01—Abstract
Summary
Summary of the 10-K filed January 31, 2014. Cited figures are marked; the original filing is the authoritative source.
Schlumberger (SLB) closed 2013 with record revenue of $45.3 billiona, up 8% from $41.7 billion in 2012, and diluted EPS from continuing operations of $5.10, up from $3.91.
Growth was driven mainly by international markets, which made up roughly 73% of revenue, with the Middle East & Asia Area up 23% and Europe/CIS/Africa up 8%. North America grew 3% despite weak land pricing, helped by offshore Gulf of Mexico activity. Reported results were also lifted by a $1.03 billionb pretax gain from forming the OneSubsea joint venture with Cameron, which partly offset $420 million of net charges elsewhere.
Operating margins expanded, with pretax operating margin up 119 bps to 20.6%. Cash generation and capital returns were strong. Operating cash flow rose to $9.8 billionc from $6.5 billion, supported by working capital discipline.
Schlumberger repurchased $2.6 billiond of stock in 2013 under a new $10 billion authorization, and dividends paid reached $1.61 billion. The board also approved a 28% increase in the quarterly dividend to $0.40 in January 2014. Net debt fell to $4.4 billion from $5.1 billion, and long-term debt rose to $10.4 billion.
Capex was $3.9 billion, with 2014 guidance of about $3.8 billion. Investors should weigh several risks. The filing discloses a U.S. grand jury investigation tied to historical operations in sanctioned countries such as Sudan, Cuba and Iran, and Schlumberger cannot estimate the outcome.
Iran operations were wound down in 2013 and reported as discontinued, with a $69 million loss. Venezuela's currency devaluation and possible 2014 remeasurement losses (about $150 million at the auction rate) add uncertainty, and North American land pricing pressure persists. Overall, the company presents a resilient, internationally weighted growth story with a rising dividend and buybacks, offset by legal and geopolitical exposure.
02—Key points
Key Highlights
- Record 2013 revenue of $45.3 billion, up 8% year over year, with international revenue up 11% and about 73% of total revenue coming from outside the United States.
- Diluted EPS from continuing operations rose to $5.10 from $3.91, helped by a $1.03 billion pretax gain on the OneSubsea joint venture formation with Cameron.
- Operating cash flow increased to $9.8 billion from $6.5 billion, reflecting strong working capital performance.
- Shareholder returns: $2.6 billion of stock repurchased in 2013 under a new $10 billion program, $1.61 billion in dividends paid, and a 28% quarterly dividend increase to $0.40 announced for 2014.
- Net debt declined to $4.4 billion from $5.1 billion, while long-term debt increased to $10.4 billion and cash plus short-term investments reached $8.4 billion.
- Pretax operating margin expanded 119 bps to 20.6%, led by Reservoir Characterization (29.8%) and international margins (up 225 bps to 22.2%).
- Key risks include an ongoing U.S. grand jury investigation related to sanctioned-country operations, the Iran wind-down (a $69 million loss from discontinued operations), and a possible Venezuela-related charge of about $150 million in Q1 2014.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2013, SLB kept $0.15.
- Revenue$45.27B100.0%
- Cost of revenue−$35.33B78.1%
- Gross profit$9.94B21.9%
- Operating costs−$591.0M1.3%
- Operating income$9.34B20.6%
- Interest, other & tax−$2.61B5.8%
- Net income$6.73B14.9%
04—Financials
Financial Highlights
Figures from 10-KFY2013filed January 31, 2014Financial Statements
FY2013 against FY2012
| Line item | FY2013FY2012 | Change |
|---|---|---|
| Revenue | $45.27B$41.73B | +8.5% |
| Cost of Revenue | $35.33B$32.88B | +7.4% |
| Gross Profit | $9.94B$8.85B | +12.3% |
| R&D Expenses | $1.17B$1.15B | +1.8% |
| Operating Income | $9.34B$5.23B | +78.7% |
| Interest Expense | $391.00M$340.00M | +15.0% |
| Net Income | $6.73B$5.49B | +22.6% |
| EPS (Basic) | $5.09$4.13 | +23.2% |
| EPS (Diluted) | $5.05$4.10 | +23.2% |
| Shares Outstanding (Basic) | 1.32B1.33B | −0.5% |
| Shares Outstanding (Diluted) | 1.33B1.34B | −0.4% |
05—Questions
Frequently Asked Questions
How did Schlumberger's 2013 performance compare with 2012?
Revenue rose 8% to a record $45.3 billion, and income from continuing operations rose 30% to $6.8 billion. Diluted EPS from continuing operations increased to $5.10 from $3.91. Growth was led by the Middle East & Asia Area (up 23%) and Europe/CIS/Africa (up 8%), while North America grew 3%. The results include a $1.03 billion gain from the OneSubsea formation, which boosted reported earnings.
What is the company's capital return policy and outlook?
Schlumberger repurchased $2.6 billion of stock in 2013 under a $10 billion authorization that runs through June 2018, with $1.7 billion used as of year-end. Dividends paid were $1.61 billion in 2013 and the quarterly dividend rises 28% to $0.40 for 2014. The company expects capex of about $3.8 billion in 2014 and roughly $500 million of postretirement plan contributions.
What legal and regulatory risks should investors watch?
A U.S. grand jury investigation and regulatory inquiry relate to historical operations in countries under U.S. trade and economic sanctions, including Sudan and Cuba. Schlumberger says it is cooperating and cannot predict the outcome, though penalties in comparable cases have reached tens or hundreds of millions of dollars. Its Iran operations were wound down in 2013, and the company is monitoring receivables held at Iranian banks.
What is the Venezuela exposure heading into 2014?
Schlumberger held about $330 million of net monetary assets denominated in Venezuelan bolivares fuertes at year-end 2013. Venezuela's new dual exchange system could force remeasurement at a rate different from the official 6.3 rate. At the 11.3 auction rate, the company estimates a charge of about $150 million in the first quarter of 2014, and the full impact is still under analysis.
How strong is the balance sheet and liquidity position?
At December 31, 2013, Schlumberger had $8.4 billion of cash and short-term investments and $3.7 billion of undrawn committed credit facilities. Net debt fell to $4.4 billion, and the company says these resources are sufficient for at least the next 12 months. Total long-term debt was $10.4 billion, and the US pension plans were 96% funded on a projected benefit obligation basis.
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