REG-Schlumberger Limited Schlumberger Announces Full-Year and Fourth-Quarter 2017 Results <Origin Href="QuoteRef">SLB.N</Origin> - Part 2
19/01/2018 12:05
- Part 2: For the preceding part double click ID:nBwc4WBKJa
Condensed Consolidated Statement
of Income (Loss).
((2)) Recorded in Tax expense (benefit) in the Condensed Consolidated
Statement of Income (Loss).
* Does not add due to rounding.
(Stated in millions, except per share amounts)
Twelve Months 2017
Pretax Tax Noncont. Net Diluted
Interests EPS *
Schlumberger net loss (GAAP basis) $(1,183) $330 $(8) $(1,505) $(1.08)
Impairments & other :
WesternGeco seismic restructuring 1,114 20 - 1,094 0.78
Venezuela investment write-down 938 - - 938 0.67
Promissory note fair value adjustment and other 510 - 12 498 0.36
Workforce reductions 247 13 - 234 0.17
Multiclient seismic data impairment 246 81 - 165 0.12
Other restructuring charges 156 10 22 124 0.09
Merger & integration 308 70 - 238 0.17
Provision for loss on long-term construction project 245 22 - 223 0.16
((1))
US tax reform - (76) - 76 0.05
((2))
Schlumberger net income, excluding charges & credits $2,581 $470 $26 $2,085 $1.50
Twelve Months 2016
Pretax Tax Noncont. Net Diluted
Interests EPS *
Schlumberger net loss (GAAP basis) $(1,905) $(278) $60 $(1,687) $(1.24)
Impairments & other :
Fixed asset impairments 1,058 177 - 881 0.65
Workforce reduction 880 69 - 811 0.59
Inventory write-downs 616 49 - 567 0.42
Multiclient seismic data impairment 198 62 - 136 0.10
Facility closure costs 165 40 - 125 0.09
Costs associated with exiting certain activities 98 23 - 75 0.05
Currency devaluation loss in Egypt 63 - - 63 0.05
Other restructuring charges 55 - - 55 0.04
Contract termination costs 39 9 - 30 0.02
Merger & integration 349 64 - 285 0.21
Amortization of purchase accounting inventory fair value adjustment 299 90 - 209 0.15
((1))
Schlumberger net income, excluding charges & credits $1,915 $305 $60 $1,550 $1.14
((1)) Recorded in Cost of revenue in the Condensed Consolidated Statement
of Income (Loss).
((2)) Recorded in Tax expense (benefit) in the Condensed Consolidated
Statement of Income (Loss).
* Does not add due to rounding.
Product Groups
(Stated in millions)
Three Months Ended
Dec. 31, 2017 Sept. 30, 2017 Dec. 31, 2016
Income Income Income
Before Before Before
Revenue Taxes Revenue Taxes Revenue Taxes
Reservoir Characterization $1,638 $360 $1,771 $311 $1,676 $319
Drilling 2,180 319 2,120 301 2,013 234
Production 3,079 315 2,876 283 2,203 128
Cameron 1,414 203 1,297 194 1,346 188
Eliminations & other (132) (42) (159) (30) (131) (59)
Pretax operating income 1,155 1,059 810
Corporate & other (219) (234) (245)
Interest income 25 30 23
((1))
Interest expense (130) (129) (126)
((1))
Charges & credits (3,041) (49) (675)
$8,179 $(2,210) $7,905 $677 $7,107 $(213)
(Stated in millions)
Twelve Months Ended
Dec. 31, 2017 Dec. 31, 2016
Income Income
Before Before
Revenue Taxes Revenue Taxes
Reservoir Characterization $6,786 $1,251 $6,648 $1,249
Drilling 8,392 1,151 8,561 994
Production 10,639 928 8,804 507
Cameron 5,205 733 4,211 653
Eliminations & other (582) (142) (414) (130)
Pretax operating income 3,921 3,273
Corporate & other (934) (925)
Interest income 107 84
((1))
Interest expense (513) (517)
((1))
Charges & credits (3,764) (3,820)
$30,440 $(1,183) $27,810 $(1,905)
((1)) Excludes interest included in the Product Groups results.
Certain prior period items have been reclassified to conform to the
current period presentation.
Supplemental Information
1) What is the capex guidance for the full year 2018?
Capex (excluding multiclient and SPM investments) for the full year
2018 is expected to be approximately $2 billion, which is similar to
the levels of 2017 and 2016.
2) What were the cash flow from operations and free cash flow for the fourth
quarter of 2017?
Cash flow from operations for the fourth quarter of 2017 was $2.3
billion and included $108 million of severance payments. Free cash
flow for the fourth quarter of 2017 was $456 million and included
$108 million of severance payments and the purchase of the Palliser
Block asset.
3) What were the cash flow from operations and free cash flow for the full year
of 2017?
Cash flow from operations for the full year of 2017 was $5.7 billion
and included $455 million of severance payments. Free cash flow for
the full year of 2017 was $1.7 billion and included $455 million of
severance payments and the purchase of the Palliser Block asset
during the fourth quarter of 2017.
4) What was included in “Interest and other income” for the fourth quarter of
2017?
“Interest and other income” for the fourth quarter of 2017 was $52
million. This amount consisted of earnings of equity method
investments of $22 million and interest income of $30 million.
5) How did interest income and interest expense change during the fourth quarter
of 2017?
Interest income of $30 million was flat sequentially. Interest
expense of $143 million was essentially flat sequentially.
6) What is the difference between pretax operating income and Schlumberger’s
consolidated income before taxes?
The difference principally consists of corporate items, 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
(including intangible asset amortization expense resulting from the
acquisition of Cameron), certain centrally managed initiatives, and
other nonoperating items.
7) What was the effective tax rate (ETR) for the fourth quarter of 2017?
The ETR for the fourth quarter of 2017, calculated in accordance
with GAAP, was -2.8% as compared to 17.9% for the third quarter of
2017. The ETR for the fourth quarter of 2017, excluding charges and
credits, was 19.0% as compared to 18.4% for the third quarter of
2017.
8) What is the impact of US tax reform on Schlumberger?
US tax reform significantly changes US corporate income tax laws by, among
other things, reducing the US corporate income tax rate to 21% starting in
2018 and creating a territorial tax system with a one-time mandatory tax on
previously deferred foreign earnings of US subsidiaries. As a result,
Schlumberger recorded a net charge of $76 million during the fourth quarter of
2017. This amount, which is included in Tax expense (benefit) in the
Consolidated Statement of Income (Loss), consists of two components: (i) a
$410 million charge relating to the one-time mandatory tax on previously
deferred earnings of certain non-US subsidiaries that are owned either wholly
or partially by a US subsidiary of Schlumberger and (ii) a $334 million credit
resulting from the remeasurement of Schlumberger’s net deferred tax
liabilities in the US based on the new lower corporate income tax rate.
After considering the impact of foreign tax credits and tax losses,
the cash tax payable as a result of the one-time mandatory tax on
previously deferred foreign earnings of Schlumberger’s US subsidiary
will not be significant.
As a non-US company, Schlumberger’s corporate structure results in
us largely paying taxes where we operate and earn profits, without
having to incur additional layers of taxes. Given this structure,
the primary impact of US tax reform on Schlumberger is that a lower
federal tax rate will be applied to income earned by our US
business. Absent the impact of US tax reform, our ETR would likely
increase by approximately 2 to 3 percentage points in 2018 as
compared to our fourth quarter 2017 ETR. However, the impact of US
tax reform for 2018 is expected to largely offset this increase. As
a result, we expect the full-year 2018 ETR to approximate our Q4
2017 ETR before charges and credits.
9) How many shares of common stock were outstanding as of December 31, 2017 and
how did this change from the end of the previous quarter?
There were 1.384 billion shares of common stock outstanding as of
December 31, 2017. The following table shows the change in the
number of shares outstanding from September 30, 2017 to December 31,
2017.
(Stated in millions)
Shares outstanding at September 30, 2017 1,385
Shares sold to optionees, less shares exchanged -
Vesting of restricted stock 1
Shares issued under employee stock purchase plan -
Stock repurchase program (2)
Shares outstanding at December 31, 2017 1,384
10) What was the weighted average number of shares outstanding during the fourth
quarter of 2017 and third quarter of 2017 and how does this reconcile to the
average number of shares outstanding, assuming dilution used in the
calculation of diluted earnings per share, excluding charges and credits?
The weighted average number of shares outstanding was 1.385 billion
during the fourth quarter of 2017 and 1.385 billion during the third
quarter of 2017.
The following is a reconciliation of the weighted average shares
outstanding to the average number of shares outstanding, assuming
dilution, used in the calculation of diluted earnings per share,
excluding charges and credits.
(Stated in millions)
Fourth Quarter Third Quarter
2017 2017
Weighted average shares outstanding 1,385 1,385
Assumed exercise of stock options 1 1
Unvested restricted stock 5 6
Average shares outstanding, assuming dilution 1,391 1,392
11) What are Schlumberger Production Management (SPM) projects and how does
Schlumberger recognize revenue from these projects?
SPM projects are focused on developing and comanaging production on
behalf of Schlumberger customers under long-term agreements.
Schlumberger will invest its own services, products, and in some
cases, cash, into the field development activities and operations.
Although in certain arrangements Schlumberger recognizes revenue and
is paid for a portion of the services or products it provides,
generally Schlumberger will not be paid at the time of providing its
services or upon delivery of its products. Instead, Schlumberger
recognizes revenue and is compensated based upon cash flow generated
or on a fee-per-barrel basis. This may include certain arrangements
whereby Schlumberger is only compensated based upon incremental
production it helps deliver above a mutually agreed base
12) How are Schlumberger products and services that are invested in SPM projects
accounted for?
Revenue and the related costs are recorded within the respective
Schlumberger Group for services and products that each Group
provides to Schlumberger’s SPM projects. This revenue (which is
based on arms-length pricing) and the related profit is then
eliminated through an intercompany adjustment that is included
within the “Eliminations & other” line. (Note that the “Eliminations
& other” line includes other items in addition to the SPM
eliminations.) The direct cost associated with providing
Schlumberger services or products to SPM projects is then
capitalized on the balance sheet.
These capitalized investments, which may be in the form of cash as
well as the previously mentioned direct costs, are expensed in the
income statement as the related production is achieved and
associated revenue is recognized. This amortization expense is based
on the units of production method, whereby each unit is assigned a
pro-rata portion of the unamortized costs based on total estimated
production.
SPM revenue along with the amortization of the capitalized
investments and other operating costs incurred in the period are
reflected within the Production Group.
13) What was the unamortized balance of Schlumberger’s investment in SPM
projects at December 31, 2017 and how did it change in terms of investment and
amortization when compared to September 30, 2017?
The unamortized balance of Schlumberger’s investments in SPM
projects was approximately $4.1 billion and $2.8 billion at December
31, 2017 and September 30, 2017, respectively. These amounts are
included within Other Assets in Schlumberger’s Condensed
Consolidated Balance Sheet. The change in the unamortized balance of
Schlumberger’s investment in SPM projects was as follows:
(Stated in millions)
Balance at September 30, 2017 $2,804
SPM investments 1,117
Other additions 279
Amortization of SPM investment (135)
Balance at December 31, 2017 $4,065
14) What was the amount of WesternGeco multiclient sales in the fourth quarter of
2017?
Multiclient sales, including transfer fees, were $166 million in the
fourth quarter of 2017 and $127 million in the third quarter of 2017.
15) What was the WesternGeco backlog at the end of the fourth quarter of 2017?
WesternGeco backlog, which is based on signed contracts with
customers, was $399 million at the end of the fourth quarter of
2017. It was $489 million at the end of the third quarter of 2017.
16) What were the orders and backlog for the Cameron Group’s OneSubsea and
Drilling Systems businesses?
OneSubsea and Drilling Systems orders and backlog were as follows:
(Stated in millions)
Fourth Quarter Third Quarter
Orders 2017 2017
OneSubsea $282 $347
Drilling Systems $150 $156
Backlog
(at the end of period)
OneSubsea $2,060 $2,328
Drilling Systems $408 $523
17) What does the $3.041 billion of pretax charges recorded during the fourth
quarter of 2017 relate to?
The $3.041 billion of pretax charges recorded during the fourth
quarter of 2017 consists of the following (in millions):
WesternGeco seismic restructuring $1,114
Venezuela write-down 938
((1))
Workforce reductions 247
((2))
Multiclient seismic data impairment 246
Other 496
((3))
$3,041
((1))
Given the recent economic and political developments
in Venezuela, Schlumberger determined that it was appropriate
to write-down its investment in the country. As a result,
Schlumberger recorded a charge of $938 million, consisting of:
$469 million of accounts receivable, a $105 million
other-than-temporary impairment charge relating to promissory
notes, $285 million of fixed assets, and $79 million of other assets.
((2))
Represents reductions associated with the
restructuring of our geographical and product line organizations.
((3))
Other includes the following: a $245 million
provision for an estimated loss on a long-term surface facility
construction
project that is accounted for under the percentage-of-completion
method; a $95 million of merger and integration
charges relating to Cameron, and the Weatherford transaction; and
$156 million of other restructuring charges.
About Schlumberger
Schlumberger is the world's leading provider of technology for reservoir
characterization, drilling, production, and processing to the oil and gas
industry. Working in more than 85 countries and employing approximately
100,000 people who represent over 140 nationalities, Schlumberger supplies the
industry's most comprehensive range of products and services, from exploration
through production, and integrated pore-to-pipeline solutions that optimize
hydrocarbon recovery to deliver reservoir performance.
Schlumberger Limited has principal offices in Paris, Houston, London and The
Hague, and reported revenues of $30.44 billion in 2017. For more information,
visit www.slb.com
(http://cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fwww.slb.com&esheet=51745036&newsitemid=20180119005272&lan=en-US&anchor=www.slb.com&index=1&md5=e571a3e24a6f6af32f986928dd005e3a)
.
*Mark of Schlumberger or of Schlumberger companies.
Notes
Schlumberger will hold a conference call to discuss the earnings press release
and business outlook on Friday, January 19, 2018. The call is scheduled to
begin at 8:30 a.m. US Eastern Time. To access the call, which is open to the
public, please contact the conference call operator at +1 (800) 288-8967
within North America, or +1 (612) 333-4911 outside North America,
approximately 10 minutes prior to the call’s scheduled start time. Ask for
the “Schlumberger Earnings Conference Call.” At the conclusion of the
conference call an audio replay will be available until February 19, 2018 by
dialing +1 (800) 475-6701 within North America, or +1 (320) 365-3844 outside
North America, and providing the access code 433023.
The conference call will be webcast simultaneously at www.slb.com/irwebcast
(http://cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fwww.slb.com%2Firwebcast&esheet=51745036&newsitemid=20180119005272&lan=en-US&anchor=www.slb.com%2Firwebcast&index=2&md5=588fb6bf53dabc7c4b26535afd9e2f9a)
on a listen-only basis. A replay of the webcast will also be available at the
same web site until February 28, 2018.
This full-year and fourth-quarter 2017 earnings release, as well as other
statements we make, contain “forward-looking statements” within the
meaning of the federal securities laws, which include any statements that are
not historical facts, such as our forecasts or expectations regarding business
outlook; growth for Schlumberger as a whole and for each of its segments (and
for specified products or geographic areas within each segment); oil and
natural gas demand and production growth; oil and natural gas prices;
improvements in operating procedures and technology, including our
transformation program; capital expenditures by Schlumberger and the oil and
gas industry; the business strategies of Schlumberger’s customers; the
effects of U.S. tax reform; our effective tax rate; the success of
Schlumberger’s SPM projects, joint ventures and alliances; future global
economic conditions; and future results of operations. These statements are
subject to risks and uncertainties, including, but not limited to, global
economic conditions; changes in exploration and production spending by
Schlumberger’s customers and changes in the level of oil and natural gas
exploration and development; general economic, political and business
conditions in key regions of the world; foreign currency risk; pricing
pressure; weather and seasonal factors; operational modifications, delays or
cancellations; production declines; changes in government regulations and
regulatory requirements, including those related to offshore oil and gas
exploration, radioactive sources, explosives, chemicals, hydraulic fracturing
services and climate-related initiatives; the inability of technology to meet
new challenges in exploration; the inability to retain key employees; and
other risks and uncertainties detailed in this full-year and fourth-quarter
2017 earnings release and our most recent Forms 10-K, 10-Q, and 8-K filed with
or furnished to the Securities and Exchange Commission. If one or more of
these or other risks or uncertainties materialize (or the consequences of any
such development changes), or should our underlying assumptions prove
incorrect, actual outcomes may vary materially from those reflected in our
forward-looking statements. Schlumberger disclaims any intention or obligation
to update publicly or revise such statements, whether as a result of new
information, future events or otherwise.
Simon Farrant – Vice President of Investor Relations, Schlumberger Limited
Joy V. Domingo – Manager of Investor Relations, Schlumberger Limited Office
+1 (713) 375-3535 investor-relations@slb.com
(mailto:investor-relations@slb.com)
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