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Schlumberger 2Q: Revenues Grow 20% YOY, Outlook Strengthens

Share Print Bookmark    |    Monday,July 25,2022

Schlumberger announced results for the second-quarter 2022.

Highlights:

• Revenue of $6.8 billion increased 14% sequentially and 20% year on year
• GAAP EPS of $0.67 increased 86% sequentially and 123% year on year
• EPS, excluding charges and credits, of $0.50 increased 47% sequentially and 67% year on year
• Cash flow from operations was $408 million
• Board approved quarterly cash dividend of $0.175 per share
• Full-year revenue outlook revised upward to at least $27 billion

2Q Revenue by Region

Results Overview

Schlumberger CEO Olivier Le Peuch commented, “The second quarter marked a significant inflection point for Schlumberger with a strong acceleration of revenue and earnings growth. Sequentially, revenue grew 14%, by more than $800 million; EPS—excluding charges and credits—increased 47%; and pretax segment operating margin expanded 212 basis points (bps). Growth was broad-based, driven by an increase in activity internationally, in North America, and across all Divisions. The quarter was also characterized by a favorable mix of exploration and offshore activity and the increasing impact of improved pricing, resulting in the largest sequential quarterly growth since 2010.

“On a year-over-year basis, revenue grew 20%; EPS—excluding charges and credits—increased 67%; and pretax segment operating margin expanded 279 bps.

Raising Full-Year Outlook

“The strength of our second-quarter outperformance highlights a firmly established growth inflection and our ability to comprehensively participate in drilling and completion activity growth globally. The multiyear upcycle continues to gain momentum with upstream activity and service pricing steadily increasing both internationally and in North America, resulting in a strengthened outlook for Schlumberger.

“As a result of this performance and based on our updated outlook for the remainder of the year, 2022 year-on-year revenue growth is now expected to be in the high-teens which translates to full-year revenue of at least $27 billion. “We expect this higher revenue to result in earnings that exceed our previous expectations, given our ambition to exit the year with adjusted EBITDA margins 200 basis points higher than in the fourth quarter of 2021,” Le Peuch said.

Second-Quarter Revenue

Second-quarter sequential revenue growth was broad-based, with international revenue increasing 12% and North America revenue growing 20%. International growth was widespread across all areas with more than 90% of our GeoUnits experiencing revenue growth. Growth was led by Europe/CIS/Africa which experienced 20% sequential growth due to higher Production Systems sales in Europe and Scandinavia, the seasonal drilling activity rebound in the Northern Hemisphere, and offshore activity increases in Sub-Sahara Africa benefitting all Divisions. Latin America sequential revenue growth of 10% was due to higher stimulation activity in Argentina, increased Production Systems sales in Brazil and Mexico, and higher offshore drilling in Guyana. Middle East & Asia revenue increased 7% sequentially due to higher drilling across Asia, particularly in China, Australia, and Indonesia, as well as multidivisional activity increases across the Middle East mainly in Oman, United Arab Emirates, Saudi Arabia, Egypt, and Iraq. In North America, sequential revenue growth of 20% was driven by a significant increase in land and offshore drilling activity and higher exploration data licensing in the US Gulf of Mexico.

Double Digit Revenue Growth

Le Peuch said, “These results demonstrate the power of Schlumberger’s Core, which is performing exceedingly well and benefitting from the effects of improved operating leverage, favorable offshore activity mix, greater technology adoption, and an improving global service pricing environment.”

Sequentially, all Divisions posted double-digit revenue growth—outpacing rig count growth both in North America and internationally. Production Systems led the sequential growth, posting an 18% revenue increase on higher product deliveries and backlog conversion during the quarter, mostly internationally. Well Construction revenue increased 12% sequentially due to higher land and offshore drilling activity both in North America and internationally, in addition to improved pricing. Reservoir Performance revenue grew 10% due to higher intervention, evaluation, and stimulation activity, both on land and offshore along with improved pricing. This solid performance in the Core was complemented by Digital & Integration, which experienced an 11% sequential revenue increase, driven by higher exploration data licensing sales.

Overall, second-quarter pretax segment operating income increased 30% sequentially, and pretax segment operating margin expanded 212 bps to 17.1%—the highest quarterly operating margin level since 2015. All four Divisions expanded their margins sequentially.

Second-quarter cash from operations was $408 million and reflected the build-up of working capital in line with the significant revenue growth. Working capital is expected to improve and, consequently, free cash flow generation will accelerate through the second half of the year, consistent with our historical trends.

Strong Outlook for Future

Le Peuch said, “Looking ahead, the second half of the year continues to shape up very well as highlighted in our revised expectations for the full year, encompassing all phases of oil and gas development and all operating environments—from high-volume onshore to deepwater offshore—and firmly establishing digital, decarbonization, and improved pricing as defining characteristics of this upcycle.

“Despite near-term concerns over a global economic slowdown, the combination of energy security, favorable break-even prices, and the urgency to grow oil and gas production capacity is expected to continue to support strong upstream E&P spending growth. Consequently, we are witnessing a decoupling of upstream spending from near-term demand volatility, resulting in resilient global oil and gas activity growth in 2022 and beyond.

“Our second-quarter results were a great demonstration of our revenue, operating margins, and earnings growth potential. I am very pleased with our execution thus far in the year and extend my appreciation to our team for delivering an exceptional quarter.”

Other Events

On July 21, 2022, Schlumberger’s Board of Directors approved a quarterly cash dividend of $0.175 per share of outstanding common stock, payable on October 13, 2022, to stockholders of record on September 7, 2022.