-
Revenue of $9.0 billion decreased 12% sequentially
-
EPS of $0.88 declined 17% sequentially, excluding charges and credits
-
Free cash flow of $1.5 billion represented 132% of earnings
-
Sequential decremental operating margin was 23%
-
5.8 million shares repurchased for $520 million during the quarter
Schlumberger Limited (NYSE:SLB) today reported results for the second
quarter of 2015.
|
|
|
|
|
|
|
|
|
|
|
|
|
(Stated in millions, except per share amounts)
|
|
|
Three Months Ended
|
|
Change
|
|
|
Jun. 30, 2015
|
|
Mar. 31, 2015
|
|
Jun. 30, 2014
|
|
Sequential
|
|
Year-on-year
|
Revenue
|
|
$
|
9,010
|
|
|
$
|
10,248
|
|
|
$
|
12,054
|
|
|
-12
|
%
|
|
-25
|
%
|
Pretax operating income
|
|
|
1,708
|
|
|
|
1,993
|
|
|
|
2,621
|
|
|
-14
|
%
|
|
-35
|
%
|
SLB income from continuing operations, excluding charges and credits*
|
|
|
1,124
|
|
|
|
1,358
|
|
|
|
1,800
|
|
|
-17
|
%
|
|
-38
|
%
|
Diluted EPS from continuing operations, excluding charges and
credits*
|
|
$
|
0.88
|
|
|
$
|
1.06
|
|
|
$
|
1.37
|
|
|
-17
|
%
|
|
-36
|
%
|
Pretax operating margin
|
|
|
19.0
|
%
|
|
|
19.4
|
%
|
|
|
21.7
|
%
|
|
-49 bps
|
|
-278 bps
|
|
|
|
|
|
|
|
|
|
|
|
North America revenue
|
|
$
|
2,361
|
|
|
$
|
3,222
|
|
|
$
|
3,888
|
|
|
-27
|
%
|
|
-39
|
%
|
North America pretax operating income
|
|
|
242
|
|
|
|
416
|
|
|
|
700
|
|
|
-42
|
%
|
|
-65
|
%
|
North America pretax operating margin
|
|
|
10.2
|
%
|
|
|
12.9
|
%
|
|
|
18.0
|
%
|
|
-268 bps
|
|
-777 bps
|
|
|
|
|
|
|
|
|
|
|
|
International revenue
|
|
$
|
6,525
|
|
|
$
|
6,889
|
|
|
$
|
8,087
|
|
|
-5
|
%
|
|
-19
|
%
|
International pretax operating income
|
|
|
1,595
|
|
|
|
1,661
|
|
|
|
1,942
|
|
|
-4
|
%
|
|
-18
|
%
|
International pretax operating margin
|
|
|
24.5
|
%
|
|
|
24.1
|
%
|
|
|
24.0
|
%
|
|
+35 bps
|
|
+44 bps
|
|
|
|
|
|
|
|
|
|
|
|
*Schlumberger income from continuing operations, including charges
and credits, was $975 million in the first quarter of 2015 and
$1.8 billion in the second quarter of 2014. Diluted EPS from
continuing operations, including charges and credits, was $0.76 in
the first quarter of 2015 and $1.37 in the second quarter of 2014.
There were no charges or credits recorded during the second
quarter of 2015 or the first six months of 2014. See section
entitled "Charges & Credits" for details.
|
|
|
|
|
|
|
|
|
|
Schlumberger Chairman and CEO Paal Kibsgaard commented, “Schlumberger
second-quarter revenue decreased 12% sequentially, driven by the
dramatic decline in North American land activity as the rig count
dropped by a further 40% and as pricing erosion continued in both North
America and the International Areas. North America revenue fell 27%
sequentially, while International revenue was 5% lower as customer
budget cuts and pricing concessions impacted results for a full quarter.
“Despite the much more challenging market conditions, overall pretax
operating margins were maintained at levels well above the previous
downturns as we continued to proactively manage costs and resources,
carefully navigate the commercial landscape, and further accelerate our
transformation program. The success of our efforts can be seen in pretax
operating margins of 10.2% in North America and 24.5% internationally
while generating $1.5 billion in free cash flow, representing 132% of
earnings.
“In the first half of 2015, year-on-year revenue dropped 26% in North
America and 14% internationally. In spite of these declines being more
severe than those of the 2009 downturn, we delivered first-half
decremental margins of 37% in North America and 18% internationally.
These results represent a marked improvement over the equivalent figures
that were both in excess of 70% for the same period in 2009.
“Among the business segments, Production Group revenue declined 18%
sequentially driven by the unprecedented drop in both activity and
pricing for pressure pumping services on land in North America. Drilling
Group and Reservoir Characterization Group revenues fell by 11% and 5%,
respectively, as the declines in development drilling activity and
exploration-related services moderated.
“As we enter the second half of the year, our visibility still remains
limited. In terms of oil supply, the first signs of flattening North
America production have appeared while OPEC marketed supply has been
increased once again. Non-NAM, non-OPEC production weakened in the first
half of the year driven by falls in Brazil and Mexico, with further
softening expected as lower investment levels start to take full effect.
The latest supply data together with a strong outlook for global oil
demand point to a tightening of the global supply-demand balance even
with additional supply from Iran.
“E&P investment in North America is now expected to fall by more than
35% in 2015 driven by lower land activity and increased pricing
pressure. We believe that the North American rig count may now be
touching the bottom, and that a slow increase in both land drilling and
completion activity could occur in the second half of the year.
“In the international market, E&P spending is now expected to drop more
than 15%. We do not expect any upward adjustment to existing 2015
budgets but see a continuation of first-half trends with low exploration
activity, tight management of development-related spend, and continued
pricing pressure.
“In this challenging market, we remain focused on the things we can
control, which include our cost and resource base, the effective
deployment of our technology and expertise, and the quality and
integrity of the products and services we provide to our customers. The
success of this approach can be seen in our strong international margins
despite the drop in revenue and in our ability to maximize our
performance in North America.
“We remain very confident in our capacity to continue to weather the
current downturn better than our surroundings, and better than in
previous downturns. Our global strength, our technology differentiation,
and our accelerated corporate transformation are creating a great
platform for us to increase revenue market share, deliver lower
reductions in earnings per share than our peers, and continue to reduce
working capital and capex intensity while generating higher levels of
free cash flow.”
Other Events
During the quarter, Schlumberger repurchased 5.8 million shares of its
common stock at an average price of $90.01 per share for a total
purchase price of $520 million.
North America
North America second-quarter revenue of $2.4 billion decreased 27%
sequentially. In the US and Western Canada, revenue fell on lower
pressure pumping activity and persistent pricing pressure as the land
rig count dropped 40%, exacerbated by the early onset of the Canadian
spring break-up. In the US Gulf of Mexico, revenue declined as the
deepwater rig count decreased and activity shifted from exploration to
development and completion.
North America pretax operating margin declined 268 basis points (bps)
sequentially to 10.2% on decreased pressure pumping activity and pricing
weakness on land. Offshore operating margin declined due to the
unfavorable revenue mix resulting from the shift from high-margin
deepwater exploration work to development and completion activity.
Despite the severity of the revenue decline in North America, focused
execution and prompt action on cost management limited the sequential
decremental margin to 20%.
On land, pricing has fallen to unsustainable levels in some basins,
leading to pressure pumping equipment being stacked and crews
reassigned. In other basins, hydraulic fracturing fleet deployment was
maintained in pursuit of market share and new technology opportunities.
In the first half of 2015, year-on-year revenue dropped 26% in North
America, which is more severe than the 24% decline of the same period
during the 2009 downturn. In spite of this, the decremental margin was
37% which represents a marked improvement over the 72% posted for the
same period in the previous downturn. Pretax operating margin in the
first half of 2015 declined by 648 bps year-on-year, less than half of
the 1,487 bps fall reported for the first half of 2009. The strength of
this performance was underpinned by prompt cost and resource management,
the growing effects of the transformation program, strong new technology
sales, and efficient supply chain management.
During the second quarter, new Schlumberger technologies helped increase
production and operational efficiency in North America.
In Southeast New Mexico, Well Services used a low viscosity composite
fluid from the BroadBand* family of unconventional reservoir completion
services for Endeavor Energy Resources, LP to stimulate a new well in
the Permian Basin with a plug-and-perf completion. In comparison to the
six closest offset wells completed using slickwater and similar proppant
amounts, the new well’s total oil production after 120 days outperformed
all the offset wells by more than 33%.
In South Texas, Well Services used BroadBand Sequence* fracturing
service for Encana to accelerate production and increase recovery in
older wells in the Eagle Ford and Haynesville shale plays. In an Eagle
Ford Shale well for example, refracturing operations increased oil
production from 50 bbl/d to 650 bbl/d and flowing pressure from 250 psi
to 5,000 psi. And in a Haynesville Shale gas well, production increased
from 100 Mscf/d to 5,000 Mscf/d while flowing pressure increased from
1,500 psi to 6,000 psi.
In North Dakota, Drilling & Measurements deployed PowerDrive Orbit*
rotary steerable system technology for WPX Energy to drill three
extended-reach lateral well sections in the Middle Bakken formation.
Given its unique pad actuation design and push-the-bit technology, the
PowerDrive Orbit system overcame the trajectory control challenges
experienced by conventional drilling assemblies and efficiently
delivered three high-quality, in-zone laterals. Similar performance was
repeated on a 14,717-ft extended-reach lateral, which represents the
longest rotary-steerable-drilled horizontal section in the area.
In South Texas, M-I SWACO used SCREEN PULSE* fluids and cuttings
separator technology for Statoil to help maintain optimal well drilling
conditions and minimize the costs of disposal and mud loss in a
high-rate-of-penetration drilling environment in the Eagle Ford Shale.
Previously, large amounts of cuttings transported significant volumes of
synthetic-base mud (SBM) over the shaker screen surface with lower
recovery potential. SCREEN PULSE technology helped the customer achieve
net savings of $68,000 for the first two wells drilled by decreasing the
average per-foot SBM cost by 30% and disposal costs by 13%.
In California, Wireline deployed RSTPro* reservoir saturation technology
for a major oil and gas customer in the Kern River Field. RSTPro service
uses full spectral analysis to measure elemental concentrations,
including the salinity-independent carbon/oxygen ratio. Combined with
Schlumberger Petrotechnical Services’ interpretation solutions, use of
the technology enabled the characterization of heavy oil saturation and
has given new life to this brownfield project. The Kern River reservoir
monitoring project completed 20 years of saturation surveillance this
year and cumulative field production is now over 2 billion barrels of
oil.
In the US Gulf of Mexico, Wireline MDT* modular formation dynamics
tester together with Quicksilver Probe* technology and an InSitu Fluid
Analyzer* system were used for Chevron to obtain reservoir measurements
in the deepwater Guadalupe and Anchor discoveries. The combination of
Schlumberger technologies helped acquire low contamination samples and
perform real-time downhole fluids analysis with the results used to
determine reservoir connectivity and improve understanding of sealing
properties and fluid charging behavior. The use of Schlumberger downhole
fluid analysis technology confirmed the value of real-time
decision-making in characterizing reservoirs.
In Atlantic Canada, Schlumberger Integrated Project Management (IPM)
completed the construction and evaluation of the first well drilled for
Statoil in a challenging deepwater environment off the coast of
Newfoundland. The work was completed within the framework of a four-year
integrated contract covering the full suite of services for the Flemish
Pass exploration and appraisal project. Despite weather-related
challenges, the efficiency of the integrated services offering has
enabled the project to match the customer’s internal targets. New
Schlumberger technologies, such as Wireline Quanta Geo* photorealistic
reservoir geology service, helped reduce sub-surface risk and
characterize the complex formations. Also, Drilling & Measurements
PowerDrive* rotary steerable, Smith Bits Stinger* conical diamond
element, and Geoservices FLAIR* fluid logging and analysis technologies
helped boost performance through improving drilling efficiency, assuring
wellbore integrity, and optimizing well placement. Aided by Schlumberger
technologies and the integrated approach, several of the well sections
were recognized by Statoil to be among their top drilling performances
worldwide.
International Areas
Revenue for the International Areas of $6.5 billion decreased 5%
sequentially driven by customer budget cuts and continued pricing
concessions.
Middle East & Asia Area revenue of $2.6 billion declined 5%
sequentially mainly due to lower activity in Asia-Pacific and Australia
from customer exploration budget cuts. Activity in India declined on
project delays while activities in Iraq and China remained muted. The
Middle East GeoMarkets remained robust on higher activity, particularly
in Saudi Arabia, the United Arab Emirates and Kuwait, but revenue in the
region declined slightly as pricing concessions affected results for a
full quarter.
Europe/CIS/Africa Area revenue of $2.4 billion decreased 5%
sequentially, primarily due to Sub-Saharan Africa as exploration
decreased and offshore rigs demobilized. Customer budget pressure in
Angola and delays in Nigeria also affected results. Russia rebounded on
a seasonal increase in conventional land activity while the Russian
ruble recovered somewhat. North Sea revenue declined on lower rig count,
pricing pressure and a continued shift from exploration to development
activity. North Africa activity increased slightly while work in Libya
continued to be limited as the security situation remained unchanged.
Revenue in the Latin America Area of $1.5 billion dropped 7% on
lower activity in Mexico, Brazil and Colombia due to sustained customer
budget cuts. This reduction was partially offset by strong exploration
and a ramp up of activity in the Venezuela, Trinidad and Tobago
GeoMarket. Activities in Argentina and Ecuador remained resilient.
International Area pretax operating margin of 24.5% increased 35 bps
sequentially. Middle East & Asia pretax operating margin increased
slightly by 8 bps to 28.7%, Latin America expanded 81 bps to 22.3%, and
Europe/CIS/Africa grew 29 bps to 21.3%. Despite the sequential revenue
decline and the increasingly unfavorable shift in revenue mix, operating
margins expanded and limited the sequential decremental margin to 18%.
For the first half of 2015, year-on-year revenue dropped 14% in the
International Areas, which is more severe than the 5% decline in the
same period during the 2009 downturn. In spite of this, the decremental
margin was 18%, which represents a marked improvement over the 73%
posted for the corresponding period in the previous downturn. Pretax
operating margin for the first half of 2015 expanded 85 bps compared to
the 269 bps fall in margin reported for the same period in 2009. The
strength of this performance was a result of proactive cost and resource
management, robust sales of new technology, and the acceleration of the
transformation program focused on workforce productivity, asset
utilization and reduction in unit support costs.
During the quarter, the International Areas saw a number of contract
awards and integration-related highlights.
Saudi Aramco awarded Schlumberger a two-year multiservice contract,
including stimulation and testing technologies, for unconventional gas
projects within the Kingdom. The project involves new unconventional
reservoir technologies under trial in the country to optimize
stimulation performance.
In the Gulf Cooperation Council countries, Schlumberger had three
contracts extended and was awarded a new contract, collectively valued
at an estimated $600 million. Five-year contract extensions for Drilling
& Measurements and Wireline services include deployment of technologies
such as PowerDrive Archer* high build rate rotary steerable systems,
MicroScope* resistivity- and imaging-while-drilling services, and Litho
Scanner* high-definition spectroscopy logging. The third contract
extension, for Artificial Lift services that include REDA* Hotline
high-temperature electric submersible pump systems, is for
three-and-a-half years. The new contract award, also for five years, is
for Well Services cementing technologies.
Schlumberger signed a performance-based contract worth approximately
$395 million over four years for the supply of integrated well
construction services for a heavy oil field development in the Marine
region of Mexico. Under this contract, Schlumberger will provide all
drilling and completion services, including project management,
directional drilling, measurement-while-drilling,
logging-while-drilling, mud logging, wireline, drilling fluids, drill
bits, fishing, cementing, coiled tubing, lower completions, and well
testing services. Drilling of the first well is planned to start in
August 2015.
In Iraq, ENI awarded Schlumberger a three-year integrated well
construction contract which covers the drilling of 30 wells and includes
the provision of land drilling rigs, directional drilling,
measurement-while-drilling, logging while-drilling, drill bits, fishing,
cementing, drilling fluids, mud logging, wellbore clean out and wireline
services. Schlumberger has delivered wells to ENI under similar
integrated contract models in the past and this recent award provides
continuity in the field’s ongoing development.
In Norway, Statoil Petroleum AS awarded M-I SWACO a contract valued at
approximately $135 million for the supply of glycols to support all of
the company’s offshore and onshore Norwegian refinery operations. The
four-and-a-half-year contract has an option period of two three-year
extensions.
In Azerbaijan, BP has awarded Caspian Geophysical, a joint venture
between WesternGeco and SOCAR, a contract to acquire marine seismic
surveys in the Caspian Sea, including 2D, 3D and 4D acquisition. The
surveys are expected to take about six months to acquire, and will be
conducted using Q-Marine* point-receiver seismic technology, the first
time this high-specification seismic acquisition system has been
deployed in the Caspian Sea. The projects will be carried out in close
collaboration between WesternGeco and Caspian Geophysical.
Reservoir Characterization Group
|
|
(Stated in millions, except margin percentages)
|
|
|
Three Months Ended
|
|
|
Change
|
|
|
Jun. 30, 2015
|
|
|
Mar. 31, 2015
|
|
|
Jun. 30, 2014
|
|
|
Sequential
|
|
|
Year-on-year
|
Revenue
|
|
$
|
2,425
|
|
|
|
$
|
2,552
|
|
|
|
$
|
3,231
|
|
|
|
-5
|
%
|
|
|
-25
|
%
|
Pretax operating income
|
|
|
642
|
|
|
|
|
655
|
|
|
|
|
933
|
|
|
|
-2
|
%
|
|
|
-31
|
%
|
Pretax operating margin
|
|
|
26.5
|
%
|
|
|
|
25.6
|
%
|
|
|
|
28.9
|
%
|
|
|
84 bps
|
|
|
-239 bps
|
Decremental operating margin
|
|
|
|
|
|
|
|
|
|
|
10
|
%
|
|
|
36
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reservoir Characterization Group revenue of $2.4 billion declined 5%
sequentially, primarily due to sustained cuts in exploration spending
that impacted Wireline and Testing Services activities in Europe/CIS &
Africa, the US Gulf of Mexico, and Australia. This decline was partially
offset by increased software license sales and by WesternGeco revenue
that improved slightly on higher land seismic activity in North Africa
and in the United Arab Emirates.
Pretax operating margin of 26.5% was 84 bps higher sequentially on 10%
decrementals as an unfavorable revenue mix was offset by the
contribution of increased higher-margin software license sales.
In addition to contract awards during the quarter, new Reservoir
Characterization technologies helped characterize complex reservoirs,
optimize well production and reservoir recovery, and improve operational
efficiency.
In Australia, Wireline introduced UltraTRAC* all-terrain wireline
tractor technology for Origin Energy to gather reservoir samples and
pressure measurements in the Otway basin offshore Victoria. UltraTRAC
technology conveys large payloads in challenging borehole conditions and
across high-angle, extended-reach wells. Combined with Saturn* 3D radial
probe technology, which enables sampling in demanding environments, this
was the first introduction of these two technologies during
extended-reach drilling in Australia. This efficient combination of
Wireline technologies saved the customer approximately five days of rig
time compared to conventional pipe-conveyed logging methods.
Offshore The Netherlands, Wireline used a StreamLINE*
polymer-encapsulated wireline monocable for Wintershall Noordzee BV to
convey a perforating gun in a deep, deviated, high-pressure,
high-temperature well in the North Sea. StreamLINE cable has a friction
coefficient that is one-half the equivalent standard braided line to
reduce cable tension and allowed completion of the perforation job in
one run instead of two, which was critical to the success of the
operation. The solution saved the customer 12 hours in operating time,
estimated at $175,000.
Offshore Mexico, Wireline deployed Saturn 3D radial probe and XL-Rock*
large-volume rotary sidewall coring technologies for PEMEX to obtain
fluid and rock samples in a deepwater well in the Middle Miocene
Formation. In addition, the combination of measurements from the Rt
Scanner* triaxial induction tool and images from OBMI* oil-base
microimager technology helped reveal the presence of new reserves. This
information enabled the customer to formulate a new exploration strategy.
In Oman, Wireline technologies were deployed for Petroleum Development
of Oman (PDO) to characterize the Shuaiba heterogeneous carbonate
reservoir in a challenging oil-base-mud (OBM) environment. Quanta Geo
photorealistic reservoir geology technology was used for the first time
in Oman to overcome the OBM challenge and identify the microfractures
created by the MDT modular dynamics tester tool equipped with high
performance packers and a high pressure pump. As a result, PDO was able
to obtain the breakdown geological and geophysical properties to update
the field development plan and optimize the completion plan.
In Venezuela, Wireline ThruBit* through-the-bit logging technology was
deployed for PDVSA to acquire a complete standard petrophysical set of
data in highly deviated wells in the Faja del Orinoco’s Ayacucho oil
field, where only gamma ray and resistivity information had previously
been available. ThruBit logging can reliably log complicated wells in
less time compared with conventional conveyance methods, enabling higher
accuracy in formation evaluation, field modeling, and horizontal well
planning.
Also in Venezuela, Wireline deployed Isolation Scanner* cement
evaluation technology for Petroindependencia, S.A., a joint venture
between PDVSA and Chevron, to help improve casing centralization design
and optimize cementing operations in the Cerro Negro Field. The
combination of the Isolation Scanner’s two independent ultrasonic
measurements and the efficient reverse tractoring capability offered by
the TuffTRAC* cased hole services tractor enabled positive confirmation
of zonal isolation in the wells.
In Iraq, Testing Services deployed Signature* quartz gauges enabled by
Muzic* wireless telemetry for Chevron to transmit downhole measurements
from wells in the onshore Sarta-2 field. In five zones tested, the
Signature gauges collected the downhole data reliably under harsh
conditions and provided continuous transmission through the InterACT*
global connectivity, collaboration, and information service. The
customer was able to meet the well-test objectives as well as save rig
time through a better-informed decision-making process.
In the UAE, ADCO awarded Schlumberger a contract for conventional and
unconventional reservoir laboratory core analysis services. The
three-year contract with a two-year option includes the provision of
core handling and processing, routine and petrophysical electrical
measurement, petrology and geomechanics services. Schlumberger will open
a rock-analysis laboratory in Abu Dhabi, in addition to the fluids
analysis laboratory currently located in Jebel Ali, UAE to provide
customers with a comprehensive suite of integrated rock and fluid
reservoir characterization services.
Drilling Group
|
|
(Stated in millions, except margin percentages)
|
|
|
Three Months Ended
|
|
|
Change
|
|
|
Jun. 30, 2015
|
|
|
Mar. 31, 2015
|
|
|
Jun. 30, 2014
|
|
|
Sequential
|
|
|
Year-on-year
|
Revenue
|
|
$
|
3,511
|
|
|
|
$
|
3,963
|
|
|
|
$
|
4,653
|
|
|
|
-11
|
%
|
|
|
-25
|
%
|
Pretax operating income
|
|
|
685
|
|
|
|
|
790
|
|
|
|
|
981
|
|
|
|
-13
|
%
|
|
|
-30
|
%
|
Pretax operating margin
|
|
|
19.5
|
%
|
|
|
|
19.9
|
%
|
|
|
|
21.1
|
%
|
|
|
-44 bps
|
|
|
-157 bps
|
Decremental operating margin
|
|
|
|
|
|
|
|
|
|
|
23
|
%
|
|
|
26
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Drilling Group revenue of $3.5 billion decreased 11% sequentially,
primarily due to a further drop in rig count in North America that
impacted activities of Drilling & Measurements and M-I SWACO. Lower
drilling activity in Sub-Saharan Africa, Australia and Colombia also
contributed to the decline.
Pretax operating margin of 19.5% declined 44 bps sequentially. Despite
the revenue decline, prompt action on cost management helped limit the
decremental operating margin to 23%.
New Drilling Group technologies delivered higher performance in the
second quarter by improving drilling efficiency, optimizing well
placement, and assuring wellbore integrity.
In the Caspian Sea, Drilling Group Technologies were deployed for BP
Exploration Caspian Sea Limited to drill the 8 1/2-in and 12 1/4-in
sections in a well in the Shah Deniz field, offshore Azerbaijan. This
was the first time that the challenging 8 1/2-in section was ever
drilled in a single run in Shah Deniz. The section was drilled with a
combination of Drilling & Measurements PowerDrive Orbit rotary steerable
technology and a Smith polycrystalline diamond compact (PDC) bit with
ONYX* cutter technology customized using the IDEAS* integrated drillbit
design platform. The section set a field drilling record of 240 m in 24
hours and saved six days of rig time amounting to approximately $2.6
million.
Offshore Brazil, Drilling Tools & Remedial deployed Rhino XC* on-demand
hydraulically actuated reamer technology for Petrobras to enlarge a
2,700-ft tangent section of a deepwater well in an unstable salt
formation in the pre-salt Lula oil field. Given the ability of Rhino XC
technology to achieve larger hole sizes, the customer had more clearance
and maintained a high rate of penetration (ROP). Overall, the operation
was completed in seven days, saving Petrobras three drilling days
compared to previous offset wells drilled without using an underreamer.
Offshore Canada, Drilling Group Technologies set a new drilling record
for Statoil in the Bay du Nord discovery northeast of St. John’s,
Newfoundland. Schlumberger StingBlade* conical diamond element
technology combined with Drilling & Measurements, Smith Bits, M-I SWACO,
Geoservices and Drilling Tools & Remedial services helped drill the 17
1/2-in riser-less section in a deepwater well at an ROP of 169.1 m/h,
setting a new world record for Statoil and surpassing the previous
record by 72%. Additionally, Drilling Group technologies drilled through
multiple, hard stringer formations at an average ROP of 35 m/h compared
to a historical average ROP of 3 m/h for these formations, and drilled
the deepwater well to total depth in a single run.
In Mexico, Drilling & Measurements used 3D VSP* vertical seismic profile
technology as well as seismicVISION* seismic-while-drilling and
sonicVISION* sonic-while-drilling services for the national oil company
in Mexico to optimize a drilling operation through and below salt in a
deepwater exploration well. As a result, the customer was able to locate
the salt’s base in order to place the casing at the correct depth while
reducing drilling risk.
In Southern Italy, Drilling Group technologies were deployed for ENI in
the drilling of a long horizontal side-track through a naturally
fractured carbonate reservoir in the Val d’Agri oil field. Drilling &
Measurements PowerDrive X6* and PowerDrive vorteX* rotary steerable
systems combined with Smith drill bits, customized using the IDEAS
integrated drillbit design platform, drilled a complex 3D trajectory and
a 2,200-m horizontal section efficiently while ensuring accurate well
placement in the reservoir. In particular, PowerDrive vorteX technology
enabled a two-fold increase in ROP compared with the performance of
conventional rotary steerable systems on offset wells. As a result of
using Drilling Group technologies, supported by an OSC* interactive
drilling operations support center, the side-track was executed as
planned and the customer saved 20 days of rig time, amounting to
approximately $1.4 million.
In Colombia, Smith drillbit technology helped EQUION ENERGIA improve
drilling performance in the Mirador Formation in the Llanos Basin. ONYX
360* rolling PDC cutters increased bit durability by revolving 360
degrees, allowing the entire diamond edge to drill the formation and
increase run length by up to 57%. The customer saved 5½ days of rig
time, amounting to approximately $896,000 through lower drilling costs
and fewer bit trips.
In Kazakhstan, Schlumberger Stinger conical diamond bit technology
combined with a high-torque displacement motor helped Hilong Petroleum
Engineering Company improve drilling performance in the 8 1/2-in section
of an onshore well in the Pridorozhnoye gas field. By combining superior
impact strength and wear resistance with a conical shape, Stinger
element technology enabled a longer and faster run through the
challenging cherty limestone formation by delivering an ROP 55% higher
compared with an offset well in the same field. As a result, the
customer shortened the time to production and was able to drill more
wells by saving 27 days of rig time that amounted to approximately
$486,000.
Production Group
|
|
(Stated in millions, except margin percentages)
|
|
|
Three Months Ended
|
|
|
Change
|
|
|
Jun. 30, 2015
|
|
|
Mar. 31, 2015
|
|
|
Jun. 30, 2014
|
|
|
Sequential
|
|
|
Year-on-year
|
Revenue
|
|
$
|
3,103
|
|
|
|
$
|
3,767
|
|
|
|
$
|
4,208
|
|
|
|
-18
|
%
|
|
|
-26
|
%
|
Pretax operating income
|
|
|
397
|
|
|
|
|
549
|
|
|
|
|
710
|
|
|
|
-28
|
%
|
|
|
-44
|
%
|
Pretax operating margin
|
|
|
12.8
|
%
|
|
|
|
14.6
|
%
|
|
|
|
16.9
|
%
|
|
|
-179 bps
|
|
|
-406 bps
|
Decremental operating margin
|
|
|
|
|
|
|
|
|
|
|
23
|
%
|
|
|
28
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Production Group revenue of $3.1 billion decreased 18% sequentially with
more than 80% of the decrease attributable to North America land.
Pressure pumping activity continued to fall and pricing pressure
increased as land rig count in North America extended its decline.
Pretax operating margin of 12.8% declined 179 bps sequentially as lower
activity and increasing pricing pressure continued during the quarter
with pricing falling to unsustainable levels in some basins leading to
pressure pumping equipment being stacked and crews reassigned. In other
basins, hydraulic fracturing fleet deployment was maintained. Despite
the severe revenue decline, prompt action on cost management and
alignment of resources with activity limited the decremental operating
margin to 23%.
New Production Group technologies helped customers meet their technical
challenges by accelerating production, enhancing recovery, and
increasing operational efficiency.
In Saudi Arabia, after collaborative investment and product development
with Saudi Aramco, Schlumberger Completions deployed the world’s first
Manara* production and reservoir management system where sensing and
control can now be performed at the compartment level within well
laterals. The Manara system controls flow using a variable electrical
choke and integrated downhole sensors, allowing the user to directly
assign compartmental production or drawdown. Patented inductive coupler
technology enables umbilical branching from the motherbore into the
laterals, providing a reliable power and communications backbone.
Avocet* production operations software platform workflows enable
real-time visualization, provide the user with improved data interaction
and reduce the response time for reservoir monitoring optimization. This
game-changing completion platform moves the reservoir monitoring
capability from the well to the lateral to the compartment, giving the
potential to significantly increase reservoir recovery.
Mangrove* reservoir-centric stimulation design based on the Petrel E&P
software platform has now been used by Schlumberger technology
integration groups (TIG) to engineer more than 1,000 wells for over 100
customers in 19 countries since initial deployment in 2012. In addition,
more than 20 customers across four continents have adopted this unique
Schlumberger end-to-end workflow for unconventional plays by acquiring
licenses for Mangrove software since sales began in 2014.
In Venezuela, Schlumberger Completions deployed a COLOSSUS UNC*
uncemented liner hanger system for Petroindependencia, S.A., to achieve
rapid liner installation in extended-reach heavy-oil wells in
unconsolidated sandstone reservoirs with shale laminations in the Cerro
Negro Field. Given the high dogleg severity of the uncemented laterals,
liner mobility was paramount to success. Furthermore, due to the
requirement for steam injection to enable production of the heavy oil,
the completion hardware had to withstand extreme temperature conditions.
COLOSSUS UNC technology helped overcome the technical challenges and
decreased liner installation time from ten to one-and-a-quarter days per
well, representing a saving of $590,000 that allowed the customer to
achieve their production targets for 25 wells.
Offshore Denmark, Schlumberger provided an integrated well intervention
solution for Maersk Oil to better understand water production and
maximize hydrocarbon recovery in the mature Svend oil field prior to
field abandonment. The technologies deployed included ACTive PS* live CT
production logging, RST Pro reservoir saturation, and FloScan* Imager
services. Initial well testing indicated that the information acquired
from this operation had enabled well optimization to reduce water
production by one-third.
In Mexico, Well Intervention deployed the ACTive OptiFIRE* coiled tubing
real-time selective perforating and activation system for PEMEX to
increase production in a well in the South region. In the past, the
reperforation of the target zone has been a challenge for conventional
wireline intervention methods without having to kill the well or delay
production. Active OptiFIRE technology enabled the accurate placement of
the perforating guns, and confirmed downhole detonation in a single run.
As a result, intervention safety was enhanced, and perforating time
reduced by 75%, allowing the well to be cleaned and kicked off
efficiently without the need for additional intervention equipment.
Well Intervention also used the ACTive* family of live downhole coiled
tubing services offshore Mexico to extend the production tubing in a
deviated well and prolong its productive life by moving away from the
gas-oil contact. In this application, ACTive technology used real-time
downhole measurements to interpret and optimize treatments and intervene
with one trip in the hole. Due to the high level of complexity, this
intervention required a detail-oriented evaluation of its technical,
operational, and logistical aspects. This fully integrated operation
took 15 days to complete on a rigless platform, and saved the time and
cost associated with major intervention using a workover rig.
Financial Tables
|
|
|
|
|
|
|
|
|
|
Condensed Consolidated Statement of Income
|
|
|
(Stated in millions, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
Second Quarter
|
|
Six Months
|
Periods Ended June 30,
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
9,010
|
|
$
|
12,054
|
|
|
$
|
19,258
|
|
$
|
23,294
|
|
Interest and other income
|
|
|
47
|
|
|
64
|
|
|
|
96
|
|
|
141
|
|
Expenses
|
|
|
|
|
|
|
|
|
Cost of revenue
|
|
|
7,136
|
|
|
9,269
|
|
|
|
15,231
|
|
|
18,017
|
|
Research & engineering
|
|
|
279
|
|
|
309
|
|
|
|
546
|
|
|
593
|
|
General & administrative
|
|
|
120
|
|
|
123
|
|
|
|
239
|
|
|
228
|
|
Restructuring & other (1)
|
|
|
-
|
|
|
-
|
|
|
|
439
|
|
|
-
|
|
Interest
|
|
|
86
|
|
|
90
|
|
|
|
169
|
|
|
193
|
|
Income before taxes
|
|
$
|
1,436
|
|
$
|
2,327
|
|
|
$
|
2,730
|
|
$
|
4,404
|
|
Taxes on income (1)
|
|
|
302
|
|
|
506
|
|
|
|
608
|
|
|
975
|
|
Income from continuing operations
|
|
|
1,134
|
|
|
1,821
|
|
|
|
2,122
|
|
|
3,429
|
|
Loss from discontinued operations
|
|
|
-
|
|
|
(205
|
)
|
|
|
-
|
|
|
(205
|
)
|
Net income
|
|
|
1,134
|
|
|
1,616
|
|
|
|
2,122
|
|
|
3,224
|
|
Net income attributable to noncontrolling interests
|
|
|
10
|
|
|
21
|
|
|
|
23
|
|
|
37
|
|
Net income attributable to Schlumberger
|
|
$
|
1,124
|
|
$
|
1,595
|
|
|
$
|
2,099
|
|
$
|
3,187
|
|
|
|
|
|
|
|
|
|
|
Schlumberger amounts attributable to:
|
|
|
|
|
|
|
|
|
Income from continuing operations (1)
|
|
$
|
1,124
|
|
$
|
1,800
|
|
|
$
|
2,099
|
|
$
|
3,392
|
|
Loss from discontinued operations
|
|
|
-
|
|
|
(205
|
)
|
|
|
-
|
|
|
(205
|
)
|
Net Income
|
|
$
|
1,124
|
|
$
|
1,595
|
|
|
$
|
2,099
|
|
$
|
3,187
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share of Schlumberger
|
|
|
|
|
|
|
|
|
Income from continuing operations (1)
|
|
$
|
0.88
|
|
$
|
1.37
|
|
|
$
|
1.64
|
|
$
|
2.58
|
|
Loss from discontinued operations
|
|
|
-
|
|
|
(0.16
|
)
|
|
|
-
|
|
|
(0.16
|
)
|
Net Income
|
|
$
|
0.88
|
|
$
|
1.21
|
|
|
$
|
1.64
|
|
$
|
2.42
|
|
|
|
|
|
|
|
|
|
|
Average shares outstanding
|
|
|
1,269
|
|
|
1,300
|
|
|
|
1,273
|
|
|
1,303
|
|
Average shares outstanding assuming dilution
|
|
|
1,280
|
|
|
1,315
|
|
|
|
1,282
|
|
|
1,316
|
|
|
|
|
|
|
|
|
|
|
Depreciation & amortization included in expenses (2)
|
|
$
|
1,047
|
|
$
|
996
|
|
|
$
|
2,089
|
|
$
|
1,997
|
|
(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
|
|
2015
|
|
|
2014
|
Current Assets
|
|
|
|
|
|
Cash and short-term investments
|
|
$
|
7,274
|
|
|
$
|
7,501
|
Receivables
|
|
|
9,569
|
|
|
|
11,171
|
Other current assets
|
|
|
6,018
|
|
|
|
6,022
|
|
|
|
22,861
|
|
|
|
24,694
|
Fixed income investments, held to maturity
|
|
|
469
|
|
|
|
442
|
Fixed assets
|
|
|
14,848
|
|
|
|
15,396
|
Multiclient seismic data
|
|
|
913
|
|
|
|
793
|
Goodwill
|
|
|
15,525
|
|
|
|
15,487
|
Other intangible assets
|
|
|
4,525
|
|
|
|
4,654
|
Other assets
|
|
|
5,612
|
|
|
|
5,438
|
|
|
$
|
64,753
|
|
|
$
|
66,904
|
|
|
|
|
|
|
Liabilities and Equity
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
$
|
7,479
|
|
|
$
|
9,246
|
Estimated liability for taxes on income
|
|
|
1,424
|
|
|
|
1,647
|
Short-term borrowings and current portion of long-term debt
|
|
|
4,231
|
|
|
|
2,765
|
Dividend payable
|
|
|
640
|
|
|
|
518
|
|
|
|
13,774
|
|
|
|
14,176
|
Long-term debt
|
|
|
9,110
|
|
|
|
10,565
|
Postretirement benefits
|
|
|
1,348
|
|
|
|
1,501
|
Deferred taxes
|
|
|
1,333
|
|
|
|
1,296
|
Other liabilities
|
|
|
1,003
|
|
|
|
1,317
|
|
|
|
26,568
|
|
|
|
28,855
|
Equity
|
|
|
38,185
|
|
|
|
38,049
|
|
|
$
|
64,753
|
|
|
$
|
66,904
|
|
|
|
|
|
|
|
|
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 information regarding the level of Schlumberger’s
indebtedness by reflecting cash and investments that could be used to
repay debt.
Details of changes in Net Debt follow:
|
|
(Stated in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
Periods Ended June 30,
|
|
|
|
|
Six Months 2015
|
|
|
Second Quarter 2015
|
|
|
Six Months 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before noncontrolling interests
|
|
|
|
|
$
|
2,122
|
|
|
|
$
|
1,134
|
|
|
|
$
|
3,429
|
|
Restructuring and other charges, net of tax
|
|
|
|
|
|
383
|
|
|
|
|
-
|
|
|
|
|
-
|
|
Income from continuing operations before noncontrolling
interests, excluding charges & credits
|
|
|
|
|
|
2,505
|
|
|
|
|
1,134
|
|
|
|
|
3,429
|
|
Depreciation and amortization (1)
|
|
|
|
|
|
2,089
|
|
|
|
|
1,047
|
|
|
|
|
1,997
|
|
Pension and other postretirement benefits expense
|
|
|
|
|
|
217
|
|
|
|
|
103
|
|
|
|
|
190
|
|
Stock-based compensation expense
|
|
|
|
|
|
167
|
|
|
|
|
87
|
|
|
|
|
162
|
|
Pension and other postretirement benefits funding
|
|
|
|
|
|
(214
|
)
|
|
|
|
(94
|
)
|
|
|
|
(127
|
)
|
Increase in working capital (2)
|
|
|
|
|
|
(837
|
)
|
|
|
|
(67
|
)
|
|
|
|
(1,090
|
)
|
Other
|
|
|
|
|
|
157
|
|
|
|
|
104
|
|
|
|
|
(342
|
)
|
Cash flow from operations
|
|
|
|
|
|
4,084
|
|
|
|
|
2,314
|
|
|
|
|
4,219
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
|
|
|
(1,193
|
)
|
|
|
|
(587
|
)
|
|
|
|
(1,786
|
)
|
SPM investments
|
|
|
|
|
|
(222
|
)
|
|
|
|
(113
|
)
|
|
|
|
(377
|
)
|
Multiclient seismic data capitalized
|
|
|
|
|
|
(221
|
)
|
|
|
|
(120
|
)
|
|
|
|
(154
|
)
|
Free cash flow (3)
|
|
|
|
|
|
2,448
|
|
|
|
|
1,494
|
|
|
|
|
1,902
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock repurchase program
|
|
|
|
|
|
(1,239
|
)
|
|
|
|
(520
|
)
|
|
|
|
(2,074
|
)
|
Dividends paid
|
|
|
|
|
|
(1,151
|
)
|
|
|
|
(639
|
)
|
|
|
|
(932
|
)
|
Proceeds from employee stock plans
|
|
|
|
|
|
256
|
|
|
|
|
74
|
|
|
|
|
492
|
|
|
|
|
|
|
|
314
|
|
|
|
|
409
|
|
|
|
|
(612
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Business acquisitions and investments, net of cash acquired plus
debt assumed
|
|
|
|
|
|
(206
|
)
|
|
|
|
(127
|
)
|
|
|
|
(964
|
)
|
Discontinued operations - settlement with U.S. Department of Justice
|
|
|
|
|
|
(233
|
)
|
|
|
|
(233
|
)
|
|
|
|
-
|
|
Other
|
|
|
|
|
|
(86
|
)
|
|
|
|
(160
|
)
|
|
|
|
(47
|
)
|
Increase in Net Debt
|
|
|
|
|
|
(211
|
)
|
|
|
|
(111
|
)
|
|
|
|
(1,623
|
)
|
Net Debt, Beginning of period
|
|
|
|
|
|
(5,387
|
)
|
|
|
|
(5,487
|
)
|
|
|
|
(4,443
|
)
|
Net Debt
|
|
|
|
|
$
|
(5,598
|
)
|
|
|
$
|
(5,598
|
)
|
|
|
$
|
(6,066
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Components of Net Debt
|
|
Jun. 30, 2015
|
|
|
Mar. 31, 2015
|
|
|
Dec. 31, 2014
|
|
|
Jun. 30, 2014
|
Cash and short-term investments
|
|
$
|
7,274
|
|
|
|
$
|
6,803
|
|
|
|
$
|
7,501
|
|
|
|
$
|
6,699
|
|
Fixed income investments, held to maturity
|
|
|
469
|
|
|
|
|
436
|
|
|
|
|
442
|
|
|
|
|
480
|
|
Short-term borrowings and current portion of long-term debt
|
|
|
(4,231
|
)
|
|
|
|
(3,828
|
)
|
|
|
|
(2,765
|
)
|
|
|
|
(1,505
|
)
|
Long-term debt
|
|
|
(9,110
|
)
|
|
|
|
(8,898
|
)
|
|
|
|
(10,565
|
)
|
|
|
|
(11,740
|
)
|
|
|
$
|
(5,598
|
)
|
|
|
$
|
(5,487
|
)
|
|
|
$
|
(5,387
|
)
|
|
|
$
|
(6,066
|
)
|
|
|
|
(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 $455 million during the
six months ended June 30, 2015 and $210 million during the second
quarter of 2015.
|
|
|
|
(3)
|
|
"Free cash flow" represents cash flow from operations less capital
expenditures, SPM investments and multiclient seismic data
capitalized. Management believes that this is an important measure
because it represents funds available to reduce debt and pursue
opportunities that enhance shareholder value such as making
acquisitions, and returning cash to shareholders through stock
repurchases and dividends.
|
|
|
|
Charges & Credits
In addition to financial results determined in accordance with US
generally accepted accounting principles (GAAP), this Second-Quarter
Press Release also includes non-GAAP financial measures (as defined
under the SEC’s Regulation G). The following is a reconciliation of
these non-GAAP measures to the comparable GAAP measures:
|
|
(Stated in millions, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter 2015
|
|
|
Pretax
|
|
|
Tax
|
|
|
Noncont. Interest
|
|
|
Net
|
|
|
Diluted EPS
|
Schlumberger income from continuing operations, excluding charges &
credits
|
|
$
|
1,733
|
|
|
|
$
|
362
|
|
|
|
$
|
13
|
|
|
$
|
1,358
|
|
|
|
$
|
1.06
|
|
Workforce reduction
|
|
|
(390
|
)
|
|
|
|
(56
|
)
|
|
|
|
-
|
|
|
|
(334
|
)
|
|
|
|
(0.26
|
)
|
Currency devaluation loss in Venezuela
|
|
|
(49
|
)
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
(49
|
)
|
|
|
|
(0.04
|
)
|
Schlumberger income from continuing operations, as reported
|
|
$
|
1,294
|
|
|
|
$
|
306
|
|
|
|
$
|
13
|
|
|
$
|
975
|
|
|
|
$
|
0.76
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months 2015
|
|
|
Pretax
|
|
|
Tax
|
|
|
Noncont. Interest
|
|
|
Net
|
|
|
Diluted EPS
|
Schlumberger income from continuing operations, excluding charges &
credits
|
|
$
|
3,169
|
|
|
|
$
|
664
|
|
|
|
$
|
23
|
|
|
$
|
2,482
|
|
|
|
$
|
1.94
|
|
Workforce reduction
|
|
|
(390
|
)
|
|
|
|
(56
|
)
|
|
|
|
-
|
|
|
|
(334
|
)
|
|
|
|
(0.26
|
)
|
Currency devaluation loss in Venezuela
|
|
|
(49
|
)
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
(49
|
)
|
|
|
|
(0.04
|
)
|
Schlumberger income from continuing operations, as reported
|
|
$
|
2,730
|
|
|
|
$
|
608
|
|
|
|
$
|
23
|
|
|
$
|
2,099
|
|
|
|
$
|
1.64
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
There were no charges or credits recorded during the second quarter
of 2015 or the first six months of 2014.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Refer to Supplemental Information for further details of these
charges.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product Groups
|
(Stated in millions)
|
|
|
Three Months Ended
|
|
|
Jun. 30, 2015
|
|
|
Mar. 31, 2015
|
|
|
Jun. 30, 2014
|
|
|
Revenue
|
|
|
Income Before Taxes
|
|
|
Revenue
|
|
|
Income Before Taxes
|
|
|
Revenue
|
|
|
Income Before Taxes
|
Reservoir Characterization
|
|
$
|
2,425
|
|
|
|
$
|
642
|
|
|
|
$
|
2,552
|
|
|
|
$
|
655
|
|
|
|
$
|
3,231
|
|
|
|
$
|
933
|
|
Drilling
|
|
|
3,511
|
|
|
|
|
685
|
|
|
|
|
3,963
|
|
|
|
|
790
|
|
|
|
|
4,653
|
|
|
|
|
981
|
|
Production
|
|
|
3,103
|
|
|
|
|
397
|
|
|
|
|
3,767
|
|
|
|
|
549
|
|
|
|
|
4,208
|
|
|
|
|
710
|
|
Eliminations & other
|
|
|
(29
|
)
|
|
|
|
(16
|
)
|
|
|
|
(34
|
)
|
|
|
|
(1
|
)
|
|
|
|
(38
|
)
|
|
|
|
(3
|
)
|
Pretax operating income
|
|
|
|
|
|
1,708
|
|
|
|
|
|
|
|
1,993
|
|
|
|
|
|
|
|
2,621
|
|
Corporate & other
|
|
|
-
|
|
|
|
|
(199
|
)
|
|
|
|
-
|
|
|
|
|
(192
|
)
|
|
|
|
-
|
|
|
|
|
(216
|
)
|
Interest income(1)
|
|
|
-
|
|
|
|
|
6
|
|
|
|
|
-
|
|
|
|
|
8
|
|
|
|
|
-
|
|
|
|
|
8
|
|
Interest expense(1)
|
|
|
-
|
|
|
|
|
(79
|
)
|
|
|
|
-
|
|
|
|
|
(76
|
)
|
|
|
|
-
|
|
|
|
|
(86
|
)
|
Charges & credits
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
(439
|
)
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
$
|
9,010
|
|
|
|
$
|
1,436
|
|
|
|
$
|
10,248
|
|
|
|
$
|
1,294
|
|
|
|
$
|
12,054
|
|
|
|
$
|
2,327
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Geographic Areas
|
(Stated in millions)
|
|
|
Three Months Ended
|
|
|
Jun. 30, 2015
|
|
|
Mar. 31, 2015
|
|
|
Jun. 30, 2014
|
|
|
Revenue
|
|
|
Income Before Taxes
|
|
|
Revenue
|
|
|
Income Before Taxes
|
|
|
Revenue
|
|
|
Income Before Taxes
|
North America
|
|
$
|
2,361
|
|
|
|
$
|
242
|
|
|
|
$
|
3,222
|
|
|
|
$
|
416
|
|
|
|
$
|
3,888
|
|
|
|
$
|
700
|
|
Latin America
|
|
|
1,537
|
|
|
|
|
343
|
|
|
|
|
1,648
|
|
|
|
|
354
|
|
|
|
|
1,852
|
|
|
|
|
393
|
|
Europe/CIS/Africa
|
|
|
2,413
|
|
|
|
|
513
|
|
|
|
|
2,538
|
|
|
|
|
532
|
|
|
|
|
3,268
|
|
|
|
|
723
|
|
Middle East & Asia
|
|
|
2,575
|
|
|
|
|
740
|
|
|
|
|
2,703
|
|
|
|
|
774
|
|
|
|
|
2,966
|
|
|
|
|
826
|
|
Eliminations & other
|
|
|
124
|
|
|
|
|
(130
|
)
|
|
|
|
137
|
|
|
|
|
(83
|
)
|
|
|
|
80
|
|
|
|
|
(21
|
)
|
Pretax operating income
|
|
|
|
|
|
1,708
|
|
|
|
|
|
|
|
1,993
|
|
|
|
|
|
|
|
2,621
|
|
Corporate & other
|
|
|
-
|
|
|
|
|
(199
|
)
|
|
|
|
-
|
|
|
|
|
(192
|
)
|
|
|
|
-
|
|
|
|
|
(216
|
)
|
Interest income(1)
|
|
|
-
|
|
|
|
|
6
|
|
|
|
|
-
|
|
|
|
|
8
|
|
|
|
|
-
|
|
|
|
|
8
|
|
Interest expense(1)
|
|
|
-
|
|
|
|
|
(79
|
)
|
|
|
|
-
|
|
|
|
|
(76
|
)
|
|
|
|
-
|
|
|
|
|
(86
|
)
|
Charges & credits
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
(439
|
)
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
$
|
9,010
|
|
|
|
$
|
1,436
|
|
|
|
$
|
10,248
|
|
|
|
$
|
1,294
|
|
|
|
$
|
12,054
|
|
|
|
$
|
2,327
|
|
(1)
|
|
Excludes interest included in the Product Groups and Geographic
Areas results.
|
|
Product Groups
|
(Stated in millions)
|
|
|
Six Months Ended
|
|
|
Jun. 30, 2015
|
|
|
Jun. 30, 2014
|
|
|
Revenue
|
|
|
Income Before Taxes
|
|
|
Revenue
|
|
|
Income Before Taxes
|
Reservoir Characterization
|
|
$
|
4,977
|
|
|
|
$
|
1,297
|
|
|
|
$
|
6,214
|
|
|
|
$
|
1,726
|
|
Drilling
|
|
|
7,474
|
|
|
|
|
1,475
|
|
|
|
|
8,984
|
|
|
|
|
1,862
|
|
Production
|
|
|
6,870
|
|
|
|
|
946
|
|
|
|
|
8,193
|
|
|
|
|
1,433
|
|
Eliminations & other
|
|
|
(63
|
)
|
|
|
|
(17
|
)
|
|
|
|
(97
|
)
|
|
|
|
(32
|
)
|
Pretax operating income
|
|
|
|
|
|
3,701
|
|
|
|
|
|
|
|
4,989
|
|
Corporate & other
|
|
|
-
|
|
|
|
|
(390
|
)
|
|
|
|
-
|
|
|
|
|
(417
|
)
|
Interest income(1)
|
|
|
-
|
|
|
|
|
14
|
|
|
|
|
-
|
|
|
|
|
15
|
|
Interest expense(1)
|
|
|
-
|
|
|
|
|
(156
|
)
|
|
|
|
-
|
|
|
|
|
(183
|
)
|
Charges & credits
|
|
|
-
|
|
|
|
|
(439
|
)
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
$
|
19,258
|
|
|
|
$
|
2,730
|
|
|
|
$
|
23,294
|
|
|
|
$
|
4,404
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Geographic Areas
|
(Stated in millions)
|
|
|
Six Months Ended
|
|
|
Jun. 30, 2015
|
|
|
Jun. 30, 2014
|
|
|
Revenue
|
|
|
Income Before Taxes
|
|
|
Revenue
|
|
|
Income Before Taxes
|
North America
|
|
$
|
5,584
|
|
|
|
$
|
658
|
|
|
|
$
|
7,572
|
|
|
|
$
|
1,383
|
|
Latin America
|
|
|
3,184
|
|
|
|
|
697
|
|
|
|
|
3,610
|
|
|
|
|
764
|
|
Europe/CIS/Africa
|
|
|
4,951
|
|
|
|
|
1,046
|
|
|
|
|
6,149
|
|
|
|
|
1,308
|
|
Middle East & Asia
|
|
|
5,278
|
|
|
|
|
1,514
|
|
|
|
|
5,811
|
|
|
|
|
1,575
|
|
Eliminations & other
|
|
|
261
|
|
|
|
|
(214
|
)
|
|
|
|
152
|
|
|
|
|
(41
|
)
|
Pretax operating income
|
|
|
|
|
|
3,701
|
|
|
|
|
|
|
|
4,989
|
|
Corporate & other
|
|
|
-
|
|
|
|
|
(390
|
)
|
|
|
|
-
|
|
|
|
|
(417
|
)
|
Interest income(1)
|
|
|
-
|
|
|
|
|
14
|
|
|
|
|
-
|
|
|
|
|
15
|
|
Interest expense(1)
|
|
|
-
|
|
|
|
|
(156
|
)
|
|
|
|
-
|
|
|
|
|
(183
|
)
|
Charges & credits
|
|
|
-
|
|
|
|
|
(439
|
)
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
$
|
19,258
|
|
|
|
$
|
2,730
|
|
|
|
$
|
23,294
|
|
|
|
$
|
4,404
|
|
(1)
|
|
Excludes interest included in the Product Groups and Geographic
Areas 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 were the pretax operating income margin and decremental
operating margin for the second quarter of 2015?
|
|
|
The pretax operating income margin was 19.0% and the year-over-year
decremental operating margin was 30%. The sequential decremental
operating margin was 23%.
|
|
|
|
3)
|
|
What were the pretax operating income margin and decremental
operating margin for the first half of 2015?
|
|
|
The pretax operating income margin was 19.2% and the year-over-year
decremental operating margin was 32%.
|
|
|
|
4)
|
|
What was the free cash flow as a percentage of income from
continuing operations before noncontrolling interests and charges
and credits, for the second quarter of 2015?
|
|
|
Free cash flow, which includes approximately $210 million of
severance payments, as a percentage of income from continuing
operations before noncontrolling interests and charges and credits
was 132% for the second quarter of 2015.
|
|
|
|
5)
|
|
What was the free cash flow as a percentage of income from
continuing operations before noncontrolling interests and charges
and credits, for the first half of 2015?
|
|
|
Free cash flow, which includes approximately $455 million of
severance payments, as a percentage of income from continuing
operations before noncontrolling interests and charges and credits
was 98% for the first half of 2015.
|
|
|
|
6)
|
|
What is the capex guidance for the full year 2015?
|
|
|
Capex (excluding multiclient and SPM investments) is still expected
to be approximately $2.5 billion for 2015.
|
|
|
|
7)
|
|
What was included in “Interest and other income” for the second
quarter of 2015?
|
|
|
“Interest and other income” for the second quarter of 2015 was $47
million. This amount consisted of earnings of equity method
investments of $35 million and interest income of $12 million.
|
|
|
|
8)
|
|
How did interest income and interest expense change during the
second quarter of 2015?
|
|
|
Interest income of $12 million decreased $1 million sequentially.
Interest expense of $86 million increased $4 million sequentially.
|
|
|
|
9)
|
|
What is the difference between the “Pretax operating income”
and Schlumberger’s consolidated income before taxes?
|
|
|
The difference consists of such items as 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 and certain centrally managed initiatives.
|
|
|
|
10)
|
|
What was the effective tax rate (ETR), excluding charges and
credits, for the second quarter of 2015?
|
|
|
The ETR for the second quarter of 2015, excluding charges and
credits, was 21.1% as compared to 20.9% for the first quarter of
2015, excluding charges and credits. There were no charges and
credits recorded during the second quarter of 2015.
|
|
|
|
|
|
The ETR for the first quarter of 2015, including charges and
credits, was 23.6%.
|
|
|
|
11)
|
|
How many shares of common stock were outstanding as of June 30,
2015 and how did this change from the end of the previous quarter?
|
|
|
There were 1.265 billion shares of common stock outstanding as of
June 30, 2015. The following table shows the change in the number
of shares outstanding from March 31, 2015 to June 30, 2015.
|
|
|
|
|
|
(Stated in millions)
|
|
|
|
|
Shares outstanding at March 31, 2015
|
|
1,270
|
|
|
|
|
|
Shares sold to optionees, less shares exchanged
|
|
1
|
|
|
|
|
|
Vesting of restricted stock
|
|
-
|
|
|
|
|
|
Shares issued under employee stock purchase plan
|
|
-
|
|
|
|
|
|
Stock repurchase program
|
|
(6
|
)
|
|
|
|
|
Shares outstanding at June 30, 2015
|
|
1,265
|
|
12)
|
|
What was the weighted average number of shares outstanding
during the second quarter of 2015 and first quarter of 2015 and
how does this reconcile to the average number of shares
outstanding, assuming dilution?
|
|
|
The weighted average number of shares outstanding during the
second quarter of 2015 and first quarter of 2015 was 1.280 billion
and 1.285 billion, respectively. The following is a reconciliation
of the weighted average shares outstanding to the average number
of shares outstanding, assuming dilution.
|
|
|
|
|
|
|
(Stated in millions)
|
|
|
|
|
|
|
Second Quarter 2015
|
|
|
First Quarter 2015
|
|
|
|
|
Weighted average shares outstanding
|
|
1,269
|
|
|
1,276
|
|
|
|
|
Assumed exercise of stock options
|
|
7
|
|
|
5
|
|
|
|
|
Unvested restricted stock
|
|
4
|
|
|
4
|
|
|
|
|
Average shares outstanding, assuming dilution
|
|
1,280
|
|
|
1,285
|
13)
|
|
What were multiclient sales in the second quarter of 2015?
|
|
|
Multiclient sales, including transfer fees, were $84 million in
the second quarter of 2015 and $53 million in the first quarter of
2015.
|
|
|
|
14)
|
|
What was the WesternGeco backlog at the end of the second
quarter of 2015?
|
|
|
WesternGeco backlog, which is based on signed contracts with
customers, was $514 million at the end of the second quarter of
2015. It was $604 million at the end of the first quarter of 2015.
|
|
|
|
15)
|
|
What do the various charges Schlumberger recorded during the
first quarter of 2015 relate to?
|
|
|
|
|
|
Workforce reduction:
|
|
|
As a result of the severe reduction in activity in North America
combined with the impact of lower international activity due to
customer budget cuts driven by lower oil prices, Schlumberger
reduced its headcount by approximately 11,000 employees in the first
quarter. Schlumberger recorded a $390 million pretax charge during
the first quarter of 2015 as a result of this headcount reduction as
well as an incentivized leave of absence program.
|
|
|
|
|
|
Venezuela currency exchange rate charge:
|
|
|
Although the financial currency of Schlumberger operations in
Venezuela is the US dollar, a portion of the transactions are
denominated in local currency. Effective December 31, 2014,
Schlumberger began applying the SICAD II exchange rate of 50
Venezuelan Bolivares per US dollar to remeasure local currency
transactions and balances into US dollars. During the first quarter
of 2015, the Venezuelan government replaced the SICAD II auction
process with a new foreign exchange market system known as SIMADI.
The SIMADI exchange rate was approximately 192 Venezuelan Bolivares
to the US dollar as of March 31, 2015. As a result, Schlumberger
recorded a $49 million pretax devaluation charge during the first
quarter of 2015.
|
|
|
|
About Schlumberger
Schlumberger is the world’s leading supplier of technology, integrated
project management and information solutions to customers working in the
oil and gas industry worldwide. Employing approximately 108,000 people
representing over 140 nationalities and working in more than 85
countries, Schlumberger provides the industry’s widest range of products
and services from exploration through production.
Schlumberger Limited has principal offices in Paris, Houston, London and
The Hague, and reported revenues of $48.58 billion in 2014. For more
information, visit www.slb.com.
*Mark of Schlumberger or of Schlumberger companies.
Notes
Schlumberger will hold a conference call to discuss the above
announcement and business outlook on Friday, July 17, 2015. The call is
scheduled to begin at 8:00 a.m. (US Central Time), 9:00 a.m. (Eastern
Time), 2:00 p.m. (London time). To access the call, which is open to the
public, please contact the conference call operator at +1 (800) 230-1059
within North America, or +1 (612) 234-9959 outside of North America,
approximately 10 minutes prior to the call’s scheduled start time. Ask
for the “Schlumberger Earnings Conference Call.” At the conclusion of
the conference call an audio replay will be available until August 17,
2015 by dialing +1 (800) 475-6701 within North America, or +1 (320)
365-3844 outside of North America, and providing the access code 358215.
The conference call will be webcast simultaneously at www.slb.com/irwebcast
on a listen-only basis. Please log in 15 minutes ahead of time to test
your browser and register for the call. A replay of the webcast will
also be available at the same web site until September 30, 2015.
For more information, contact
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
This second-quarter 2015 earnings release and Supplemental Information,
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; capital expenditures by
Schlumberger and the oil and gas industry; the business strategies of
Schlumberger’s customers; 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;
general economic, political and business conditions in key regions of
the world, including in Russia and the Ukraine; pricing erosion; weather
and seasonal factors; operational delays; 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; and other risks and uncertainties detailed in this
second-quarter 2015 earnings release and Supplemental Information and
our most recent Forms 10-K, 10-Q, and 8-K filed with or furnished to the
Securities and Exchange Commission. If one or more of these or other
risks or uncertainties materialize (or the consequences of any such
development changes), or should our underlying assumptions prove
incorrect, actual outcomes may vary materially from those reflected in
our forward-looking statements. Schlumberger disclaims any intention or
obligation to update publicly or revise such statements, whether as a
result of new information, future events or otherwise.
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