Schlumberger Announces Full-Year and Fourth-Quarter 2017 Results
- 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
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
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
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
"Among the business segments, the fourth-quarter revenue increase was led by the
"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
"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
"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
"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
On
In
On
On
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
International
Revenue in the
Given the recent economic and political developments in
(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 |
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
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
In
Schlumberger announced at the
In December, Schlumberger inaugurated the newly expanded reservoir rock and fluid analysis laboratory in
In
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
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.
In
In the
Offshore
In the
In
In the Norwegian sector of the
(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 |
Pretax operating margin of 10% increased 39 bps sequentially due to improved pricing on land in North America. Incremental margin in
In
In
In the
In British
(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 |
Pretax operating margin of 14% decreased 58 bps sequentially, mainly due to a change in mix in Surface and Drilling Systems.
Ophir Equatorial Guinea Limited—a subsidiary of Ophir Energy—awarded the
Schlumberger installed and commissioned the industry's first all-OEM managed pressure drilling (MPD) system for drilling contractor
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
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? |
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"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? |
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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? |
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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? |
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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? |
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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. |
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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? |
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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. |
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(Stated in millions) |
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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? |
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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? |
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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 |
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12) |
How are Schlumberger products and services that are invested in SPM projects accounted for? |
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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? |
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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? |
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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? |
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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? |
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OneSubsea and Drilling Systems orders and backlog were as follows: |
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(Stated in millions) |
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Fourth Quarter | Third Quarter | |||
Orders |
2017 | 2017 | |||
OneSubsea | $282 | $347 | |||
Drilling Systems | $150 |
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$156 | ||
Backlog (at the end of period) | |||||
OneSubsea | $2,060 | $2,328 | |||
Drilling Systems | $408 |
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$523 |
17) |
What does the $3.041 billion of pretax charges recorded during the fourth quarter of 2017 relate to? |
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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.
*Mark of Schlumberger or of Schlumberger companies.
Notes
Schlumberger will hold a conference call to discuss the earnings press release and business outlook on
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
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
View source version on businesswire.com: http://www.businesswire.com/news/home/20180119005263/en/
Source:
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