01—Abstract
Summary
Summary of the 10-K filed February 5, 2010. Cited figures are marked; the original filing is the authoritative source.
SLB Limited (SLB) reported its 2009 annual results, highlighting a challenging year marked by the global economic downturn which significantly impacted oil and gas exploration and production spending.
Total revenue for the year decreased by 16% to $22.7 billiona compared to 2008. The Oilfield Services segment, the company's largest, saw a 16% revenue decline, primarily driven by reduced activity and pricing pressure in North America due to lower natural gas prices. WesternGeco, the seismic services segment, experienced a more substantial revenue drop of 25% as customers reduced discretionary spending.
Despite the revenue decline and increased expenses such as workforce reductions and pension curtailments, SLB demonstrated resilience by maintaining its technological leadership and investing in infrastructure and strategic acquisitions. The company ended the year with a strengthened balance sheet, including a significant cash position.
Management expressed cautious optimism for 2010, anticipating a gradual recovery in oil prices and customer confidence, though natural gas markets remained oversupplied. The company remains committed to long-term growth and capital deployment strategies, including share repurchases and dividends.
02—Key points
Key Highlights
- Full-year 2009 revenue declined 16% to $22.7 billion, reflecting the impact of the global economic downturn on oilfield services spending.
- Oilfield Services revenue decreased 16% to $20.5 billion, with North America experiencing a significant 37% drop due to lower natural gas prices and market fundamentals.
- WesternGeco revenue fell 25% to $2.1 billion, impacted by reduced discretionary spending from customers, particularly in North America.
- The company incurred $238 million in pretax charges during 2009 related to workforce reductions and pension curtailments.
- Schlumberger maintained a strong liquidity position, ending the year with $4.6 billion in cash and short-term investments.
- WesternGeco's backlog decreased to $1.0 billion at year-end 2009 from $1.8 billion at year-end 2008.
- The company returned $1.0 billion to shareholders through dividends paid in 2009.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2009, SLB kept $0.14.
- Revenue$22.70B100.0%
- Cost of revenue−$17.25B76.0%
- Gross profit$5.46B24.0%
- Operating costs−$2.30B10.1%
- Operating income$3.16B13.9%
- Interest, other & tax−$22.0M0.1%
- Net income$3.13B13.8%
Where FY2009 revenue went
$22.70B- Cost of revenue: $17.25B, 76% of revenue
- Net income: $3.13B, 14% of revenue
- R&D: $802.0M, 3.5% of revenue
- Other operating costs: $1.50B, 6.6% of revenue
Kept 14% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2009filed February 5, 2010Financial Statements
FY2009 against FY2008
| Line item | FY2009FY2008 | Change |
|---|---|---|
| Revenue | $22.70B$27.16B | −16.4% |
| Cost of Revenue | $17.25B$18.96B | −9.0% |
| Gross Profit | $5.46B$8.21B | −33.5% |
| R&D Expenses | $802.00M$819.00M | −2.1% |
| Operating Income | $3.16B$5.40B | −41.5% |
| Interest Expense | $221.00M$247.00M | −10.5% |
| Net Income | $3.13B$5.43B | −42.3% |
| EPS (Basic) | $2.62$4.54 | −42.3% |
| EPS (Diluted) | $2.59$4.45 | −41.8% |
| Shares Outstanding (Basic) | 1.20B1.20B | +0.2% |
| Shares Outstanding (Diluted) | 1.21B1.22B | −0.8% |
05—Questions
Frequently Asked Questions
How did the global economic downturn affect SLB's financial performance in 2009?
The global economic downturn significantly impacted SLB's financial performance in 2009. This led to reduced oil and gas prices, causing customers to cut exploration and production spending, which directly translated into lower demand and pricing for SLB's services and products. Consequently, total revenue for 2009 decreased by 16% to $22.7 billion compared to the previous year, with a notable 37% decline in North American revenue for the Oilfield Services segment.
What were the main drivers behind the revenue decline in the Oilfield Services segment?
The primary drivers for the revenue decline in Oilfield Services were lower natural gas prices and unfavorable market fundamentals, particularly in North America, leading to a 37% decrease in that region. Additionally, reduced customer spending, weakening local currencies against the US dollar, and lower activity in various GeoMarkets across Europe/CIS/Africa and Middle East & Asia contributed to the overall 16% revenue decrease for the segment.
How did WesternGeco perform in 2009, and what factors influenced its results?
The WesternGeco segment experienced a significant revenue decline of 25% in 2009, reaching $2.1 billion. This was primarily due to customers reducing discretionary spending, which particularly impacted Multiclient seismic activity in North America. Marine revenue also fell due to lower activity and reduced pricing amid weak market conditions. Land and Data Processing revenues also saw decreases reflecting lower utilization and activity.
What is SLB's outlook for 2010, and what are the key uncertainties?
SLB's outlook for 2010 is cautiously optimistic, anticipating a better year driven by expected increases in oil demand, particularly in developing nations, and a potential rise in customer E&P budgets. However, key uncertainties remain. The natural gas market is expected to stay oversupplied, and while some recovery in industrial demand is noted, increased LNG flows and uncertainty around unconventional gas production could limit the growth in North American gas drilling. The company's overall performance in 2010 will remain largely dependent on global economic prospects and continued economic growth.
06—Continue