uploads///SLB CAM Revenues

Cameron International Could Lend Balance to Schlumberger’s Operating Performance

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Sep. 11 2015, Updated 8:08 a.m. ET

Crude oil prices

Crude oil prices have slumped by nearly 60% since highs in June 2014, a trend that has reduced upstream energy companies’ revenues. Oil rigs, on average, declined by 55% in 2Q15 from 2Q14 in the US, and many of the upstream companies have reacted by curtailing exploration & production capex (capital expenditures) and by pressing OFS (oilfield service) companies for lower bargain rates. These factors have severely crimped OFS companies’ revenues and profits, especially in the past two quarters.

In this part of the series, we’ll examine whether Cameron International Corporation’s (CAM) merger with Schlumberger (SLB) will add more balance to latter company’s business.

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Schlumberger’s and Cameron International’s revenues

Previously in this series, we discussed Schlumberger’s and Cameron International’s respective business segments. Schlumberger’s QoQ (quarter-over-quarter) revenues declined by 19% in 1Q15 and by 12% in 2Q15. By comparison, Cameron International’s QoQ revenues only declined by 19% and 2.6%, respectively, during the same periods—a trend that shows that Cameron International has recently managed to steady its ship better than Schlumberger has.

On a YoY (year-over-year) basis, Cameron International’s revenue has also performed better than Schlumberger’s. While Schlumberger’s revenues slipped 25% in 2Q15 from 2Q14, Cameron International managed to hold its own fall in revenues at 14.5% during the same period.

In 2Q15, Cameron International’s adjusted revenue was $2.22 billion, while Schlumberger’s 2Q15 adjusted revenue of $9.01 billion was the highest in the US OFS industry.

By comparison, Baker Hughes’s (BHI) 2Q15 revenue was ~$3.96 billion, while Halliburton Company’s (HAL) 2Q15 adjusted revenue was $5.92 billion. Baker Hughes and Halliburton are in the advanced stages of a merger.

Schlumberger makes up 23.6% of the VanEck Vectors Oil Services ETF (OIH).

Schlumberger’s income versus Cameron International’s

Similarly, Cameron International’s operating income has been holding up better than Schlumberger’s. In 2Q15, Cameron’s operating income fall decelerated to 9% on a QoQ basis, from 26% in 1Q15. Schlumberger’s pre-tax income fell by 14% in 2Q15 from 1Q15, after a 30% decline in 1Q15 over the previous quarter.

Cameron International makes up 1.6% of the Energy Select Sector SPDR ETF (XLE).

Reasons for operational performance variations

Let’s look at Schlumberger’s operating performance. In 2Q15, Schlumberger’s four segments registered revenue and operating income declines from 1Q15 and 2Q14. Schlumberger’s Production segment was affected most in the latest quarter, attributed primarily to the weak North America drilling environment and to price squeezes from upstream clients.

On the other hand, Cameron International’s Subsea segment produced strong results in 2Q15—a performance that helped the company limit its overall decline. OneSubsea, which part of Schlumberger’s Subsea segment, is strategically important to both Schlumberger and Cameron.

In the next part of this series, we’ll discuss OnSubsea in further detail.

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