01—Abstract
Summary
Summary of the 10-K filed February 11, 2009. Cited figures are marked; the original filing is the authoritative source.
Schlumberger Limited (SLB) reported robust revenue growth of 17% in 2008, reaching $27.2 billiona, driven primarily by its Oilfield Services segment, which saw a 20% increase.
Despite strong performance throughout most of the year, the fourth quarter was impacted by the global economic downturn, leading to a sequential decline in revenue and downward pressure on service pricing. The company's international operations continue to be a significant revenue driver, accounting for approximately 78%b of total revenue. While Oilfield Services demonstrated resilience, the WesternGeco segment experienced a 4% revenue decline due to lower multiclient sales and reduced land activity.
However, WesternGeco's backlog reached a record $1.8 billionc, indicating future potential. The company maintained a strong financial position with significant cash reserves and managed its debt effectively. Looking ahead to 2009, Schlumberger anticipates a challenging environment with weakening activity across the board, particularly in North American gas drilling and mature offshore basins, prompting proactive cost adjustments while preserving long-term R&D commitments.
02—Key points
Key Highlights
- 2008 total revenue increased by 17% to $27.2 billion, driven by strong Oilfield Services performance.
- Oilfield Services revenue grew 20% year-over-year, with notable strength in international markets, although Q4 saw sequential declines due to the economic downturn.
- WesternGeco revenue decreased by 4% in 2008, but its backlog ended the year at a record $1.8 billion.
- The company operated in approximately 80 countries, with 78% of its 2008 revenue generated from international operations.
- Significant share repurchases continued in 2008, with $1.8 billion spent as part of an $8 billion program.
- Schlumberger expects challenging market conditions in 2009, with anticipated reductions in exploration and production expenditures by customers.
- The company ended 2008 with $3.7 billion in cash and short-term investments, maintaining a strong liquidity position.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2008, SLB kept $0.20.
- Revenue$27.16B100.0%
- Cost of revenue−$18.96B69.8%
- Gross profit$8.21B30.2%
- Operating costs−$2.81B10.3%
- Operating income$5.40B19.9%
- Interest, other & tax$38.0M0.1%
- Net income$5.43B20.0%
Where FY2008 revenue went
$27.16B- Cost of revenue: $18.96B, 70% of revenue
- Operating income: $5.40B, 20% of revenue
- R&D: $819.0M, 3.0% of revenue
- Other operating costs: $1.99B, 7.3% of revenue
Kept 20% as operating income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2008filed February 11, 2009Financial Statements
FY2008 against FY2007
| Line item | FY2008FY2007 | Change |
|---|---|---|
| Revenue | $27.16B$23.28B | +16.7% |
| Cost of Revenue | $18.96B$15.48B | +22.5% |
| Gross Profit | $8.21B$7.80B | +5.3% |
| R&D Expenses | $819.00M$728.00M | +12.5% |
| Operating Income | $5.40B$5.18B | +4.2% |
| Interest Expense | $247.00M$275.00M | −10.2% |
| Net Income | $5.43B$5.18B | +5.0% |
| EPS (Basic) | $4.54$4.36 | +4.1% |
| EPS (Diluted) | $4.45$4.20 | +6.0% |
| Shares Outstanding (Basic) | 1.20B1.19B | +0.7% |
| Shares Outstanding (Diluted) | 1.22B1.24B | −1.2% |
05—Questions
Frequently Asked Questions
What was Schlumberger's overall financial performance in 2008?
Schlumberger reported a 17% increase in total revenue for 2008, reaching $27.2 billion. Net income was $5.43 billion. While the company experienced strong growth for most of the year, the fourth quarter was negatively impacted by the global economic downturn, leading to a sequential decrease in revenue and some pressure on service pricing.
How did the two business segments, Oilfield Services and WesternGeco, perform?
The Oilfield Services (OFS) segment showed strong performance with a 20% revenue increase, driven by robust international demand. However, OFS revenue declined sequentially in the fourth quarter. WesternGeco, the seismic segment, saw a 4% revenue decrease due to lower multiclient sales and reduced land activity, though its backlog ended the year at a record $1.8 billion.
What are the key risks facing Schlumberger in the near future?
The primary risk identified is the significant dependence on oil and gas industry expenditures, which are vulnerable to global economic conditions and commodity prices. The report highlights that a significant decline in oil and gas prices, as seen late in 2008, can reduce customer spending and adversely affect Schlumberger's revenue and operating results. International operations also carry inherent risks due to political and economic instability in various regions.
What is Schlumberger's outlook for 2009?
Schlumberger anticipates a weakening of activity across the board in 2009 due to the economic slowdown and subsequent reductions in customer exploration and production expenditures. The company expects the most significant declines in North American gas drilling and mature offshore basins. In response, Schlumberger is taking actions to adjust its operating cost base while continuing to invest in technology development and service quality.
06—Continue