Schlumberger Announces 2Q:22 Results

(Schlumberger, 22.Jul.2022) — Schlumberger Limited (NYSE: SLB) announced results for the second-quarter 2022.

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 Growth Broad-Based Across All Geographies

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.

Power of the Core—Complemented by Digital

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.

A Strengthened Outlook Aligned to Schlumberger’s Strengths

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

Revenue by Geographical Area

International

Revenue in Latin America of $1.3bn increased 10% sequentially due to higher stimulation activity in Argentina, higher Production Systems sales in Brazil and Mexico, and higher offshore drilling in Guyana.

Year on year, revenue grew 26% due to higher drilling activity in Mexico, Ecuador, and Brazil as well as increased stimulation activity in Argentina.

Europe/CIS/Africa revenue of $1.7bn increased 20% sequentially. This significant growth was driven by activity that strengthened beyond the impact of the seasonal drilling activity recovery in the Northern Hemisphere with higher Production Systems sales in Europe and Scandinavia and multidivisional activity increases in Sub-Sahara Africa.

Year on year, revenue grew 16%, primarily from higher Production Systems sales in Europe and higher exploration drilling in offshore Sub-Sahara Africa, partially offset by the revenue decline in Russia.

Revenue in the Middle East & Asia of $2.2bn 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.

Year on year, revenue increased 8% due to higher drilling, stimulation, and intervention activity on new projects in Iraq, Oman, Egypt, Qatar and across Southeast Asia and Australia.

North America

North America revenue of $1.5bn increased 20% sequentially and represented the highest sequential quarterly growth rate since 2017. US land revenue growth outperformed the rig count increase sequentially, while offshore revenue growth was more than double the pace of US land—boosted by increased exploration data licensing in the US Gulf of Mexico and higher drilling activity. US land revenue increased due to higher drilling activity and increased sales of surface production systems, while Canada land revenue increased despite the spring breakup due to higher Asset Performance Solutions (APS) project revenue.

Compared to the same quarter last year, North America revenue grew 42%. All Divisions experienced significant growth primarily from higher drilling and intervention activity, increased sales of production systems, increased exploration data licensing, and strong contribution from the APS project in Canada.

Quarterly Highlights

Schlumberger continues to secure a pipeline of new contract awards as customers announce new projects and with the expansion of existing developments globally. Schlumberger is increasingly being selected for its superior performance and execution and its innovative technology that enhances customer success. Examples of awards from the quarter include the following:

• In Norway, Aker BP ASA has awarded a frame agreement to Cameron, a Schlumberger company, for surface wellheads and production trees for up to 64 wells on the North of Alvheim, King Lear, and Valhall New Central Platform projects in the Norwegian sector of the North Sea. The ten-year agreement contains optional extensions for the life of the field and covers engineering, qualification, and manufacture of digitalized wellhead equipment and production trees capable of up to 15,000-psi operation and condition-based monitoring, as well as a new 21-in metal-to-metal Fontus* configurable production wellhead system. Installation is scheduled to begin in 2024.
  
  
• In Brazil, Petrobras awarded Schlumberger a contract for integrated intelligent completions for wells in the presalt area. The advanced completion design selected for these wells includes premium interval flow control valves, an inductive coupling downhole wet disconnect tool and a wireless real-time running tool, GeoGuard* high-performance deepwater safety valves, and Metris* permanent monitoring systems. This intelligent completion technology package will enable Petrobras to more accurately monitor and control production—enhancing ultimate recovery. This contract, for which work is expected to commence in the first quarter of 2023, is a precursor to the development of an all-electric completion, currently underway in Brazil at the Schlumberger Taubaté Engineering Center.
  
  
• OneSubsea^®, the subsea technologies, production, and processing systems business of Schlumberger, has been awarded an engineering, procurement, construction, and installation (EPCI) contract by OKEA for the supply of three subsea high-boost pumps to increase production from the Draugen Field, located in the southern part of the Norwegian Sea. Under the contract, which is part of a frame agreement signed in 2017 by OKEA and Subsea Integration Alliance, OneSubsea will deliver a new high-boost pump module and modify two existing pump modules into high-boost pumps capable of handling higher differential pressure and throughput to maximize production from this asset. Delivery of the pump modules is scheduled for 2023.
  
  
• Sarawak Shell Berhad has awarded Schlumberger a contract for integrated drilling services on seven exploration wells offshore Malaysia. The scope of the contract includes drilling and measurement, electrical wireline, drilling fluids, solids control, cementing, casing drilling, bits, and mud logging. Schlumberger will apply a variety of technologies, including the Allegro CD* directional casing-while-drilling service with the sonicVISION* sonic-while-drilling service to enhance performance of this operation, which commenced during the second quarter of 2022.
  
  
• Equinor has made a direct award to Schlumberger for downhole completion and artificial lift equipment to extend the life of the Statfjord Field in the North Sea. Supporting Equinor’s dual objective of increasing recovery from the field while significantly reducing the carbon intensity of incremental production, the award includes a Shuttle* rigless electric submersible pump (ESP) using a REDA* pump powered through a completion-integrated downhole wet-mate docking station. Because an ESP can more completely drain the reservoir using less electricity per barrel than compressor-driven gas lift, this solution will increase annual production and lower carbon intensity. Installation of the completions using the Shuttle rigless ESP technology is expected to commence in the first quarter of 2023.
  
  
• Chariot, the African-focused transitional energy company, has signed a front-end engineering and design (FEED) contract with Schlumberger and Subsea 7, as part of a consortium, for the Anchois gas development project offshore Morocco. The scope of the agreement incorporates offshore components including well completions; subsea production systems; and subsea umbilicals, risers, and flowlines (SURF) that will be delivered by Subsea Integration Alliance. Onshore components include a central processing facility (CPF) and flowlines and controls from the CPF to the shore crossing that will be delivered by Schlumberger.
  
  
• Talos Energy has awarded Schlumberger contracts for well construction services including drilling fluids, directional drilling, bits and reamers, and logging while drilling in the deepwater Gulf of Mexico. This adds to previous awards on ongoing Talos projects, including developmental drilling from the Pompano platform on the Continental Shelf. The new awards include technologies that will deliver demanding 3D directional drilling profiles and high-quality data with superior logging-while-drilling technology. Talos is scheduled to deploy a semisubmersible rig in August 2022 for this multiwell, deepwater campaign—the latest project in a collaboration between the two companies that has developed over years to deliver best-in-class wells.
  
  
• The Abu Dhabi National Oil Company (ADNOC) has awarded Schlumberger a five-year wireline services contract. The contract, which includes an optional two-year extension, covers open- and cased-hole wireline logging, as well as perforating and coiled tubing logging services. Schlumberger technologies, including the Pulsar* multifunction spectroscopy service and Saturn* 3D radial probe, will be deployed to maximize the production of existing wells and appraise new fields for production expansion. Work is expected to commence in the third quarter of 2022.

Digital adoption across the industry continues to gather momentum, expanding how customers access their data, improve existing or create new workflows, and use data to guide decisions that boost performance in the field. Customers are adopting our industry-leading digital platform and edge solutions in the field to solve new challenges and improve operational performance. Examples from the quarter include the following:

• Offshore Brazil, Schlumberger’s autonomous operations on the Peregrino platform offer a glimpse into the future of well construction—built on a digitally native foundation and unique equipment and service integration capabilities. In addition to the delivery of the full drilling and control systems on the platform, Schlumberger developed a digital avatar of the rig, fully enabling the seamless digital orchestration of the surface equipment and subsurface well construction process—a step closer to the autonomous drilling vision.
  
• In Malaysia, PETRONAS has awarded Schlumberger a contract to incorporate the DrillOps* on-target well delivery solution in a drilling campaign in the West Malaysia offshore, the first deployment of this digital application in Asia. Drilling has already commenced, with the DrillOps solution expected to deliver superior drilling performance, safety, and efficiency for PETRONAS. This deployment builds on digital partnerships initiated between Schlumberger and PETRONAS to accelerate its field development planning and optimize asset production performance.
  
• In Ecuador, Schlumberger deployed a digital water injection solution—built on Agora* edge AI and IoT solutions—that is increasing production for PetroEcuador in the Shushufindi Field. The system integrates smart hardware and Agora solutions to generate continuous real-time surveillance, smart notifications, and local control loops for water injection. Leveraging AI deployed at the edge, the system has predicted early water injection pump failures and consequently avoided reduced oil production stemming from limited water handling capacity. This digital solution has avoided 12,000 bbl of production losses, corrective maintenance cost, and 100 labor hours that would have otherwise reduced project performance. The customer expects to expand the deployment of this Agora solution to other injection systems across the field.

Schlumberger continues to introduce new technologies that boost customer efficiency and improve operational performance. Among the new technologies deployed were solutions from the Transition Technologies* portfolio that delivered significant emissions reduction.

• In East Texas, Schlumberger delivered the fastest one-mile curve-and-lateral production hole in KJ Energy history in the challenging Cotton Valley Formation. The fit-for-basin bottomhole assembly (BHA) comprising only Schlumberger technology—including PowerDrive Orbit G2* rotary steerable system, xBolt G2* accelerated drilling service, and AxeBlade* ridged diamond element bit—remotely drilled the 6.75-in curve and lateral in 10.6 days with Performance Live* digitally connected service. This performance helped the customer beat its average performance by 28% and its previous well record by 24 hours.
  
• Offshore Brazil, Schlumberger’s recent application of technology and an integrated drilling contract model has enabled Petrobras to drill two of its fastest wells on record, including the most recent national record of 23 days—7 days ahead of plan. The adoption of an integrated approach enabled Petrobras’ bold drilling plan that was executed with fit-for-purpose technology, including GeoSphere HD* high-definition reservoir mapping-while-drilling service, and AxeBlade ridged diamond element bit. This marked the first use of geometric cutters in the Marlim Field and contributed to operational success. With the recent record-breaking performances, Schlumberger Well Construction has now drilled the three fastest wells offshore Brazil.
  
• Offshore East Java, Schlumberger enabled Saka Indonesia Pangkah Limited (SIPL) to bring two plugged exploration wells into production, avoiding the need to drill new wells and shortening time to first gas. This was the first conversion of an offshore exploration well to a producing well where the casing had been cut at the seabed. To achieve this, Schlumberger used a novel application of its Casing Reconnect* metal-to-metal, gas-tight casing repair system for reentry and completion.
  
• Schlumberger is deploying a new technology that can increase the efficiency of rigless plugging and abandonment (P&A) of wells, delivering a step change in the P&A process for the industry. The Schlumberger dual-string P&A barrier evaluation technology was run for the first time in the Gulf of Mexico to evaluate cement bonding in the annulus between the 13 3/8-in and 16-in casing with the logging tool run inside uncemented 9 5/8-in production casing. The technique documented sufficient cement bonding to allow the Bureau of Safety and Environmental Enforcement to waive further remediation of that annulus. This saved W&T Offshore Inc. multiple days on the abandonment operation being performed by the Q4000 vessel, operated by Helix Energy Solutions Group, Inc., Schlumberger’s partner in the nonincorporated Subsea Services Alliance.

Our industry must advance sustainability in its operations by reducing environmental impact while contributing to the stability of the global energy supply. Schlumberger continues to create and apply technology to both reduce emissions from customer operations and support clean energy generation around the world.

• Zorlu Enerji, Turkey’s leading geothermal investor, installed the country’s first REDA Thermal* power-efficient geothermal electric submersible pump (ESP) to increase zero-carbon electricity generation at its Kızıldere geothermal power facility. The REDA Thermal pump uses ESP permanent magnet motor technology, one of Schlumberger’s Transition Technologies, to reduce the parasitic load needed to operate the ESP—increasing net generated power. REDA Thermal pumps are designed specifically for the geothermal industry, combining innovation that overcomes oil and gas production challenges with materials that meet the operational and longevity requirements of geothermal wells. This technology was developed leveraging industry domain expertise from GeothermEx, a Schlumberger multidisciplinary geothermal consulting and services company.

Schlumberger continues to advance its portfolio of new energy ventures in Schlumberger New Energy, where it is applying domain expertise and technology industrialization capabilities to growing new energy markets.

• Celsius Energy, a Schlumberger New Energy business venture focused on heating and cooling solutions for buildings, commenced installation of its novel geoenergy solution for Groupement Optic 2000, a leading French eyewear brand, at its headquarters in Clamart, France. The facility comprises 12,000 m² of offices and a workshop in which glasses are manufactured from recycled materials. In line with Groupement Optic 2000’s commitment to sustainable development, the Celsius system was selected for its capability to reduce both CO₂ emissions and energy costs, and it is expected to decrease the location’s CO₂ footprint by 70% and its energy consumption by 40%. This installation is one of five projects ongoing in Europe for Celsius Energy and is expected to be operational in the fourth quarter of 2022.

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