Schlumberger Posts $940.4 Million Net Income In Q1 2009

Published: 24-Apr-2009

By: Staff Writer Staff Writer Staff Writer

Schlumberger Limited (Schlumberger), a supplier of technology, project management and information solutions to oil and gas industry, has reported $6 billion for the first quarter of 2009, compared with the revenues of $6.3 billion in the year-ago quarter. It also reported a net income of $0.94 billion, or $0.78 per diluted share, for the first quarter of 2009, compared with the net income of $1.3 billion or $1.09 per diluted share, in the year-ago quarter.

Income from continuing operations attributable to Schlumberger, before charges and credits, was $938 million—a decrease of 25% sequentially and 28% year-on-year. Diluted earnings-per-share from continuing operations was $0.78, versus $1.03 excluding charges of $0.08 per share in the previous quarter, and $1.06 in the first quarter of 2008.

Andrew Gould, Schlumberger chairman and chief executive officer commented, “The rate of decline in revenue at Oilfield Services accelerated considerably compared to the fourth quarter, largely due to the precipitous drop in the North American natural gas rig count. Outside North America, low activity in Russia and the fall of many local currencies against the US dollar remained the principal causes of weakness.”

“At WesternGeco, the rate of sequential revenue decline slowed to 8% as continuing weak North American Multiclient revenue was partially offset by improved Marine revenues. Backlog decreased by $319 million to $1.5 billion, partly due to delayed contract awards pending the results of licensing rounds in several countries.”

“Overall, our operating cost base has declined sequentially by more than $450 million due to prompt action on all variable cost categories and to the effects of favorable exchange rate movements.”

“Our visibility on 2009 has not materially changed from the end of the fourth quarter. We do not see any significant recovery in North American gas drilling before 2010. Overseas, while activity declines will be limited, customers are actively seeking and are obtaining price relief to improve the economics of current projects. At the same time, exploration expenditures are being deferred in favor of projects that produce immediate cash flow. However, we are encouraged to see offshore deepwater activity resisting fairly well to the current budget cuts.”

“As we indicated in our fourth-quarter comments, longer term we remain convinced that any demand recovery for oil will need to be accompanied by increased investment to offset decline in the ageing production base.”

Other Events:

In March 2009, Schlumberger issued EUR 1 billion of 4.50% guaranteed notes due 2014. The proceeds from this offering will be used to refinance existing debt obligations and for general corporate purposes, and will serve to further increase the financial flexibility of Schlumberger.

Oilfield Services

First-quarter revenue of $5.44 billion decreased 13% sequentially and 3% year-on-year. Sequentially, North America revenue dropped significantly due to reduced activity and pricing pressure in the US Land, US Gulf of Mexico and Canada GeoMarkets. In Europe/CIS/Africa, revenue fell primarily as a result of weaker activity in the Russia, North Africa and Caspian GeoMarkets, as well as from the weakening of the US dollar versus local currencies. Middle East & Asia revenue declined due to reduced activity in the Arabian, runei/Malaysia/Philippines and East Mediterranean GeoMarkets. Latin America revenue decreased mostly on lower activity in Venezuela/Trinidad & Tobago and reduced product sales in Peru/Colombia/Ecuador, partially offset by stronger integrated project management (IPM) results in Mexico/Central America and increased offshore services in Brazil. Among the technologies, well services, wireline, Schlumberger information solutions (SIS) and artificial lift led the declines in revenue.

First-quarter pretax operating income of $1.26 billion was down 21% sequentially and 16% year-on-year. Pretax operating margin decreased 248 basis points (bps) sequentially to 23.1% primarily due to the drop in activity and pricing pressure in North America.

In Brazil, Petroleo Brasileiro S.A (Petrobras) and Schlumberger signed a three-year technology cooperation agreement focused on research and development projects for exploration and production activities in the pre-salt area offshore. The first four projects announced are mainly dedicated to reservoir characterization using controlled source electromagnetic, seismic and nuclear magnetic resonance techniques.

During the quarter, SIS released the 2009.1 version of the Petrel workflow process software to bring new efficiency to seismic interpretation workflows through the combination of rapid acreage assessment and the ability to run multiple iterations for prospect ranking. The release also includes significant improvements to software architecture and hardware capability to provide state-of-the-art performance and scalability.

At the Middle East Oil Show in Bahrain, Schlumberger announced the expansion of its Deep Reading technology portfolio with the release of the second-generation electromagnetic DeepLook-EM enhanced crosswell reservoir imaging and monitoring system, as well as the acquisition of Z-Seis, a Houston, Texas-based supplier of crosswell seismic reservoir imaging technology. The new services include planning, modeling, simulation, acquisition, processing and inversion to deliver interwell reservoir images and bridge the gap between downhole and surface measurement resolution and integration.

North America

Revenue of $1.19 billion was down 23% sequentially and 16% year-on-year. Pretax operating income of $163 million decreased 53% sequentially and 55% year-on-year.

Sequentially, the US Land GeoMarket recorded a significant decrease in revenue as low natural gas prices and a lack of available credit for some customers resulted in a rapid and deep reduction in activity coupled with heavy pricing pressure. US Gulf of Mexico GeoMarket revenue was down due to weak shelf drilling activity and associated pricing erosion, while Canada GeoMarket revenue decreased on unusually low winter drilling activity and early spring break-up. These decreases, however, were partially offset by seasonally high exploration-related activity in the Alaska GeoMarket.

Pretax operating margin decreased sequentially by 858 bps to 13.7% on the precipitous activity decline and consequent pricing pressure in the US Land and US Gulf of Mexico GeoMarkets.

In the Rockies Pinedale field, the Schlumberger Drilling & Measurements rotary-steerable PowerV system has been used for one operator to reduce drilling time from eight to five days throughout the production interval. Drilling is monitored by the Schlumberger OSC operations support center in Denver, where engineers monitor drilling information from sensors on the rig to optimize the drilling process. The success of this project has been based not only on PowerV technology, but also on the support and collaboration afforded by the OSC.

In Alaska, a well drilled with casing drilling technology was successfully logged with Schlumberger Wireline ABC analysis behind casing services. Casing drilling, which saves considerable operating time, prevents wells from being logged in open hole and restricts the information that can be acquired. ABC services however offer sufficient versatility to provide a complete formation evaluation.

Also in Alaska, in another complex logging environment, the multi express conveyance platform was used to provide BP with a complete evaluation in a slim-hole coiled-tubing drilled horizontal sidetrack well. Previously, only logging-while-drilling (LWD) correlation, induction and memory porosity measurements have been possible in such wells, but the real-time Multi Express service now offers the advantage of full complex lithology evaluations.

In Canada, oil sand operators successfully used Schlumberger Wireline MDT Modular formation dynamics tester technology with full-bore packers to quantify shale integrity. The steam-assisted gravity drainage technique used in the region requires accurate knowledge of such integrity in order to calculate optimal steam injection pressure.

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