• Worldwide revenue of $5.3 billion decreased 2% sequentially
• International revenue of $4.1 billion decreased 1% sequentially
• North America revenue of $1.2 billion decreased 2% sequentially
• GAAP loss per share, including charges and credits of $0.22 per share, was $0.06
• EPS, excluding charges and credits, was $0.16
• Cash flow from operations was $479 million and free cash flow was $226 million
• Board approved quarterly cash dividend of $0.125 per share
HOUSTON-Wednesday 21 October 2020 [ AETOS Wire ]
(BUSINESS WIRE) -- Schlumberger Limited (NYSE: SLB) today reported results for the third quarter of 2020.
Third-Quarter Results
(Stated in millions, except per share amounts)
Three Months Ended
Change
Sept. 30, 2020
Jun. 30, 2020
Sept. 30, 2019
Sequential
Year-on-year
Revenue
$5,258
$5,356
$8,541
-2%
-38%
Income (loss) before taxes - GAAP basis
$(54)
$(3,627)
$(11,971)
n/m
n/m
Adjusted EBITDA*
$1,018
$838
$1,773
21%
-43%
Adjusted EBITDA margin*
19.4%
15.6%
20.8%
371 bps
-140 bps
Pretax segment operating income*
$575
$396
$1,096
45%
-48%
Pretax segment operating margin*
10.9%
7.4%
12.8%
355 bps
-190 bps
Net income (loss) - GAAP basis
$(82)
$(3,434)
$(11,383)
n/m
n/m
Net income, excluding charges & credits*
$228
$69
$596
231%
-62%
Diluted EPS (loss per share) - GAAP basis
$(0.06)
$(2.47)
$(8.22)
n/m
n/m
Diluted EPS, excluding charges & credits*
$0.16
$0.05
$0.43
220%
-63%
North America revenue
$1,157
$1,183
$2,850
-2%
-59%
International revenue
$4,091
$4,138
$5,629
-1%
-27%
*These are non-GAAP financial measures. See sections titled "Charges & Credits", "Segments", and "Supplemental Information" for details.
n/m = not meaningful
Schlumberger CEO Olivier Le Peuch commented, “Our results in the third quarter clearly demonstrate our focus on execution, returns, and customer performance. Margins expanded sequentially while pretax segment operating income and adjusted EBITDA grew 45% and 21%, respectively, highlighting notable progress in the reset of our earnings power and further demonstrating our execution capabilities as we transition to our new organization.
“Through this cycle, we are leading technology innovation for our customers and reinventing ourselves to deliver a return above our cost of capital through the combination of capital stewardship, margin expansion, and free cash flow generation.
“In North America, we have exhibited capital discipline, and are high-grading and rationalizing our portfolio, with a focus on reduced volatility of earnings and less capital-intensive businesses as demonstrated by two key milestones we achieved during the quarter. The first is the agreement to combine our OneStim® pressure pumping business with Liberty Oilfield Services Inc. The second is an agreement to divest our low-flow artificial lift business in a cash transaction.
“Internationally, our fit-for-basin approach continues to extend our leadership position built on the largest and most diverse footprint in the industry. Despite the rig count decline during the quarter, we have experienced significant new technology uptake, achieved new performance benchmarks for our customers, and captured higher performance incentives on multiple projects. In addition, our international business continues to generate resilient, accretive margins and significant free cash flow. Upon the close of the two North America transactions, we expect our international revenue to represent more than 80% of consolidated revenue, up from an average of approximately 65% over the past decade. The combination of our fit-for-basin strategy, digital technology innovation, and scale puts us in the best position to leverage the anticipated shift of spending growth toward the international market.
“Third-quarter revenue declined 2% sequentially, as North America revenue was 2% lower and international revenue declined 1%. In North America land, increased completions activity on drilled but uncompleted (DUC) wells was offset by reduced drilling in US land. North America offshore was affected by reduced rig activity, lower multiclient seismic license sales, and hurricane disruption.
“International revenue was driven by higher activity in Latin America, boosted by the resumption of production in our Asset Performance Solutions (APS) projects in Ecuador and increased seasonal summer activity in the North Sea and Russia. These increases were offset by the effects of rig count declines and extended COVID-19 disruptions in Africa and in the Middle East & Asia.
Third-Quarter Revenue by Segment
(Stated in millions)
Three Months Ended
Change
Sept. 30, 2020
Jun. 30, 2020
Sept. 30, 2019
Sequential
Year-on-year
Reservoir Characterization
$1,010
$1,052
$1,651
-4%
-39%
Drilling
1,519
1,731
2,469
-12%
-38%
Production
1,801
1,615
3,153
12%
-43%
Cameron
965
1,015
1,363
-5%
-29%
Other
(37)
(57)
(95)
n/m
n/m
$5,258
$5,356
$8,541
-2%
-38%
n/m = not meaningful
Certain prior period amounts have been reclassified to conform to the current period presentation.
“Sequentially, by business segment, third-quarter Production revenue increased 12%, driven by the gradual recovery in DUC well completions activity in US land and the resumption of APS production in Ecuador, which was further boosted by digital technology, improving project performance and efficiency. Reservoir Characterization, Drilling, and Cameron decreased 4%, 12%, and 5%, respectively, due to lower WesternGeco® multiclient seismic license sales, the US land drilling activity decline, hurricane disruption in the US Gulf of Mexico, and persistent COVID-19 disruptions internationally.
“Our cost-reduction program, which will permanently remove $1.5 billion of structural costs on an annual basis, is progressing well. We expect to realize the vast majority of these savings as we exit this year. This represents a critical step toward our intermediate goal of restoring 2019 adjusted EBITDA margins before the end of 2021.
“I am extremely proud of our operational and financial performance during the quarter, as we continue to build the foundation of our future success.
“As we look to the fourth quarter, we expect to continue to benefit from the effectiveness of our strategy, disciplined approach to North America, and broad strength of our international business, as reflected in our third-quarter results. In North America, the conditions are set for continued momentum, with improving DUC well completion activity in US land and a modest drilling resumption in the US and Canada. International activity is steady following the budget resets completed in the third quarter and activity will be affected by the seasonal decline in the Northern Hemisphere, partly offset by muted year-end product and multiclient license sales.
“Overall internationally, we view the next two quarters as a period of transition for our industry at the trough of this cycle. Improving demand recovery supported by various government measures to stimulate economic activity and continued supply discipline from the major producers set the conditions for a long-term activity rebound. However, while the global lockdowns are evolving and vaccine development is progressing, the near-term recovery remains fragile owing to potential subsequent waves of COVID-19 that could pose a significant risk to this outlook.
“Therefore, in this flattening near-term activity outlook, we will continue to execute on a path toward restoring our 2019 adjusted EBITDA margins and generating robust free cash flow—through our restructuring measures, the high-grading of our portfolio, and the further strengthening of our broad international portfolio.
“As our industry emerges from this trough, the ability to deliver new performance benchmarks—to innovate and collaborate in every basin—will define success for the coming decades. Schlumberger will lead this innovation and the path to recovery. Our performance and returns-focused strategy will allow us to capitalize upon the emerging growth cycle and deliver industry-leading returns, through our capital stewardship, fit-for-basin technology, digital leadership, and a unique talent pool supporting our global execution. In addition, we are accelerating the expansion of our New Energy portfolio as we develop avenues to contribute to the sustainable energy mix of the future, leveraging our technology, expertise, and execution platform to reduce our environmental impacts while helping our customers reach their environmental goals.
“The crisis has served as a catalyst for reinventing Schlumberger. We are executing our performance strategy and are determined to continue taking bold actions to secure resilience and reposition ourselves as clear leaders—both in performance measured by our customers and in returns measured by our shareholders.”
Other Events
During the third quarter, Schlumberger issued $500 million of 1.400% Senior Notes due 2025 and $350 million of 2.650% Senior Notes due 2030.
On August 31, 2020, Schlumberger and Liberty Oilfield Services Inc. (Liberty) signed an agreement for the contribution to Liberty of OneStim, Schlumberger’s onshore hydraulic fracturing business in the United States and Canada, including its pressure pumping, pumpdown perforating, and Permian frac sand businesses, in exchange for a 37% equity interest in Liberty. The transaction is expected to close in the fourth quarter of 2020 and is subject to Liberty stockholder approval and other customary closing conditions.
On October 15, 2020, Schlumberger’s Board of Directors approved a quarterly cash dividend of $0.125 per share of outstanding common stock, payable on January 14, 2021 to stockholders of record on December 2, 2020.
Consolidated Revenue by Area
(Stated in millions)
Three Months Ended
Change
Sept. 30, 2020
Jun. 30, 2020
Sept. 30, 2019
Sequential
Year-on-year
North America
$1,157
$1,183
$2,850
-2%
-59%
Latin America
707
543
1,014
30%
-30%
Europe/CIS/Africa
1,397
1,449
2,062
-4%
-32%
Middle East & Asia
1,987
2,146
2,553
-7%
-22%
Other
10
35
62
n/m
n/m
$5,258
$5,356
$8,541
-2%
-38%
North America revenue
$1,157
$1,183
$2,850
-2%
-59%
International revenue
$4,091
$4,138
$5,629
-1%
-27%
n/m = not meaningful
Certain prior period amounts have been reclassified to conform to the current period presentation.
North America
North America area consolidated revenue of $1.2 billion was 2% lower sequentially. On land, an uptick in DUC well completions was partially offset by reduced drilling activity. OneStim fracturing revenue grew on higher fleet utilization driven by a US-market stage count increase of more than 30% as customers worked on their DUCs in the Permian and in the resilient gas basins in the Haynesville. Land drilling activity was lower as the average US land rig count declined 29% sequentially, though the rig count had increased slightly by quarter end. In addition, sales in Surface Systems and Valves & Process Systems, mainly on land, decreased sequentially due to reduced drilling activity. North America offshore revenue decreased 13% sequentially due to the combination of reduced rig count, lower WesternGeco multiclient seismic license sales, and hurricane disruption.
International
Consolidated revenue in the Latin America area of $707 million increased 30% sequentially, primarily due to the resumption of production in our APS projects in Ecuador. Argentina revenue increased as activity rebounded following the easing of COVID-19 lockdown restrictions while revenue in both Mexico and Brazil declined.
Europe/CIS/Africa area consolidated revenue of $1.4 billion decreased 4% sequentially as increased seasonal summer activity in the North Sea and Russia was offset by rig count declines and extended COVID-19 disruptions in Africa and the Caspian region. Resilient activity in Russia and the North Sea was driven by summer drilling and pressure pumping activity campaigns, partially offset by disruptions and delays in Kazakhstan and in Sakhalin. The seasonal activity increase in the Northern Hemisphere, however, was offset by a significant drop in activity in Sub-Sahara Africa from COVID-19 disruptions, reduced rig count, and project delays.
Consolidated revenue in the Middle East & Asia area of $2.0 billion decreased 7% sequentially, primarily due to extended COVID-19 disruptions and project delays in Asia and as customers reduced spending and activity due to budget adjustments, particularly in the Middle East.
Reservoir Characterization
(Stated in millions)
Three Months Ended
Change
Sept. 30, 2020
Jun. 30, 2020
Sept. 30, 2019
Sequential
Year-on-year
Revenue
$1,010
$1,052
$1,651
-4%
-39%
Pretax operating income
$169
$185
$360
-9%
-53%
Pretax operating margin
16.7%
17.6%
21.8%
-90 bps
-512 bps
Certain prior period amounts have been reclassified to conform to the current period presentation.
Reservoir Characterization revenue of $1.0 billion, 85% of which came from the international markets, decreased 4% sequentially. North America and international revenues declined 14% and 2%, respectively. This was mainly due to lower WesternGeco multiclient seismic license sales in North America offshore. Revenue was also lower in the Middle East due to reduced WesternGeco activity as a result of a completed project and lower Testing Services activity due to project cancellations and delays. Sequentially, Wireline activity was essentially flat while Software Integrated Solutions (SIS) revenue was higher.
Reservoir Characterization pretax operating margin of 17% contracted 90 basis points (bps) sequentially due to lower sales of WesternGeco multiclient seismic licenses, which impacted North America margin, while international margin was flat sequentially.
Drilling
(Stated in millions)
Three Months Ended
Change
Sept. 30, 2020
Jun. 30, 2020
Sept. 30, 2019
Sequential
Year-on-year
Revenue
$1,519
$1,731
$2,469
-12%
-38%
Pretax operating income
$144
$165
$306
-13%
-53%
Pretax operating margin
9.5%
9.6%
12.4%
-9 bps
-292 bps
Drilling revenue of $1.5 billion, 83% of which came from the international markets, decreased 12% sequentially. North America and international revenues declined 16% and 11%, respectively. The revenue decline in North America was primarily due to lower activity in US land as rig count dropped 29%, along with rig count reductions and activity disruptions in the US Gulf of Mexico due to a more active hurricane season. In addition, extended COVID-19 disruptions caused drilling activities to be suspended or deferred in several international GeoMarkets.
Sequentially, Drilling pretax operating margin of 10% was essentially flat, despite the significant revenue decline. Margin was resilient both in North America and internationally supported by prompt cost reduction measures.
Production
(Stated in millions)
Three Months Ended
Change
Sept. 30, 2020
Jun. 30, 2020
Sept. 30, 2019
Sequential
Year-on-year
Revenue
$1,801
$1,615
$3,153
12%
-43%
Pretax operating income
$227
$25
$288
816%
-21%
Pretax operating margin
12.6%
1.5%
9.1%
1,107 bps
347 bps
Production revenue of $1.8 billion, 74% of which came from the international markets, increased 12% sequentially. North America and international revenues increased 13% and 11%, respectively. This was driven primarily by the gradual recovery in DUC well completions activity in US land and the resumption of APS production in Ecuador, which was further boosted by digital technology, improving project performance and efficiency. OneStim revenue grew more than 50% sequentially as US-market stage counts increased by more than 30%. Artificial Lift Solutions revenue increased, also benefitting from the US land recovery. These increases were offset by international declines in Well Services and Completions revenue, resulting from lower spending and activity due to customer budget adjustments, particularly in the Middle East, and from extended COVID-19 lockdown disruption across several GeoMarkets.
Production pretax operating margin of 13% expanded by 1,107 bps sequentially, posting a 108% incremental operating margin. The margin expansion was due to the resumption of production in our APS projects in Ecuador and improved profitability across each of Completions, Artificial Lift Solutions, and Well Services, supported by cost reduction measures. OneStim margin improved due to better operating leverage as revenue increased by more than 50%. Margins improved both in North America and internationally.
Cameron
(Stated in millions)
Three Months Ended
Change
Sept. 30, 2020
Jun. 30, 2020
Sept. 30, 2019
Sequential
Year-on-year
Revenue
$965
$1,015
$1,363
-5%
-29%
View source version on businesswire.com: https://www.businesswire.com/news/home/20201016005317/en/
Contacts
For more information, contact
Ndubuisi Maduemezia – Vice President of Investor Relations, Schlumberger Limited
Joy V. Domingo – Director of Investor Relations, Schlumberger Limited
Office +1 (713) 375-3535
investor-relations@slb.com
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