Schlumberger Limited has recently reported its results for 2Q15.
- Revenue of US$9.0 billion decreased 12% sequentially.
- EPS of US$0.88 declined 17% sequentially, excluding charges and credits.
- Free cash flow of US$1.5 billion represented 132% of earnings.
- Sequential decremental operating margin was 23%.
- 5.8 million shares repurchased for US$520 million during the quarter.
Schlumberger Chairman and CEO Paal Kibsgaard commented: “Schlumberger second-quarter revenue decreased 12% sequentially, driven by the dramatic decline in North American land activity as the rig count dropped by a further 40%.”
Pretax operating margins were maintained
“Despite the much more challenging market conditions, overall pretax operating margins were maintained at levels well above the previous downturns as we continued to proactively manage costs and resources, carefully navigate the commercial landscape, and further accelerate our transformation programme. The success of our efforts can be seen in pretax operating margins of 10.2% in North America and 24.5% internationally while generating US$1.5 billion in free cash flow, representing 132% of earnings.”
“In the 1H15, year-on-year revenue dropped 26% in North America and 14% internationally. In spite of these declines being more severe than those of the 2009 downturn, we delivered first-half decremental margins of 37% in North America and 18% internationally. These results represent a marked improvement over the equivalent figures that were both in excess of 70% for the same period in 2009.”
Production Group revenue declined
“Among the business segments, Production Group revenue declined 18% sequentially, driven by the unprecedented drop in both activity and pricing for pressure pumping services on land in North America. Drilling Group and Reservoir Characterisation Group revenues fell by 11% and 5%, respectively, as the declines in development drilling activity and exploration-related services moderated.”
“As we enter the second half of the year, our visibility still remains limited. In terms of oil supply, the first signs of flattening North America production have appeared while OPEC marketed supply has been increased once again. Non-NAM, non-OPEC production weakened in the first half of the year driven by falls in Brazil and Mexico, with further softening expected as lower investment levels start to take full effect. The latest supply data together with a strong outlook for global oil demand point to a tightening of the global supply-demand balance even with additional supply from Iran.”
E&P spending expected to drop
“E&P investment in North America is now expected to fall by more than 35% in 2015 driven by lower land activity and increased pricing pressure. We believe that the North American rig count may now be touching the bottom, and that a slow increase in both land drilling and completion activity could occur in the second half of the year.”
“In the international market, E&P spending is now expected to drop more than 15%. We do not expect any upward adjustment to existing 2015 budgets but see a continuation of first-half trends with low exploration activity, tight management of development-related spend, and continued pricing pressure.”
Focused on cost and resource base
“In this challenging market, we remain focused on the things we can control, which include our cost and resource base, the effective deployment of our technology and expertise, and the quality and integrity of the products and services we provide to our customers. The success of this approach can be seen in our strong international margins despite the drop in revenue and in our ability to maximise our performance in North America.”
“We remain very confident in our capacity to continue to weather the current downturn better than our surroundings, and better than in previous downturns. Our global strength, our technology differentiation, and our accelerated corporate transformation are creating a great platform for us to increase revenue market share, deliver lower reductions in earnings per share than our peers, and continue to reduce working capital and capex intensity while generating higher levels of free cash flow.”
Adapted from press release by David Bizley