Schlumberger Limited (NYSE:SLB) today reported second-quarter 2012 revenue of $10.45 billion versus $9.92 billion in the first quarter of 2012, and $8.99 billion in the second quarter of 2011.
Income from continuing operations attributable to Schlumberger, excluding charges and credits, was $1.4 billion"”an increase of 8% sequentially and 20% year-on-year. Diluted earnings-per-share from continuing operations, excluding charges and credits, was $1.05 versus $0.96 in the previous quarter, and $0.86 in the second quarter of 2011.
Following Schlumberger´s previously announced sale of both the Wilson distribution business and its equity ownership interest in CE Franklin Ltd. (CE Franklin), the Distribution segment has been reclassified to discontinued operations. All prior periods have been restated accordingly.
Schlumberger recorded charges of $0.02 per share in the second quarter and $0.01 per share in the first quarter of 2012 and $0.05 per share in the second quarter of 2011.
Oilfield Services revenue of $10.45 billion was up 5% sequentially and increased 16% year-on-year. Pretax segment operating income of $2.1 billion was up 8% sequentially and increased 20% year-on-year.
Schlumberger CEO Paal Kibsgaard commented, "Solid activity growth and a consistent focus on execution led to results that continued to strengthen in the second quarter.
Internationally, sequential results were underpinned by activity growth both offshore and in key land markets. Latin America and Middle East & Asia Areas both progressed well, while Europe, CIS and Africa showed particular strength across the Area. In North America, the Canadian spring break-up and the weakness in the US land hydraulic fracturing market lowered results although this was tempered by robust performance in other land businesses and in the US Gulf of Mexico.
Service capacity tightened further during the quarter, particularly for seismic, wireline and drilling services. We continued to test pricing on smaller contracts and we were successful in securing work at pricing premiums in some cases due to the quality and consistency of our performance.
Schlumberger Production Management saw increased activity with the flawless startup on the Shushufindi field in Ecuador, and success in securing future work with the award of the Panuco block in Mexico in partnership with Petrofac.
The quarter saw several significant new technology introductions. These included the rollout of the groundbreaking WesternGeco IsoMetrix true 3D seismic acquisition and processing system, and the unique Drilling & Measurements fully sourceless NeoScope formation evaluation tool. In addition, the Mangrove stimulation design software that brings enhanced decision making to well completions was announced.
Against these results, the worsening of the Eurozone crisis and the disappointing numbers from China and the US led to downward revisions of GDP growth and oil demand. Together with inventory builds from higher OPEC production, these brought oil prices lower in spite of tight global spare oil capacity and potential production disruption due to geopolitical events. With the situation in the global economies remaining unsettled, the present climate of uncertainty is likely to remain for some time to come.
In the midst of such uncertainty, we are maintaining focus on what we can control, which is the planning and execution of our work. We are currently undertaking further initiatives to extend our leadership in execution and we believe that such actions, together with our international strength and our balanced portfolio in North America, should enable strong relative future performance."
Other Events:
- During the quarter, Schlumberger repurchased 7.5 million shares of its common stock at an average price of $66.30 for a total purchase price of $499 million.
- On May 31, 2012, Schlumberger announced the completion of the sale of its Wilson distribution business to National Oilwell Varco, Inc. (NOV) for $906 million. Additionally, on July 19, 2012, Schlumberger divested the remaining portion of its distribution business to NOV by selling its 56% equity ownership interest in CE Franklin for approximately $122 million.
- During the quarter, Schlumberger completed the previously announced acquisition of SPT Group"â€a privately owned software company based in Norway specializing in dynamic modeling for the oil and gas industry.
- During the quarter, Schlumberger also acquired, or agreed to acquire, the following business interests:
- GEDCO, a Calgary-based provider of geophysical survey design software and services. GEDCO offers consulting services for integrated seismic solutions from design through interpretation.
- The CASING DRILLING TM division of Tesco Corporation. Schlumberger and Tesco also entered a long-term agreement in which Tesco will provide Casing Drive System equipment to support CASING DRILLING projects.
- The remaining shares of Radius Service, after having been the minority shareholder for the past seven years. Radius Service is the market leader in the engineering, manufacturing and service of downhole motors and drilling tools for the Russian land market. The company employs approximately 1,000 people and operates in all major oil and gas producing regions of Russia.
- A 20% minority share in Anton Oilfield Services Group, a leading independent oilfield services provider in China. This extends a strategic cooperation agreement that began in 2010 in drilling fluids and well-cementing services. This transaction is expected to be completed in the third quarter of 2012.
- An ownership interest in the Liquid Robotics Oil & Gas joint venture to integrate and deploy new services for the oil and gas industry using Liquid Robotics Wave Glider® wave-powered, autonomous marine vehicles.
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| Condensed Consolidated Statement of Income | ||||||||||||||||||||||
| Â | Â | Â | Â | Â | Â | Â | Â | Â | Â | Â | Â | Â | Â | Â | Â | Â | Â | Â | ||||
| (Stated in millions, except per share amounts) | ||||||||||||||||||||||
| Â | Â | Â | Â | Â | Â | Â | Â | Â | Â | Â | Â | Â | Â | Â | Â | Â | Â | Â | ||||
| Â | Â | Â | Â | Â | Â | Second Quarter | Â | Â | Â | Six Months | ||||||||||||
| Periods Ended June 30 | Â | Â | Â | Â | Â | 2012 | Â | Â | Â | 2011 | Â | Â | Â | 2012 | Â | Â | Â | 2011 | ||||
| Â | Â | Â | Â | Â | Â | Â | Â | Â | Â | Â | Â | Â | Â | Â | Â | Â | Â | Â | ||||
| Revenue | Â | Â | Â | Â | Â | $ | 10,448 | Â | Â | Â | $ | 8,990 | Â | Â | Â | $ | 20,366 | Â | Â | Â | $ | 17,112 |
| Interest and other income, net (1) | Â | Â | Â | Â | Â | Â | 45 | Â | Â | Â | Â | 29 | Â | Â | Â | Â | 92 | Â | Â | Â | Â | 61 |
| Expenses | Â | Â | Â | Â | Â | Â | Â | Â | Â | Â | Â | Â | Â | Â | Â | Â | Â | Â | ||||
| Cost of revenue | Â | Â | Â | Â | Â | Â | 8,162 | Â | Â | Â | Â | 7,024 | Â | Â | Â | Â | 15,973 | Â | Â | Â | Â | 13,508 |
| Research & engineering | Â | Â | Â | Â | Â | Â | 291 | 281 | 566 | 535 | ||||||||||||
| General & administrative(2) | 101 | 139 | 199 | 231 | ||||||||||||||||||
| Merger & integration(2) | 22 | 31 | 37 | 65 | ||||||||||||||||||
| Interest | 78 | 69 | 158 | 142 | ||||||||||||||||||
| Income before taxes | 1,839 | 1,475 | 3,525 | 2,692 | ||||||||||||||||||
| Taxes on income(2) | 445 | 366 | 845 | 653 | ||||||||||||||||||
| Income from continuing operations | 1,394 | 1,109 | 2,680 | 2,039 | ||||||||||||||||||
| Income from discontinued operations | 21 | 233 | 40 | 245 | ||||||||||||||||||
| Net income | 1,415 | 1,342 | 2,720 | 2,284 | ||||||||||||||||||
| Net income attributable to noncontrolling interests | 12 | 3 | 17 | 1 | ||||||||||||||||||
| Net income attributable to Schlumberger | $ | 1,403 | $ | 1,339 | $ | 2,703 | $ | 2,283 | ||||||||||||||
| Schlumberger amounts attributable to: | ||||||||||||||||||||||
| Income from continuing operations(2) | $ | 1,382 | $ | 1,106 | $ | 2,663 | $ | 2,038 | ||||||||||||||
| Income from discontinued operations | 21 | 233 | 40 | 245 | ||||||||||||||||||
| Net income | $ | 1,403 | $ | 1,339 | $ | 2,703 | $ | 2,283 | ||||||||||||||
| Diluted earnings per share of Schlumberger | ||||||||||||||||||||||
| Income from continuing operations(2) | $ | 1.03 | $ | 0.81 | $ | 1.99 | $ | 1.49 | ||||||||||||||
| Income from discontinued operations | 0.02 | 0.17 | 0.03 | 0.18 | ||||||||||||||||||
| Net income | $ | 1.05 | $ | 0.98 | $ | 2.02 | $ | 1.67 | ||||||||||||||
| Average shares outstanding | 1,331 | 1,352 | 1,333 | 1,356 | ||||||||||||||||||
| Average shares outstanding assuming dilution | 1,339 | 1,366 | 1,341 | 1,370 | ||||||||||||||||||
| Depreciation & amortization included in expenses(3) | $ | 854 | $ | 804 | $ | 1,706 | $ | 1,590 | ||||||||||||||
| 1) | Includes interest income of: | |||||||
| Second quarter 2012 - $6 million (2011 - $10 million) | ||||||||
| Six months 2012 - $16 million (2011 - $19 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) | |||||||||||
| Jun. 30, | Dec. 31, | ||||||||||
| Assets | 2012 | 2011 | |||||||||
| Current Assets | |||||||||||
| Cash and short-term investments | $ | 3,493 | $ | 4,827 | |||||||
| Receivables | 10,802 | 9,500 | |||||||||
| Other current assets | 6,745 | 6,212 | |||||||||
| 21,040 | 20,539 | ||||||||||
| Fixed income investments, held to maturity | 261 | 256 | |||||||||
| Fixed assets | 13,689 | 12,993 | |||||||||
| Multiclient seismic data | 478 | 425 | |||||||||
| Goodwill | 14,540 | 14,154 | |||||||||
| Other intangible assets | 4,980 | 4,882 | |||||||||
| Other assets | 2,025 | 1,952 | |||||||||
| $ | 57,013 | $ | 55,201 | ||||||||
| Liabilities and Equity | |||||||||||
| Current Liabilities | |||||||||||
| Accounts payable and accrued liabilities | $ | 7,422 | $ | 7,579 | |||||||
| Estimated liability for taxes on income | 1,214 | 1,245 | |||||||||
| Short-term borrowings and current portion | |||||||||||
| of long-term debt | 2,521 | 1,377 | |||||||||
| Dividend payable | 369 | 337 | |||||||||
| 11,526 | 10,538 | ||||||||||
| Long-term debt | 7,953 | 8,556 | |||||||||
| Postretirement benefits | 1,490 | 1,732 | |||||||||
| Deferred taxes | 1,800 | 1,731 | |||||||||
| Other liabilities | 1,277 | 1,252 | |||||||||
| 24,046 | 23,809 | ||||||||||
| Equity | 32,967 | 31,392 | |||||||||
| $ | 57,013 | $ | 55,201 | ||||||||
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) | |||||||||||||
| Six Months | 2012 | ||||||||||||
| Net Debt, January 1, 2012 | $ | (4,850 | ) | ||||||||||
| Income from continuing operations | 2,680 | ||||||||||||
| Depreciation and amortization | 1,706 | ||||||||||||
| Pension and other postretirement benefits expense | 193 | ||||||||||||
| Excess of equity income over dividends received | (77 | ) | |||||||||||
| Stock-based compensation expense | 167 | ||||||||||||
| Pension and other postretirement benefits funding | (338 | ) | |||||||||||
| Increase in working capital | (2,720 | ) | |||||||||||
| Capital expenditures | (2,081 | ) | |||||||||||
| Multiclient seismic data capitalized | (183 | ) | |||||||||||
| Dividends paid | (701 | ) | |||||||||||
| Proceeds from employee stock plans | 232 | ||||||||||||
| Stock repurchase program | (823 | ) | |||||||||||
| Business acquisitions, net of cash and debt acquired | (682 | ) | |||||||||||
| Proceeds from the sale of Wilson | 906 | ||||||||||||
| Other | (309 | ) | |||||||||||
| Currency effect on net debt | 160 | ||||||||||||
| Net Debt, June 30, 2012 | $ | (6,720 | ) | ||||||||||
| Components of Net Debt | Jun. 30, | Dec. 31, | |||||||||||
| Cash and short-term investments | $ | 3,493 | $ | 4,827 | |||||||||
| Fixed income investments, held to maturity | 261 | 256 | |||||||||||
| Short-term borrowings and current portion of long-term debt | (2,521 | ) | (1,377 | ) | |||||||||
| Long-term debt | (7,953 | ) | (8,556 | ) | |||||||||
| $ | (6,720 | ) | $ | (4,850 | ) | ||||||||
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) | |||||||||||||||||||
| Second Quarter 2012 | |||||||||||||||||||
| Pretax | Tax | Noncont. | Net | Diluted | Income Statement Classification | ||||||||||||||
| Schlumberger income from continuing operations, | |||||||||||||||||||
| as reported | $ | 1,839 | $ | 445 | $ | 12 | $ | 1,382 |
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