REG-Schlumberger Limited Schlumberger Announces Full-Year and Fourth-Quarter 2015 Results <Origin Href="QuoteRef">SLB.N</Origin> - Part 2
01/04/2016 13:17
- Part 2: For the preceding part double click ID:nBw8fHt6Fa
Schlumberger amounts attributable to:
Income (loss) from continuing operations (1) $ (1,016 ) $ 302 $ 2,072 $ 5,643
Loss from discontinued operations - - - (205 )
Net income (loss) $ (1,016 ) $ 302 $ 2,072 $ 5,438
Diluted earnings per share of Schlumberger
Income (loss) from continuing operations (1) $ (0.81 ) $ 0.23 $ 1.63 $ 4.31
Loss from discontinued operations - - - (0.16 )
Net income (loss) $ (0.81 ) $ 0.23 $ 1.63 $ 4.16
Depreciation & amortization included in expenses (2) $ 963 $ 1,065 $ 4,078 $ 4,094
(1) See section entitled "Charges & Credits" for details.
(2) Includes depreciation of property, plant and equipment and amortization of intangible assets, multiclient seismic data costs and SPM investments.
Refer to "Supplemental Information" for details regarding outstanding shares.
Condensed Consolidated Balance Sheet
(Stated in millions)
Dec. 31, Dec. 31,
Assets 2015 2014
Current Assets
Cash and short-term investments $ 13,034 $ 7,501
Receivables 8,780 11,171
Other current assets 5,098 6,022
26,912 24,694
Fixed income investments, held to maturity 418 442
Fixed assets 13,415 15,396
Multiclient seismic data 1,026 793
Goodwill 15,605 15,487
Intangible assets 4,569 4,654
Other assets 6,060 5,438
$ 68,005 $ 66,904
Liabilities and Equity
Current Liabilities
Accounts payable and accrued liabilities $ 7,727 $ 9,246
Estimated liability for taxes on income 1,203 1,647
Short-term borrowings and current portion
of long-term debt 4,557 2,765
Dividend payable 634 518
14,121 14,176
Long-term debt 14,442 10,565
Postretirement benefits 1,434 1,501
Deferred taxes 1,075 1,296
Other liabilities 1,028 1,317
32,100 28,855
Equity 35,905 38,049
$ 68,005 $ 66,904
Net Debt
"Net Debt" represents gross debt less cash, short-term investments and fixed
income investments, held to maturity. Management believes that Net Debt provides
useful information regarding the level of Schlumberger`s indebtedness by
reflecting cash and investments that could be used to repay debt.
Details of changes in Net Debt follow:
(Stated in millions)
Periods Ended December 31, Twelve Fourth Twelve
Months Quarter Months
2015
2015
2014
Income (loss) from continuing operations before noncontrolling interests $ 2,135 $ (989 ) $ 5,711
Impairments and other charges, net of tax 2,218 1,835 1,639
Income from continuing operations before noncontrolling
interests, excluding charges & credits 4,353 846 7,350
Depreciation and amortization (1) 4,078 963 4,094
Pension and other postretirement benefits expense 438 112 355
Stock-based compensation expense 326 76 329
Pension and other postretirement benefits funding (346 ) (54 ) (390 )
(Increase) decrease in working capital (2) (478 ) 31 (36 )
Other 434 204 (507 )
Cash flow from operations 8,805 2,178 11,195
Capital expenditures (2,410 ) (627 ) (3,976 )
SPM investments (953 ) (603 ) (740 )
Multiclient seismic data costs capitalized (486 ) (150 ) (321 )
Free cash flow (3) 4,956 798 6,158
Stock repurchase program (2,182 ) (398 ) (4,678 )
Dividends paid (2,419 ) (633 ) (1,968 )
Proceeds from employee stock plans 448 25 825
803 (208 ) 337
Business acquisitions and investments, net of cash acquired plus debt assumed (478 ) (154 ) (1,501 )
Discountinued operations - settlement with U.S. Department of Justice (233 ) - -
Other (252 ) 19 220
Increase in Net Debt (160 ) (343 ) (944 )
Net Debt, Beginning of period (5,387 ) (5,204 ) (4,443 )
Net Debt $ (5,547 ) $ (5,547 ) $ (5,387 )
Components of Net Debt Dec. 31, Sept. 30, Dec. 31,
2015 2015 2014
Cash and short-term investments $ 13,034 $ 6,605 $ 7,501
Fixed income investments, held to maturity 418 439 442
Short-term borrowings and current portion of long-term debt (4,557 ) (4,761 ) (2,765 )
Long-term debt (14,442 ) (7,487 ) (10,565 )
$ (5,547 ) $ (5,204 ) $ (5,387 )
(1) Includes depreciation of property, plant and equipment and amortization of intangible assets, multiclient seismic data costs and SPM investments.
(2) Includes severance payments of approximately $810 million during the twelve months ended December 31, 2015 and $205 million during the fourth quarter of 2015.
(3) "Free cash flow" represents cash flow from operations less capital expenditures, SPM investments and multiclient seismic data costs capitalized. Management believes that this is an important measure because it represents funds available to reduce debt and pursue opportunities that enhance shareholder value such as acquisitions, and returning cash to shareholders through stock repurchases and dividends.
Charges & Credits
In addition to financial results determined in accordance with US generally
accepted accounting principles (GAAP), this Full-Year and Fourth-Quarter 2015
Press Release also includes non-GAAP financial measures (as defined under the
SEC`s Regulation G). The following is a reconciliation of these non-GAAP
measures to the comparable GAAP measures:
(Stated in millions, except per share amounts)
Fourth Quarter 2015
Pretax Tax Noncont. Net Diluted
Interest EPS
Schlumberger income from continuing operations, excluding charges & credits $ 1,034 $ 188 $ 27 $ 819 $ 0.65
Fixed asset impairments (776 ) (141 ) - (635 )
Workforce reduction (530 ) (51 ) - (479 )
Inventory write-downs (269 ) (27 ) - (242 )
Impairment of SPM project in Colombia (182 ) (36 ) - (146 )
Facility closures (177 ) (37 ) - (140 )
Geopolitical events (77 ) - - (77 )
Contract terminations (41 ) (2 ) - (39 )
Other (84 ) (7 ) - (77 )
Schlumberger loss from continuing operations, as reported $ (1,102 ) $ (113 ) $ 27 $ (1,016 ) $ (0.81 )
Twelve Months 2015
Pretax Tax Noncont. Net Diluted
Interest EPS
Schlumberger income from continuing operations, excluding charges & credits $ 5,456 $ 1,103 $ 63 $ 4,290 $ 3.37
Workforce reduction (920 ) (107 ) - (813 )
Fixed asset impairments (776 ) (141 ) - (635 )
Inventory write-downs (269 ) (27 ) - (242 )
Impairment of SPM project in Colombia (182 ) (36 ) - (146 )
Facility closures (177 ) (37 ) - (140 )
Geopolitical events (77 ) - - (77 )
Currency devaluation loss in Venezuela (49 ) - - (49 )
Contract terminations (41 ) (2 ) - (39 )
Other (84 ) (7 ) - (77 )
Schlumberger income from continuing operations, as reported $ 2,881 $ 746 $ 63 $ 2,072 $ 1.63
(Stated in millions, except per share amounts)
Fourth Quarter 2014
Pretax Tax Noncont. Net Diluted
Interest EPS
Schlumberger income from continuing operations, excluding charges & credits $ 2,488 $ 532 $ 15 $ 1,941 $ 1.50
WesternGeco restructuring (806 ) (25 ) - (781 )
Currency devaluation loss in Venezuela (472 ) - - (472 )
Workforce reduction (296 ) (37 ) - (259 )
Impairment of SPM project (199 ) (72 ) - (127 )
Schlumberger income from continuing operations, as reported $ 715 $ 398 $ 15 $ 302 $ 0.23
Twelve Months 2014
Pretax Tax Noncont. Net Diluted
Interest EPS
Schlumberger income from continuing operations, excluding charges & credits $ 9,412 $ 2,062 $ 68 $ 7,282 $ 5.57
WesternGeco restructuring (806 ) (25 ) - (781 )
Currency devaluation loss in Venezuela (472 ) - - (472 )
Workforce reduction (296 ) (37 ) - (259 )
Impairment of SPM project (199 ) (72 ) - (127 )
Schlumberger income from continuing operations, as reported $ 7,639 $ 1,928 $ 68 $ 5,643 $ 4.31
Product Groups
(Stated in millions)
Three Months Ended
Dec. 31, 2015 Sept. 30, 2015 Dec. 31, 2014
Revenue Income Revenue Income Revenue Income
Before Before Before
Taxes Taxes Taxes
Reservoir Characterization $ 2,154 $ 520 $ 2,321 $ 614 $ 3,265 $ 984
Drilling 2,953 494 3,219 594 4,576 947
Production 2,671 303 2,974 330 4,863 898
Eliminations & other (34 ) (29 ) (42 ) (17 ) (63 ) (48 )
Pretax operating income 1,288 1,521 2,781
Corporate & other - (179 ) - (198 ) - (221 )
Interest income(1) - 8 - 8 - 8
Interest expense(1) - (83 ) - (78 ) - (80 )
Charges & credits - (2,136 ) - - - (1,773 )
$ 7,744 $ (1,102 ) $ 8,472 $ 1,253 $ 12,641 $ 715
Geographic Areas
(Stated in millions)
Three Months Ended
Dec. 31, 2015 Sept. 30, 2015 Dec. 31, 2014
Revenue Income Revenue Income Revenue Income
Before Before Before
Taxes Taxes Taxes
North America $ 1,955 $ 139 $ 2,273 $ 202 $ 4,324 $ 849
Latin America 1,407 324 1,422 295 2,053 429
Europe/CIS/Africa 2,059 428 2,274 505 3,063 683
Middle East & Asia 2,248 507 2,372 641 3,094 877
Eliminations & other 75 (110 ) 131 (122 ) 107 (57 )
Pretax operating income 1,288 1,521 2,781
Corporate & other - (179 ) - (198 ) - (221 )
Interest income(1) - 8 - 8 - 8
Interest expense(1) - (83 ) - (78 ) - (80 )
Charges & credits - (2,136 ) - - - (1,773 )
$ 7,744 $ (1,102 ) $ 8,472 $ 1,253 $ 12,641 $ 715
(1) Excludes interest included in the Product Groups and Geographic Areas results.
Product Groups
(Stated in millions)
Twelve Months Ended
Dec. 31, 2015 Dec. 31, 2014
Revenue Income Revenue Income
Before Before
Taxes Taxes
Reservoir Characterization $ 9,501 $ 2,450 $ 12,905 $ 3,708
Drilling 13,563 2,538 18,128 3,805
Production 12,548 1,585 17,763 3,193
Eliminations & other (137 ) (63 ) (216 ) (130 )
Pretax operating income 6,510 10,576
Corporate & other - (768 ) - (848 )
Interest income(1) - 30 - 31
Interest expense(1) - (316 ) - (347 )
Charges & credits - (2,575 ) - (1,773 )
$ 35,475 $ 2,881 $ 48,580 $ 7,639
Geographic Areas
(Stated in millions)
Twelve Months Ended
Dec. 31, 2015 Dec. 31, 2014
Revenue Income Revenue Income
Before Before
Taxes Taxes
North America $ 9,811 $ 999 $ 16,151 $ 3,057
Latin America 6,014 1,315 7,699 1,639
Europe/CIS/Africa 9,284 1,979 12,515 2,765
Middle East & Asia 9,898 2,661 11,875 3,273
Eliminations & other 468 (444 ) 340 (158 )
Pretax operating income 6,510 10,576
Corporate & other - (768 ) - (848 )
Interest income(1) - 30 - 31
Interest expense(1) - (316 ) - (347 )
Charges & credits - (2,575 ) - (1,773 )
$ 35,475 $ 2,881 $ 48,580 $ 7,639
(1) Excludes interest included in the Product Groups and Geographic Areas results.
Supplemental Information
1) What is the definition of decremental operating margin?
Decremental operating margin is equal to the ratio of the change in pretax operating income over the change in revenue.
2) What were the pretax operating income margin and decremental operating margin for the fourth quarter of 2015?
For the fourth quarter of 2015, the pretax operating income margin was 16.6%. The year-over-year decremental operating margin was 31% and the sequential decremental operating margin was 32%.
3) What were the pretax operating income margin and decremental operating margin for the full year 2015?
For the full year 2015, the pretax operating income margin was 18.4%. The year-over-year decremental operating margin was 31%.
4) What was the free cash flow as a percentage of income from continuing operations before noncontrolling interests and charges and credits, for the fourth quarter of 2015?
Free cash flow, which was $798 million and included approximately $205 million of severance payments, as a percentage of income from continuing operations before noncontrolling interests and charges and credits was 94% for the fourth quarter of 2015.
5) What was the free cash flow as a percentage of income from continuing operations before noncontrolling interests and charges and credits, for the full year 2015?
Free cash flow, which was $4.96 billion and included approximately $810 million of severance payments, as a percentage of income from continuing operations before noncontrolling interests and charges and credits was 114% for the full year 2015.
6) What is the capex guidance for the full year 2016?
Capex (excluding multiclient and SPM investments) is expected to be $2.4 billion for 2016. Capex for the full year 2015 was $2.4 billion.
7) What was included in "Interest and other income" for the fourth quarter of 2015?
"Interest and other income" for the fourth quarter of 2015 was $81 million. This amount consisted of earnings of equity method investments of $67 million and interest income of $14 million.
8) How did interest income and interest expense change during the fourth quarter of 2015?
Interest income of $14 million increased $1 million sequentially. Interest expense of $91 million increased $5 million sequentially.
9) What is the difference between pretax operating income and Schlumberger`s consolidated income before taxes?
The difference principally consists of corporate items (including charges and credits) and interest income and interest expense not allocated to the segments as well as stock-based compensation expense, amortization expense associated with certain intangible assets, certain centrally managed initiatives and other nonoperating items.
10) What was the effective tax rate (ETR), excluding charges and credits, for the fourth quarter of 2015?
The ETR for the fourth quarter of 2015, excluding charges and credits, was 18.2% as compared to 20.0% for the third quarter of 2015.
The ETR for the fourth quarter of 2015, including charges and credits, was 10.2%.
11) How many shares of common stock were outstanding as of December 31, 2015 and how did this change from the end of the previous quarter?
There were 1.256 billion shares of common stock outstanding as of December 31, 2015. The following table shows the change in the number of shares outstanding from September 30, 2015 to December 31, 2015.
(Stated in millions)
Shares outstanding at September 30, 2015 1,261
Shares sold to optionees, less shares exchanged -
Vesting of restricted stock -
Shares issued under employee stock purchase plan -
Stock repurchase program (5 )
Shares outstanding at December 31, 2015 1,256
12) What was the weighted average number of shares outstanding during the fourth quarter of 2015 and third quarter of 2015 and how does this reconcile to the average number of shares outstanding, assuming dilution used in the calculation of diluted earnings per share from continuing operations, excluding charges and credits?
The weighted average number of shares outstanding during the fourth quarter of 2015 and third quarter of 2015 was 1.259 billion and 1.265 billion, respectively. The following is a reconciliation of the weighted average shares outstanding to the average number of shares outstanding, assuming dilution.
(Stated in millions)
Fourth Quarter Third Quarter
2015 2015
Weighted average shares outstanding 1,259 1,265
Assumed exercise of stock options 2 3
Unvested restricted stock 3 4
Average shares outstanding, assuming dilution 1,264 1,272
13) What were multiclient sales in the fourth quarter of 2015?
Multiclient sales, including transfer fees, were $117 million in the fourth quarter of 2015 and $60 million in the third quarter of 2015.
14) What was the WesternGeco backlog at the end of the fourth quarter of 2015?
WesternGeco backlog, which is based on signed contracts with customers, was $1.13 billion at the end of the fourth quarter of 2015. It was $910 million at the end of the third quarter of 2015.
15) What are the interest rates and maturities of the Senior Notes issued in December 2015 in connection with financing part of Schlumberger`s pending acquisition of Cameron International Corporation?
Schlumberger Holdings Corporation (SHC), an indirect, wholly-owned U.S. subsidiary of Schlumberger Limited, issued five tranches of senior notes in December 2015 totaling $6 billion with the following interest rates and maturities: $500 million of 1.900% Senior Notes due 2017, $1.3 billion of 2.350% Senior Notes due 2018, $1.6 billion of 3.000% Senior Notes due 2020, $850 million of 3.625% Senior Notes due 2022 and $1.75 billion of Senior Notes due 2025.
16) What do the various charges Schlumberger recorded during the fourth quarter of 2015 relate to?
Workforce reduction and Incentivized Leave of Absence Program:
Based on the activity outlook for 2016, as well as to further streamline its support structure, Schlumberger decided to further reduce its headcount and expand its incentivized leave of absence (ILOA) program during the fourth quarter of 2015. As a result, Schlumberger recorded a $530 million charge during the fourth quarter associated with these headcount reductions and the ILOA program.
Asset impairments and restructuring charges:
As a result of oil and gas industry market conditions that have continued to deteriorate and its impact on the activity outlook, Schlumberger determined that carrying values of certain assets were no longer
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