10-QPeriod: Q2 FY2015

SLB LIMITED/NV Quarterly Report for Q2 Ended Jun 30, 2015

Filed July 22, 2015For Securities:SLB

Summary

SLB LIMITED/NV (SLB) reported its financial results for the second quarter and the first six months of 2015. The company experienced a significant decline in revenue and profitability compared to the prior year, primarily driven by the ongoing downturn in oil prices impacting customer spending and activity levels, especially in North America. Revenue for the second quarter of 2015 was $9.01 billion, down from $12.05 billion in the same period of 2014. Net income attributable to Schlumberger for the quarter was $1.124 billion, a decrease from $1.595 billion in Q2 2014, resulting in diluted EPS of $0.88 compared to $1.21 in the prior year. The company highlighted substantial restructuring and devaluation charges during the first half of 2015, amounting to $439 million pre-tax, related to workforce reductions and currency devaluation in Venezuela. Despite these challenges, SLB continued to manage its costs effectively and generated solid free cash flow of $2.45 billion for the first six months of 2015, supporting share repurchases and dividends. The company also finalized a significant legal settlement related to past sanctions violations, paying $233 million in fines and penalties.

Financial Highlights

50 data points
Beta

Revenue

$9.01B

20.8% Gross Margin

Net Income

$1.12B

12.5% Net Margin

EPS (Diluted)

$0.88

Total Assets

$64.75B

Cash & Equivalents

$3.54B

Free Cash Flow

$1.73B

Financial Statements
Beta
Revenue$9.01B
Cost of Revenue$7.14B
Gross Profit$1.87B
R&D Expenses$279.00M
Operating Income$1.71B
Interest Expense$86.00M
Net Income$1.12B
EPS (Basic)$0.89
EPS (Diluted)$0.88
Shares Outstanding (Basic)1.27B
Shares Outstanding (Diluted)1.28B

Key Highlights

  • 1Revenue declined significantly year-over-year, with Q2 2015 revenue at $9.01 billion compared to $12.05 billion in Q2 2014, reflecting industry-wide pressures.
  • 2Net income attributable to Schlumberger for Q2 2015 was $1.124 billion, down from $1.595 billion in Q2 2014, with diluted EPS of $0.88 versus $1.21.
  • 3The company recorded $439 million in pre-tax charges in the first half of 2015 for workforce reductions and Venezuelan currency devaluation, impacting profitability.
  • 4North America revenue saw a sharp 39% year-over-year decline in Q2 2015 due to severe activity and pricing drops in land operations.
  • 5International revenue decreased by 19% year-over-year in Q2 2015, impacted by customer budget cuts and currency fluctuations.
  • 6Despite revenue challenges, the company maintained a strong focus on cost management and generated $2.45 billion in free cash flow for the first six months of 2015.
  • 7SLB paid a $233 million settlement in Q2 2015 to resolve a U.S. Department of Justice investigation into past sanctions violations.

Frequently Asked Questions

The primary drivers for the revenue decline were the significant decrease in oil prices, which led to substantial cuts in customer exploration and production budgets, particularly impacting activity levels in North America. Pricing pressure was also a major factor, especially in land operations.

Schlumberger implemented aggressive cost management strategies, including workforce reductions that resulted in $390 million in charges during the first quarter of 2015. While these measures helped mitigate some of the impact, profitability was significantly affected by the revenue decline and specific charges, leading to a year-over-year decrease in net income.

The $233 million payment was a settlement with the U.S. Department of Justice to resolve an investigation into past violations of U.S. sanctions related to Schlumberger's historical operations in Iran and Sudan between 2004 and 2010. This resolved a significant legal contingency for the company.

Schlumberger generated strong free cash flow of $2.45 billion in the first six months of 2015, which allowed it to continue its share repurchase program and pay dividends. The company also maintained a substantial cash balance of $7.3 billion and had unused committed debt facilities, indicating a solid liquidity position.