Schlumberger Announces Third-Quarter 2016 Results
- Revenue of
$7.0 billion decreased 2% sequentially - Pretax operating income of
$815 million increased 9% sequentially - GAAP EPS was
$0.13 . Excluding Cameron merger and integration charges, EPS was$0.25 - Cash flow from operations was
$1.4 billion . Free cash flow was$699 million - Quarterly cash dividend of
$0.50 per share approved
(Stated in millions, except per share amounts) | |||||||||||||||
Three Months Ended | Change | ||||||||||||||
Sept. 30, 2016 | Jun. 30, 2016 | Sept. 30, 2015 | Sequential | Year-on-year | |||||||||||
Revenue | $7,019 | $7,164 | $8,472 | -2% | -17% | ||||||||||
Pretax operating income | $815 | $747 | $1,521 | 9% | -46% | ||||||||||
Pretax operating margin | 11.6% | 10.4% | 18.0% | 119 bps | -634 bps | ||||||||||
Net income (loss) (GAAP basis) | $176 | $(2,160) | $989 | n/m | -82% | ||||||||||
Net income, excluding charges and credits* | $353 | $316 | $989 | 12% | -64% | ||||||||||
Diluted EPS (loss per share) (GAAP basis) | $0.13 | $(1.56) | $0.78 | n/m | -83% | ||||||||||
Diluted EPS, excluding charges and credits* | $0.25 | $0.23 | $0.78 | 9% | -68% | ||||||||||
*These are non-GAAP financial measures. See section entitled "Charges & Credits" for details. | |||||||||||||||
n/m = not meaningful |
Schlumberger Chairman and CEO
"Our third-quarter revenue decreased 2% sequentially, driven largely by the expected reduction in activity at Cameron as the order backlog of products declined. In spite of the challenging business environment, Cameron delivered strong financial results that were partly supported by excellent progress in the integration process.
"Excluding Cameron, revenue increased 1% sequentially driven by higher activity in the
"The solid nature of these results is apparent through incremental and decremental margin performance. The 12% sequential drop in
"Among the business segments, the third-quarter revenue of the
"Pretax operating margins improved 119 basis points (bps) to 11.6% in the third quarter as a result of steady progress of our transformation program, further streamlining of our global support structure, and early efforts in high-grading our contract portfolio. Margins were also partly boosted by the capacity reductions and asset impairments we made in the second quarter.
"Among the Groups, Reservoir Characterization pretax operating margin improved 292 bps sequentially to 19.1% while the
"Free cash flow generation of
"In the global oil market, the supply and demand of crude is now more or less balanced as evidenced by flattening petroleum inventory levels and the start of consistent draws toward the end of the quarter—particularly in
"In terms of 2017 E&P investment, visibility remains limited as our customers are still in the planning process. We maintain that a broad-based V-shaped recovery is unlikely given the fragile financial state of the industry, although we do see activity upside in 2017 in
"With the unparalleled cost and cash discipline we have established, we are confident in our capability to deliver incremental margins north of 65% and a free cash conversion rate above 75%. Going forward, this will give us significant flexibility to both re-invest in our business and steadily return cash to our shareholders. This capability, together with our unmatched scale and our unique ability to drive change throughout our company, clearly sets us apart from other industry players."
Other Events
During the quarter, Schlumberger repurchased 2 million shares of its common stock at an average price of
On
On
Consolidated Revenue by Geography
(Stated in millions) | ||||||||||||
Three Months Ended | Change | |||||||||||
Sept. 30, 2016 | Jun. 30, 2016 | Sequential | ||||||||||
North America | $ | 1,699 | $ | 1,737 | -2 | % | ||||||
Latin America | 992 | 1,007 | -1 | % | ||||||||
Europe/CIS/Africa | 1,872 | 1,948 | -4 | % | ||||||||
Middle East & Asia | 2,385 | 2,404 | -1 | % | ||||||||
Eliminations & other | 71 | 68 | - | |||||||||
$ | 7,019 | $ | 7,164 | -2 | % | |||||||
North America revenue | $ | 1,699 | $ | 1,737 | -2 | % | ||||||
International revenue | $ | 5,249 | $ | 5,359 | -2 | % |
Third-quarter revenue of
In
International Areas
International revenue declined 2% sequentially due to continued pricing pressure across most GeoMarkets and reduced Cameron Group Drilling sales. In spite of this, robust activity improvements were seen in the
Revenue in the
(Stated in millions, except margin percentages) | ||||||||||||||||||||||||
Three Months Ended | Change | |||||||||||||||||||||||
Sept. 30, 2016 | Jun. 30, 2016 | Sept. 30, 2015 | Sequential | Year-on-year | ||||||||||||||||||||
Revenue | $ | 1,689 | $ | 1,609 | $ | 2,380 | 5 | % | -29 | % | ||||||||||||||
Pretax operating income | $ | 322 | $ | 260 | $ | 616 | 24 | % | -48 | % | ||||||||||||||
Pretax operating margin | 19.1 | % | 16.1 | % | 25.9 | % | 292 bps | -684 bps |
Pretax operating margin of 19% increased 292 bps sequentially and generated an incremental margin of 78%. This improvement was due to the benefits of cost initiatives across the Group, the impact of asset impairments recorded last quarter and increased high-margin Wireline and Testing Services activity. Results were also driven by improved profitability on increased WesternGeco marine and land seismic surveys.
Offshore
In the Norwegian sector of the
In Norway,
Petronas, through its wholly-owned subsidiary
Schlumberger has entered into agreements with BP and Rosneft to collaborate on an innovative research and development project to develop cableless land seismic acquisition technology that could significantly change the design and acquisition of land seismic surveys. Rosneft will join as an equal partner in BP's ongoing project with WesternGeco to develop the technology, which is anticipated to improve subsurface imaging as well as the efficiency of exploration, appraisal, and field development. Development of the acquisition system is expected to take two years. BP and Rosneft will then have preferential access to the technology for a period of time, after which Schlumberger will have exclusive marketing rights.
In
In
Drilling Group
|
(Stated in millions, except margin percentages) | ||||||||||||||||||||||
Three Months Ended | Change | ||||||||||||||||||||||
Sept. 30, 2016 | Jun. 30, 2016 | Sept. 30, 2015 | Sequential | Year-on-year | |||||||||||||||||||
Revenue | $ | 2,021 | $ | 2,034 | $ | 3,219 | -1 | % | -37 | % | |||||||||||||
Pretax operating income | $ | 218 | $ | 171 | $ | 594 | 28 | % | -63 | % | |||||||||||||
Pretax operating margin | 10.8 | % | 8.4 | % | 18.4 | % | 241 bps | -764 bps |
Drilling Group revenue of
Pretax operating margin of 11% expanded 241 bps sequentially despite the slight revenue decline. This was due to the benefits of our transformation, the impact of asset impairments recorded last quarter, and the reduced losses in
A combination of Integrated Drilling Services (IDS) contract awards, transformation efficiencies from remote operations, and new technology deployments contributed to
In Norway, Wintershall Norge AS awarded Schlumberger a four-year IDS contract with an option for two two-year extensions on the Brage platform on the Norwegian Continental Shelf. The largely performance-based contract combines all services into one contract and represents the intent of the two companies to work as one team. In addition, there are strong incentives to optimize drilling efficiency and extend the late-life production of the Brage field until 2030 and beyond. The plan includes a five-well infill drilling campaign starting in 2017.
In the
Offshore
In
In
In the
In
(Stated in millions, except margin percentages) | |||||||||||||||||||||||
Three Months Ended | Change | ||||||||||||||||||||||
Sept. 30, 2016 | Jun. 30, 2016 | Sept. 30, 2015 | Sequential | Year-on-year | |||||||||||||||||||
Revenue | $ | 2,083 | $ | 2,099 | $ | 2,915 | -1 | % | -29 | % | |||||||||||||
Pretax operating income | $ | 98 | $ | 90 | $ | 327 | 9 | % | -70 | % | |||||||||||||
Pretax operating margin | 4.7 | % | 4.3 | % | 11.2 | % | 41 bps | -652 bps |
Pretax operating margin of 5% increased 41 bps sequentially. This was due to the benefits of cost management initiatives, the impact of asset impairments recorded last quarter, and improved asset utilization from an increasing volume of work on land in
In
In
In
Also in
In
Offshore
In
(Stated in millions, except margin percentages) | |||||||||||||||||||||||
Three Months Ended | Change | ||||||||||||||||||||||
Sept. 30, 2016 | Jun. 30, 2016 | Sept. 30, 2015* | Sequential | Year-on-year | |||||||||||||||||||
Revenue | $ | 1,341 | $ | 1,525 | $ | 2,222 | -12 | % | -40 | % | |||||||||||||
Pretax operating income | $ | 215 | $ | 250 | $ | 390 | -14 | % | -45 | % | |||||||||||||
Pretax operating margin | 16.0 | % | 16.4 | % | 17.6 | % | -34 bps | -151 bps | |||||||||||||||
*Third-quarter 2015 is presented on a pro forma basis for comparative purposes. |
Pretax operating margin of 16% declined 34 bps sequentially due to the drop in high-margin Drilling project volume. Despite the significant drop in revenue, sequential decremental margin was only 19%, boosted by strong project execution in OneSubsea, improved manufacturing efficiency, and overall strong cost control across the Group.
New contract awards for Subsea alliances, Surface revenue synergies, and a global frame agreement during the quarter will provide future growth for the
OneSubsea signed two five-year global frame agreements with BP to provide engineering, procurement and construction of subsea production systems (SPS), and aftermarket services. The agreements, specifically formulated to accommodate supplier-led solutions, provide a framework for worldwide supply of SPS technology and aftermarket services, including service personnel and rental equipment.
Chevron Thailand Exploration and Production awarded Schlumberger a contract for services for six or more rigs commencing in the third quarter of 2016 and continuing through 2018. The award encompasses Cameron Group Surface wellheads, trees and systems; as well as Wireline openhole and cased-hole logging services; and M-I SWACO drilling fluids products, services, and supply of barite. This contract was awarded based on an integrated proposal designed for the high-temperature reservoirs in the Gulf of
Financial Tables
Condensed Consolidated Statement of Income |
|||||||||||||||||
(Stated in millions, except per share amounts) |
|||||||||||||||||
Third Quarter | Nine Months | ||||||||||||||||
Periods Ended September 30, | 2016 | 2015 | 2016 | 2015 | |||||||||||||
Revenue | $ | 7,019 | $ | 8,472 | $ | 20,703 | $ | 27,731 | |||||||||
Interest and other income | 54 | 60 | 153 | 155 | |||||||||||||
Expenses | |||||||||||||||||
Cost of revenue | 6,142 | 6,798 | 17,917 | 22,028 | |||||||||||||
Research & engineering | 253 | 273 | 750 | 819 | |||||||||||||
General & administrative | 92 | 122 | 305 | 362 | |||||||||||||
Impairments & other (1) | - | - | 2,573 | 439 | |||||||||||||
Merger & integration (1) | 237 | - | 571 | - | |||||||||||||
Interest | 149 | 86 | 431 | 254 | |||||||||||||
Income (loss) before taxes | $ | 200 | $ | 1,253 | $ | (1,691 | ) | $ | 3,984 | ||||||||
Taxes on income (loss) (1) | 10 | 250 | (259 | ) | 859 | ||||||||||||
Net income (loss) | $ | 190 | $ | 1,003 | $ | (1,432 | ) | $ | 3,125 | ||||||||
Net income attributable to noncontrolling interests | 14 | 14 | 50 | 37 | |||||||||||||
Net income (loss) attributable to Schlumberger (1) | $ | 176 | $ | 989 | $ | (1,482 | ) | $ | 3,088 | ||||||||
Diluted earnings (loss) per share of Schlumberger (1) | $ | 0.13 | $ | 0.78 | $ | (1.10 | ) | $ | 2.42 | ||||||||
Average shares outstanding | 1,392 | 1,265 | 1,345 | 1,270 | |||||||||||||
Average shares outstanding assuming dilution | 1,401 | 1,272 | 1,345 | 1,278 | |||||||||||||
Depreciation & amortization included in expenses (2) | $ | 998 | $ | 1,026 | $ | 3,078 | $ | 3,115 |
(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) | ||||||||
Sept. 30, | Dec. 31, | |||||||
Assets | 2016 | 2015 | ||||||
Current Assets | ||||||||
Cash and short-term investments | $ | 10,756 | $ | 13,034 | ||||
Receivables | 9,565 | 8,780 | ||||||
Other current assets | 6,104 | 5,098 | ||||||
26,425 | 26,912 | |||||||
Fixed income investments, held to maturity | 354 | 418 | ||||||
Fixed assets | 13,004 | 13,415 | ||||||
Multiclient seismic data | 1,042 | 1,026 | ||||||
Goodwill | 24,957 | 15,605 | ||||||
Intangible assets | 9,837 | 4,569 | ||||||
Other assets | 4,975 | 6,060 | ||||||
$ | 80,594 | $ | 68,005 | |||||
Liabilities and Equity | ||||||||
Current Liabilities | ||||||||
Accounts payable and accrued liabilities | $ | 9,439 | $ | 7,727 | ||||
Estimated liability for taxes on income | 1,092 | 1,203 | ||||||
Short-term borrowings and current portion | ||||||||
of long-term debt | 3,739 | 4,557 | ||||||
Dividends payable | 702 | 634 | ||||||
14,972 | 14,121 | |||||||
Long-term debt | 17,538 | 14,442 | ||||||
Deferred taxes | 2,622 | 1,075 | ||||||
Postretirement benefits | 1,293 | 1,434 | ||||||
Other liabilities | 1,595 | 1,028 | ||||||
38,020 | 32,100 | |||||||
Equity | 42,574 | 35,905 | ||||||
$ | 80,594 | $ | 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 September 30, |
Nine |
Third |
Nine |
||||||||||||||||
Net income (loss) before noncontrolling interests | $ | (1,432 | ) | $ | 190 | $ | 3,125 | ||||||||||||
Impairment and other charges, net of tax | 2,652 | 177 | 383 | ||||||||||||||||
Net income before noncontrolling interest,
excluding charges & credits |
1,220 | 367 | 3,508 | ||||||||||||||||
Depreciation and amortization (1) | 3,078 | 998 | 3,115 | ||||||||||||||||
Pension and other postretirement benefits expense | 139 | 47 | 326 | ||||||||||||||||
Stock-based compensation expense | 210 | 65 | 250 | ||||||||||||||||
Pension and other postretirement benefits funding | (127 | ) | (44 | ) | (292 | ) | |||||||||||||
Change in working capital | (223 | ) | 27 | (509 | ) | ||||||||||||||
Other | (49 | ) | (54 | ) | 229 | ||||||||||||||
Cash flow from operations (2) |
4,248 | 1,406 | 6,627 | ||||||||||||||||
Capital expenditures | (1,401 | ) | (403 | ) | (1,783 | ) | |||||||||||||
SPM investments | (869 | ) | (140 | ) | (350 | ) | |||||||||||||
Multiclient seismic data capitalized | (497 | ) | (164 | ) | (336 | ) | |||||||||||||
Free cash flow | 1,481 | 699 | 4,158 | ||||||||||||||||
Stock repurchase program | (662 | ) | (156 | ) | (1,784 | ) | |||||||||||||
Dividends paid | (1,951 | ) | (696 | ) | (1,786 | ) | |||||||||||||
Proceeds from employee stock plans | 344 | 149 | 423 | ||||||||||||||||
(788 | ) | (4 | ) | 1,011 | |||||||||||||||
Business acquisitions and investments, net of cash acquired plus debt assumed | (3,866 | ) | (76 | ) | (324 | ) | |||||||||||||
Discontinued operations - settlement with US Department of Justice | - | - | (233 | ) | |||||||||||||||
Other | 34 | (42 | ) | (271 | ) | ||||||||||||||
(Increase) decrease in Net Debt | (4,620 | ) | (122 | ) | 183 | ||||||||||||||
Net Debt, beginning of period | (5,547 | ) | (10,045 | ) | (5,387 | ) | |||||||||||||
Net Debt, end of period | $ | (10,167 | ) | $ | (10,167 | ) | $ | (5,204 | ) | ||||||||||
Components of Net Debt |
Sept. 30, |
Jun. 30, |
Dec. 31, |
Sept. 30, |
|||||||||||||||
Cash and short-term investments | $ | 10,756 | $ | 11,192 | $ | 13,034 | $ | 6,605 | |||||||||||
Fixed income investments, held to maturity | 354 | 386 | 418 | 439 | |||||||||||||||
Short-term borrowings and current portion of long-term debt | (3,739 | ) | (3,371 | ) | (4,557 | ) | (4,761 | ) | |||||||||||
Long-term debt | (17,538 | ) | (18,252 | ) | (14,442 | ) | (7,487 | ) | |||||||||||
$ | (10,167 | ) | $ | (10,045 | ) | $ | (5,547 | ) | $ | (5,204 | ) | ||||||||
(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 $700 million and $605 million during the nine months ended September 30, 2016 and 2015, respectively, and $170 million during the third quarter of 2016. Also includes approximately $100 million of one-off transaction-related payments associated with the acquisition of Cameron during the nine months ended September 30, 2016. |
Charges & Credits
In addition to financial results determined in accordance with US generally accepted accounting principles (GAAP), this third-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 earnings per share, 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) | ||||||||||||||||||||
Third Quarter 2016 | ||||||||||||||||||||
Pretax | Tax |
Noncont. |
Net | Diluted
EPS |
||||||||||||||||
Schlumberger net income, excluding charges & credits | $ | 437 | $ | 70 | $ | 14 | $ | 353 | $ | 0.25 | ||||||||||
Amortization of purchase accounting inventory fair value adjustment | (149 | ) | (45 | ) | - | (104 | ) | |||||||||||||
Merger-related employee benefits and professional fees | (46 | ) | (10 | ) | - | (36 | ) | |||||||||||||
Other merger and integration-related | (42 | ) | (5 | ) | - | (37 | ) | |||||||||||||
Schlumberger net income (GAAP basis) | $ | 200 | $ | 10 | $ | 14 | $ | 176 | $ | 0.13 | ||||||||||
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) | ||||||||||||||||||||
Nine Months 2016 | ||||||||||||||||||||
Pretax | Tax |
Noncont. |
Net | Diluted
EPS |
||||||||||||||||
Schlumberger net income, excluding charges & credits | $ | 1,453 | $ | 233 | $ | 50 | $ | 1,170 | $ | 0.86 | ||||||||||
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 | (299 | ) | (90 | ) | - | (209 | ) | |||||||||||||
Merger-related employee benefits and professional fees | (138 | ) | (27 | ) | (111 | ) | ||||||||||||||
Other merger and integration-related | (134 | ) | (24 | ) | - | (110 | ) | |||||||||||||
Schlumberger net loss (GAAP basis) | $ | (1,691 | ) | $ | (259 | ) | $ | 50 | $ | (1,482 | ) | $ | (1.10 | ) | ||||||
Nine Months 2015 | ||||||||||||||||||||
Pretax | Tax |
Noncont. |
Net | Diluted
EPS |
||||||||||||||||
Schlumberger net income, excluding charges & credits | $ | 4,423 | $ | 915 | $ | 37 | $ | 3,471 | $ | 2.72 | ||||||||||
Workforce reduction | (390 | ) | (56 | ) | - | (334 | ) | |||||||||||||
Currency devaluation loss in Venezuela | (49 | ) | - | - | (49 | ) | ||||||||||||||
Schlumberger net income (GAAP basis) | $ | 3,984 | $ | 859 | $ | 37 | $ | 3,088 | $ | 2.42 | ||||||||||
There were no charges or credits during the first quarter of 2016 or the second and third quarters of 2015. |
Product Groups |
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(Stated in millions) | ||||||||||||||||||||||||||||||
Three Months Ended | ||||||||||||||||||||||||||||||
Sept. 30, 2016 | Jun. 30, 2016 | Sept. 30, 2015 | ||||||||||||||||||||||||||||
Revenue |
Income |
Revenue |
Income |
Revenue |
Income |
|||||||||||||||||||||||||
Reservoir Characterization | $ | 1,689 | $ | 322 | $ | 1,609 | $ | 260 | $ | 2,380 | $ | 616 | ||||||||||||||||||
Drilling | 2,021 | 218 | 2,034 | 171 | 3,219 | 594 | ||||||||||||||||||||||||
Production | 2,083 | 98 | 2,099 | 90 | 2,915 | 327 | ||||||||||||||||||||||||
Cameron | 1,341 | 215 | 1,525 | 250 | - | - | ||||||||||||||||||||||||
Eliminations & other | (115 | ) | (38 | ) | (103 | ) | (24 | ) | (42 | ) | (16 | ) | ||||||||||||||||||
Pretax operating income | 815 | 747 | 1,521 | |||||||||||||||||||||||||||
Corporate & other | (267 | ) | (241 | ) | (198 | ) | ||||||||||||||||||||||||
Interest income(1) | 24 | 24 | 8 | |||||||||||||||||||||||||||
Interest expense(1) | (135 | ) | (136 | ) | (78 | ) | ||||||||||||||||||||||||
Charges & credits | (237 | ) | (2,908 | ) | - | |||||||||||||||||||||||||
$ | 7,019 | $ | 200 | $ | 7,164 | $ | (2,514 | ) | $ | 8,472 | $ | 1,253 |
Effective July 1, 2016, certain business units were transferred among the Product Groups. Financial data for the three months ended June 30, 2016 have been reclassified to conform to this new presentation. The effects of these transfers were not material. |
(Stated in millions) | ||||||||||||||||||||
Nine Months Ended | ||||||||||||||||||||
Sept. 30, 2016 | Sept. 30, 2015 | |||||||||||||||||||
Revenue |
Income |
Revenue |
Income |
|||||||||||||||||
Reservoir Characterization | $ | 5,044 | $ | 913 | $ | 7,545 | $ | 1,944 | ||||||||||||
Drilling | 6,548 | 760 | 10,610 | 2,044 | ||||||||||||||||
Production | 6,529 | 396 | 9,679 | 1,268 | ||||||||||||||||
Cameron | 2,865 | 465 | - | - | ||||||||||||||||
Eliminations & other | (283 | ) | (72 | ) | (103 | ) | (34 | ) | ||||||||||||
Pretax operating income | 2,462 | 5,222 | ||||||||||||||||||
Corporate & other | (679 | ) | (587 | ) | ||||||||||||||||
Interest income(1) | 61 | 22 | ||||||||||||||||||
Interest expense(1) | (391 | ) | (234 | ) | ||||||||||||||||
Charges & credits | (3,144 | ) | (439 | ) | ||||||||||||||||
$ | 20,703 | $ | (1,691 | ) | $ | 27,731 | $ | 3,984 | ||||||||||||
(1) Excludes interest included in the Product Groups results. |
Supplemental Information |
||
1) |
What is the definition of incremental or decremental operating margin? |
|
Incremental or 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 third quarter of 2016? |
|
Cash flow from operations was $1.4 billion for the third quarter of 2016 and included approximately $170 million of severance payments during the quarter. | ||
3) |
What was the cash flow from operations for the first nine months of 2016? |
|
Cash flow from operations was $4.2 billion for the first nine months of 2016 and included approximately $700 million of severance payments and $100 million of one-off transaction-related payments associated with the acquisition of Cameron. | ||
4) |
What was the free cash flow as a percentage of net income before noncontrolling interests and charges and credits, for the third quarter of 2016? |
|
Free cash flow, which was $699 million and included approximately $170 million of severance payments, as a percentage of net income before noncontrolling interests and charges and credits was 190% for the third 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 nine months of 2016? |
|
Free cash flow, which was $1.5 billion and included approximately $700 million of severance payments, $100 million of one-off transaction-related payments, as a percentage of net income before noncontrolling interests and charges and credits was 121% for the first nine months of 2016. | ||
6) |
What is the capex guidance for the full year 2016? |
|
Capex (excluding multiclient and SPM investments) is expected to be $2.0 billion for 2016, including three quarters of capex for the acquired Cameron businesses. | ||
7) |
What was included in "Interest and other income" for the third quarter of 2016? |
|
"Interest and other income" for the third quarter of 2016 were $54 million. This amount consisted of earnings of equity method investments of $23 million and interest income of $31 million. | ||
8) |
How did interest income and interest expense change during the third quarter of 2016? |
|
Interest income of $31 million increased $1 million sequentially. Interest expense of $149 million was flat 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 third quarter of 2016? |
|
The ETR for the third quarter of 2016 calculated in accordance with GAAP was 5.1% as compared to 14.6% for the second quarter of 2016. | ||
The ETR for the third quarter of 2016, excluding charges and credits, was 16.0% as compared to 16.2% for the second quarter of 2016. | ||
11) |
How many shares of common stock were outstanding as of September 30, 2016 and how did this change from the end of the previous quarter? |
|
There were 1.391 billion shares of common stock outstanding as of September 30, 2016. The following table shows the change in the number of shares outstanding from June 30, 2016 to September 30, 2016. |
(Stated in millions) | |||||||||||
Shares outstanding at June 30, 2016 | 1,391 | ||||||||||
Shares sold to optionees, less shares exchanged | - | ||||||||||
Vesting of restricted stock | - | ||||||||||
Shares issued under employee stock purchase plan | 2 | ||||||||||
Stock repurchase program | (2 | ) | |||||||||
Shares outstanding at September 30, 2016 | 1,391 |
12) |
What was the weighted average number of shares outstanding during the third quarter of 2016 and second 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 third quarter of 2016 and second quarter of 2016 was 1.392 billion and 1.389 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) | |||||||||||||
Third Quarter |
Second Quarter |
||||||||||||
Weighted average shares outstanding | 1,392 | 1,389 | |||||||||||
Assumed exercise of stock options | 4 | 3 | |||||||||||
Unvested restricted stock | 5 | 5 | |||||||||||
Average shares outstanding, assuming dilution | 1,401 | 1,397 |
13) |
What were multiclient sales in the third quarter of 2016? |
|
Multiclient sales, including transfer fees, were $144 million in the third quarter of 2016 and $145 million in the second quarter of 2016. | ||
14) |
What was the WesternGeco backlog at the end of the third quarter of 2016? |
|
WesternGeco backlog, which is based on signed contracts with customers, was $845 million at the end of the third quarter of 2016. It was $865 million at the end of the second quarter of 2016. | ||
15) |
What were the orders and backlog for Cameron's Subsea and Drilling businesses? |
|
Subsea and Drilling orders and backlog were as follows: |
(Stated in millions) | |||||||||||||||
Orders |
Third Quarter |
Second Quarter |
|||||||||||||
Subsea | $ | 434 | $ | 315 | |||||||||||
Drilling | $ | 179 |
|
$ | 166 | ||||||||||
Backlog (at the end of period) | |||||||||||||||
Subsea | $ | 2,527 | $ | 2,642 | |||||||||||
Drilling | $ | 865 |
|
$ | 1,050 |
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 third-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 Cameron transaction; the success of Schlumberger's 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; demand for our integrated services and new technologies; our future cash flows; the success of our transformation efforts; 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 integrate the Cameron business and to realize expected synergies; the inability to retain key employees; and other risks and uncertainties detailed in this third-quarter 2016 earnings release and our most recent Forms 10-K, 10-Q and 8-K filed with or furnished to 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