed as the industry recovers from this unprecedented
downturn.”
Other Events
In January, Schlumberger completed the sale of its 49% interest
in the Bandurria Sur Block in Argentina to Shell Argentina S.A. and
Equinor. The net cash proceeds from this transaction, combined with
the proceeds received from the divestiture of a smaller APS
project, amounted to $298 million.
In February, Schlumberger issued EUR 400 million of 0.25% Notes
due 2027 and EUR 400 million of 0.50% Notes due 2031. The notes
were subsequently swapped into US dollars, with a weighted-average
interest rate of 2.04%.
In April, Schlumberger’s Board of Directors determined that Mark
G. Papa, its Chairman of the Board, is “independent” under the
listing standards of the New York Stock Exchange and Schlumberger’s
own director independence standards. The Board’s determination is
effective as of April 1, following Mr. Papa’s retirement as
chairman and chief executive officer of Centennial Resource
Development, Inc.
In April, Schlumberger entered into a EUR 1.2 billion committed
revolving credit facility. This one-year facility can be extended
at Schlumberger’s option for up to an additional year. Schlumberger
can potentially upsize this facility through syndication. No
amounts have been drawn under this facility.
On April 16, 2020, Schlumberger’s Board of Directors approved a
quarterly cash dividend of $0.125 per share of outstanding common
stock, payable on July 9, 2020 to stockholders of record on June 3,
2020.
Consolidated Revenue by Area
(Stated in millions)
Three Months Ended Change
Mar. 31, 2020 Dec. 31, 2019 Mar. 31, 2019
Sequential
Year-on-year North America
$2,279
$2,454
$2,738
-7%
-17%
Latin America
945
$1,028
992
-8%
-5%
Europe/CIS/Africa
1,751
$2,018
1,707
-13%
3%
Middle East & Asia
2,426
$2,674
2,338
-9%
4%
Other
54
$54
104
n/m
n/m
$7,455
$8,228
$7,879
-9%
-5%
North America revenue
$2,279
$2,454
$2,738
-7%
-17%
International revenue
$5,121
$5,720
$5,037
-10%
2%
North America revenue, excluding Cameron
$1,773
$1,907
$2,157
-7%
-18%
International revenue, excluding Cameron
$4,395
$4,892
$4,416
-10%
-
n/m = not meaningful
Certain prior period amounts have been
reclassified to conform to the current period presentation.
First-quarter revenue of $7.5 billion decreased 9% sequentially.
North America revenue of $2.3 billion decreased 7% while
international revenue of $5.1 billion decreased 10%.
North America
North America area consolidated revenue of $2.3 billion
was 7% lower sequentially. Customer spending and drilling activity
were lower as oil prices slipped early in the quarter before
falling abruptly in March. US land rig count was 6% lower
sequentially including a 15% drop in the last two weeks of March.
North America land revenue declined 4% sequentially as we
accelerated our land strategy to high-grade our portfolio and
resized our operational footprint. In addition, Artificial Lift
Solutions sales were lower and APS revenue decreased. OneStim
revenue grew 2% as its scale-to-fit strategy successfully generated
higher fleet utilization, however activity fell sharply in
mid-March as customers cut their spending. We began to stack more
frac fleets in response and reduced our active fleets by 27% during
March.
North America offshore revenue decreased by 14% due to reduced
multiclient seismic license sales. Cameron revenue was lower due to
lower Surface Systems and Valves & Process Systems sales.
International
Consolidated revenue in the Latin America area of $945
million decreased 8% sequentially. This was primarily due to lower
WesternGeco multiclient seismic license sales in Mexico, partially
offset by strong exploration offshore activity in the Mexico Bay of
Campeche. Integrated project activity on Mexico land was flat with
the previous quarter. Revenue in the Latin America South GeoMarket
was flat as Brazil revenue was higher due to additional deepwater
rigs and increased frac activity in Argentina offset by lower
Cameron revenue from reduced Surface Systems sales in Argentina.
Revenue in the Latin America North GeoMarket was flat sequentially
as the revenue increase from higher production in APS projects in
Ecuador was partially offset by lower Colombia revenue due to
COVID-19-related lockdowns.
Europe/CIS/Africa area consolidated revenue of $1.7
billion decreased 13% sequentially, mainly due to the onset of
winter in the Russia & Central Asia GeoMarket that impacted all
Technologies. Revenue in the UK & Continental Europe and the
Norway & Denmark GeoMarkets was seasonally lower due to reduced
software and product sales, decreased drilling activity, extreme
winter weather, and COVID-19-related disruptions particularly on
offshore projects. Revenue in the Sub-Sahara Africa GeoMarket fell
sequentially due to decreased product sales and lower exploration
activity in Gabon, Angola, and West Africa from reduced IOC
spending, exacerbated by COVID-19-related disruptions. Cameron
revenue also declined due to the temporary closure of manufacturing
facilities in Italy caused by COVID-19-related disruption that
impacted Valves & Process Systems.
Consolidated revenue in the Middle East & Asia area
of $2.4 billion decreased 9% sequentially, primarily from lower
revenue in the Far East Asia & Australia GeoMarket due to
winter weather in China. This was exacerbated by COVID-19-related
disruptions that impacted land activity, while offshore operations
were relatively unaffected. Revenue in Australia was higher from
strong offshore activity, partially offset by reduced activity due
to offshore cyclones and onshore bushfires. Eastern Middle East
GeoMarket revenue was lower due to reduced software and product
sales and decreased Well Construction Services (WCS) project
activity in Iraq that was also impacted by COVID-19-related
disruptions. WCS revenue from lump-sum turnkey (LSTK) projects in
Saudi Arabia was lower following the strong activity and the
delivery of additional wells in the fourth quarter. WCS revenue in
India was also lower due to reduced drilling activity. Cameron
revenue declined mostly in the North Middle East and South East
Asia GeoMarkets. This was due to lower OneSubsea and Drilling
Systems revenue, exacerbated by the temporary closure of
manufacturing facilities in Malaysia caused by COVID-19-related
disruption.
Reservoir Characterization
(Stated in millions)
Three Months Ended Change
Mar. 31, 2020 Dec. 31, 2019 Mar. 31, 2019
Sequential
Year-on-year Revenue
$1,311
$1,643
$1,459
-20%
-10%
Pretax operating income
$184
$368
$281
-50%
-35%
Pretax operating margin
14.0%
22.4%
19.3%
-839 bps
-525 bps
Certain prior period amounts have been
reclassified to conform to the current period presentation.
Reservoir Characterization revenue of $1.3 billion, 84% of which
came from the international markets, decreased 20% sequentially.
This was due mainly to seasonally lower sales of software and
multiclient seismic licenses and reduced winter activity in the
Northern Hemisphere, although customers began to cut both
discretionary spend and activity toward the end of the quarter.
This affected exploration activity in several GeoMarkets. Wireline
revenue was lower due to the effects of the seasonal winter decline
in the Russia & Central Asia GeoMarket and the North Sea.
Offshore exploration was reduced in China, Mozambique, Gabon,
Angola, and the US Gulf of Mexico with activity also affected by
COVID-19-related disruptions. Multiclient seismic license sales in
both the Mexico Bay of Campeche and the US Gulf of Mexico were also
lower. Seasonally lower Software Integrated Solutions (SIS)
software sales, mainly in the Europe/CIS/Africa and the Middle East
& Asia areas, also contributed to the decline in revenue.
Reservoir Characterization pretax operating margin of 14% fell
839 bps sequentially due to seasonally lower revenue from Wireline
in the Russia & Central Asia GeoMarket and the North Sea, and
from decreased exploration activity in several GeoMarkets. Lower
sales of SIS software and WesternGeco multiclient seismic licenses
also contributed to the sequential margin contraction.
Drilling
(Stated in millions)
Three Months Ended Change
Mar. 31, 2020 Dec. 31, 2019 Mar. 31, 2019
Sequential
Year-on-year Revenue
$2,291
$2,442
$2,387
-6%
-4%
Pretax operating income
$285
$303
$307
-6%
-7%
Pretax operating margin
12.4%
12.4%
12.9%
2 bps
-42 bps
Drilling revenue of $2.3 billion, 75% of which came from the
international markets, decreased 6% sequentially due to seasonality
effects in the Northern Hemisphere. US land rig count was 6% lower
sequentially including a 15% drop in the last two weeks of March.
Revenue was also lower, particularly in Bits & Drilling Tools,
due to the divestiture of the businesses and associated assets of
DRILCO, Thomas Tools, and Fishing & Remedial Services (Drilling
Tools businesses) consistent with our capital stewardship strategy
of high-grading the business portfolio. WCS revenue from LSTK
projects in Saudi Arabia was lower following the strong activity
and the delivery of additional wells in the fourth quarter. WCS
revenue in India was also lower due to reduced drilling
activity.
Drilling pretax operating margin of 12% was resilient, as it
remained flat with the previous quarter despite the sequential
revenue decline. Although margins were seasonally lower in Russia
and the North Sea, they were offset by improved margins in the
Americas. Improved profitability in Latin America and in North
America land was boosted by the divestiture of the Drilling Tools
businesses, which were previously dilutive to margins, while
margins on WCS contracts in the Middle East and India combined,
proved resilient.
Production
(Stated in millions)
Three Months Ended Change
Mar. 31, 2020 Dec. 31, 2019 Mar. 31, 2019
Sequential
Year-on-year Revenue
$2,703
$2,867
$2,890
-6%
-6%
Pretax operating income
$212
$253
$217
-16%
-2%
Pretax operating margin
7.8%
8.8%
7.5%
-98 bps
32 bps
Production revenue of $2.7 billion, 61% of which came from the
international markets, declined 6% sequentially. This was driven by
lower Well Services activity and weaker Artificial Lift Solutions
sales in the international markets. Revenue also declined as we
accelerated our land strategy to high-grade our business portfolio
in North America land, such as by exiting from the coiled tubing
services business. OneStim revenue grew 2% as its scale-to-fit
strategy successfully generated higher fleet utilization, however
activity fell sharply in mid-March as customers cut their spending.
We began to stack more frac fleets in response and have reduced our
active fleets by 27% during March.
Production pretax operating margin of 8% contracted by 98 bps
sequentially due to reduced profitability in North America while
international margins were flat despite lower revenue. Although
margins were seasonally lower in Russia and the North Sea, these
were fully offset by improved margins in Latin America. In North
America, APS margin contracted due to lower oil prices, but this
was partially mitigated by our exit from the dilutive coiled tubing
services business. OneStim margin was flat sequentially.
Cameron
(Stated in millions)
Three Months Ended Change
Mar. 31, 2020 Dec. 31, 2019 Mar. 31, 2019
Sequential
Year-on-year Revenue
$1,254
$1,387
$1,259
-10%
0%
Pretax operating income
$121
$126
$148
-4%
-18%
Pretax operating margin
9.7%
9.1%
11.8%
57 bps
-209 bps
Certain prior period amounts have been
reclassified to conform to the current period presentation.
Cameron revenue of $1.3 billion, 58% of which came from
international markets, decreased 10% sequentially mostly due to
lower revenue in North America from the short-cycle businesses of
Surface Systems and Valves & Process Systems. OneSubsea revenue
decreased due to lower project deliveries following the strong
year-end sales of the previous quarter. International revenue
declined 12% sequentially while North America revenue declined by
7% on weaker land activity. International revenue was lower due to
the temporary closure of manufacturing facilities in Italy and
Malaysia caused by COVID-19-related disruptions. These closures
impacted OneSubsea, Surface Systems, and Valves & Process
Systems activity.
Cameron pretax operating margin of 10% improved by 57 bps
sequentially, despite the 10% drop in revenue. This was driven by
this quarter’s favorable mix in the OneSubsea portfolio, which was
partially offset by reduced profitability in Drilling Systems and
Surface Systems.
Quarterly Highlights
Schlumberger is leading the development of Digital solutions to
increase performance across the E&P value chain. Deploying
these solutions in the current challenging industry environment can
help customers maintain business continuity for their teams
worldwide. Examples of this during the quarter included:
- The enterprise-wide deployment of the DELFI* cognitive E&P
environment through a seven-year technology collaboration with
Woodside Energy, announced in August 2019, has been accelerated to
enable remote working during the COVID-19 pandemic. Deployment for
a Woodside international asset team based in the UK that was
scheduled for the end of 2020 was completed March 20th, taking less
than a week to finalize via close collaboration between Woodside
and Schlumberger teams.
- Schlumberger and the Egyptian Ministry of Petroleum together
introduced the Egypt Upstream Gateway, a unique and innovative
national project for digitizing subsurface information and
delivering a Digital platform to keep Egypt's subsurface data
evergreen. The Egypt Upstream Gateway will leverage the GAIA*
digital subsurface platform and provide additional value-added
solutions—enabled by Digital technology and domain expertise—using
the DELFI E&P cognitive environment capabilities and
technologies.
Our commitment to environmental, social, and governance (ESG)
considerations and the responsible management of resources—natural,
human, and economic—is defined by the Schlumberger Global
Stewardship program. This is supported by fit-for-basin
technologies that can help customers achieve their own ESG goals,
lowering their carbon footprint by reducing CO2 emissions. During
the quarter, examples included:
- In North America land, OneStim deployed StimCommander Pumps*
automated and intelligent rate and pressure control in all major
shale plays, totaling more than 69,000 stages and exceeding 140,000
pumping hours. Many customers have reduced pumping times due to
more efficient operations, resulting in lower fuel consumption and
a reduced carbon footprint. In 2019, the use of StimCommander Pumps
control in all North American OneStim operations reduced diesel
fuel consumption by more than 500,000 galUS, representing a CO2
reduction of at least 5,000 t.
- Schlumberger developed a fit-for-basin solution for BP Oman to
achieve a significant reduction in CO2 emissions to clean up and
produce gas from the Khazzan Field after fracturing. Modifications
and design were performed through the Schlumberger RapidResponse*
customer-driven product development process. In 2019, the solution
was applied to 10 wells for flowback to clean up for production and
reservoir testing. The result is a reduction in CO2 emissions of
more than 80,000 t, equivalent to removing 18,000 cars from the
road for one year.
The deployment of performance-based business models and
fit-for-basin technologies further differentiate Schlumberger
within the industry. A few examples of this included:
- In the US Gulf of Mexico, WCS drilled and completed eight wells
for Shell on the Vito project and reduced the average AFE by 15%.
Key technologies deployed for this deepwater project included the
PowerDrive Orbit* rotary steerable system, AxeBlade* ridged diamond
element bit, and RheGuard* flat rheology drilling fluid system.
These results are from an integrated performance-based contract
that delivered the project ahead of schedule.
- In the Cygnus Field offshore UK, Drilling & Measurements
deployed the GeoSphere HD* high-definition reservoir
mapping-while-drilling service and the PeriScope HD* multilayer bed
boundary detection service for Neptune in a very low resistivity
and thinly bedded environment that exhibited very little variation
in resistivity. These fit-for-basin technologies helped Neptune
understand the complexities of the reservoir in real time and place
the horizontal well in the most productive intervals to maximize
reservoir contact and recovery.
- In the Williston Basin, OneStim deployed fit-for-basin
technologies during a multiwell campaign for Lime Rock Resources to
mitigate negative well interference, which increased incremental
oil production by 41% in the first five months compared with nearby
existing parent wells. Optimizing the BroadBand Shield* fracture
geometry control service and WellWatcher Stim* stimulation
monitoring service confirmed the elimination of negative well
interference, resulting in savings of more than $2.1 million in
well cleanup costs.
This quarter’s contract awards reflect the diversity of our
business models in different basins around the globe, including
offshore subsea integration, multiclient seismic, digital
enablement, and alignment with in-country value.
- Equinor awarded Subsea Integration Alliance an exclusive
contract for the front-end engineering design (FEED) on its
Bacalhau (formerly Carcará) project offshore Brazil. The contract
is based on a two-step award. The FEED and preinvestment are
starting now, with an option for the execution phase under a
lump-sum turnkey setup that includes engineering, procurement,
construction, and installation for the entire subsea umbilicals,
risers, and flowlines and subsea production systems scope. Option
for the contract is subject to Equinor’s planned investment
decision for the Bacalhau project in late 2020. The field
development will include 19 wells.
- Following the successful Amendment Phase 1 project acquired in
Mississippi Canyon in 2019, TGS and Schlumberger announced the
second phase of their ultralong-offset node project in the US Gulf
of Mexico. The next phase will extend the footprint of
ultralong-offset data to the Northern Green Canyon protraction area
and will be called Engagement. Acquisition of the project, which is
supported by industry prefunding, is expected to commence in the
second quarter of 2020 with final data available in 2021.
- OMV Upstream and Schlumberger signed a memorandum of
understanding (MOU) via video conference for a strategic
partnership to further support OMV’s digital program called
DigitUP, by using the DELFI cognitive E&P environment. OMV
seeks to reduce the planning time for production wells by 90% by
the end of 2022 and reduce the development phase of projects to 25%
of current practice by 2025. The MOU details the technical scope
and timelines of 12 pilots to be executed during a due diligence
phase from April to November 2020.
- Schlumberger opened a world-class manufacturing center in King
Salman Energy Park that supports Saudi Aramco’s In-Kingdom Total
Value Add (IKTVA) program to promote economic growth. The center
will manufacture various technologies including liner hangers and
packers, in addition to isolation valve technologies such as GROVE*
valves and ORBIT* rising stem ball valves, to help improve the
efficiency of oil and gas operations in Saudi Arabia and
neighboring countries.
International Maritime Industries—a joint venture between Saudi
Aramco, Lamprell Energy Limited (LEL), Bahri, and Hyundai Heavy
Industries—through its stakeholder LEL awarded Schlumberger a
contract for two complete jack-up rig drilling packages to drill
wells offshore Saudi Arabia. The rigs will be owned and operated by
ARO Drilling, a joint venture between Valaris and Saudi Aramco.
These are the first jack-ups to be ordered worldwide in the last
five years. Delivery is expected in Q2 2021. The award supports
Saudi Aramco’s IKTVA program to promote economic growth.
Financial Tables
Condensed Consolidated Statement of Income (Loss)
(Stated in millions, except per
share amounts)
Three Months
Periods Ended March 31,
2020
2019
Revenue
$7,455
$7,879
Interest and other income
39
14
Expenses Cost of revenue
6,624
6,952
Research & engineering
173
173
General & administrative
127
112
Impairments & other (1)
8,523
-
Interest
136
147
Income (loss) before taxes
$(8,089)
$509
Tax (benefit) expense (1)
(721)
79
Net income (loss) (1)
$(7,368)
$430
Net income attributable to noncontrolling interests
8
9
Net income (loss) attributable to Schlumberger (1)
$(7,376)
$421
Diluted earnings (loss) per share of Schlumberger (1)
$(5.32)
$0.30
Average shares outstanding
1,387
1,385
Average shares outstanding assuming dilution
1,387
1,397
Depreciation & amortization included in expenses (2)
$792
$903
(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)
Mar. 31,
Dec. 31,
Assets
2020
2019
Current Assets Cash and short-term investments
$3,344
$2,167
Receivables
7,486
7,747
Other current assets
5,436
5,616
16,266
15,530
Fixed assets
8,550
9,270
Multiclient seismic data
556
568
Goodwill
12,924
16,042
Intangible assets
3,673
7,089
Deferred taxes
155
-
Other assets
6,470
7,813
$48,594
$56,312
Liabilities and Equity Current Liabilities Accounts payable
and accrued liabilities
$10,168
$10,663
Estimated liability for taxes on income
1,157
1,209
Short-term borrowings and current portion of long-term debt
1,233
524
Dividends payable
704
702
13,262
13,098
Long-term debt
15,409
14,770
Deferred taxes
-
491
Postretirement benefits
936
967
Other liabilities
3,004
2,810
32,611
32,136
Equity
15,983
24,176
$48,594
$56,312
Liquidity
(Stated in millions)
Components of Liquidity
Mar. 31, 2020
Dec. 31, 2019
Mar. 31, 2019
Cash and short-term investments
$3,344
$2,167
$2,155
Short-term borrowings and current portion of long-term debt
(1,233)
(524)
(99)
Long-term debt
(15,409)
(14,770)
(16,449)
Net Debt (1)
$(13,298)
$(13,127)
$(14,393)
Details of changes in liquidity follow:
Three
Three
Months
Months
Periods Ended March 31,
2020
2019
Net income (loss) before noncontrolling interests
$(7,368)
$430
Impairment and other charges, net of tax
7,727
-
$359
$430
Depreciation and amortization (2)
792
903
Stock-based compensation expense
108
108
Change in working capital
(482)
(1,048)
Other
7
(67)
Cash flow from operations (3)
$784
$326
Capital expenditures
(407)
(413)
APS investments
(163)
(151)
Multiclient seismic data capitalized
(35)
(45)
Free cash flow (4)
179
(283)
Dividends paid
(692)
(692)
Stock repurchase program
(26)
(98)
Proceeds from employee stock plans
74
106
Net proceeds from asset divestitures
298
-
Other
(4)
(152)
Increase in Net Debt
(171)
(1,119)
Net Debt, beginning of period
(13,127)
(13,274)
Net Debt, end of period
$(13,298)
$(14,393)
(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, amortization of intangible assets, multiclient
seismic data costs, and APS investments.
(3)
Includes severance payments of $56 million
and $48 million during the three months ended March 31, 2020 and
2019, respectively.
(4)
“Free cash flow” represents cash flow from
operations less capital expenditures, APS investments, and
multiclient seismic data costs capitalized. Management believes
that free cash flow is an important liquidity measure for the
company and that it is useful to investors and management as a
measure of Schlumberger’s ability to generate cash. Once business
needs and obligations are met, this cash can be used to reinvest in
the company for future growth or to return to shareholders through
dividend payments or share repurchases. Free cash flow does not
represent the residual cash flow available for discretionary
expenditures. Free cash flow is a non-GAAP financial measure that
should be considered in addition to, not as substitute for or
superior to, cash flow from operations.
Charges & Credits
In addition to financial results determined in accordance with
US generally accepted accounting principles (GAAP), this
first-quarter 2020 earnings release also includes non-GAAP
financial measures (as defined under the SEC’s Regulation G). In
addition to the non-GAAP financial measures discussed under
“Liquidity”, net income (loss), excluding charges & credits, as
well as measures derived from it (including diluted EPS, excluding
charges & credits; Schlumberger net income (loss), excluding
charges & credits; 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)
First
Quarter 2020 Pretax Tax Noncont. Interests Net DilutedEPS
Schlumberger net loss (GAAP basis)
$(8,089)
$(721)
$8
$(7,376)
$(5.32)
Goodwill
3,070
-
-
3,070
2.21
Intangible assets
3,321
815
-
2,506
1.81
APS investments
1,264
(4)
-
1,268
0.91
North America pressure pumping
587
133
-
454
0.33
Severance
202
7
-
195
0.14
Other
79
9
-
70
0.05
Valuation allowance
-
(164)
-
164
0.12
Schlumberger net income, excluding charges & credits
$434
$75
$8
$351
$0.25
Fourth Quarter 2019 Pretax Tax Noncont. Interests Net
DilutedEPS* Schlumberger net income (GAAP basis)
$452
$109
$10
$333
$0.24
North America restructuring
225
51
-
174
0.12
Other restructuring
104
(33)
-
137
0.10
Workforce reductions
68
8
-
60
0.04
Pension settlement
37
8
-
29
0.02
Repurchase of Notes
22
5
-
17
0.01
Gain on formation of Sensia
(247)
(42)
-
(205)
(0.15)
Schlumberger net income, excluding charges & credits
$661
$106
$10
$545
$0.39
There were no charges or credits during
the first quarter of 2019.
* Does not add due to rounding.
Segments
(Stated in millions)
Three Months Ended Mar. 31,
2020 Dec. 31, 2019 Mar. 31, 2019
Revenue
Income(Loss)BeforeTaxes Revenue IncomeBeforeTaxes Revenue
IncomeBeforeTaxes Reservoir Characterization
$1,311
$184
$1,643
$368
$1,459
$281
Drilling
2,291
285
2,442
303
2,387
307
Production
2,703
212
2,867
253
2,890
217
Cameron
1,254
121
1,387
126
1,259
148
Eliminations & other
(104)
(26)
(111)
(44)
(116)
(45)
Pretax segment operating income
776
1,006
908
Corporate & other
(228)
(215)
(273)
Interest income(1)
15
8
10
Interest expense(1)
(129)
(138)
(136)
Charges & credits(2)
(8,523)
(209)
-
$7,455
$(8,089)
$8,228
$452
$7,879
$509
(1)
Excludes interest included in the segment
results.
(2)
See section entitled “Charges &
Credits” for details.
Prior period amounts have been reclassified to the current
period presentation.
Supplemental Information
1)
What is the capital investment guidance
for the full year 2020?
Capital investment (comprised of capex,
multiclient, and APS investments) for the full year 2020 is
expected to be approximately $1.8 billion, which is more than 30%
lower than 2019. Capex is expected to reduce to approximately $1.2
billion in 2020 as compared to $1.7 billion in 2019. APS
investments will not exceed $500 million in 2020 as compared to
$781 million in 2019.
2)
What were the cash flow from operations
and free cash flow for the first quarter of 2020?
Cash flow from operations for the first
quarter of 2020 was $784 million. Free cash flow for the first
quarter of 2020 was $179 million, including $56 million of
severance payments.
3)
What was included in “Interest and
other income” for the first quarter of 2020?
“Interest and other income” for the first
quarter of 2020 was $39 million. This amount consisted of earnings
of equity method investments of $24 million and interest income of
$15 million.
4)
How did interest income and interest
expense change during the first quarter of 2020?
Interest income of $15 million for the
first quarter of 2020 increased $4 million sequentially. Interest
expense of $136 million decreased $10 million sequentially.
5)
What is the difference between
Schlumberger’s consolidated income (loss) before taxes and pretax
segment operating income?
The difference principally consists of
corporate items, charges and credits, and interest income and
interest expense not allocated to the segments as well as
stock-based compensation expense, amortization expense associated
with certain intangible assets, certain centrally managed
initiatives, and other nonoperating items.
6)
What was the effective tax rate (ETR)
for the first quarter of 2020 and what is the guidance on the ETR
going forward?
The ETR for the first quarter of 2020,
calculated in accordance with GAAP, was 8.9% as compared to
24.0%
for the fourth quarter of 2019. Excluding
charges and credits, the ETR for the first quarter of 2020 was
17.2% as compared to 16.0% for the fourth quarter of 2019.
Going forward, it is very challenging to
provide guidance regarding our effective tax rate. This is because
relatively small changes in our geographic mix of earnings will
have a disproportionate impact on the effective tax rate as our
pretax income decreases. As a result, our second quarter 2020
effective tax rate will likely increase around 5 to 10 percentage
points as compared to the first quarter. However, each percentage
point change will have a significantly smaller impact on our tax
expense line and, consequently net income, as compared to our
recent past.
7)
How many shares of common stock were
outstanding as of March 31, 2020 and how did this change from the
end of the previous quarter?
There were 1.388 billion shares of common
stock outstanding as of March 31, 2020. The following table shows
the change in the number of shares outstanding from December 31,
2019 to March 31, 2020.
(Stated in millions) Shares outstanding at December 31, 2019
1,385
Shares issued under employee stock purchase plan
2
Vesting of restricted stock
2
Stock repurchase program
(1)
Shares outstanding at March 31, 2020
1,388
8)
What was the weighted average number of
shares outstanding during the first quarter of 2020 and fourth
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 1.387 billion during the first quarter of 2020 and
1.384 billion during the fourth 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)
First Quarter
2020
Fourth Quarter
2019
Weighted average shares outstanding
1,387
1,384
Assumed exercise of stock options
-
-
Unvested restricted stock
16
12
Average shares outstanding, assuming dilution
1,403
1,396
9)
What was the unamortized balance of
Schlumberger’s investment in APS projects at March 31,
2020?
The unamortized balance of Schlumberger’s
investments in APS projects was approximately $2.5 billion at March
31, 2020 and $3.7 billion at December 31, 2019. These amounts are
included within Other Assets in Schlumberger’s Condensed
Consolidated Balance Sheet.
10)
What are the components of depreciation
and amortization expense for the first quarter of 2020 and the
fourth quarter of 2019?
The components of depreciation and
amortization expense for the first quarter of 2020 and fourth
quarter of 2019 were as follows:
(Stated in millions)
First Quarter
2020
Fourth Quarter
2019
Depreciation of fixed assets
$449
$451
Amortization of intangible assets
133
138
Amortization of multiclient seismic data costs capitalized
47
75
Amortization of APS investments
163
184
$792
$848
11)
What was the amount of WesternGeco
multiclient sales in the first quarter of 2020?
Multiclient sales, including transfer
fees, were $88 million in the first quarter of 2020 and $175
million in the fourth quarter of 2019.
12)
What was the WesternGeco backlog at the
end of the first quarter of 2020?
The WesternGeco backlog, which is based on
signed contracts with customers, was $282 million at the end of the
first quarter of 2020. It was $324 million at the end of the fourth
quarter of 2019.
13)
What was the book-to-bill ratio for
Cameron’s long-cycle businesses? What were the orders and backlog
for Cameron’s OneSubsea and Drilling Systems businesses?
The book-to-bill ratio for the Cameron
long-cycle businesses was 1.2. The OneSubsea and Drilling Systems
orders and backlog were as follows:
(Stated in millions)
Orders
First Quarter
2020
Fourth Quarter
2019
OneSubsea
$371
$785
Drilling Systems
$317
$170
Backlog (at the end of period) OneSubsea
$2,241
$2,222
Drilling Systems
$526
$433
14)
What are the components of the $8.5
billion of charges recorded during the first quarter of
2020?
The components of the $8.5 billion net
pretax charge are as follows (in millions):
Goodwill(a)
$3,070
Intangible assets(b)
3,321
APS investments(c)
1,264
North America pressure pumping(d)
587
Severance(e)
202
Other(f)
79
$8,523
(a)
As a result of market valuations,
Schlumberger determined that the carrying value of certain of its
reporting units were in excess of their fair values resulting in a
$3.1 billion goodwill impairment charge. This charge primarily
relates to goodwill associated with Schlumberger’s Drilling and
Production segments.
(b)
$2.2 billion relates to Schlumberger’s
2016 acquisition of Cameron International Corporation and $1.1
billion relates to Schlumberger’s 2010 acquisition of Smith
International, Inc.
(c)
Relates to the carrying value of certain
APS projects in North America.
(d)
Consists of fixed assets associated with
the pressure pumping business in North America.
(e)
The vast majority of this severance is
expected to be paid during the second quarter of 2020.
Additionally, Schlumberger expects to record significant charges
relating to severance during the second quarter of 2020. However,
at this time the amount cannot be reasonably estimated.
(f)
Primarily relates to an equity method
investment that was determined to be other-than-temporarily
impaired.
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 103,000 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, April 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 May 17, 2020 by dialing +1
(866) 207-1041 within North America, or +1 (402) 970-0847 outside
North America, and providing the access code 8905486. 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 May 17,
2020.
This first-quarter 2020 earnings release, as well as other
statements we make, contain “forward-looking statements” within the
meaning of the federal securities laws, which include any
statements that are not historical facts, such as our forecasts or
expectations regarding business outlook; growth for Schlumberger as
a whole and for each of its 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, changing global
economic conditions; public health crises, such as the COVID-19
pandemic, and any related actions taken by businesses and
governments; changes in exploration and production spending by
Schlumberger’s customers and changes in the level of oil and
natural gas exploration and development; the results of operations
and financial condition of Schlumberger’s customers and suppliers,
particularly during extended periods of low prices for crude oil
and natural gas; 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; the
competitiveness of alternate-energy sources or product substitutes;
and other risks and uncertainties detailed in this first-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. Statements in this first-quarter 2020 earnings release
are made as of April 17, 2020, and Schlumberger disclaims any
intention or obligation to update publicly or revise such
statements, whether as a result of new information, future events
or otherwise.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200417005208/en/
Simon Farrant – Vice President of Investor Relations,
Schlumberger Limited Joy V. Domingo – Director of Investor
Relations, Schlumberger Limited Office +1 (713) 375-3535
investor-relations@slb.com
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