SCHLUMBERGER NET INCOME DOWN 64%
SCHLUMBERGER announces Third-Quarter 2016 Results:
- Revenue of $7.0 billion decreased 2% sequentially
- Pretax operating income of $815 million increased 9% sequentially
- GAAP EPS was $0.13. Excluding Cameron merger and integration charges, EPS was $0.25
- Cash flow from operations was $1.4 billion. Free cash flow was $699 million
- Quarterly cash dividend of $0.50 per share approved
|(Stated in millions, except per share amounts)|
|Three Months Ended||Change|
|Sept. 30, 2016||Jun. 30, 2016||Sept. 30, 2015||Sequential||Year-on-year|
|Pretax operating income||$815||$747||$1,521||9%||-46%|
|Pretax operating margin||11.6%||10.4%||18.0%||119 bps||-634 bps|
|Net income (loss) (GAAP basis)||$176||$(2,160)||$989||n/m||-82%|
|Net income, excluding charges and credits*||$353||$316||$989||12%||-64%|
|Diluted EPS (loss per share) (GAAP basis)||$0.13||$(1.56)||$0.78||n/m||-83%|
|Diluted EPS, excluding charges and credits*||$0.25||$0.23||$0.78||9%||-68%|
Schlumberger Chairman and CEO Paal Kibsgaard commented, "After calling the bottom of the cycle in the second quarter of this year, our business stabilized in the third quarter following a drop of more than 50% in pro forma revenue during the previous seven quarters. Over the same period, we have removed $6 billion from our quarterly cost base.
"Our third-quarter revenue decreased 2% sequentially, driven largely by the expected reduction in activity at Cameron as the order backlog of products declined. In spite of the challenging business environment, Cameron delivered strong financial results that were partly supported by excellent progress in the integration process.
"Excluding Cameron, revenue increased 1% sequentially driven by higher activity in the North America and Middle East Areas as well as in the Australia and Russia GeoMarkets. In North America, a modest increase in activity on land was partially tempered by lower offshore rig count in the US Gulf of Mexico. At the same time, increased activity during the peak summer drilling campaigns in Russia and new projects in the Middle East and Australia GeoMarkets were offset by continued weakness in Latin America, the North Sea, Sub-Saharan Africa and Southeast Asia.
"The solid nature of these results is apparent through incremental and decremental margin performance. The 12% sequential drop in Cameron Group revenue translated to a decremental margin of only 19% as a result of strong execution, accelerated integration, and effective cost control; while the 1% sequential increase in revenue for the remainder of the company leveraged strong execution and transformation effects to generate incremental margins north of 65%, excluding the effects of last quarter's impairment charges.
"Among the business segments, the third-quarter revenue of the Reservoir Characterization Group increased 5% due to increased WesternGeco marine surveys in the North Sea, additional land seismic surveys in Saudi Arabia and Kuwait, solid progress on the early production facilities in Kuwait, and the seasonal increase of Wireline and Testing activity in Russia and Kazakhstan. Production Group revenue declined slightly by 1% as lower fracturing and completions activity in Latin America, the North Sea, and the Middle East was offset by increased fracturing activity on land in North America. Drilling Group revenue was also down by 1% due to the prolonged decline in deepwater activity in Sub-Saharan Africa, Brazil, and the Asia-Pacific region, which was only partially offset by the strong recovery in directional drilling activity in US land. Cameron Group revenue was sequentially lower by 12% primarily due to reduced product sales from a declining order backlog.
"Pretax operating margins improved 119 basis points (bps) to 11.6% in the third quarter as a result of steady progress of our transformation program, further streamlining of our global support structure, and early efforts in high-grading our contract portfolio. Margins were also partly boosted by the capacity reductions and asset impairments we made in the second quarter.
"Among the Groups, Reservoir Characterization pretax operating margin improved 292 bps sequentially to 19.1% while the Drilling Group margin increased 241 bps to 10.8% and the Production Group margin grew 41 bps to 4.7%. Sequentially, Cameron Group operating margin decreased 34 bps to 16.0% on the declining order backlog, although this was partially mitigated by strong project execution and cost controls leading to a decremental margin of only 19%. Diluted earnings per share of $0.25, excluding Cameron merger and integration charges, improved 9% sequentially.
"Free cash flow generation of $699 million in the third quarter was solid as inventory and capex investments remained tightly managed. However, working capital was negatively affected by lower than expected collections as we are now seeing widespread delays in payments from customers in all geographies. This is a clear sign of the persistent financial distress across the industry.
"In the global oil market, the supply and demand of crude is now more or less balanced as evidenced by flattening petroleum inventory levels and the start of consistent draws toward the end of the quarter—particularly in North America. At the same time, oil demand for 2017 was again revised upward in October and if combined with OPEC's announced intention to cut production, this suggests further inventory draws in the coming quarters that should lead to upward movement in prices.
"In terms of 2017 E&P investment, visibility remains limited as our customers are still in the planning process. We maintain that a broad-based V-shaped recovery is unlikely given the fragile financial state of the industry, although we do see activity upside in 2017 in North America land, the Middle East and Russia markets. We are therefore ensuring that we are optimally positioned to capture a large share of this upside that we can subsequently turn it into positive earnings contributions.
"With the unparalleled cost and cash discipline we have established, we are confident in our capability to deliver incremental margins north of 65% and a free cash conversion rate above 75%. Going forward, this will give us significant flexibility to both re-invest in our business and steadily return cash to our shareholders. This capability, together with our unmatched scale and our unique ability to drive change throughout our company, clearly sets us apart from other industry players."
|October, 15, 12:30:00|
|October, 15, 12:25:00|
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|October, 15, 12:15:00|
|October, 15, 12:10:00|
|October, 15, 12:05:00|
GAZPROM - The parties discussed relevant issues related to bilateral cooperation, including the Baltic LNG project. Emphasis was placed on the priority measures aimed at developing a joint design concept (pre-FEED).
BHGE - U.S. Rig Count is up 11 rigs from last week to 1,063, with oil rigs up 8 to 869, gas rigs up 4 to 193, and miscellaneous rigs down 1 to 1. Canada Rig Count is up 13 rigs from last week to 195, with oil rigs up 8 to 127 and gas rigs up 5 to 68.
REUTERS - Brent crude futures had risen $1.02 cents, or 1.3 percent, to $81.28 a barrel by 0637 GMT. The contract dropped 3.4 percent on Thursday following sharp falls in equity markets and indications that supply concerns have been overblown. U.S. West Texas Intermediate (WTI) crude futures were up 80 cents, or 1.1 percent, at $71.77 a barrel, after a 3 percent fall in the previous session. WTI is on track for a 3.5 percent drop this week.
EIA - Brent crude oil spot prices averaged $79 per barrel (b) in September, up $6/b from August. EIA expects Brent spot prices will average $74/b in 2018 and $75/b in 2019. EIA expects West Texas Intermediate (WTI) crude oil prices will average about $6/b lower than Brent prices in 2018 and in 2019.