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Schlumberger’s Segment-Wise Revenue and Margin Performance

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Jul. 24 2015, Updated 12:06 p.m. ET

Schlumberger’s segment-wise revenue

We have already discussed Schlumberger’s (SLB) 2Q15 operating results. We will now look into Schlumberger’s segment-wise performance in 2Q15.

Each of Schlumberger’s three product group segments witnessed revenue declines in 2Q15 over 2Q14. The production segment witnessed the highest revenue decline at 26%, followed by reservoir characterization at 25%, and drilling at 24.5%. The falls can be attributed to:

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  • The sharp decrease in exploration-related services negatively affected wireline and testing services’ activities in Europe/CIS & Africa, the US Gulf of Mexico, and Australia.
  • The drop in the North American rig count impacted the company’s drilling and measurements and M-I SWACO services. M-I SWACO supplies drilling fluid systems for wells.

Schlumberger’s segment margin analysis

The drilling group’s 2Q15 EBT (earnings before tax) margins remained resilient at 19.5%, as strong cost management limited margin decline compared to a year ago. The production group, on the other hand, experienced a huge margin decline from 2Q14 to 2Q15 of 17% versus 13%. This was due to sharp decline in North America E&P activity and pricing for pressure pumping services in North America.

In 1Q15, in comparison to National Oilwell Varco’s (NOV) 23% EBITDA (or earnings before interest, tax, depreciation, and amortization) decrease over 1Q14, Weatherford International’s (WFT) 1Q15 EBITDA declined 24% over 1Q14, while Ensco’s (ESV) EBITDA increased 21% over the same period. Schlumberger accounts for 6.8% of the iShares US Energy ETF (IYE).

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