SCHLUMBERGER NET LOSS $1 BLN
Schlumberger Announces Full-Year and Fourth-Quarter 2015 Results
- Fourth-quarter revenue of $7.7 billion decreased 9% sequentially
- Fourth-quarter EPS of $0.65, excluding charges and credits, declined 17% sequentially
- Fourth-quarter restructuring and asset impairment charges totaled $1.46 per share
- Full-year free cash flow of $5 billion represented 114% of earnings
- New share repurchase program of $10 billion approved
- Quarterly cash dividend of $0.50 per share approved
HOUSTON--Jan. 21, 2016-- Schlumberger Limited (NYSE:SLB) today reported results for full-year 2015 and the fourth quarter of 2015. Full-year results are shown in the table below.
|(Stated in millions, except per share amounts)|
|Twelve Months Ended||Change|
|Dec. 31, 2015||Dec. 31, 2014||Year-on-year|
|Pretax operating income||6,510||10,576||-38||%|
|Income from continuing operations, excluding charges and credits*||4,290||7,282||-41||%|
|Diluted EPS from continuing operations, excluding charges and credits*||$||3.37||$||5.57||-39||%|
|Pretax operating margin||18.4||%||21.8||%||-342 bps|
|North America revenue||$||9,811||$||16,151||-39||%|
|North America pretax operating income||999||3,057||-67||%|
|North America pretax operating margin||10.2||%||18.9||%||-874 bps|
|International pretax operating income||5,955||7,677||-22||%|
|International pretax operating margin||23.6||%||23.9||%||-29 bps|
*Income from continuing operations, including charges and credits, was $2.072 billion in 2015 and $5.643 billion in 2014. Diluted EPS from continuing operations, including charges and credits, was $1.63 in 2015 and $4.31 in 2014. See section entitled "Charges & Credits" for details.
Schlumberger Chairman and CEO Paal Kibsgaard commented, "Full-year 2015 revenue of $35.5 billion decreased 27% year-on-year in line with upstream capex spending cuts that resulted in significantly lower E&P investment levels. North America revenue declined 39%, with land falling 45% while offshore was down 17%. The decrease in land activity was the sharpest seen since 1986, as capex spending by North American customers declined by more than 40%. With the year-end US land rig count 68% lower than the 2014 peak, at less than 700 rigs, the massive over-capacity in the land services market offers no signs of pricing recovery in the short to medium term.
"Full-year revenue for the International Areas declined 21% due to customer budget cuts of more than 20%, as international and national oil companies responded to lower commodity prices. This effect was exacerbated by service company pricing concessions. More than one-third of the revenue decline was the result of the fall of certain currencies against the US dollar. Performance among the Areas was led by a 26% decrease in Europe/CIS & Africa, mainly due to weakness in the Russian ruble. Exploration activities in the UK and Norway fell as customer spending decelerated. In Sub-Saharan Africa, offshore rigs demobilized as exploration work decreased, and in North Africa work progressed slowly, partly because activity in Libya remained muted as onshore operations were limited by security concerns. Full-year revenue in the Latin America Area declined 22% due to significantly decreased activity in Mexico, Brazil and Colombia as a result of sustained budget cuts that led to rig count reductions. Devaluation of the Venezuela bolivar impacted revenue in the Venezuela, Trinidad & Tobago GeoMarket. Middle East & Asia Area full-year revenue decreased 17% due to a significant activity drop in the Asia-Pacific region, particularly in Australia. This decrease was partially offset, however, by robust activity in the Gulf Cooperation Council countries in the Middle East, particularly Saudi Arabia, Kuwait and Oman, although the effect of this was offset by pricing concessions. Activity in Iraq continued to decline.
"Full-year Schlumberger pretax operating income declined 38%, with pretax operating margin contracting 342 basis points to 18.4%. North America margin declined 874 basis points to 10.2% on decreased pressure pumping activity and pricing weakness on land. International margin was essentially flat with 2014 at 23.6% despite the revenue decline from pricing concessions, and from an increasingly unfavorable shift in revenue mix from offshore exploration to development. While revenues in North America and in the International Areas have declined by 39% and 21%, respectively, decremental operating margins have been limited to 32% in North America, and 25% internationally. These figures are substantially better than those we delivered in the 2009 downturn.
"The strength of these results demonstrates the resiliency of our business portfolio in the face of the activity, pricing and foreign currency challenges of 2015. Our performance was driven by excellence in execution, prompt and proactive cost and resource management, and the growing impact of our transformation program.
|(Stated in millions, except per share amounts)|
|Three Months Ended||Change|
|Dec. 31, 2015||Sept. 30, 2015||Dec. 31, 2014||Sequential||Year-on-year|
|Pretax operating income||1,288||1,521||2,781||-15||%||-54||%|
|Income from continuing operations, excluding charges and credits*||819||989||1,941||-17||%||-58||%|
|Diluted EPS from continuing operations, excluding charges and credits*||$||0.65||$||0.78||$||1.50||-17||%||-57||%|
|Pretax operating margin||16.6||%||18.0||%||22.0||%||-132 bps||-537 bps|
|North America revenue||$||1,955||$||2,273||$||4,324||-14||%||-55||%|
|North America pretax operating income||139||202||849||-31||%||-84||%|
|North America pretax operating margin||7.1||%||8.9||%||19.6||%||-175 bps||-1,250 bps|
|International pretax operating income||1,259||1,440||1,990||-13||%||-37||%|
|International pretax operating margin||22.0||%||23.7||%||24.2||%||-170 bps||-220 bps|
*Loss from continuing operations, including charges and credits, was $1.016 billion in the fourth quarter of 2015. Income from continuing operations, including charges and credits, was $302 million in the fourth quarter of 2014. Loss per share from continuing operations, including charges and credits, was $0.81 in the fourth quarter of 2015. Diluted EPS from continuing operations, including charges and credits, was $0.23 in the fourth quarter of 2014. There were no charges or credits recorded during the third quarter of 2015. See section entitled "Charges & Credits" for details.
"Fourth-quarter revenue decreased 9% sequentially driven by the continuing decline in rig activity and persistent pricing pressure throughout our global operations that also suffered from activity disruptions and project delays and cancellations. North America revenue fell 14% sequentially as the US land rig count declined 15% and customer E&P budgets were exhausted. International revenue declined 6% due to the combination of customer budget cuts, the start of the seasonal winter slow-down, persistent pricing pressure, and the largely muted year-end product, software, and multiclient seismic license sales.
"Among the business segments, Production Group revenue declined by 10% on lower pressure pumping services in North America. Reservoir Characterization and Drilling Group revenues declined sequentially by 7% and 8%, respectively, on lower demand for exploration-related products and services in the International Areas as customer budgets were exhausted. These effects were amplified by the almost complete absence of the year-end product, software, and multiclient seismic license sales that have typically offset seasonal winter slow-downs in previous years.
"Negative market sentiments intensified in the fourth quarter, with oil over-production continuing and extending the bearish trend in global inventories. This led to a further drop in oil prices, which reached a 12-year low in January 2016. The worsening market conditions added further pressure to a deepening financial crisis in the E&P industry, and prompted customers to make further cuts to already significantly lower E&P investment levels. Customer budgets were also exhausted early in the quarter, leading to unscheduled and abrupt activity cancellations.
"In anticipation of an extended activity weakness in the first half of 2016, we implemented another significant adjustment to our cost and resource base during the fourth quarter. This included a further workforce reduction of 10,000 employees, as well as greater streamlining of our overhead, infrastructure and asset base. This led us to recognize in the fourth quarter $530 million in pretax restructuring charges for expanding the incentivized leave of absence program and reducing our workforce, as well as a largely non-cash $1.6 billion pretax impairment charge for fixed assets, inventory write-downs, facility closures, contract terminations, and other asset impairments.
"In spite of the challenging business landscape, we generated approximately $5 billion in free cash flow in 2015, after taking into account capital expenditures of $2.4 billion and $1.4 billion of investments in future revenue streams. We returned $4.6 billion in cash to our shareholders, through $2.4 billion in dividend payments and $2.2 billion in stock buy-backs. We also spent approximately $500 million on technology acquisitions, while increasing our net debt by only $160 million. Our ability to generate cash in this environment has been unmatched in the oilfield services industry, and has given us an unrivaled ability to capitalize on a variety of significant business opportunities.
"As the pending Cameron transaction progresses, pre-close integration plans are substantially complete, and we will be ready to close once all regulatory approvals are received. We expect this to occur in the first quarter of 2016 and we have already received approvals from regulators in the US, Canada, Brazil and Russia. In addition, Cameron shareholders have voted to adopt the merger agreement and we have secured the necessary financing for our US subsidiary that will make the acquisition. The large stock component of the deal, with 78% in stock and 22% in cash, has largely insulated us from market volatility.
"In this uncertain environment, we continue to focus on what we can control. Throughout the year we took a number of actions to streamline and resize our organization as we continued to navigate the downturn. In continuing to accelerate the benefits of the transformation program across both our Technologies and GeoMarkets in 2016, we believe we will emerge as a stronger company relative to industry peers and competitors once the price of oil and the market conditions in our industry turnaround.
"We remain constructive in our view of the market outlook in the medium term, and continue to believe that the underlying balance of supply and demand will tighten, driven by growth in demand, weakening supply as E&P investment cuts take effect, and by the size of the annual supply replacement challenge."
|Condensed Consolidated Statement of Income|
|(Stated in millions, except per share amounts)|
|Fourth Quarter||Twelve Months|
|Periods Ended December 31,||2015||2014||2015||2014|
|Interest and other income||81||71||236||291|
|Cost of revenue||6,292||9,691||28,321||37,398|
|Research & engineering||276||324||1,094||1,217|
|General & administrative||132||122||494||475|
|Impairments & other (1)||2,136||1,773||2,575||1,773|
|Income (loss) before taxes||$||(1,102)||$||715||$||2,881||$||7,639|
|Taxes on income (loss) (1)||(113)||398||746||1,928|
|Income (loss) from continuing operations||(989)||317||2,135||5,711|
|Loss from discontinued operations||-||-||-||(205)|
|Net income (loss)||(989)||317||2,135||5,506|
|Net income attributable to noncontrolling interests||27||15||63||68|
|Net income (loss) attributable to Schlumberger||$||(1,016)||$||302||$||2,072||$||5,438|
|Schlumberger amounts attributable to:|
|Income (loss) from continuing operations (1)||$||(1,016)||$||302||$||2,072||$||5,643|
|Loss from discontinued operations||-||-||-||(205||)|
|Net income (loss)||$||(1,016)||$||302||$||2,072||$||5,438|
|Diluted earnings per share of Schlumberger|
|Income (loss) from continuing operations (1)||$||(0.81)||$||0.23||$||1.63||$||4.31|
|Loss from discontinued operations||-||-||-||(0.16)|
|Net income (loss)||$||(0.81)||$||0.23||$||1.63||$||4.16|
|Depreciation & amortization included in expenses (2)||$||963||$||1,065||$||4,078||$||4,094|
|(1)||See section entitled “Charges & Credits” for details.|
|(2)||Includes depreciation of property, plant and equipment and amortization of intangible assets, multiclient seismic data costs and SPM investments.|
|Refer to “Supplemental Information” for details regarding outstanding shares.|
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