2017-01-23 18:35:00
SCHLUMBERGER NET LOSS $1.7 BLN
SCHLUMBERGER - Schlumberger Limited (NYSE:SLB) today reported results for full-year 2016 and the fourth quarter of 2016.
- Fourth-quarter revenue of $7.1 billion increased 1% sequentially
- Fourth-quarter GAAP loss per share, including charges of $0.42 per share, was $0.15
- Fourth-quarter earnings per share, excluding charges was $0.27
- Fourth-quarter cash flow from operations was $2.0 billion. Fourth-quarter free cash flow was $1.1 billion
- Full-year cash flow from operations was $6.3 billion. Full-year free cash flow was $2.5 billion
- Quarterly cash dividend of $0.50 per share approved
Full-Year Results
| (Stated in millions, except per share amounts) | ||||||
| Twelve Months Ended | Change | |||||
| Dec. 31, 2016 | Dec. 31, 2015 | Year-on-year | ||||
| Revenue | $27,810 | $35,475 | -22% | |||
| Pretax operating income | $3,273 | $6,510 | -50% | |||
| Pretax operating margin | 11.8% | 18.4% | -658 bps | |||
| Net income (loss) (GAAP basis) | $(1,687) | $2,072 | n/m | |||
| Net income, excluding charges and credits* | $1,550 | $4,290 | -64% | |||
| Diluted EPS (loss per share) (GAAP basis) | $(1.24) | $1.63 | n/m | |||
| Diluted EPS, excluding charges and credits* | $1.14 | $3.37 | -66% | |||
| *These are non-GAAP financial measures. See section below entitled "Charges & Credits" for details. n/m=not meaningful |
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Full-year 2016 revenue of $27.8 billion decreased 22% year-on-year, despite three quarters of activity from the Cameron Group that contributed $4.2 billion in revenue. Excluding Cameron, consolidated revenue declined 34%.
Full-year 2016 pretax operating income of $3.3 billion, including the $653 million contribution from the Cameron Group, decreased 50% year-on-year. Consolidated margin fell 658 basis points (bps) to 11.8%. Excluding Cameron, consolidated margin fell 727 bps to 11.1%.
Fourth-Quarter Results
| (Stated in millions, except per share amounts) | ||||||
| Three Months Ended | Change | |||||
| Dec. 31, 2016 | Sep. 30, 2016 | Dec. 31, 2015 | Sequential | Year-on-year | ||
| Revenue | $7,107 | $7,019 | $7,744 | 1% | -8% | |
| Pretax operating income | $810 | $815 | $1,288 | -1% | -37% | |
| Pretax operating margin | 11.4% | 11.6% | 16.6% | -21 bps | -523 bps | |
| Net income (loss) (GAAP basis) | $(204) | $176 | $(1,016) | n/m | -80% | |
| Net income, excluding charges and credits* | $379 | $353 | $819 | 7% | -54% | |
| Diluted EPS (loss per share) (GAAP basis) | $(0.15) | $0.13 | $(0.81) | n/m | n/m | |
| Diluted EPS, excluding charges and credits* | $0.27 | $0.25 | $0.65 | 8% | -58% | |
| *These are non-GAAP financial measures. See section below entitled "Charges & Credits" for details. n/m=not meaningful |
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Schlumberger Chairman and CEO Paal Kibsgaard commented, "Fourth-quarter sequential revenue growth of 1% was driven by strong activity in the Middle East and North America, which was largely offset by continued weakness in Latin America and seasonal activity declines in Europe, CIS and Africa.
"Among the business segments, the fourth-quarter revenue increase was led by the Production Group, which grew 5% due to increased hydraulic fracturing activity in the Middle East and in North America land. Reservoir Characterization Group revenue increased 1% sequentially due to strong Testing & Process activity in Kuwait that outweighed the seasonal decline in Wireline activity in Norway and Russia. Drilling Group revenue was flat sequentially as continued strong directional drilling activity in North America land was offset by activity declines in Europe/CIS/Africa and Middle East & Asia. Cameron Group revenue was also flat sequentially, with growth in OneSubsea and Surface Systems offset by reduced product sales from Valves & Measurement and from a declining order backlog in Drilling Systems.
"Pretax operating margin was essentially flat sequentially at 11.4% as margin improvements in the Production and Drilling Groups were balanced by contractions in the Cameron and Reservoir Characterization Groups. In recent quarters, we have managed to stabilize our business from an activity and capacity standpoint, and this has subsequently allowed us to refine and reduce our support structure to reflect current activity and service pricing levels. This has led us to record a $536 million restructuring charge in the fourth quarter. We also recorded $139 million of charges relating to the Cameron integration and a currency devaluation loss in Egypt.
"We maintain our constructive view of the oil markets, as the tightening of the supply and demand balance continued in the fourth quarter, as seen by a steady draw in OECD stocks. This trend was further strengthened by the December OPEC and non-OPEC agreements to cut production, which should, with a certain lag, accelerate inventory draws, support a further increase in oil prices, and lead to increased E&P investments.
"We expect the growth in investments to initially be led by land operators in North America, where continued negative free cash flows seem less of a constraint, as external funding is readily available and the pursuit of shorter-term equity value takes precedence over full-cycle return on investment. E&P spending surveys currently indicate that 2017 NAM E&P investments will increase by around 30%, led by the Permian basin, which should lead to both higher activity and a long overdue recovery in service industry pricing.
"In the international markets, operators are more focused on full-cycle returns and E&P investments are generally governed by the operators' free cash flow generation. Based on this, we expect the 2017 recovery in the international markets to start off more slowly, driven by the economic reality facing the E&P industry. This will likely lead to a third successive year of underinvestment, with a continued low rate of new project approvals and an accelerating production decline in the aging production base. These factors together are increasing the likelihood of a significant supply deficit in the medium term, which can only be avoided by a broad-based global increase in E&P spending, which we expect will start unfolding in the later parts of 2017 and leading into 2018.
"Against this backdrop and following nine consecutive quarters of relentless workforce reductions, cost cutting, and restructuring efforts, we are excited to restore focus on the pursuit of growth and improving returns. As we navigated this downturn, we have streamlined our cost and support structure, continued to drive the underlying efficiency and quality of our business workflows, expanded our offering through maintaining investments in R&E, and made a series of strategic acquisitions. The combination of these actions has enabled us to further strengthen our global market position during the downturn, which will enable us to maintain and extend our well established margin and earnings leadership in both North America and in all parts of the International markets going forward.
"While earnings growth continues to be a very important financial driver for us, full-cycle cash generation is even more critical, and here, we remain unique in the industry. Over the past two years of this downturn, we have generated $7.5 billion in free cash flow, which is more than the rest of our major competitors combined.
Furthermore, we have returned $8.0 billion to our shareholders through dividends and share buy-backs. This clearly demonstrates the full-cycle robustness of Schlumberger, the careful management of our business, and the strength of our executional capabilities."
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Earlier:
SCHLUMBERGER NET INCOME DOWN 64%
ROSNEFT - BP - SCHLUMBERGER COOPERATION
SCHLUMBERGER NET LOSS $2.16 BLN
