10-QPeriod: Q1 FY2006

SLB LIMITED/NV Quarterly Report for Q1 Ended Mar 31, 2006

Filed April 27, 2006For Securities:SLB

Summary

SLB LIMITED/NV (SLB) reported robust financial performance for the first quarter of 2006, with a significant increase in operating revenue and net income compared to the prior year. Operating revenue surged by 34% to $4.24 billion, driven by strong growth in both the Oilfield Services and WesternGeco segments. Net income attributable to shareholders reached $722.5 million, a substantial increase from $523.4 million in the first quarter of 2005, with diluted earnings per share growing to $0.59 from $0.43. The company demonstrated operational efficiency and pricing power, particularly in its Oilfield Services segment, which saw a 70% increase in pretax segment income. WesternGeco also experienced significant growth, with revenue up 40% and pretax segment income rising by 149%. These results reflect strong demand for the company's services and technologies in the global oil and gas exploration and production market.

Key Highlights

  • 1Operating revenue increased by 34% to $4.24 billion for Q1 2006 compared to $3.16 billion in Q1 2005.
  • 2Net income rose significantly to $722.5 million ($0.59 per diluted share) from $523.4 million ($0.43 per diluted share) in the prior year's quarter.
  • 3Oilfield Services segment revenue grew 34% year-over-year, with pretax segment income up 70%.
  • 4WesternGeco segment revenue increased by 40% year-over-year, with pretax segment income surging by 149%.
  • 5The company continues to invest in its business, with capital expenditures of $466.9 million in Q1 2006.
  • 6Schlumberger repurchased approximately 2.2 million shares in Q1 2006 under its buy-back program.
  • 7The company announced a significant acquisition of Baker Hughes' 30% minority interest in WesternGeco for $2.4 billion, signaling strategic expansion.

Frequently Asked Questions

The primary drivers for SLB's revenue growth in the first quarter of 2006 were strong performance in both its Oilfield Services and WesternGeco segments. The Oilfield Services segment benefited from increased activity and pricing power, especially in North America, while WesternGeco saw record marine revenue due to high vessel utilization and improved pricing.

Schlumberger adopted SFAS 123R effective January 1, 2006. This adoption resulted in an additional $6 million in stock-based compensation charges in the first quarter of 2006. The company expects to recognize an additional $5 million per quarter throughout the remainder of 2006 due to this standard. Stock-based compensation expense in Q1 2006 was $25.8 million, up from $8.8 million in Q1 2005.

Investors should focus on the substantial year-over-year growth in operating revenue and net income, the strong performance of both the Oilfield Services and WesternGeco segments, earnings per share trends, and the company's cash flow from operations. The significant investment in fixed assets and the announced acquisition of Baker Hughes' stake in WesternGeco are also key strategic developments to monitor.

Yes, SLB completed its 15 million-share buy-back program in the first quarter of 2006. More significantly, subsequent to the quarter end on April 20, 2006, the company announced an agreement to acquire Baker Hughes' 30% minority interest in WesternGeco for $2.4 billion. The Board also approved a new share buy-back program of up to 40 million shares.