Schlumberger Q1 Revenue Increases 18%

Schlumberger Limited reported first-quarter revenue of $6.29 billion versus $6.25 billion in the fourth quarter of 2007, and $5.46 billion in the first quarter of 2007.

Income from continuing operations before charges and credits was $1.30 billion—a decrease of 5% sequentially, but an increase of 10% year-on-year. Diluted earnings-per-share from continuing operations was $1.06, versus $1.11 before charges and credits in the previous quarter, and $0.96 in the first quarter of 2007.

Net income, including discontinued operations, was $1.34 billion or $1.09 per share-diluted, compared to $1.12 in the previous quarter, and $0.96 in the first quarter of 2007.

Oilfield Services revenue of $5.60 billion increased 3% sequentially and 18% year-on-year. Pretax segment operating income of $1.50 billion decreased 2% sequentially but increased 7% year-on-year.

WesternGeco revenue of $676 million decreased 15% compared to the prior quarter and 4% year-on-year. Pretax segment operating income of $196 million decreased 28% sequentially and 26% year-on-year.

Schlumberger Chairman and CEO Andrew Gould commented, "Seasonal factors and weather-related events, as well as lower product and software sales following the exceptional levels in the fourth quarter, had a general dampening effect on sequential revenue gains with a consequent effect on margins.

"Integrated Project Management activity in Mexico continued its rapid new-project ramp up with an additional seven drilling rigs being deployed in the quarter, which resulted in heavy initial start-up costs being incurred.

"At WesternGeco, results fell sequentially as Multiclient revenues declined steeply from the record levels of the fourth quarter of 2007. The Gulf of Mexico lease sale late in the first quarter, coupled with the increased cost of wide-azimuthal data sets that are fast becoming the norm for new Multiclient purchases, delayed new sales activity until customers absorb the results of the March leasing round. We expect the uneven pattern in Multiclient activity to likely persist throughout the year.

"In the absence of a severe global recession leading to a steep drop in demand, the thin cushion of excess oil supply and the failure to stem decline rates in many countries, coupled with the higher-than-expected drawdown of US natural gas storage, are all factors that lead us to conclude that growth will strengthen as the year progresses.

"We remain convinced that current investment levels are insufficient to both stem decline and to explore and develop new reserves and, as a result, we anticipate that the current cycle of exploration and production spending will remain stronger for a longer period than we originally anticipated."

First-quarter revenue of $5.60 billion was 3% higher sequentially and 18% higher year-on-year. Sequential revenue increases were highest in the Canada, US Gulf Coast, South Russia, Australia/Papua New Guinea, West & South Africa and Alaska GeoMarkets*. In addition, double-digit growth rates were recorded by the North Russia, Thailand/Vietnam, Continental Europe and Caspian GeoMarkets. Among the Technologies, demand was strongest for Wireline, Drilling & Measurements, Well Services and Well Testing services. Sequential revenue also grew through inclusion of FRAMO revenue in the Europe/CIS/Africa Area following the acquisition, in the prior quarter, of a majority stake in the company. However, overall sequential growth was moderated by operational delays in the North Sea, project transitions and delays on Integrated Project Management (IPM) activities in Latin America, and seasonal weather-related reductions in the China/Japan/Korea GeoMarket. Lower sales of Schlumberger Information Solutions (SIS), Completions and Artificial Lift Systems products were also recorded following the seasonal highs of the prior quarter.

First-quarter pretax operating income of $1.50 billion decreased 2% sequentially but increased 7% year-on-year. Sequential growth was recorded through demand for high-margin Wireline and Drilling & Measurements services in the US Gulf Coast; strong demand for Wireline and Well Services technologies in Canada; and higher activity levels with a more favorable technology mix in East Mediterranean, Australia/Papua New Guinea and Thailand/Vietnam. However, this growth was more than offset by the impact of the seasonal land access restrictions in US West; a less favorable activity mix in the North Sea; project delays in Peru/Colombia/Ecuador; higher IPM project startup and third-party managed costs in Mexico/Central America; the weather-related slowdown in China/Japan/Korea; and an overall reduction in Completions and Artificial Lift Systems product sales together with reduced high-margin SIS sales across all Areas. These events resulted in an overall pretax operating margin of 26.8%.


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