- Fourth-quarter revenue of $8.2 billion
increased 3% sequentially
- Fourth-quarter pretax operating income
of $1.2 billion increased 9% sequentially
- Fourth-quarter GAAP loss per share,
including charges of $2.11 per share, was $1.63
- Fourth-quarter EPS, excluding charges,
was $0.48
- Full-year and fourth-quarter cash flow
from operations were $5.7 billion and $2.3 billion,
respectively
Schlumberger Limited (NYSE:SLB) today reported results for
full-year 2017 and the fourth quarter of 2017.
Full-Year Results
(Stated in millions, except per share amounts)
Twelve Months Ended Change Dec. 31,
2017 Dec. 31, 2016
Year-on-year Revenue
$30,440 $27,810
9% Pretax operating income
$3,921 $3,273
20% Pretax operating margin
12.9% 11.8%
111 bps Net loss (GAAP basis)
$(1,505) $(1,687)
n/m Net income, excluding charges
and credits*
$2,085 $1,550
35% Diluted EPS (loss per
share) (GAAP basis)
$(1.08) $(1.24)
n/m Diluted EPS,
excluding charges and credits*
$1.50 $1.14
32%
*These are non-GAAP financial measures. See section below entitled
"Charges & Credits" for details. n/m = not meaningful
Full-year 2017 revenue of $30.4 billion increased 9%
year-on-year. This included a full year’s activity from the
acquired Cameron businesses as compared to three quarters of
activity in 2016. Excluding the addition of Cameron, revenue growth
was driven by land activity in North America, which increased by
82% in line with the increase in rig count. Full-year Production
Group revenue increased 21%, Reservoir Characterization Group
revenue improved 2%, and Drilling Group revenue declined 2%.
Full-year 2017 pretax operating income grew 20% and pretax
operating margin of 13% expanded 111 basis points (bps). This was
driven by improved profitability in North America due to the growth
in land activity that benefited both the Production and Drilling
Groups.
Fourth-Quarter Results
(Stated in millions, except per share amounts)
Three Months Ended Change Dec. 31, 2017
Sept. 30, 2017 Dec. 31, 2016
Sequential
Year-on-year Revenue
$8,179 $7,905 $7,107
3%
15% Pretax operating income
$1,155 $1,059 $810
9% 43% Pretax operating margin
14.1% 13.4%
11.4%
73 bps 272 bps Net income (loss) - GAAP basis
$(2,255) $545 $(204)
n/m n/m Net income,
excluding charges & credits*
$668 $581 $379
15%
76% Diluted EPS (loss per share) - GAAP basis
$(1.63)
$0.39 $(0.15)
n/m n/m Diluted EPS, excluding charges
& credits*
$0.48 $0.42 $0.27
14% 78%
*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, “We
closed the year with fourth-quarter revenue growing 3% sequentially
while pretax operating income rose 9%. Sequential growth was driven
by strong activity in North America, Saudi Arabia, and Latin
America, while revenue in the Europe, CIS, and Africa Area
seasonally declined. Earnings per share of $0.48, excluding
charges, were 14% higher than the third quarter.
“Among the business segments, the fourth-quarter revenue
increase was led by the Production Group, which grew by 7%.
Production Group performance was driven by strong international
activity, with more than 20% sequential growth in Saudi Arabia,
Russia, and Argentina. In North America land, revenue grew 6%
following the redeployment of additional pressure pumping fleets,
despite a slight sequential decline in market activity.
“Cameron Group revenue increased 9% sequentially with growth
across all product lines led by OneSubsea, on higher project volume
and increased service revenue. Drilling Group revenue had more
modest sequential growth of 3%, driven by strong M-I SWACO sales in
Mexico and North America and increased Integrated Drilling Services
activity in Kuwait. Reservoir Characterization Group revenue
decreased 8% sequentially, as the seasonal decline in Wireline
activity in Russia and lower revenue on a long-term project in the
Middle East were partially offset by year-end sales of SIS software
and WesternGeco multiclient seismic licenses.
“Pretax operating margin grew 73 bps sequentially to 14.1%
driven by improved profitability in the Production, Drilling, and
Reservoir Characterization Groups.
“Over the past three years of unprecedented market downturn, we
have proactively sought to strengthen our technology offering and
our market presence in key markets around the world, with the
expansion of our hydraulic fracturing presence in North America
land being the most recent example. In line with the challenging
business environment over the same period, we have restructured all
relevant parts of the company, in terms of size and organizational
set-up, to maximize our market competitiveness and operational
agility.
“With the significant changes seen in customer priorities and
buying habits in recent years, we have also continued to evaluate
the present and future return prospects for all of our product
lines, as we look to maximize all aspects of the Company’s
long-term financial performance. Based on this in-depth analysis,
the only product line that does not meet our return expectations
going forward, even factoring in an eventual market recovery, is
our seismic acquisition business. We have therefore taken the
difficult decision to exit the marine and land seismic acquisition
market, and instead turn our WesternGeco product line into an
asset-light business, built on our leading position within
multiclient, data processing, and geophysical interpretation
services.
“Looking at the oil market, the strong growth in demand is
projected to continue in 2018, on the back of a robust global
economy. On the supply side, the extension of the OPEC- and
Russia-led production cuts is already translating into
higher-than-expected inventory draws. In North America, 2018 shale
oil production is set for another year of strong growth, as the
positive oil market sentiments will likely increase both investment
appetite and availability of financing. At the same time, the
production base in the rest of the world is showing fatigue after
three years of unprecedented underinvestment. The underlying signs
of weakness will likely become more evident in the coming year, as
the production additions from investments made in the previous
upcycle start to noticeably fall off. All together this means the
oil market is now in balance and the previous oversupply discount
is gradually being replaced by a market tightness premium, which
makes us increasingly positive on the global outlook for our
business.
“These positive oil market sentiments are reflected in the
third-party E&P spend surveys, which predict 15–20% growth in
North American investments in 2018, while the international market
is expected to grow for the first time in four years, with a
projected 5% increase in spend. So, as we enter the first year of
growth in all parts of our global operations since 2014, there is
renewed excitement and enthusiasm throughout our organization, and
we remain committed to delivering market-leading products and
services to our customers, and superior returns to our
shareholders.”
Other Events
During the quarter, Schlumberger repurchased 1.6 million shares
of its common stock at an average price of $64.82 per share for a
total purchase price of $101 million.
On December 7, 2017, Schlumberger Production Management (SPM)
and Torxen Energy, a private Canadian E&P company, completed
the purchase of the Palliser Block asset located in Alberta,
Canada, from Cenovus Energy, an integrated Canadian oil
company.
In December 2017, Schlumberger announced plans to develop a
state-of-the-art industrial manufacturing center at the King Salman
Energy Park in the Kingdom of Saudi Arabia. The 500,000-m2 center
will manufacture products for drilling, exploration, production,
and midstream operations. The first phase is expected to be
completed in the second quarter of 2018.
On December 29, 2017, Schlumberger purchased the US hydraulic
fracturing and pumpdown perforating businesses from Weatherford for
$430 million. Schlumberger took ownership of Weatherford’s US-based
facilities, field assets, and supplier and customer contracts
related to these businesses. This transaction will expand the
Schlumberger OneStimSM business.
On January 17, 2018, the Company’s Board of Directors approved a
quarterly cash dividend of $0.50 per share of outstanding common
stock, payable on April 13, 2018 to stockholders of record on
February 7, 2018.
Consolidated Revenue by Area
(Stated in millions)
Three Months Ended
Change Dec. 31, 2017 Sept. 30, 2017
Dec. 31, 2016
Sequential Year-on-year North
America
2,811 $2,602 $1,765
8% 59% Latin
America
1,034 952 952
9% 9% Europe/CIS/Africa
1,808 1,838 1,834
-2% -1% Middle East &
Asia
2,396 2,357 2,494
2% -4% Other
130
157 62
n/m n/m $8,179 $7,905 $7,107
3%
15% North America revenue
$2,811 $2,602 $1,765
8% 59% International revenue
$5,237 $5,147
$5,280
2% -1% n/m = not meaningful
Fourth-quarter revenue of $8.2 billion increased 3%
sequentially, with North America growing 8% and International
increasing 2%.
North America
North America Area revenue grew 8% sequentially on
increased land activity and improved pricing, while offshore
revenue increased due to WesternGeco year-end multiclient seismic
license sales. North America land revenue grew 5% sequentially
despite a 1% decline in total market stage count. This increase was
mostly driven by OneStim activity, which was boosted by additional
fleet redeployments. Drilling Group revenue in North America land
increased due to the continued high demand for longer lateral
sections in shale oil wells. Increased Cameron Surface and Drilling
Systems product sales and services also contributed to higher
revenue in North America.
International
Revenue in the Latin America Area increased 9%
sequentially due to increased Drilling and Production Group
activities in Argentina and Colombia. SPM project revenue in
Ecuador was essentially flat, while revenue in the Mexico &
Central America GeoMarket declined following the strong WesternGeco
multiclient seismic license sales recorded in the third quarter.
Higher project volume for OneSubsea also contributed to increased
revenue in the Area.
Given the recent economic and political developments in
Venezuela, Schlumberger determined that it was appropriate to
write-down its investment in the country. As a result, Schlumberger
recorded a charge of $938 million during the fourth quarter of
2017.
Europe/CIS/Africa Area revenue declined 2%
sequentially as peak summer activity ended in Russia, the North
Sea, and Continental Europe. This decline, however, was partially
offset by strong SIS software sales as well as increased sales of
Completions, Artificial Lift, and Bits & Drilling Tools
products across the Area. Sub-Saharan Africa revenue declined
sequentially from lower activity in Congo as well as from the
absence of WesternGeco multiclient seismic license sales in
Mozambique recorded in the third quarter.
Middle East & Asia Area revenue increased 2%
sequentially due to strong Integrated Production Services (IPS)
project activity in the Saudi Arabia & Bahrain GeoMarket. This
increase was partially offset by lower revenue as a result of a
change in estimate on a long-term construction project in the
Middle East that is accounted for under the
percentage-of-completion method. Activity was higher for the
Production and Drilling Groups in the Eastern Middle East and Far
East Asia & Australia GeoMarkets, with notably stronger
Integrated Drilling Services (IDS) project activity in Kuwait.
Increased Valves & Measurement product sales and higher project
volume for OneSubsea in Australia also contributed to increased
revenue in the Area.
Reservoir Characterization Group
(Stated in millions)
Three Months Ended
Change Dec. 31, 2017 Sept. 30, 2017
Dec. 31, 2016
Sequential Year-on-year Revenue
$1,638 $1,771 $1,676
-8% -2% Pretax operating
income
$360 $311 $319
16% 13% Pretax operating
margin
22.0% 17.6% 19.0%
441 bps 294 bps
Reservoir Characterization Group revenue of $1.6 billion, of
which 74% came from the international markets, decreased 8%
sequentially. This was driven by the effects of a seasonal decline
in Wireline activity in Russia and by a change in estimate on a
long-term project in the Middle East. This decline was partially
offset by year-end sales of SIS software and WesternGeco
multiclient seismic licenses. Geographically, increased sales of
SIS software were recorded across a number of GeoMarkets, while
higher sales of WesternGeco multiclient seismic licenses in the US
Gulf of Mexico were partially offset by lower license sales in the
Mexico & Central America GeoMarket.
Pretax operating margin of 22% was 441 bps higher sequentially,
supported by increased contributions of high-margin SIS software
and WesternGeco multiclient seismic license sales, as well as the
impact of the accounting for the long-term project in the Middle
East.
Reservoir Characterization Group performance was enhanced by
Integrated Services Management (ISM) operations and strengthened by
contract awards and new technology deployments.
BP awarded Schlumberger an ISM contract for the well
construction of five to eight development wells in the Mad Dog 2
project in the US Gulf of Mexico. The scope of work in this
performance contract includes all drilling-related services with a
goal of achieving lower well construction costs while maintaining
safety, reliability, and integrity requirements.
In Indonesia, ISM drilled 13 wells for KS ORKA for the Sorik
Marapi Geothermal project in North Sumatra. This included the
deployment of technologies and services from six different product
lines, such as the Xtreme* high-pressure, high-temperature well
logging platform and i-DRILL* integrated dynamic system analysis
service. This resulted in 99.9% operating efficiency in this
challenging high-temperature environment.
Schlumberger announced at the SIS Global Forum in Paris, France,
that BP will be a strategic partner on the DrillPlan* digital well
construction planning solution and on a future execution solution
focused on the drilling of a well. BP will pilot these solutions
during its development of the Khazzan field in Oman. The DrillPlan
solution is the first step in the DELFI* cognitive E&P
environment. This technology has the potential to deliver a well
planning program in days rather than weeks and is part of a fully
integrated well construction offering.
In December, Schlumberger inaugurated the newly expanded
reservoir rock and fluid analysis laboratory in Houston, Texas. The
laboratory enables petrotechnical experts to better leverage
physical and digital rock and fluid analysis for comprehensive
reservoir characterization. Integrating data and insight from field
and laboratory measurements conducted at this new facility into the
DELFI cognitive E&P environment will enhance collaboration
across E&P teams to realize the full potential of all available
data and science in optimizing oil and gas assets.
In South Texas, Wireline deployed a combination of technologies
for Chesapeake Operating LLC to complete the second largest
microseismic fracture characterization project in North America in
the JJ Henry field. The technologies included VSI* versatile
seismic imager arrays positioned horizontally by a TuffTRAC* cased
hole services tractor to enable real-time mapping of experimental
unconventional resource stimulation designs. Analysis of this data
will enable the customer to derisk decisions affecting stimulation
design and well placement.
Drilling Group
(Stated in millions)
Three Months Ended
Change Dec. 31, 2017 Sept. 30, 2017
Dec. 31, 2016
Sequential Year-on-year Revenue
$2,180 $2,120 $2,013
3% 8% Pretax operating
income
$319 $301 $234
6% 36% Pretax operating
margin
14.6% 14.2% 11.6%
43 bps 300 bps
Drilling Group revenue of $2.2 billion, of which 73% came from
the international markets, increased 3% sequentially driven by
strong M-I SWACO sales in Mexico and North America land, as well as
increased IDS activity in Kuwait. Higher drilling activity in
Argentina and Colombia, new drilling project startups in Qatar and
China, the restart of onshore activity in Libya, and increased
drillbit sales in Algeria also contributed to the revenue
growth.
Pretax operating margin of 15% expanded 43 bps sequentially from
improved profitability in Drilling & Measurements and from
increased M-I SWACO product sales.
Drilling Group performance in the fourth quarter was
strengthened by contract awards, IDS operations, and a full range
of technologies and integrated drilling systems that helped reduce
operating costs.
Saudi Aramco awarded Schlumberger two IDS contracts to provide
drilling rigs and services for up to 146 gas wells and up to 128
oil wells over three years. IDS will use enhanced processes and the
latest technology to increase efficiency levels and improve cost
effectiveness while maintaining the highest operational safety
standards.
Kuwait Energy awarded Schlumberger a one-year IDS contract for
four wells and one optional well in the Siba field. The integrated
services will include Bits & Drilling Tools StingBlade* conical
diamond element bits as well as technologies from Drilling &
Measurements, M-I SWACO, Wireline, Completions, and Well
Services.
In India, Vedanta Limited (Cairn Oil & Gas) awarded
Schlumberger a two-year IDS contract with an optional one-year
extension valued at $40 million for an offshore exploration
campaign in the Bay of Bengal. The contract includes the provision
of services and technologies from multiple Schlumberger product
lines, such as M-I SWACO, Drilling & Measurements, Bits &
Drilling Tools, Wireline, Well Services, and OneSubsea.
In the Mexico sector of the Gulf of Mexico, IDS used a
combination of technologies for Hokchi Energy to reduce drilling
time by 154 days and improve the rate of penetration (ROP) by 50%
in a four-well campaign, enabling Hokchi to drill a fifth appraisal
well—all within the time frame and budget of the initial project
scope. Technologies included Bits & Drilling Tools FireStorm*
wear-resistant high-impact PDC cutter technology, Rhino XS2*
full-cycle expandable reamer, the i-DRILL integrated dynamic system
analysis service, and Drilling & Measurements PowerDrive X6*
rotary steerable system.
Offshore Russia, IDS used a combination of technologies for
LUKOIL-Nizhnevolzhskneft to save $4.6 million in operating costs by
eliminating the need for three pilot wells in the Filanovsky field
in the Caspian Sea. Well construction was performed 19 days faster
than planned. The GeoSphere* reservoir mapping-while-drilling
service enabled the customer to precisely land the well in the
target zone, thus decreasing technical risks for completions
operations.
In the UK sector of the North Sea, Drilling & Measurements
used the GeoSphere reservoir mapping-while-drilling service for
Centrica Energy to eliminate the need for a pilot hole and complex
sidetracking operations in the Chestnut field. The GeoSphere
service enabled real-time adjustments to the well trajectory while
drilling, maximizing reservoir contact of the horizontal well in
the complex injectite reservoir.
In Argentina, Drilling & Measurements used a combination of
technologies for a major oil producer to drill the longest lateral
section in the Vaca Muerta Shale play. The horizontal section in
the Pampa de las Yeguas field is 3,152 m in length. The
technologies included the PowerDrive Orbit* rotary steerable system
and the PowerDrive Archer* high build rate rotary steerable
system.
In the Norwegian sector of the North Sea, Drilling Group
technologies helped save Statoil $5.5 million in operating costs,
equivalent to 28 days of operating time, in the Gullfaks field. A
customized solution enabled Statoil to gain access to the reservoir
with a conventional borehole-sized drillstring in a challenging
cased-hole section. The combination of technologies that helped
reduce operating time and increase system reliability included the
TrackMaster* comprehensive whipstock sidetracking solution,
PowerDrive X6 rotary steerable system, and Rhino RHE* dual-reamer
rathole elimination system.
Production Group
(Stated in millions)
Three Months Ended
Change Dec. 31, 2017 Sept. 30, 2017
Dec. 31, 2016
Sequential Year-on-year Revenue
$3,079 $2,876 $2,203
7% 40% Pretax operating
income
$315 $283 $128
11% 146% Pretax
operating margin
10.2% 9.8% 5.8%
39 bps 440
bps
Production Group revenue of $3.1 billion, of which 54% came from
the international markets, increased 7% sequentially. Performance
was driven by strong international activity, with more than 20%
sequential growth in Saudi Arabia, Russia, and Argentina. In North
America, land revenue grew 6% following the redeployment of
additional pressure pumping fleets despite a 1% decline in market
stage count. Sequentially, SPM revenue was essentially flat.
Pretax operating margin of 10% increased 39 bps sequentially due
to improved pricing on land in North America. Incremental
margin in North America land was 23%, expanding pretax operating
margin by almost 100 bps during the quarter.
The Production Group benefited from technology deployments and
contract awards.
Occidental Petroleum Corporation (Oxy) and Schlumberger signed
an MOU for a five-year service partnership in the Aventine project
in New Mexico’s Delaware basin. The partners will jointly reduce
the cost per barrel in the safest and most efficient way possible.
Pending final contract negotiation, the agreement includes a
minimum scope of 700 wells, exclusivity of services, and
construction of a Schlumberger facility within the Oxy acreage that
will service the Aventine project as well as other operators in the
region.
In Louisiana, OneStim used BroadBand Sequence* fracturing
service for Aethon Energy and achieved top quartile production in
one well after stimulating a four-well pad in the Haynesville
Shale. The BroadBand Sequence service injected pills to promote
diversion and stimulate all perforation clusters, while pressure
analysis verified stimulation throughout the perforated interval.
As a result, Aethon Energy awarded Schlumberger the work for a
dedicated fracturing fleet in this basin.
In North America land, OneStim deployed the BroadBand Sequence
fracturing service for Encana to refracture wells in two shale
plays. In the Eagle Ford Shale, the Broadband Sequence service
increased oil production in one well from approximately 50 bbl/d to
650 bbl/d and increased flowing pressure from 250 psi to 5,000 psi.
In the Haynesville Shale, the BroadBand Sequence service helped
increase gas production in one well from 100 Mscf/d to 5,000
Mscf/d, with flowing pressure increasing from 1,500 psi to 6,000
psi. Selection of the wells for refracturing was based on the
quality of the reservoir, completion and production history, and
location relative to offset wells.
In the United Kingdom, Hurricane Energy awarded Schlumberger a
contract for the provision of Artificial Lift Solutions
technologies for the Lancaster Basement field on the UK Continental
Shelf west of Shetland. The technologies include REDA Maximus*
electric submersible pump systems with variable speed drive
systems.
In British Colombia, HEAL System™ technology was used for
several oil and gas customers to increase productivity by an
average of 75% in 25 horizontal wells in the Montney Shale. As a
joint venture between Schlumberger and Production Plus Energy
Services Inc., HEAL System technology is designed to lower
production costs by mitigating multiphase slug fluid flow and
excessive gas interference during the production phases of
horizontal unconventional wells. This technology has now been
introduced in all major liquid-rich shale basins in North America
land.
Cameron Group
(Stated in millions)
Three Months Ended
Change Dec. 31, 2017 Sept. 30, 2017
Dec. 31, 2016
Sequential Year-on-year Revenue
$1,414 $1,297 $1,346
9% 5%
Pretax operating income
$203 $194 $188
5% 8%
Pretax operating margin
14.4% 14.9% 14.0%
-58 bps
38 bps
Cameron Group revenue of $1.4 billion, of which 56% came from
international markets, increased 9% sequentially. Growth was
recorded across all product lines, led by OneSubsea on higher
project volume and increased service revenue in Australia and
Mexico. Surface Systems revenue increased due to stronger product
sales on land in North America, while Drilling Systems revenue grew
on product volume increases in the US and Norway. Valves &
Measurement revenue increased from higher product sales in Saudi
Arabia and the Eastern Middle East GeoMarket.
Pretax operating margin of 14% decreased 58 bps sequentially,
mainly due to a change in mix in Surface and Drilling Systems.
Cameron Group performance benefitted from Subsea Integration
Alliance synergies, capital-efficient solutions, contract awards,
and new technology commercialization.
Ophir Equatorial Guinea Limited—a subsidiary of Ophir
Energy—awarded the Subsea Integration Alliance (a partnership
between OneSubsea and Subsea 7), an engineering, procurement,
construction, installation, and commissioning (EPCIC) contract for
the Fortuna FLNG project in Equatorial Guinea. The contract
includes subsea umbilicals, risers and flowlines, and a subsea
production system. The project will deliver 440 Mmscf/d of gas
through infrastructure comprising four wells located at an average
water depth of 1,790 m. Expenditure under the EPCIC contract will
only commence after the project FID. Delivery of first gas is
expected in 2020.
Schlumberger installed and commissioned the industry’s first
all-OEM managed pressure drilling (MPD) system for drilling
contractor Stena Drilling. The closed-loop MPD system, currently
installed on the ultradeepwater drillship Stena Carron, was
recently used to drill exploration wells offshore Guyana.
This quarter, Schlumberger commercialized the GROVE IST*
integrated seat technology ball valve that requires up to 70% less
torque, reducing wear on moving parts, resulting in lower total
cost of ownership. The GROVE IST valve also weighs up to 40% less
than conventional ball valves, which is a key benefit in harsher
environments where larger-sized valves are typically required. In
addition, GROVE IST technology uses a patented seat-on-ball design
that exceeded the industry standard on sealing performance by a
factor of 100 during qualification pressure testing.
In Queensland Australia, Senex Energy awarded
Schlumberger an IDS contract for the well construction of 30 coal
seam gas wells. This integrated contract includes Schlumberger Land
Rigs and, for the first time in Australia, Surface Systems
wellheads. Operations started in June 2017 and were completed in
November 2017. This integrated operation with a single rig achieved
a benchmark of 3 days and 16 hours to drill and complete a well,
including the time needed to move the rig.
Introduced in 2014, OneSubsea Capital-Efficient
Solutions extend market-leading subsea boosting technology and are
now an integral part of all customer projects. Capital-Efficient
Solutions have reduced the average lead times of subsea products by
more than 50%, saving up to 60% in project costs. As a portfolio of
standardized designs that leverages streamlined engineering and
manufacturing processes, Capital-Efficient Solutions deliver
integrated subsea production systems, which reduce project cycle
time and overall cost. The adoption of prequalified quality plans,
suppliers, materials, and welding specifications has enhanced the
efficiency and reliability of the product-manufacturing life
cycle.
Financial Tables
Condensed Consolidated Statement of Income (Loss)
(Stated in millions, except per share amounts)
Fourth Quarter Twelve Months Periods Ended December 31,
2017 2016
2017 2016 Revenue
$8,179 $7,107
$30,440 $27,810 Interest and other
income
52 47
224 200 Expenses Cost of revenue (1)
7,201 6,193
26,543 24,409 Research & engineering
192 261
787 1,012 General & administrative
109 99
432 403 Impairments & other (1)
2,701 599
3,211 3,172 Merger & integration (1)
95 76
308 349 Interest
143 139
566 570
Loss before taxes
$(2,210) $(213)
$(1,183) $(1,905)
Tax expense (benefit) (1)
62 (19)
330 (278) Net loss
$(2,272) $(194)
$(1,513) $(1,627) Net income (loss)
attributable to noncontrolling interests
(17) 10
(8)
60 Net loss attributable to Schlumberger (1)
$(2,255) $(204)
$(1,505) $(1,687) Diluted loss per share of
Schlumberger (1)
$(1.63) $(0.15)
$(1.08) $(1.24)
Average shares outstanding
1,385 1,391
1,388
1,357 Average shares outstanding assuming dilution
1,385
1,391
1,388 1,357 Depreciation & amortization
included in expenses (2)
$906 $1,016
$3,837 $4,094
(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)
Dec. 31, Dec. 31, Assets
2017
2016 Current Assets Cash and short-term investments
$5,089 $9,257 Receivables
8,084 9,387 Other current
assets
5,324 5,283
18,497
23,927 Fixed income investments, held to maturity
- 238
Fixed assets
11,576 12,821 Multiclient seismic data
727 1,073 Goodwill
25,118 24,990 Intangible assets
9,354 9,855 Other assets
6,715
5,052
$71,987
$77,956 Liabilities and Equity
Current Liabilities Accounts payable and accrued
liabilities
$10,036 $10,016 Estimated liability for taxes on
income
1,223 1,188
Short-term borrowings and current portion
of long-term debt
3,324 3,153 Dividends payable
699
702
15,282 15,059 Long-term debt
14,875
16,463 Deferred taxes
1,650 1,880 Postretirement benefits
1,082 1,495 Other liabilities
1,837
1,530
34,726 36,427 Equity
37,261 41,529
$71,987 $77,956
Liquidity
(Stated in millions)
Dec. 31,
Sept. 30, Dec. 31, Components of Liquidity
2017 2017 2016 Cash and short-term investments
$5,089 $4,952 $9,257 Fixed income investments, held to
maturity
- - 238 Short-term borrowings and current portion
of long-term debt
(3,324) (1,289) (3,153) Long-term debt
(14,875) (15,871) (16,463) Net Debt (1)
$(13,110)
$(12,208) $(10,121) Details of changes in liquidity follow:
Twelve Fourth Twelve
Months
Quarter Months Periods Ended December 31,
2017 2017 2016 Net loss before
noncontrolling interests
$(1,513) $(2,272) $(1,627)
Impairment and other charges, net of tax before noncontrolling
interests
3,624 2,945 3,237
$2,111 $673
$1,610 Depreciation and amortization (2)
3,837 906
4,094 Pension and other postretirement benefits expense
104
25 187 Stock-based compensation expense
343 82
267 Pension and other postretirement benefits funding
(133)
(26) (174) Change in working capital
(823) 650
416 US federal tax refund
685 - - Other
(461)
(59) (139)
Cash flow from operations (3)
$5,663 $2,251 $6,261 Capital expenditures
(2,107) (625) (2,055) SPM investments
(1,609)
(1,117) (1,031) Multiclient seismic data capitalized
(276) (53) (630)
Free cash flow (4)
1,671 456 2,545 Dividends paid
(2,778)
(692) (2,647) Stock repurchase program
(969)
(101) (778) Proceeds from employee stock plans
297
36 415
(1,779) (301) (465) Business
acquisitions and investments, net of cash acquired plus debt
assumed
(847) (465) (4,022) Other
(363)
(136) (87) Increase in Net Debt
(2,989) (902)
(4,574) Net Debt, beginning of period
(10,121)
(12,208) (5,547) Net Debt, end of period
$(13,110)
$(13,110) $(10,121) (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 SPM investments. (3) Includes severance
payments of $455 million and $108 million during the twelve months
and fourth quarter ended December 31, 2017, respectively; and $850
million during the twelve months ended December 31, 2016. The
twelve months ended December 31, 2016 also includes approximately
$100 million of one-off transaction-related payments associated
with the acquisition of Cameron. (4) “Free cash flow” represents
cash flow from operations less capital expenditures, SPM
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 Full-Year
and Fourth-Quarter 2017 Earnings Release also includes non-GAAP
financial measures (as defined under the SEC’s Regulation G). Net
income, excluding charges & credits, as well as measures
derived from it (including diluted EPS, excluding charges &
credits; Schlumberger net income, excluding charges & credits;
and effective tax rate, excluding charges & credits) are
non-GAAP financial measures. Management believes that the exclusion
of charges & credits from these financial measures enables it
to evaluate more effectively Schlumberger’s operations period over
period and to identify operating trends that could otherwise be
masked by the excluded items. These measures are also used by
management as performance measures in determining certain incentive
compensation. The foregoing non-GAAP financial measures should be
considered in addition to, not as a substitute for or superior to,
other measures of financial performance prepared in accordance with
GAAP. The following is a reconciliation of these non-GAAP measures
to the comparable GAAP measures.
(Stated in millions, except per share
amounts)
Fourth Quarter 2017 Noncont.
Diluted Pretax Tax Interests Net
EPS * Schlumberger net loss (GAAP basis) $(2,210) $62 $(17)
$(2,255) $(1.63) Impairments & other : WesternGeco seismic
restructuring 1,114 20 - 1,094 0.79 Venezuela investment write-down
938 - - 938 0.67 Workforce reductions 247 13 - 234 0.17 Multiclient
seismic data impairment 246 81 - 165 0.12 Other restructuring
charges 156 10 22 124 0.09 Merger & integration 95 26 - 69 0.05
Provision for loss on long-term construction project (1) 245 22 -
223 0.16 US tax reform (2) - (76) - 76
0.05 Schlumberger net income, excluding charges & credits $831
$158 $5 $668 $0.48
Third
Quarter 2017 Noncont. Diluted Pretax Tax
Interests Net EPS Schlumberger net income (GAAP
basis) $677 $121 $11 $545 $0.39 Merger & integration 49
13 - 36 0.03 Schlumberger net income,
excluding charges & credits $726 $134 $11
$581 $0.42
Fourth Quarter 2016 Noncont.
Diluted Pretax Tax Interests Net EPS *
Schlumberger net loss (GAAP basis) $(213) $(19) $10 $(204) $(0.15)
Impairments & other : Workforce reduction 234 6 - 228 0.16
Facility closure costs 165 40 - 125 0.09 Costs associated with
exiting certain activities 98 23 - 75 0.05 Currency devaluation
loss in Egypt 63 - - 63 0.04 Contract termination costs 39 9 - 30
0.02 Merger & integration 76 14 - 62
0.04 Schlumberger net income, excluding charges &
credits $462 $73 $10 $379 $0.27 (1)
Recorded in Cost of revenue in the Condensed Consolidated
Statement of Income (Loss). (2) Recorded in Tax expense (benefit)
in the Condensed Consolidated Statement of Income (Loss). *
Does not add due to rounding. (Stated in
millions, except per share amounts)
Twelve Months
2017 Pretax Tax Noncont. Net Diluted
Interests EPS *
Schlumberger net loss (GAAP basis) $(1,183) $330 $(8) $(1,505)
$(1.08) Impairments & other : WesternGeco seismic restructuring
1,114 20 - 1,094 0.78 Venezuela investment write-down 938 - - 938
0.67 Promissory note fair value adjustment and other 510 - 12 498
0.36 Workforce reductions 247 13 - 234 0.17 Multiclient seismic
data impairment 246 81 - 165 0.12 Other restructuring charges 156
10 22 124 0.09 Merger & integration 308 70 - 238 0.17 Provision
for loss on long-term construction project (1) 245 22 - 223 0.16 US
tax reform (2) - (76) - 76 0.05
Schlumberger net income, excluding charges & credits $2,581
$470 $26 $2,085 $1.50
Twelve
Months 2016 Pretax Tax Noncont. Net Diluted
Interests EPS * Schlumberger net
loss (GAAP basis) $(1,905) $(278) $60 $(1,687) $(1.24) Impairments
& other : Fixed asset impairments 1,058 177 - 881 0.65
Workforce reduction 880 69 - 811 0.59 Inventory write-downs 616 49
- 567 0.42 Multiclient seismic data impairment 198 62 - 136 0.10
Facility closure costs 165 40 - 125 0.09 Costs associated with
exiting certain activities 98 23 - 75 0.05 Currency devaluation
loss in Egypt 63 - - 63 0.05 Other restructuring charges 55 - - 55
0.04 Contract termination costs 39 9 - 30 0.02 Merger &
integration 349 64 - 285 0.21 Amortization of purchase accounting
inventory fair value adjustment (1) 299 90 -
209 0.15 Schlumberger net income, excluding charges &
credits $1,915 $305 $60 $1,550 $1.14
(1) Recorded in Cost of revenue in the Condensed
Consolidated Statement of Income (Loss). (2) Recorded in Tax
expense (benefit) in the Condensed Consolidated Statement of Income
(Loss). * Does not add due to rounding.
Product Groups
(Stated in millions)
Three Months Ended Dec. 31, 2017 Sept. 30, 2017 Dec.
31, 2016
Income
Income
Income
Before Before Before
Revenue
Taxes
Revenue
Taxes
Revenue
Taxes Reservoir Characterization
$1,638 $360 $1,771
$311 $1,676 $319 Drilling
2,180 319 2,120 301 2,013
234 Production
3,079 315 2,876 283 2,203 128 Cameron
1,414 203 1,297 194 1,346 188 Eliminations &
other
(132) (42) (159) (30) (131) (59) Pretax
operating income
1,155 1,059 810 Corporate & other
(219) (234) (245) Interest income(1)
25 30 23
Interest expense(1)
(130) (129) (126) Charges & credits
(3,041) (49) (675)
$8,179
$(2,210) $7,905 $677 $7,107 $(213) (Stated in millions)
Twelve Months Ended Dec. 31, 2017
Dec. 31, 2016
Income
Income
Before Before
Revenue
Taxes
Revenue
Taxes Reservoir Characterization
$6,786 $1,251 $6,648
$1,249 Drilling
8,392 1,151 8,561 994 Production
10,639 928 8,804 507 Cameron
5,205 733
4,211 653 Eliminations & other
(582) (142) (414)
(130) Pretax operating income
3,921 3,273 Corporate &
other
(934) (925) Interest income(1)
107 84 Interest
expense(1)
(513) (517) Charges & credits
(3,764) (3,820)
$30,440 $(1,183)
$27,810 $(1,905) (1) Excludes interest included in the
Product Groups results. Certain prior period items have been
reclassified to conform to the current period presentation.
Supplemental Information
1)
What is the capex guidance for the full
year 2018?
Capex (excluding multiclient and SPM investments) for the full year
2018 is expected to be approximately $2 billion, which is similar
to the levels of 2017 and 2016. 2)
What were the cash flow from operations
and free cash flow for the fourth quarter of 2017?
Cash flow from operations for the fourth quarter of 2017 was $2.3
billion and included $108 million of severance payments. Free cash
flow for the fourth quarter of 2017 was $456 million and included
$108 million of severance payments and the purchase of the Palliser
Block asset. 3)
What were the cash flow from operations
and free cash flow for the full year of 2017?
Cash flow from operations for the full year of 2017 was $5.7
billion and included $455 million of severance payments. Free cash
flow for the full year of 2017 was $1.7 billion and included $455
million of severance payments and the purchase of the Palliser
Block asset during the fourth quarter of 2017. 4)
What was included in “Interest and
other income” for the fourth quarter of 2017?
“Interest and other income” for the fourth quarter of 2017 was $52
million. This amount consisted of earnings of equity method
investments of $22 million and interest income of $30 million.
5)
How did interest income and interest
expense change during the fourth quarter of 2017?
Interest income of $30 million was flat sequentially. Interest
expense of $143 million was essentially flat sequentially.
6)
What is the difference between pretax
operating income and Schlumberger’s consolidated income before
taxes?
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
(including intangible asset amortization expense resulting from the
acquisition of Cameron), certain centrally managed initiatives, and
other nonoperating items. 7)
What was the effective tax rate (ETR)
for the fourth quarter of 2017?
The ETR for the fourth quarter of 2017, calculated in accordance
with GAAP, was -2.8% as compared to 17.9% for the third quarter of
2017. The ETR for the fourth quarter of 2017, excluding charges and
credits, was 19.0% as compared to 18.4% for the third quarter of
2017. 8)
What is the impact of US tax reform on
Schlumberger?
US tax reform significantly changes US
corporate income tax laws by, among other things, reducing the US
corporate income tax rate to 21% starting in 2018 and creating a
territorial tax system with a one-time mandatory tax on previously
deferred foreign earnings of US subsidiaries. As a result,
Schlumberger recorded a net charge of $76 million during the fourth
quarter of 2017. This amount, which is included in Tax expense
(benefit) in the Consolidated Statement of Income (Loss), consists
of two components: (i) a $410 million charge relating to the
one-time mandatory tax on previously deferred earnings of certain
non-US subsidiaries that are owned either wholly or partially by a
US subsidiary of Schlumberger and (ii) a $334 million credit
resulting from the remeasurement of Schlumberger’s net deferred tax
liabilities in the US based on the new lower corporate income tax
rate.
After considering the impact of foreign tax credits and tax
losses, the cash tax payable as a result of the one-time mandatory
tax on previously deferred foreign earnings of Schlumberger’s US
subsidiary will not be significant. As a non-US company,
Schlumberger’s corporate structure results in us largely paying
taxes where we operate and earn profits, without having to incur
additional layers of taxes. Given this structure, the primary
impact of US tax reform on Schlumberger is that a lower federal tax
rate will be applied to income earned by our US business. Absent
the impact of US tax reform, our ETR would likely increase by
approximately 2 to 3 percentage points in 2018 as compared to our
fourth quarter 2017 ETR. However, the impact of US tax reform for
2018 is expected to largely offset this increase. As a result, we
expect the full-year 2018 ETR to approximate our Q4 2017 ETR before
charges and credits. 9)
How many shares of common stock were
outstanding as of December 31, 2017 and how did this change from
the end of the previous quarter?
There were 1.384 billion shares of common stock outstanding as of
December 31, 2017. The following table shows the change in the
number of shares outstanding from September 30, 2017 to December
31, 2017.
(Stated in millions)
Shares outstanding at September 30, 2017 1,385 Shares sold to
optionees, less shares exchanged - Vesting of restricted stock 1
Shares issued under employee stock purchase plan - Stock repurchase
program (2) Shares outstanding at December 31, 2017 1,384 10)
What was the weighted average number of
shares outstanding during the fourth quarter of 2017 and third
quarter of 2017 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 was 1.385 billion
during the fourth quarter of 2017 and 1.385 billion during the
third quarter of 2017. 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)
Fourth Quarter
Third Quarter
2017
2017
Weighted average shares outstanding
1,385 1,385 Assumed
exercise of stock options
1 1 Unvested restricted stock
5 6 Average shares outstanding, assuming dilution
1,391 1,392 11)
What are Schlumberger Production
Management (SPM) projects and how does Schlumberger recognize
revenue from these projects?
SPM projects are focused on developing and comanaging production on
behalf of Schlumberger customers under long-term agreements.
Schlumberger will invest its own services, products, and in some
cases, cash, into the field development activities and operations.
Although in certain arrangements Schlumberger recognizes revenue
and is paid for a portion of the services or products it provides,
generally Schlumberger will not be paid at the time of providing
its services or upon delivery of its products. Instead,
Schlumberger recognizes revenue and is compensated based upon cash
flow generated or on a fee-per-barrel basis. This may include
certain arrangements whereby Schlumberger is only compensated based
upon incremental production it helps deliver above a mutually
agreed base
12)
How are Schlumberger products and
services that are invested in SPM projects accounted for?
Revenue and the related costs are recorded within the respective
Schlumberger Group for services and products that each Group
provides to Schlumberger’s SPM projects. This revenue (which is
based on arms-length pricing) and the related profit is then
eliminated through an intercompany adjustment that is included
within the “Eliminations & other” line. (Note that the
“Eliminations & other” line includes other items in addition to
the SPM eliminations.) The direct cost associated with providing
Schlumberger services or products to SPM projects is then
capitalized on the balance sheet. These capitalized
investments, which may be in the form of cash as well as the
previously mentioned direct costs, are expensed in the income
statement as the related production is achieved and associated
revenue is recognized. This amortization expense is based on the
units of production method, whereby each unit is assigned a
pro-rata portion of the unamortized costs based on total estimated
production. SPM revenue along with the amortization of the
capitalized investments and other operating costs incurred in the
period are reflected within the Production Group. 13)
What was the unamortized balance of
Schlumberger’s investment in SPM projects at December 31, 2017 and
how did it change in terms of investment and amortization when
compared to September 30, 2017?
The unamortized balance of Schlumberger’s investments in SPM
projects was approximately $4.1 billion and $2.8 billion at
December 31, 2017 and September 30, 2017, respectively. These
amounts are included within Other Assets in Schlumberger’s
Condensed Consolidated Balance Sheet. The change in the unamortized
balance of Schlumberger’s investment in SPM projects was as
follows: (Stated in millions) Balance at September
30, 2017 $2,804 SPM investments 1,117 Other additions 279
Amortization of SPM investment (135) Balance at December 31, 2017
$4,065 14)
What was the amount of WesternGeco
multiclient sales in the fourth quarter of 2017?
Multiclient sales, including transfer fees, were $166 million in
the fourth quarter of 2017 and $127 million in the third quarter of
2017. 15)
What was the WesternGeco backlog at the
end of the fourth quarter of 2017?
WesternGeco backlog, which is based on signed contracts with
customers, was $399 million at the end of the fourth quarter of
2017. It was $489 million at the end of the third quarter of 2017.
16)
What were the orders and backlog for
the Cameron Group’s OneSubsea and Drilling Systems
businesses?
OneSubsea and Drilling Systems orders and backlog were as follows:
(Stated in millions)
Fourth Quarter Third Quarter
Orders
2017 2017 OneSubsea
$282 $347 Drilling Systems
$150
$156
Backlog (at the end of period) OneSubsea
$2,060 $2,328 Drilling Systems
$408
$523 17)
What does the $3.041 billion of pretax
charges recorded during the fourth quarter of 2017 relate
to?
The $3.041 billion of pretax charges recorded during the fourth
quarter of 2017 consists of the following (in millions):
WesternGeco seismic restructuring $1,114 Venezuela
write-down (1) 938 Workforce reductions (2) 247 Multiclient seismic
data impairment 246 Other (3) 496 $3,041 (1) Given the recent
economic and political developments in Venezuela, Schlumberger
determined that it was appropriate to write-down its investment in
the country. As a result, Schlumberger recorded a charge of $938
million, consisting of: $469 million of accounts receivable, a $105
million other-than-temporary impairment charge relating to
promissory notes, $285 million of fixed assets, and $79 million of
other assets. (2) Represents reductions associated with the
restructuring of our geographical and product line organizations.
(3) Other includes the following: a $245 million provision for an
estimated loss on a long-term surface facility construction project
that is accounted for under the percentage-of-completion method; a
$95 million of merger and integration charges relating to Cameron,
and the Weatherford transaction; and $156 million of other
restructuring charges.
About Schlumberger
Schlumberger is the world's leading provider of technology for
reservoir characterization, drilling, production, and processing to
the oil and gas industry. Working in more than 85 countries and
employing approximately 100,000 people who represent over 140
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.
Schlumberger Limited has principal offices in Paris, Houston,
London and The Hague, and reported revenues of $30.44 billion in
2017. For more information, visit www.slb.com.
*Mark of Schlumberger or of Schlumberger companies.
Notes
Schlumberger will hold a conference call to discuss the earnings
press release and business outlook on Friday, January 19, 2018. 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 (800) 288-8967 within North America,
or +1 (612) 333-4911 outside 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 February
19, 2018 by dialing +1 (800) 475-6701 within North America, or +1
(320) 365-3844 outside North America, and providing the access code
433023.
The conference call will be webcast simultaneously at
www.slb.com/irwebcast on a listen-only basis. A replay of the
webcast will also be available at the same web site until February
28, 2018.
This full-year and fourth-quarter 2017 earnings release, as well
as other statements we make, contain “forward-looking statements”
within the meaning of the federal securities laws, which include
any statements that are not historical facts, such as our forecasts
or expectations regarding business outlook; growth for Schlumberger
as a whole and for each of its segments (and for specified products
or geographic areas within each segment); oil and natural gas
demand and production growth; oil and natural gas prices;
improvements in operating procedures and technology, including our
transformation program; capital expenditures by Schlumberger and
the oil and gas industry; the business strategies of Schlumberger’s
customers; the effects of U.S. tax reform; our effective tax rate;
the success of Schlumberger’s SPM projects, 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 pressure; weather and seasonal
factors; operational modifications, delays or cancellations;
production declines; changes in government regulations and
regulatory requirements, including those related to offshore oil
and gas exploration, radioactive sources, explosives, chemicals,
hydraulic fracturing services and climate-related initiatives; the
inability of technology to meet new challenges in exploration; the
inability to retain key employees; and other risks and
uncertainties detailed in this full-year and fourth-quarter 2017
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. 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/20180119005263/en/
Schlumberger LimitedSimon Farrant – Vice President of Investor
Relations, Schlumberger LimitedJoy V. Domingo – Manager of Investor
Relations, Schlumberger LimitedOffice +1 (713)
375-3535investor-relations@slb.com
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