Schlumberger 4Q Profit Up 31%
Schlumberger reported full-year 2010 revenue of $27.45 billion versus $22.70 billion in 2009.
Full-year 2010 income from continuing operations attributable to Schlumberger, excluding charges and credits, was $3.60 billion, representing diluted earnings-per-share of $2.86 versus $2.78 in 2009.
Fourth-quarter 2010 revenue was $9.07 billion versus $6.85 billion in the third quarter of 2010, and $5.74 billion in the fourth quarter of 2009.
Income from continuing operations attributable to Schlumberger, excluding charges and credits, was $1.16 billion—an increase of 33% sequentially and 42% year-on-year. Diluted earnings-per-share from continuing operations, excluding charges and credits, was $0.85 versus $0.70 in the previous quarter, and $0.67 in the fourth quarter of 2009.
Oilfield Services revenue of $6.01 billion increased 9% sequentially and 16% year-on-year. Pretax segment operating income of $1.33 billion was up 21% sequentially and 32% year-on-year.
WesternGeco revenue of $560 million increased 17% sequentially and 2% year-on-year. Pretax segment operating income of $113 million was 183% higher sequentially but 1% lower year-on-year.
The fourth-quarter 2010 results reflect a full quarter of activity from the acquired Smith businesses, which contributed revenue of $2.49 billion and pretax operating income of $275 million. The merger was dilutive to the fourth-quarter 2010 earnings-per-share by approximately $0.05.
Schlumberger Chairman and CEO Andrew Gould commented, "Fourth-quarter activity in North America remained strong through increased activity in liquid-rich plays and improvement in Canada. Stronger pricing and the restructuring efforts across the Area continued to contribute to margin expansion, particularly at Well Services. In addition, an accelerated payout on an IPM gain-share project following the sale of the project by the customer clearly demonstrated how this business model can create value.
"Outside North America, activity improvements in the North Sea, West Africa, and several Middle East & Asia GeoMarkets, coupled with strong year-end product sales particularly for software, more than offset continued weakness in Mexico and seasonal activity decline in Russia. Rapid revenue ramp-up in Iraq, which was impacted by heavy start-up costs, did not yield equivalent profitability.
"At WesternGeco, excellent fourth-quarter multiclient sales were due mostly to the enhanced quality of subsalt imaging products in the US Gulf of Mexico.
"The acquired Smith businesses continued to outperform our original expectations with the revenue synergies achieved through the acquisition increasing in each successive month of the quarter.
"As we look forward to 2011 it is important to remember that the primary driver of our business has always been, and will remain, the demand for oil and gas.
"For oil, 2010 turned out to be the year of the second-largest demand increase in the last thirty years. The consensus forecast for demand in 2011 shows a further healthy increase. Oil prices have moved into a range that will encourage increased investment, particularly in exploration, which remains the swing factor in operators’ budgets. While we do not anticipate a return to pre-Macondo activity levels in deepwater US Gulf of Mexico in 2011, we do expect a marked increase in deepwater activity in the rest of the world. These factors, coupled with increases in development activity and production enhancement in many other areas, promise stronger growth rates as the year unfolds.
"For natural gas, demand recovery has been less marked. Increases in supply of both unconventional gas in the United States and of liquefied natural gas around the world will limit the progress of prices. Nonetheless, activity in the United States is likely to remain strong—at least through the first half of the year—due to the commitments necessary to retain leases, the backlog of wells to be completed, and the contribution of natural gas liquids to overall project economics. Increased service capacity, however, will negatively affect pricing at some stage during the year.
"Overseas, the governing factor on gas activity, particularly in the Middle East, will be the ability of many nations to use gas as a substitute for oil to meet increased local energy demand, thus freeing up more liquids for export. Elsewhere the long lead time necessary to execute large gas projects for LNG exports will ensure that a certain level of activity is maintained.
"Unconventional gas resources will continue to attract considerable interest outside North America. The leading activity will continue to be gas in tight, or low permeability, reservoirs, and in coal-bed methane developments. There will be exploration activity around the potential that shale gas offers in many other parts of the world.
"Increased activity, coupled with the higher technology needs of exploration, deepwater operations, and tight gas activity, particularly outside North America, will make 2011 a stronger year for Schlumberger. The importance of risk reduction and the minimization of drilling cost make the acquisitions of Geoservices and Smith major contributors to our future growth in this scenario."
- During the quarter, Schlumberger repurchased 6.1 million shares of its common stock at an average price of $74.14 for a total purchase price of $449 million under the stock repurchase program approved by the Schlumberger Board of Directors on April 17, 2008. For the full-year 2010, Schlumberger repurchased 26.6 million shares at an average price of $64.48 for a total purchase price of $1.72 billion.
- In December 2010, Schlumberger issued EUR 1 billon of 2.75% Guaranteed Notes due 2015. In January 2011, Schlumberger issued $1.1 billion of 4.200% Senior Notes due 2021 and $500 million of 2.650% Senior Notes due 2016. The net proceeds from these offerings will be used for general corporate purposes.
- On January 20, 2011, the Board of Directors approved a 19% increase in the quarterly dividend. The next quarterly dividend, which will increase to $0.25 per share of outstanding common stock, is payable on April 1, 2011 to stockholders of record on February 16, 2011.
- The impact of the deepwater drilling moratorium in the US Gulf of Mexico on Schlumberger fourth-quarter earnings-per-share was approximately $0.04-$0.05.
Full-year 2010 revenue of $22.08 billion was 8% higher than 2009. Growth was led by the North America Area (up 35%) followed by the Middle East & Asia (up 7%) and Latin America (up 2%). Europe/CIS/Africa revenue decreased 4%. Among the Technologies, growth was primarily in Well Services while the acquisition of Geoservices also contributed to the increased revenue. Pretax operating income of $4.47 billion was 3% higher than 2009. Pretax operating margin decreased 82 basis points (bps) to 20.3% as a significant improvement in North America Area land performance from the recovery in activity and pricing for Well Services technologies was insufficient to offset the impact of the halt to deepwater drilling in the US Gulf of Mexico and lower international activity levels and pricing, particularly in the Europe/CIS/Africa Area.
Fourth-quarter revenue of $6.01 billion increased 9% sequentially and 16% year-on-year. Sequentially, North America Area revenue increased 27% on strong activity on land in the US and Canada as well as from the early payout of an Integrated Project Management (IPM) gain share project. In the Middle East & Asia Area, revenue grew on year-end equipment, Schlumberger Information Solutions (SIS) software sales, and on higher activity in the Iraq, East Asia and Indonesia GeoMarkets. Europe/CIS/Africa Area revenue increased from stronger activity in the North Sea, West & South Africa, Caspian and Continental Europe GeoMarkets, as well as from year-end SIS software sales. These increases were partially offset by a decrease in Latin America Area revenue primarily due to continuing weakness in the Mexico/Central America GeoMarket.
All Technologies recorded sequential growth, most notably Well Services due to continuing strong activity in North America, and SIS and Artificial Lift from year-end sales. IPM revenue also increased as a result of the early payout on the IPM project in North America.
Fourth-quarter pretax operating income of $1.33 billion increased 21% sequentially and 32% year-on-year. Pretax operating margin increased 224 bps sequentially to 22.1% primarily driven by the robust performance in North America and strong contributions from the year-end equipment and software sales.
Schlumberger has successfully executed a three-well exploration campaign for Cairn Energy PLC using two rigs in the Sigguk block offshore Greenland with integrated services from Data & Consulting Services, Drilling & Measurements, Wireline, Cementing and Well Testing. In addition, M-I SWACO delivered drilling and completions fluids, Smith Bits supplied drill bits and high-speed motors, Geoservices provided mud logging services, and Global Connectivity Services ensured real-time streaming of data. All services were coordinated by a senior Schlumberger project manager based in the client's offices. The remoteness of the operation provided logistical challenges as the field was more than 2,000 miles from the project support base. During drilling, seismicVISION real-time seismic-while-drilling technology was used in a specific section of one well to feed the bit position back through the InterACT connectivity, collaboration, and information system for use in the Petrel seismic-to-simulation workflow process. In another section, real-time analysis of the MR Scanner expert magnetic resonance service indicated zones of sufficient interest that further logs and tests were ordered. After casing, specific zones were then selectively perforated and tested by the MDT modular formation dynamics tester tool with a dual packer module and the InSitu Fluid Analyzer system with interval pressure transient tests conducted with real-time support from experts. To ensure cement quality, an offshore laboratory installed on one rig tested all cementing systems deployed—including ISOBLOK and GASBLOK isolation and gas migration control systems as well as AccuSET engineered cement hydration control slurries and CemNET fiber technology systems.
In Brazil, a complete range of Schlumberger?? and Smith integrated drilling services was deployed on a Shell well in block BMS-54. Smith drill bits, Schlumberger directional drilling, M-I SWACO drilling fluids and Geoservices mud logging services all contributed to the well becoming the fastest drilled to date, recording substantial increases in rates of penetration in all hole sizes while meeting all directional goals. In particular, the pre-salt section, drilled with the new Smith High Abrasion Resistance Configuration (SHARC) bit with ONYX PDC cutters, recorded an improvement of 160% over offset wells drilled in the area. The integrated nature of the bottomhole assembly demonstrates how optimization can impact the high-cost deepwater drilling environment.
Offshore Indonesia, Total E&P Indonesie has successfully deployed an innovative bottom-hole assembly combining Schlumberger and Smith technologies to mitigate risk in drilling a difficult coal-shale sequence in Kalimantan. Schlumberger PowerDrive Xceed and PowerDrive rotary steerable systems were successively used in combination with logging-while-drilling and measurement-while-drilling technologies together with Smith Rhino hydraulically expandable reamers and Smith PDC bits to drill an enlarged hole that analysis had indicated would minimize drilling difficulties. The chosen bottomhole assemblies were designed using Smith IDEAS integrated dynamic engineering analysis technology to confirm likely lateral and axial acceleration and to select bit and reamer hole patterns. No drilling difficulties were encountered during the operation.
As part of an integrated service offering comprising drilling fluids, cementing, measurement while drilling, and testing, Schlumberger Well Services successfully executed the first hydraulic fracturing stimulation treatment of a shale gas reservoir in the Polish Baltic Basin area. The results of this treatment are helping to gain knowledge of the potential for shale gas development in the region. Successful execution was enabled by close interaction between Lane Energy/ConocoPhillips and Schlumberger.
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