Schlumberger North America revenue declined 39% (land down 45%, offshore down 17%)
HOUSTON, Texas – Schlumberger Limited says 2015 global revenue was down 27 per cent, with a full one-third of the decline coming from the weak position of international currencies against the US dollar.
“Full-year 2015 revenue of $35.5 billion decreased 27 per cent year-on-year in line with upstream capex spending cuts that resulted in significantly lower E&P investment levels,” said Paal Kibsgaard, Schlumberger chairman and CEO.
Full-year revenue for the International Areas declined 21 per cent due to customer budget cuts of more than 20 per cent, as international and national oil companies responded to lower commodity prices, as Schlumberger reported results for full-year 2015 and the fourth quarter of 2015.
“The decrease in land activity was the sharpest seen since 1986, as capex spending by North American customers declined by more than 40 per cent. With the year-end US land rig count 68 per cent lower than the 2014 peak, at less than 700 rigs, the massive over-capacity in the land services market offers no signs of pricing recovery in the short to medium term,” said Kibsgaard.
More than one-third of the revenue decline was the result of the fall of currencies against the US dollar. Performance among the Areas was led by a 26 per cent decrease in Europe/CIS & Africa, mainly due to weakness in the Russian ruble.
Schlumberger exploration activities in the UK and Norway fell as customer spending decelerated. In Sub-Saharan Africa, offshore rigs demobilized as exploration work decreased, and in North Africa work progressed slowly, partly because activity in Libya remained muted as onshore operations were limited by security concerns.
Full-year revenue for Schlumberger in the Latin America Area declined 22 per cent due to significantly decreased activity in Mexico, Brazil and Colombia as a result of sustained budget cuts that led to rig count reductions.
Devaluation of the Venezuela bolivar impacted revenue in the Venezuela, Trinidad & Tobago GeoMarket. Middle East & Asia Area full-year revenue decreased 17 per cent due to a significant activity drop in the Asia-Pacific region, particularly in Australia.
This decrease was partially offset, however, by robust activity in the Gulf Cooperation Council countries in the Middle East, particularly Saudi Arabia, Kuwait and Oman, although the effect of this was offset by pricing concessions. Activity in Iraq continued to decline.
Full-year Schlumberger pretax operating income declined 38 per cent, with pretax operating margin contracting 342 basis points to 18.4 per cent. North America margin declined 874 basis points to 10.2 per cent on decreased pressure pumping activity and pricing weakness on land.
International margin was essentially flat with 2014 at 23.6 per cent despite the revenue decline from pricing concessions, and from an increasingly unfavorable shift in revenue mix from offshore exploration to development.
While revenues in North America and in the International Areas have declined by 39 per cent and 21 per cent, respectively, decremental operating margins have been limited to 32 per cent in North America, and 25 per cent internationally. Schlumberger says those figures are substantially better than those delivered in the 2009 downturn.
“The strength of these results demonstrates the resiliency of our business portfolio in the face of the activity, pricing and foreign currency challenges of 2015. Our performance was driven by excellence in execution, prompt and proactive cost and resource management, and the growing impact of our transformation program,” said Kibsgaard.
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Full-Year Results |
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| (Stated in millions, except per share amounts) | |||||||||||||||
| Twelve Months Ended | Change | ||||||||||||||
| Dec. 31, 2015 | Dec. 31, 2014 | Year-on-year | |||||||||||||
| Revenue | $ | 35,475 | $ | 48,580 | -27 | % | |||||||||
| Pretax operating income | 6,510 | 10,576 | -38 | % | |||||||||||
| Income from continuing operations, excluding charges and credits* | 4,290 | 7,282 | -41 | % | |||||||||||
| Diluted EPS from continuing operations, excluding charges and credits* | $ | 3.37 | $ | 5.57 | -39 | % | |||||||||
| Pretax operating margin | 18.4 | % | 21.8 | % | -342 bps | ||||||||||
| North America revenue | $ | 9,811 | $ | 16,151 | -39 | % | |||||||||
| North America pretax operating income | 999 | 3,057 | -67 | % | |||||||||||
| North America pretax operating margin | 10.2 | % | 18.9 | % | -874 bps | ||||||||||
| International revenue | $ | 25,196 | $ | 32,089 | -21 | % | |||||||||
| International pretax operating income | 5,955 | 7,677 | -22 | % | |||||||||||
| International pretax operating margin | 23.6 | % | 23.9 | % | -29 bps | ||||||||||
*Income from continuing operations, including charges and credits, was $2.072 billion in 2015 and $5.643 billion in 2014. Diluted EPS from continuing operations, including charges and credits, was $1.63 in 2015 and $4.31 in 2014. See section entitled “Charges & Credits” for details.