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Schlumberger Announces Second-Quarter 2013 Results

Stock quotes in this article: SLB

New technology deployment was strong in the quarter with growing customer interest in new formation evaluation, drillbit and well intervention products and services. The OneSubsea™ joint venture was completed with Cameron, and we look forward to the opportunities for the best-in-class new subsea technologies and solutions that we expect this new organization to provide. Elsewhere, our growing integration capability has led to organizational changes that combine our leading project and production management businesses to fuel growth through joint expertise and portfolio alignment.

The soft global economic picture has changed little since the first quarter. The U.S. has shown virtually no impact from the financial sequester, the Eurozone remains in recession, and data from China continue to be mixed. Given the lack of change, supply and demand for both oil and natural gas remain stable, which is also reflected in oil and gas prices. E&P spending, however, has been revised upwards making this year the fourth consecutive year of double-digit spending increases and pointing to the long-term nature of oil and gas developments.

As a result, we continue to see consistent growth as spending plans are confirmed by rig count outlooks and customer activity. We remain confident in the industry outlook, our strategic positioning in the markets in which we operate, the strength of our technology portfolio and in our ability to further improve our overall performance.”

Other Events

  • During the quarter, Schlumberger repurchased 6.8 million shares of its common stock at an average price of $73.07 for a total purchase price of $500 million. This repurchase substantially completed the share repurchase program of $8 billion approved by the Board of Directors in April 2008. As of June 30, 2013, Schlumberger had repurchased over 105 million shares of common stock under the program for a total purchase price of $7.8 billion. The remaining balance of $187 million will be exhausted in the third quarter of 2013. On July 18, 2013, the Board of Directors approved a new share repurchase program of $10 billion to be completed at the latest by June 30, 2018.
  • On June 24, 2013, Cameron and Schlumberger announced that OneSubsea™, a joint venture to manufacture and develop products, systems and services for the subsea oil and gas market, had received all required regulatory approvals. The parties closed the transaction on June 30, 2013. Schlumberger recognized a $1.03 billion gain as a result of this transaction.

Oilfield Services

Second-quarter revenue of $11.18 billion was up 6% sequentially and increased 8% year-on-year, with International Area revenue of $7.70 billion growing $543 million, or 8% sequentially, while North America Area revenue of $3.36 billion increased $67 million, or 2% sequentially.

By segment, Reservoir Characterization Group revenue of $3.01 billion grew 10% sequentially while Drilling Group revenue of $4.29 billion increased 4%. These increases were due to seasonal rebounds, market share gains and higher exploration activity in both offshore and key international land markets, particularly for Wireline technologies. Other Technologies that gained significantly during the quarter were led by WesternGeco, Schlumberger Information Solutions (SIS), Drilling & Measurements and M-I SWACO. Despite the seasonal decline in Western Canada as a result of the spring break-up, the Production Group posted a sequential increase of 4%. Improving industry utilization of pressure pumping capacity in US land, increasing Well Intervention coiled tubing activity worldwide, and strong international sales of Completions products contributed to growth.

Geographically, the Middle East & Asia Area led the sequential increase with revenue of $2.7 billion increasing 11%, mainly from a seasonal rebound of exploration and drilling activity in China and Japan, higher WesternGeco UniQ* land seismic productivity across the region, and continued growth across a diversified portfolio of projects and activities in Saudi Arabia and Iraq. Improved WesternGeco marine vessel utilization and robust drilling activity in the Australasia GeoMarket also contributed to growth. Europe/CIS/Africa revenue of $3.1 billion increased 10% from higher WesternGeco multiclient sales ahead of licensing awards in Norway, and the seasonal pick-up of drilling and exploration activity in Russia and the North Sea. Sub-Saharan Africa revenue also grew sequentially through increased exploration activity in the Gulf of Guinea while activity in Angola was subdued due to project delays. Latin America revenue of $1.9 billion grew slightly as the effect of strong Integrated Project Management (IPM) activity in Argentina was largely offset by a decline in WesternGeco marine utilization following the planned transit of vessels out of Brazil. North America revenue of $3.36 billion increased 2%—with North America offshore revenue up due to robust Wireline deepwater activity and WesternGeco. US land posted double-digit growth, but this was offset by the seasonal decline in Western Canada following the spring break-up. While US land rig count grew only marginally, well and stage counts increased through drilling efficiency resulting in improved industry utilization of pressure pumping capacity.

Second-quarter pretax operating income of $2.28 billion was up 16% sequentially, and increased 12% year-on-year. International pretax operating income of $1.69 billion increased 18% sequentially, while North America pretax operating income of $662 million increased 6% sequentially.

Sequentially, pretax operating margin of 20.4% increased 178 basis points (bps), as International pretax operating margin expanded 202 bps to 22.0% Middle East & Asia posted a 178-bps sequential margin improvement to reach 24.6%, Europe/CIS/Africa increased by 275 bps to 20.6%, and Latin America improved by 107 bps to 20.6%. The expansion in International margins was due to seasonal activity rebounds combined with strong results in Sub-Saharan Africa and the Middle East & Asia Area. Increased high-margin exploration, seismic and deepwater activities also helped boost international margins. Despite the effect of the seasonal spring break-up in Western Canada, North America pretax operating margin increased 65 bps sequentially to 19.7%. US land margin expanded on improving efficiency, better utilization and lower raw material costs in pressure pumping, while North America offshore margin increased due to robust Wireline deepwater activity and WesternGeco.

Sequentially by segment, Reservoir Characterization Group pretax operating margin expanded 380 bps to 30.1% due to the strong WesternGeco and Wireline results. The pretax operating margin of the Drilling Group increased 97 bps to 18.7% through improved Drilling & Measurements performance and increased profitability on IPM projects in the Middle East and Latin America. Production Group pretax operating margin increased 116 bps to 15.9% on improved profitability in Well Services as pressure pumping utilization and efficiency improved in US land.

A number of technology innovation and integration highlights contributed to second-quarter results.

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