Market Overview

Schlumberger Announces First-Quarter 2018 Results

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  • Revenue of $7.8 billion decreased 4% sequentially
  • Pretax operating income of $974 million decreased 16% sequentially
  • EPS was $0.38
  • Cash flow from operations was $568 million

Schlumberger Limited (NYSE:SLB) today reported results for the first
quarter of 2018.

 
       

 

     

(Stated in millions, except

per share amounts)

Three Months Ended Change
Mar. 31, 2018     Dec. 31, 2017     Mar. 31, 2017 Sequential     Year-on-year
Revenue $7,829 $8,179 $6,894 -4% 14%
Pretax operating income $974 $1,155 $757 -16% 29%
Pretax operating margin 12.4% 14.1% 11.0% -169 bps 145 bps
Net income (loss) - GAAP basis $525 $(2,255) $279 n/m 88%
Net income, excluding charges & credits* $525 $668 $347 -21% 51%
Diluted EPS (loss per share) - GAAP basis $0.38 $(1.63) $0.20 n/m 90%
Diluted EPS, excluding charges & credits* $0.38 $0.48 $0.25 -21% 52%
 
*These are non-GAAP financial measures. See section below entitled
"Charges & Credits" for details.
n/m = not meaningful
 

Schlumberger Chairman and CEO Paal Kibsgaard commented, "As forecast,
our results in the first quarter of 2018 largely reflected transitory
factors, with seasonal reductions in activity in the Northern Hemisphere
and planned project startup costs including the equipment mobilization,
reactivation, and redeployment associated with recent contract wins.

"The underlying international businesses started the year well, as
business units in the Middle East, the North Sea, and Russia were all in
line with our first-quarter activity expectations, while activity
upsides in Asia were offset by continued weakness in Latin America and
Africa.

"On land in North America, our Drilling services business continued to
grow, driven by strong demand for horizontal drilling technologies.
Revenue also increased due to the ramp-up of activity in Canada. The US
land pressure pumping business, however, was impacted by weaker than
expected activity as well as by softer pricing, inefficiency, rising
supply chain costs, and rail logistical challenges. In spite of this, we
continued to deploy available fracturing assets, including equipment
from our newly acquired capacity. We expect the US land hydraulic
fracturing market to improve during the second quarter, both in terms of
pricing and in operational efficiency and, therefore, we are continuing
with our aggressive fleet reactivation and recommissioning program.

"Overall, the first-quarter sequential revenue decline was led by the
Cameron Group, which fell 7%, driven by seasonally lower project volumes
and reduced product sales. Reservoir Characterization Group revenue
decreased 5% sequentially due to the seasonal reduction in sales of SIS
software and WesternGeco multiclient seismic licenses. Drilling Group
and Production Group revenues were respectively 2% and 4% lower
sequentially, also as a result of the seasonal reductions in activity in
the Northern Hemisphere.

"Looking at the global oil market, the absence of global stock builds in
the first quarter, supported by the OPEC- and Russia-led production
cuts, confirm that the oil market is in balance. More importantly, after
three consecutive years of dramatic underinvestment in global E&P
spending, the worldwide production base has started to show the
anticipated signs of weakness with noticeable year-over-year production
declines appearing in several countries such as Angola, Norway, Mexico,
Malaysia, China, and Indonesia. With Libya and Nigeria producing at
near-full capacity, Venezuelan production in free fall, the potential of
new sanctions against Iran, and rising geopolitical risks, the only
major sources of short-term supply growth to address global production
decline and strong worldwide demand are Saudi Arabia, Kuwait, the UAE,
Russia, and the US shale oil industry. However, production challenges in
US shale are emerging that are linked to infill drilling well-to-well
interference, the potential lower production of step-out drilling from
Tier 1 acreage, and significant infrastructure constraints. It is,
therefore, becoming increasingly likely that the industry will face
growing supply challenges over the coming year and a significant
increase in global E&P investment will be required to minimize the
impending deficit.

"We remain optimistic about the outlook for sustainable activity growth
in our global business over the course of 2018 and into 2019. This is
driven by higher customer activity and our ability to capture a major
share of the emerging opportunities as performance-based contracts and
integrated projects continue to gain traction as the preferred business
models for many of our customers. Recent contract awards, which include
the major lump-sum turnkey (LSTK) contracts in Saudi Arabia, additional
wins elsewhere in the Middle East and Latin America, and new projects in
the US Delaware Basin, are examples of this market trend. Our increased
R&E focus in recent years on systems innovation and design is now
enabling us to create additional value for both our customers and
Schlumberger on these projects. This is achieved by integrating a new
generation of purpose-built hardware and software with our deep domain
expertise and the latest advances in digital technologies.

"Therefore, we are excited about the outlook for Schlumberger. We are
ready and primed to deliver superior growth, financial returns, and free
cash flow in the coming years by building on the broadest technology
offering and expertise in the industry, our unmatched scale and
operational efficiency, strong capital discipline, and a clear desire to
provide industry-leading cash returns to our shareholders."

Other Events

During the quarter, Schlumberger repurchased 1.4 million shares of its
common stock at an average price of $69.79 per share, for a total
purchase price of $97 million.

On February 23, 2018, Schlumberger and Subsea 7 S.A. announced that they
entered into exclusive negotiations to form a joint venture that builds
on the success of Subsea Integration Alliance, which was established in
2015. The joint venture will be owned 50% by Subsea 7 and 50% by
Schlumberger.

On April 18, 2018, the Company's Board of Directors approved a quarterly
cash dividend of $0.50 per share of outstanding common stock, payable on
July 13, 2018 to stockholders of record on June 6, 2018.

Consolidated Revenue by Area

 
       

 

   

(Stated in millions)

Three Months Ended Change
Mar. 31, 2018     Dec. 31, 2017     Mar. 31, 2017 Sequential     Year-on-year
North America

$2,835

$2,811 $1,871 1% 52%
Latin America 870 1,034 952
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