10-QPeriod: Q2 FY2017

SLB LIMITED/NV Quarterly Report for Q2 Ended Jun 30, 2017

Filed July 26, 2017For Securities:SLB

Summary

SLB LIMITED/NV (SLB) reported its second quarter and first half 2017 financial results, indicating a shift towards recovery in the oilfield services sector. Total revenue for the second quarter of 2017 was $7.46 billion, a 4% increase year-over-year, driven by significant recovery in North America land activity, particularly in the Production and Drilling segments. For the first six months of 2017, total revenue increased 5% to $14.36 billion, benefiting from the full inclusion of Cameron's results compared to the prior year. Despite revenue growth, the company reported a net loss attributable to Schlumberger of $74 million for the second quarter of 2017, an improvement from the $2.16 billion loss in the same period of 2016. The six-month period resulted in a net loss of $1.66 billion, compared to a $2.14 billion loss in the first half of 2016, highlighting ongoing charges and the lingering effects of market downturns. The significant charges and credits, particularly those related to the Venezuela receivable adjustment and Cameron integration, heavily impacted profitability. Management highlights the operational improvements and the positive impact of increased activity in North America as key drivers for future performance.

Financial Highlights

48 data points
Beta

Revenue

$7.46B

75.3% Gross Margin

Net Income

-$74.00M

-1.0% Net Margin

EPS (Diluted)

$-0.05

Total Assets

$74.86B

Cash & Equivalents

$1.90B

Free Cash Flow

$355.00M

Financial Statements
Beta
Revenue$7.46B
Cost of Revenue$1.84B
Gross Profit$5.62B
R&D Expenses$196.00M
Operating Income$950.00M
Interest Expense$142.00M
Net Income-$74.00M
EPS (Basic)$-0.05
EPS (Diluted)$-0.05
Shares Outstanding (Basic)1.39B
Shares Outstanding (Diluted)1.39B

Key Highlights

  • 1Revenue increased 4% year-over-year in Q2 2017 to $7.46 billion, signaling a recovery in the oilfield services market, primarily driven by North America land activity.
  • 2Net loss attributable to Schlumberger improved significantly to $74 million in Q2 2017 from $2.16 billion in Q2 2016, indicating a return towards profitability.
  • 3The Production Group showed strong year-over-year revenue growth of 18% in Q2 2017, largely due to accelerated land activity in North America and a sustained pricing recovery.
  • 4Significant charges and credits, including a $460 million charge related to a Venezuelan promissory note, impacted Q2 2017 earnings. Total charges and credits for H1 2017 were $674 million.
  • 5Cash flow from operations for the first six months of 2017 was $1.51 billion, a decrease from $2.84 billion in the prior year, attributed to delays in receivables collection and increased activity.
  • 6SLB continued its share repurchase program, completing a $10 billion program in May 2017 and initiating a new $10 billion program.

Frequently Asked Questions

The revenue increase in Q2 2017 was primarily driven by a significant recovery in North America land activity, which saw a more than 150% increase in rig count compared to the same period in the prior year. This growth was particularly strong in the Production and Drilling segments.

Despite revenue growth, SLB reported a net loss primarily due to significant charges and credits recorded during the quarter. Notably, a $460 million charge was recognized from the fair value adjustment of a promissory note received in exchange for receivables from its primary customer in Venezuela. Additionally, integration costs related to the Cameron acquisition also contributed to the net loss.

As of June 30, 2017, SLB had $6.2 billion in cash and short-term investments. The company also had $3.5 billion available under its committed debt facilities. Net debt increased from $10.1 billion at the end of 2016 to $12.6 billion at June 30, 2017, partly due to changes in working capital and debt repayment activities.

The filing indicates a positive outlook for North America land-based operations, especially for the Production and Drilling segments, due to increased activity and pricing recovery. While Reservoir Characterization and Cameron segments also saw revenue increases, the Cameron segment experienced a year-on-year revenue decline and margin pressure due to a declining backlog.