slb-10q_20160930.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended: September 30, 2016

Commission file No.: 1-4601

 

SCHLUMBERGER N.V.

(SCHLUMBERGER LIMITED)

(Exact name of registrant as specified in its charter)

 

 

CURAÇAO

 

52-0684746

(State or other jurisdiction of
incorporation or organization)

 

(I.R.S. Employer
Identification No.)

 

 

 

42 RUE SAINT-DOMINIQUE

 

 

PARIS, FRANCE

 

75007

 

 

 

5599 SAN FELIPE, 17th FLOOR

 

 

HOUSTON, TEXAS, U.S.A.

 

77056

 

 

 

62 BUCKINGHAM GATE

 

 

LONDON, UNITED KINGDOM

 

SW1E 6AJ

 

 

 

PARKSTRAAT 83 THE HAGUE,

 

 

THE NETHERLANDS

 

2514 JG

(Addresses of principal executive offices)

 

(Zip Codes)

Registrant’s telephone number in the United States, including area code, is:

(713) 513-2000

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

 

 

 

 

Non-accelerated filer

  (Do not check if a smaller reporting company)

Smaller reporting company

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

 

Class

Outstanding at September 30, 2016

COMMON STOCK, $0.01 PAR VALUE PER SHARE

1,391,308,399

 

 

 


SCHLUMBERGER LIMITED

Third Quarter 2016 Form 10-Q

Table of Contents

 

 

 

 

Page

 PART I

 

Financial Information

 

 

 

 

 

Item 1.

 

Financial Statements

3

 

 

 

 

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

20

 

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosures about Market Risk

27

 

 

 

 

Item 4.

 

Controls and Procedures

27

 

 

 

 

 PART II

 

Other Information

 

 

 

 

 

Item 1.

 

Legal Proceedings

27

 

 

 

 

Item 1A.

 

Risk Factors

27

 

 

 

 

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

27

 

 

 

 

Item 3.

 

Defaults Upon Senior Securities

28

 

 

 

 

Item 4.

 

Mine Safety Disclosures

28

 

 

 

 

Item 5.

 

Other Information

28

 

 

 

 

Item 6.

 

Exhibits

29

 

 

 

 

 

 

Certifications

 

 

 

 

2


PART I. FINANCIAL INFORMATION

Item 1.  Financial Statements.

 

SCHLUMBERGER LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF INCOME

(Unaudited)

 

 

(Stated in millions, except per share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Third Quarter

 

 

Nine Months

 

 

2016

 

 

2015

 

 

2016

 

 

2015

 

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Services

$

5,023

 

 

$

7,574

 

 

$

15,741

 

 

$

24,897

 

Product sales

 

1,996

 

 

 

898

 

 

 

4,962

 

 

 

2,834

 

Total Revenue

 

7,019

 

 

 

8,472

 

 

 

20,703

 

 

 

27,731

 

Interest & other income

 

54

 

 

 

60

 

 

 

153

 

 

 

155

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of services

 

4,355

 

 

 

6,064

 

 

 

13,482

 

 

 

19,703

 

Cost of sales

 

1,787

 

 

 

734

 

 

 

4,435

 

 

 

2,325

 

Research & engineering

 

253

 

 

 

273

 

 

 

750

 

 

 

819

 

General & administrative

 

92

 

 

 

122

 

 

 

305

 

 

 

362

 

Impairments & other

 

-

 

 

 

-

 

 

 

2,573

 

 

 

439

 

Merger & integration

 

237

 

 

 

-

 

 

 

571

 

 

 

-

 

Interest

 

149

 

 

 

86

 

 

 

431

 

 

 

254

 

Income (loss) before taxes

 

200

 

 

 

1,253

 

 

 

(1,691

)

 

 

3,984

 

Taxes on income (loss)

 

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

$

176

 

 

$

989

 

 

$

(1,482

)

 

$

3,088

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings (loss) per share of Schlumberger

$

0.13

 

 

$

0.78

 

 

$

(1.10

)

 

$

2.43

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted earnings (loss) per share of Schlumberger

$

0.13

 

 

$

0.78

 

 

$

(1.10

)

 

$

2.42

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

1,392

 

 

 

1,265

 

 

 

1,345

 

 

 

1,270

 

Assuming dilution

 

1,401

 

 

 

1,272

 

 

 

1,345

 

 

 

1,278

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

See Notes to Consolidated Financial Statements

 

 

 

3


SCHLUMBERGER LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(Unaudited)

 

(Stated in millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Third Quarter

 

 

Nine Months

 

 

2016

 

 

2015

 

 

2016

 

 

2015

 

Net income (loss)

$

190

 

 

$

1,003

 

 

$

(1,432

)

 

$

3,125

 

Currency translation adjustments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized net change arising during the period

 

27

 

 

 

(166

)

 

 

(26

)

 

 

(260

)

Marketable securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized loss arising during the period

 

(5

)

 

 

(26

)

 

 

(2

)

 

 

(36

)

Cash flow hedges

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss on cash flow hedges

 

(18

)

 

 

(13

)

 

 

(86

)

 

 

(123

)

Reclassification to net income of net realized loss

 

29

 

 

 

21

 

 

 

109

 

 

 

161

 

Pension and other postretirement benefit plans

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Actuarial loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization to net income of net actuarial loss

 

40

 

 

 

87

 

 

 

119

 

 

 

230

 

Prior service cost

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization to net income of net prior service cost

 

25

 

 

 

25

 

 

 

76

 

 

 

76

 

Income taxes on pension and other postretirement benefit plans

 

(6

)

 

 

(13

)

 

 

(20

)

 

 

(35

)

Comprehensive income (loss)

 

282

 

 

 

918

 

 

 

(1,262

)

 

 

3,138

 

Comprehensive income attributable to noncontrolling interests

 

14

 

 

 

14

 

 

 

50

 

 

 

37

 

Comprehensive income (loss) attributable to Schlumberger

$

268

 

 

$

904

 

 

$

(1,312

)

 

$

3,101

 

 

See Notes to Consolidated Financial Statements

 

 

 

4


SCHLUMBERGER LIMITED AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

 

(Stated in millions)

 

 

 

 

 

 

 

 

 

 

Sept. 30,

 

 

 

 

 

 

2016

 

 

Dec. 31,

 

 

(Unaudited)

 

 

2015

 

ASSETS

 

 

 

 

 

 

 

Current Assets

 

 

 

 

 

 

 

Cash

$

3,441

 

 

$

2,793

 

Short-term investments

 

7,315

 

 

 

10,241

 

Receivables less allowance for doubtful accounts (2016 - $371; 2015 - $333)

 

9,565

 

 

 

8,780

 

Inventories

 

4,572

 

 

 

3,756

 

Deferred taxes

 

391

 

 

 

208

 

Other current assets

 

1,141

 

 

 

1,134

 

 

 

26,425

 

 

 

26,912

 

Fixed Income Investments, held to maturity

 

354

 

 

 

418

 

Investments in Affiliated Companies

 

1,283

 

 

 

3,311

 

Fixed Assets less accumulated depreciation

 

13,004

 

 

 

13,415

 

Multiclient Seismic Data

 

1,042

 

 

 

1,026

 

Goodwill

 

24,957

 

 

 

15,605

 

Intangible Assets

 

9,837

 

 

 

4,569

 

Other Assets

 

3,692

 

 

 

2,749

 

 

$

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

 

Long-term debt - current portion

 

1,788

 

 

 

3,011

 

Short-term borrowings

 

1,951

 

 

 

1,546

 

Dividends payable

 

702

 

 

 

634

 

 

 

14,972

 

 

 

14,121

 

Long-term Debt

 

17,538

 

 

 

14,442

 

Postretirement Benefits

 

1,293

 

 

 

1,434

 

Deferred Taxes

 

2,622

 

 

 

1,075

 

Other Liabilities

 

1,595

 

 

 

1,028

 

 

 

38,020

 

 

 

32,100

 

Equity

 

 

 

 

 

 

 

Common stock

 

12,823

 

 

 

12,693

 

Treasury stock

 

(3,571

)

 

 

(13,372

)

Retained earnings

 

37,370

 

 

 

40,870

 

Accumulated other comprehensive loss

 

(4,388

)

 

 

(4,558

)

Schlumberger stockholders' equity

 

42,234

 

 

 

35,633

 

Noncontrolling interests

 

340

 

 

 

272

 

 

 

42,574

 

 

 

35,905

 

 

$

80,594

 

 

$

68,005

 

 

See Notes to Consolidated Financial Statements

 

 

 

5


SCHLUMBERGER LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS

(Unaudited)

 

(Stated in millions)

 

 

 

 

 

 

 

 

 

 

Nine Months Ended Sept. 30,

 

 

2016

 

 

2015

 

Cash flows from operating activities:

 

 

 

 

 

 

 

Net income (loss)

$

(1,432

)

 

$

3,125

 

Adjustments to reconcile net income (loss) to cash provided by operating activities:

 

 

 

 

 

 

 

Impairments and other charges

 

3,144

 

 

 

439

 

Depreciation and amortization (1)

 

3,078

 

 

 

3,115

 

Stock-based compensation expense

 

210

 

 

 

250

 

Pension and other postretirement benefits expense

 

139

 

 

 

326

 

Pension and other postretirement benefits funding

 

(127

)

 

 

(292

)

Earnings of equity method investments, less dividends received

 

(51

)

 

 

(83

)

Change in assets and liabilities: (2)

 

 

 

 

 

 

 

Decrease in receivables

 

851

 

 

 

1,848

 

Decrease in inventories

 

556

 

 

 

445

 

Decrease in other current assets

 

241

 

 

 

93

 

Increase in other assets

 

(335

)

 

 

(9

)

Decrease in accounts payable and accrued liabilities

 

(1,684

)

 

 

(2,426

)

Decrease in estimated liability for taxes on income

 

(187

)

 

 

(469

)

Increase (decrease) in other liabilities

 

40

 

 

 

(21

)

Other

 

(195

)

 

 

286

 

NET CASH PROVIDED BY OPERATING ACTIVITIES

 

4,248

 

 

 

6,627

 

Cash flows from investing activities:

 

 

 

 

 

 

 

Capital expenditures

 

(1,401

)

 

 

(1,783

)

SPM investments

 

(869

)

 

 

(350

)

Multiclient seismic data costs capitalized

 

(497

)

 

 

(336

)

Business acquisitions and investments, net of cash acquired

 

(2,251

)

 

 

(289

)

Sale of investments, net

 

4,439

 

 

 

939

 

Other

 

(13

)

 

 

(207

)

NET CASH USED IN INVESTING ACTIVITIES

 

(592

)

 

 

(2,026

)

Cash flows from financing activities:

 

 

 

 

 

 

 

Dividends paid

 

(1,951

)

 

 

(1,786

)

Proceeds from employee stock purchase plan

 

231

 

 

 

296

 

Proceeds from exercise of stock options

 

113

 

 

 

127

 

Stock repurchase program

 

(662

)

 

 

(1,784

)

Proceeds from issuance of long-term debt

 

3,586

 

 

 

1,714

 

Repayment of long-term debt

 

(4,749

)

 

 

(2,815

)

Net increase (decrease) in short-term borrowings

 

401

 

 

 

(41

)

Other

 

(8

)

 

 

(14

)

NET CASH USED IN FINANCING ACTIVITIES

 

(3,039

)

 

 

(4,303

)

CASH FLOWS USED IN DISCONTINUED OPERATIONS - OPERATING ACTIVITIES

 

-

 

 

 

(233

)

Net increase in cash before translation effect

 

617

 

 

 

65

 

Translation effect on cash

 

31

 

 

 

(23

)

Cash, beginning of period

 

2,793

 

 

 

3,130

 

Cash, end of period

$

3,441

 

 

$

3,172

 

 

(1) Includes depreciation of property, plant and equipment and amortization of intangible assets, multiclient seismic data costs and SPM investments.  

(2) Net of the effect of business acquisitions.

 

See Notes to Consolidated Financial Statements

 

 

 

6


SCHLUMBERGER LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF EQUITY

(Unaudited)

 

 

(Stated in millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Retained

 

 

Comprehensive

 

 

Noncontrolling

 

 

 

 

 

January 1, 2016 – September 30, 2016

Issued

 

 

In Treasury

 

 

Earnings

 

 

Loss

 

 

Interests

 

 

Total

 

Balance, January 1, 2016

$

12,693

 

 

$

(13,372

)

 

$

40,870

 

 

$

(4,558

)

 

$

272

 

 

$

35,905

 

Net loss

 

 

 

 

 

 

 

 

 

(1,482

)

 

 

 

 

 

 

50

 

 

 

(1,432

)

Currency translation adjustments

 

 

 

 

 

 

 

 

 

 

 

 

 

(26

)

 

 

 

 

 

 

(26

)

Changes in unrealized gain on marketable securities

 

 

 

 

 

 

 

 

 

 

 

 

 

(2

)

 

 

 

 

 

 

(2

)

Changes in fair value of cash flow hedges

 

 

 

 

 

 

 

 

 

 

 

 

 

23

 

 

 

 

 

 

 

23

 

Pension and other postretirement benefit plans

 

 

 

 

 

 

 

 

 

 

 

 

 

175

 

 

 

 

 

 

 

175

 

Shares sold to optionees, less shares exchanged

 

(52

)

 

 

165

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

113

 

Vesting of restricted stock

 

(84

)

 

 

84

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

-

 

Shares issued under employee stock purchase plan

 

(55

)

 

 

286

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

231

 

Stock repurchase program

 

 

 

 

 

(662

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(662

)

Stock-based compensation expense

 

210

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

210

 

Dividends declared ($1.50 per share)

 

 

 

 

 

 

 

 

 

(2,018

)

 

 

 

 

 

 

 

 

 

 

(2,018

)

Acquisition of Cameron International Corporation

 

103

 

 

 

9,924

 

 

 

 

 

 

 

 

 

 

 

57

 

 

 

10,084

 

Other

 

8

 

 

 

4

 

 

 

 

 

 

 

 

 

 

 

(39

)

 

 

(27

)

Balance, September 30, 2016

$

12,823

 

 

$

(3,571

)

 

$

37,370

 

 

$

(4,388

)

 

$

340

 

 

$

42,574

 

 

 

(Stated in millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Retained

 

 

Comprehensive

 

 

Noncontrolling

 

 

 

 

 

January 1, 2015 – September 30, 2015

Issued

 

 

In Treasury

 

 

Earnings

 

 

Loss

 

 

Interests

 

 

Total

 

Balance, January 1, 2015

$

12,495

 

 

$

(11,772

)

 

$

41,333

 

 

$

(4,206

)

 

$

199

 

 

$

38,049

 

Net income

 

 

 

 

 

 

 

 

 

3,088

 

 

 

 

 

 

 

37

 

 

 

3,125

 

Currency translation adjustments

 

 

 

 

 

 

 

 

 

 

 

 

 

(260

)

 

 

 

 

 

 

(260

)

Changes in unrealized gain on marketable securities

 

 

 

 

 

 

 

 

 

 

 

 

 

(36

)

 

 

 

 

 

 

(36

)

Changes in fair value of cash flow hedges

 

 

 

 

 

 

 

 

 

 

 

 

 

38

 

 

 

 

 

 

 

38

 

Pension and other postretirement benefit plans

 

 

 

 

 

 

 

 

 

 

 

 

 

271

 

 

 

 

 

 

 

271

 

Shares sold to optionees, less shares exchanged

 

(30

)

 

 

157

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

127

 

Vesting of restricted stock

 

(95

)

 

 

95

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

-

 

Shares issued under employee stock purchase plan

 

17

 

 

 

279

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

296

 

Stock repurchase program

 

 

 

 

 

(1,784

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,784

)

Stock-based compensation expense

 

250

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

250

 

Dividends declared ($1.50 per share)

 

 

 

 

 

 

 

 

 

(1,906

)

 

 

 

 

 

 

 

 

 

 

(1,906

)

Other

 

5

 

 

 

2

 

 

 

 

 

 

 

 

 

 

 

2

 

 

 

9

 

Balance, September 30, 2015

$

12,642

 

 

$

(13,023

)

 

$

42,515

 

 

$

(4,193

)

 

$

238

 

 

$

38,179

 

 

SHARES OF COMMON STOCK

(Unaudited)

 

 

 

 

 

 

(Stated in millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

Issued

 

 

In Treasury

 

 

Outstanding

 

Balance, January 1, 2016

 

1,434

 

 

 

(178

)

 

 

1,256

 

Acquisition of Cameron International Corporation

 

-

 

 

 

138

 

 

 

138

 

Shares sold to optionees, less shares exchanged

 

-

 

 

 

2

 

 

 

2

 

Vesting of restricted stock

 

-

 

 

 

1

 

 

 

1

 

Shares issued under employee stock purchase plan

 

-

 

 

 

3

 

 

 

3

 

Stock repurchase program

 

-