North American operations
As discussed in the previous sections of this series, North America has chugged along in Schlumberger’s (SLB) effort to increase revenues. The company has bagged some decent long-term projects in the conventional and unconventional energy resource plays in the US in 4Q14 to maintain growth and cash flows.
In 4Q14, Schlumberger’s revenues from its North American operations increased 18.5% to $4.32 billion, while it earned $8.21 billion in revenues from operations in various geographies outside North America. From 4Q13, this represents only ~1% growth. So, what projects are expected to take Schlumberger’s (SLB) North American operations forward?
North American projects
In North Dakota, Whiting Petroleum (WLL), a crude oil upstream company, deployed Schlumberger’s fracturing services in a horizontal well. Schlumberger’s Broadband Sequence technology contributed 42% of the oil there. WLL is a component of the Energy Select Sector SPDR ETF (XLE).
US oil major Apache Corporation (APA) used Schlumberger’s fracturing service in the Cottage Grove formation in Oklahoma in two wells. Following the application, production increased by 74% and 134% in these wells, compared to pre-treatment production.
Talisman Energy (TLM), a Canada-based energy producer, used Schlumberger’s rotary steerable system, which led to higher overall rates of penetration and resulted in an average saving of 1.3 days or $70,000 per well.
Noble Energy (NBL), a Texas-based independent energy upstreamer, used a combination of Schlumberger’s (SLB) rotary steerable technology and Smith customized PDC bits in the Niobrara play in the DJ Basin, which resulted in saving two days of drilling per well.
With crude oil price and oil rigs sliding down for the past months and showing no signs of bottoming out yet, Schlumberger will do itself a favor by putting less weight on the North American onshore market. Its current focus on the US market can be a recipe for trouble going forward. Read Market Realist’s article on US rig count in free fall, long-term profits in question to find out more.
In the following section of this series, we’ll discuss Schlumberger’s profit and income margin from operations within and outside North America.