• Full-year worldwide revenue of $32.9 billion was flat year-on-year, with international revenue growth of 7%
• Full-year GAAP loss per share, including charges & credits, was $7.32
• Full-year EPS, excluding charges & credits, was $1.47
• Full-year cash flow from operations and free cash flow were $5.4 billion and $2.7 billion, respectively
• Fourth-quarter revenue of $8.2 billion decreased 4% sequentially, with international revenue growth of 2%
• Fourth-quarter GAAP EPS, including charges & credits, was $0.24
• Fourth-quarter EPS, excluding charges & credits, was $0.39
• Fourth-quarter cash flow from operations and free cash flow were $2.3 billion and $1.5 billion, respectively
• Board approves quarterly cash dividend of $0.50 per share

Schlumberger Limited today reported results for full-year 2019 and the fourth quarter of 2019.

Schlumberger CEO Olivier Le Peuch commented,
“Full-year revenue for 2019 was $32.9 billion, a level essentially flat with 2018. Overall performance was positive—particularly in the international markets—and we generated $2.7 billion in free cash flow, which was a remarkable achievement under these market conditions. Full-year pretax segment operating margin of 12%, however, was slightly down year-on-year.

“International revenue, excluding Cameron, grew 8% and was consistent with our expectations of high single-digit growth. Most of our international GeoMarkets benefited from these favorable market conditions, and almost half of them registered double-digit, year-on-year revenue growth driven by exploration activity, offshore operations, and acceleration of the industry’s digital transformation. Compared with the first half of 2019, international pretax segment operating margin improved by 100 basis points (bps) in the second half of the year—a firm step toward our strategic target of margin expansion.

“In contrast, after two years of strong growth, North American revenue fell sharply, driven largely by the land market weakness affecting our OneStim® pressure pumping business, as customers reached their budget limits earlier in the year and remained highly disciplined on capital spend.

“Among the business segments, Drilling and Reservoir Characterization revenue benefited from their international market exposure, while Production and Cameron contracted year-on-year due to weakness in the North America land market.

“During the year, we recognized material pretax charges driven by market conditions, particularly in North America. As these charges were largely noncash and primarily related to goodwill, intangible assets, and fixed assets, they did not impede our ability to generate strong cash flow as we demonstrated in the second half of the year.

“We ended the year building on the strength of our international franchise, driven by the breadth of the international recovery, after four consecutive years of declining revenue. We initiated our scale-to-fit strategy in North America land amid continued challenging market conditions, removed structural costs to protect margins, and accelerated technology-access business models and asset-light operations transformation.

“The year 2019 marked the beginning of a new chapter for Schlumberger. As we move forward, our vision is to define and drive high performance sustainably - operationally and financially. Simply put, we want to be the performance partner of choice for the benefit of our customers and our industry. Our strategy has favorably positioned Schlumberger to achieve margin expansion, increase return on capital, and grow free cash flow.

“Fourth quarter revenue of $8.2 billion was 4% lower sequentially. International revenue of $5.7 billion grew 2% sequentially and 8% year-on-year. North America revenue of $2.5 billion, however, dropped 14% sequentially due to customer budget exhaustion and cash flow constraints.

“Sequential international growth was led by the Middle East & Asia area, where revenue increased 5% driven by higher year-end product sales in Kuwait, Iraq, and Oman; delivery of additional lump-sum-turnkey (LSTK) wells in Saudi Arabia; and increased Well Services activity in Qatar. Latin America revenue grew 1% due to stronger WesternGeco® multiclient seismic license sales in the Mexico Bay of Campeche, while revenue in the Europe/CIS/Africa area only declined 2% given the mild winter slowdown of activity in the Northern Hemisphere that was partially mitigated by strong year-end product sales and Software Integrated Solutions (SIS) digital software sales.

“Production revenue declined 9% sequentially primarily due to the 33% sequential drop in OneStim revenue as we continued to right-size our hydraulic fracturing capacity by stacking more fleets in the face of lower demand. This is part of the scale-to-fit strategy we are deploying in North America land—rationalizing our business portfolio to achieve improved returns and better profitability. Drilling and Reservoir Characterization revenue each decreased 1% sequentially due to the end of summer campaigns in the North Sea and Russia. These effects, however, were partially offset by increased drilling activity in the Middle East & Asia area and stronger SIS digital software sales across several GeoMarkets. Cameron revenue increased 2% sequentially from higher OneSubsea®, Surface Systems, and Drilling Systems sales - primarily in the international markets.

“I’m very pleased with our operational and financial results as we closed 2019, and I’m encouraged by the sustained international activity growth, although conditions in North America land became more challenging. Fourth-quarter EPS of $0.39, excluding charges and credits, was sequentially lower, but was 8% higher than the same quarter last year. Pretax segment operating margin declined sequentially on seasonal effects but improved when compared to the same quarter last year. This quarter delivered the first sequential growth in international margin in any fourth quarter since 2014. We are therefore confident we have turned the corner, particularly as we have now seen sequential international margin growth for the last three quarters as a result of our discipline and focus on execution performance. Meanwhile, in North America land, we minimized the margin dilution from lower activity by implementing our scale-to-fit strategy, acting decisively in reducing capacity, and restructuring our operations.

“In addition, we generated significant cashflow from operations as we ended the year, leveraging our capital stewardship program. We also completed two major milestones during the quarter: the formation of the Sensia joint venture and the divestiture of our Drilling Tools business. The proceeds from these transactions further supported the significant reduction of our net debt during the quarter.

“From a macro perspective, we ended the year with 2020 oil demand growth sentiment turning positive as uncertainty reduced following the progress made toward a US-China trade deal. The fall in the North America production growth estimate of between 400,000 to 800,000 bpd should continue to support the thesis for international investment. The recent escalation of geopolitical risk should set the floor for the oil price going forward. In the near term, we expect the OPEC+ production cuts agreed upon in December 2019 to limit investment and activity, particularly in the Middle East and Russia, during the first half of 2020. As the year progresses, the effect of slowing North America production growth is likely to cause tightness in the market and further stimulate international operators to step up their investments in the second half of the year and beyond.

“Based on this, we expect 2020 E&P capex spending growth rate in the international markets to be in the mid-single-digit range. We would therefore expect our international portfolio revenue to grow at the same pace or higher, excluding the effects of the Sensia and Drilling Tools transactions. The carved-out businesses in these transactions accounted for approximately 2% of our global revenue in 2019. International revenue growth will be more heavily weighted to the second half of the year with increasing offshore activity, improving activity mix from the early deepwater growth cycle, and increasing exploration work toward the end of the year and into 2021.

“In North America, we are continuing to scale-to-fit our organization and portfolio by repurposing or exiting underperforming business units, focusing on asset-light operations, and expanding our technology access business models. In alignment with our stated strategy, we are cautiously optimistic that the high-grading of our portfolio will promote margin expansion and the improvement of returns in the North America land market. It has also led to the closing of a significant number of facilities and, unfortunately, workforce reductions.

“After a strong free cash flow performance in the second half of 2019, we are confident in our ability to further improve cash flow generation in 2020. Our focus on improved margins, capital stewardship, and careful management of working capital will continue to underpin our ability to generate improved free cash flow.

“All in all, we finished the year with a very solid quarter, aligned with our performance vision and our focus on returns. I am very pleased with the results, and I’m proud of the Schlumberger team that delivered this performance.”

KeyFacts Energy Industry Directory: Schlumberger