10-QPeriod: Q1 FY2016

SLB LIMITED/NV Quarterly Report for Q1 Ended Mar 31, 2016

Filed April 27, 2016For Securities:SLB

Summary

SLB LIMITED/NV (SLB) reported its first quarter 2016 results, showing a significant decline in revenue and net income compared to the same period in 2015. Revenue decreased by 36% year-over-year to $6.52 billion, and net income attributable to Schlumberger fell by 49% to $501 million. This downturn reflects the challenging operating environment in the oil and gas industry, characterized by drastic cuts in customer spending, activity disruptions, and pricing pressure, particularly in North America. Despite these headwinds, the company continued its strategic capital allocation, repurchasing shares and managing its debt levels effectively. An extremely significant development for the company, though not reflected in these Q1 2016 results as it closed on April 1, 2016, was the acquisition of Cameron International Corporation for approximately $12.9 billion. This merger is expected to create a comprehensive technology portfolio spanning the entire oil and gas lifecycle. While the current quarter demonstrates the ongoing industry downturn, the strategic acquisition of Cameron signals a strong focus on long-term value creation and market leadership through technological integration and expanded service offerings.

Financial Statements
Beta

Key Highlights

  • 1Revenue for Q1 2016 was $6.52 billion, a 36% decrease from $10.25 billion in Q1 2015, reflecting the severe downturn in the oil and gas industry.
  • 2Net income attributable to Schlumberger decreased by 49% to $501 million ($0.40 per diluted share) in Q1 2016, down from $975 million ($0.76 per diluted share) in Q1 2015.
  • 3North America revenue saw a significant year-over-year decline of 55% to $1.46 billion, driven by a 62% drop in the US land rig count.
  • 4The company repurchased $475 million of its stock in Q1 2016, continuing its capital return strategy.
  • 5Total debt increased to $17.23 billion at March 31, 2016, from $14.44 billion at December 31, 2015, partly due to commercial paper borrowings.
  • 6A major strategic event, the acquisition of Cameron International Corporation for approximately $12.9 billion, closed on April 1, 2016, and is expected to enhance technology-driven growth, though it is not reflected in these Q1 2016 financial statements.
  • 7The company experienced a significant decrease in pretax operating income margin to 13.8% in Q1 2016, down from 29.3% in Q1 2015, with North America reporting a negative margin of -1%.

Frequently Asked Questions

The primary driver was the severe downturn in the oil and gas industry, characterized by drastic reductions in customer spending (E&P budgets), significant activity disruptions, and persistent pricing pressure, especially in North America where the US land rig count had fallen dramatically.

The acquisition of Cameron International Corporation closed on April 1, 2016, meaning its financial results are not included in the Q1 2016 report presented here. However, it represents a significant strategic move for Schlumberger, costing approximately $12.9 billion and aimed at integrating complementary technologies to offer a more comprehensive suite of services from exploration to production.

As of March 31, 2016, Schlumberger had $14.4 billion in cash and short-term investments. Long-term debt stood at $17.23 billion. The company also had $6.8 billion in committed debt facilities, with $2.1 billion available and unused. Management indicated that these resources were sufficient for at least the next 12 months.

Schlumberger implemented cost control measures, which led to a decrease in absolute dollar terms for Research & Engineering and General & Administrative expenses, despite them increasing as a percentage of revenue due to lower overall revenue. The company stated it would continue to tailor cost and resource levels to activity, which might result in future charges.