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Schlumberger (SLB) Q1 Earnings Meet, Revenues Miss Estimates

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Oilfield Services giant Schlumberger Limited’s (SLB - Free Report) first-quarter 2017 earnings of 25 cents per share (excluding charges and credits) came in line with the Zacks Consensus Estimate. This may be attributed to improvement in production of the Kuwait and Egypt developments and increase in directional drilling works in North America.

 

 

However, the bottom line decreased substantially from 40 cents per share earned in the year-earlier quarter. Slowdown of drilling works in the international market resulted in the year-over-year deterioration.

Schlumberger is the first among the so-called Big Four oilfield service and equipment providers to release quarterly earnings. The other three players – Baker Hughes Inc. (BHI - Free Report) , Halliburton Company (HAL - Free Report) and Weatherford International plc (WFT - Free Report) – will report first-quarter results next week.

Schlumberger reported total revenue of $6,894 million. The top line improved from the year-earlier level of $6,520 million but missed the Zacks Consensus Estimate of $6,977 million.

Segmental Performance

Each of the groups – Reservoir Characterization, Drilling Group, Production Group and Cameron Group – registered year-over-year decrease in revenues.

Drilling Group revenues decreased primarily due to pricing pressure and reduced drilling works in the International market. However, the negatives were partially mitigated by the improvement in operations related to directional drilling in North America.                     

Results of the Production Group were adversely impacted by lower drilling and hydraulic fracturing work in the Middle East. However, good hydraulic fracturing operations and recovery in pricing in North America partially offset the weakness.

Reservoir Characterization segment was affected by completions of developments from a lower backlog. However, progress in the production front from the Kuwait and Egypt developments partially offset the negatives.

Reservoir Characterization: This group posted revenues of $1,618 million as against $1,719 million in the prior-year quarter. Pre-tax operating income was $281 million, down 16% year over year.  

Drilling Group: Revenues of $1,985 million plunged 20% year over year. Pre-tax operating income was $229 million, down 38% year over year.

Production Group: Revenues recorded by this group declined 8% from the year-earlier quarter to $2,187 million. Pre-tax operating income plummeted 47% year over year to $110 million.

Cameron Group: This segment generated revenues of $1,229 million, down 25% year over year. Pre-tax operating income plunged 31% from the prior-year comparable period to $162 million.

Financials

As of Mar 31, 2017, company had approximately $7,353 million in cash and short-term investments and $16,538 million in long-term debt. This represents a debt-to-capitalization ratio of 31.6%. In the January to March quarter, the company repurchased 4.7 million shares.

Q1 Price Performance   

Schlumberger’s shares have outperformed the Zacks categorized Oil & Gas-Field Services industry during the first quarter. During this period, the company’s shares lost almost 7%, while the broader industry registered a decrease of 12.6%.

Guidance

During 2017, the company reaffirmed its decision to invest $2.2 billion. This is slightly higher than $2.1 billion spent in 2016.

Zacks Rank

Schlumberger currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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