- Revenue of $6.5 billion decreased 16%
sequentially
- EPS of $0.40 declined 38% sequentially,
excluding charges and credits
- Repurchased 7.1 million shares for $475
million during the quarter
- Quarterly cash dividend of $0.50 per
share approved
- Cameron merger closed on April 1,
2016
Schlumberger Limited (NYSE:SLB) today reported results for the
first quarter of 2016.
(Stated in millions, except per share amounts)
Three Months Ended Change Mar. 31,
2016 Dec. 31, 2015 Mar. 31, 2015
Sequential Year-on-year Revenue
$ 6,520 $ 7,744 $ 10,248
-16 %
-36 % Pretax operating income
901 1,288 1,993
-30 % -55 % Schlumberger net income,
excluding charges and credits*
501 819 1,358
-39
% -63 % Diluted EPS, excluding charges and
credits*
$ 0.40 $ 0.65 $ 1.06
-38 %
-62 % Pretax operating margin
13.8 %
16.6 % 19.4 %
-281 bps -563 bps North America
revenue
$ 1,464 $ 1,955 $ 3,222
-25 %
-55 % North America pretax operating income (loss)
(10 ) 139 416
-107 % -102
% North America pretax operating margin
-0.7 %
7.1 % 12.9 %
-777 bps -1,357 bps International
revenue
$ 4,979 $ 5,714 $ 6,889
-13 %
-28 % International pretax operating income
1,062 1,259 1,661
-16 % -36 %
International pretax operating margin
21.3 % 22.0 %
24.1 %
-70 bps -277 bps
*
Schlumberger net income, including charges
and credits, was $975 million in the first quarter of 2015.
Schlumberger net loss, including charges and credits, was $1.016
billion in the fourth quarter of 2015. Diluted EPS, including
charges and credits, was $0.76 in the first quarter of 2015. Loss
per share, including charges and credits, was $0.81 in the fourth
quarter of 2015. There were no charges or credits recorded during
the first quarter of 2016. See section entitled "Charges &
Credits" for details.
Schlumberger Chairman and CEO Paal Kibsgaard commented, “During
the first quarter of 2016, the decline in global activity and the
rate of activity disruption reached unprecedented levels as the
industry displayed clear signs of operating in a full-scale cash
crisis. Budgeted E&P spend fell again and substantially
affected our operating results. This environment is expected to
continue deteriorating over the coming quarter given the magnitude
and erratic nature of the disruptions in activity.
“Sequentially, the first-quarter revenue decrease of 16% was one
of the steepest quarterly declines we have posted since this
downturn started. This was driven by a continuing drop in activity
and persistent pricing pressure throughout our global operations as
well as from project delays, job cancellations and activity
disruptions. North America revenue fell 25% sequentially as the US
land rig count declined 31% following customer budget cuts. By the
end of the quarter, the US land rig count had fallen to around 400,
representing a drop of 80% from the peak of October 2014.
International revenue declined 13% due to a combination of customer
budget cuts, activity disruptions, seasonal winter slowdowns, and
continued pricing pressure. The decline in international revenue
was most pronounced in the Europe/CIS/Africa Area where seasonally
lower performance was exacerbated by the further weakness of the
Russian ruble. Revenues in the Latin America and Middle East &
Asia Areas also fell significantly.
“Among the business segments, first-quarter revenues of the
Drilling and Reservoir Characterization Groups declined
sequentially by 16% and 20%, respectively, on continued lower
demand for exploration- and development-related products and
services as customer budgets were further reduced. Production Group
revenue declined by 11% generally due to lower pressure pumping
services in North America.
“As previously announced, the Cameron merger closed on April 1,
2016. Cameron is now the fourth Schlumberger product group
alongside the existing Reservoir Characterization, Drilling and
Production Groups. Cameron’s first-quarter revenue was $1.6
billion.
“Meanwhile, E&P spending cuts continue. Recent spending
surveys for 2016 now indicate sharper declines than previously
forecasted. Global spending reductions in 2016 are approaching 25%,
corresponding to reductions between 40% to 50% in North America and
around 20% internationally.
“In this environment, our overall outlook for the oil markets
remains unchanged with the tightening of the supply-demand balance
expected to continue during the rest of the year. Although new
exports from Iran and growing global oil inventories drove oil
prices lower earlier in the quarter, prices have rebounded to
around the $40 level, due to underlying market trends, supply
disruptions and talks about a production freeze. Demand growth
forecasts remain steady, while OPEC production levels have been
largely flat since mid-2015. Production in North America continues
to fall as the effects of decline become more pronounced, while
mature non-OPEC production is also declining in a number of
regions.
“In navigating this landscape, we remain focused on balancing
market share against profitability while also working to best
preserve the core capabilities of the company for the long term. We
will continue to tailor costs and resources to activity, while
remaining cautious in adding back capacity given the unpredictable
nature of the current market.
“In the midst of a deepening downturn that has already entered
its seventh quarter, we are still optimistic and confident about
the medium term outlook for Schlumberger. Our unmatched ability to
generate cash in the oilfield services industry allows us to
capitalize on a variety of significant business opportunities while
continuing to return cash to our shareholders through dividends and
stock buy-backs. This, combined with the strategic moves we have
made that include the Cameron merger, leaves us very well
positioned once markets start to recover.”
Other Events
During the quarter, Schlumberger repurchased 7.1 million shares
of its common stock at an average price of $67.34 per share for a
total purchase price of $475 million.
On March 24, 2016, Schlumberger announced the acquisition of
Meta Downhole Limited, a UK-based engineering and service company
that offers technology and expertise to provide downhole
metal-to-metal isolation solutions in well integrity
applications.
On March 31, 2016, Schlumberger acquired Asset Development &
Improvement Ltd., a leading UK-based consultancy to the oil and gas
industry.
On April 1, 2016, Schlumberger completed its merger with Cameron
International Corporation (Cameron). The transaction combines two
complementary technology portfolios in a pore-to-pipeline products
and services offering. The merger creates technology-driven growth
by integrating Schlumberger reservoir and well expertise with
Cameron wellhead and surface equipment, flow control, and
processing technology. This combination will result in the
industry’s first complete drilling and production systems, which
will be enabled by Schlumberger expertise in instrumentation, data
processing, control software, and system integration.
On April 5, 2016, Schlumberger announced the completion of its
$1.24 billion tender offer for Cameron’s outstanding senior
notes.
On April 12, 2016, Schlumberger announced that it will reduce
its activity in Venezuela to align operations with cash
collections. This measure is a result of insufficient payments
received in recent quarters and a lack of progress in establishing
new mechanisms that address past and future accounts receivable.
The reduction in activity levels has begun and will be made in
close coordination with all customers in Venezuela, in order to
continue to provide service to those customers with available cash
flow, while allowing for a safe and orderly wind down of operations
for others.
On April 20, 2016, the Company’s Board of Directors approved a
quarterly cash dividend of $0.50 per share of outstanding common
stock, payable on July 8, 2016 to stockholders of record on June 1,
2016.
North America
North America first-quarter revenue of $1.5 billion decreased
25% sequentially, as the US land rig count declined 31% and
customer E&P budgets were further reduced. Land revenue fell
29% from lower activity, continuing pricing pressure, and the early
onset of the Canadian spring break-up. Offshore revenue decreased
18% on reduced activity, project delays, and lower multiclient
seismic license sales.
North America pretax operating margin declined 777 basis points
(bps) sequentially to -1% as the downturn deepened causing further
E&P spending cuts, and as widespread operational disruptions
prevented prompt cost adjustments. While focus was maintained on
balancing market share position and profitability, the economics of
temporarily shutting down operations were weighed against the cost
of maintaining resources. As a result, decremental operating margin
increased from 20% to 30% sequentially. We will continue to tailor
service capacity to activity while preserving long-term operational
and technical capabilities, and we will also remain cautious in
adding capacity once activity shows signs of recovery.
In the first quarter, integrated services and new Schlumberger
technologies helped increase production and operational efficiency
in North America.
In US land, the Department of Energy’s National Energy
Technology Laboratory and its partners, West Virginia University,
the operator Northeast Natural Energy LLC, and The Ohio State
University, formed the Marcellus Shale Energy and Environment
Laboratory (MSEEL) Consortium to monitor unconventional gas
production in wells in the Marcellus shale play. Schlumberger was
selected as the sole technology and service provider with the
objective of better understanding the wells’ long-term production
performance, environmental and social impact, to optimize
protective management and well treatment strategies for future
unconventional developments in the region. Schlumberger Integrated
Production Services designed a unique stimulation program that
maximized wellbore coverage. Wireline technologies included Quanta
Geo* photorealistic reservoir geology service and XL-Rock*
large-volume rotary sidewall coring service to identify a preferred
lateral landing target. A combination of Drilling &
Measurements technologies, notably PowerDrive Archer*
high-build-rate rotary steerable system, SonicPacer* acoustic shale
evaluation service, and PayZone Steering* well placement service
confined the horizontal wellbores in the target interval while
Invizion* well integrity services ensured effective zonal
isolation. Furthermore, WellWatcher Contact* MSS proppant placement
assurance system measured wellbore distributed temperature and
acoustic data in real time during fracturing to verify the
uniformity of the proppant placement. The project wells were
successfully completed and are now in production with encouraging
initial results.
In US land, Well Services used BroadBand Sequence* fracturing
service to refracture multiple wells for Enerplus Resources in the
Williston Basin in eastern Montana and western North Dakota.
Technical experts from various product lines working in a
Production Technology Integration Center helped the customer select
and rank the candidate wells. BroadBand* technology overcame the
challenges posed by the exposed wellbore and the need for effective
diversion by sequentially isolating fractures in the wellbore to
ensure each cluster in every zone was fractured and contributed to
the well’s production. A low viscosity composite fluid from the
BroadBand family of unconventional reservoir completion services
ensured adequate proppant suspension and avoided screen outs or
unwanted sand settling across the entire lateral section. Post-job
fracture gradient analysis on the wells indicated that new rock was
encountered, which resulted in a three-to-sixfold production
increase among four wells that were refractured.
In US land, Schlumberger Bits & Drilling Tools achieved
record footage drilled for BP Lower 48 in the Woodford shale
unconventional play. The IDEAS* integrated drillbit design
platform was used to customize an MDSi813 drillbit with RockStorm*
wear-resistant, high-impact polycrystalline diamond compact (PDC)
cutters. The fit-for-purpose design improved rate of
penetration (ROP) and reduced the number of bits required to drill
the lateral wellbore, resulting in a 71% improvement in footage
drilled compared to the average of the top 10 comparable offset
wells. This achievement resulted in an AFE savings of 24 days
and $1 million.
In North Dakota, Completions used Infinity* dissolvable
plug-and-perf technology for Zavanna in the Bakken Formation. The
Infinity system uses degradable fracturing balls and seats instead
of plugs to isolate zones during stimulation and is suitable for a
variety of applications and formation lithologies. A total depth
verification check on one high-temperature unconventional well that
used Infinity technology confirmed no remnants of the dissolvable
system remained. As a result, the customer saved 50 hours of
operating time on a second well by eliminating the need for
post-stimulation plug millout.
In California, Bits & Drilling Tools introduced StingBlade*
conical diamond element bit to drill three geothermal wells in
Sonoma and Lake Counties. In the past, the super-hard serpintine,
argilite, and graywacke rock of these formations caused severe bit
damage as well as short, slow runs with damaging vibration.
StingBlade technology increased the ROP by 97% compared to roller
cone runs, and averaged a 5% increase in footage.
In the US Gulf of Mexico, Wireline completed a 3D vertical
seismic profile data acquisition program for BP Exploration and
Production Inc. Using a 100-level receiver array conveyed on
wireline cable, Schlumberger set a new record with a total of
47,874 shots over a spiral survey grid with a cumulative distance
of 1,380 km.
In Canada, WesternGeco received underwriting for a deepwater 3D
multiclient survey covering more than 9,000 km2 in the Flemish Pass
offshore Newfoundland. Seismic acquisition will commence in the
second quarter of 2016 using IsoMetrix* marine isometric seismic
technology. The purpose-built WesternGeco Amazon Conqueror will tow
14 streamers during the summer and deliver its first images later
in the year. In 2017, measurement of an additional 9,000 km2 is
planned to provide contiguous high-resolution, long-offset,
broadband seismic data for the location.
International Areas
Revenue for the International Areas of $5.0 billion decreased
13% sequentially due to a combination of customer budget cuts,
activity disruptions, seasonal winter slow-downs, persistent
pricing pressures, and currency weaknesses.
Middle East & Asia Area revenue of $2.0 billion
declined 11% sequentially, due mainly to the seasonal winter
slowdown in China and lower activity in Australia and the
Asia-Pacific region as a result of customer budget cuts. These
factors led to lower rig counts, job deferrals, and project
cancellations. Revenue in the Middle East GeoMarkets was also lower
as solid activity in Kuwait, Egypt, and the United Arab Emirates
was more than offset by weaker revenue in the rest of the region
due to the effects of service pricing concessions and project
completions.
Europe/CIS/Africa Area revenue of $1.7 billion
dropped 18% sequentially, mainly in Russia and Central Asia due to
weakness in the Russian ruble and the seasonal winter slowdown.
Severe weather, lower exploration and project completions in the
North Sea and widespread project delays and job cancellations in
Sub-Saharan Africa also contributed to the drop in revenue.
Revenue in the Latin America Area of $1.3 billion
declined 9% sequentially, mainly on significantly lower activity in
Mexico & Central America and on customer budget cuts in the
Colombia & Peru, Brazil, and Argentina, Bolivia & Chile
GeoMarkets. These effects were partially offset by the start of a
new SPM project in Ecuador.
International Area pretax operating margin of 21% decreased 70
bps sequentially due to project cancellations, job delays, and
activity disruptions, particularly in the Europe/CIS/Africa Area.
Sequentially, Europe/CIS/Africa pretax operating margin decreased
194 bps to 19%, while the Latin America and the Middle East &
Asia Areas maintained their margins of 23% and 22%,
respectively.
Sequential decremental operating margin improved to 27% as
higher decrementals in Europe/CIS/Africa were offset by better
performance in the Latin America and Middle East & Asia Areas
due to prompt resource adjustments.
The first quarter saw a number of major events and contract
awards in the international areas that highlighted key areas of
Schlumberger performance in technology, integration, reliability
and efficiency.
In March, Schlumberger and the Saudi Aramco President and CEO
Amin H. Nasser inaugurated the state-of-the-art Middle East Center
for Reliability and Efficiency (CRE) in Dammam, Saudi Arabia. The
Middle East CRE is the newest and largest addition to the
Schlumberger network of high-efficiency centers dedicated to
advanced maintenance services for oilfield technologies and marks
another important milestone in the company’s pursuit of operational
excellence through our transformation program. In addition to the
Middle East CRE in the Kingdom of Saudi Arabia, the network
includes regional centers in Malaysia, Mexico and the United
States. Testing Services, which centralized its assets in the
Middle East CRE in 2015, has already achieved a 21% increase in
asset turnaround times.
In Kuwait, the Kuwait Oil Company awarded Schlumberger a
five-year contract valued at more than $450 million for the
engineering, procurement, construction, commissioning, and
operation of two facilities—one for Jurassic gas production in the
Sabriya field, and the other for heavy oil production in the Umm
Niqa field.
In China, CNOOC awarded Software Integrated Solutions (SIS) a
three-year contract for E&P software and related services,
which marks their fourth consecutive award. The contract includes
the Petrel* E&P software and Techlog* wellbore software
platforms, and the INTERSECT* high-resolution reservoir simulator.
The Petrel platform enables companies to standardize workflows from
exploration to production and make better informed decisions. The
contract award was based on the proven SIS track record in
delivering industry-leading software and superior technical support
services.
Also in China, PetroChina awarded Drilling & Measurements a
contract for 10 ultradeep and high-temperature wells in Ordovician
carbonate formations. The seismicVISION* seismic-while-drilling
service helped overcome uncertainties associated with heterogeneity
and variations in velocity and thickness in both shallow formations
and Permian volcanic rock. The well paths were redesigned to meet
the primary drilling targets and avoid drilling hazards. To date,
seven wells are already in production and are meeting the
customer’s expectations.
In Egypt, Testing Services was awarded a $60 million, three-year
contract by BP Egypt Company for completions installation and
commissioning services in the offshore West Nile Delta Taurus Libra
Field. With production expected to begin in 2017, Schlumberger will
provide the well testing package along with fast-acting control
subsea landing string services. Development drilling has begun in
this program that includes 21 wells and is expected to produce 1.2
Bcf/d, or approximately 25% of Egypt’s current gas production.
Offshore Libya, Mellitah Oil and Gas B.V. awarded Testing
Services and OneSubsea a contract for subsea landing string system
services during phase two development of the Bahr Essalam field.
The two-and-a-half year contract includes the deployment of SenTREE
7* completion subsea test tree technology to complete 13 gas wells.
SenTREE 7 technology, which can be customized for each job, is
rated to 10,000-psi working pressure and is a rapid and reliable
method to disconnect the completion landing string during an
emergency.
Offshore Mozambique, WesternGeco has begun a prefunded
14,500-km2 survey with the Western Trident and WG Amundsen using
IsoMetrix marine isometric seismic technology. This is the first
time that IsoMetrix technology will be used simultaneously by two
vessels working on the same project. The survey follows the success
of a 2D project by WesternGeco in Mozambique and reflects the
technology, local knowledge, and experience that WesternGeco has
developed in the area. The survey is expected to be completed in
the fourth quarter of 2016.
In Mexico, WesternGeco received additional precommitments from
several major oil companies for the multiyear Campeche deepwater
wide-azimuth multiclient project—the first of its kind in the
Mexican waters of the Gulf of Mexico. Campeche project deliverables
will provide information to oil companies for licensing rounds in
2016 and beyond as well as for future exploration and appraisal
activities in the area.
In the North Sea, Apache awarded WesternGeco a contract for a 4D
reservoir monitoring survey over 208 km2 in the Forties field and
its surrounding area with an optional extension. The survey will
use Q-Marine* point-receiver marine seismic technology, which is
significantly more repeatable than conventional acquisition
systems. WesternGeco has a long-standing partnership with Apache on
the Forties field, on which it has acquired seismic data since
2010, including two 4D surveys.
Schlumberger and BP won the Best Oil & Gas
Innovation/Technology Award in the subsurface category at the 2015
ADIPEC Conference in Abu Dhabi. The technical collaboration
included petrophysical rock typing coupled with mechanical models
that reflect local lithology and regional stress regimes, all of
which helped optimize the value of hydraulic fracture stimulation
in Oman’s Khazzan field. The innovative workflow benefited from a
thorough understanding of the field’s subsurface controls on
hydrocarbon storage capacity, flow capacity, mechanical
stratigraphy, and regional tectonic influences. The new method to
incorporate these effects has been developed through a proof of
concept to establish improved completion efficiency, superior
production, and significant cost savings compared to previous wells
in the Khazzan field.
Reservoir Characterization
Group
(Stated in millions, except margin percentages)
Three Months Ended Change Mar. 31,
2016 Dec. 31, 2015 Mar. 31, 2015
Sequential Year-on-year Revenue
$1,747 $2,193 $2,655
-20% -34% Pretax
operating income
331 521 672
-36% -51% Pretax
operating margin
19.0% 23.8% 25.3%
-480 bps -635
bps Decremental operating margin
43% 38%
Reservoir Characterization Group revenue of $1.7 billion
declined 20% sequentially, primarily due to seasonal winter
slowdowns and project cancellations that impacted Wireline
activities. Testing Services revenue declined significantly,
particularly in Brazil, while lower multiclient and SIS software
sales also contributed to the decline in the Group revenue.
Pretax operating margin of 19% declined 480 bps sequentially due
to reduced high-margin Wireline services. A decline in revenue from
multiclient and SIS software sales also contributed to a higher
sequential decremental margin.
A combination of transformation program gains, integrated
services benefits, and new technology deployments contributed to
Reservoir Characterization product line performance in a number of
locations during the first quarter.
In Malaysia, the Asia CRE in Port Klang uses advanced processes,
including reliability-centered maintenance to enhance field
equipment reliability, along with best practices to optimize asset
utilization. In 2015, Testing Services centralized its regional
downhole equipment fleet in the Asia CRE. The application of global
traceability and a LEAN maintenance process improved equipment
reliability and optimized maintenance costs, which led to a
reduction in material and supply expenses. In addition, faster
equipment turnaround times increased asset availability by 50%.
In North America, the transformation program enabled increases
in workforce productivity through a combination of multiskilling
and remote operations. When a customer in Canada needed resistivity
measurements in an unstable well that was cased after a failed
first logging attempt, the CHFR* cased-hole formation resistivity
tool was an ideal solution. Upon short notice, a CHFR field
engineer at the Houston Remote Operations Center provided support
to the Canadian field engineers at the wellsite to complete 11
hours of logging and final analysis. Similarly, the Center
fulfilled a customer request in Colorado using RSTPro* reservoir
saturation tool technology for reservoir evaluation. The customer
needed 24-hour operations to log 20 wells in four days. The Center
stepped in to cover the night operations and completed the job on
schedule with zero service quality incidents. The customer saved
operational costs due to remote operations and decreased exposure
to HSE risks.
The Schlumberger Integrated Services Management (ISM) multiyear
contract for Shell on the Sail and Drill project concluded in
February 2016 after drilling a total of five wells in three
countries—Benin, Turkey and Gabon. A total of 16,120 m were
drilled, complicated logistics were successfully managed, and the
project was considered an operational success. The ISM model,
including the collocation, integration, and aligned objectives of
the Shell and Schlumberger teams, led to world-class performance
with continuous improvement throughout the project. The customer
acknowledged the key role ISM played on the Sail and Drill project
in providing unparalleled support during unplanned events.
Offshore Romania, ISM completed a deepwater exploration project
in the Black Sea. The project consisted of seven wells with over
22,000 m drilled during nearly two years of operations, with a
combination of drilling, formation evaluation, and testing
technologies that spanned 10 different product lines. Drilling
technologies, which included the PowerDrive Xceed* rotary steerable
system and the Rhino XS* hydraulically expandable and Rhino XC*
on-demand hydraulically actuated reamers, set a record in the Black
Sea for the longest drilled 17½-in section of 1,551 m. Reservoir
characterization technologies included Quanta Geo photorealistic
reservoir geology service, the Saturn* 3D radial probe, and Muzic*
wireless telemetry. As a result, the wells were delivered within
the planned budget and met the customer’s program objectives.
In Abu Dhabi, SIS successfully completed deployment of the
Exploration & Production Information Solutions (EXPRIS) project
for Abu Dhabi National Oil Company and its operating companies.
Awarded to SIS in 2012, the contract entails deployment to more
than 1,000 users and provides them efficient and intuitive access
to a variety of geophysical, geological, drilling, well completion,
fluid sample analysis, well testing, and production data. EXPRIS is
built on the ProSource* E&P data management and delivery system
and allows users to apply the data in other technical applications,
thus enhancing user productivity as well as team integration.
In Brazil, Wireline used a TuffLINE* torque-balanced composite
wireline cable for Petrobras and set a new record for perforating
the longest interval in the shortest operational time in the Lula
pre-salt field. The TuffLINE* composite cable overcame the
challenging conditions of ultra-deepwater wells, perforating a
total of 134 m in 34 hours in 5 runs in the wells. This saved the
customer 29 hours of rig time.
In the Norwegian North Sea, Wireline carried out reservoir
formation testing and fluid sampling operations—including stress
testing in conglomeratic reservoirs, chalk and overburden shales—in
an appraisal well for Lundin Norway AS in the Edvard Grieg field.
Formation-testing-while-tripping technology effectively evaluated
permeability, anisotropy, and formation producibility, and captured
formation fluid samples in the oil bearing zones, and allowed
evaluation of permeability in the water zone. All services were
performed at 100% operating efficiency and provided essential input
to the customer’s mechanical earth model and field development
plan.
Offshore China, Wireline used a combination of reservoir
characterization technologies for CNOOC in an ultra-deepwater well
in the South China Sea. In conjunction with XL-Rock large-volume
rotary sidewall coring service and MDT* modular formation dynamics
tester technology, the MSCT* mechanical sidewall coring tool
replaced conventional core drilling methods. This combination of
Wireline technologies saved the customer $1.2 million and the job
was flawlessly executed with zero non-productive time.
Drilling Group
(Stated in millions, except margin percentages)
Three Months Ended Change Mar. 31,
2016 Dec. 31, 2015 Mar. 31, 2015
Sequential Year-on-year Revenue
$2,493 $2,953 $3,922
-16% -36% Pretax
operating income
371 494 778
-25% -52% Pretax
operating margin
14.9% 16.7% 19.8%
-183 bps -496
bps Decremental operating margin
27% 29%
Drilling Group revenue of $2.5 billion decreased 16%
sequentially from a sharp drop in drilling activity combined with
persistent pricing pressure, seasonal winter slowdowns, and
currency weaknesses that primarily impacted Drilling &
Measurements and M-I SWACO results.
Pretax operating margin of 15% contracted 183 bps sequentially
as revenue declined sharply on both lower activity and pricing
weakness. Decremental margin, however, was maintained sequentially
at 27% on prompt adjustment of resources.
In the first quarter, a combination of operational highlights,
transformation program gains, and new technology deployments
contributed to Drilling Group product line performance in locations
around the world.
Offshore Brazil, the Drilling Group drilled four challenging
pre-salt wells and one sidetrack for Repsol Sinopec during a
30-month campaign in the ultra-deepwater Campos basin. A total of
75 bottomhole assembly runs drilled more than 15 km. A
collaborative business model with technology integration enabled a
step-change in reliability and efficiency that led to completion of
the last of the four wells 26 days ahead of schedule. The Repsol
and Schlumberger engineering teams collaborated to create the best
well construction design. Improved commercial alignment was
established by using a performance-based model. A combination of
“while-drilling” technologies enhanced characterization of the
complex reservoir. Downhole drilling tool reliability, the use of
Standard Work Instructions, and the planning and coordination
support from ISM kept Drilling & Measurements nonproductive
time to less than 8 hours out of a total operating time of 7,300
hours. Drilling & Measurements multiskilled directional
drillers also used WELL COMMANDER* circulating tool technology and
the Rhino* integrated borehole enlargement system to increase
workforce productivity.
In Australia, the transformation program enabled Drilling &
Measurements to decrease operational costs using remote operations
for Chevron in Barrow Island. The Barrow Island CO2 injection
project, which includes 17 wells, is expected to be the largest
long-term CO2 storage project in the world with a planned injection
of 3.3 to 4 million tons of CO2 per year. By implementing remote
operations, Drilling & Measurements decreased operational
costs; reduced HSE risks; and reduced the environmental footprint.
In addition, the service delivery contributed to the 99.7%
efficiency in total operating time.
The transformation program also enabled increases in workforce
productivity through remote operations in US land. By establishing
a command center in the Permian basin, Drilling & Measurements
increased remote operations activity by 27% and reduced exposure to
HSE risks. As a result, ROP improved 82%, which reduced well costs
and delivery times for customers. In addition, operational
reliability in 2015 benefitted from a 31% improvement compared to
the previous year. Combined with these results, the remote
operations command center also helped balance field crew
loading.
The Drilling Group reached a milestone in the transformation
program by increasing workforce productivity through multiskilling
on operations for customers in Italy and Egypt. In Italy, drilling
fluids engineers were cross-trained to operate solids control
equipment, with directional drillers to operate specialized tools.
This reduced footprint at the rig site, decreased HSE risks, and
led to an increase in capacity equivalent to 33 man-years in 2015.
In Egypt, the Drilling Group was also able to increase workforce
productivity by multiskilling and remote operations with a total of
27 field engineers and directional drillers from Drilling &
Measurements, M-I SWACO, and Bits & Drilling Tools being
cross-trained to run bits. In combination with remote operations,
this resulted in decreased operational cost and increased capacity
equivalent to the work of 162 people.
Offshore Canada, Schlumberger completed a total of 500 days and
10,000 cumulative operational hours on a multiyear integrated
services contract for Statoil in deepwater in the Flemish Pass,
with no HSE incidents. A combination of technologies from Drilling
& Measurements, Smith Bits, M-I SWACO, Geoservices, and Bits
& Drilling Tools enabled Statoil to achieve a new net ROP
record of 190.1 m/h, through multiple, hard stringer
formations—surpassing the previous record established during the
same campaign in 2015.
Offshore Australia, Drilling & Measurements used GeoSphere*
reservoir mapping-while-drilling service for Quadrant Energy Ltd.
to drill 6 multilateral wells with 15 laterals in the Coniston
Field. The highly faulted nature of the reservoir meant that only
15 to 20% of the oil in place was recoverable, and well placement
was of the utmost importance to maximize recovery. GeoSphere
technology revealed subsurface bedding and fluid contact details
more than 100 ft from the wellbore, which allowed for optimum well
placement and also revealed previously undetected oil reserves. As
a result, the total depth of the laterals was extended by 11,155 ft
and the customer benefitted from expected increase of oil
recovery.
Offshore Mexico, M-I SWACO introduced dynamic pressure
management technologies for PEMEX to drill high-pressure and
high-temperature exploration wells in shallow water. The use of
managed pressure drilling in an offshore environment drilled
through a narrow operational window, eliminated fluid losses, and
increased drilling performance. The customer was able to confirm
the reservoirs and book additional oil reserves in one-third of the
conventional drilling time.
Offshore Norway, Bits & Drilling Tools used Stinger* conical
diamond element technology on a TCT two-cone customized drill bit
for Statoil to drill a vertical section in the Gymir well in Block
6706. The vertical section was drilled in a single run, and as a
result, Statoil achieved one of its fastest wells drilled from spud
to total depth by taking less than two weeks from rig setup to rig
move. In addition, the customer set a net ROP record of 92
m/hr.
In US Land, Bits & Drilling Tools ONYX 360* rolling cutter
drillbit technology improved drilling efficiency for QEP Energy
Company in the Pinedale Anticline of Wyoming. ONYX 360 drillbit
technology allows for the dissipation of heat during drilling
rotation, supporting drillbit durability in highly abrasive
formations. The application of ONYX 360 technology enabled the
customer to improve ROP and reduce the number of rig trips for bit
wear compared to offset wells, saving 11 hours of drilling time per
well.
Production Group
(Stated in millions, except margin percentages)
Three Months Ended Change Mar. 31,
2016 Dec. 31, 2015 Mar. 31, 2015
Sequential Year-on-year Revenue
$2,348 $2,632 $3,705
-11% -37% Pretax
operating income
208 302 544
-31% -62% Pretax
operating margin
8.9% 11.5% 14.7%
-258 bps -580
bps Decremental operating margin
33% 25%
Production Group revenue of $2.3 billion decreased 11%
sequentially with 74% of the decrease attributable to a further
decline in North America land activity as customer E&P spending
suffered another round of cuts, which led to a further decline in
rig count and increased pricing pressure. Before the new round of
cuts, market pricing for pressure pumping services was already at
unsustainable levels with a number of service companies in dire
financial condition.
Pretax operating margin of 9% decreased 258 bps sequentially
primarily from further pricing weakness in pressure pumping
services. Sequential decremental operating margin increased to 33%
due to higher decrementals in North America.
A variety of new Production Group product line technologies
helped customers meet technical challenges during the quarter by
increasing operational efficiency, accelerating production, and
enhancing recovery.
Schlumberger used a combination of technologies in Mexico
to achieve complete zonal isolation in two deepwater exploration
wells. Well Services Invizion well integrity services enabled the
integration of drilling, petrophysical, and geomechanical real-time
data to provide robust cementing designs that helped improve zonal
isolation and increased the success of stimulation treatments. In
addition, Drilling & Measurements SonicScope* multipole
sonic-while-drilling service provided compressional and shear
measurements to estimate pore pressure as well as fracture
gradients. These two technologies provided a comprehensive analysis
of the cementing jobs, and the high-quality zonal isolation enabled
the customer to avoid costly workover operations that can add
approximately $1.2 million per day in operating costs.
Offshore Ghana, Well Services used Invizion Evaluation* well
integrity evaluation service for Tullow Oil in the Jubilee field.
Invizion Evaluation technology ensured effective zonal isolation
for one well so the lessons learned could be applied to other
development wells. The evaluation helped optimize production and
avoided costly remedial operations that saved the customer $245,000
per well and rig time valued at $1.5 million.
In Ecuador, Artificial Lift successfully installed a ZEiTECS
Shuttle* rigless ESP replacement system in a well for ANDES
Petroleum. The plug-and-play design means that any standard ESP
assembly can be retrieved and redeployed without a rig using
wireline, coiled tubing, or sucker rods. The ZEiTECS Shuttle system
improved efficiency, reduced operating cost, minimized production
deferment, eliminated disruption to operations, and reduced HSE
risk.
In Oman, Schlumberger Well Services introduced FUTUR*
self-healing cement system for Petroleum Development Oman to
provide long-term zonal isolation in wells in the Saih Nihayda
field. FUTUR technology is self-repairing when it comes in contact
with hydrocarbons, successfully sealing pathways and restoring well
integrity without the need for well intervention. High-quality
zonal isolation enabled the customer to decrease exposure to HSE
risks as well as to potentially save the cost of drilling
replacement wells.
In the UK sector of the North Sea, Artificial Lift deployed
MaxFORTE* high-reliability electrical submersible pump technology
for Apache North Sea Ltd. in wells in the Forties field. The
extended run life of MaxFORTE technology compared to conventional
pump systems allows the customer to benefit from decreased workover
rig time, increased well uptime, and lower production
deferment.
Financial Tables
Condensed Consolidated Statement of
Income
(Stated in millions, except per share amounts)
Three Months Periods Ended March 31,
2016
2015 Revenue
$
6,520
$ 10,248 Interest and other income
45
49 Expenses Cost of revenue
5,460
8,096 Research & engineering
240
267 General & administrative
110
119 Restructuring & other (1)
-
439 Interest
133
82 Income before taxes
$
622
$ 1,294 Taxes on income (1)
99
306 Net income
523
988 Net income attributable to noncontrolling interests
22
13 Net income attributable to Schlumberger (1)
$
501
$ 975 Diluted earnings per share of
Schlumberger (1)
$
0.40
$ 0.76 Average shares outstanding
1,254
1,276 Average shares outstanding assuming dilution
1,259
1,285 Depreciation & amortization
included in expenses (2)
$
967
$ 1,042 (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 SPM investments.
Condensed Consolidated Balance Sheet
(Stated in millions)
Mar. 31, Dec. 31, Assets
2016 2015 Current Assets Cash
and short-term investments
$ 14,432 $ 13,034
Receivables
8,382 8,780 Other current assets
4,886 5,098
27,700 26,912
Fixed income investments, held to maturity
401 418 Fixed
assets
13,259 13,415 Multiclient seismic data
1,108
1,026 Goodwill
15,649 15,605 Intangible assets
4,551
4,569 Other assets
6,473
6,060
$ 69,141
$ 68,005 Liabilities and Equity
Current Liabilities Accounts payable and
accrued liabilities
$ 6,725 $ 7,727 Estimated
liability for taxes on income
1,269 1,203 Short-term
borrowings and current portion of long-term debt
4,254 4,557
Dividends payable
632
634
12,880 14,121 Long-term debt
17,233 14,442
Postretirement benefits
1,392 1,434 Deferred taxes
923 1,075 Other liabilities
1,051 1,028
33,479 32,100 Equity
35,662 35,905
$ 69,141 $ 68,005
Net Debt
“Net Debt” represents gross debt less cash, short-term
investments and fixed income investments, held to maturity.
Management believes that Net Debt provides useful information
regarding the level of Schlumberger’s indebtedness by reflecting
cash and investments that could be used to repay debt.
Details of changes in Net Debt follow: (Stated in millions)
Periods Ended March 31,
ThreeMonths2016
ThreeMonths2015
Net income before noncontrolling
interests $ 523 $ 988 Restructuring and other charges, net of tax
- 383
Net income before
noncontrolling interest, excluding charges & credits
523 1,371 Depreciation and amortization (1) 967 1,042
Pension and other postretirement benefits expense 60 114
Stock-based compensation expense 61 80 Pension and other
postretirement benefits funding (45 ) (120 ) Increase in working
capital (2) (463 ) (770 ) Other 107 53
Cash flow from operations 1,210
1,770 Capital expenditures (549 ) (606 ) SPM
investments (597 ) (109 ) Multiclient seismic data capitalized
(167 ) (101 )
Free cash flow (3)
(103 ) 954 Stock
repurchase program (475 ) (719 ) Dividends paid (629 ) (512 )
Proceeds from employee stock plans 163 182
(1,044 ) (95 )
Business acquisitions and investments, net of cash acquired
plus debt assumed (81 ) (79 ) Other 18 74
Increase in Net Debt (1,107 ) (100 ) Net Debt, beginning of
period (5,547 ) (5,387 ) Net Debt $ (6,654 ) $ (5,487
) Components of Net Debt
Mar. 31,2016
Dec. 31,2015
Mar. 31,2015
Cash and short-term investments $ 14,432 $ 13,034 $ 6,803 Fixed
income investments, held to maturity 401 418 436 Short-term
borrowings and current portion of long-term debt (4,254 ) (4,557 )
(3,828 ) Long-term debt (17,233 ) (14,442 )
(8,898 ) $ (6,654 ) $ (5,547 ) $ (5,487 ) (1) Includes
depreciation of property, plant and equipment and amortization of
intangible assets, multiclient seismic data costs and SPM
investments. (2) Includes severance payments of
approximately $260 million and $245 million during the three months
ended March 31, 2016 and March 31, 2015, respectively. (3)
"Free cash flow" represents cash flow from operations less capital
expenditures, SPM investments and multiclient seismic data
capitalized. Management believes that this is an important measure
because it represents funds available to reduce debt and pursue
opportunities that enhance shareholder value such as making
acquisitions, and returning cash to shareholders through stock
repurchases and dividends.
Charges & Credits
In addition to financial results determined in accordance
with US generally accepted accounting principles (GAAP), this
First-Quarter Earnings Release and Supplemental Information also
include non-GAAP financial measures (as defined under the SEC’s
Regulation G). The following is a reconciliation of these non-GAAP
measures to the comparable GAAP measures: (Stated in
millions, except per share amounts)
Fourth Quarter
2015 Pretax Tax
Noncont.Interest
Net Diluted
EPS
Schlumberger net income, excluding charges & credits $ 1,034 $
188 $ 27 $ 819 $ 0.65 Fixed asset impairments (776 ) (141 )
- (635 ) Workforce reduction (530 ) (51 ) - (479 ) Inventory
write-downs (269 ) (27 ) - (242 ) Impairment of SPM project in
Colombia (182 ) (36 ) - (146 ) Facility closures (177 ) (37 ) -
(140 ) Geopolitical events (77 ) - - (77 ) Contract terminations
(41 ) (2 ) - (39 ) Other (84 ) (7 ) -
(77 ) Schlumberger net loss, as reported $ (1,102 ) $ (113 ) $ 27 $
(1,016 ) $ (0.81 )
First Quarter 2015 Pretax Tax
Noncont.Interest
Net Diluted
EPS
Schlumberger net income, excluding charges & credits $ 1,733 $
362 $ 13 $ 1,358 $ 1.06 Workforce reduction (390 ) (56 ) -
(334 ) Currency devaluation loss in Venezuela (49 ) -
- (49 ) Schlumberger net income, as reported $
1,294 $ 306 $ 13 $ 975 $ 0.76
There were no charges or credits during
the first quarter of 2016.
Product Groups (Stated in millions)
Three Months Ended Mar. 31, 2016 Dec.
31, 2015 Mar. 31, 2015
Revenue
IncomeBeforeTaxes
Revenue
IncomeBeforeTaxes
Revenue
IncomeBeforeTaxes
Reservoir Characterization
$ 1,747 $
331 $ 2,193 $ 521 $ 2,655 $ 672 Drilling
2,493
371 2,953 494 3,922 778 Production
2,348 208
2,632 302 3,705 544 Eliminations & other
(68 )
(9 ) (34 ) (29 ) (34 ) (1 )
Pretax operating income
901 1,288 1,993 Corporate &
other
- (172 ) - (179 ) - (192 ) Interest
income(1)
- 13 - 8 - 8 Interest expense(1)
-
(120 ) - (83 ) - (76 ) Charges & credits
- - -
(2,136 ) - (439 )
$ 6,520
$ 622 $ 7,744 $ (1,102 ) $ 10,248
$ 1,294
Geographic Areas (Stated
in millions)
Three Months Ended Mar. 31, 2016 Dec.
31, 2015 Mar. 31, 2015
Revenue
IncomeBeforeTaxes
Revenue
IncomeBeforeTaxes
Revenue
IncomeBeforeTaxes
North America
$ 1,464 ($10 ) $ 1,955 $
139 $ 3,222 $ 416 Latin America
1,280 296 1,407 324
1,648 354 Europe/CIS/Africa
1,698 320 2,059 428 2,538
532 Middle East & Asia
2,002 446 2,248 507 2,703
774 Eliminations & other
76 (151 )
75 (110 ) 137 (83 ) Pretax operating income
901 1,288 1,993 Corporate & other
- (172
) - (179 ) - (192 ) Interest income(1)
- 13 -
8 - 8 Interest expense(1)
- (120 ) - (83 ) -
(76 ) Charges & credits
- -
- (2,136 ) - (439
)
$ 6,520 $ 622 $ 7,744
$ (1,102 ) $ 10,248 $ 1,294
(1) Excludes interest included in the
Product Groups and Geographic Areas results.
Supplemental Information
1)
What is the definition of decremental
operating margin?
Decremental operating margin is equal to the ratio of the change in
pretax operating income over the change in revenue.
2)
What were the pretax operating income
margin and decremental operating margin for the first quarter of
2016?
For the first quarter of 2016, the pretax operating income margin
was 13.8%. The year-over-year decremental operating margin was 29%
and the sequential decremental operating margin was 32%.
3)
What was the free cash flow for the
first quarter of 2016?
Free cash flow, was -$103 million for the first quarter of 2016 and
included approximately $260 million of severance payments, $597
million of SPM investments, $549 million of capex, and $167 million
of multiclient seismic data.
4)
What is the capex guidance for the full
year 2016?
Capex (excluding multiclient, SPM investments and Cameron) is
expected to be $2.0 billion for 2016. Cameron capex in the first
quarter of 2016 was $37 million and is expected to be $200 million
for 2016.
5)
What was included in “Interest and
other income” for the first quarter of 2016?
“Interest and other income” for the first quarter of 2016 was $45
million. This amount consisted of earnings of equity method
investments of $25 million and interest income of $20 million.
6)
How did interest income and interest
expense change during the first quarter of 2016?
Interest income of $20 million increased $6 million sequentially.
Interest expense of $133 million increased $42 million
sequentially.
7)
What is the difference between pretax
operating income and Schlumberger’s consolidated income before
taxes?
The difference principally consists of corporate items (including
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.
8)
What was the effective tax rate (ETR),
excluding charges and credits, for the first quarter of 2016? The
ETR for the first quarter of 2016, excluding charges and credits,
was 15.9% as compared to 18.2% for the fourth quarter of
2015.
The ETR for the fourth quarter of 2015, including charges
and credits, was 10.2%.
9)
How many shares of common stock were
outstanding as at March 31, 2016 and how did this change from the
end of the previous quarter?
There were 1.252 billion shares of common stock outstanding as of
March 31, 2016. The following table shows the change in the number
of shares outstanding from December 31, 2015 to March 31, 2016.
(Stated in millions) Shares outstanding at December
31, 2015 1,256 Shares sold to optionees, less shares
exchanged 1 Vesting of restricted stock - Shares issued under
employee stock purchase plan 2 Stock repurchase program (7 )
Shares outstanding at March 31, 2016
1,252
10)
What was the weighted average number of
shares outstanding during the first quarter of 2016 and fourth
quarter of 2015 and 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 during the first
quarter of 2016 and fourth quarter of 2015 was 1.254 billion and
1.259 billion, respectively. The following is a reconciliation of
the weighted average shares outstanding to the average number of
shares outstanding, assuming dilution. (Stated
in millions)
First Quarter 2016
Fourth Quarter2015
Weighted average shares outstanding
1,254
1,259 Assumed exercise of stock options
1
2 Unvested restricted stock
4
3 Average shares outstanding, assuming dilution
1,259
1,264
11)
What were multiclient sales in the
first quarter of 2016?
Multiclient sales, including transfer fees, were $77 million in the
first quarter of 2016 and $117 million in the fourth quarter of
2015.
12)
What was the WesternGeco backlog at the
end of the first quarter of 2016?
WesternGeco backlog, which is based on signed contracts with
customers, was $966 million at the end of the first quarter of
2016. It was $1.13 billion at the end of the fourth quarter of
2015.
13)
What were the orders and backlog for
Cameron’s Subsea and Drilling segments?
Subsea and Drilling orders and backlog were as follows:
(Stated in millions)
Orders
First Quarter 2016
Fourth Quarter2015
Subsea
$ 305 $ 481
Drilling
$ 150
$ 169
Backlog (at the end of period) Subsea
$
2,870 $ 3,011 Drilling
$ 1,308
$ 1,611
About Schlumberger
Schlumberger is the world’s leading supplier of technology,
integrated project management and information solutions to
customers working in the oil and gas industry worldwide. Employing
approximately 93,000 people representing over 140 nationalities and
working in more than 85 countries, Schlumberger provides the
industry’s widest range of products and services from exploration
through production.
Schlumberger Limited has principal offices in Paris, Houston,
London and The Hague, and reported revenues of $35.47 billion in
2015. For more information, visit www.slb.com.
*Mark of Schlumberger or of Schlumberger companies.
Notes
Schlumberger will hold a conference call to discuss the above
announcement and business outlook on Friday, April 22, 2016. The
call is scheduled to begin at 8:00 a.m. (US Central Time), 9:00
a.m. (Eastern Time) and 3:00 p.m. (Paris time). To access the call,
which is open to the public, please contact the conference call
operator at +1 (800) 288-8967 within North America, or +1 (612)
333-4911 outside of North America, approximately 10 minutes prior
to the call’s scheduled start time. Ask for the “Schlumberger
Earnings Conference Call.” At the conclusion of the conference call
an audio replay will be available until May 22, 2016 by dialing +1
(800) 475-6701 within North America, or +1 (320) 365-3844 outside
of North America, and providing the access code 385312.
The conference call will be webcast simultaneously at
www.slb.com/irwebcast on a listen-only basis. Please log in 15
minutes ahead of time to test your browser and register for the
call. A replay of the webcast will also be available at the same
web site until June 30, 2016.
This first-quarter 2016 earnings release and supplemental
information, 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; capital expenditures by Schlumberger and
the oil and gas industry; the business strategies of Schlumberger’s
customers; the integration of Cameron into our business; the
anticipated benefits of the Cameron transaction; the success of
Schlumberger’s joint ventures and alliances; future global economic
conditions; and future results of operations. These statements are
subject to risks and uncertainties, including, but not limited to,
global economic conditions; changes in exploration and production
spending by Schlumberger’s customers and changes in the level of
oil and natural gas exploration and development; general economic,
political and business conditions in key regions of the world;
foreign currency risk; pricing erosion; 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
inability to successfully integrate Cameron and to realize expected
synergies; the inability to retain key employees; and other risks
and uncertainties detailed in this first-quarter 2016 earnings
release and Supplemental Information and our most recent Forms
10-K, 10-Q and 8-K filed with or furnished to the Securities and
Exchange Commission. If one or more of these or other risks or
uncertainties materialize (or the consequences of any such
development changes), or should our underlying assumptions prove
incorrect, actual outcomes may vary materially from those reflected
in our forward-looking statements. Schlumberger disclaims any
intention or obligation to update publicly or revise such
statements, whether as a result of new information, future events
or otherwise.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160421006646/en/
Schlumberger LimitedSimon Farrant – Schlumberger Limited, Vice
President of Investor RelationsJoy V. Domingo – Schlumberger
Limited, Manager of Investor RelationsOffice +1 (713)
375-3535investor-relations@slb.com
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