Previously in this series, we looked at Schlumberger Limited’s (SLB) 3Q14 North American performance. In this article, we’ll discuss its international operations and where growth came from during the latest quarter.
Schlumberger is a component of the VanEck Vectors Oil Services ETF (OIH) and the Energy Select Sector SPDR (XLE). Other companies that are components of theVanEck Vectors Oil Services ETF include Halliburton Company (HAL) and Baker Hughes Incorporated (BHI).
In 3Q14, Schlumberger’s revenues from its international operations, or operations outside the U.S., increased 5% to $8.30 billion from $7.91 billion in 3Q13. Earnings before tax, or EBT, from its international operations increased 11% to $2.04 billion, from $1.84 billion in 3Q13.
Europe, Commonwealth of Independent States, and Africa regions help improve profit margins
In Schlumberger’s Europe, Commonwealth of Independent States, or CIS, and Africa operations, revenues increased by 3.7% in 3Q14 to $3.30 billion, compared to $3.18 billion recorded in 3Q13. Increased revenue came from the following key activities:
- New exploration and projects in Angola, Congo, and Equatorial Guinea
- Higher drilling activities in Russia and Central Asia
- Higher software sales in the United Kingdom
Meanwhile, sales in these regions were dampened somewhat by European Union and U.S. sanctions against Russia, as well as lower seismic and drilling activity in Norway. Exploration seismic activity refers to the study of geologic structure by studying elastic waves through the earth’s exterior.
Margins on pre-tax earnings in these regions improved by 1.0% to 23.4% in 3Q14.
In 3Q14, Schlumberger won a $180 million contract with Statoil ASA (STO) to supply integrated drilling services for various licenses related to exploration drilling.
Middle East and Asia
In Asia and the Middle East, revenues increased 6.3% year-over-year, to $2.97 billion in 3Q14 from $2.79 billion in 3Q13. Increased exploration and drilling activities in Saudi Arabia and Oman, as well as better performance by Schlumberger’s reservoir characterization group in offshore activities, contributed to the higher revenues.
Higher exploration seismic activity in United Arab Emirates, Saudi Arabia, and Qatar also added to the growth. This was partially offset by operational slowdowns in Kurdistan and Iraq due to geopolitical unrest.
EBT margin improved to 27.6% in 3Q14 from 26.1% in 3Q13.
In 3Q14, Schlumberger’s revenues from its Latin American operations increased by 5.3% to $2.03 billion, from $1.94 billion recorded in 3Q13. Growth was led by strong integrated project management work and higher drilling activity in Venezuela, Argentina, Colombia, and Brazil.
Pre-tax operating margin also increased to 21.9% in 3Q14, from 20.6% in 3Q13.
Schlumberger’s strong operating performance has translated into strong free cash flows and higher shareholder returns from a share-repurchase program. Read on in the series to learn how shareholders are benefiting from a stronger Schlumberger.