HOUSTON-Saturday, January 27th 2018 [ AETOS Wire ]
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
(BUSINESS WIRE)-- 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...
Contacts
Schlumberger Limited
Simon Farrant – Vice President of Investor Relations, Schlumberger Limited
Joy V. Domingo – Manager of Investor Relations, Schlumberger Limited
Office +1 (713) 375-3535
investor-relations@slb.com
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