- Worldwide revenue of $5.4 billion decreased 28%
sequentially
- International revenue of $4.1 billion decreased 19%
sequentially
- North America revenue of $1.2 billion decreased 48%
sequentially
- GAAP loss per share, including charges and credits of $2.52 per
share, was $2.47
- EPS, excluding charges and credits, was $0.05
- Cash flow from operations was $803 million and free cash flow
was $465 million
- Board approved quarterly cash dividend of $0.125 per share
Schlumberger Limited (NYSE: SLB) today reported results for the
second quarter of 2020.
Second-Quarter Results (Stated in millions, except per share
amounts)
Three Months Ended Change Jun. 30,
2020 Mar. 31, 2020 Jun. 30, 2019
Sequential
Year-on-year Revenue
$5,356
$7,455
$8,269
-28%
-35%
Income (loss) before taxes - GAAP basis
$(3,627)
$(8,089)
$593
n/m
n/m
Pretax segment operating income*
$396
$776
$968
-49%
-59%
Pretax segment operating margin*
7.4%
10.4%
11.7%
-303 bps
-431 bps
Net income (loss) - GAAP basis
$(3,434)
$(7,376)
$492
n/m
n/m
Net income, excluding charges & credits*
$69
$351
$492
-80%
-86%
Diluted EPS (loss per share) - GAAP basis
$(2.47)
$(5.32)
$0.35
n/m
n/m
Diluted EPS, excluding charges & credits*
$0.05
$0.25
$0.35
-80%
-86%
North America revenue
$1,183
$2,279
$2,801
-48%
-58%
International revenue
$4,138
$5,121
$5,463
-19%
-24%
North America revenue, excluding Cameron
$842
$1,773
$2,201
-53%
-62%
International revenue, excluding Cameron
$3,463
$4,395
$4,708
-21%
-26%
*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, “Before addressing
our results, I would like to pay tribute to our employees and
contractors for their remarkable resilience in the face of the
historic COVID-19 pandemic that confronts us all.
“Our employees and contractors have shown outstanding
adaptability to the new working environment with up to 55,000 of
our people working remotely to maintain business continuity. They
have embraced digital remote operations, adjusted work practices to
mitigate contamination risks, and delivered benchmark safety and
service quality performance for our customers. I would like to
extend my heartfelt appreciation for their dedication and
sacrifices while working in a difficult operating environment, and
for their leadership in helping the communities where we live and
work. As the pandemic lingers, we will remain cautious in our
global operations. The safety of our people remains paramount.
“This has probably been the most challenging quarter in past
decades. Schlumberger second-quarter revenue declined 28%
sequentially, caused by the unprecedented fall in North America
activity, and international activity drop due to downward revisions
to customer budgets accentuated by COVID-19 disruptions. This
speaks volumes about an industry confronted with historic oil
demand and supply imbalances caused by demand destruction from the
global COVID-19 containment effort.
“North America revenue declined 48% sequentially with land
revenue falling 60% as customers dramatically cut back spending.
International revenue declined 19% sequentially with Latin America
and Africa experiencing the largest revenue declines due to
COVID-19-related restrictions and the drop in deepwater activity.
In addition, there was a production interruption in our Asset
Performance Solutions (APS) projects in Ecuador caused by a major
land slide that led to the rupture of the main pipeline. Revenue in
the Middle East, Russia, Europe, and Asia proved more resilient as
these regions, when combined, declined 10% sequentially.
Second-Quarter Revenue by Segment (Stated in millions)
Three Months Ended Change Jun. 30, 2020 Mar.
31, 2020 Jun. 30, 2019
Sequential Year-on-year
Reservoir Characterization
$1,052
$1,311
$1,558
-20%
-32%
Drilling
1,731
2,289
2,420
-24%
-28%
Production
1,615
2,703
3,077
-40%
-48%
Cameron
1,015
1,254
1,328
-19%
-24%
Other
(57
)
($102
)
(114
)
n/m
n/m
$5,356
$7,455
$8,269
-28%
-35%
n/m = not meaningful Certain prior period amounts have been
reclassified to conform to the current period presentation.
“By business segment sequentially, second-quarter revenue for
Reservoir Characterization and Drilling fell 20% and 24%,
respectively. This was due to the North America land activity
decline and COVID-19 disruptions in several international
GeoMarkets. Production revenue declined 40% sequentially, driven by
the precipitous drop in OneStim® pressure-pumping activity. Cameron
revenue declined 19% sequentially, mostly due to North America land
activity decline in Surface Systems and Valves & Process
Systems.
“In the face of such adversity, Schlumberger has demonstrated
resilience. Through our decisive actions, we protected our
liquidity and cash positions, and sustained resilient international
margins while navigating the trough of this downcycle. The results
of our actions and continued success with technology—particularly
digital—can be seen from our decremental margins and our strong
free cash flow generation.
“First, our cash flow from operations was $803 million and we
generated $465 million of free cash flow despite significant
severance payments during the quarter. We continue to be
opportunistic in accessing the financial markets, systematically
refinancing and spacing out future debt maturities, and taking
proactive measures to enhance our liquidity position.
“Second, despite the severe drop in international revenue and
the significant effect of the APS production interruption in
Ecuador, international margin was extraordinarily resilient, as it
was essentially flat compared to the previous quarter. Three out of
our four business segments and more than half of our 13
international GeoMarkets either expanded or maintained their
international margins on a sequential basis. This was due to our
swift and decisive actions to reduce operating costs, restructure,
and rationalize our asset base. We are permanently removing $1.5
billion of structural costs annually by reorganizing Schlumberger
into a leaner and more responsive company that is better aligned
with our customers’ workflows. We are combining our 17 product
lines into four divisions, structuring our geographic organization
around five key basins of activity, and streamlining our management
structure. In addition, significant progress was also made in
improving the results of previously underperforming business units
and digital technology adoption has increased. Overall this
quarter, we posted a decremental operating margin of 18%
sequentially.
“In response to market conditions, we recorded $3.7 billion of
pretax restructuring and asset impairment charges, including $1
billion of severance costs, as of the end of the quarter. The
remaining portion of the charge largely relates to the non-cash
impairment of certain assets.
“Altogether, I am extremely proud of our operational and
financial performance during the quarter as we continue to build
the foundation for our future success while we navigate the trough
of this downcycle.
“Looking at the macro view in the near-term, oil demand is
slowly starting to normalize and is expected to improve as
government measures support consumption. However, subsequent waves
of potential COVID-19 resurgence pose a negative risk to this
outlook.
“The conditions are set in the third quarter for a modest frac
completion activity increase in North America, though from a very
low base. Internationally, markets may continue to be disrupted by
the pandemic and will continue to adjust to budget levels set
during the second quarter, but this would be mostly offset by the
seasonal return of activity in the Northern Hemisphere and the
rebound of Latin America from its second-quarter weakness. However,
any further material COVID-19 disruption or significant setback in
oil demand arising from a slower economic recovery could present
downside risks to this outlook. Absent these risks, we anticipate
flat sequential revenue on a global basis and our pretax segment
operating income and margin should expand as a result of our
restructuring efforts, improved activity mix, and sustained
benefits from technology adoption, including digital.
“We believe the decisive and comprehensive measures we have
taken to face the industry reality will continue to protect our
liquidity and cash positions and allow us to expand our margins. We
have taken the long-term view in restructuring our company—aligning
with our customers’ workflows, empowering a lean and responsive
organization, and accelerating the execution of our performance
strategy, with capital stewardship, fit-for-basin, and digital as
key attributes of success. I am extremely optimistic about the
future of Schlumberger, building on the strength of our
international franchise and positioning the company as the
performance partner of choice for our customers in the new industry
landscape.”
Other Events
During the second quarter, Schlumberger issued EUR 1 billion of
1.375% Notes due 2026, $900 million of 2.650% Notes due 2030, and
EUR 1 billion of 2.000% Notes due 2032.
In June, Schlumberger repurchased $1.5 billion of its
outstanding notes, consisting of $935 million of its 3.300% Notes
due 2021 and all $600 million of its 4.200% Notes due 2021.
On July 23, 2020, Schlumberger’s Board of Directors approved a
quarterly cash dividend of $0.125 per share of outstanding common
stock, payable on October 8, 2020 to stockholders of record on
September 2, 2020.
Consolidated Revenue by Area
(Stated in millions)
Three Months Ended Change
Jun. 30, 2020 Mar. 31, 2020 Jun. 30, 2019
Sequential
Year-on-year North America
$1,183
$2,279
$2,801
-48%
-58%
Latin America
543
$945
1,115
-42%
-51%
Europe/CIS/Africa
1,449
$1,751
1,896
-17%
-24%
Middle East & Asia
2,146
$2,426
2,452
-12%
-12%
Other
35
$54
5
n/m
n/m
$5,356
$7,455
$8,269
-28%
-35%
North America revenue
$1,183
$2,279
$2,801
-48%
-58%
International revenue
$4,138
$5,121
$5,463
-19%
-24%
North America revenue, excluding Cameron
$842
$1,773
$2,201
-52%
-62%
International revenue, excluding Cameron
$3,463
$4,395
$4,708
-21%
-26%
n/m = not meaningful Certain prior period amounts have been
reclassified to conform to the current period presentation.
North America
North America area consolidated revenue of $1.2 billion
was 48% lower sequentially with North America land revenue falling
60%, in line with the decline in rig and hydraulic fracturing stage
counts, as customers dramatically cut back spending. OneStim
fracturing and land drilling activity fell as customers revised
budgets downward, challenged by low oil prices, take-away
constraints, and storage overflow. In addition, sales in North
America land of Surface Systems, Artificial Lift Solutions, and
Valves & Process Systems decreased sequentially. North America
offshore revenue decreased less severely, 12% sequentially.
International
Consolidated revenue in the Latin America area of $543
million decreased 42% sequentially, primarily due to a production
interruption in our APS projects in Ecuador. In addition, COVID-19
disruptions affected drilling activities in Argentina, Bolivia,
Colombia, and Peru. In contrast, Mexico and Brazil declined less
severely as reduced land activity was partially offset by offshore
exploration operations, where work continued with COVID-19
risk-mitigation protocols.
Europe/CIS/Africa area consolidated revenue of $1.4
billion decreased 17% sequentially due to a significant drop in
activity in the Sub-Sahara Africa and North Africa GeoMarkets from
COVID-19 disruptions, project cancellations, and work stoppages.
The Russia & Central Asia GeoMarket was resilient as COVID-19
activity disruption was offset by the pickup of seasonal land
activity in Russia, in preparation for the summer drilling
campaigns. Revenue also declined less in the North Sea and
Continental Europe, following the winter slowdown and as activity
resumed later in the quarter after COVID-19 lockdowns were
relaxed.
Consolidated revenue in the Middle East & Asia area
of $2.1 billion decreased 12% sequentially, primarily due to a
significant drop in activity in the Eastern Middle East and South
East Asia GeoMarkets from work delays, project suspensions, and
completed contracts. Revenue in the North Middle East and Saudi
Arabia & Bahrain GeoMarkets declined less due to new projects.
Revenue in the Far East Asia GeoMarket was essentially flat as
project delays were offset by the seasonal rebound and resumption
of activity after the lifting of COVID-19 lockdowns in China.
Reservoir Characterization
(Stated in millions)
Three Months Ended Change
Jun. 30, 2020 Mar. 31, 2020 Jun. 30, 2019
Sequential
Year-on-year Revenue
$1,052
$1,311
$1,558
-20%
-32%
Pretax operating income
$185
$184
$317
1%
-42%
Pretax operating margin
17.6%
14.0%
20.3%
357 bps
-273 bps
Certain prior period amounts have been reclassified to conform to
the current period presentation.
Reservoir Characterization revenue of $1.1 billion, 84% of which
came from the international markets, decreased 20% sequentially.
North America and international revenues declined 17% and 20%,
respectively. This was mainly due to lower Wireline activity in
North America land and the Eastern Middle East and Sub-Sahara
Africa GeoMarkets. Testing Services revenue was also lower mainly
in the Sub-Sahara Africa GeoMarket as a result of completed
projects and delayed and cancelled activities due to COVID-19.
WesternGeco® revenue declined as a project was completed in the
Middle East, while Software Integrated Solutions (SIS) revenue
declined slightly as well.
Reservoir Characterization pretax operating margin of 18%
rebounded 357 bps sequentially despite the significant revenue
decline. This margin expansion was evident both in North America
and internationally. Outperformance was delivered by prompt cost
reduction measures in compensation through headcount
rationalization and furloughs, particularly in SIS, WesternGeco,
and Wireline.
Drilling
(Stated in millions)
Three Months Ended Change
Jun. 30, 2020 Mar. 31, 2020 Jun. 30, 2019
Sequential
Year-on-year Revenue
$1,731
$2,289
$2,420
-24%
-28%
Pretax operating income
$165
$285
$301
-42%
-45%
Pretax operating margin
9.6%
12.4%
12.4%
-289 bps
-288 bps
Drilling revenue of $1.7 billion, 82% of which came from the
international markets, decreased 24% sequentially. North America
and international revenues declined 48% and 18%, respectively. This
was primarily due to the activity decline in US land as rig count
dropped more than 50% while COVID-19 disruptions caused drilling
activities to be cancelled or suspended in several international
GeoMarkets. Drilling activity in Russia & Central Asia,
however, was resilient as COVID-19 disruption was offset by
seasonal pickup in Russia land activity in preparation for the
summer drilling campaigns.
Drilling pretax operating margin of 10% contracted by 289 bps
sequentially, posting a 21% decremental operating margin. The
margin contraction was primarily in North America, while
international margin was resilient and flat sequentially. Drilling
& Measurements and M-I SWACO accounted for most of the margin
decline and experienced the largest drop in activity due to their
sizeable footprint in North America land.
Production
(Stated in millions)
Three Months Ended Change
Jun. 30, 2020 Mar. 31, 2020 Jun. 30, 2019
Sequential
Year-on-year Revenue
$1,615
$2,703
$3,077
-40%
-48%
Pretax operating income
$25
$212
$235
-88%
-89%
Pretax operating margin
1.5%
7.8%
7.6%
-630 bps
-612 bps
Production revenue of $1.6 billion, 75% of which came from the
international markets, declined 40% sequentially. North America and
international revenues declined 62% and 26%, respectively. This was
driven by the precipitous drop in OneStim pressure-pumping activity
in North America land. APS revenue was also down by nearly 50% due
primarily to a significant production interruption in Ecuador.
International revenue decreased due mostly to COVID-19
disruptions—mainly in the Latin America South, Sub-Sahara Africa,
Saudi Arabia & Bahrain, and Eastern Middle East GeoMarkets.
Production pretax operating margin of 2% contracted by 630 bps
sequentially, posting a 17% decremental operating margin. The
margin decline was due to reduced profitability in North America
land from the dramatic fall in activity, which mostly impacted the
OneStim margin. International margin declined also, albeit less
severely, driven by the drop in APS revenue in Ecuador and the
reduction of Well Services activity.
Cameron
(Stated in millions)
Three Months Ended Change
Jun. 30, 2020 Mar. 31, 2020 Jun. 30, 2019
Sequential
Year-on-year Revenue
$1,015
$1,254
$1,328
-19%
-24%
Pretax operating income
$80
$121
$165
-34%
-51%
Pretax operating margin
7.9%
9.7%
12.4%
-180 bps
-453 bps
Certain prior period amounts have been reclassified to conform to
the current period presentation.
Cameron revenue of $1.0 billion, 67% of which came from the
international markets, decreased 19% sequentially. North America
and international revenues declined 33% and 7%, respectively. The
North America decline was driven by lower Surface Systems and
Valves & Process Systems revenues while international activity
decline was mainly due to lower Drilling Systems sales. Meanwhile,
OneSubsea® revenue was resilient, only declining slightly with
international revenue growing sequentially, but offset by a decline
in North America.
Cameron pretax operating margin of 8% declined by 180 bps
sequentially, posting a 17% decremental operating margin. The
margin contraction was primarily due to reduced profitability in
North America, impacting Surface Systems and Valves & Process
Systems margins, while international margin expanded sequentially
due to OneSubsea and Drilling Systems. Prompt cost reduction
measures through headcount rationalization, furloughs, and lower
manufacturing costs contributed to the international margin
expansion.
Quarterly Highlights
Schlumberger is leading the industry in the development of
Digital solutions to increase performance in drilling and reservoir
characterization. Deploying these solutions in the current
challenging industry environment can help customers maintain
business continuity and improve their teams' performance worldwide.
Examples of this during the quarter included:
- As announced last quarter, Schlumberger and ExxonMobil are
jointly working on the deployment of digital drilling solutions
around planning, execution, and continuous improvement through
learning. As a next step, ExxonMobil and Schlumberger have
finalized an enabling agreement for the deployment of DrillOps*
on-target well delivery solution in ExxonMobil’s unconventional
operations. The technology is expected to enable faster, lower-cost
wells through drilling automation and orchestration of the digital
well plan generated by DrillPlan* coherent well construction
planning solution.
- Schlumberger and Honghua Electric Co., Ltd. entered into a
memorandum of understanding (MOU) for the seamless integration of
the DrillOps on-target well delivery solution with all new Honghua
rigs. Under the MOU, Honghua will manufacture and sell rigs that
have plug-and-play capability with the DrillOps solution, which
integrates planning and operations while automating well
construction tasks in order for the rig to operate at peak
performance throughout the execution of the drilling plan.
- In the United Arab Emirates, Dragon Oil plc awarded
Schlumberger a contract for deployment of agile reservoir modeling
through the DELFI* cognitive E&P environment, the first
implementation of this kind in the Middle East and North Africa
region. A joint Dragon Oil and Schlumberger team will use this
approach to enhance productivity of Dragon Oil’s Lam Main and Lam
West Fields in Turkmenistan. The approach will use a combination of
automated, traditional domain workflows and workflows driven by
machine learning and AI to rapidly provide insights into
development strategies for optimizing production across the life
cycle of the assets.
- The Nigerian Department of Petroleum Resources (DPR) signed an
agreement for the provision of a Schlumberger virtual data room in
support of the first-ever virtual marginal fields bid round to be
held this year. DPR is adopting Schlumberger digital technologies
in alignment with its commitment to promoting Nigeria’s oil and gas
assets online to a global audience in a secure digital environment.
The agreement includes an online digital solution to support the
bid round delivered by Schlumberger via software as a service
(SaaS). The solution uses the Petrel* E&P software platform to
improve subsurface insight and to identify bypassed reserves.
- GAIA Xchange* data marketplace, the world’s first digital
E&P data marketplace, was launched in the first Schlumberger
Online Conference. GAIA Xchange marketplace brings together global
content providers and consumers on a single, open platform. The
GAIA* digital subsurface platform enables customers to securely and
instantly access multidomain, evergreen E&P data as a
subscription from a growing number of content providers. GAIA
Xchange marketplace has multiple E&P content providers who can
showcase, manage, and deliver their data immediately to prospective
buyers.
- In the Gulf of Mexico, Schlumberger used the Ora* intelligent
wireline formation testing platform to characterize a complex
reservoir in a deepwater exploration well for Repsol. Remote
collaboration between the Repsol and Schlumberger teams in town and
at the wellsite enabled the efficient deployment of the Ora
platform, which secured pure fluid samples at multiple depths in
the unconsolidated formation. The Ora platform’s technology helped
the operator investigate reservoir fluid viscosity variations and
conduct a high-quality deep transient testing on wireline—without
flaring—to prove economic producibility. Repsol announced a
significant discovery just days after the survey.
The deployment of evolving, differentiated business models,
fit-for-basin technologies, and technology access with regional
partners further differentiate Schlumberger within the industry. A
few examples of this included:
- In the Gulf of Mexico, secure remote capabilities delivered by
OneSubsea helped BP keep the Mad Dog 2 project on schedule. Using a
suite of remote solutions, including remote customer-witness
factory integration testing (FIT), a remote master control station,
and integrated control and safety systems, OneSubsea was able to
provide overviews of system functionality without requiring onsite
witnessing. BP is now considering conducting all future FITs
remotely, which would result in significant cost savings related to
travel and further reduce operational risk.
- In West Texas, OneStim deployed fit-for-basin fracturing
technology services to protect production from parent-child well
interference effects for MDC Texas Energy. The service—comprised of
BroadBand Shield* fracture-geometry control technology and the
equipment required—was deployed in conjunction with a pumping and
wellsite equipment services provider. After 60 days, the infill
well treated with BroadBand Shield technology, located closest to
the parent well, achieved approximately 10% higher production
performance compared to an adjacent infill well farther from the
parent well. The parent well experienced no detrimental production
impact following the infill well’s stimulation treatments,
indicating no negative fracture interference.
- Schlumberger entered into a collaboration agreement with China
Petroleum Logging Co., Ltd (CPL), a subsidiary of China National
Petroleum Corporation (CNPC), to jointly manufacture fit-for-basin
wireline downhole technology in China. As part of this technology
access agreement, Schlumberger will support CPL on the
manufacturing and sustaining activities for ThruBit*
through-the-bit logging services technology at the CPL technology
center in Xi’an, Shaanxi province. The increasing number of
horizontal wells undertaken by CNPC each year has made the
differentiated technology of the ThruBit services platform
essential to their reservoir evaluation strategy. This technology
collaboration will enable CPL to significantly improve their
logging capabilities in horizontal and vertical wells across China
while increasing Schlumberger’s participation in this market.
- In Malaysia, the SpectraSphere* fluid mapping-while-drilling
technology has helped add value to PETRONAS brownfield assets. The
technology developed by Schlumberger Drilling & Measurements
eliminated fluid uncertainty in untapped fault blocks while
mitigating operational risks. SpectraSphere technology was
successfully deployed in two field rejuvenation campaigns in the
Temana and Dulang Fields, offshore Malaysia. It involved wellbores
with up to 80° of inclination and large overbalance, resulting in
approximately USD 2 million in operating cost savings. Fluid
identification was performed in real-time, in multiple reservoir
horizons. The data provided by SpectraSphere assisted PETRONAS
petrotechnical experts to firm up and accelerate perforation and
completion design, in addition to understanding the reservoir and
improving reserve estimation.
This quarter’s contract awards reflect the diversity of our
business models in different basins around the globe, including
alignment with in-country value, offshore processing, and subsea
integration.
- Kuwait Oil Company awarded Schlumberger a five-year contract
with an optional one-year extension valued at USD 320 million for
the provision of coiled tubing and stimulation services. Some of
the technologies include ACTive* real-time downhole coiled tubing
services, OpenPath Reach* extended-contact stimulation service, and
OpenPath Sequence* diversion stimulation service.
- In Oman, OQ—the company regrouping Oman Oil and Orpic Group's
nine business units—awarded Schlumberger a contract valued at more
than USD 125 million for the design, engineering, procurement, and
construction of a production facility in the Bisat Field. The
contract includes four years of operations and maintenance support
with an optional one-year extension. First oil is scheduled for
delivery in late 2021.
- SBM Offshore awarded Schlumberger five contracts for the
provision of a comprehensive portfolio of processing technologies
to be used on a floating production, storage, and offloading (FPSO)
vessel. The packages will be delivered in 2022 and include NATCO
DUAL FREQUENCY* electrostatic treaters, CYNARA* acid gas removal
membrane systems, VORTOIL* deoiling hydrocyclones, and EPCON Dual*
compact flotation units.
- China National Offshore Oil Corporation (CNOOC) awarded
OneSubsea an engineering, procurement, and construction (EPC)
contract for the supply of an integrated subsea production and
processing system for the Lufeng 22-1 oil field in the South China
Sea. The contract, valued at USD 143 million, includes subsea
trees, an integrated boosting and manifold system, a unified
control system, an integrated power-control umbilical, a virtual
flow metering solution, and estimated services. The project
consists of four deepwater wells and a 19-km tieback system to a
newly built platform—the Lufeng 15-1—which will act as a central
production and processing facility for the Lufeng development
project.
Financial Tables
Condensed Consolidated Statement of Income (Loss)
(Stated in millions, except per
share amounts)
Second Quarter
Six Months
Periods Ended June 30,
2020
2019
2020
2019
Revenue
$5,356
$8,269
$12,811
$16,149
Interest and other income
33
25
72
39
Expenses Cost of revenue
4,925
7,252
11,548
14,209
Research & engineering
142
179
315
351
General & administrative
81
114
208
225
Impairments & other (1)
3,724
-
12,247
-
Interest
144
156
281
302
Income (loss) before taxes (1)
$(3,627
)
$593
$(11,716
)
$1,101
Tax (benefit) expense (1)
(199
)
99
(920
)
178
Net income (loss) (1)
$(3,428
)
$494
$(10,796
)
$923
Net income attributable to noncontrolling interests
6
2
14
10
Net income (loss) attributable to Schlumberger (1)
$(3,434
)
$492
$(10,810
)
$913
Diluted earnings (loss) per share of Schlumberger (1)
$(2.47
)
$0.35
$(7.79
)
$0.65
Average shares outstanding
1,388
1,384
1,388
1,385
Average shares outstanding assuming dilution
1,388
1,395
1,388
1,396
Depreciation & amortization included in expenses (2)
$604
$938
$1,396
$1,841
(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)
Jun. 30,
Dec. 31,
Assets
2020
2019
Current Assets Cash and short-term investments
$3,589
$2,167
Receivables
5,808
7,747
Other current assets
4,982
5,616
14,379
15,530
Fixed assets
7,729
9,270
Multiclient seismic data
356
568
Goodwill
12,954
16,042
Intangible assets
3,622
7,089
Other assets
5,627
7,813
$44,667
$56,312
Liabilities and Equity Current Liabilities Accounts payable
and accrued liabilities
$9,824
$10,663
Estimated liability for taxes on income
1,054
1,209
Short-term borrowings and current portion of long-term debt
603
524
Dividends payable
184
702
11,665
13,098
Long-term debt
16,763
14,770
Deferred taxes
42
491
Postretirement benefits
905
967
Other liabilities
2,836
2,810
32,211
32,136
Equity
12,456
24,176
$44,667
$56,312
Liquidity
(Stated in millions) Components of Liquidity Jun. 30,2020 Mar.
31,2020 Dec. 31,2019 Jun. 30,2019 Cash and short-term investments
$3,589
$3,344
$2,167
$2,348
Short-term borrowings and current portion of long-term debt
(603
)
(1,233
)
(524
)
(98
)
Long-term debt
(16,763
)
(15,409
)
(14,770
)
(16,978
)
Net Debt (1)
$(13,777
)
$(13,298
)
$(13,127
)
$(14,728
)
Details of changes in liquidity follow:
Six
Second
Six
Months
Quarter
Months
Periods Ended June 30,
2020
2020
2019
Net income (loss) before noncontrolling interests
$(10,796
)
$(3,428
)
$923
Impairment and other charges, net of tax
11,230
3,503
-
$434
$75
$923
Depreciation and amortization (2)
1,396
604
1,841
Stock-based compensation expense
213
105
194
Change in working capital
(423
)
42
(1,460
)
Other
(33
)
(23
)
(64
)
Cash flow from operations (3)
$1,587
$803
$1,434
Capital expenditures
(658
)
(251
)
(817
)
APS investments
(224
)
(61
)
(332
)
Multiclient seismic data capitalized
(61
)
(26
)
(109
)
Free cash flow (4)
$644
465
176
Dividends paid
(1,386
)
(694
)
(1,385
)
Stock repurchase program
(26
)
-
(199
)
Business acquisitions and investments, net of cash acquired plus
debt assumed
(20
)
(20
)
(17
)
Net proceeds from asset divestitures
298
-
-
Other
(160
)
(230
)
(29
)
Increase in Net Debt
(650
)
(479
)
(1,454
)
Net Debt, beginning of period
(13,127
)
(13,298
)
(13,274
)
Net Debt, end of period
$(13,777
)
$(13,777
)
$(14,728
)
(1)
“Net Debt” represents gross debt less
cash, short-term investments, and fixed income investments, held to
maturity. Management believes that Net Debt provides useful
information regarding the level of Schlumberger’s indebtedness by
reflecting cash and investments that could be used to repay debt.
Net Debt is a non-GAAP financial measure that should be considered
in addition to, not as a substitute for or superior to, total
debt.
(2)
Includes depreciation of property, plant
and equipment and amortization of intangible assets, multiclient
seismic data costs, and APS investments.
(3)
Includes severance payments of $426
million and $370 million during the six months and second quarter
ended June 30, 2020, respectively; and $71 million and $23 million
during the six months and second quarter ended June 30, 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
second-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 more effectively evaluate Schlumberger’s
operations period over period and to identify operating trends that
could otherwise be masked by the excluded items. These measures are
also used by management as performance measures in determining
certain incentive compensation. The foregoing non-GAAP financial
measures should be considered in addition to, not as a substitute
for or superior to, other measures of financial performance
prepared in accordance with GAAP. The following is a reconciliation
of these non-GAAP measures to the comparable GAAP measures.
(Stated in millions, except per
share amounts)
Second Quarter 2020 Pretax
Tax Noncont.Interests Net DilutedEPS*
Schlumberger net loss (GAAP basis)
$(3,627
)
$(199
)
$6
$(3,434
)
$(2.47
)
Workforce reductions
1,021
71
-
950
0.68
Asset performance solutions investments
730
15
-
715
0.52
Fixed asset impairments
666
52
-
614
0.44
Inventory write-downs
603
49
-
554
0.40
Right-of-use asset impairments
311
67
-
244
0.18
Costs associated with exiting certain activities
205
(25
)
-
230
0.17
Multiclient seismic data impairment
156
2
-
154
0.11
Repurchase of bonds
40
2
-
38
0.03
Postretirement benefits curtailment gain
(69
)
(16
)
-
(53
)
(0.04
)
Other
61
4
-
57
0.04
Schlumberger net income, excluding charges & credits
$97
$22
$6
$69
$0.05
Six Months 2020 Pretax
Tax Noncont.Interests Net DilutedEPS* Schlumberger
net loss (GAAP basis)
$(11,716
)
$(920
)
$14
$(10,810
)
$(7.79
)
Goodwill
3,070
-
-
3,070
2.21
Intangible assets
3,321
815
-
2,506
1.81
Asset performance solutions investments
1,994
11
-
1,983
1.43
Workforce reductions
1,223
78
-
1,145
0.82
Fixed asset impairments
666
52
-
614
0.44
Inventory write-downs
603
49
-
554
0.40
North America pressure pumping impairment
587
133
-
454
0.33
Right-of-use asset impairments
311
67
-
244
0.18
Costs associated with exiting certain activities
205
(25
)
-
230
0.17
Multiclient seismic data impairment
156
2
-
154
0.11
Repurchase of bonds
40
2
-
38
0.03
Postretirement benefits curtailment gain
(69
)
(16
)
-
(53
)
(0.04
)
Other
140
13
-
127
0.09
Valuation allowance
-
(164
)
-
164
0.12
Schlumberger net income, excluding charges & credits
$531
$97
$14
$420
$0.30
* Does not add due to rounding.
(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 impairments
3,321
815
-
2,506
1.81
Asset performance solutions investments
1,264
(4
)
-
1,268
0.91
North America pressure pumping impairment
587
133
-
454
0.33
Workforce reductions
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
There were no charges or credits during the first six months of
2019.
Segments
(Stated in millions)
Three Months Ended Jun. 30, 2020
Mar. 31, 2020 Jun. 30, 2019
Revenue
Income (Loss) Before
Taxes
Revenue
Income (Loss) Before Taxes
Revenue
Income Before Taxes
Reservoir Characterization
$1,052
$185
$1,311
$184
$1,558
$317
Drilling
1,731
165
2,289
285
2,420
301
Production
1,615
25
2,703
212
3,077
235
Cameron
1,015
80
1,254
121
1,328
165
Eliminations & other
(57
)
(59
)
(102
)
(26
)
(114
)
(50
)
Pretax segment operating income
396
776
968
Corporate & other
(169
)
(228
)
(238
)
Interest income(1)
7
15
9
Interest expense(1)
(137
)
(129
)
(146
)
Charges & credits(2)
(3,724
)
(8,523
)
-
$5,356
$(3,627
)
$7,455
$(8,089
)
$8,269
$593
(Stated in millions)
Six Months Ended Jun. 30,
2020 Jun. 30, 2019
Revenue
Income (Loss) Before
Taxes
Revenue
Income Before
Taxes
Reservoir Characterization
$2,363
$369
$3,017
$598
Drilling
4,020
450
4,806
608
Production
4,318
237
5,967
453
Cameron
2,270
201
2,586
313
Eliminations & other
(160
)
(85
)
(227
)
(96
)
Pretax operating income
1,172
1,876
Corporate & other
(397
)
(511
)
Interest income(1)
22
18
Interest expense(1)
(266
)
(282
)
Charges & credits(2)
(12,247
)
-
$12,811
$(11,716
)
$16,149
$1,101
(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 $1.5 billion, which is approximately
45% lower than 2019. Capex is expected to be approximately $1.1
billion in 2020 as compared to $1.7 billion in 2019. APS
investments will be about $300 million in 2020 as compared to $781
million in 2019.
2)
What were the cash flow from
operations and free cash flow for the second quarter of
2020?
Cash flow from operations for the
second quarter of 2020 was $803 million. Free cash flow for the
second quarter of 2020 was $465 million, despite making $370
million of severance payments during the quarter.
3)
What was included in “Interest
and other income” for the second quarter of 2020?
“Interest and other income” for
the second quarter of 2020 was $33 million. This amount consisted
of earnings of equity method investments of $26 million and
interest income of $7 million.
4)
How did interest income and
interest expense change during the second quarter of 2020?
Interest income of $7 million for
the second quarter of 2020 decreased $8 million sequentially.
Interest expense of $144 million increased $8 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 second quarter of 2020 and what is the guidance
on the ETR going forward?
The ETR for the second quarter of
2020, calculated in accordance with GAAP, was 5.5% as compared to
8.9% for the first quarter of 2020. Excluding charges and credits,
the ETR for the second quarter of 2020 was 22.6% as compared to
17.2% for the first quarter of 2020. The ETR, excluding charges and
credits, is expected to remain in the low twenties for the rest of
2020.
7)
How many shares of common
stock were outstanding as of June 30, 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 June 30, 2020 and March 31,
2020.
(Stated in millions) Shares outstanding at March 31, 2020
1,388
Shares issued under employee stock purchase plan
-
Vesting of restricted stock
-
Stock repurchase program
-
Shares outstanding at June 30, 2020
1,388
8)
What was the weighted average
number of shares outstanding during the second quarter of 2020 and
first quarter of 2020? 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 1.388 billion during the second quarter of
2020 and 1.387 billion during the first quarter of 2020.
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)
Second Quarter2020 First Quarter2020
Weighted average shares outstanding
1,388
1,387
Assumed exercise of stock options
-
-
Unvested restricted stock
15
16
Average shares outstanding, assuming dilution
1,403
1,403
9)
What was the unamortized
balance of Schlumberger’s investment in APS projects at June 30,
2020?
The unamortized balance of
Schlumberger’s investments in APS projects was approximately $1.8
billion at June 30, 2020 and $2.5 billion at March 31, 2020. 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 second quarter of
2020 and the first quarter of 2020?
The components of depreciation
and amortization expense for the second quarter of 2020 and first
quarter of 2020 were as follows:
(Stated in millions)
Second Quarter2020 First Quarter2020
Depreciation of fixed assets
$417
$449
Amortization of intangible assets
80
133
Amortization of APS investments
58
163
Amortization of multiclient seismic data costs capitalized
49
47
$604
$792
11)
What was the amount of
WesternGeco multiclient sales in the second quarter of
2020?
Multiclient sales, including
transfer fees, were $71 million in the second quarter of 2020 and
$88 million in the first quarter of 2020.
12)
What was the WesternGeco
backlog at the end of the second quarter of 2020?
The WesternGeco backlog, which is
based on signed contracts with customers, was $248 million at the
end of the second quarter of 2020. It was $282 million at the end
of the first quarter of 2020.
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 0.7. The OneSubsea and Drilling
Systems orders and backlog were as follows:
(Stated in millions)
Orders Second Quarter2020 First
Quarter2020 OneSubsea
$277
$371
Drilling Systems
$95
$317
Backlog (at the end of period) OneSubsea
$2,139
$2,241
Drilling Systems
$457
$526
14)
What are the components of the
$3.7 billion of charges recorded during the second quarter of
2020?
The components of the $3.7
billion net pretax charge are as follows (in millions):
Severance (a)
$1,021
APS investments (b)
730
Fixed assets impairments(c)
666
Inventory write-downs(d)
603
Right-of-use asset impairments(e)
311
Costs associated with exiting certain activities
205
Multiclient seismic data impairment
156
Repurchase of bonds
40
Postretirement benefits curtailment gain
(69
)
Other(f)
61
$3,724
(a)
Severance is associated with reducing
Schlumberger’s workforce by more than 21,000 employees. The vast
majority of this charge is expected to be paid during the second
half of 2020.
(b)
Relates to the carrying value of certain
APS projects in Latin America.
(c)
Consists of equipment that will no longer
be utilized and facilities Schlumberger is exiting.
(d)
Represents the write-down of inventory to
its net realizable value.
(e)
Relates to assets under operating leases
associated with leased facilities Schlumberger is exiting and
excess equipment.
(f)
Includes a $42 million increase to the
allowance for the doubtful accounts.
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 85,000 people as of
the end of the second quarter of 2020 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, July 24, 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 August 24, 2020 by dialing +1
(866) 207-1041 within North America, or +1 (402) 970-0847 outside
North America, and providing the access code 7688409. 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 website until August 24,
2020.
This second-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 product lines (and for specified
products or geographic areas within each product line); oil and
natural gas demand and production growth; oil and natural gas
prices; pricing; Schlumberger’s response to, and preparedness for,
the COVID-19 pandemic; access to raw materials; improvements in
operating procedures and technology; capital expenditures by
Schlumberger and the oil and gas industry; the business strategies
of Schlumberger and Schlumberger’s customers; Schlumberger’s
digital strategy; Schlumberger’s restructuring efforts and charges
recorded as a result of such efforts; our effective tax rate;
Schlumberger’s APS projects, joint ventures, and alliances; 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; 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; Schlumberger’s inability to sufficiently monetize
assets; the extent of future charges; general economic,
geopolitical, and business conditions in key regions of the world;
foreign currency risk; pricing pressure; weather and seasonal
factors; unfavorable effects of health pandemics; availability and
cost of raw materials; operational modifications, delays, or
cancellations; challenges in Schlumberger’s supply chain;
production declines; Schlumberger’s inability to recognize intended
benefits from its business strategies and initiatives, such as
digital or new energy; 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 alternative energy sources or product
substitutes; and other risks and uncertainties detailed in this
second-quarter 2020 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
second-quarter 2020 earnings release are made as of July 24, 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/20200724005185/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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