Schlumberger optimistic about 2018. 4Q profit hit by write-downs

Schlumberger, world’s largest oilfield services provider, posted a 9 percent rise in revenue for the full-year 2017, and a 9 percent increase in the fourth quarter, year-on-year. Apart from the revenue hike, the company also recorded a $3B charge in the fourth quarter.

Despite the charge, following the oil industry downturn in 2014, and gloomy forecasts that followed quarter after quarter, Schlumberger is now optimistic about 2018.

Full-year 2017 revenue was $30,4 billion, up from $27,8 billion in 2016. Net loss for the year was $1,5 billion, versus $1,68 billion in 2016. Excluding charges and credits, net profit was $2 billion, up from $1,6 billion a year ago.

Increase in revenue,  included a full year’s activity from the acquired Cameron businesses as compared to three quarters of activity in 2016.

Excluding the addition of Cameron, revenue growth was driven by land activity in North America, which increased by 82% in line with the increase in rig count. Full-year Production Group revenue increased 21%, Reservoir Characterization Group revenue improved 2%, and Drilling Group revenue declined 2%.

$3 billion in 4Q charge 

Fourth quarter revenue was $8,179, 3% up from 3Q 2017, and 15% up compared to the fourth quarter of 2017 when it reported a revenue of $7,1 billion.

Worth noting, Schlumberger in the fourth quarter recorded $3.041 billion of pretax charges on WesternGeco restructuring, Venezuela Write-Down, Workforce reductions, multi-client seismic data impairment, and other charges.

Thus, the company’s net loss for the quarter was $2,255 billion, compared to a 3Q 2017 profit of $545 million, and a $204 million loss in 4Q 2016.

Excluding the charges 4Q net profit was 688 million.

Cameron boosted by OneSubsea

Schlumberger Chairman and CEO Paal Kibsgaard said:“We closed the year with fourth-quarter revenue growing 3% sequentially while pretax operating income rose 9%. Sequential growth was driven by strong activity in North America, Saudi Arabia, and Latin America, while revenue in the Europe, CIS, and Africa Area seasonally declined. Earnings per share of $0.48, excluding charges, were 14% higher than the third quarter.

The company’s fourth-quarter revenue increase was led by the Production Group, which grew by 7%. Production Group performance was driven by strong international activity, with more than 20% sequential growth in Saudi Arabia, Russia, and Argentina. In North America land, revenue grew 6% following the redeployment of additional pressure pumping fleets, despite a slight sequential decline in market activity.

“…oil market is now in balance and the previous oversupply discount is gradually being replaced by a market tightness premium…”

CEO said: “Cameron Group revenue increased 9% sequentially with growth across all product lines led by OneSubsea, on higher project volume and increased service revenue. Drilling Group revenue had more modest sequential growth of 3%, driven by strong M-I SWACO sales in Mexico and North America and increased Integrated Drilling Services activity in Kuwait. Reservoir Characterization Group revenue decreased 8% sequentially, as the seasonal decline in Wireline activity in Russia and lower revenue on a long-term project in the Middle East were partially offset by year-end sales of SIS software and WesternGeco multiclient seismic licenses.

Industry spending set for growth

Providing his view on how 2018 will pan out, Kibsgaard was optimistic that effects of three years of underinvestment across the oil and gas industry, mixed with increasing oil prices, would start to show, and lead to an increase in demand for oilfield services.

He said: “Looking at the oil market, the strong growth in demand is projected to continue in 2018, on the back of a robust global economy. On the supply side, the extension of the OPEC- and Russia-led production cuts is already translating into higher-than-expected inventory draws. In North America, 2018 shale oil production is set for another year of strong growth, as the positive oil market sentiments will likely increase both investment appetite and availability of financing.

“At the same time, the production base in the rest of the world is showing fatigue after three years of unprecedented underinvestment. The underlying signs of weakness will likely become more evident in the coming year, as the production additions from investments made in the previous upcycle start to noticeably fall off. All together this means the oil market is now in balance and the previous oversupply discount is gradually being replaced by a market tightness premium, which makes us increasingly positive on the global outlook for our business.”

“These positive oil market sentiments are reflected in the third-party E&P spend surveys, which predict 15–20% growth in North American investments in 2018, while the international market is expected to grow for the first time in four years, with a projected 5% increase in spend. So, as we enter the first year of growth in all parts of our global operations since 2014, there is renewed excitement and enthusiasm throughout our organization, and we remain committed to delivering market-leading products and services to our customers, and superior returns to our shareholders.”