TIDMSCL
Schlumberger Limited (NYSE: SLB) today reported results for
full-year 2018 and the fourth quarter of 2018.
(Stated in millions, except per share amounts)
Full-Year Results Twelve Months Ended Change
Dec. 31, 2018 Dec. 31, 2017 Year-on-year
Revenue $32,815 $30,440 8%
Pretax operating income $4,187 $3,921 7%
Pretax operating margin 12.8% 12.9% -12 bps
Net income (loss) - GAAP basis $2,138 $(1,505) n/m
Net income, excluding $2,261 $2,085 8%
charges & credits*
Diluted EPS (loss per $1.53 $(1.08) n/m
share) - GAAP basis
Diluted EPS, excluding $1.62 $1.50 8%
charges and credits*
Full-Year Consolidated Revenue by Area
North America $11,984 $9,487 26%
Latin America 3,745 3,976 -6%
Europe/CIS/Africa 7,158 7,072 1%
Middle East & Asia 9,543 9,394 2%
Other 385 511 n/m
$32,815 $30,440 8%
North America revenue $11,984 $9,487 26%
International revenue $20,446 $20,442 -
North America revenue, $9,668 $7,518 29%
excluding Cameron
International revenue, $17,675 $17,423 1%
excluding Cameron
*These are non-GAAP financial measures. See section
titled "Charges & Credits" for details.
n/m = not meaningful
Schlumberger Chairman and CEO Paal Kibsgaard commented,
"Full-year 2018 revenue of $32.8 billion increased 8% year-on-year
and grew for the second successive year. Performance was driven by
North America where revenue of $12.0 billion increased 26% due to
the results of our OneStim® business, which grew by 41%. Full-year
international revenue of $20.4 billion was essentially flat
compared with 2017. However, excluding Cameron, international
revenue for the second half of 2018 showed year-over-year growth of
3%, marking the beginning of a positive activity trend after three
consecutive years of declining revenues.
"Production revenue of $12.4 billion increased 17%, while
Drilling revenue of $9.3 billion improved 10%. Reservoir
Characterization revenue of $6.5 billion declined 4%, mostly driven
by the divestiture of the WesternGeco® marine seismic acquisition
business. Cameron revenue of $5.2 billion declined 1% as a further
decline in the long-cycle businesses of OneSubsea® and Drilling
Systems was largely offset by growth in Surface Systems and Valves
& Measurement.
"Full-year 2018 pretax operating income of $4.2 billion grew 7%.
Pretax operating margin of 13% was essentially flat with the
previous year, as the impact of higher revenue was offset by
reactivation and mobilization costs associated with the ramp-up and
strategic positioning for increased activity in both North America
and internationally.
Fourth-Quarter Results
(Stated in millions, except per share amounts)
Three Months Ended Change
Dec. 31, 2018 Sept. 30, 2018 Dec. 31, 2017 Sequential Year-on-year
Revenue $8,180 $8,504 $8,179 -4% -
Pretax operating income $967 $1,152 $1,155 -16% -16%
Pretax operating margin 11.8% 13.5% 14.1% -172 bps -230 bps
Net income (loss) - GAAP basis $538 $644 $(2,255) -16% n/m
Net income, excluding $498 $644 $668 -23% -25%
charges & credits*
Diluted EPS (loss per $0.39 $0.46 $(1.63) -15% n/m
share) - GAAP basis
Diluted EPS, excluding $0.36 $0.46 $0.48 -22% -25%
charges & credits*
North America revenue $2,820 $3,189 $2,811 -12% -
International revenue $5,283 $5,215 $5,237 1% 1%
North America revenue, $2,265 $2,572 $2,246 -12% 1%
excluding Cameron
International revenue, $4,581 $4,559 $4,446 - 3%
excluding Cameron
*These are non-GAAP financial measures. See section
titled "Charges & Credits" for details.
n/m = not meaningful
"Fourth-quarter revenue of $8.2 billion declined 4% sequentially
driven by lower activity and pricing for most Production- and
Cameron-related businesses in North America land. Lower revenue
from OneSubsea also drove the decline, but we are now close to the
cycle trough of backlog-driven activity as we booked more than $600
million in new project orders during the quarter.
"International activity remained resilient despite the oil price
drop, with revenue increasing 1% sequentially. The seasonal
slowdown in Russia was offset by increased revenue in the Middle
East, Asia, and Africa. Revenue from Europe and Latin America was
flat compared with the previous quarter.
"Sequential performance was heavily impacted by Production- and
Cameron-related activity in North America land, as seen by the 12%
sequential decrease in our consolidated North America revenue.
OneStim revenue dropped 25% sequentially as we decided to
warm-stack a number of our fleets during the latter part of the
quarter, and as we focused on securing dedicated contracts for the
first half of 2019 early in the fourth-quarter tendering cycle.
Drilling revenue increased 1% sequentially as we continued to
mobilize additional drilling rigs for our Integrated Drilling
Services (IDS) projects in Norway, Saudi Arabia, India, Argentina,
Ecuador, China, and Iraq. Reservoir Characterization revenue
decreased 1% sequentially driven by lower Wireline and OneSurface®
revenue and limited year-end sales of Software Integrated Solutions
(SIS) software and WesternGeco multiclient seismic licenses.
Cameron revenue declined 3% sequentially, mostly due to lower
revenue from our OneSubsea and Valves & Measurement product
lines.
"From a macro perspective, the dramatic fall in oil prices in
the fourth quarter was largely driven by the US shale production
surprising to the upside as a result of the surge in activity
earlier in the year, and as geopolitics negatively impacted the
global demand- and supply-balance sentiments. The combination of
these factors, together with a large sell-off in the equity markets
due to concerns around global growth and increasing US interest
rates, created a near perfect storm to close out 2018.
"Looking forward to 2019, we expect a more positive supply- and
demand-balance sentiment to lead to a gradual recovery in the price
of oil over the course of the year, as the OPEC and Russia cuts
take full effect; the effect of lower activity in North America
land in the second half of 2018 impacts production growth; the
dispensations from the Iran export sanctions expire and are not
renewed; and as the US and China continue to work toward a solution
to their ongoing trade dispute.
"In the meantime, the recent oil price volatility has introduced
more uncertainty around the E&P spending outlook for 2019, with
customers generally taking a more conservative approach at the
start of the year. This will once again push out in time the
broad-based recovery in E&P spending that we expected only
three months ago.
"However, based on our recent discussions with customers, we are
seeing clear signs that E&P investments are starting to
normalize and reflect a more sustainable financial stewardship of
the global resource base. For the North America land E&P
operators, this means that future investments will likely be much
closer to the level that can be covered by free cash flow.
Conversely, in the international markets apart from the Middle East
and Russia, after four years of underinvestment and a focus on
maximizing cash flow, the NOCs and independents are starting to see
the need to invest in their resource base simply to maintain
production at current levels.
"For Schlumberger, this means that even with the current oil
prices, we expect solid, single-digit growth in the international
markets while in North America land, the increased cost of capital
and focus on aligning investments closer to free cash flow has
introduced more uncertainty to the outlook for both drilling and
production activity.
"In this environment, we have built significant flexibility into
our operating plan for 2019, which gives us the means and
confidence to address any investment and activity scenario.
Furthermore, the foundation for our 2019 plans is a clear
commitment to generate sufficient cash flow to cover all our
business needs, without increasing net debt. After a very strong
free cash flow performance in the second half of 2018, we are
confident in our ability to further improve our liquidity position
in 2019, through our focus on top-line growth, incremental margins,
capital discipline, and careful management of working capital."
Other Events
During the quarter, Schlumberger repurchased 2.1 million shares
of its common stock at an average price of $48.44 per share, for a
total purchase price of $100 million.
On November 15, 2018, Shearwater GeoServices Holding AS
completed the purchase of the WesternGeco marine seismic
acquisition assets and operations. Schlumberger received cash
consideration of $600 million plus a 15% post-closing equity
interest in Shearwater GeoServices Holding AS.
On January 16, 2019, Schlumberger's Board of Directors approved
a quarterly cash dividend of $0.50 per share of outstanding common
stock, payable on April 12, 2019 to stockholders of record on
February 13, 2019.
Consolidated Revenue by Area
(Stated in millions)
Three Months Ended Change
Dec. 31, 2018 Sept. 30, 2018 Dec. 31, 2017 Sequential Year-on-year
North $2,820 $3,189 $2,811 -12% -
America
Latin 978 978 1,034 - -5%
America
Europe/CIS/Africa 1,842 1,820 1,816 1% 1%
Middle East 2,464 2,417 2,387 2% 3%
& Asia
Other 76 100 131 n/m n/m
$8,180 $8,504 $8,179 -4% -
North $2,820 $3,189 $2,811 -12% -
America
revenue
International $5,283 $5,215 $5,237 1% 1%
revenue
North $2,265 $2,572 $2,246 -12% 1%
America
revenue,
excluding
Cameron
International $4,581 $4,559 $4,446 - 3%
revenue,
excluding
Cameron
n/m
=
not meaningful
Fourth-quarter consolidated revenue of $8.2 billion decreased 4%
sequentially, as North America revenue of $2.8 billion declined 12%
while international revenue of $5.3 billion increased 1%.
North America
North America Area consolidated revenue of $2.8 billion
decreased 12% sequentially driven by lower activity and pricing for
most Production- and Cameron-related businesses in North America
land. OneStim revenue dropped 25% sequentially as we decided to
warm-stack a number of our fleets during the latter part of the
quarter and as we focused on securing dedicated contracts for the
first half of 2019 early in the fourth-quarter tendering cycle. The
decline in Cameron land revenue was due to weaker activity in
Valves & Measurement and Surface Systems. Offshore revenue
declined slightly as growth in drilling activity on development
projects and higher WesternGeco multiclient seismic license sales
was more than offset by lower Cameron activity.
International
Consolidated revenue in the Latin America Area of $1.0 billion
was flat sequentially. In the Latin America South GeoMarket,
revenue increased from new drilling projects and higher Cameron
Surface Systems activity, but this was partially offset by reduced
hydraulic fracturing operations in Argentina. In the Mexico &
Central America GeoMarket, revenue declined due to lower
WesternGeco multiclient seismic license sales following a strong
performance in the previous quarter. Revenues in the Latin America
North and Venezuela GeoMarkets were flat sequentially.
Europe/CIS/Africa Area consolidated revenue of $1.8
billionincreased 1%sequentially despite the seasonal activity
decline in Russia and the North Sea. The revenue increase was due
to higher drilling activity in the Sub-Sahara Africa GeoMarket and
additional WesternGeco multiclient seismic license sales in
Mozambique and Angola. Higher revenue was also posted by the North
Africa GeoMarket from increased hydraulic fracturing and drilling
activity on new projects in Algeria and the start of a well
intervention project in Libya. Cameron revenue was higher across
the Area led by the Norway & Denmark GeoMarket.
Consolidated revenue in the Middle East & Asia Area of $2.5
billion increased 2% sequentially, primarily from higher revenue in
the Eastern Middle East GeoMarket, due to strong IDS project
activity in Iraq, increased hydraulic fracturing activity in Oman,
and higher Wireline and Testing Services exploration activity in
the United Arab Emirates. Lump-sum turnkey (LSTK) project revenue
in Saudi Arabia grew further with all 25 rigs now fully deployed.
Revenue in the Far East Asia & Australia GeoMarket was higher
sequentially due to increased drilling and well construction
activity in China and increased sales of SIS software and
WesternGeco multiclient seismic licenses across the GeoMarket.
However, revenue decreased sequentially in the Northern Middle East
GeoMarket from lower OneSurface revenue in Kuwait and Egypt and
completed IDS projects. Cameron revenue in the Area was flat
compared with the previous quarter as increased sales of Surface
Systems in India were offset by reduced activity in Saudi Arabia
and the Far East Asia & Australia GeoMarket.
Reservoir Characterization
(Stated in millions)
Three Months Ended Change
Dec. 31, 2018 Sept. 30, 2018 Dec. 31, 2017 Sequential Year-on-year
Revenue $1,651 $1,676 $1,640 -1% 1%
Pretax $364 $372 $359 -2% 1%
operating
income
Pretax 22.0% 22.2% 21.9% -16 bps 17 bps
operating
margin
Reservoir Characterization revenue of $1.7 billion, of which 79%
came from the international markets, decreased 1% sequentially
driven by the seasonal decline in Wireline activity in Russia,
lower Wireline exploration activity offshore North America, and
reduced OneSurface activity in the Middle East. These effects were
partially offset by year-end sales of SIS software in China,
Russia, India, Vietnam, and Norway as well as higher Testing
Services activity in Qatar, United Arab Emirates, Oman, and Iraq.
WesternGeco revenue was essentially flat sequentially as the
decline in marine seismic acquisition activity, following the sale
of the business in November, was fully offset by year-end sales of
multiclient seismic licenses in Mozambique, Angola, Australia, and
offshore North America.
Reservoir Characterization pretax operating margin of 22% was
essentially flat compared with the previous quarter as the effect
of high-margin SIS software and WesternGeco multiclient seismic
license sales was offset by a seasonal decline in higher-margin
Wireline revenue.
In the fourth quarter, Reservoir Characterization performance
benefited from multiple contract awards, new multiclient seismic
surveys, and the application of technology and domain expertise to
improve operational efficiency.
In Mexico, BHP Billiton awarded Schlumberger a two-year contract
with an optional one-year extension for exploration and appraisal
services in the deepwater Trion project in the Gulf of Mexico. The
scope of work includes the SonicScope* multipole
sonic-while-drilling service, Quanta Geo* photorealistic reservoir
geology service, Litho Scanner* high-definition spectroscopy
service, and CLEANCUT* cuttings collection and transportation
system.
In Australia, Schlumberger introduced Concert* well testing live
performance technology for a customer to test the first development
wells of a major offshore gas condensate field. Concert performance
introduced a new level of efficiency for managing the testing
spread required for the ultrahigh flow rate wells. The automated
real-time data collection and communication enabled collaborative
analysis that accelerated the understanding of the testing
operation while significantly reducing field personnel.
In Indonesia, Integrated Services Management (ISM) used a
combination of technologies in 21 geothermal wells for KS Orka to
reduce operating costs in the Sorik Marapi Field. The reservoir is
characterized by very hard volcanic rocks and high temperatures up
to 250 degC. The technologies included PowerPak* steerable motors
and the Xtreme* high-pressure, high-temperature well logging
platform.
In Norway, Petoro AS awarded Schlumberger a two-year Software as
a Service (SaaS) contract for the provision of the DELFI* cognitive
E&P environment, as well as use of the ECLIPSE*
industry-reference and INTERSECT* high- resolution reservoir
simulators. These technologies will provide the company with deeper
insights about its active licenses in order to rank and analyze
them for maximum impact.
Dyas Norge AS awarded SIS a SaaS contract for use of the DELFI
cognitive E&P environment in the Fogelberg gas discovery on the
Norwegian Continental Shelf.
Offshore Sri Lanka, WesternGeco has begun a 5,020-km 2D
multiclient survey for the Sri Lanka Petroleum Resources
Development Secretariat and a major oil and gas company using a
third-party seismic acquisition vessel. This is the largest survey
ever conducted in Sri Lanka and is supported by industry
prefunding.
Drilling
(Stated in millions)
Three Months Ended Change
Dec. 31, 2018 Sept. 30, 2018 Dec. 31, 2017 Sequential Year-on-year
Revenue $2,461 $2,429 $2,180 1% 13%
Pretax $318 $339 $319 -6% -
operating
income
Pretax 12.9% 14.0% 14.6% -105 bps -170 bps
operating
margin
Drilling revenue of $2.5 billion, of which 73% came from the
international markets, increased 1% sequentially driven by growth
in Drilling & Measurements, M-I SWACO, and IDS as we continued
to mobilize additional drilling rigs on integrated drilling
projects in Norway, Saudi Arabia, India, Argentina, Ecuador, China,
and Iraq. Drilling revenue remained resilient in North America land
driven by our directional drilling business. These revenue
increases, however, were partially offset by the seasonal decline
in activity in the Northern Hemisphere, particularly in Russia.
Drilling pretax operating margin of 13% decreased 105 bps
sequentially due to the seasonal activity decline in Russia and the
increased cost of mobilizing additional resources as IDS project
activity scaled up across international operations.
Drilling performance this quarter was underpinned by the
deployment of several record-breaking drilling and drill bit
technologies, GeoSphere* reservoir mapping-while-drilling service
for optimizing recovery, and multiple contract awards.
In the New Mexico Delaware Basin, Drilling & Measurements
used the PowerDrive Orbit* rotary steerable system for XTO Energy
to drill the longest wells with the longest laterals. XTO Energy
drilled the James Ranch Unit D12 #191H to a total depth of 26,150
ft, making this the longest horizontal well drilled in the Permian
Basin. Additionally, XTO Energy drilled the longest lateral in the
Permian of 16,426 ft on the LHS Ranch 4-40 4004BH. The PowerDrive
Orbit system helped create access to additional reservoirs,
enabling the customer to reduce operating costs and optimize acre
utilization by providing access to valuable reservoir acreage that
could have otherwise been inaccessible.
Eni Iraq B.V. awarded Schlumberger an IDS contract for a minimum
of eight wells in the Zubair Field. The performance-based contract
builds upon previous awards from Eni in the same field and includes
the provision of technologies such as the DBOS* drillbit
optimization system, i-DRILL* integrated dynamic system analysis
service, and COLOSSUS* liner hanger systems.
Also in Iraq, IDS established a new well delivery record for Eni
Iraq B.V. of 20 days from spud to total depth, a 13% improvement
over the previous record. The turnkey project requires drilling of
several well types with varying levels of complexity that require a
broad range of technologies. Some of the drilling technologies
included ROPO* rate of penetration optimization software, RigHour*
multiwell drilling operational efficiency analysis, and StingBlade*
conical diamond element bits.
In the West Texas Permian Basin, Drilling & Measurements
used the PowerDrive Orbit rotary steerable system in drilling a
well for Apache Corporation and saved 27 drilling hours in the
Lower Spraberry Formation. PowerDrive Orbit system technology
drilled a 7,600-ft lateral section in a single run in a little over
29 hours, which is nearly twice as fast as similar lateral sections
in offset wells in this formation that averaged 56.1 on-bottom
hours when using conventional motors.
In the Colorado Denver-Julesburg Basin, Bits & Drilling
Tools introduced HyperBlade* hyperbolic diamond element bit
technology to help a customer increase drilling efficiency in two
wells. In one well, HyperBlade bit technology achieved a 50%
improvement in the rate of penetration (ROP) in the vertical
section, which saved the operator 7.5 hours of drilling time
compared with offset wells using conventional bits. Another well
was the fastest well drilled to total depth in this basin with an
on-bottom ROP of 464.6 ft/h.
In Russia, Bits & Drilling Tools used a combination of
technologies for Orenburgneft to reduce drilling time in a well by
nearly 75 hours compared with offset wells in the conventional
Zaykino-Zorinskoye Field. Technologies included the AxeBlade*
ridged diamond element bit, StingBlade conical diamond element bit,
and 3DC* three-dimensional cutter.
In the Schiehallion Field in the UK sector of the North Sea,
Drilling & Measurements deployed the GeoSphere reservoir
mapping-while-drilling service for BP, reducing the probability of
geological sidetracks in two wells. The GeoSphere service mapped
channel sands 20 m to 30 m from the wellbore, which improved the
customer's understanding of the formation, maximizing reservoir
contact and recovery.
Apache North Sea UK Limited awarded Schlumberger a three-year
contract with two optional one-year extensions for the provision of
drilling and completion fluids for platform and subsea drilling
projects in the UK North Sea. The new agreement was effective
October 1, 2018 and operations began in December.
Production
(Stated in millions)
Three Months Ended Change
Dec. 31, 2018 Sept. 30, 2018 Dec. 31, 2017 Sequential Year-on-year
Revenue $2,936 $3,249 $3,078 -10% -5%
Pretax $198 $320 $316 -38% -37%
operating
income
Pretax 6.8% 9.9% 10.3% -310 bps -351 bps
operating
margin
Production revenue of $2.9 billion, of which 53% came from the
international markets, declined 10% sequentially. OneStim revenue
in North America land dropped 25% as we decided to warm-stack a
number of our fleets during the latter part of the quarter, and as
we focused on securing dedicated contracts for the first half of
2019 early in the fourth-quarter tendering cycle. Well Services
revenue also declined internationally from lower hydraulic
fracturing activity in Argentina. These revenue decreases were
partially offset by higher revenue from Artificial Lift Solutions
due to strong product sales and service activity in Russia,
Continental Europe, Sub-Sahara Africa, the Middle East, and
Ecuador.
Production pretax operating margin of 7% decreased 310 bps
sequentially due to reduced pricing and activity in the OneStim
business in North America land.
Production performance was supported by contract awards and the
deployment of new cementing and hydraulic fracturing technologies
that helped improve operational efficiency and well productivity.
The Fulcrum* cement-conveyed frac performance technology provides
superior well zonal isolation in hydraulically-fractured lateral
sections. In addition, BroadBand Precision* integrated completion
services ensure every fracture is stimulated and propped open from
the tip of the fracture to the wellbore, and BroadBand Shield*
fracture-geometry control services help limit the risk of
communicating with neighboring wells (frac hits), which is
particularly important for infill wells and multiwell pads.
Saudi Aramco awarded Schlumberger a three-year integrated
production services contract for the provision of well stimulation
and testing services for a conventional gas field in the South
Area. The contract, which has an optional one-year extension, will
include deployment of the BroadBand Sequence* fracturing and
OpenPath* stimulation services.
In the Permian Basin, Well Services introduced Fulcrum
cement-conveyed frac performance technology to overcome challenges
in removing drilling fluid behind the casing that can compromise
zonal isolation during hydraulic fracturing of horizontal wells.
After cementing five horizontal wells with 10,000-ft laterals, the
cement bond logs recorded, on average, a 55% improvement in the
bond index, confirming superior zonal isolation compared with
offset wells cemented with conventional methods. OneStim
hydraulically fractured these five wells and early production was
compared with public data from representative offset wells within a
10-mile radius that had been completed in the last two years using
conventional stimulation methods. Normalized by lateral length, the
mean three-month cumulative liquids production in the five wells
treated with Fulcrum technology was 22% higher compared with the
offset wells.
In Canada, OneStim deployed BroadBand Precision integrated
completion service through coiled tubing, resulting in up to 160
fracturing stages per well in the Cardium Formation in Alberta.
BroadBand Precision service reduced the transition time between
fracturing stages to as low as four minutes. In addition, the
optimized sleeve size enabled higher efficiency during
installation, resulting in rig time savings of up to 16 hours per
well.
In North Dakota, OneStim deployed a combination of technologies
to stimulate a new infill well near an older horizontal well and
saved the customer approximately $400,000 in costs by avoiding the
need for a cleanout operation that would have required two weeks.
OneStim specialists designed new stimulation treatments using the
BroadBand Shield fracture-geometry control service to eliminate
fracture hits. The treatments maintained the productivity of the
older primary well by avoiding sanding up, while their success in
eliminating fracture hits was confirmed by the WellWatcher Stim*
stimulation monitoring service.
In the UK North Sea, Well Services used CemPRIME* engineered
chemistry spacer technology to help BP reduce plug and abandonment
operating costs in the Achmelvich Field. This technology enabled a
switch from a two-spacer to a one-spacer fluid system due to
improvements in fluid compatibility and a reduced impact on cement
setting times.
Cameron
(Stated in millions)
Three Months Ended Change
Dec. 31, 2018 Sept. 30, 2018 Dec. 31, 2017 Sequential Year-on-year
Revenue $1,265 $1,298 $1,414 -3% -11%
Pretax $127 $148 $203 -14% -37%
operating
income
Pretax 10.0% 11.4% 14.4% -140 bps -432 bps
operating
margin
Cameron revenue of $1.3 billion, of which 55% came from the
international markets, declined 3% sequentially as increased sales
in Surface Systems were more than offset by lower revenue from the
OneSubsea and Valves & Measurement product lines, while
Drilling Systems revenue was flat. In addition, OneSubsea booked
more than $600 million in new project orders during the quarter
indicating that it is now close to the cycle trough of
backlog-driven activity. Surface Systems sales were higher in
India, Europe & Africa, the Middle East, and Latin America
while Valves & Measurement revenue was lower due to the decline
in North America land activity.
Cameron pretax operating margin of 10% declined 140 bps
sequentially due to lower OneSubsea margins.
In the fourth quarter, Cameron won several contracts for
integrated subsea production systems and integrated drilling
packages to be deployed in four of the world's major deepwater
basins. Also, the Subsea Integration Alliance, a global partnership
between OneSubsea and Subsea 7, executed record extended-length
tieback installations in the US Gulf of Mexico and UK North Sea,
reducing time to first production.
Equinor awarded OneSubsea an engineering, procurement, and
construction (EPC) contract for supply of the industry's first
all-electric actuated boosting system for the Vigdis Field in the
Norwegian North Sea. The contract scope includes a pump station
with a manifold foundation and protective structure, along with a
pump module, topside equipment, umbilical, and all-electric
controls with electric actuation. Work began in December 2018 and
delivery is scheduled for the first quarter of 2020.
Esso Australia Pty. Ltd. awarded the Subsea Integration Alliance
an integrated subsea engineering, procurement, construction,
installation, and commissioning (EPCIC) contract for offshore
Australia. This supplier-led integrated development solution
combines subsea production systems (SPS) and subsea umbilicals,
risers, and flowlines (SURF). The wells will be tied back to the
Longford onshore gas plants. Offshore installation activities are
scheduled for 2020.
Schlumberger subsea multiphase boosting system technology
enabled the development of the longest tiebacks in the UK North Sea
and the US Gulf of Mexico. In the Otter Field in the UK North Sea,
the 18-mile tieback is part of an integrated solution providing
production security for a late-life asset. In the Dalmatian Field
in the US Gulf of Mexico, the 22-mile tieback is part of an
enhanced oil recovery project. These projects were executed by the
Subsea Integration Alliance.
Equinor and South Atlantic Holding B.V. signed a contract with
Schlumberger for the Total Well Delivery on the Peregrino C
platform, and an amendment to the Cameron EPC contract for the
delivery of a Cameron drilling module. Located 85 km off the coast
of Rio de Janeiro, the drilling module will be installed on
platform C to support drilling of production and injection wells in
reservoirs that are inaccessible from the current platforms A and
B. Through the Total Well Delivery model, Schlumberger will provide
the full scope of well construction services, drilling management
services, and advanced digital technology solutions, including the
DrillPlan* coherent well construction planning solution to drill 22
wells. This integrated model includes efficiency improvements to
the drilling module, streamlined consecutive workflows, and
optimized human resources at the wellsite by multiskilling crew
members.
Financial Tables
Condensed Consolidated Statement
of Income (Loss)
(Stated in millions, except
per share amounts)
Fourth Quarter Twelve Months
Periods Ended December 31, 2018 2017 2018 2017
Revenue $8,180 $8,179 $32,815 $30,440
Interest and other income 31 52 149 224
Gain on sale of business(1) 215 - 215 -
Expenses
Cost of revenue 7,172 7,201 28,478 26,543
Research & engineering 178 192 702 787
General & administrative 114 109 444 432
Impairments & other(1) 172 2,701 356 3,211
Merger & integration(1) - 95 - 308
Interest 142 143 575 566
Income (loss) before taxes $648 $(2,210) $2,624 $(1,183)
Tax expense(1) 100 62 447 330
Net income (loss) attributable $548 $(2,272) $2,177 $(1,513)
to Schlumberger(1)
Net income (loss) attributable 10 (17) 39 (8)
to noncontrolling interests
Net income (loss) attributable $538 $(2,255) $2,138 $(1,505)
to Schlumberger(1)
Diluted earnings (loss) per $0.39 $(1.63) $1.53 $(1.08)
share of Schlumberger(1)
Average shares outstanding 1,384 1,385 1,385 1,388
Average shares outstanding 1,392 1,385 1,393 1,388
assuming dilution
Depreciation & amortization $919 $906 $3,556 $3,837
included in expenses(2)
(1) See section titled "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 2018 2017
Current Assets
Cash and short-term investments $2,777 $5,089
Receivables 7,881 8,084
Other current assets 5,073 5,324
15,731 18,497
Fixed assets 11,679 11,576
Multiclient seismic data 601 727
Goodwill 24,931 25,118
Intangible assets 8,727 9,354
Other assets 8,838 6,715
$70,507 $71,987
Liabilities and Equity
Current Liabilities
Accounts payable and accrued liabilities $10,223 $10,036
Estimated liability for taxes on income 1,155 1,223
Short-term borrowings and current 1,407 3,324
portion of long-term debt
Dividends payable 701 699
13,486 15,282
Long-term debt 14,644 14,875
Deferred taxes 1,441 1,650
Postretirement benefits 1,153 1,082
Other liabilities 3,197 1,837
33,921 34,726
Equity 36,586 37,261
$70,507 $71,987
Liquidity
(Stated in millions)
Components of Liquidity Dec. 31,2018 Sept. 30,2018 Dec. 31,2017
Cash and short-term investments $2,777 $2,854 $5,089
Short-term borrowings (1,407) (3,215) (3,324)
and current
portion of long-term debt
Long-term debt (14,644) (14,159) (14,875)
Net Debt(1) $(13,274) $(14,520) $(13,110)
Details of changes in
liquidity follow:
Twelve Fourth Twelve
Months Quarter Months
Periods Ended December 31, 2018 2018 2017
Net income (loss) before $2,177 $548 $(1,513)
noncontrolling interests
Impairment and other 320 156 3,624
charges, net of tax
before noncontrolling
interests
Gain on sale of WesternGeco (196) (196) -
marine
seismic business, net of tax
$2,301 $508 $2,111
Depreciation and 3,556 919 3,837
amortization(2)
Stock-based compensation 345 86 343
expense
Change in working capital (442) 705 (823)
US federal tax refund - - 685
Other (47) 113 (490)
Cash flow from operations(3) $5,713 $2,331 $5,663
Capital expenditures (2,160) (621) (2,107)
SPM investments (981) (262) (1,609)
Multiclient seismic (100) (37) (276)
data capitalized
Free cash flow(4) 2,472 1,411 1,671
Dividends paid (2,770) (693) (2,778)
Stock repurchase program (400) (100) (969)
Proceeds from employee 261 5 297
stock plans
(437) 623 (1,779)
Proceeds from sale of 579 579 -
WesternGeco marine
seismic business, net
of cash divested
Business acquisitions (292) (2) (847)
and investments, net
of cash acquired plus
debt assumed
Other (14) 46 (363)
(Increase) decrease in Net Debt (164) 1,246 (2,989)
Net Debt, beginning of period (13,110) (14,520) (10,121)
Net Debt, end of period $(13,274) $(13,274) $(13,110)
(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 $340 million and $75 million during
the twelve months and fourth quarter ended December 31, 2018,
respectively; and $455 million and $108 million during the twelve
months and fourth quarter ended December 31, 2017, respectively.
(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 2018 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 2018
Pretax Tax Noncont.Interests Net DilutedEPS
Schlumberger $648 $100 $10 $538 $0.39
net income
(GAAP basis)
Gain on sale (215) (19) - (196) (0.14)
of
marine seismic
acquisition
business
Asset 172 16 - 156 0.11
impairments(1)
Schlumberger $605 $97 $10 $498 $0.36
net income,
excluding
charges &
credits
Fourth Quarter 2017
Pretax Tax Noncont.Interests Net DilutedEPS *
Schlumberger $(2,210) $62 $(17) $(2,255) $(1.63)
net loss
(GAAP basis)
Impairments
& other:
WesternGeco 1,114 20 - 1,094 0.79
seismic
restructuring
Venezuela 938 - - 938 0.67
investment
write-down
Workforce 247 13 - 234 0.17
reductions
Multiclient 246 81 - 165 0.12
seismic
data
impairment
Other 156 10 22 124 0.09
restructuring
charges
Merger 95 26 - 69 0.05
& integration
Provision 245 22 - 223 0.16
for loss
on long-term
construction
project(2)
US - (76) - 76 0.05
tax reform(3)
Schlumberger $831 $158 $5 $668 $0.48
net income,
excluding
charges &
credits
Twelve Months 2018
Pretax Tax Noncont.Interests Net* DilutedEPS
Schlumberger $2,624 $447 $39 $2,138 $1.53
net income
(GAAP basis)
Gain on sale (215) (19) - (196) (0.14)
of
marine seismic
acquisition
business
Impairments
& other:
Workforce 184 20 - 164 0.12
reductions
Asset 172 16 - 156 0.11
impairments
Schlumberger $2,765 $464 $39 $2,261 $1.62
net income,
excluding
charges &
credits
(Stated in
millions,
except
per share
amounts)
Twelve Months 2017
Pretax Tax Noncont.Interests Net DilutedEPS
Schlumberger $(1,183) $330 $(8) $(1,505) $(1.08)
net loss
(GAAP basis)
Impairments
& other:
WesternGeco 1,114 20 - 1,094 0.79
seismic
restructuring
Venezuela 938 - - 938 0.67
investment
write-down
Promissory note 510 - 12 498 0.36
fair value
adjustment
and other
Workforce 247 13 - 234 0.17
reductions
Multiclient 246 81 - 165 0.12
seismic
data impairment
Other 156 10 22 124 0.09
restructuring
charges
Merger 308 70 - 238 0.17
& integration
Provision 245 22 - 223 0.16
for loss
on long-term
construction
project(2)
US tax reform(3) - (76) - 76 0.05
Schlumberger $2,581 $470 $26 $2,085 $1.50
net income,
excluding
charges &
credits
There were no charges or credits during the third quarter of
2018.
(1) Recorded in Impairments & other in the Condensed Consolidated Statement of Income (Loss).
(2) Recorded in Cost of revenue in the Condensed Consolidated Statement of Income (Loss).
(3) Recorded in Tax expense (benefit) in the Condensed Consolidated Statement of Income (Loss).
*Does not add due
to rounding
Segments
(Stated in
millions)
Three Months Ended
Dec. 31, 2018 Sept. 30, 2018 Dec. 31, 2017
Revenue IncomeBeforeTaxes Revenue IncomeBeforeTaxes Revenue IncomeBeforeTaxes
Reservoir $1,651 $364 $1,676 $372 $1,640 $359
Characterization
Drilling 2,461 318 2,429 339 2,180 319
Production 2,936 198 3,249 320 3,078 316
Cameron 1,265 127 1,298 148 1,414 203
Eliminations (133) (40) (148) (27) (133) (42)
& other
Pretax 967 1,152 1,155
operating
income
Corporate (238) (234) (219)
& other
Interest 8 8 25
income(1)
Interest (132) (139) (130)
expense(1)
Charges & 43 - (3,041)
credits
$8,180 $648 $8,504 $787 $8,179 $(2,210)
(Stated in millions)
Twelve Months Ended
Dec. 31, 2018 Dec. 31, 2017
Revenue IncomeBeforeTaxes Revenue IncomeBeforeTaxes
Reservoir $6,526 $1,392 $6,795 $1,244
Characterization
Drilling 9,250 1,239 8,392 1,151
Production 12,394 1,052 10,630 936
Cameron 5,167 608 5,205 733
Eliminations & other (522) (104) (582) (143)
Pretax operating 4,187 3,921
income
Corporate & other (937) (934)
Interest income(1) 52 107
Interest expense(1) (537) (513)
Charges & credits (141) (3,764)
$32,815 $2,624 $30,440 $(1,183)
(1) Excludes interest included
in the segment results.
Supplemental
Information
1) What is the capex guidance for the full year 2019?
Capex (excluding multiclient and SPM investments) for the full year 2019 is expected to be approximately $1.5 to $1.7 billion, which is lower than the $2.2 billion that was spent in 2018.
2) What were the cash flow from operations and free cash flow for the fourth quarter of 2018?
Cash flow from operations for the fourth quarter of 2018 was $2.3 billion. Free cash flow for the fourth quarter of 2018 was $1.4 billion, including $75 million of severance payments but excluding $600 million of cash proceeds that were received from the sale of the WesternGeco marine seismic business.
3) What were the cash flow from operations and free cash flow for the full year of 2018?
Cash flow from operations for the full year of 2018 was $5.7 billion. Free cash flow for the full year of 2018 was $2.5 billion, including $340 million of severance payments but excluding $600 million of cash proceeds that were received from the sale of the WesternGeco marine seismic business.
4) What was included in "Interest and other income" for the fourth quarter of 2018?
"Interest and other income" for the fourth quarter of 2018 was $31 million. This amount consisted of earnings of equity method investments of $21 million and interest income of $10 million.
5) How did interest income and interest expense change during the fourth quarter of 2018?
Interest income of $10 million for the fourth quarter of 2018 was flat sequentially. Interest expense of $142 million decreased $5 million 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, certain centrally managed initiatives, and other nonoperating items.
7) What was the effective tax rate (ETR) for the fourth quarter of 2018?
The ETR for the fourth quarter of 2018, calculated in accordance with GAAP, was 15.4% as compared to 16.4% for the third quarter of 2018. Excluding charges and credits, the ETR for the fourth quarter of 2018 was 16.0%. There were no charges and credits in the third quarter of 2018.
8) How many shares of common stock were outstanding as of December 31, 2018 and how did this change from the end of the previous quarter?
There were 1.383 billion shares of common stock outstanding as of December 31, 2018. The following table shows the change in the number of shares outstanding from September 30, 2018 to December 31, 2018.
(Stated in millions)
Shares outstanding at September 30, 2018 1,385
Shares issued to optionees, less shares exchanged -
Vesting of restricted stock -
Shares issued under employee stock purchase plan -
Stock repurchase program (2)
Shares outstanding at December 31, 2018 1,383
9) What was the weighted average number of
shares outstanding during the fourth
quarter of 2018 and third quarter of 2018,
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 1.384 billion during the
fourth quarter of 2018 and 1.385 billion
during the third quarter of 2018.
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 Quarter2018 Third Quarter2018
Weighted average shares outstanding 1,384 1,385
Assumed exercise of stock options - -
Unvested restricted stock 8 7
Average shares outstanding, 1,392 1,392
assuming dilution
10) 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 baseline.
11) 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 segment
for services and products that each segment 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 segment.
12) What was the unamortized balance of Schlumberger's investment
in SPM projects at December 31, 2018 and
how did it change in terms of investment and amortization
when compared to September 30, 2018?
The unamortized balance of Schlumberger's investments
in SPM projects was approximately $4.2
billion at both December 31, 2018 and September 30, 2018. 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, 2018 $4,248
SPM investments 262
Amortization of SPM investment (152)
Other (157)
Balance at December 31, 2018 $4,201
13) What was the amount of WesternGeco multiclient
sales in the fourth quarter of 2018?
Multiclient sales, including transfer fees, were $176 million in the
fourth quarter of 2018 and $139 million in the third quarter of 2018.
14) What was the WesternGeco backlog at the
end of the fourth quarter of 2018?
The WesternGeco backlog, which is based on signed contracts
with customers, was $343 million at the
end of the fourth quarter of 2018. It was $322
million at the end of the third quarter of 2018.
15) What were the orders and backlog for Cameron's
OneSubsea and Drilling Systems businesses?
The OneSubsea and Drilling Systems orders
and backlog were as follows:
(Stated in millions)
Orders Fourth Quarter2018 Third Quarter2018
OneSubsea $611 $425
Drilling Systems $196 $193
Backlog(at the end of period)
OneSubsea $1,903 $1,654
Drilling Systems $495 $523
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 $32.82 billion in
2018. For more information, visit www.slb.com.
*Mark of Schlumberger or Schlumberger companies.
Notes
Schlumberger will hold a conference call to discuss the earnings
press release and business outlook on Friday, January 18, 2019. 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
18, 2019 by dialing +1 (800) 475-6701 within North America, or +1
(320) 365-3844 outside North America, and providing the access code
457252. 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 2018 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;
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; and other risks and uncertainties detailed in this
full-year and fourth-quarter 2018 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.
Simon 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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