10-QPeriod: Q2 FY2011

SLB LIMITED/NV Quarterly Report for Q2 Ended Jun 30, 2011

Filed July 27, 2011For Securities:SLB

Summary

SLB LIMITED/NV (SLB) reported strong financial results for the second quarter and the first six months of 2011. Revenue significantly increased year-over-year, driven by the strategic acquisitions of Smith and Geoservices, coupled with a robust recovery in oilfield activity and improved pricing, particularly in North America and internationally. The company's restructuring into new product group segments (Reservoir Characterization, Drilling, and Reservoir Production) appears to be aligning with market demands, showing positive contributions across the board. Net income also saw a substantial increase, reflecting operational improvements and the successful integration of acquired businesses. The company is actively managing its financial position, including debt repayment and a significant share repurchase program. Despite ongoing geopolitical uncertainties in some regions and the inherent cyclicality of the oilfield services industry, SLB is well-positioned to navigate market challenges and capitalize on growth opportunities, especially with the increasing service intensity required for unconventional resource development and international exploration. Key financial metrics highlight significant revenue growth, healthy operating margins, and strong cash flow generation. Investors should note the company's strategic focus on technology, its global operational footprint, and its commitment to returning value to shareholders through buybacks and dividends.

Financial Highlights

52 data points
Beta

Revenue

$8.99B

21.9% Gross Margin

Net Income

$1.34B

14.9% Net Margin

EPS (Diluted)

$0.98

Total Assets

$54.02B

Cash & Equivalents

$1.38B

Free Cash Flow

$285.00M

Financial Statements
Beta
Revenue$8.99B
Cost of Revenue$7.02B
Gross Profit$1.97B
R&D Expenses$281.00M
Operating Income$2.04B
Interest Expense$69.00M
Net Income$1.34B
EPS (Basic)$0.99
EPS (Diluted)$0.98
Shares Outstanding (Basic)1.35B
Shares Outstanding (Diluted)1.37B

Key Highlights

  • 1Revenue for the second quarter of 2011 reached $9.621 billion, a substantial increase from $5.937 billion in the prior year's second quarter, largely driven by acquisitions and improved market activity.
  • 2Net income attributable to Schlumberger for the six months ended June 30, 2011, was $2.283 billion, a significant increase from $1.490 billion in the same period of 2010.
  • 3The company completed the divestiture of its Global Connectivity Services business in Q2 2011 for approximately $385 million, recognizing an after-tax gain of $220 million.
  • 4Significant capital expenditures were made, totaling $1.720 billion for the six months ended June 30, 2011, compared to $1.083 billion in the prior year, reflecting investments in growth and operational capabilities.
  • 5SLB continued its share repurchase program, spending $1.551 billion in the first six months of 2011.
  • 6The company successfully integrated the acquisitions of Smith and Geoservices, which contributed significantly to revenue growth across its newly defined product groups: Reservoir Characterization, Drilling, and Reservoir Production.
  • 7Operating income before taxes for Oilfield Services grew to $1.750 billion in Q2 2011 from $1.120 billion in Q2 2010, showcasing improved operational performance and pricing power.

Frequently Asked Questions

Revenue growth was primarily driven by the acquisitions of Smith and Geoservices, which significantly expanded the company's scale and offerings. Additionally, a substantial increase in oilfield activity, improved pricing for services, and higher demand for technologies, particularly in North America's shale plays and international exploration, contributed significantly to the revenue increase.

The acquisitions of Smith and Geoservices were key to the significant year-over-year revenue growth. These acquisitions broadened SLB's product and service portfolio, particularly in the Drilling and Distribution segments, allowing for greater synergy and market reach. While initially dilutive to margins, the integration appears to be progressing well, contributing to the overall top-line growth.

SLB anticipates continued strong activity levels, especially internationally, with a strong start to the second quarter expected to carry through the rest of the year and into 2012. The company notes that the increasing service intensity of drilling and completing horizontal wells in liquid-rich plays and shale basins, coupled with concurrent international activity, will challenge the industry's capacity. SLB believes its size, global reach, and technological capabilities position it well to meet these challenges.

SLB is actively managing its financial position. The company generated substantial operating cash flow and made significant capital expenditures. It also repurchased a considerable amount of its stock and issued new debt, including $1.1 billion in 4.200% Guaranteed Notes due 2021 and $500 million in 2.650% Guaranteed Notes due 2016. The company also repurchased $1.26 billion of its senior notes. As of June 30, 2011, SLB had $4.9 billion in cash and short-term investments, along with available committed credit facilities, indicating sufficient liquidity for at least the next twelve months.