HOUSTON -Thursday, October 26th 2017 [ AETOS Wire ]
Revenue of $7.9 billion increased 6% sequentially
Pretax operating income of $1.1 billion increased 11% sequentially
GAAP EPS, including Cameron integration-related charges of $0.03 per share, was $0.39
EPS, excluding Cameron integration-related charges, was $0.42
Cash flow from operations was $1.9 billion; free cash flow was $1.1 billion
(BUSINESS WIRE)--Schlumberger Limited (NYSE:SLB) today reported results for the third quarter of 2017.
(Stated in millions, except per share amounts)
Three Months Ended Change
Sept. 30, 2017 Jun. 30, 2017 Sept. 30, 2016 Sequential Year-on-year
Revenue $7,905 $7,462 $7,019 6% 13%
Pretax operating income $1,059 $950 $815 11% 30%
Pretax operating margin 13.4 % 12.7 % 11.6 % 66 bps 178 bps
Net income (loss) (GAAP basis)
$545 $(74 ) $176 n/m 209%
Net income, excluding charges & credits* $581 $488 $353 19% 65%
Diluted EPS (loss per share) (GAAP basis)
$0.39 $(0.05 ) $0.13 n/m 200%
Diluted EPS, excluding charges and credits*
$0.42 $0.35 $0.25 20% 68%
*These are non-GAAP financial measures. See section below entitled "Charges & Credits" for details.
n/m = not meaningful
Schlumberger Chairman and CEO Paal Kibsgaard commented, “Our third-quarter revenue increased 6% sequentially while pretax operating income rose by 11%, resulting in EPS, excluding Cameron integration charges, of $0.42, which was 20% higher than the second quarter.
“Activity growth in the third quarter was again led by our North America Land GeoMarket, where we continued to gain market share in both hydraulic fracturing and drilling services despite the decelerating rig count growth. We also saw strong sequential activity growth in Russia, the North Sea, and Asia, while our activity in the rest of the world was largely flat compared with the second quarter.
“From a technology standpoint, revenue growth was driven by the Production Group, which increased 15% sequentially from continued share gains in the hydraulic fracturing market in North America land as well as from increased unconventional resources project activity in the Middle East. Reservoir Characterization Group revenue increased 1% as strong Wireline activity in Russia and the North Sea was partly offset by lower exploration-related activity for WesternGeco. Cameron Group revenue increased 3% driven by higher product sales for Surface Systems in North America land. Drilling Group revenue grew 1% as we remained sold out on PowerDrive Orbit* technology in North America land and completed key Integrated Drilling Services (IDS) projects in Mexico and Iraq that will not resume until early 2018.
“Geographically, North America revenue increased 18% as we continued the high redeployment rate of our spare hydraulic fracturing capacity. North America land revenue grew 23% sequentially, significantly outpacing the 12% increase in rig count, with hydraulic fracturing revenue growing 42%. Over the past six months, we have more than doubled the number of active fracturing fleets in North America land and have now redeployed almost all available capacity. This generated transitory costs and inefficiencies across field operations and in our distribution network, which will be addressed during the fourth quarter. In the US Gulf of Mexico, activity continued to weaken in the third quarter, and the outlook remains bleak for this region based on current customer plans.
“In the international markets, revenue was essentially flat with the second quarter, with Europe/CIS/Africa growing 5% due to strong summer activity in the Russia & Central Asia, United Kingdom & Continental Europe, and Norway & Denmark GeoMarkets. Middle East & Asia revenue was flat sequentially as the growth contributed by the Saudi Arabia & Bahrain, Far East & Australia, and South & East Asia GeoMarkets was offset by a decline in Iraq following the completion of an IDS project. Latin America revenue declined 8% driven by lower multiclient seismic license sales and the completion of IDS projects in the Mexico & Central America GeoMarket.
“Looking at the industry macro, the reduction in global oil inventories in the third quarter is clearly showing that the oil market is now in balance, which is reflected in the upward movement in oil prices over the past month. This view is supported by the following positive signs. First, the investment appetite in North America land now seems to be moderating, driven by a growing focus from E&P companies on financial return and the need to operate within cash flow rather than the pursuit of production growth. Second, comments from several of the key OPEC Gulf countries, as well as from Russia, suggest that an extension of the existing production cuts beyond the current nine-month agreement is a possibility. And third, investment levels in the production base outside North America land, OPEC Gulf, and Russia all remain at unprecedented low levels, raising the likelihood of a medium-term global supply challenge, and increasing the urgency for higher investment.
“A continuation of these market trends, combined with further steady draws in global oil inventories is now creating the required foundation for further upward movement in oil prices and subsequent growth in global E&P investment. And while there is still some level of uncertainty around the exact timing of this industry recovery, we see a number of market factors and data points now emerging that make us increasingly positive and optimistic about the outlook for our global business. It is also worth noting that the geopolitical risk premium on the oil price, which was quite significant in the past, has been replaced in many ways today by an oversupply discount. Given the visible tightening of the supply and demand balance and the current geopolitical tensions in many of the world’s key oil producing regions, a geopolitical risk premium may again become a significant factor.
“Based on this operational and macro backdrop, we continue to focus on serving our customers and implementing our quality and efficiency plans while remaining opportunistic with respect to making further strategic investments. We will continue to position Schlumberger at the forefront of the industry as the global activity upturn slowly but surely emerges. Finally, I would like to thank the 600-plus delegates from over 200 E&P companies and industry bodies from more than 60 countries who attended the SIS Global Forum in Paris in September. The interest and support for the new ways of working shown at the Forum confirmed that the industry is beginning to leverage greater collaboration and digital enablement to improve efficiency and lower cost per barrel.”
During the quarter, Schlumberger repurchased 1.5 million shares of its common stock at an average price of $66.04 per share for a total purchase price of $98 million.
On August 22, 2017, Schlumberger acquired the Petrofac interest in Petro-SPM Integrated Services S.A. de C.V. (Petro-SPM), which operates the Pánuco Integrated Service Contract in Mexico. As a result, Schlumberger now owns 100% of Petro-SPM.
On October 6, 2017, Schlumberger and Borr Drilling signed an enhanced collaboration agreement to offer integrated, performance-based drilling contracts in the offshore jackup market by leveraging the Schlumberger global footprint, infrastructure, and technical expertise combined with Borr Drilling’s modern jackup fleet.
On October 18, 2017, the Company’s Board of Directors approved a quarterly cash dividend of $0.50 per share of outstanding common stock, payable on January 12, 2018 to stockholders of record on December 6, 2017.
On October 19, 2017, Schlumberger Production Management (SPM) and Torxen Energy, a private Canadian E&P company, entered into an agreement to purchase the Palliser Block asset located in Alberta, Canada, from Cenovus Energy, an integrated Canadian oil company, for cash consideration of approximately $1 billion (CAD 1.30 billion). The Palliser Block consists of oil and gas wells, surface facilities, a pipeline network, and approximately 800,000 acres of oil and gas development rights. The Palliser Block borders the acreage awarded to the SPM and Torxen joint venture established earlier this year. Under the agreement, which is subject to customary closing conditions, Schlumberger will be the majority nonoperating owner, with the rights to exclusive service provision and Torxen will be the operator.
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