15 October 2002 23:01
Schlumberger Announces Third Quarter 2002 Results
Consolidated Statement of Income (Unaudited)
(Stated in thousands except per share amounts)
Third Quarter Nine Months
For Periods Ended
September 30 2002 2001(1) 2002 2001(1)
Revenue
Operating $ 3,501,370 $ 3,772,473 $10,199,287 $10,557,568
Interest and
other income(2) 40,917 40,762 112,930 190,179
----------- ----------- ----------- -----------
3,542,287 3,813,235 10,312,217 10,747,747
----------- ----------- ----------- -----------
Expenses
Cost of goods sold
and services(3) 2,778,651 2,856,755 8,016,236 8,359,101
Research &
engineering(4) 166,232 177,366 492,721 527,171
Marketing 102,356 120,277 293,430 348,642
General 169,233 189,836 493,860 504,316
Interest 98,238 102,319 276,904 287,277
----------- ----------- ----------- -----------
3,314,710 3,446,553 9,573,151 10,026,507
----------- ----------- ----------- -----------
Income before taxes
and minority
interest 227,577 366,682 739,066 721,240
Taxes on income(3) 60,843 157,358 195,273 356,388
----------- ----------- ----------- -----------
Income before minority
interest 166,734 209,324 543,793 364,852
Minority interest 6,103 (14,676) (2,449) (27,601)
----------- ----------- ----------- -----------
Net Income $ 172,837 $ 194,648 $ 541,344 $ 337,251
----------- ----------- ----------- -----------
Diluted Earnings
Per Share:
Net Income $ 0.30 $ 0.34 $ 0.94 $ 0.59
Add back
amortization
of goodwill - 0.16 - 0.34
----------- ----------- ----------- -----------
Adjusted earnings
per share $ 0.30 $ 0.50 $ 0.94 $ 0.93
=========== =========== =========== ===========
Average shares
outstanding 579,632 575,019 577,727 573,843
Average shares
outstanding
assuming dilution 581,856 579,472 581,468 580,307
Depreciation and
amortization
included in
expenses(5) $ 394,711 $ 464,468 $ 1,150,061 $ 1,368,308
----------- ----------- ----------- -----------
1) Reclassified, in part, for comparative purposes.
2) Includes interest income of :
-- Third quarter 2002 - $ 17 million (2001 - $28 million).
-- Nine months 2002 - $ 56 million (2001 - $129 million).
3) The first quarter of 2002 includes a $29 million charge
(pretax $30 million and minority interest credit of $1
million) related to the financial/economic crisis in Argentina
($0.05 per share - diluted). The second quarter of 2001
includes a $280 million charge (pretax and after tax) for the
estimated impairment charge from the disposition of certain
Resource Management Services Businesses ($0.48 per share -
diluted). In the third quarter of 2001, Cost of goods sold and
services includes a pretax credit of $42 million representing
the gain on sale of the worldwide gas compression business
partially offset by an impairment charge related to the
disposition of certain other activities. Taxes on income, in
the third quarter of 2001, includes a net charge of $39
million relating to these items. The third quarter 2001
effective tax rate was 36% excluding these items.
4) The first quarter of 2001 includes a charge of $25 million
(pretax and after tax) for in-process R&D related to the Bull
CP8 acquisition ($0.04 per share - diluted).
5) Including multiclient seismic data costs.
Condensed Balance Sheet (Unaudited)
(Stated in thousands)
Assets Sept. 30, Dec. 31,
2002 2001
Current Assets
Cash and short-term investments $ 1,558,289 $ 1,617,701
Other current assets 5,921,942 6,087,189
------------ ------------
7,480,231 7,704,890
Fixed income investments,
held to maturity 428,000 576,000
Fixed assets 4,721,705 4,827,879
Multiclient seismic data 1,179,667 1,028,954
Goodwill 6,750,956 6,260,969
Other assets 1,847,809 1,927,675
------------ ------------
$ 22,408,368 $ 22,326,367
------------ ------------
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable and accrued liabilities $ 4,166,845 $ 4,506,634
Estimated liability for taxes on income 487,880 587,328
Bank loans and current portion
of long-term debt 761,586 1,015,181
Dividend payable 109,533 108,642
------------ ------------
5,525,844 6,217,785
Long-term debt 6,757,090 6,215,709
Postretirement benefits 523,667 504,797
Other liabilities 251,036 372,696
------------ ------------
13,057,637 13,310,987
Minority interest 649,044 636,899
Stockholders' Equity 8,701,687 8,378,481
------------ ------------
$ 22,408,368 $ 22,326,367
------------ ------------
Business Review
(Stated in millions)
Oilfield Services SchlumbergerSema Other(1)
Third Quarter 2002 2001 % chg 2002 2001 % chg 2002 2001 % chg
---- ---- ----- ---- ---- ----- ---- ---- -----
Operating
Revenue $2,531 $2,640 (4)% $ 896 $ 848 6% $ 94 $295 (68)%
Pretax
Operating
Income(2) $ 340 $ 502 (32)% $ 4 $ 21 (83)% $(6) $ 12 - %
Nine Months
Operating
Revenue $7,410 $7,671 (3)% $2,585 $2,026 28% $273 $911 (70)%
Pretax
Operating
Income(2) $1,091 $1,391 (22)% $ 15 $ 15 - % $(19) $ 17 - %
1) 2001 includes the divested Resource Management Services
businesses.
2) Pretax operating income represents income before taxes and
minority interest, excluding interest income, interest
expense, gain on sale of securities and amortization of
intangibles.
NEW YORK--(BUSINESS WIRE)--Oct. 16, 2002--Schlumberger Limited (NYSE: SLB) reported today third quarter operating
revenue of $3.5 billion and net income of $173 million. Diluted earnings were $0.30 per share. This compares with an
adjusted $0.50 per share for the same period last year and $0.34 per share in the second quarter of 2002. The loss from
the WesternGeco joint venture in the quarter included the Schlumberger share of losses- to-completion of $21 million
($0.04 per share) for contracts primarily in Mexico and India. SchlumbergerSema results in the quarter included a $12
million after-tax charge ($0.02 per share) for workforce reductions. Oilfield Services revenue of $2.53 billion
increased 3% versus the second quarter of 2002. The worldwide M-I rig count increased 6% over the same period. Revenue
decreased 4% year-on-year, substantially less than the rig count decline of 21%. SchlumbergerSema revenue of $896
million for the quarter increased 5% sequentially despite the continued depression in the IT services industry. Chairman
and CEO Euan Baird commented: "Faced with huge economic and political uncertainties our customers, particularly in
North America, have become risk averse and are tending to use the proceeds of higher oil and gas prices to strengthen
balance sheets rather than expand exploration & production programs. Lack of visibility about oil demand may mean
that this mood of caution will persist well into next year." Note: Supplemental information in the form of a
question and answer document on this press release is available at http://www.slb.com/ir .
Highlights
-- Launched a multi-year joint technology development project
with ChevronTexaco Corp. to develop a next-generation
reservoir management solution that will enhance the use of
real-time oilfield sensor data from wells and facilities to
improve real-time oilfield management. This project will
provide the industry with automated tools and services to
screen pertinent data, flag under-performing wells, diagnose
production problems and recommend corrective actions to
optimize field production.
-- Completed the world's first installation of a distributed
fiber optic system directly into a sand face completion across
the whole length of the horizontal section of a well in
Trinidad. This industry-leading technique, combining
Schlumberger expertise in sand control technology with the
Sensa* distributed temperature fiber optic system, offers
customers the unique ability to monitor the temperature
profile of produced fluids across the wellbore sand face
continuously for real-time production optimization.
-- Won two major contracts in Norway during the quarter. First, a
major three-year coiled tubing drilling contract in Norway by
Statoil to increase and maintain production from its fields on
the Norwegian Continental Shelf. Second, a rotary steerable,
directional drilling, MWD/LWD services contract, which
significantly increases Schlumberger market share for these
services in Norway.
-- Entered into a 10-year service contract with Romgaz, S.A., the
national gas company of Romania, to enhance production from
the 54-well Laslau Mare gas field. The pilot project will be
used to confirm technical data and provide a wide range of
services from wireline logging and data analysis to reentry
drilling, perforating and fracturing. After the initial pilot
phase, activities will focus on gas compression services to
decrease wellhead pressure, perforating and fracturing
services to increase individual well performance, uphole
completion work to recover previously bypassed zones and
reentry drilling to deepen existing wells for access to
previously non-producible tight gas zones.
-- Introduced the OrientXact* perforating system to improve well
productivity and prevent sand production in horizontal and
deviated wells. In the North Sea, it was used to perforate a
6,000ft horizontal section in a single trip resulting in a
flow rate of more than 50,000 barrels per day making the well
the biggest producer in the Visund field. The OrientXact
system increases production in mechanically weak formations,
which would typically produce sand when perforated by
conventional technology.
-- Selected by Houston-based international offshore drilling
contractor, Atwood Oceanics, to provide communications for its
offshore and land facilities around the world using the
Schlumberger DeXa.Net* global connectivity solution. This
includes the deployment of DeXa.Net very small aperture
terminal (VSAT) links between offshore oil rigs in the
Mediterranean, Gulf of Mexico and South East Asia and their
respective land offices in Cairo, Houston and Kuala Lumpur
ensuring continuous connectivity independent of rig mobility.
-- Won a three-year DeXa.Touch* contract for IT infrastructure
support for Petrozuata, a joint venture between ConocoPhillips
and PDVSA in Venezuela. The award is significant in that it
demonstrates the unique ability of Schlumberger to offer oil
and gas customers IT support wherever they are based in the
world.
Oilfield Services Operating revenue of $2.53 billion in the third quarter decreased 4% versus last year, but
increased 3% sequentially. In comparison, the M-I rig count decreased 21% year-on-year and increased 6% sequentially.
Pretax operating income of $340 million decreased 32% year-on-year and 11% sequentially. North America revenue decreased
26% compared with the previous year and was flat sequentially as the M-I rig count declined 29% versus last year and
increased 12% on a sequential basis. In contrast, revenues outside North America increased 10% versus 2001 and 6%
sequentially as the M-I rig count decreased 6% and 1% respectively. Outside North America revenue growth was led by the
Europe/CIS/West Africa Area both year-on-year and sequentially primarily due to the demand for well completions and
productivity technologies. Overall, the Russia, Caspian, Mexico and China GeoMarkets experienced the strongest revenue
growth sequentially and year-on-year. From a technology standpoint, the Well Completions & Productivity segment
continued to record the strongest growth increasing 13% year-on-year and 9% sequentially primarily due to increased
market share gained through the accelerated introduction of innovative cost-effective new technologies. These included
the Sensa* distributed temperature fiber optic system and the Poseidon(TM) artificial lift system, which is used in
gaseous oil wells where conventional electrical submersible pumps can lock and fail. Pretax operating income was
negatively impacted by lower pricing in proprietary WesternGeco marine services and losses relating to land seismic
contracts in Mexico and marine contracts in India. North America Revenue of $718 million decreased 26% versus last year
but was flat versus last quarter. The M-I rig count decreased 29% year-on-year but increased 12% sequentially. Pretax
operating income of $99 million decreased 61% year-on-year and 8% sequentially. Initial signs of improvement in rig
count at the beginning of the quarter slowed amid continued economic uncertainty, a slower pick-up in Canadian activity
post-Spring break-up and lower natural gas prices in the West. These reasons, combined with the initial impact of
tropical storms in the Gulf of Mexico, resulted in year-on-year and sequential revenue decreases across the Area. All
technology segments posted year-on-year and sequential revenue decreases with the exception of Drilling &
Measurements which achieved significant growth following the introduction of DD Direct*. This new acquisition software
allows reduced field crew size leading to improved efficiency and reduced costs resulting in increased margins. In
addition, the success of drilling & measurements technologies led to two three-year contract awards for LWD/MWD
services in the Gulf of Mexico. Pricing pressures across the board and operational interruptions due to hurricane
activity negatively affected pretax operating income. Latin America Revenue of $370 million decreased 5% year-on-year
but increased 10% sequentially in sharp contrast to the M-I rig count, which decreased 22% year-on-year and increased 1%
sequentially. Pretax operating income of $29 million fell 37% year-on-year and 25% sequentially. Excluding the effect of
WesternGeco, pretax operating income increased 17% sequentially. The sequential increase in revenue was led by improved
demand for well services, drilling & measurements, and well completions activities in the Mexico GeoMarket.
Schlumberger also won a new integrated services contract for 100 wells in the Burgos project. In the Latin America South
GeoMarket, increased activity for Petrobras in Brazil resulted from a drive to reduce oil imports, together with a
higher demand for integrated services and solutions. This trend was highlighted when Schlumberger was awarded a key
integrated well construction project for the development of the Albacora Leste field in the Campos Basin covering 29
wells over three years. Europe/CIS/West Africa Revenue of $761 million grew 22% year-on-year and 13% sequentially in
contrast to the M-I rig count, which fell 10% and 6% respectively. Pretax operating income of $102 million increased 5%
and 6% versus last year and last quarter respectively. Year-on-year and sequentially, the Russia and the Caspian
GeoMarkets recorded the highest growth as a result of unusually high artificial lift sales in Russia and ongoing
drilling activity related to major contracts in both countries. This was partially offset by lower than expected
revenues in the UK and Norway where activity slowed towards the end of the quarter as a result of the start of seasonal
lower activity in the UK and employee strikes in Norway. The strongest growth was experienced by the Well Completions
& Productivity segment led by artificial lift sales. WesternGeco posted solid revenue growth, as seismic activity
peaked in the North Sea. Softer pricing in proprietary marine seismic services, combined with the effects of the strikes
in Norway, resulted in lower pretax operating income. During the quarter, the first integrated Q-Land* surface seismic
and Q-Borehole* vertical seismic profile acquisition was completed in Algeria. These results provided the customer with
high-resolution data to image the target channel sands. The Q-Borehole survey was acquired using the Versatile Seismic
Imager* (VSI) downhole tool, recorded by the wireline logging unit and transmitted over a network connection to the
Q-Land recorder. From there the information was transferred to the seismic camp by microwave link for rapid quality
control and geometry updating. This technology enabled the channel sands to be imaged for the first time. Middle East
& Asia Revenue of $612 million increased 7% year-on-year but decreased 2% sequentially as the M-I rig count
increased 6% versus 2001 and 1% sequentially. Pretax operating income of $113 million decreased 13% year-on-year and 12%
sequentially principally due to WesternGeco losses associated with marine contracts in India. The slowdown in activity
during the quarter was attributable to a combination of factors that included a number of major projects nearing
completion and lower equipment sales. Year-on-year growth was led by well services technologies in the China GeoMarket
and increased pricing on contract renewals in the India GeoMarket. Sequentially, revenue fell in all GeoMarkets with the
exception of China, which experienced strong marine seismic activity, robust well services related to a production
optimization contract in Bohai Bay, and increased data and consulting services. Growth in the latter services was
highlighted by the award of four key reservoir evaluation contracts in China with a combined work scope that spans
reprocessing and interpreting petrophysical and geological data, building reservoir models and characterizing
geophysical parameters for oil and gas fields in the region.
Highlights
-- Awarded a multimillion-dollar business process outsourcing
contract by the Department for Work and Pensions (DWP) in the
UK. SchlumbergerSema will provide a high capacity customer
conversion center to support the program, enabling the DWP to
convert up to 13 million customers currently reliant on
paper-based payment methods to payments made directly into
bank or building society accounts, or into the new Post Office
card account.
-- Signed a $56 million substation automation contract with Los
Angeles Department of Water and Power (LADWP), to improve
security, customer service, and operating and maintenance
efficiency. The contract represents one of the world's largest
substation automation projects, and includes the retrofitting
of 179 existing substations and the supply of two
development/testing systems and a training simulator.
-- Won the contract to supply the Royal Bank of Scotland (RBOS)
with EMV smart cards for both its RBOS credit and debit card
products. These products will enable RBOS to be at the
forefront of the UK's move to "PIN at the point of sale"
replacing signature as the form of customer identification in
a card sales transaction, thus minimizing card fraud.
-- Selected by UK Railtrack Major Stations as preferred supplier
for customer information systems. These systems manage and
transmit accurate travel information in real time to
passengers via multiple sources, including information screens
and public address systems in stations.
-- Selected as provider by Mobipay - the Spanish joint venture
company formed by all of the country's mobile operators and
80% of its financial institutions - to launch m-commerce
services in Spain.
Change in Liquidity
Liquidity represents cash, short-term investments and fixed income
investments, held to maturity, less debt. A summary of the major
components of the third quarter and nine months change in liquidity
follows:
(Stated in millions)
Third Nine
2002 Quarter Months
Funds provided by:
Net income $ 173 $ 541
Charges - 29
Depreciation and amortization 395 1,150
Employee stock option plan 14 61
Employee stock purchase plan 6 108
Funds used for:
Capital expenditures (401) (1,303)
Dividends paid (108) (324)
Working capital 197 (163)
Impact of change in exchange rates 5 (350)
Other 6 (244)
-------- --------
Change in liquidity 287 (495)
Liquidity, beginning of period (5,819) (5,037)
-------- --------
Liquidity, end of period $ (5,532) $ (5,532)
-------- --------
*Mark of Schlumberger
(TM) Mark of IFP, TotalFinaElf and Statoil
Schlumberger holds the exclusive license to manufacture and market
these products for oilfield applications.
This press release is available at http://www.slb.com .
--30--rc/ny*
CONTACT: Schlumberger Limited
Investor Relations
Christian Lange
Tel: 212 350 9432
or
Paulo Loureiro - North America
Tel: 212 350 9432
or
Kamilla Gam Nielsen - Europe
Tel: 33 1 4062 1330
SchlumbergerSema Operating revenue of $896 million in the third quarter increased 6% year-on-year and 5% sequentially
despite the weak IT spending environment. Customers continued to revise budgets downwards and to delay decisions on
contract awards. However, focus on specific markets resulted in growth particularly in managed services, mobilecom and
banking-card shipments, the public sector and the UK GeoMarket. These positive effects were partially offset by lower
energy and utilities activities in North America. Pretax operating income of $20 million, before charges, declined 8%
year-on-year but doubled sequentially due to continuous cost-containment efforts and improved margins in the UK
GeoMarket. However, prices continued to weaken. To adapt to the slower growth environment, the cost reduction program
continued during the quarter resulting in a pretax operating charge of $16 million ($12 million after tax) for employee
severance costs. Volume products revenue of $210 million experienced strong year-on-year and sequential growth of 10%
and 5% respectively. This improvement reflected an all-time record volume of mobilecom cards, higher demand in the
banking card segment, and sustained activity in banking and parking terminals. Pretax operating income of $9 million
improved 42% sequentially, mainly attributable to better productivity in smart cards and terminals. Europe, Middle East
and Africa Revenue of $672 million increased 5% year-on-year and 9% sequentially despite the overall economic slowdown
in Europe and the continued fall in demand for discretionary consulting and systems integration services. These results
demonstrated that SchlumbergerSema continued to gain incremental market share in its focus customer and business
segments. The UK GeoMarket experienced strong activity across the board due mainly to the growing managed services
practice in the public sector, increased shipments of banking cards and improved activity in mobilecom cards for One2One
and Orange. GeoMarket activity in France was weak due to the summer slowdown. Companies continued to reduce spending and
to delay decisions. Low activity in the telecommunications and finance segments was partially offset by steady growth in
the public sector. The Italy and Spain GeoMarkets also suffered from seasonally slow summer months, which primarily
impacted IT consulting and systems integration services. With increasing market uncertainty, the Germany GeoMarket
showed softness, mainly in the telecommunications sector but this was partially offset by increased activity in IT
services for the energy & utilities and transport sectors. Pretax operating income of $32 million decreased 27%
year-on-year and 5% sequentially. Despite significant cost reductions, the continued excess capacity in IT services,
with consequently tougher pricing pressure, led to flat margins and lower income for the quarter. North & South
America Revenue of $159 million decreased 10% year-on-year but grew 1% sequentially. The yearly decrease was due to
across-the-board declines in IT spending and the economic challenges experienced by utilities companies in the energy
trading industry. The sequential gain came mainly from stronger activity in the telecommunications sector in North
America, which was partially offset by continued weakness in the financial services and telecommunications markets in
South America as a result of economical and political uncertainty. Despite weak demand for consulting and systems
integration services, pretax operating losses of $2 million decreased year-on-year and sequentially. The sequential
improvement came almost entirely from reduction in overhead and the closure of one facility in the US. Margin
improvement in Real-Time Energy Management activities contributed to reduced pretax losses. Asia Revenue of $88 million
increased 18% year-on-year but decreased 2% sequentially. The sequential decline was due to lower mobilecom deliveries
to China Mobile coupled with pricing pressure. However this was partially offset by higher card deliveries in the
Philippines and Thailand together with improved managed services activity in the financial sector. The significant
yearly improvement was due to the recovery in mobilecom cards from an all-time low level that offset a decline in the
average card-selling price. Pretax operating income of $3 million decreased 37% year-on-year but increased sequentially.
The year-on-year decrease was a direct consequence of the significant pricing pressure in the card market, where excess
capacity could not be matched by the recovery in demand. The sequential improvement was due to better card gross margins
as a result of productivity improvements.
[CAIW [Corporate Announcements Intelligence Wire]] |
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