Post Earnings Coverage as Schlumberger Q3 Results Eclipse Market Forecasts

LONDON, UK / ACCESSWIRE / October 28, 2016 / Active Wall St. announces its post-earnings coverage on Schlumberger Ltd (NYSE: SLB). The company released its financial results for the third quarter fiscal 2016 (Q3 FY16) on October 20, 2016. The Houston, Texas-based company’s revenues decline 17% y-o-y, while its GAAP diluted EPS plummeted 83% y-o-y. Register with us now for your free membership at: http://www.activewallst.com/register/.

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Earnings Reviewed

During the quarter ended on September 30, 2016, Schlumberger reported revenue of $7.02 billion compared to $8.47 billion recorded at the end of Q3 FY15. The market had expected the company to report total revenue of $7.13 billion. During the reported quarter, revenue also declined 2% on a sequential basis.

The oil and natural gas producing company reported GAAP net income of $176 million, or $0.13 per diluted share, in Q3 FY16 compared to $989 million, or $0.78 per diluted share, in Q3 FY15. The company’s non-GAAP income (excluding charges and credits), came in at $353 million, or $0.25 per diluted share, in Q3 FY16 versus $989 million, or $0.78 per diluted share, in Q3 FY15. Non-GAAP, net income numbers for Q3 FY16 outperformed market expectations of $0.22 per diluted share.

Operating-Metrics

In Q3 FY16, Schlumberger’s pretax operating income declined 46% y-o-y to $815 million from $1.52 billion in Q3 FY15. Pretax operating margin for Q3 FY16 came in at 11.6% of revenues versus 18.0% of revenues in the year ago comparable period. However, sequentially pretax operating margin improved 119 basis points as the company steadily progressed in its transformation program.

Segment Performance

For Q3 FY16, the company’s Reservoir Characterization Group reported revenues of $1.69 billion compared to $2.38 billion in Q3 FY15. Furthermore, the group’s pretax operating margin declined to 19.1% of total revenues in Q3 FY16 from 25.9% of total revenues in Q3 FY15.

Drilling Group contributed $2.02 billion to total revenues during Q3 FY16 compared to $3.22 billion in Q3 FY15. Additionally, pretax operating margin for the reported quarter stood at $218 million, or 10.8% of revenues, versus $594 million, or 18.4% of segment revenues, in Q3 FY15.

The company’s Production Group revenues declined 29% y-o-y during Q3 FY16 to $2.08 billion. The segments pretax operating margin also declined to $98 million, or 4.7% of segment revenues, in Q3 FY16 from $327 million, or 11.2% of segment revenues, in the year ago quarter.

Schlumberger’s Cameron Group’s revenue has plummeted 40% y-o-y in Q3 FY16 to $1.34 billion. Furthermore, the segment’s pretax operating margin declined to $215 million, or 16.0% of revenues, in Q3 FY16 from $390 million, or 17.6% of revenues, in the last year comparable quarter.

Regional Contribution

During the reported quarter, overall revenues from North America declined 2% sequentially to $1.70 billion. However, excluding Cameron Group results, land revenue grew 14% sequentially. In Q3 FY16, the company reported growth in drilling and fracturing activity as the average US land rig count increased sequentially and fracturing stage count increased 17%.

Latin American region’s revenue fell 1% sequentially to stand at $992 million in Q3 FY16. The company attributed this decline to lower drilling and production activity in Brazil and Argentina along with a decline in rig count in Colombia and Venezuela.

In Q3 FY16, Europe/CIS/Africa area saw revenue fell 4% sequentially to $1.87 billion due to decreased rig count in the region and delayed project status in Nigeria.

Schlumberger generated $2.39 billion of its total revenues from Middle East and Asia regions, which fell 1% sequentially. The decline was attributed to lower activity in Indonesia, the UAE, and the South East Asia GeoMarkets.

Cash Flow & Balance Sheet

During first nine months of FY16, Schlumberger’s cash flow from operations came in at $4.25 billion compared to $6.63 billion in the previous year’s comparable quarter. The company reported free cash flow of $1.48 billion in the nine months ended September 30, 2016 versus $4.16 billion recorded in the nine months ended September 30, 2015. At the close of books in the reported quarter, Schlumberger had $10.76 billion in cash and short-term investments compared to $13.03 billion at the close of books on December 31, 2015. Additionally, the company’s long-term debt increased to $17.54 billion on September 30, 2016, from $7.49 billion on September 30, 2015.

Stock Performance

Schlumberger’s shares are trading slightly down by 0.52%, closing Thursday’s session at $79.60 on volume of 3.91 million shares. The stock has advanced 2.04% in the last month. Additionally, the company’s shares gained 16.44% since the beginning of the year. Shares of the company have a dividend yield of 2.51% and currently have a market cap of $114.17 billion.

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