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Earnings Calls: 
Schlumberger First Quarter Earnings Call
Author: 123jump.com Staff
123jump.com
Last Update: 1:14 AM EDT April 29 2008

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The world’s leading oilfield services company reported Q1 revenue of $6.29 billion versus $6.25 billion in the fourth quarter of 2007, and $5.46 billion in the Q1 of 2007. The net income, including discontinued operations, was $1.34 billion or $1.09 per share compared with $1.12 in the previous quarter and 96 cents in the last year quarter. The management is convinced that current investment levels are insufficient to both curb decline and to explore and develop new reserves.

Investors Question and Answers

 
Sequential Earnings Growth | Quarterly Earnings by Year | Quarterly Earnings Growth by Year

Source: Company filings    Q1:March  Q2:June  Q3:September  Q4:December
 
This summary is based on the first quarter fiscal 2008 earnings call conducted by Schlumberger (SLB: chart) on April 18, 2008.

Management:

Chairman and CEO: Andrew F Gould
EVP and CFO: Simon Ayat
VP, Investor Relations: Malcolm Theobald

Key Investor Issues:

- Q1 revenue was $6.29 billion compared with $5.46 billion in the prior year quarter.
- Quarterly EPS was $1.06 versus 96 cents per share.
- Net income rose from $1.18 billion last year quarter to $1.34 billion Q1 of 2008.

First-Quarter Financial Highlights:

The quarterly income from continuing operations before charges and credits was $1.30 billion.

- This represents a 5% sequential decrease but an increase of 10% year-on-year.
- The EPS from continuing operations was $1.06 versus $1.11 before charges and credits in the previous quarter.

The Q1 effective tax rate was lower than last quarter at 19.1%.

- The decrease was due to the favorable resolution of tax examination in several countries.
- The effective tax rate is anticipated to be in the low 20s for the full year 2008.

As part of the 40 million shares repurchase program approved by the Board of Directors in Q2 of 2006, the company has bought back seven million shares of common stock in the quarter.

- The shares were repurchased at an average price of $81.16 for a total of $564 million.
- As of March 31, 2008, the company had repurchased 36.9 million shares of common stock at an average price of $74.15 for a total of $2.73 billion and had remaining authorization to repurchase 3.1 million shares of common stock.
- On April 17, 2008, the company’s Board of Directors approved a new share repurchase program of $8 billion in shares of common stock to be acquired before December 2011.

Segment Analysis

Oilfield Services:

- The Q1 revenue of $5.6 billion was 3% higher sequentially and 18% higher year-on-year.
- The sequential revenue increases were highest in Canada, the U.S. Gulf Coast, South Russia, Australia/Papua New Guinea, West & South Africa and Alaska GeoMarkets.
- The Q1 pre-tax operating income was $1.5 billion, representing a decrease of 2% sequentially but an increase of 7% year-on-year.
- The sequential growth was a result of demand for high-margin Wireline and Drilling & Measurement services in the U.S. Gulf Coast; strong demand for Wireline and Well Services technologies in Canada; and higher activity levels with a more favorable technology mix in East Mediterranean, Australia/Papua New Guinea and Thailand/Vietnam.
- During the quarter, the company opened the new Siberian Training Center in Tyumen, West Siberia and the training capacity is expected to double over the next year to reach 350 students.

- In North America, revenue increased 6% sequentially to $1.42 billion and 3% year-on-year.
- The pre-tax operating income of $363 million rose 7% sequentially but decreased 16% year-on-year.
- The pre-tax operating margin for the area increased sequentially to 25.6% due to a more favorable exploration-driven activity mix and higher operating leverage in the U.S. Gulf Coast, Canada and Alaska GeoMarkets.

- In Latin America, the revenue decreased 2% sequentially but rose 27% year-on-year.
- The pre-tax operating income was $185 million, a decrease of 11% sequentially. The year-on-year figures increased by 14%.
- The pre-tax operating margin declined sequentially to 20.1% primarily due to higher IPM project startup and third-party managed costs in the Mexico/Central America GeoMarket. An unfavorable activity mix in Peru/Colombia/Ecuador and Brazil as well as reduced high margin SIS and Artificial Lift Systems product sales also contributed to this result.

- In Europe/CIS/Africa, Q1 revenue was $1.9 billion, representing sequential and year-on-year increases of 7% and 24% respectively.
- The pre-tax operating income increased 1% sequentially to $500 million and rose 16% on a year-on-year basis.
- The pre-tax operating margin declined sequentially to 26.3% due to unfavorable activity mix in the North Sea, lower-margin Artificial Lift Systems product sales in South Russia, reduced high-margin Area-wide SIS product sales and the effect of consolidation of FRAMO revenue in the Area.

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