Schlumberger Limited (NYSE:SLB) today reported third-quarter 2011 revenue of $10.23 billion versus $9.62 billion in the second quarter of 2011, and $6.85 billion in the third quarter of 2010.
Income from continuing operations attributable to Schlumberger, excluding charges and credits, was $1.32 billion"”an increase of 12% sequentially and 51% year-on-year. Diluted earnings-per-share from continuing operations, excluding charges and credits, was $0.98 versus $0.87 in the previous quarter, and $0.70 in the third quarter of 2010.
Schlumberger recorded charges of $0.02 per share in the third quarter of 2011 and $0.05 per share in the second quarter of 2011. During the third quarter of 2010, Schlumberger recorded a gain of $0.98 per share on its investment in M-I SWACO as a result of the merger with Smith International, Inc., which was offset in part by restructuring and merger-related charges of $0.30 per share in that quarter.
Oilfield Services revenue of $9.55 billion increased 6% sequentially and 44% year-on-year. Pretax segment operating income of $1.93 billion was up 10% sequentially and 59% year-on-year.
Distribution revenue of $698 million increased 10% sequentially. Pretax segment operating income of $31 million improved 28% sequentially.
Schlumberger CEO Paal Kibsgaard commented, "Schlumberger third-quarter results continued to show solid progress with revenue increasing sequentially across all Schlumberger Product Groups.
In North America, performance was driven by strong growth on land in Canada, and in liquids-rich shale basins in the US, while offshore posted solid growth in the deepwater areas of the Gulf of Mexico. Further pricing momentum was seen in wireline- and drilling-related product lines both on land and offshore.
Internationally, deepwater and exploration activity continued to strengthen with early signs of pricing traction for Wireline and Drilling & Measurements technologies although overall sequential international growth could not replicate that of the second quarter, as we had indicated. All Areas showed sequential growth, with the exception of the Middle East and Asia, which suffered from WesternGeco marine vessels transiting between contracts, and seismic land crews mobilizing for new acquisition surveys. Excluding WesternGeco, MEA also posted sequential growth.
A number of international regions showed particular strength. These included Iraq, where strong operational performance and new IPM contract awards helped drive results; Saudi Arabia, where rigless activity was particularly strong; Mexico, with higher IPM project work as well as increased offshore activity; Brazil, both on land and offshore; Russia, with seasonal expansion and the integration of services from Eurasia; and Angola as both pre-salt exploration activity and development activity grew.
Integration with Smith continues to progress with cost and revenue synergies set to exceed even our revised targets for the year. The combination of Schlumberger and Smith drilling technologies are driving drilling performance for our customers and the transaction continued to be accretive on an earnings per share basis in the quarter.
The current financial turmoil has already resulted in a lower outlook for oil demand growth in 2012, although demand growth is still expected to exceed that of 2011. Recent production data, as well as forward projections indicate that there is a tight cushion of excess oil supply that will continue to support activity.
Therefore, while the financial turmoil introduces some uncertainty over near-term activity, we remain confident that any reductions will be short-lived, and that the outlook for the service industry remains very positive. We further believe that our customers´ needs to renew reserves, as evidenced by the recent string of exploration successes particularly in deepwater offshore areas, favors our broad international footprint. In addition, the balance between our reservoir characterization, drilling and production technologies"”both in North America and overseas"”will enable us to weather any activity fluctuations."
Other Events:
- During the quarter, Schlumberger repurchased 9.9 million shares of its common stock at an average price of $81.86 for a total purchase price of $811.4 million.
- During the quarter, Schlumberger issued $1.1 billion of 1.950% five-year notes, $1.6 billion of 3.300% ten-year notes and $300 million of three-year floating rate notes.
- During the quarter, Schlumberger completed the purchase, from Frank Mohn AS, of the remaining equity interests in Framo Engineering AS, a privately owned Norwegian company specializing in the manufacture and sales of products and services related to multiphase pumps and subsea pump-systems, multiphase metering systems, and swivel and marine systems to the oil and gas industry.
| Consolidated Statement of Income | ||||||||||||||||
| (Stated in millions, except per share amounts) | ||||||||||||||||
| Third Quarter | Nine Months | |||||||||||||||
| Periods Ended September 30 | 2011 | 2010 | 2011 | 2010 | ||||||||||||
| Revenue | $ | 10,229 | $ | 6,845 | $ | 28,566 | $ | 18,379 | ||||||||
| Interest and other income, net (1) | 34 | 54 | 94 | 169 | ||||||||||||
| Gain on investment in M-I SWACO(2) | - | 1,270 | - | 1,270 | ||||||||||||
| Expenses | ||||||||||||||||
| Cost of revenue(2) | 8,092 | 5,471 | 22,776 | 14,537 | ||||||||||||
| Research & engineering | 266 | 240 | 800 | 662 | ||||||||||||
| General & administrative(2) | 91 | 75 | 326 | 221 | ||||||||||||
| Merger & integration(2) | 27 | 97 | 93 | 131 | ||||||||||||
| Restructuring & other(2) | - | 299 | - | 299 | ||||||||||||
| Interest | 70 | 47 | 212 | 146 | ||||||||||||
| Income from continuing operations before taxes | 1,717 | 1,940 | 4,453 | $ | 3,822 | |||||||||||
| Taxes on income (2) | 410 | 209 | 1,079 | 600 | ||||||||||||
| Income from continuing operations | 1,307 | 1,731 | 3,374 | 3,222 | ||||||||||||
| Income from discontinued operations | - | - | 220 | - | ||||||||||||
| Net income | 1,307 | 1,731 | 3,594 | 3,222 | ||||||||||||
| Net income (loss) attributable to noncontrolling interests | 6 | (3 | ) | 10 | (2 | ) | ||||||||||
| Net income attributable to Schlumberger(2) | $ | 1,301 | $ | 1,734 | $ | 3,584 | $ | 3,224 | ||||||||
| Schlumberger amounts attributable to: | ||||||||||||||||
| Income from continuing operations | $ | 1,301 | $ | 1,734 | $ | 3,364 | $ | 3,224 | ||||||||
| Income from discontinued operations | - | - | 220 | - | ||||||||||||
| Net Income | $ | 1,301 | $ | 1,734 | $ | 3,584 | $ | 3,224 | ||||||||
| Diluted earnings per share of Schlumberger(2) | ||||||||||||||||
| Income from continuing operations | $ | 0.96 | $ | 1.38 | $ | 2.46 | $ | 2.63 | ||||||||
| Income from discontinued operations | - | - | 0.16 | - | ||||||||||||
| Net Income | $ | 0.96 | $ | 1.38 | $ | 2.62 | $ | 2.63 | ||||||||
| Average shares outstanding | 1,345 | 1,249 | 1,352 | 1,212 | ||||||||||||
| Average shares outstanding assuming dilution | 1,357 | 1,258 | 1,365 | 1,227 | ||||||||||||
| Depreciation & amortization included in expenses(3) | $ | 828 | $ | 709 | $ | 2,420 | $ | 1,967 | ||||||||
| 1) | Includes interest income of: | |
| Third quarter 2011 - $10 million (2010 - $12 million) | ||
| Nine months 2011 - $28 million (2010 - $43 million) | ||
| 2) | See pages 6-7 for details of charges and credits. | |
| 3) | Including multiclient seismic data cost. |
| Condensed Consolidated Balance Sheet | ||||||||
| (Stated in millions) | ||||||||
| Sept. 30, | Dec. 31, | |||||||
| Assets | 2011 | 2010 | ||||||
| Current Assets | ||||||||
| Cash and short-term investments | $ | 6,064 | $ | 4,990 | ||||
| Receivables | 9,493 | 8,278 | ||||||
| Other current assets | 5,703 | 4,830 | ||||||
| 21,260 | 18,098 | |||||||
| Fixed income investments, held to maturity | 255 | 484 | ||||||
| Fixed assets | 12,583 | 12,071 | ||||||
| Multiclient seismic data | 444 | 394 | ||||||
| Goodwill | 14,118 | 13,952 | ||||||
| Other intangible assets | 4,927 | 5,162 | ||||||
| Other assets | 1,994 | 1,606 | ||||||
| $ | 55,581 | $ | 51,767 | |||||
| Liabilities and Equity | ||||||||
| Current Liabilities | ||||||||
| Accounts payable and accrued liabilities | $ | 7,023 | $ | 6,488 | ||||
| Estimated liability for taxes on income | 1,207 | 1,493 | ||||||
| Short-term borrowings and current portion | ||||||||
| of long-term debt | 2,743 | 2,595 | ||||||
| Dividend payable | 334 | 289 | ||||||
| 11,307 | 10,865 | |||||||
| Long-term debt | 8,740 | 5,517 | ||||||
| Postretirement benefits | 1,034 | 1,262 | ||||||
| Deferred taxes | 1,662 | 1,636 | ||||||
| Other liabilities | 1,215 | 1,043 | ||||||
| 23,958 | 20,323 | |||||||
| Equity | 31,623 | 31,444 | ||||||
| $ | 55,581 | $ | 51,767 | |||||
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 for the year to date follow:
| (Stated in millions) | |||||||||||
| Nine Months | 2011 | ||||||||||
| Net Debt, January 1, 2011 | $ | (2,638 | ) | ||||||||
| Income from continuing operations | 3,374 | ||||||||||
| Depreciation and amortization | 2,420 | ||||||||||
| Pension and other postretirement benefits expense | 274 | ||||||||||
| Excess of equity income over dividends received | (59 | ) | |||||||||
| Stock-based compensation expense | 203 | ||||||||||
| Increase in working capital | (2,438 | ) | |||||||||
| Capital expenditures | (2,763 | ) | |||||||||
| Multiclient seismic data capitalized | (206 | ) | |||||||||
| Dividends paid | (968 | ) | |||||||||
| Proceeds from employee stock plans | 426 | ||||||||||
| Stock repurchase program | (2,362 | ) | |||||||||
| Business acquisitions, net of cash and debt acquired | (571 | ) | |||||||||
| Pension and other postretirement benefits funding | (359 | ) | |||||||||
| Proceeds from divestiture of Global Connectivity Services business | 385 | ||||||||||
| Other | 246 | ||||||||||
| Currency effect on net debt | (128 | ) | |||||||||
| Net Debt, September 30, 2011 | $ | (5,164 | ) | ||||||||
| Components of Net Debt | Sept. 30, | Dec. 31, | |||||||||
| Cash and short-term investments | $ | 6,064 | $ | 4,990 | |||||||
| Fixed income investments, held to maturity | 255 | 484 | |||||||||
| Short-term borrowings and current portion of long-term debt | (2,743 | ) | (2,595 | ) | |||||||
| Long-term debt | (8,740 | ) | (5,517 | ) | |||||||
| $ | (5,164 | ) | $ | (2,638 | ) | ||||||
Charges and Credits
In addition to financial results determined in accordance with generally accepted accounting principles (GAAP), this Third-Quarter Earnings 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) | |||||||||||||||||||
| Third Quarter 2011 | |||||||||||||||||||
| Pretax | Tax | Noncont. | Net | Diluted | Income Statement Classification | ||||||||||||||
| Schlumberger income from continuing operations, | |||||||||||||||||||
| as reported | $ | 1,717 | $ | 410 | $ | 6 | $ | 1,301 | $ | 0.96 | |||||||||
| Merger and integration costs | 27 | 4 | - | 23 | 0.02 | Merger & integration | |||||||||||||
| Schlumberger income from continuing operations, | |||||||||||||||||||
| excluding charges & credits | $ | 1,744 | $ | 414 | $ | 6 | $ | 1,324 | $ | 0.98 | |||||||||
| Second Quarter 2011 | |||||||||||||||||||
| Pretax | Tax | Noncont. | Net | Diluted | Income Statement Classification | ||||||||||||||
| Schlumberger Income from continuing operations, | |||||||||||||||||||
| as reported | $ | 1,498 | $ | 374 | $ | 5 | $ | 1,119 | $ | 0.82 | |||||||||
| Merger and integration costs | 32 | 8 | - | 24 | 0.02 | Merger & integration | |||||||||||||
| Donation to Schlumberger Foundation | 50 | 10 | - | 40 | 0.03 | General & administrative | |||||||||||||
| Schlumberger income from continuing operations, | |||||||||||||||||||
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