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Certain Factors Impact Schlumberger’s Financial Performance

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Schlumberger’s revenue by segment

Schlumberger’s (SLB) Drilling segment witnessed the highest revenue decline (37% fall) in 3Q16 compared to 3Q15. Next, the Reservoir Characterization segment fell 29% and the Production segment fell 28.5%. In 2Q16, Schlumberger added Cameron to its product group, following the acquisition of Cameron International on April 1. Schlumberger generated $1.3 billion in revenues from Cameron in 3Q16. In comparison, FMC Technologies’ (FTI) 3Q16 revenues fell 29% compared to 3Q15. Schlumberger accounts for 5.2% of the ProShares Ultra Oil & Gas ETF (DIG).

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Schlumberger’s segment margin analysis

Schlumberger’s Reservoir Characterization segment’s 3Q16 operating income margin fell to 19% from 26% a year ago. The Production segment’s operating margin fell from 3Q15 to 3Q16—11% versus 5%. The Drilling segment’s operating margin fell to 11% in 3Q16 from 18% in 3Q15.

Factors impacting Schlumberger’s financial results

  • lower offshore rig count, reduced license fees from Schlumberger’s WesternGeco division, and lower sales from Schlumberger’s Cameron segment in North America
  • lower capex spend by upstream producers in Mexico and Brazil
  • muted upstream activity in Columbia and Venezuela
  • project delays and lower rig counts in Central and West Africa, Angola, and the United Kingdom

Can Schlumberger still benefit from integrating Cameron?

Schlumberger’s management estimates that the company will achieve its synergy target of $300 million in 2016. In 3Q16, Schlumberger gained $139 million through synergy-related work. Read Wedding Season in Energy OFS: SLB’s Proposed Acquisition of CAM to learn more about Schlumberger’s Cameron acquisition.

In the next part, we’ll discuss Schlumberger’s indebtedness.

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