01—Abstract
Summary
Summary of the 10-K filed January 27, 2016. Cited figures are marked; the original filing is the authoritative source.
SLB Limited/NV (SLB) filed its 2015 10-K report on January 26, 2016, detailing a challenging year marked by a significant industry-wide downturn in oil and gas prices.
The company experienced a 27% decrease in revenue to $35.5 billiona compared to 2014, primarily driven by reduced customer spending on exploration and production, particularly in North America. This downturn led to substantial charges and credits in 2015, including workforce reductions, fixed asset impairments, and inventory write-downs, totaling $2.575 billion pretax. Despite the adverse market conditions, SLB is strategically positioning itself for the future.
The company announced a definitive agreement to merge with Cameron International Corporation in August 2015, a significant move expected to close in the first quarter of 2016, subject to regulatory approvals. Management remains constructive about the medium-term market outlook, anticipating a tightening of supply and demand dynamics. The company also continued its commitment to returning capital to shareholders through dividends and share repurchases, albeit at a reduced pace in 2015 compared to the previous year, reflecting the challenging economic environment.
02—Key points
Key Highlights
- Revenue declined by 27% to $35.5 billion in 2015, largely due to a significant downturn in oil and gas prices and reduced customer spending.
- The company incurred substantial charges and credits totaling $2.575 billion pretax in 2015, primarily related to workforce reductions, asset impairments, and facility closures, reflecting the challenging market.
- SLB announced a definitive merger agreement with Cameron International Corporation in August 2015, a significant strategic move anticipated to close in Q1 2016, pending regulatory approvals.
- North America revenue experienced a sharp 39% decrease, significantly impacted by a 68% drop in the land rig count and intensified pricing pressure.
- International revenue decreased by 21%, with notable declines in Europe/CIS/Africa (26%) and Latin America (22%), affected by currency weaknesses and budget cuts.
- The company maintained a strong focus on capital allocation, with dividends paid totaling $2.4 billion and $2.2 billion spent on share repurchases in 2015.
- Despite the downturn, management expressed a constructive view on the medium-term market outlook, expecting supply and demand to rebalance.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2015, SLB kept $0.06.
- Revenue$35.48B100.0%
- Cost of revenue−$28.32B79.8%
- Gross profit$7.15B20.2%
- Operating costs−$644.0M1.8%
- Operating income$6.51B18.4%
- Interest, other & tax−$4.44B12.5%
- Net income$2.07B5.8%
04—Financials
Financial Highlights
Figures from 10-KFY2015filed January 27, 2016Financial Statements
FY2015 against FY2014
| Line item | FY2015FY2014 | Change |
|---|---|---|
| Revenue | $35.48B$48.58B | −27.0% |
| Cost of Revenue | $28.32B$37.40B | −24.3% |
| Gross Profit | $7.15B$11.18B | −36.0% |
| R&D Expenses | $1.09B$1.22B | −10.1% |
| Operating Income | $6.51B$10.58B | −38.4% |
| Interest Expense | $346.00M$369.00M | −6.2% |
| Net Income | $2.07B$5.44B | −61.9% |
| EPS (Basic) | $1.63$4.20 | −61.2% |
| EPS (Diluted) | $1.63$4.16 | −60.8% |
| Shares Outstanding (Basic) | 1.27B1.29B | −2.2% |
| Shares Outstanding (Diluted) | 1.27B1.31B | −2.5% |
05—Questions
Frequently Asked Questions
What were the primary drivers of SLB's financial performance in 2015?
The primary driver was the significant downturn in oil and gas prices starting in 2014, which led to reduced exploration and production spending by customers. This resulted in a 27% year-over-year revenue decline for SLB, particularly impacting its North American operations due to a sharp decrease in land rig activity and intense pricing pressure.
What is the significance of the announced merger with Cameron International Corporation?
The announced merger with Cameron is a major strategic initiative. Cameron is a leading manufacturer of oil and gas equipment. This transaction, expected to close in early 2016, aims to create a more comprehensive offering for the oil and gas industry by combining SLB's service expertise with Cameron's equipment manufacturing capabilities. However, it is subject to regulatory approvals.
How did the company address the challenging market conditions in 2015?
SLB implemented several measures to navigate the downturn. These included significant workforce reductions, impairment charges for underutilized assets, inventory write-downs, and facility closures, totaling $2.575 billion pretax. The company also focused on cost management and streamlining its operations while maintaining a constructive outlook for the medium term.
What is the company's outlook for the oilfield services market?
Management expressed a constructive view on the medium-term market outlook, anticipating that the balance between oil and gas supply and demand will tighten. This expectation is based on anticipated decreases in exploration and production investment affecting supply, coupled with continued demand growth.
06—Continue