10-QPeriod: Q3 FY2020

SLB LIMITED/NV Quarterly Report for Q3 Ended Sep 30, 2020

Filed October 21, 2020For Securities:SLB

Summary

Schlumberger Limited (SLB) reported a net loss of $82 million ($0.06 per diluted share) for the third quarter of 2020, a significant improvement from the $11.38 billion net loss in the prior year's same quarter, which was heavily impacted by impairment charges. Total revenue for the quarter was $5.26 billion, down 38% year-over-year, reflecting the challenging market conditions in the oil and gas industry due to the COVID-19 pandemic and reduced oil prices. The company's revenue was significantly impacted by a sharp decline in North America activity, while international revenue also saw a decrease due to budget revisions and pandemic-related disruptions. Despite the revenue decline, the company has been actively managing its cost structure and balance sheet. Significant restructuring and impairment charges totaling $12.6 billion were recorded for the nine months ended September 30, 2020, primarily in the first half of the year, addressing the volatile market. The company continues to focus on cash conservation and has reduced its quarterly dividend. SLB ended the quarter with a solid liquidity position, including $1.22 billion in cash and $2.62 billion in short-term investments, providing financial flexibility in the current environment.

Financial Highlights

47 data points
Beta

Revenue

$5.26B

Net Income

-$82.00M

-1.6% Net Margin

EPS (Diluted)

$-0.06

Total Assets

$44.07B

Cash & Equivalents

$1.22B

Free Cash Flow

$279.00M

Financial Statements
Beta
Revenue$5.26B
R&D Expenses$137.00M
Operating Income$575.00M
Interest Expense$138.00M
Net Income-$82.00M
EPS (Basic)$-0.06
EPS (Diluted)$-0.06
Shares Outstanding (Basic)1.39B
Shares Outstanding (Diluted)1.39B

Key Highlights

  • 1Q3 2020 Net Loss: Reported a net loss of $82 million, a substantial improvement from the $11.38 billion net loss in Q3 2019.
  • 2Revenue Decline: Total revenue for Q3 2020 was $5.26 billion, down 38% year-over-year, due to market headwinds from COVID-19 and lower oil prices.
  • 3North America Impact: Revenue in North America saw a significant 59% decline year-over-year, reflecting operator capital discipline and reduced drilling/frac activity.
  • 4International Revenue Decrease: International revenue fell 27% year-over-year due to COVID-19 disruptions, offshore activity drops, and reduced customer discretionary spending.
  • 5Significant Charges in 2020: The company recorded substantial impairment and restructuring charges totaling $12.6 billion for the nine months ended September 30, 2020, to address market conditions.
  • 6Dividend Reduction: Schlumberger announced a 75% reduction in its quarterly cash dividend in April 2020 to conserve cash and protect its balance sheet.
  • 7Strong Liquidity: Ended the quarter with $1.22 billion in cash and $2.62 billion in short-term investments, maintaining financial flexibility.

Frequently Asked Questions

The primary driver of the significant reduction in net loss from $11.38 billion in Q3 2019 to $82 million in Q3 2020 was the absence of the massive impairment and restructuring charges that heavily impacted the prior year's results. In Q3 2019, Schlumberger recorded $12.69 billion in charges compared to $350 million in Q3 2020. The overall market conditions in 2020 also led to a substantial decrease in revenue, but the cost management and reduced charges were key to turning a massive loss into a smaller one.

The COVID-19 pandemic and ensuing drop in oil demand and prices significantly impacted Schlumberger's revenue, leading to a 38% year-over-year decline in Q3 2020. This was particularly acute in North America, where revenue fell 59% due to reduced customer spending and capital discipline. International revenue also decreased by 27% due to global economic slowdowns, travel restrictions, and project delays. The company responded with cost reductions and strategic adjustments.

Schlumberger maintains a strong liquidity position, with $1.22 billion in cash and $2.62 billion in short-term investments as of September 30, 2020. The company has actively managed its balance sheet, including issuing new debt and repurchasing some outstanding debt. While facing challenging market conditions, the company's focus on cash conservation, including dividend reduction, and its available credit facilities provide confidence in its ability to meet its financial obligations and weather the uncertain environment over the next 12 months.

Schlumberger recorded substantial impairment and restructuring charges totaling $12.6 billion for the nine months ended September 30, 2020. These charges were primarily recognized in the first and second quarters of 2020 and included goodwill impairments ($3.07 billion), intangible asset impairments ($3.32 billion), impairments related to Asset Performance Solutions investments, fixed assets, inventory write-downs, workforce reductions, and facility exit charges. These actions were taken to address the significant market deterioration and optimize the company's asset base.