10-QPeriod: Q2 FY2020

SLB LIMITED/NV Quarterly Report for Q2 Ended Jun 30, 2020

Filed July 29, 2020For Securities:SLB

Summary

SLB Limited/NV (SLB) reported significant financial challenges in its second-quarter 2020 10-Q filing, reflecting the severe impact of the COVID-19 pandemic and a collapse in oil prices. The company experienced a substantial net loss of $3.43 billion, a stark contrast to the net income reported in the prior year's quarter. This downturn was primarily driven by a 35% year-over-year revenue decline to $5.36 billion, heavily impacted by reduced customer spending in North America and international markets. The company incurred significant impairment and restructuring charges totaling $12.25 billion in the first half of 2020, including substantial write-downs for goodwill, intangible assets, and fixed assets, alongside significant workforce reductions. Despite the severe operational and financial headwinds, SLB took aggressive cost-saving measures and strategic actions to conserve cash and protect its balance sheet. This included a 75% reduction in its quarterly dividend. The company highlighted its efforts to rationalize its asset base and restructure for long-term efficiency, aiming to permanently remove $1.5 billion in annual structural costs. SLB ended the quarter with $1.46 billion in cash and maintains access to significant credit facilities, indicating a focus on maintaining liquidity in a highly uncertain market environment.

Financial Highlights

47 data points
Beta

Revenue

$5.36B

Net Income

-$3.43B

-64.1% Net Margin

EPS (Diluted)

$-2.47

Total Assets

$44.67B

Cash & Equivalents

$1.46B

Free Cash Flow

$552.00M

Financial Statements
Beta
Revenue$5.36B
R&D Expenses$142.00M
Operating Income$396.00M
Interest Expense$144.00M
Net Income-$3.43B
EPS (Basic)$-2.47
EPS (Diluted)$-2.47
Shares Outstanding (Basic)1.39B
Shares Outstanding (Diluted)1.39B

Key Highlights

  • 1Reported a significant net loss of $3.43 billion for Q2 2020, compared to a net income of $492 million in Q2 2019.
  • 2Total revenue for Q2 2020 decreased by 35% year-over-year to $5.36 billion, impacted by reduced global oil and gas activity.
  • 3Incurred substantial impairment and restructuring charges totaling $12.25 billion in the first six months of 2020, primarily due to the challenging market conditions.
  • 4Implemented significant workforce reductions, impacting over 21,000 employees and resulting in $1.02 billion in severance charges in Q2 2020.
  • 5Reduced quarterly dividend by 75% to conserve cash and protect the balance sheet.
  • 6Ended the quarter with $1.46 billion in cash and $2.13 billion in short-term investments, with access to substantial credit facilities, demonstrating a focus on liquidity.
  • 7Experienced a sharp decline in North America revenue (58% year-over-year) and international revenue (24% year-over-year) due to the pandemic and oil price collapse.

Frequently Asked Questions

The primary driver was the unprecedented downturn in the global oil and gas market caused by the COVID-19 pandemic and a collapse in oil prices. This led to significant reductions in customer spending, activity levels, and consequently, a substantial decline in SLB's revenue and profitability.

SLB incurred substantial charges in the first half of 2020, totaling $12.25 billion. These include $3.07 billion in goodwill impairment, $3.32 billion in intangible asset impairments, $1.3 billion for Asset Performance Solutions (APS) investments, $0.59 billion for North America pressure pumping fixed asset impairments, and $1.02 billion for workforce reductions (severance).

SLB is prioritizing cash conservation and balance sheet protection. They reduced their quarterly dividend by 75%, are actively managing costs and rationalizing assets to remove structural costs, and ended the quarter with a strong cash position of $1.46 billion, supplemented by $2.13 billion in short-term investments and significant available credit facilities, ensuring sufficient liquidity for at least the next 12 months.

SLB anticipates a modest improvement in oil demand and a slight increase in North America frac completion activity from a low base. Internationally, markets may continue to be disrupted by the pandemic, but this is expected to be offset by seasonal activity and a rebound in Latin America. The company projects flat sequential revenue for Q3 2020, with an expected expansion in pretax segment operating income and margin due to restructuring efforts and technology adoption.