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Schlumberger, Announces

Schlumberger Announces Second-Quarter 2020 Results

24.07.2020 - 14:32:07

Business Wire India
  • Worldwide revenue of $5.4 billion decreased 28% sequentially
  • International revenue of $4.1 billion decreased 19% sequentially
  • North America revenue of $1.2 billion decreased 48% sequentially
  • GAAP loss per share, including charges and credits of $2.52 per share, was $2.47EPS, excluding charges and credits, was $0.05
  • ?Cash flow from operations was $803 million and free cash flow was $465 million
  • Board approved quarterly cash dividend of $0.125 per share
 

Schlumberger Limited (NYSE: SLB) today reported results for the second quarter of 2020.

 
Second-Quarter Results (Stated in millions, except per share amounts)
  Three Months Ended   Change
  Jun. 30, 2020   Mar. 31, 2020   Jun. 30, 2019   Sequential   Year-on-year
Revenue

$5,356

 

$7,455

 

$8,269

 

-28%

 

-35%

Income (loss) before taxes - GAAP basis

$(3,627)

 

$(8,089)

 

$593

 

n/m

 

n/m

Pretax segment operating income*

$396

 

$776

 

$968

 

-49%

 

-59%

Pretax segment operating margin*

7.4%

 

10.4%

 

11.7%

 

-303 bps

 

-431 bps

Net income (loss) - GAAP basis

$(3,434)

 

$(7,376)

 

$492

 

n/m

 

n/m

Net income, excluding charges & credits*

$69

 

$351

 

$492

 

-80%

 

-86%

Diluted EPS (loss per share) - GAAP basis

$(2.47)

 

$(5.32)

 

$0.35

 

n/m

 

n/m

Diluted EPS, excluding charges & credits*

$0.05

 

$0.25

 

$0.35

 

-80%

 

-86%

             

 

 

 

North America revenue

$1,183

 

$2,279

 

$2,801

 

-48%

 

-58%

International revenue

$4,138

 

$5,121

 

$5,463

 

-19%

 

-24%

             

 

 

 

North America revenue, excluding Cameron

$842

 

$1,773

 

$2,201

 

-53%

 

-62%

International revenue, excluding Cameron

$3,463

 

$4,395

 

$4,708

 

-21%

 

-26%

                   
*These are non-GAAP financial measures. See sections titled "Charges & Credits" and "Segments" for details.
n/m = not meaningful
 

Schlumberger CEO Olivier Le Peuch commented, “Before addressing our results, I would like to pay tribute to our employees and contractors for their remarkable resilience in the face of the historic COVID-19 pandemic that confronts us all.

 

“Our employees and contractors have shown outstanding adaptability to the new working environment with up to 55,000 of our people working remotely to maintain business continuity. They have embraced digital remote operations, adjusted work practices to mitigate contamination risks, and delivered benchmark safety and service quality performance for our customers. I would like to extend my heartfelt appreciation for their dedication and sacrifices while working in a difficult operating environment, and for their leadership in helping the communities where we live and work. As the pandemic lingers, we will remain cautious in our global operations. The safety of our people remains paramount.

 

“This has probably been the most challenging quarter in past decades. Schlumberger second-quarter revenue declined 28% sequentially, caused by the unprecedented fall in North America activity, and international activity drop due to downward revisions to customer budgets accentuated by COVID-19 disruptions. This speaks volumes about an industry confronted with historic oil demand and supply imbalances caused by demand destruction from the global COVID-19 containment effort.

 

“North America revenue declined 48% sequentially with land revenue falling 60% as customers dramatically cut back spending. International revenue declined 19% sequentially with Latin America and Africa experiencing the largest revenue declines due to COVID-19-related restrictions and the drop in deepwater activity. In addition, there was a production interruption in our Asset Performance Solutions (APS) projects in Ecuador caused by a major land slide that led to the rupture of the main pipeline. Revenue in the Middle East, Russia, Europe, and Asia proved more resilient as these regions, when combined, declined 10% sequentially.

 
Second-Quarter Revenue by Segment (Stated in millions)
  Three Months Ended   Change
  Jun. 30, 2020   Mar. 31, 2020   Jun. 30, 2019   Sequential   Year-on-year
Reservoir Characterization

$1,052

 

 

$1,311

 

 

$1,558

 

 

-20%

 

-32%

Drilling

1,731

 

 

2,289

 

 

2,420

 

 

-24%

 

-28%

Production

1,615

 

 

2,703

 

 

3,077

 

 

-40%

 

-48%

Cameron

1,015

 

 

1,254

 

 

1,328

 

 

-19%

 

-24%

Other

(57)

 

 

($102)

 

 

(114)

 

 

n/m

 

n/m

 

$5,356

 

 

$7,455

 

 

$8,269

 

 

-28%

 

-35%

n/m = not meaningful
Certain prior period amounts have been reclassified to conform to the current period presentation.

“By business segment sequentially, second-quarter revenue for Reservoir Characterization and Drilling fell 20% and 24%, respectively. This was due to the North America land activity decline and COVID-19 disruptions in several international GeoMarkets. Production revenue declined 40% sequentially, driven by the precipitous drop in OneStim® pressure-pumping activity. Cameron revenue declined 19% sequentially, mostly due to North America land activity decline in Surface Systems and Valves & Process Systems.

 

“In the face of such adversity, Schlumberger has demonstrated resilience. Through our decisive actions, we protected our liquidity and cash positions, and sustained resilient international margins while navigating the trough of this downcycle. The results of our actions and continued success with technology—particularly digital—can be seen from our decremental margins and our strong free cash flow generation.

 

“First, our cash flow from operations was $803 million and we generated $465 million of free cash flow despite significant severance payments during the quarter. We continue to be opportunistic in accessing the financial markets, systematically refinancing and spacing out future debt maturities, and taking proactive measures to enhance our liquidity position.

 

“Second, despite the severe drop in international revenue and the significant effect of the APS production interruption in Ecuador, international margin was extraordinarily resilient, as it was essentially flat compared to the previous quarter. Three out of our four business segments and more than half of our 13 international GeoMarkets either expanded or maintained their international margins on a sequential basis. This was due to our swift and decisive actions to reduce operating costs, restructure, and rationalize our asset base. We are permanently removing $1.5 billion of structural costs annually by reorganizing Schlumberger into a leaner and more responsive company that is better aligned with our customers’ workflows. We are combining our 17 product lines into four divisions, structuring our geographic organization around five key basins of activity, and streamlining our management structure. In addition, significant progress was also made in improving the results of previously underperforming business units and digital technology adoption has increased. Overall this quarter, we posted a decremental operating margin of 18% sequentially.

 

“In response to market conditions, we recorded $3.7 billion of pretax restructuring and asset impairment charges, including $1 billion of severance costs, as of the end of the quarter. The remaining portion of the charge largely relates to the non-cash impairment of certain assets.

 

“Altogether, I am extremely proud of our operational and financial performance during the quarter as we continue to build the foundation for our future success while we navigate the trough of this downcycle.

 

“Looking at the macro view in the near-term, oil demand is slowly starting to normalize and is expected to improve as government measures support consumption. However, subsequent waves of potential COVID-19 resurgence pose a negative risk to this outlook.

 

“The conditions are set in the third quarter for a modest frac completion activity increase in North America, though from a very low base. Internationally, markets may continue to be disrupted by the pandemic and will continue to adjust to budget levels set during the second quarter, but this would be mostly offset by the seasonal return of activity in the Northern Hemisphere and the rebound of Latin America from its second-quarter weakness. However, any further material COVID-19 disruption or significant setback in oil demand arising from a slower economic recovery could present downside risks to this outlook. Absent these risks, we anticipate flat sequential revenue on a global basis and our pretax segment operating income and margin should expand as a result of our restructuring efforts, improved activity mix, and sustained benefits from technology adoption, including digital.

 

“We believe the decisive and comprehensive measures we have taken to face the industry reality will continue to protect our liquidity and cash positions and allow us to expand our margins. We have taken the long-term view in restructuring our company—aligning with our customers’ workflows, empowering a lean and responsive organization, and accelerating the execution of our performance strategy, with capital stewardship, fit-for-basin, and digital as key attributes of success. I am extremely optimistic about the future of Schlumberger, building on the strength of our international franchise and positioning the company as the performance partner of choice for our customers in the new industry landscape.”

 

Other Events

 

During the second quarter, Schlumberger issued EUR 1 billion of 1.375% Notes due 2026, $900 million of 2.650% Notes due 2030, and EUR 1 billion of 2.000% Notes due 2032.

 

In June, Schlumberger repurchased $1.5 billion of its outstanding notes, consisting of $935 million of its 3.300% Notes due 2021 and all $600 million of its 4.200% Notes due 2021.

 

On July 23, 2020, Schlumberger’s Board of Directors approved a quarterly cash dividend of $0.125 per share of outstanding common stock, payable on October 8, 2020 to stockholders of record on September 2, 2020.

 

Consolidated Revenue by Area

 
  (Stated in millions)
  Three Months Ended   Change
  Jun. 30, 2020   Mar. 31, 2020   Jun. 30, 2019   Sequential   Year-on-year
North America

$1,183

 

$2,279

 

$2,801

 

-48%

 

-58%

Latin America

543

 

$945

 

1,115

 

-42%

 

-51%

Europe/CIS/Africa

1,449

 

$1,751

 

1,896

 

-17%

 

-24%

Middle East & Asia

2,146

 

$2,426

 

2,452

 

-12%

 

-12%

Other

35

 

$54

 

5

 

n/m

 

n/m

 

$5,356

 

$7,455

 

$8,269

 

-28%

 

-35%

North America revenue

$1,183

 

$2,279

 

$2,801

 

-48%

 

-58%

International revenue

$4,138

 

$5,121

 

$5,463

 

-19%

 

-24%

             

 

 

 

North America revenue, excluding Cameron

$842

 

$1,773

 

$2,201

 

-52%

 

-62%

International revenue, excluding Cameron

$3,463

 

$4,395

 

$4,708

 

-21%

 

-26%

                   
n/m = not meaningful
Certain prior period amounts have been reclassified to conform to the current period presentation.
 

North America

 

North America area consolidated revenue of $1.2 billion was 48% lower sequentially with North America land revenue falling 60%, in line with the decline in rig and hydraulic fracturing stage counts, as customers dramatically cut back spending. OneStim fracturing and land drilling activity fell as customers revised budgets downward, challenged by low oil prices, take-away constraints, and storage overflow. In addition, sales in North America land of Surface Systems, Artificial Lift Solutions, and Valves & Process Systems decreased sequentially. North America offshore revenue decreased less severely, 12% sequentially.

 

International

  area of $543 million decreased 42% sequentially, primarily due to a production interruption in our APS projects in Ecuador. In addition, COVID-19 disruptions affected drilling activities in Argentina, Bolivia, Colombia, and Peru. In contrast, Mexico and Brazil declined less severely as reduced land activity was partially offset by offshore exploration operations, where work continued with COVID-19 risk-mitigation protocols.

 

Europe/CIS/Africa area consolidated revenue of $1.4 billion decreased 17% sequentially due to a significant drop in activity in the Sub-Sahara Africa and North Africa GeoMarkets from COVID-19 disruptions, project cancellations, and work stoppages. The Russia & Central Asia GeoMarket was resilient as COVID-19 activity disruption was offset by the pickup of seasonal land activity in Russia, in preparation for the summer drilling campaigns. Revenue also declined less in the North Sea and Continental Europe, following the winter slowdown and as activity resumed later in the quarter after COVID-19 lockdowns were relaxed.

 

Consolidated revenue in the Middle East & Asia area of $2.1 billion decreased 12% sequentially, primarily due to a significant drop in activity in the Eastern Middle East and South East Asia GeoMarkets from work delays, project suspensions, and completed contracts. Revenue in the North Middle East and Saudi Arabia & Bahrain GeoMarkets declined less due to new projects. Revenue in the Far East Asia GeoMarket was essentially flat as project delays were offset by the seasonal rebound and resumption of activity after the lifting of COVID-19 lockdowns in China.

 

Reservoir Characterization

 
  (Stated in millions)
  Three Months Ended   Change
  Jun. 30, 2020   Mar. 31, 2020   Jun. 30, 2019   Sequential   Year-on-year
Revenue

$1,052

 

$1,311

 

$1,558

 

-20%

 

-32%

Pretax operating income

$185

 

$184

 

$317

 

1%

 

-42%

Pretax operating margin

17.6%

 

14.0%

 

20.3%

 

357 bps

 

-273 bps

Certain prior period amounts have been reclassified to conform to the current period presentation.

Reservoir Characterization revenue of $1.1 billion, 84% of which came from the international markets, decreased 20% sequentially. North America and international revenues declined 17% and 20%, respectively. This was mainly due to lower Wireline activity in North America land and the Eastern Middle East and Sub-Sahara Africa GeoMarkets. Testing Services revenue was also lower mainly in the Sub-Sahara Africa GeoMarket as a result of completed projects and delayed and cancelled activities due to COVID-19. WesternGeco® revenue declined as a project was completed in the Middle East, while Software Integrated Solutions (SIS) revenue declined slightly as well.

 

Reservoir Characterization pretax operating margin of 18% rebounded 357 bps sequentially despite the significant revenue decline. This margin expansion was evident both in North America and internationally. Outperformance was delivered by prompt cost reduction measures in compensation through headcount rationalization and furloughs, particularly in SIS, WesternGeco, and Wireline.

 

Drilling

 
  (Stated in millions)
  Three Months Ended   Change
  Jun. 30, 2020   Mar. 31, 2020   Jun. 30, 2019   Sequential   Year-on-year
Revenue

$1,731

  @ businesswireindia.com