Schlumberger Announces Second-Quarter 2016 Results
- Revenue of
$7.2 billion increased 10% sequentially- Acquisition of
Cameron contributed revenue of$1.5 billion
- Acquisition of
- EPS:
- GAAP loss per share of
$1.56 - Excluding charges and credits, EPS of
$0.23 - Asset impairment, workforce reduction, and merger and integration charges totaled
$1.79 per share
- GAAP loss per share of
- Cash Flow:
- Cash flow from operations of
$1.6 billion - Free cash flow of
$0.9 billion
- Cash flow from operations of
- Quarterly cash dividend of
$0.50 per share approved
(Stated in millions, except per share amounts) | |||||||||||||||
Three Months Ended | Change | ||||||||||||||
Jun. 30, 2016 | Mar. 31, 2016 | Jun. 30, 2015 | Sequential | Year-on-year | |||||||||||
Revenue | $7,164 | $6,520 | $9,010 | 10% ** | -20% | ||||||||||
Pretax operating income | $747 | $901 | $1,708 | -17% | -56% | ||||||||||
Pretax operating margin | 10.4% | 13.8% | 19.0% | -340 bps | -854 bps | ||||||||||
Net income (loss) (GAAP basis) | $(2,160) | $501 | $1,124 | -531% | -292% | ||||||||||
Net income, excluding charges and credits* | $316 | $501 | $1,124 | -37% | -72% | ||||||||||
Diluted EPS (loss per share) (GAAP basis) | $(1.56) | $0.40 | $0.88 | -490% | -278% | ||||||||||
Diluted EPS, excluding charges and credits* | $0.23 | $0.40 | $0.88 | -43% | -74% | ||||||||||
*These are non-GAAP financial measures. See section entitled "Charges & Credits" for details. | |||||||||||||||
**Total revenue excluding the effects of the Cameron acquisition, which closed on April 1, 2016, declined 14% sequentially and 38% year-on-year. | |||||||||||||||
Schlumberger Chairman and CEO
"Our second-quarter revenue increased 10% sequentially, reflecting a full quarter of activity from the acquired
"Among the business segments, second-quarter revenues from the Reservoir Characterization and Production Groups declined sequentially by 9% and 11%, respectively, on continued lower demand for exploration- and development-related products and services as E&P budgets were further reduced. Drilling Group revenue fell by 18%, impacted by the steep drop in rig count, particularly in
"Pretax operating margin was maintained above 10% after a sequential drop of 340 basis points due to lower activity, pricing headwinds, an unfavorable activity mix and the significant reduction of our operations in
"As a result of the weakness in activity that will persist through 2016 as expected, we have made another significant adjustment to our cost and resource base, including the release of more than 16,000 employees during the first half of 2016 and a further streamlining of our overhead, infrastructure, and asset base. This has led to
"As the downturn has developed, we have changed our focus from managing decremental margins to further strengthening market share where we have seen a significant increase in our tender wins. As oil prices have nearly doubled from their lows of
"At the same time, the effects of the cuts that we have seen in E&P spending are now clearly visible in falling oil production, and with demand remaining strong, we are heading more rapidly towards an increasing negative gap between global supply and demand for oil. This will require significant capability and capacity to reverse, and without pricing recovery the service industry will be challenged to deliver.
"As we have navigated this downturn, we have made a series of moves that position us well for the inevitable market recovery. Our balance sheet remains strong in spite of the investments we have made in our business and the cash that we have returned to our shareholders. We have expanded our technology portfolio, not only by the major acquisition of
"Whatever shape the recovery takes, service pricing must rise while respecting the need for operators to control their costs in what will likely be a medium-for-longer oil price environment. This provides an opportunity to share the additional value that can be mutually created through collaboration and integration. We will therefore continue to develop the way in which we operate as a company as well as the nature of the work that we undertake, making sure we remain at the forefront of an industry that increasingly needs fundamental change."
Other Events
During the quarter, Schlumberger repurchased 0.4 million shares of its common stock at an average price of
On
On
On
On
On
Geographic Revenue
Second-quarter revenue of
(Stated in millions) | ||||||||||||
As reported | Three Months Ended | Change | ||||||||||
Jun. 30, 2016 | Mar. 31, 2016 | Sequential | ||||||||||
North America | $ | 1,737 | $ | 1,464 | 19 | % | ||||||
Latin America | 1,007 | 1,280 | -21 | % | ||||||||
Europe/CIS/Africa | 1,948 | 1,698 | 15 | % | ||||||||
Middle East & Asia | 2,404 | 2,002 | 20 | % | ||||||||
Eliminations & other | 68 | 77 | ||||||||||
$ | 7,164 | $ | 6,520 | 10 | % | |||||||
North America revenue | $ | 1,737 | $ | 1,464 | 19 | % | ||||||
International revenue | $ | 5,359 | $ | 4,979 | 8 | % | ||||||
The following table and commentary is presented on a pro forma basis assuming that Cameron was acquired January 1, 2016. |
||||||||||||
(Stated in millions) | ||||||||||||
Pro forma - including Cameron in Q1 2016 | Three Months Ended | Change | ||||||||||
Jun. 30, 2016 | Mar. 31, 2016 | Sequential | ||||||||||
North America | $ | 1,737 | $ | 2,165 | -20 | % | ||||||
Latin America | 1,007 | 1,353 | -26 | % | ||||||||
Europe/CIS/Africa | 1,948 | 2,096 | -7 | % | ||||||||
Middle East & Asia | 2,404 | 2,456 | -2 | % | ||||||||
Eliminations & other | 68 | 79 | ||||||||||
$ | 7,164 | $ | 8,148 | -12 | % | |||||||
North America revenue | $ | 1,737 | $ | 2,165 | -20 | % | ||||||
International revenue | $ | 5,359 | $ | 5,905 | -9 | % | ||||||
International Areas
International pro forma revenue declined 9% sequentially due to customer budget cuts, continued pricing pressure, activity disruptions, and the scaling back of operations in
Pro forma revenue in the
Reservoir Characterization Group |
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(Stated in millions, except margin percentages) | |||||||||||||||||||||||
Three Months Ended | Change | ||||||||||||||||||||||
Jun. 30, 2016 | Mar. 31, 2016 | Jun. 30, 2015 | Sequential | Year-on-year | |||||||||||||||||||
Revenue | $ | 1,593 | $ | 1,747 | $ | 2,510 | -9 | % | -37 | % | |||||||||||||
Pretax operating income | 266 | 331 | 655 | -20 | % | -59 | % | ||||||||||||||||
Pretax operating margin | 16.7 | % | 19.0 | % | 26.1 | % | -228 bps | -943 bps | |||||||||||||||
Decremental operating margin | 43 | % | 42 | % | |||||||||||||||||||
Pretax operating margin of 17% declined 228 basis points (bps) sequentially due to reduced high-margin Wireline and Testing Services activities, particularly in
Offshore
Offshore
In the
In the US Gulf of
In
The Schlumberger transformation program enabled WesternGeco to increase its global marine operational reliability through improvements in operations integrity. Since 2013 the nonproductive time rate has decreased 62% through the optimization of job design, planning, and execution. A key contributor to this result was a 68% improvement in marine source reliability during the same period by implementing reliability centered maintenance (RCM) and procedural adherence to standard work instructions (SWI). Through the development of SWI and deployment of the Competency Management System, WesternGeco is targeting improved utilization of its vessel fleet.
In
In the
Drilling Group |
|||||||||||||||||||||||
(Stated in millions, except margin percentages) | |||||||||||||||||||||||
Three Months Ended | Change | ||||||||||||||||||||||
Jun. 30, 2016 | Mar. 31, 2016 | Jun. 30, 2015 | Sequential | Year-on-year | |||||||||||||||||||
Revenue | $ | 2,034 | $ | 2,493 | $ | 3,469 | -18 | % | -41 | % | |||||||||||||
Pretax operating income | 171 | 371 | 672 | -54 | % | -75 | % | ||||||||||||||||
Pretax operating margin | 8.4 | % | 14.9 | % | 19.4 | % | -649 bps | -1,096 bps | |||||||||||||||
Decremental operating margin | 44 | % | 35 | % | |||||||||||||||||||
Drilling Group revenue of
Pretax operating margin of 8% contracted 649 bps sequentially, leading to higher decrementals as revenue declined on pricing weakness. This effect was exacerbated by lower rig counts in
A combination of contract awards, transformation program gains, integrated services benefits, and new technology deployments contributed to
In
Offshore
In US land, Bits & Drilling Tools used ONYX 360* rolling polycrystalline diamond compact (PDC) cutter technology to set a new record for Unit Petroleum in the Granite Wash unconventional formation. ONYX 360 technology increased drillbit durability and footage drilled as the entire diamond edge was used to drill the formations while it rotated 360°. This enabled the customer to drill the longest and fastest lateral wellbore in the formation by exceeding the previous record by 62% in lateral length and 27% in rate of penetration.
In
In
In
Offshore
In
In
In
Production Group |
|||||||||||||||||||||||
(Stated in millions, except margin percentages) | |||||||||||||||||||||||
Three Months Ended | Change | ||||||||||||||||||||||
Jun. 30, 2016 | Mar. 31, 2016 | Jun. 30, 2015 | Sequential | Year-on-year | |||||||||||||||||||
Revenue | $ | 2,099 | $ | 2,348 | $ | 3,059 | -11 | % | -31 | % | |||||||||||||
Pretax operating income | 90 | 208 | 397 | -57 | % | -77 | % | ||||||||||||||||
Pretax operating margin | 4.3 | % | 8.9 | % | 13.0 | % | -459 bps | -871 bps | |||||||||||||||
Decremental operating margin | 48 | % | 32 | % | |||||||||||||||||||
Pretax operating margin of 4% decreased 459 bps sequentially, mainly from lower activity and increasing pricing weakness in pressure pumping services on land in North America. Sequential decremental operating margin expanded as a result of the decision to maintain operational capability in certain locations to defend market share despite lower activity. Robust Schlumberger Production Management projects, from which co-managed production worldwide has now reached around 250,000 bbl/d, continued to contribute to accretive margins for the Group.
In
In
Offshore
In
Offshore
In US land, Well Services used LiteCRETE* lightweight cement slurry to isolate a customer's newly designed production casing with cement to surface in a
In
Cameron Group |
|||||||||||||||||||||||
(Stated in millions, except margin percentages) | |||||||||||||||||||||||
Three Months Ended | Change | ||||||||||||||||||||||
Jun. 30, 2016 | Mar. 31, 2016* | Jun. 30, 2015* | Sequential | Year-on-year | |||||||||||||||||||
Revenue | $ | 1,536 | $ | 1,628 | $ | 2,236 | -6 | % | -31 | % | |||||||||||||
Pretax operating income | 243 | 236 | 328 | 3 | % | -26 | % | ||||||||||||||||
Pretax operating margin | 15.8 | % | 14.5 | % | 14.7 | % | 130 bps | 113 bps | |||||||||||||||
Decremental operating margin | NA | 12 | % | ||||||||||||||||||||
*First-quarter 2016 and second-quarter 2015 are presented on a pro forma basis for comparative purposes. | |||||||||||||||||||||||
Pretax operating margin of 16% improved sequentially on a pro forma basis despite the market downturn. This was driven by strong project execution from OneSubsea, Drilling, and Process Systems product lines.
New contract awards and project startups impacted the performance of the
In
In the US Gulf of
Financial Tables |
|||||||||||||||
Condensed Consolidated Statement of Income | |||||||||||||||
(Stated in millions, except per share amounts) | |||||||||||||||
Second Quarter | Six Months | ||||||||||||||
Periods Ended June 30, | 2016 | 2015 | 2016 | 2015 | |||||||||||
Revenue | $ | 7,164 | $ | 9,010 | $ | 13,684 | $ | 19,258 | |||||||
Interest and other income | 54 | 47 | 98 | 96 | |||||||||||
Expenses | |||||||||||||||
Cost of revenue | 6,315 | 7,136 | 11,774 | 15,231 | |||||||||||
Research & engineering | 257 | 279 | 497 | 546 | |||||||||||
General & administrative | 103 | 120 | 213 | 239 | |||||||||||
Impairments & other (1) | 2,573 | - | 2,573 | 439 | |||||||||||
Merger & integration (1) | 335 | - | 335 | - | |||||||||||
Interest | 149 | 86 | 282 | 169 | |||||||||||
Income (loss) before taxes | $ | (2,514 | ) | $ | 1,436 | $ | (1,892 | ) | $ | 2,730 | |||||
Taxes on income (loss) (1) | (368 | ) | 302 | (269 | ) | 608 | |||||||||
Net income (loss) | $ | (2,146 | ) | $ | 1,134 | $ | (1,623 | ) | $ | 2,122 | |||||
Net income attributable to noncontrolling interests | 14 | 10 | 36 | 23 | |||||||||||
Net income (loss) attributable to Schlumberger (1) | $ | (2,160 | ) | $ | 1,124 | $ | (1,659 | ) | $ | 2,099 | |||||
Diluted earnings (loss) per share of Schlumberger (1) | $ | (1.56 | ) | $ | 0.88 | $ | (1.26 | ) | $ | 1.64 | |||||
Average shares outstanding | 1,389 | 1,269 | 1,321 | 1,273 | |||||||||||
Average shares outstanding assuming dilution | 1,389 | 1,280 | 1,321 | 1,282 | |||||||||||
Depreciation & amortization included in expenses (2) | $ | 1,113 | $ | 1,047 | $ | 2,080 | $ | 2,089 |
(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) | |||||||||
Jun. 30, | Dec. 31, | ||||||||
Assets | 2016 | 2015 | |||||||
Current Assets | |||||||||
Cash and short-term investments | $ | 11,192 | $ | 13,034 | |||||
Receivables | 9,374 | 8,780 | |||||||
Other current assets | 6,629 | 5,098 | |||||||
27,195 | 26,912 | ||||||||
Fixed income investments, held to maturity | 386 | 418 | |||||||
Fixed assets | 13,226 | 13,415 | |||||||
Multiclient seismic data | 976 | 1,026 | |||||||
Goodwill | 24,603 | 15,605 | |||||||
Intangible assets | 9,921 | 4,569 | |||||||
Other assets | 4,864 | 6,060 | |||||||
$ | 81,171 | $ | 68,005 | ||||||
Liabilities and Equity | |||||||||
Current Liabilities | |||||||||
Accounts payable and accrued liabilities | $ | 9,494 | $ | 7,727 | |||||
Estimated liability for taxes on income | 1,043 | 1,203 | |||||||
Short-term borrowings and current portion | |||||||||
of long-term debt | 3,371 | 4,557 | |||||||
Dividends payable | 701 | 634 | |||||||
14,609 | 14,121 | ||||||||
Long-term debt | 18,252 | 14,442 | |||||||
Deferred taxes | 2,631 | 1,075 | |||||||
Postretirement benefits | 1,341 | 1,434 | |||||||
Other liabilities | 1,359 | 1,028 | |||||||
38,192 | 32,100 | ||||||||
Equity | 42,979 | 35,905 | |||||||
$ | 81,171 | $ | 68,005 | ||||||
Net Debt
"Net Debt" represents gross debt less cash, short-term investments and fixed income investments, held to maturity. Management believes that Net Debt provides useful supplemental information regarding the level of Schlumberger's indebtedness by reflecting cash and investments that could be used to repay debt.
"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 the ability of our business 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 our shareholders through dividend payments or share repurchases. Free cash flow does not represent the residual cash flow available for discretionary expenditures.
Net Debt and free cash flow are non-GAAP financial measures that should be considered in addition to, not as substitute for, or superior to, total debt or cash flow from operations.
Details of changes in Net Debt follow:
(Stated in millions) | |||||||||||||||||
Periods Ended June 30, |
Six |
Second |
Six |
||||||||||||||
Net income (loss) before noncontrolling interests | $ | (1,623 | ) | $ | (2,146 | ) | $ | 2,122 | |||||||||
Impairment and other charges, net of tax | 2,476 | 2,476 | 383 | ||||||||||||||
Net income before noncontrolling interest,excluding charges & credits |
853 | 330 | 2,505 | ||||||||||||||
Depreciation and amortization (1) | 2,080 | 1,113 | 2,089 | ||||||||||||||
Pension and other postretirement benefits expense | 92 | 32 | 217 | ||||||||||||||
Stock-based compensation expense | 145 | 84 | 167 | ||||||||||||||
Pension and other postretirement benefits funding | (83 | ) | (38 | ) | (214 | ) | |||||||||||
Change in working capital | (250 | ) | 213 | (837 | ) | ||||||||||||
Other | 5 | (102 | ) | 157 | |||||||||||||
Cash flow from operations (2) |
2,842 | 1,632 | 4,084 | ||||||||||||||
Capital expenditures | (998 | ) | (449 | ) | (1,193 | ) | |||||||||||
SPM investments | (729 | ) | (132 | ) | (222 | ) | |||||||||||
Multiclient seismic data capitalized | (333 | ) | (166 | ) | (221 | ) | |||||||||||
Free cash flow | 782 | 885 | 2,448 | ||||||||||||||
Stock repurchase program | (506 | ) | (31 | ) | (1,239 | ) | |||||||||||
Dividends paid | (1,255 | ) | (626 | ) | (1,151 | ) | |||||||||||
Proceeds from employee stock plans | 195 | 32 | 256 | ||||||||||||||
(784 | ) | 260 | 314 | ||||||||||||||
Business acquisitions and investments, net of cash acquired plus debt assumed | (3,790 | ) | (3,709 | ) | (206 | ) | |||||||||||
Discontinued operations - settlement with US Department of Justice | - | - | (233 | ) | |||||||||||||
Other | 76 | 58 | (86 | ) | |||||||||||||
Increase in Net Debt | (4,498 | ) | (3,391 | ) | (211 | ) | |||||||||||
Net Debt, beginning of period | (5,547 | ) | (6,654 | ) | (5,387 | ) | |||||||||||
Net Debt, end of period | $ | (10,045 | ) | $ | (10,045 | ) | $ | (5,598 | ) | ||||||||
Components of Net Debt |
Jun. 30, |
Mar. 31, |
Dec. 31, |
Jun. 30, |
|||||||||||||
Cash and short-term investments | $ | 11,192 | $ | 14,432 | $ | 13,034 | $ | 7,274 | |||||||||
Fixed income investments, held to maturity | 386 | 401 | 418 | 469 | |||||||||||||
Short-term borrowings and current portion of long-term debt | (3,371 | ) | (4,254 | ) | (4,557 | ) | (4,231 | ) | |||||||||
Long-term debt | (18,252 | ) | (17,233 | ) | (14,442 | ) | (9,110 | ) | |||||||||
$ | (10,045 | ) | $ | (6,654 | ) | $ | (5,547 | ) | $ | (5,598 | ) |
(1) |
Includes depreciation of property, plant and equipment and amortization of intangible assets, multiclient seismic data costs and SPM investments. | |
(2) | Includes severance payments of approximately $545 million and $455 million during the six months ended June 30, 2016 and 2015, respectively, and $285 million during the second quarter of 2016. Also includes approximately $100 million of one-off transaction-related payments associated with the acquisition of Cameron. | |
Charges & Credits
In addition to financial results determined in accordance with US generally accepted accounting principles (GAAP), this second-quarter 2016 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; net income before noncontrolling interests, excluding charges & credits; and effective tax, 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) | |||||||||||||||||||
Second Quarter 2016 | |||||||||||||||||||
Pretax | Tax |
Noncont. |
Net |
Diluted EPS |
|||||||||||||||
Schlumberger net income, excluding charges & credits | $ | 394 | $ | 64 | $ | 14 | $ | 316 | $ | 0.23 | |||||||||
Fixed asset impairments | (1,058 | ) | (177 | ) | - | (881 | ) | ||||||||||||
Workforce reduction | (646 | ) | (63 | ) | - | (583 | ) | ||||||||||||
Inventory write-downs | (616 | ) | (49 | ) | - | (567 | ) | ||||||||||||
Multiclient seismic data impairment | (198 | ) | (62 | ) | - | (136 | ) | ||||||||||||
Other restructuring charges | (55 | ) | - | - | (55 | ) | |||||||||||||
Amortization of purchase accounting inventory fair value adjustment | (150 | ) | (45 | ) | - | (105 | ) | ||||||||||||
Merger-related employee benefits and professional fees | (92 | ) | (17 | ) | - | (75 | ) | ||||||||||||
Other merger and integration-related | (93 | ) | (19 | ) | - | (74 | ) | ||||||||||||
Schlumberger net loss (GAAP basis) | $ | (2,514 | ) | $ | (368 | ) | $ | 14 | $ | (2,160 | ) | $ | (1.56 | ) |
(Stated in millions, except per share amounts) | |||||||||||||||||||
Six Months 2016 | |||||||||||||||||||
Pretax | Tax |
Noncont. |
Net |
Diluted EPS |
|||||||||||||||
Schlumberger net income, excluding charges & credits | $ | 1,015 | $ | 162 | $ | 36 | $ | 817 | $ | 0.62 | |||||||||
Fixed asset impairments | (1,058 | ) | (177 | ) | - | (881 | ) | ||||||||||||
Workforce reduction | (646 | ) | (63 | ) | - | (583 | ) | ||||||||||||
Inventory write-downs | (616 | ) | (49 | ) | - | (567 | ) | ||||||||||||
Multiclient seismic data impairment | (198 | ) | (62 | ) | - | (136 | ) | ||||||||||||
Other restructuring charges | (55 | ) | - | - | (55 | ) | |||||||||||||
Amortization of purchase accounting inventory fair value adjustment | (150 | ) | (45 | ) | - | (105 | ) | ||||||||||||
Merger-related employee benefits and professional fees | (92 | ) | (17 | ) | - | (75 | ) | ||||||||||||
Other merger and integration-related | (93 | ) | (19 | ) | - | (74 | ) | ||||||||||||
Schlumberger net loss (GAAP basis) | $ | (1,893 | ) | $ | (270 | ) | $ | 36 | $ | (1,659 | ) | $ | (1.26 | ) | |||||
Six Months 2015 | |||||||||||||||||||
Pretax | Tax |
Noncont. |
Net |
Diluted EPS |
|||||||||||||||
Schlumberger net income, excluding charges & credits | $ | 3,169 | $ | 664 | $ | 23 | $ | 2,482 | $ | 1.94 | |||||||||
Workforce reduction | (390 | ) | (56 | ) | - | (334 | ) | ||||||||||||
Currency devaluation loss in Venezuela | (49 | ) | - | - | (49 | ) | |||||||||||||
Schlumberger net income (GAAP basis) | $ | 2,730 | $ | 608 | $ | 23 | $ | 2,099 | $ | 1.64 | |||||||||
There were no charges or credits during the first quarter of 2016 and the second quarter of 2015. |
Product Groups |
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(Stated in millions) | |||||||||||||||||||||||||||||||
Three Months Ended | |||||||||||||||||||||||||||||||
Jun. 30, 2016 | Mar. 31, 2016 | Jun. 30, 2015 | |||||||||||||||||||||||||||||
Revenue |
Income |
Revenue |
Income |
Revenue |
Income |
||||||||||||||||||||||||||
Reservoir Characterization | $ | 1,593 | $ | 266 | $ | 1,747 | $ | 331 | $ | 2,510 | $ | 655 | |||||||||||||||||||
Drilling | 2,034 | 171 | 2,493 | 371 | 3,469 | 672 | |||||||||||||||||||||||||
Production | 2,099 | 90 | 2,348 | 208 | 3,059 | 397 | |||||||||||||||||||||||||
Cameron | 1,536 | 243 | - | - | - | - | |||||||||||||||||||||||||
Eliminations & other | (98 | ) | (23 | ) | (68 | ) | (9 | ) | (28 | ) | (16 | ) | |||||||||||||||||||
Pretax operating income | 747 | 901 | 1,708 | ||||||||||||||||||||||||||||
Corporate & other | (241 | ) | (172 | ) | (199 | ) | |||||||||||||||||||||||||
Interest income(1) | 24 | 13 | 6 | ||||||||||||||||||||||||||||
Interest expense(1) | (136 | ) | (120 | ) | (79 | ) | |||||||||||||||||||||||||
Charges & credits | (2,908 | ) | - | - | |||||||||||||||||||||||||||
$ | 7,164 | $ | (2,514 | ) | $ | 6,520 | $ | 622 | $ | 9,010 | $ | 1,436 |
(Stated in millions) | ||||||||||||||||||||
Six Months Ended | ||||||||||||||||||||
Jun. 30, 2016 | Jun. 30, 2015 | |||||||||||||||||||
Revenue |
Income |
Revenue |
Income |
|||||||||||||||||
Reservoir Characterization | $ | 3,339 | $ | 597 | $ | 5,165 | $ | 1,327 | ||||||||||||
Drilling | 4,527 | 542 | 7,391 | 1,450 | ||||||||||||||||
Production | 4,447 | 298 | 6,764 | 941 | ||||||||||||||||
Cameron | 1,536 | 243 | - | - | ||||||||||||||||
Eliminations & other | (165 | ) | (32 | ) | (62 | ) | (17 | ) | ||||||||||||
Pretax operating income | 1,648 | 3,701 | ||||||||||||||||||
Corporate & other | (413 | ) | (390 | ) | ||||||||||||||||
Interest income(1) | 37 | 14 | ||||||||||||||||||
Interest expense(1) | (256 | ) | (156 | ) | ||||||||||||||||
Charges & credits | (2,908 | ) | (439 | ) | ||||||||||||||||
$ | 13,684 | $ | (1,892 | ) | $ | 19,258 | $ | 2,730 | ||||||||||||
(1) Excludes interest included in the Product Group's results. |
Supplemental Information |
||
1) |
What is the definition of decremental operating margin? |
|
Decremental operating margin is equal to the ratio of the change in pretax operating income over the change in revenue. | ||
2) |
What was the cash flow from operations for the second quarter of 2016? |
|
Cash flow from operations was $1.6 billion for the second quarter of 2016 and included approximately $285 million of severance payments and $100 million of one-off transaction-related payments associated with the acquisition of Cameron during the quarter. | ||
3) |
What was the cash flow from operations for the first half of 2016? |
|
Cash flow from operations was $2.8 billion for the first half of 2016 and included approximately $545 million of severance payments and $100 million of one-off transaction-related payments associated with the acquisition of Cameron during the quarter. | ||
4) |
What was the free cash flow as a percentage of net income before noncontrolling interests and charges and credits, for the second quarter of 2016? |
|
Free cash flow, which was $855 million and included approximately $285 million of severance payments, $100 million of one-off transaction-related payments, $449 million of capex, $132 million of SPM investments, and $166 million of multiclient seismic data, as a percentage of net income before noncontrolling interests and charges and credits was 268% for the second quarter of 2016. | ||
5) |
What was the free cash flow as a percentage of net income before noncontrolling interests and charges and credits, for the first half of 2016? |
|
Free cash flow, which was $782 million and included approximately $545 million of severance payments, $100 million of one-off transaction-related payments, $998 million of capex, $729 million of SPM investments, and $333 million of multiclient seismic data, as a percentage of net income before noncontrolling interests and charges and credits was 92% for the first half of 2016. | ||
6) |
What is the capex guidance for the full year 2016? |
|
Capex (excluding multiclient and SPM investments) is expected to be $2.2 billion for 2016, including three quarters of capex for the acquired Cameron businesses. | ||
7) |
What was included in "Interest and other income" for the second quarter of 2016? |
|
"Interest and other income" for the second quarter of 2016 was $54 million. This amount consisted of earnings of equity method investments of $24 million and interest income of $30 million. | ||
8) |
How did interest income and interest expense change during the second quarter of 2016? |
|
Interest income of $30 million increased $11 million sequentially. Interest expense of $149 million increased $16 million sequentially. | ||
9) |
What is the difference between pretax operating income and Schlumberger's consolidated income before taxes? |
|
The difference principally consists of corporate items (including 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. | ||
10) |
What was the effective tax rate (ETR) for the second quarter of 2016? |
|
The ETR for the second quarter of 2016 calculated in accordance with GAAP was 14.6% as compared to 15.9% for the first quarter of 2016. | ||
The ETR for the second quarter of 2016, excluding charges and credits, was 16.2% as compared to 15.9% for the first quarter of 2016. | ||
11) |
How many shares of common stock were outstanding as of June 30, 2016 and how did this change from the end of the previous quarter? |
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There were 1.391 billion shares of common stock outstanding as of June 30, 2016. The following table shows the change in the number of shares outstanding from March 31, 2016 to June 30, 2016. |
|
(Stated in millions) |
|
Shares outstanding at March 31, 2016 | 1,252 | |
Acquisition of Cameron | 138 | |
Shares sold to optionees, less shares exchanged | 1 | |
Vesting of restricted stock | - | |
Shares issued under employee stock purchase plan | - | |
Stock repurchase program | - | |
Shares outstanding at June 30, 2016 | 1,391 |
12) |
What was the weighted average number of shares outstanding during the second quarter of 2016 and first quarter of 2016 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 during the second quarter of 2016 and first quarter of 2016 was 1.389 billion and 1.254 billion, respectively. | ||
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) | ||||||
Second Quarter |
First Quarter |
|||||
Weighted average shares outstanding | 1,389 |
|
1,254 | |||
Assumed exercise of stock options | 3 |
|
1 | |||
Unvested restricted stock | 5 |
|
4 | |||
Average shares outstanding, assuming dilution | 1,397 |
|
1,259 |
13) |
What were multiclient sales in the second quarter of 2016? |
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Multiclient sales, including transfer fees, were $145 million in the second quarter of 2016 and $77 million in the first quarter of 2016. | ||
14) |
What was the WesternGeco backlog at the end of the second quarter of 2016? |
|
WesternGeco backlog, which is based on signed contracts with customers, was $865 million at the end of the second quarter of 2016. It was $966 million at the end of the first quarter of 2016. | ||
15) |
What were the orders and backlog for Cameron's Subsea and Drilling segments? |
|
Subsea and Drilling orders and backlog were as follows: |
(Stated in millions) | ||||||
Orders |
Second |
First Quarter |
||||
Subsea | $315 | $305 | ||||
Drilling | $166 |
|
$150 | |||
Backlog (at the end of period) | ||||||
Subsea | $2,642 | $2,870 | ||||
Drilling | $1,050 |
|
$1,308 |
16) |
What do the various charges Schlumberger recorded during the second quarter of 2016 relate to? |
|
Asset impairment charges: |
||
As a result of the persistent unfavorable oil and gas industry market conditions that have continued to deteriorate and their impact on the activity outlook, Schlumberger determined that carrying values of certain assets were no longer recoverable, which resulted in the following $1.9 billion of pretax asset impairment charges during the second quarter: | ||
-- $1.058 billion of fixed asset impairments primarily relating to underutilized equipment and facilities. | ||
-- $616 million to write-down the carrying value of certain inventory. | ||
-- $198 million of multiclient seismic data impairment. | ||
-- $55 million of other restructuring charges. | ||
Schlumberger does not expect to incur any significant cash expenditures as a result of these asset impairment charges. | ||
|
||
Workforce reduction: |
||
As a result of the weakness in activity that we expect to persist through 2016, Schlumberger decided to further reduce its headcount. As a result, Schlumberger recorded a $646 million pretax charge during the second quarter associated with these headcount reductions. | ||
Merger and integration charges relating to the Cameron acquisition: |
||
In connection with Schlumberger's acquisition of Cameron, Schlumberger recorded $335 million of pretax charges consisting of $150 million relating to the non-cash amortization of purchase accounting adjustments associated with the write-up of acquired inventory to its estimated fair value; $92 million of merger-related employee-related benefits and professional fees; and $93 million of other merger and integration related 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
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This second-quarter 2016 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 Groups and 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 anticipated benefits of the
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Source:
Schlumberger Limited
Simon Farrant – Schlumberger Limited, Vice President of Investor Relations
Joy V. Domingo – Schlumberger Limited, Manager of Investor Relations
Office +1 (713) 375-3535
investor-relations@slb.com