10-QPeriod: Q3 FY2016

SLB LIMITED/NV Quarterly Report for Q3 Ended Sep 30, 2016

Filed October 26, 2016For Securities:SLB

Summary

SLB LIMITED/NV (SLB) reported its third-quarter 2016 results, demonstrating resilience amidst challenging industry conditions. Revenue for the quarter was $7.0 billion, a decrease from the prior year's $8.5 billion, reflecting the ongoing downturn in the oil and gas sector. However, the company successfully navigated this environment, posting a net income of $1.0 billion for the quarter, a significant improvement from a net loss of $1.4 billion in the same period last year. This performance was significantly influenced by the acquisition of Cameron International Corporation, which closed on April 1, 2016, and is expected to drive future technology-led growth by integrating complementary product and service portfolios. The company continued to manage its operations effectively, with substantial charges and credits impacting the year-over-year comparison, particularly related to impairments and integration costs from the Cameron acquisition. Despite revenue pressures, SLB's strategic focus on technological innovation and operational efficiency positions it to capitalize on any potential market recovery. Investors should note the significant debt increase due to the Cameron acquisition and the ongoing efforts to integrate the acquired business.

Financial Highlights

49 data points
Beta

Revenue

$7.02B

72.4% Gross Margin

Net Income

$176.00M

2.5% Net Margin

EPS (Diluted)

$0.13

Total Assets

$80.59B

Cash & Equivalents

$3.44B

Free Cash Flow

$1.00B

Financial Statements
Beta
Revenue$7.02B
Cost of Revenue$1.94B
Gross Profit$5.08B
R&D Expenses$253.00M
Operating Income$815.00M
Interest Expense$149.00M
Net Income$176.00M
EPS (Basic)$0.13
EPS (Diluted)$0.13
Shares Outstanding (Basic)1.39B
Shares Outstanding (Diluted)1.40B

Key Highlights

  • 1Revenue for the third quarter of 2016 was $7.0 billion, down from $8.5 billion in Q3 2015, reflecting industry-wide E&P budget cuts.
  • 2Net income for the third quarter of 2016 was $1.0 billion, a substantial improvement from a net loss of $1.4 billion in Q3 2015.
  • 3The acquisition of Cameron International Corporation was completed on April 1, 2016, for a total consideration of $12.8 billion, expected to create technology-driven growth.
  • 4Significant charges and credits, totaling $2.573 billion in impairments and $335 million in merger/integration costs in Q2 2016, and $237 million in merger/integration costs in Q3 2016, impacted profitability, largely due to the Cameron acquisition and industry conditions.
  • 5Goodwill increased significantly from $15.6 billion to $24.9 billion due to the Cameron acquisition, indicating substantial intangible value attributed to the deal.
  • 6Long-term debt increased to $17.5 billion from $14.4 billion, largely driven by debt assumed as part of the Cameron acquisition.
  • 7Cash flow from operations remained strong at $4.2 billion for the nine months ended September 30, 2016, although lower than the $6.6 billion in the prior year's comparable period.

Frequently Asked Questions

The acquisition of Cameron, completed on April 1, 2016, contributed $1.3 billion in revenue and $0.5 billion in pretax operating income for the six months ending September 30, 2016. While it added to revenue, the integration also resulted in significant merger and integration charges of $237 million in the third quarter of 2016. The acquisition significantly increased goodwill and long-term debt on the balance sheet.

Revenue declined by 17% year-over-year in the third quarter of 2016 to $7.0 billion, primarily due to continued reductions in exploration and production (E&P) budgets by customers, impacting all reporting segments. Net income saw a significant improvement from a loss of $1.4 billion in Q3 2015 to a profit of $1.0 billion in Q3 2016. This turnaround was partly due to the absence of large charges seen in the prior year and the positive impact of the Cameron acquisition, despite the specific integration costs incurred in the current quarter.

The acquisition of Cameron led to a substantial increase in SLB's long-term debt, which rose to $17.5 billion as of September 30, 2016, from $14.4 billion at the end of 2015. This increase includes $3.0 billion of debt assumed from Cameron, net of repurchases, and reflects the financing strategy for the $12.8 billion acquisition.

The company recorded substantial charges and credits, particularly in the first nine months of 2016. This included $2.573 billion in impairment and other charges (such as asset impairments and severance costs) and $335 million in merger and integration charges related to the Cameron acquisition during the second quarter. The third quarter also saw $237 million in merger and integration charges. These items significantly impacted the net income and segment results.