SCL.L Regulatory News (SCL)

20 Oct 2006 11:00

Schlumberger Limited (NYSE:SLB) today reported third-quarter 2006 operatingrevenue of $4.95 billion versus $4.69 billion in the second quarter of 2006 and$3.70 billion in the third quarter of 2005. Income from continuing operations, before charges and credits, reached $1.00billion--an increase of 11% sequentially and 91% year-on-year.Earnings-per-share diluted, before charges and credits, were $0.81 versus $0.73in the previous quarter and $0.43 in the third quarter of 2005. Income from continuing operations, including charges and credits, was $1.00billion or $0.81 per-share diluted versus $0.69 in the previous quarter and$0.44 in the third quarter of 2005. Oilfield Services revenue of $4.30 billion increased 4% sequentially and 32%year-on-year. Pretax business segment operating income of $1.21 billionincreased 8% sequentially and 68% year-on-year. WesternGeco revenue of $659 million increased 17% sequentially and 51%year-on-year. Pretax business segment operating income of $242 million increased35% sequentially and 183% year-on-year. Schlumberger Chairman and CEO Andrew Gould commented, "Continuing strength inseismic activity and increased demand for drilling services and well placementtechnologies were the highlights of the robust performance in the third quarter.The outstanding results at WesternGeco, where revenues grew 17% sequentially,were due to significant strength in multiclient data sales and high marineutilization. With more than 85% of WesternGeco acquisition activity now focusedon exploration and appraisal operations, the industry's effort to replace andincrease reserves is now clearly underway. Growth in the quarter was broad based, with significant strength in Canadafollowing the spring break-up, and on land in the US where pricing remainedstrong and pressure-pumping backlogs were unchanged. These improvements weresupported by growth in the Caspian, the North Sea and the Arabian GeoMarkets.Burgeoning exploration activity in Vietnam and Eastern Russia added furtherimpetus to these results. Drilling & Measurements PowerDrive and Scope technologies saw further growthbacked by strong technical and operational performance. The range of bothproduct lines is unmatched in the industry and their combination enablesincreasingly complex well profiles to be drilled. As a result these servicescontinue to expand their range and reach as the industry seeks to improveperformance and mitigate risk. Other Schlumberger Technologies that benefitedfrom the quarter's overall activity pattern included Well Services, CompletionSystems and Data & Consulting Services. High levels of natural gas storage in North America with consequent volatilityin the price of natural gas have recently begun to impact activity, particularlyin areas of higher-cost coal bed methane and shallow gas production in Canada.This has not yet materially impacted our activity, however if the coming winterfails to stimulate strong natural gas demand there is a growing likelihood ofexcess equipment capacity in the pressure pumping business at some point in2007. Activity growth elsewhere for both oil and gas will remain strong as ourcustomers continue to fight decline curves and bring in new fields." Other Events -- As part of the current 40 million-share buy-back program announced in the first quarter of 2006, Schlumberger repurchased 8.1 million shares during the quarter for a total amount of $482 million, at an average price of $59 per share. Under this buy-back program 11.7 million shares have been repurchased to date. \* T Consolidated Statement of Income (Stated in thousands except per share amounts) Third Quarter Nine Months -------------------------------------------------For Periods Ended September 30 2006 2005 2006 2005----------------------------------------------------------------------Operating revenue $4,954,818 $3,698,093 $13,880,610 $10,285,836Interest and other income(1) (3) 70,699 80,101 199,781 314,874Expenses Cost of goods sold and services(3) 3,369,573 2,761,591 9,628,650 7,723,760 Research & engineering (3) 149,538 128,266 449,834 371,121 Marketing 17,632 13,477 49,474 39,319 General & administrative 109,158 83,920 300,337 248,670 Interest 62,351 50,637 171,616 147,636----------------------------------------------------------------------Income from Continuing Operations before taxes and minority interest 1,317,265 740,303 3,480,480 2,070,204Taxes on income(3) 317,434 174,953 852,504 474,772----------------------------------------------------------------------Income from Continuing Operations before minority interest 999,831 565,350 2,627,976 1,595,432Minority interest(3) (7) (24,547) (48,741) (56,991)----------------------------------------------------------------------Income from Continuing Operations 999,824 540,803 2,579,235 1,538,441Income from Discontinued Operations - - - 7,972----------------------------------------------------------------------Net Income $999,824 $540,803 $2,579,235 $1,546,413---------------------------------------------------------------------- Diluted Earnings Per Share Income from Continuing Operations $0.81 $0.44 $2.09 $1.27 Income from Discontinued Operations - - - 0.01 ----------- ----------- ------------ ------------ Net Income $0.81 $0.44 $2.09 $1.28 =========== =========== ============ ============ Average shares outstanding 1,183,683 1,179,640 1,182,795 1,178,596Average shares outstanding assuming dilution 1,243,966 1,231,846 1,243,579 1,228,446 Depreciation & amortization included in expenses(2) $392,765 $337,107 $1,122,410 $992,088----------------------------------------------------------------------\* T \* T1) Includes interest income of: a. Third quarter 2006 - $25 million (2005 - $27 million) b. Nine months 2006 - $90 million (2005 - $70 million) 2) Including Multiclient seismic data costs. 3) Charges and credits:\* T \* T (Stated in millions except per share amounts) Diluted EPS Income Minority effect Statement Pretax Tax Interest Net (a) Classification ------- ------ --------- ------- ------- -------------- The second quarter of 2006 includes: WesternGeco in-process Research & R&D charge $(21.0) $- $- $(21.0) $(0.02) engineering Loss on sale of investments to fund the WesternGeco Interest and transaction (9.4) - - (9.4) (0.01) other income WesternGeco Cost of goods visa sold and settlement (9.7) (0.3) 3.2 (6.8) (0.01) services Other in- process R&D Research & charges (5.6) - - (5.6) - engineering ------- ------ --------- ------- ------- $(45.7) $(0.3) $3.2 $(42.8) $(0.03) ------- ------ --------- ------- ------- The first quarter of 2005 includes: Gain on sale of Montrouge Interest and facility $145.7 $- $- $145.7 $0.12 other income Real estate Cost of goods related sold and charges (12.1) 0.8 - (11.3) (0.01) services ------- ------ --------- ------- ------- $133.6 $0.8 $- $134.4 $0.11 ------- ------ --------- ------- ------- The third quarter of 2005 includes: Resolution of contingency - Montrouge Interest and facility $17.8 $- $- $17.8 $0.01 other income ------- ------ --------- ------- ------- (a) May not add due to rounding\* T There were no charges or credits in the third quarter of 2006. \* T Condensed Balance Sheet (Stated in thousands)Assets Sep. 30, 2006 Dec. 31, 2005----------------------------------------------------------------------Current Assets Cash and short-term investments $1,901,219 $3,495,681 Other current assets 6,090,762 5,058,232---------------------------------------------------------------------- 7,991,981 8,553,913Fixed income investments, held to maturity 94,500 359,750Fixed assets 5,096,474 4,200,638Multiclient seismic data 239,914 222,106Goodwill 4,808,809 2,922,465Other assets 2,505,189 1,818,620---------------------------------------------------------------------- $20,736,867 $18,077,492---------------------------------------------------------------------- Liabilities and Stockholders' Equity----------------------------------------------------------------------Current Liabilities Accounts payable and accrued liabilities $3,704,368 $3,564,854 Estimated liability for taxes on income 1,155,402 946,723 Bank loans and current portion of long- term debt 1,234,500 796,578 Dividend payable 148,834 124,733---------------------------------------------------------------------- 6,243,104 5,432,888Long-term debt 3,930,849 3,591,338Postretirement benefits 710,673 707,040Other liabilities 252,780 249,459---------------------------------------------------------------------- 11,137,406 9,980,725Minority interest - 505,182Stockholders' Equity 9,599,461 7,591,585---------------------------------------------------------------------- $20,736,867 $18,077,492----------------------------------------------------------------------\* T \* T Net Debt Net debt represents gross debt less cash, short-term investments and fixed income investments, held to maturity. Management believes that net debt provides useful information regarding the level of Schlumberger indebtedness. Details of the net debt follow: (Stated in millions)Nine Months 2006----------------------------------------------------------------------Net Debt, January 1, 2006 $(532) Net income 2,579 Depreciation and amortization 1,122 Charges & credits, net of minority interest and tax 43 Excess of equity income over dividends received (121) US pension and postretirement benefit contributions (225) Increase in working capital requirements (474) Capital expenditures(1) (1,741) Dividends paid (420) Proceeds from employee stock plans 346 Stock repurchase program (949) Acquisition of minority interest in WesternGeco (2,406) Other business acquisitions and related payments (331) Distribution to joint venture partner (60) Other 53 Translation effect on net debt (54) ----------Net Debt, September 30, 2006 $(3,170) ==========\* T \* T (Stated in millions)Components of Net Debt Sep. 30, 2006 Dec. 31, 2005----------------------------------------------------------------------Cash and short-term investments $1,901 $3,496Fixed income investments, held to maturity 95 360Bank loans and current portion of long- term debt (1,235) (797)Long-term debt (3,931) (3,591) ------------- ------------- $(3,170) $(532) ============= ============= 1. Including Multiclient seismic data expenditure.\* T In addition to financial results determined in accordance with generallyaccepted accounting principles (GAAP) this Third-Quarter Earnings Press Releasealso includes non-GAAP financial measures (as defined under SEC Regulation G).The following is a reconciliation of these non-GAAP measures to the comparableGAAP measures: \* T Before chargesContinuing operations GAAP & credits---------------------------- --------------------------------Effective tax rate 24.4% 23.4% Third Quarter 2005 ----------------------------------------- Diluted Pretax Tax Min Int Net EPS -----------------------------------------Income from Continuing Operations per Consolidated Statement of Income $740.3 $175.0 $(24.5) $540.8 $0.44Add back Charges & Credits: - Resolution of contingency - Montrouge facility (17.8) - - (17.8) (0.01) -----------------------------------------Income from Continuing Operations before charges & credits $722.5 $175.0 $(24.5) $523.0 $0.43 ========================================= Before chargesContinuing operations GAAP & credits---------------------------- --------------------------------Effective tax rate 23.6% 24.2%\* T \* T Business Review (Stated in millions) Third Quarter Nine Months ------------------- -------------------- 2006 2005 % chg 2006 2005 % chg ------------------- --------------------Oilfield Services---------------------------Operating Revenue $4,299 $3,259 32% $12,138 $9,082 34%Pretax Operating Income $1,213 $722 68% $3,286 $1,954 68% WesternGeco---------------------------Operating Revenue $659 $436 51% $1,751 $1,197 46%Pretax Operating Income $242 $85 183% $580 $207 181%\* T Pretax operating income represents the Segments' income before taxes andminority interest. The pretax operating income excludes corporate expenses,interest income, interest expense, amortization of certain intangible assets,interest on post-retirement benefits, stock-based compensation costs and thecharges and credits described on page 4, as these items are not allocated to thesegments. Oilfield Services Third-quarter revenue of $4.30 billion was 4% higher sequentially and 32% higheryear-on-year. Overall sequential revenue increases were highest in the Canada, US Land,Arabian and Caspian GeoMarkets. Marked increases were also experienced in theEastern Russia and Thailand/Vietnam GeoMarkets. Demand was particularly strongfor Drilling & Measurements, Well Services, Completion Systems and Data &Consulting Services technologies. Pretax operating income increased 8% sequentially and 68% year-on-year, drivenmainly by higher activity in the US Land and Canada GeoMarkets; strengtheningactivity in the North Sea, Caspian, Arabian, Thailand/Vietnam, Indonesia andIndia GeoMarkets; and a more favorable mix of activity in Latin America. Thesefactors resulted in sequential growth of 99 basis points (bps) in pretaxoperating margins to reach 28.2%. Advanced Schlumberger technologies saw continued demand during the quarter.Since its launch in 2000, the PowerDrive(a) rotary-steerable system hasexperienced rapid success, as demonstrated by total footage drilled andyear-on-year increase in reliability, which has doubled since the end of lastyear. Continuing this rapid technology uptake, Schlumberger recentlycommercialized PowerDrive Xceed(a) 900, which provides "point-the-bit" rotarysteerable capability in hole sizes ranging from 12 1/4" to 17 1/2". Thiscomplements the existing Xceed(a) 675 "point-the-bit" technology that has beenavailable for hole sizes from 8 1/2" to 9 7/8" for several years. In addition, the next-generation Drilling & Measurements Scope(a) family oflogging-while-drilling services, which offer improved drilling efficiency andenhanced formation evaluation, continues to gain industry acceptance ascustomers realize step changes in well-placement accuracy. Since its launch inlate 2004, Scope technology has been deployed in 20 of our 28 GeoMarkets and isnow utilized by 14 of the top 20 Schlumberger customers. During the quarter, Schlumberger entered into an agreement with Cisco Systemsand Intel to develop a "first mile" wireless service for oilfield operations."First mile" refers to the critical connectivity of drilling sites or producingfields into a wider network. The service will help operators better managedrilling and production operations through an innovative wireless fabric ofsensors, distributed computing networks and service-oriented applications. North America Revenue of $1.35 billion increased 6% sequentially and 42% year-on-year. Pretaxoperating income of $410 million increased 9% sequentially and 88% year-on-year. Sequentially, Canada recorded strong revenue growth from higher activityfollowing the spring break-up, and growth in US Land resulted from sustaineddemand for Well Services, Drilling & Measurements and Wireline technologies.This was partially offset by slightly reduced activity in the US Gulf Coast dueto operator caution in anticipation of the hurricane season. Sequential Area pretax operating margins expanded by 81 bps, primarily driven byhigher operating leverage, sustained pricing levels and a favorable mix ofhigher-margin activity in Canada and US Land. This growth was partially offsetby operator caution in the US Gulf Coast in anticipation of the hurricane seasonand by reduced activity in Alaska. In US Land, a West Texas operator awarded Schlumberger a contract for advancedlifting services to optimize production on more than 100 wells. TheespWatcher(a) surveillance system for electrical submersible pumps (ESPs) wasdeployed, allowing surveillance engineers at the Schlumberger Production Centerof Excellence in Oklahoma City to monitor and analyze flow rates ofunderperforming wells. Data acquired by the espWatcher enabled real-timeperformance diagnosis resulting in a remedial acid stimulation program thatincreased production rates by nearly 30% to reach 580 bbl/d. Elsewhere in US Land, a South Texas operator deployed the Schlumbergerresistivity-while-drilling service mcrVISION(a) in combination with theSlimPulse(a) slim MWD tool on their horizontal-drilling campaign. Designedspecifically to enable retrieval and reconnection without pulling the bottomhole assembly (BHA) from the well, this tool combination helped mitigateoperational risk by reducing the operator's lost-in-hole costs by 75% when theBHA became stuck. In the deepwater Gulf of Mexico, Schlumberger successfully completed the world'smost extensive 3D vertical seismic profile (VSP) survey for Hess Corporation intheir lower Tertiary Pony exploration well. The well was drilled in 3,497 ft ofwater and the 3D VSP was recorded at more than 18,000 ft beneath the sea floorto image the reservoir below the salt--a key technical challenge. The 3D VSP wasacquired using the 40-shuttle VSI(a) Versatile Seismic Imager tool. Also in the deepwater Gulf of Mexico, BP extended their contract for welltesting services. The extension awarded Schlumberger the operations andmaintenance of the well test facility permanently installed onboard thedrillship Discoverer Enterprise. The facility has the capacity to handleproduction rates up to 18,000 bbl/d or 60 MMcf/d. Latin America Revenue of $629 million decreased 6% sequentially but increased 11%year-on-year. Pretax operating income of $130 million increased 1% sequentiallyand 41% year-on-year. Sequentially, revenue declined in the Area as the positive effects of higherDrilling & Measurements and Wireline activity and stronger product sales in theVenezuela/Trinidad & Tobago GeoMarket, together with higher demand for WellServices and Well Testing technologies in the Peru/Colombia/Ecuador GeoMarket,were unable to counter client budget-related activity declines in the MexicoGeoMarket. Reduced drilling activity, coupled with the completion of an IPMproject in the Latin America South GeoMarket also contributed to the overallrevenue decline. In Venezuela, discussions regarding new contracts for the drilling barges workand the settlement of certain outstanding receivables had progressed at the endof the quarter. Pending finalization of these new contracts, revenue recognitionwas deferred on certain work performed during the quarter. The strong sequential gain in pretax operating margins of 135 bps was driven bya more favorable activity mix in both the Latin America South andVenezuela/Trinidad & Tobago GeoMarkets and improved margins on integratedprojects in Mexico, primarily as a result of reduced levels of lower marginthird-party billings. In Reynosa, Mexico, remote directional drilling operations were directedsimultaneously on five wells from the Operations Support Center(a), which openedin March of this year, to support the Burgos IPM development project. With thedecision-making process centralized at the facility, more efficient assignmentsof personnel improved the level of operational support and reduced the number ofdirectional drilling engineers required on site. Offshore Brazil, the QuickSilver Probe(a) focused sampling technologysuccessfully collected multiple oil samples from a zone of medium permeabilityin a deepwater exploration well for Petrobras. The laboratory results showedless than 0.2% contamination. Europe/CIS/Africa Revenue of $1.27 billion increased 7% sequentially and 34% year-on-year. Pretaxoperating income of $335 million increased 14% sequentially and 67%year-on-year. Sequential revenue growth in the Area was driven by higher activity in theCaspian and Eastern Russia GeoMarkets, and strong demand for higher-margintechnologies in the North Sea. Overall growth in Russia resulted from higherland drilling activity and the seasonal pick-up in offshore activity inSakhalin. Sequential growth was further boosted by higher rig count in Nigeriaand pricing gains and extended Wireline activities in the West and South AfricaGeoMarket. Sequential gains in pretax operating margin of 156 bps resulted from a morefavorable mix of technologies offshore in the Caspian, pricing and technologygains in the North Sea and stronger returns on higher-margin offshore activitiesin the Eastern Russia GeoMarket. In Sakhalin, Russia, EcoScope(a) multifunction logging-while-drilling,TeleScope(a) high-speed telemetry and VISION(a) imaging-while-drilling servicesenabled faster rate-of-penetration and acquired high-quality LWD data for ElvaryNeftegaz. The resultant time savings from Scope technology, slimhole welldesign, bit performance and reduced non-productive time allowed the customer toimprove drilling performance by 100% from 2005 to 2006 during the four-monthweather window. In the UK sector of the North Sea, Schlumberger was awarded a contract for ESPsystems and associated monitoring and control services for the first stage ofthe CNR International (UK) Ltd. Lyell project. When completed, this artificiallift project will be the largest subsea deployment of dual ESPs in the NorthSea. On a Shell Aragorn high-pressure, high-temperature exploration well in the UKsector of the North Sea, Schlumberger deployed a custom-designed FlexSTONE HT(a)cementing system. Due to the hostile nature of this well, the mechanicalproperties of the cement were optimized to suit the harsh downhole conditionsand ensure long-term zonal isolation. In Nigeria, Chevron used the PeriScope 15(a) directional deep electromagneticimaging-while-drilling service in multiple offshore wells to identify reservoirthickness, oil-water contact and sub-seismic faults while drilling. Thedeployment of this technology contributed to the addition of three millionbarrels of recoverable reserves to the field. Middle East & Asia Revenue of $1.02 billion increased 5% sequentially and 32% year-on-year. Pretaxoperating income of $332 million increased 3% sequentially and 47% year-on-year. The sequential revenue growth resulted from higher rig count and gas explorationin the Arabian GeoMarket; exploration activity in the Thailand/VietnamGeoMarket; increased drilling activity in the Australia/New Zealand/Papua NewGuinea GeoMarket together with higher artificial lift product sales in the EastMediterranean GeoMarket. Sequential pretax operating income growth was driven by expansion ofhigher-margin Drilling & Measurements Scope and PowerDrive services, WellTesting activities and Completion Systems product sales. The growth wasattenuated by lower-margin product sales in China and the end of a deepwaterWell Services project in Malaysia. In China, greater acceptance of Wireline ABC(a) Analysis Behind Casingtechnologies continued during the quarter due to an upsurge of reservoirmonitoring operations for PetroChina. Performed initially on the Huabeioilfield, the ABC campaign has widened to other mature fields including Daqing,Xinjiang and Qinghai with 53 wells logged by the end of the quarter.Additionally, PetroChina announced plans to apply ABC technology to its otherfields. In the Malaysian-Thailand Joint Development Area, the recently commercializedIsolation Scanner(a) cement evaluation service was run on two highly deviatedwells for Carigali Hess Operating Company Sdn. Bhd. The Isolation Scanner wasdeployed with the MaxTRAC(a) downhole well tractor system and provided a muchclearer understanding of the downhole environment. Isolation Scanner is thelatest member of the deep-reading Scanner Family(a) of characterizationmeasurements. In Egypt, Schlumberger PowerJet Omega(a) deep-penetrating shaped charges wereused on two re-completion wells for Eshpetco, resulting in production rates 50%above operator expectations. Deeper penetration translates into increased wellproduction and improved well efficiency--directly impacting lifting costs. WesternGeco Third-quarter revenue of $659 million was 17% higher sequentially and 51% highercompared to the same period last year. Pretax operating income of $242 millionimproved 35% sequentially and 183% year-on-year. The sequential revenue increase was driven by significant Multiclient salesarising from the E-Dog survey in North America as well as Multiclient sales inother regions following the seasonal low of the second quarter. Marine revenueincreased through higher pricing and utilization, which reached 97% during thequarter, with the bulk of the marine fleet operating in Asia, Europe and NorthAmerica. Land revenue declined due to weather-related shutdowns in South Americaand the Middle East coupled with the completion of projects in Saudi Arabia.During the quarter, WesternGeco mobilized a new Q-Land(a) crew in Libya andrelocated the Q-Land crew from Egypt to Qatar following the completion ofprojects in the Western Desert. Data Processing revenue decreased with areduction in activity in North America where resources were focused on theprocessing of multiclient surveys. Pretax operating margins improved sequentially by 482 bps to reach 36.8%. Thehigher utilization and improved pricing in Marine drove strong sequentialimprovement in pretax operating income. Multiclient margins increased on higherrevenue following the seasonal reduction in activity during the second quarter.This growth was partially offset by Land due to lower utilization, while DataProcessing remained flat. In North America, WesternGeco completed the world's largest and most complexdepth migration project. This 20,250 sq km project named E-Dog extends over 800blocks in the deepwater Gulf of Mexico and dramatically improves the sub-saltimaging in an area that has historically been technically challenging. Contracts awarded during the quarter included a two-year extension of theQ-Marine(a) contract with India's Oil and Natural Gas Corporation Ltd. toinclude additional exploration and development seismic programs, as well as anew contract with Petronas Carigali to conduct a number of Q-Marine surveys overvarious fields offshore Malaysia. WesternGeco is conducting the first-ever 3D over/under configuration in theNorwegian sector of the Barents Sea for Statoil and its partners. This surveydesign, enabled through the unique capabilities of Q-Marine, extends thefrequency bandwidth to better image the complex geology. About Schlumberger Schlumberger is the world's leading oilfield services company supplyingtechnology, information solutions and integrated project management thatoptimize reservoir performance for customers working in the oil and gasindustry. The company employs more than 66,000 people of over 140 nationalitiesworking in more than 80 countries. Schlumberger supplies a wide range ofproducts and services from seismic acquisition and processing; formationevaluation; well testing and directional drilling to well cementing andstimulation; artificial lift and well completions; and consulting, software, andinformation management. In 2005, Schlumberger operating revenue was $14.31billion. For more information, visit www.SLB.com. (a) Mark of Schlumberger Notes Schlumberger will hold a conference call to discuss the above announcement onFriday, October 20, 2006, at 9:00am eastern, 8:00am central (2:00pm Londontime/3:00pm Paris time). To access the call, which is open to the public, pleasecontact the conference call operator at +1-888-428-4471 (toll free) for NorthAmerica, or +1-612-234-9960 outside of North America, approximately 10 minutesprior to the scheduled start time. Ask for the "Schlumberger Earnings ConferenceCall." A replay will be available through November 3, 2006, by dialing+1-800-475-6701 in North America, or +1-320-365-3844 outside of North America,and providing the access code 839179. The conference call will be webcast simultaneously at www.SLB.com/irwebcast on alisten-only basis. Please log in 15 minutes ahead of time to test your browserand register for the call. A replay of the webcast will also be availablethrough November 3, 2006 at the above web site. Supplemental information in the form of a question and answer document on thispress release and financial schedules are available at www.SLB.com/ir. \* TSchlumberger LimitedVice President of Communications and Investor RelationsJean-Francois Poupeau, +1-212-350-9432orInvestor Relations ManagerDebashis Gupta, +1-212-350-9432investor-relations@slb.com\* T Copyright Business Wire 2006