Schlumberger Sees Success in North, South America
To follow-up on its earnings report for second quarter 2008, Schlumberger has issued an update on revenue specifics for the Company's holdings in North America, Latin America and its WesternGeco operations.
Revenue of $1.44 billion increased 1% sequentially and 7% year-on-year. Pretax operating income of $344 million decreased 5% sequentially and 18% year-on-year.
Sequentially, the US land GeoMarkets recorded strong revenue increases driven by robust demand for Well Services and Wireline technologies in addition to a rebound in activity following the end of seasonal winter weather restrictions. The US Gulf Coast registered strong growth from demand for Drilling & Measurements services and a surge in Completions product sales. These increases were largely offset by the significant seasonal slowdown of activity in Canada.
Pretax operating margin for the Area decreased sequentially to 23.9% as the higher operating leverage in the US land, and the strong demand for high-margin technologies in the US Gulf Coast GeoMarkets, were more than offset by the seasonal slowdown in Canada.
In Oklahoma, Schlumberger simultaneously fractured four Continental Resources Woodford Shale horizontal wells while monitoring operations with the Well Services StimMAP Live* microseismic fracture mapping service. Several world firsts were accomplished on this unique job engineered to maximize reservoir contact. Continental Resources reported 40% higher initial gas production from these wells compared to nearby wells that had been conventionally stimulated. StimMAP Live determines optimum fracture stimulation with real-time data acquisition.
Working for BP in the US Gulf of Mexico, Schlumberger deployed a 30,000 psi bottom-hole assembly consisting of directional-drilling, MWD and logging-while-drilling (LWD) technologies to drill the ultra-deep, ultra-high pressure Kaskida ST2 well. Total depth reached 32,455 ft with a maximum circulating annular pressure of 26,419 psi.
An operator working in the deep waters of the US Gulf of Mexico set three consecutive sub-salt drilling records using a number of advanced Drilling & Measurements, Wireline and Well Services technologies. In particular, PowerDrive X5* in combination with TeleScope* high-speed telemetry and VISION* resistivity technologies achieved average penetration rates exceeding 100 ft/hr while use of Well Services FlexSTONE* advanced flexible cement technology minimized slurry pumping times. The time saved translated to savings of more than $40 million versus planned well costs.
In the Delaware basin of West Texas, operators deployed Drilling & Measurements PowerDrive* rotary-steerable and PeriScope* bed boundary mapping technologies to help improve drilling efficiency. In one case, the combination was used to drill a horizontal well in the 3rd Bone Springs formation to reduce drilling time by more than half. The resulting smooth well bore aided positioning of the multistage completion equipment.
In the Groesbeck area of East Texas, Schlumberger PowerDrive rotary-steerable tools were deployed for Devon Energy to significantly reduce drilling time in horizontal wells. PowerDrive in the lateral section improved the ability to get weight-on-bit and increased average rate of penetration by 50% reducing overall drilling time on average by 6 days.
On a SAGD (steam-assisted gravity drainage) operation for MEG Energy Corp. in the Athabasca region of Western Canada, Schlumberger deployed a Wireline FMI* Fullbore Formation MicroImager tool that enabled, in combination with drill cores and high-resolution logging data, accurate identification of lateral permeability barriers and the definition of a detailed litho-facies scheme. This helped the customer build a more detailed reservoir model and decide where to place the injector and producer wells.
During the quarter, Hess Corporation signed an agreement for Schlumberger Information Solutions (SIS) to provide geological, geophysical, reservoir engineering, economics, drilling and production software along with data management services and enhanced application and workflow support. Under the agreement, Hess will deploy Petrel seismic-to-simulation, GeoFrame* reservoir characterization, ECLIPSE* reservoir simulation, Merak project economics, OFM well and reservoir analysis, and Drilling Office* integrated drilling software.
Revenue of $1.06 billion increased 15% sequentially and 39% year-on-year. Pretax operating income of $243 million increased 31% sequentially and 36% year-on-year.
Sequential growth was strong across the Area, led by the Mexico/Central America GeoMarket due to the ramp-up of IPM projects, and higher offshore activity following operational delays in previous quarters. In addition, Peru/Colombia/Ecuador saw significant improvement due to higher demand for Wireline and Drilling & Measurements technologies together with increased gain share in IPM activity in Colombia, while the Venezuela/Trinidad & Tobago GeoMarket benefited from strong demand for Well Services and Wireline technologies. In the Brazil GeoMarket, growth was driven by higher exploration activity and increased SIS product sales. The Argentina/Bolivia/Chile GeoMarket improved on strong demand for Well Services and Wireline technologies, however growth was partially offset by delays in Argentina.
Pretax operating margin improved sequentially by a notable 296 bps to 23.0% primarily due to increased demand for high-margin Drilling & Measurements and Wireline technologies offshore Mexico/Central America and a more favorable activity mix in Peru/Colombia/Ecuador and Brazil. In addition, lower IPM project start-up costs on land in Mexico/Central America contributed to the improvement.
Offshore Brazil, Schlumberger successfully plugged and abandoned a high-pressure, high-temperature well using a combination of unique Well Services technologies. Gas migration in this well was controlled using a combination of DensCRETE high solid content slurry and GASBLOK gas migration control cement systems.
In Venezuela, PDVSA drilled three wells using Schlumberger real-time geosteering and slimhole PeriScope technologies. This resulted in net-pay sand ratios of 82%, 97%, and 78% respectively for the three wells, confirming the economic validity of advanced technology in cost-sensitive land drilling environments. Early reports indicate production exceeded expectations in the first well tested.
Elsewhere in Venezuela, PDVSA awarded Schlumberger a contract for rigless intervention services in more than 300 wells as part of an initiative to increase production. The objective is to improve productivity and recovery from existing reservoirs through services such as re-perforation, stimulation and mechanical repair. The operator’s goal is to increase production by 200,000 bpd from interventions in more than 1,000 wells.
In Argentina, an operator achieved a more than four-fold increase in gas production in three openhole completed horizontal wells using Schlumberger StageFRAC multistage fracturing and completions services to place five stages of propped fractures along the horizontal openhole section of each well. The operator required a fast deploying system that enhanced productivity at a controlled total cost to optimize well economics. The objectives of the three-well project were achieved delivering maximized production in an efficient, cost-effective operation, with one of the wells becoming the largest gas producer in the field.
Second-quarter revenue of $671 million decreased 1% over the prior quarter but was 1% higher than the same period last year. Pretax operating income of $196 million was flat sequentially and 9% lower year-on-year.
Sequentially, Multiclient revenue increased on additional pre-commitments for wide-azimuth surveys in North America as well as pre-commitments on new projects in Norway and Australia, although these increases were partially offset by lower late sales of narrow-azimuth data in North America. Land revenue increased due to improved utilization and productivity in North Africa partially offset by reduced activity in Latin America. Data Processing revenue also recorded a sequential increase — primarily in Europe and India. However, these increases were more than offset by decreased Marine revenue resulting from seasonal vessel transits and vessel transfers to multiclient surveys.
Pretax operating margin was essentially flat sequentially at 29.2% as increased contributions from higher Land and Data Processing activity were partially offset by the impact of the Multiclient sales mix in North America.
During the quarter, Schlumberger acquired Integrated Exploration Systems (IES), the Aachen, Germany-based technology leader in petroleum systems modeling. IES PetroMod proprietary software models basin evolution through geological time to predict the generation, migration and entrapment of hydrocarbons. IES technology will be combined with other Schlumberger services to create the new Integrated Services for Exploration software suite designed to mitigate exploration risk.
In addition, Schlumberger acquired Staag Imaging, L.P., a Houston-based provider of leading-edge depth imaging technologies for seismic data processing. Staag will become part of the Schlumberger WesternGeco business segment. The company is one of the first providers of a commercial full waveform inversion technique that uses the two-way wave equation method to build highly accurate velocity models of the subsurface, including complex geology formations such as salt bodies. The accurate models it produces can then be used to exploit the power of WesternGeco complementary high-resolution reverse time migration capability.
The improved prospect imaging of the Q-Land Chaves II multiclient survey in New Mexico led to the survey being expanded from 74 to 120 square miles as a result of additional client prefunding.
WesternGeco commenced phase IV of the E-Octopus wide-azimuth multiclient survey in the ultra-deepwaters of the US Gulf of Mexico. The survey is designed to assist operators in imaging and identifying subsalt prospects, and is due to complete acquisition in early Q3 2008. WesternGeco Electromagnetics continued acquisition of marine magnetotelluric (MMT) data over wide-azimuth multiclient seismic data sets in the US Gulf of Mexico. Approximately 7,000 km of information has been acquired, making this the largest MMT data set recorded to date. The data are now being introduced into integrated imaging product offerings. Additionally, WesternGeco Electromagnetics launched the Toisa Vigilant, a second controlled-source electromagnetics (CSEM) acquisition vessel which will commence work in the North Sea in Q3 2008.
Eni Indonesia awarded WesternGeco the first commercial full-azimuth towed streamer survey using the proprietary WesternGeco Coil Shooting technique. The project, which has received full technical support and endorsement from the Indonesian authorities, will cover the Tulip Reservoir in the Bukat PSC, Indonesia using a single Q-Marine vessel without additional source vessels to more than double operational efficiency.
Kuwait Oil Company awarded WesternGeco an integrated Q-Land acquisition and processing project for various fields within Kuwait. The project, which covers 2,600 sq km commenced in June and is expected to last for a two-year period. The award represents the largest Q-Land contract to date.
Kosmos Energy awarded WesternGeco a second Q-Marine project covering an area of 505 sq km over the West Cape Three Points area offshore Ghana.
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