USA: Schlumberger Announces Fourth-Quarter and Full-Year 2010 Results

Schlumberger Limited today 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 Results

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.”

Other Events:

• 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.

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Source: Schlumberger , January 21, 2011;