Schlumberger Announces Full-Year and Fourth-Quarter 2019 Results

  • Full-year worldwide revenue of $32.9 billion was flat year-on-year, with international revenue growth of 7%
  • Full-year GAAP loss per share, including charges & credits, was $7.32
  • Full-year EPS, excluding charges & credits, was $1.47
  • Full-year cash flow from operations and free cash flow were $5.4 billion and $2.7 billion, respectively
  • Fourth-quarter revenue of $8.2 billion decreased 4% sequentially, with international revenue growth of 2%
  • Fourth-quarter GAAP EPS, including charges & credits, was $0.24
  • Fourth-quarter EPS, excluding charges & credits, was $0.39
  • Fourth-quarter cash flow from operations and free cash flow were $2.3 billion and $1.5 billion, respectively
  • Board approves quarterly cash dividend of $0.50 per share

HOUSTON–(BUSINESS WIRE)–Schlumberger Limited (NYSE: SLB) today reported results for full-year 2019 and the fourth quarter of 2019.

Full-Year Results (Stated in millions, except per share amounts)

Twelve Months Ended

 

Change

Dec. 31, 2019

 

Dec. 31, 2018

 

Year-on-year

Revenue

$32,917

 

$32,815

 

0%

Income (loss) before taxes – GAAP basis

$(10,418

)

$2,624

 

n/m

Pretax segment operating income*

$3,978

 

$4,187

 

-5%

Pretax segment operating margin*

12.1

%

12.8

%

-68 bps

Net income (loss) – GAAP basis

$(10,137

)

$2,138

 

n/m

Net income, excluding charges & credits*

$2,054

 

$2,261

 

-9%

Diluted EPS (loss per share) – GAAP basis

$(7.32

)

$1.53

 

n/m

Diluted EPS, excluding charges and credits*

$1.47

 

$1.62

 

-9%

 

Full-Year Revenue by Area

 

 

North America

$10,843

 

11,984

 

-10%

Latin America

4,149

 

3,745

 

11%

Europe/CIS/Africa

7,683

 

7,158

 

7%

Middle East & Asia

10,017

 

9,543

 

5%

Other

225

 

385

 

n/m

$32,917

 

$32,815

 

0%

 

North America revenue

$10,843

 

$11,984

 

-10%

International revenue

$21,849

 

$20,446

 

7%

 

North America revenue, excluding Cameron

$8,525

 

$9,556

 

-11%

International revenue, excluding Cameron

$18,874

 

$17,439

 

8%

 
*These are non-GAAP financial measures. See section titled “Charges & Credits” for details.
n/m = not meaningful

Schlumberger CEO Olivier Le Peuch commented, “Full-year revenue for 2019 was $32.9 billion, a level essentially flat with 2018. Overall performance was positive—particularly in the international markets—and we generated $2.7 billion in free cash flow, which was a remarkable achievement under these market conditions. Full-year pretax segment operating margin of 12%, however, was slightly down year-on-year.

“International revenue, excluding Cameron, grew 8% and was consistent with our expectations of high single-digit growth. Most of our international GeoMarkets benefited from these favorable market conditions, and almost half of them registered double-digit, year-on-year revenue growth driven by exploration activity, offshore operations, and acceleration of the industry’s digital transformation. Compared with the first half of 2019, international pretax segment operating margin improved by 100 basis points (bps) in the second half of the year—a firm step toward our strategic target of margin expansion.

“In contrast, after two years of strong growth, North American revenue fell sharply, driven largely by the land market weakness affecting our OneStim® pressure pumping business, as customers reached their budget limits earlier in the year and remained highly disciplined on capital spend.

(Stated in millions)
Full-Year Revenue by Segment

Twelve Months Ended

 

Change

Dec. 31, 2019

 

Dec. 31, 2018

 

Year-on-year

Reservoir Characterization

$6,312

 

6,173

 

2%

Drilling

9,721

 

9,250

 

5%

Production

11,987

 

12,394

 

-3%

Cameron

5,336

 

5,520

 

-3%

Other

(439

)

(522

)

n/m

$32,917

 

$32,815

 

0%

n/m = not meaningful

“Among the business segments, Drilling and Reservoir Characterization revenue benefited from their international market exposure, while Production and Cameron contracted year-on-year due to weakness in the North America land market.

“During the year, we recognized material pretax charges driven by market conditions, particularly in North America. As these charges were largely noncash and primarily related to goodwill, intangible assets, and fixed assets, they did not impede our ability to generate strong cash flow as we demonstrated in the second half of the year.

“We ended the year building on the strength of our international franchise, driven by the breadth of the international recovery, after four consecutive years of declining revenue. We initiated our scale-to-fit strategy in North America land amid continued challenging market conditions, removed structural costs to protect margins, and accelerated technology-access business models and asset-light operations transformation.

“The year 2019 marked the beginning of a new chapter for Schlumberger. As we move forward, our vision is to define and drive high performance sustainably—operationally and financially. Simply put, we want to be the performance partner of choice for the benefit of our customers and our industry. Our strategy has favorably positioned Schlumberger to achieve margin expansion, increase return on capital, and grow free cash flow.

Fourth-Quarter Results (Stated in millions, except per share amounts)

Three Months Ended

 

Change

Dec. 31, 2019

 

Sept. 30, 2019

 

Dec. 31, 2018

 

Sequential

 

Year-on-year

Revenue

$8,228

 

$8,541

 

$8,180

 

-4%

 

1%

Income (loss) before taxes – GAAP basis

$452

 

$(11,971

)

$648

 

n/m

 

-30%

Pretax segment operating income*

$1,006

 

$1,096

 

$967

 

-8%

 

4%

Pretax segment operating margin*

12.2

%

12.8

%

11.8

%

-60 bps

 

40 bps

Net income (loss) – GAAP basis

$333

 

$(11,383

)

$538

 

n/m

 

-38%

Net income, excluding charges & credits*

$545

 

$596

 

$498

 

-9%

 

9%

Diluted EPS (loss per share) – GAAP basis

$0.24

 

$(8.22

)

$0.39

 

n/m

 

-38%

Diluted EPS, excluding charges & credits*

$0.39

 

$0.43

 

$0.36

 

-9%

 

8%

 

 

 

North America revenue

$2,454

 

$2,850

 

$2,820

 

-14%

 

-13%

International revenue

$5,721

 

$5,629

 

$5,284

 

2%

 

8%

 

 

 

North America revenue, excluding Cameron

$1,907

 

$2,261

 

$2,235

 

-16%

 

-15%

International revenue, excluding Cameron

$4,892

 

$4,857

 

$4,526

 

1%

 

8%

 
*These are non-GAAP financial measures. See sections titled “Charges & Credits” and “Segments” for details.
n/m = not meaningful

“Fourth quarter revenue of $8.2 billion was 4% lower sequentially. International revenue of $5.7 billion grew 2% sequentially and 8% year-on-year. North America revenue of $2.5 billion, however, dropped 14% sequentially due to customer budget exhaustion and cash flow constraints.

“Sequential international growth was led by the Middle East & Asia area, where revenue increased 5% driven by higher year-end product sales in Kuwait, Iraq, and Oman; delivery of additional lump-sum-turnkey (LSTK) wells in Saudi Arabia; and increased Well Services activity in Qatar. Latin America revenue grew 1% due to stronger WesternGeco® multiclient seismic license sales in the Mexico Bay of Campeche, while revenue in the Europe/CIS/Africa area only declined 2% given the mild winter slowdown of activity in the Northern Hemisphere that was partially mitigated by strong year-end product sales and Software Integrated Solutions (SIS) digital software sales.

Fourth-Quarter Revenue by Segment (Stated in millions)

Three Months Ended

 

Change

Dec. 31, 2019

 

Sept. 30, 2019

 

Dec. 31, 2018

 

Sequential

 

Year-on-year

Reservoir Characterization

$1,643

 

$1,651

 

$1,571

 

-1%

 

5%

Drilling

2,442

 

2,470

 

2,461

 

-1%

 

-1%

Production

2,867

 

3,153

 

2,936

 

-9%

 

-2%

Cameron

1,387

 

1,363

 

1,345

 

2%

 

3%

Other

(110

)

(96

)

(133

)

n/m

 

n/m

$8,228

 

$8,541

 

$8,180

 

-4%

 

1%

n/m = not meaningful

“Production revenue declined 9% sequentially primarily due to the 33% sequential drop in OneStim revenue as we continued to right-size our hydraulic fracturing capacity by stacking more fleets in the face of lower demand. This is part of the scale-to-fit strategy we are deploying in North America land—rationalizing our business portfolio to achieve improved returns and better profitability. Drilling and Reservoir Characterization revenue each decreased 1% sequentially due to the end of summer campaigns in the North Sea and Russia. These effects, however, were partially offset by increased drilling activity in the Middle East & Asia area and stronger SIS digital software sales across several GeoMarkets. Cameron revenue increased 2% sequentially from higher OneSubsea®, Surface Systems, and Drilling Systems sales—primarily in the international markets.

“I’m very pleased with our operational and financial results as we closed 2019, and I’m encouraged by the sustained international activity growth, although conditions in North America land became more challenging. Fourth-quarter EPS of $0.39, excluding charges and credits, was sequentially lower, but was 8% higher than the same quarter last year. Pretax segment operating margin declined sequentially on seasonal effects but improved when compared to the same quarter last year. This quarter delivered the first sequential growth in international margin in any fourth quarter since 2014. We are therefore confident we have turned the corner, particularly as we have now seen sequential international margin growth for the last three quarters as a result of our discipline and focus on execution performance. Meanwhile, in North America land, we minimized the margin dilution from lower activity by implementing our scale-to-fit strategy, acting decisively in reducing capacity, and restructuring our operations.

“In addition, we generated significant cashflow from operations as we ended the year, leveraging our capital stewardship program. We also completed two major milestones during the quarter: the formation of the Sensia joint venture and the divestiture of our Drilling Tools business. The proceeds from these transactions further supported the significant reduction of our net debt during the quarter.

“From a macro perspective, we ended the year with 2020 oil demand growth sentiment turning positive as uncertainty reduced following the progress made toward a US-China trade deal. The fall in the North America production growth estimate of between 400,000 to 800,000 bpd should continue to support the thesis for international investment. The recent escalation of geopolitical risk should set the floor for the oil price going forward. In the near term, we expect the OPEC+ production cuts agreed upon in December 2019 to limit investment and activity, particularly in the Middle East and Russia, during the first half of 2020. As the year progresses, the effect of slowing North America production growth is likely to cause tightness in the market and further stimulate international operators to step up their investments in the second half of the year and beyond.

“Based on this, we expect 2020 E&P capex spending growth rate in the international markets to be in the mid-single-digit range. We would therefore expect our international portfolio revenue to grow at the same pace or higher, excluding the effects of the Sensia and Drilling Tools transactions. The carved-out businesses in these transactions accounted for approximately 2% of our global revenue in 2019. International revenue growth will be more heavily weighted to the second half of the year with increasing offshore activity, improving activity mix from the early deepwater growth cycle, and increasing exploration work toward the end of the year and into 2021.

“In North America, we are continuing to scale-to-fit our organization and portfolio by repurposing or exiting underperforming business units, focusing on asset-light operations, and expanding our technology access business models. In alignment with our stated strategy, we are cautiously optimistic that the high-grading of our portfolio will promote margin expansion and the improvement of returns in the North America land market. It has also led to the closing of a significant number of facilities and, unfortunately, workforce reductions.

“After a strong free cash flow performance in the second half of 2019, we are confident in our ability to further improve cash flow generation in 2020. Our focus on improved margins, capital stewardship, and careful management of working capital will continue to underpin our ability to generate improved free cash flow.

“All in all, we finished the year with a very solid quarter, aligned with our performance vision and our focus on returns. I am very pleased with the results, and I’m proud of the Schlumberger team that delivered this performance.”

Other Events

On December 10, 2019, Schlumberger announced that Simon Ayat, Executive Vice President and Chief Financial Officer, will step down effective January 22, 2020. Mr. Ayat, who joined the Company in 1982, will remain with Schlumberger as Senior Strategic Advisor to the Chief Executive Officer for a period of two years. Mr. Stephane Biguet, our current Vice President of Finance and a 24-year Schlumberger veteran, will succeed Mr. Ayat as Executive Vice President and Chief Financial Officer.

On October 1, 2019, Schlumberger and Rockwell Automation closed Sensia, their previously announced joint venture. Rockwell Automation owns 53% of the joint venture and Schlumberger owns 47%. At closing, Rockwell Automation made a $238 million cash payment, net of working capital adjustments, to Schlumberger.

On December 31, 2019, Schlumberger completed the sale of the businesses and associated assets of DRILCO, Thomas Tools, and Fishing & Remedial Services and received net cash proceeds of $348 million.

During the fourth quarter, Schlumberger repurchased $1.1 billion of its outstanding notes, which comprise $416 million of its outstanding 3.00% Notes due 2020; $126 million of its outstanding 4.50% Notes due 2021; $500 million of its outstanding 4.20% Notes due 2021; and $106 million of its 3.60% Senior Notes due 2022.

On January 17, 2020, Schlumberger’s Board of Directors approved a quarterly cash dividend of $0.50 per share of outstanding common stock, payable on April 9, 2020 to stockholders of record on February 12, 2020.

Consolidated Revenue by Area

(Stated in millions)

Three Months Ended

 

Change

Dec. 31, 2019

 

Sept. 30, 2019

 

Dec. 31, 2018

 

Sequential

 

Year-on-year

North America

$2,454

$2,850

$2,820

-14%

 

-13%

Latin America

1,028

1,014

978

1%

 

5%

Europe/CIS/Africa

2,018

2,062

1,842

-2%

 

10%

Middle East & Asia

2,675

2,553

2,464

5%

 

9%

Other

53

62

76

n/m

 

n/m

$8,228

$8,541

$8,180

-4%

 

1%

 

 

 

North America revenue

$2,454

$2,850

$2,820

-14%

 

-13%

International revenue

$5,721

$5,629

$5,284

2%

 

8%

 

 

 

North America revenue, excluding Cameron

$1,907

$2,261

$2,235

-16%

 

-15%

International revenue, excluding Cameron

$4,892

$4,857

$4,526

1%

 

8%

n/m = not meaningful
Certain prior period amounts have been reclassified to conform to the current period presentation.

Fourth-quarter revenue of $8.2 billion decreased 4% sequentially. North America revenue of $2.5 billion decreased 14% while international revenue of $5.7 billion increased 2%.

North America

North America area consolidated revenue of $2.5 billion was 14% lower sequentially. The sequential decline was driven by lower activity and pricing for our OneStim and Drilling businesses in North America land due to expected customer budget limitations and cash flow constraints. North America land revenue declined 19% sequentially while North America offshore revenue grew by 3%. OneStim revenue dropped 33% sequentially as we continued to right-size our hydraulic fracturing capacity by stacking more fleets in the face of lower demand. This is part of the scale-to-fit strategy we are deploying in North America land—rationalizing our business portfolio to achieve improved returns and better profitability.

International

Consolidated revenue in the Latin America area of $1.0 billion increased 1% sequentially. This was due primarily to higher WesternGeco multiclient seismic license sales in the Mexico Bay of Campeche, partially offset by lower revenue in Argentina on reduced drilling and well services activity. Revenue in Ecuador declined slightly from production shut-ins caused by civil unrest that occurred at the beginning of the quarter. Cameron revenue was higher on increased Surface Systems sales in the Mexico & Central America GeoMarket.

Europe/CIS/Africa area consolidated revenue of $2.0 billion decreased 2% sequentially. This was driven by the winter slowdown of wireline and well services activity following the end of summer campaigns in the North Sea and Russia, partially offset by increased SIS digital software sales and Artificial Lift Solutions product sales across the area. Higher revenue in the Sub-Sahara Africa and North Africa GeoMarkets from new project startups also helped mitigate the seasonal decline of activity in the Northern Hemisphere. Cameron revenue was higher on increased Valves & Process Systems (VPS) sales in Russia and increased OneSubsea project and service activity in Norway.

Consolidated revenue in the Middle East & Asia area of $2.7 billion increased 5% sequentially. This was driven by increased Middle East revenue from higher Completions, Artificial Lift Solutions, and M-I SWACO product sales in Kuwait, Iraq, and Oman; delivery of additional LSTK wells in Saudi Arabia; and increased Well Services activity in Qatar. Revenues in the South & East Asia and Far East Asia & Australia GeoMarkets were also higher sequentially from increased SIS digital software and Completions product sales. Cameron revenue was higher from increased OneSubsea activity in India.

Reservoir Characterization

(Stated in millions)

Three Months Ended

 

Change

Dec. 31, 2019

 

Sept. 30, 2019

 

Dec. 31, 2018

 

Sequential

 

Year-on-year

Revenue

$1,643

 

$1,651

 

$1,571

 

-1%

 

5%

Pretax operating income

$368

 

$360

 

$360

 

2%

 

2%

Pretax operating margin

22.4

%

21.8

%

22.9

%

59 bps

 

-48 bps

Reservoir Characterization revenue of $1.6 billion, 83% of which came from the international markets, decreased 1% sequentially following the end of the summer campaigns for wireline and testing activity in the North Sea and Russia, where the mild winter did not significantly disrupt activity. This decline was partially offset by higher SIS digital software sales across several GeoMarkets. WesternGeco multiclient seismic license sales were also lower as increased sales in the Mexico Bay of Campeche were more than offset by reduced activity in the US Gulf of Mexico.

Reservoir Characterization pretax operating margin of 22% increased 59 bps sequentially due to increased SIS digital software sales. The margin expansion was partially offset by the seasonal decline in Wireline revenue and reduced multiclient seismic licensing activity.

Drilling

(Stated in millions)

Three Months Ended

 

Change

Dec. 31, 2019

 

Sept. 30, 2019

 

Dec. 31, 2018

 

Sequential

 

Year-on-year

Revenue

$2,442

 

$2,470

 

$2,461

 

-1%

 

-1%

Pretax operating income

$303

 

$305

 

$318

 

-1%

 

-5%

Pretax operating margin

12.4

%

12.4

%

12.9

%

5 bps

 

-51 bps

Drilling revenue of $2.4 billion, 76% of which came from the international markets, decreased 1% sequentially due to the end of the summer drilling campaign in Russia and lower drilling activity in North America land largely impacting M-I SWACO and Bits & Drilling Tools. These declines were partially offset by increased drilling activity in the Middle East & Asia area, mainly from the delivery of additional LSTK wells in Saudi Arabia.

Drilling pretax operating margin of 12% was flat sequentially as margin improvements from drilling projects in the Middle East were offset by the seasonally lower margins in Russia and lower drilling margins in North America land.

Production

(Stated in millions)

Three Months Ended

 

Change

Dec. 31, 2019

 

Sept. 30, 2019

 

Dec. 31, 2018

 

Sequential

 

Year-on-year

Revenue

$2,867

 

$3,153

 

$2,936

 

-9%

 

-2%

Pretax operating income

$253

 

$288

 

$198

 

-12%

 

27%

Pretax operating margin

8.8

%

9.1

%

6.8

%

-32 bps

 

205 bps

Production revenue of $2.9 billion, of which 61% came from the international markets, declined 9% sequentially. This was driven by OneStim revenue, which dropped 33% sequentially as we continued to right-size our hydraulic fracturing capacity by stacking more fleets in the face of lower demand. This is part of the deployment of our scale-to-fit strategy in North America land—rationalizing our business portfolio to achieve improved returns and better profitability. In addition, sand and proppant supply revenue also declined. These declines, however, were partially offset by increased international completions activity in Kuwait, Oman, and the South & East Asia GeoMarket. Higher project activity for Asset Performance Solutions (APS), formerly known as Schlumberger Production Management (SPM), contributed positively to the quarter despite the temporary production shut-in issues in Ecuador.

Production pretax operating margin of 9% contracted by 32 bps sequentially due to lower OneStim activity, partially offset by strength in international margins from higher activity.

Cameron

(Stated in millions)

Three Months Ended

 

Change

Dec. 31, 2019

 

Sept. 30, 2019

 

Dec. 31, 2018

 

Sequential

 

Year-on-year

Revenue

$1,387

 

$1,363

 

$1,345

 

2%

 

3%

Pretax operating income

$126

 

$173

 

$131

 

-27%

 

-4%

Pretax operating margin

9.1

%

12.7

%

9.8

%

-359 bps

 

-64 bps

Cameron revenue of $1.4 billion, of which 60% came from international markets, increased 2% sequentially from higher OneSubsea, Surface Systems, and Drilling Systems revenue—primarily in the international markets. VPS was lower sequentially due to the reduced North America land activity and as a result of contributing the VPS measurement business to the Sensia joint venture. By geography, international revenue grew 7% sequentially, primarily on strong growth in the Norway & Denmark and Far East & Australia GeoMarkets, while North America revenue declined by 7% on weak land activity.

Cameron pretax operating margin of 9% contracted by 359 bps sequentially, driven largely by reduced margins in the OneSubsea project portfolio. Lower North America land activity also resulted in reduced margins, particularly for VPS and Surface Systems.

Quarterly Highlights

The combination of unique Schlumberger team and technology performance, centered on customer and industry challenges, delivers the potential for market and financial outperformance. Within this vision, the deployment of fit-for-basin technology and business models creates differentiation for Schlumberger. Examples of this during the quarter include:

  • In Norway, Schlumberger, Aker BP, and StimWell Services created a Well Intervention and Stimulation Alliance, entering into a 5+5-year tripartite agreement. Through collaboration, innovative technologies, and digitization, the newly formed alliance endeavors to completely transform conventional intervention operations with clear targets for propelling hydrocarbon production on new and existing assets on the Norwegian Continental Shelf. The alliance focus will span interventions operations, with Schlumberger as partner for wireline logging, perforation, and well stimulation through digital slickline, coiled tubing, and flowback operations on Aker BP’s fixed installations, and StimWell as partner for the provision of fracturing services, using vessel-based stimulation services. An early success for the alliance was the execution of the single-trip, multifrac operation at the Valhall Field running a world’s-first type of stimulation methodology with coiled tubing in an offshore environment, resulting in significant time savings.
  • In Kuwait and for the first time in the Middle East, Drilling & Measurements deployed GeoSphere HD* reservoir mapping-while-drilling service for Kuwait Oil Company.

Contacts

Simon Farrant – 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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