Schlumberger kicks off earnings season with increased revenue and dividends
Schlumberger (ticker: SLB) released its fourth-quarter and full-year 2014 results on January 15, showing year-over-year revenue growth and announcing a 25% increase to dividends. The company said revenue growth was fueled largely by performance in North America where revenue grew 16%. The company’s Middle East & Asia operations increased by 10%. The company also reported that drilling activity in the Gulf of Mexico grew 12% from Q3’14. The Gulf is the site of several new projects coming online, and production volume is forecasted to reach an all-time high in 2016.
According to the press release put out by SLB, full-year 2014 revenue increased 7% to $48.6 billion from $45.3 billion in 2013. The North American segment increased to $16.2 billion from $13.9 billion, while total international revenue increased 4% to $32.1 billion from $30.9 billion. Paal Kibsgaard, CEO of Schlumberger, said: “Fourth-quarter results were led by record revenue in North America due to continued efficiency improvements and new technology uptake in pressure pumping land and by the recovery of activity in the U.S. Gulf of Mexico. In the international markets, growth was strongest in the Middle East & Asia Area, driven by record revenue in Saudi Arabia and Bahrain, robust activity in Kuwait and the United Arab Emirates, and year-end increases in product and software sales across the Area.”
In Europe, Commonwealth of Independent States (CIS) and Africa revenue fell by 7% sequentially and 5% from the same quarter in 2013. Schlumberger said this was due to weakness in the ruble, the onset of winter weather and lower oil prices.
The company’s production group posted revenue just shy of $5 million, according the company’s earning call. The impressive revenue from the production group represented a 5% quarter-over-quarter increase from Q3’14.The reservoir characterization group and drilling group both posted a 3% decline in margins over the same period.
Despite low oil prices narrowing the margins in Europe, CIS and Africa, the company’s overall performance was still positive. Q4 earnings per share (EPS) from continuing operations excluding charges and credits was $1.50. This represents respective increases of $0.01 and $0.15 from Q3’14 and Q4’13.
In the SLB’s earnings call, Simon Ayat, Executive VP & CFO of Schlumberger, said the company would be increasing its annual dividend by 25% to $2.00 a share. He also said in 2014 the company repurchased 47.5 million shares at an average price of $98.38 for a total of $4.7 billion while paying out almost $2 billion in dividends.
The net debt for the company at the end of Q4’14 was $5.4 billion representing an improvement of $458 million as compared to the end of Q3’14. Other significant liquidity events for SLB included $1.2 billion in CapEx and an improvement in working capital of almost $1 billion. Ayat said, “From a cash flow perspective, we generated $11.2 billion of cash flow from operations during all of 2014. During the same period we generated a pre-tax low of $6.2 billion. This represents a $700 million increase over 2015 and means that we converted 84% of our 2014 earnings excluding charges and credits into free cash flow.”
With regards to the current price environment, Ayat said, “In this uncertain environment, we continue to focus on what we can control and we have already taken significant steps to restructure and right size our business to match the reduced E&P investment levels.”
The company plans on reducing its 2015 capital guidance to $3.0 billion – 25% lower than 2014’s total of $4.0 billion.
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