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Main » 2019 » July » 25 » Schlumberger Announces Second-Quarter 2019 Results
*These are non-GAAP financial measures. See section titled "Charges & Credits" for details.
Schlumberger Chairman and CEO Paal Kibsgaard commented, “Second-quarter revenue of $8.3 billion increased 5% sequentially, driven by our international business that grew 8% and showed continued signs of a broad upturn in E&P investment and activity. International rig counts increased 6% sequentially and 5% year-over-year. In contrast, North America land revenue grew 1% sequentially while North America offshore revenue increased 10%.
“During the first half of 2019, excluding Cameron, international revenue increased 8% year-over-year while North America land revenue declined 12% year-over-year. These results reflect the normalization in global E&P spend that we were anticipating as international investment increases in response to the accelerating decline in the mature production base, and North America land investment decreases due to E&P operator cash flow constraints. Double-digit year-over-year growth during the first half of 2019 was posted in the Mexico & Central America, Latin America North, Sub-Sahara Africa, and Far East Asia & Australia GeoMarkets while high, single-digit growth was seen in the United Kingdom & Continental Europe, Eastern Middle East, and South & East Asia GeoMarkets. Our results, therefore, continue to match our expectations of high, single-digit growth across our international business in 2019.
“During the second quarter, sequential international growth was led by the Europe/CIS/Africa area, where revenue increased sequentially by 11% driven by activity that strengthened beyond the seasonal recovery in the Russia & Central Asia and United Kingdom & Continental Europe GeoMarkets. Sequential international growth was also driven by a 19% improvement in the Far East Asia & Australia GeoMarket and a 12% increase in the Latin America area while revenue in the Middle East region grew 3%.
“In North America land, despite the impact of the spring breakup in Canada, OneStim® activity was higher, which was offset by weak hydraulic fracturing pricing and a general decrease in drilling activity. Offshore North America revenue increased from stronger exploration-led activity driven mainly by WesternGeco®multiclient seismic license sales.
“By business segment, sequential growth in the second quarter was led by a 7% increase in revenue in Reservoir Characterization followed by a 6% increase in Production on higher international activity that exceeded the strength of the seasonal rebounds following winter in the Northern Hemisphere. The higher international activity benefited Wireline, WesternGeco, Well Services, Completions, Schlumberger Production Management (SPM), and Artificial Lift Solutions. Cameron revenue increased 5% sequentially from higher OneSubsea® and Surface Systems activity, primarily in the international markets. Drilling revenue increased 1% sequentially as international growth was partially offset by weakness in activity in North America land.
“From a macro perspective, we expect oil market sentiments to remain balanced. The oil demand forecast for 2019 has been reduced slightly on trade war fears and current global geopolitical tensions, but we do not anticipate a change in the structural demand outlook for the mid-term. On the supply side, we continue to see US shale oil as the only near- to medium-term source of global production growth, albeit at a slowing growth rate, as E&P operators continue to transition from an emphasis on growth to a focus on cash and returns, with consequent restraining effects on investment levels. These effects, combined with the decision by OPEC and Russia to extend production cuts through the first quarter of 2020, are likely to keep oil prices range bound around present levels. Although the markets are well supplied from production added by projects that were sanctioned before 2015, this added supply will begin to fall in 2020 and create risk for the future as the decline rates in many mature production basins become an increasingly significant challenge. In addition, while the number of new projects we expect to receive final investment decision (FID) approval in 2019 is likely to increase again for the fourth consecutive year, their size and number account for supply additions far below the required global annual production replacement rates. We therefore maintain our view that international E&P investment will grow 7% to 8% in 2019, further supported by the increase in international rig count. In contrast, spending in North America land is tracking our expectations of a 10% decline this year.
“The increasing international market investment and a reduction in North America land capex represent a positive market shift for Schlumberger and the welcome return of a very familiar opportunity set. With our unmatched global strength, our modernized execution platform, and our expanded technology portfolio now ready for broad digital implementation, we are well positioned to generate superior earnings growth, margin expansion, and free cash flow in the emerging international upcycle.”
Schlumberger announced today that its Board of Directors has appointed Olivier Le Peuch as its Chief Executive Officer, and member of the Schlumberger Board, effective August 1, 2019. Mr. Le Peuch succeeds Paal Kibsgaard, who will retire as Chief Executive Officer effective that same date. Also effective August 1, Mr. Kibsgaard will step down as Chairman of the Board and retire as a member of the Board of Directors. Mr. Kibsgaard will retire after more than 22 years of service to the Company, including eight years as CEO and four years as Chairman. Effective the same date, Mark G. Papa, a current non-independent director, will become non-executive Chairman of the Board. Peter Currie will continue to serve as the Board’s Lead Independent Director.
During the quarter, Schlumberger repurchased 2.5 million shares of its common stock at an average price of $40.12 per share, for a total purchase price of $101 million.
On April 28, 2019, Saudi Arabia’s Industrialization and Energy Services Company (TAQA) announced that Arabian Drilling Company (ADC)—a joint venture between TAQA and Schlumberger—agreed to acquire Schlumberger’s Middle East onshore drilling rigs business in Kuwait, Oman, Iraq, and Pakistan for $415 million. Schlumberger and TAQA formed the ADC joint venture in 1964, with Schlumberger owning 49% while TAQA owns 51%. The transaction is expected to close in the second half of 2019, subject to regulatory approvals and other customary closing conditions.
On May 14, 2019, Schlumberger and Wellbore Integrity Solutions (WIS), an affiliate of Rhône Capital, announced that they had entered into an agreement for WIS to acquire the Schlumberger businesses and associated assets of DRILCO, Thomas Tools, and Fishing & Remedial services. The transaction is valued at approximately $400 million and is expected to close by year-end 2019, subject to regulatory approvals and other customary closing conditions.
On July 17, 2019, Schlumberger’s Board of Directors approved a quarterly cash dividend of $0.50 per share of outstanding common stock, payable on October 11, 2019 to stockholders of record on September 4, 2019.
Schlumberger is the world’s leading provider of technology for reservoir characterization, drilling, production, and processing to the oil and gas industry. With product sales and services in more than 120 countries and employing approximately 100,000 people who represent over 140 nationalities, Schlumberger supplies the industry’s most comprehensive range of products and services, from exploration through production, and integrated pore-to-pipeline solutions that optimize hydrocarbon recovery to deliver reservoir performance.
Schlumberger Limited has executive offices in Paris, Houston, London, and The Hague, and reported revenues of $32.82 billion in 2018. For more information, visit www.slb.com.
*Mark of Schlumberger or Schlumberger companies.
Schlumberger will hold a conference call to discuss the earnings press release and business outlook on Friday, July 19, 2019. The call is scheduled to begin at 8:30 a.m. US Eastern Time. To access the call, which is open to the public, please contact the conference call operator at +1 (800) 288-8967 within North America, or +1 (612) 333-4911 outside 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 19, 2019 by dialing +1 (800) 475-6701 within North America, or +1 (320) 365-3844 outside North America, and providing the access code 468337. The conference call will be webcast simultaneously at www.slb.com/irwebcast on a listen-only basis. A replay of the webcast will also be available at the same web site until August 19, 2019.
This second-quarter 2019 earnings release, 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, including our transformation program; capital expenditures by Schlumberger and the oil and gas industry; the business strategies of Schlumberger’s customers; our effective tax rate; Schlumberger’s SPM projects, 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; foreign currency risk; pricing pressure; weather and seasonal factors; operational modifications, delays or cancellations; 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 2019 earnings release 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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