Schlumberger Reports 33% Increase in 2Q Revenues

Schlumberger reported second-quarter 2010 revenue of $5.94 billion versus $5.60 billion in the first quarter of 2010, and $5.53 billion in the second quarter of 2009.

Income from continuing operations attributable to Schlumberger excluding charges was $818 million—an increase of 9% sequentially and essentially flat year-on-year. Diluted earnings-per-share from continuing operations attributable to Schlumberger excluding charges was $0.68 versus $0.62 in the previous quarter, and $0.68 in the second quarter of 2009.

Schlumberger recorded charges of $75 million ($0.06 per share) in the first quarter of 2010 and $207 million ($0.17 per share) in the second quarter of 2009. There were no charges recorded in the second quarter of 2010.

Oilfield Services revenue of $5.44 billion increased 7% sequentially and 10% year-on-year. Pretax segment operating income of $1.07 billion was up 11% sequentially and 5% year-on-year.

WesternGeco revenue of $476 million increased 1% sequentially but decreased 15% year-on-year. Pretax segment operating income of $47 million decreased 31% sequentially and 52% year-on-year.

Schlumberger Chairman and CEO Andrew Gould commented, "Sequential revenue increases were recorded in all Areas as were sequential margin improvements led by strong performances in North America and Latin America.

"In North America, high activity and improved pricing in the US Land GeoMarket more than offset the revenue effects of the Canadian spring break-up and the reduced offshore activity late in the quarter following the start of the drilling moratorium in the US Gulf of Mexico. In Latin America, Mexico and Brazil led the revenue improvement.

"In the other Areas, activity steadily improved as we had forecast. In Europe/CIS/Africa, a strong rebound in Russia and the North Sea was somewhat offset by slow activity in North Africa and lower demand for exploration-related services in West & South Africa.

"At WesternGeco, flat revenues were accompanied by a significant decrease in operating income as strong increases in Marine and Data Processing could not offset the lower margin effect of reduced Multiclient activity following the seasonally stronger first-quarter sales.

"Looking forward to the remainder of the year, we see a continued slow build of activity in the second half in most parts of the world. In particular, US Land, Brazil, North Sea and Russia will be GeoMarkets of continued strength. Meanwhile, we see continued growth across most of the Middle East & Asia GeoMarkets. This will be partially offset by reductions in IPM activity in Mexico in both Chicontepec and Burgos.

"In the deepwater Gulf of Mexico, we are not planning for any resumption of drilling activity this year. In deepwater activity elsewhere we have not seen, nor do we expect to see, any significant delays or program reductions as a result of the US Gulf of Mexico drilling moratorium. Internationally, operators, contractors and regulatory bodies have stepped up maintenance and verification of key well control equipment and procedures, but have not restricted actual drilling activity.

"The outlook for WesternGeco will be governed by the evolution of the Multiclient market in the US Gulf of Mexico, which remains uncertain at this time.

"At Schlumberger we began a program three years ago called 'Excellence in Execution.' This program was designed to create a step change in the service quality and efficiency we provide and, in deepwater, was aimed at enabling our clients to reduce the risk and cost of deepwater operations. The program, in addition to equipment and procedural improvements, provides for competency certification of all personnel involved in deepwater operations. We are encouraged by the results as well as by our customers' acceptance of this multiyear initiative.

"We believe that the contribution of deepwater discoveries has been, and will remain, very significant to future hydrocarbon production. We therefore welcome the current efforts to better understand and control the risks associated with these types of operations. While additional control and oversight will undoubtedly add cost, we expect this will be offset in the long run by improvements in operating procedures and technology.

"The recovery in world demand for oil has been reasonably robust and current forecasts for the coming year remain consistent with slowly increasing levels of exploration and production activity. Natural gas economics remain more challenging, as supply of both LNG and unconventional gas in the US would appear to continue to outstrip the demand recovery. Overall, therefore, we see the current trend of a slow but sure recovery in activity as likely to continue without change until we have a clearer view of the sustainability of the recovery in the world economy."

Oilfield Services

Second-quarter revenue of $5.44 billion was 7% higher sequentially and 10% higher year-on-year. Sequentially, revenue increased in all Areas. In Europe/CIS/Africa, revenue grew primarily due to the seasonal rebound in activity in Russia and improved activity in the North Sea GeoMarket, the effects of which were partially offset by reduced activity in the North Africa and West & South Africa GeoMarkets. Latin America Area revenue increased mostly in the Mexico/Central America GeoMarket on higher activity as well as on a strong performance in Integrated Project Management (IPM) service delivery, and in the Brazil GeoMarket on the continued build-up of offshore exploration activity. In North America, revenue grew on a surge in US Land from a combination of increased activity and pricing that was partially offset by the impact of the spring break-up in Canada and the early effects of the deepwater drilling moratorium in the US Gulf of Mexico. Middle East & Asia Area revenue was higher mainly due to increased activity and Well Services product sales. The acquisition of Geoservices during the quarter also contributed to the overall sequential increase in revenue.

Among the Technologies, sequential revenue growth was strongest in Well Services primarily due to stronger US Land activity and pricing, increased product sales in the Middle Eastern GeoMarkets, and the seasonal rebound in Russia. Artificial Lift recorded strong growth on equipment sales in Russia and the Middle Eastern GeoMarkets.

Second-quarter pretax operating income of $1.07 billion increased 11% sequentially and 5% year-on-year. Pretax operating margin improved 75 basis points (bps) sequentially to 19.8% primarily due to the significantly stronger performance in the US Land GeoMarket resulting from the increased activity and pricing combined with the seasonal rebound in Russia and a more favorable revenue mix in the North Sea GeoMarket. These increases were partially offset by the impact of lower activity in the North Africa and West & South Africa GeoMarkets, the effects of the deepwater drilling moratorium in the US Gulf of Mexico, and the spring break-up in Canada.

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