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Analyzing Schlumberger’s Revenues and Earnings in 4Q17

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Jan. 22 2018, Published 7:49 a.m. ET

Schlumberger’s annual revenue and income?

In fiscal 2017, Schlumberger’s (SLB) revenues increased 9% to $30.4 billion—compared to the same period in fiscal 2016. Its reported net loss improved marginally to ~$1.5 billion in fiscal 2017—compared to a net loss of $1.68 billion in fiscal 2016. Schlumberger’s fiscal 2017 net income declined mostly due to asset impairment charges and write-downs in Venezuela’s operations in 4Q17, as we discussed in the previous part of this series.

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4Q17 revenue by segment

Schlumberger’s Production segment witnessed the highest revenue growth (~40% rise) in 4Q17 over 4Q16, followed by the Drilling (8.3% rise) and Cameron (5% increase) segments. The Reservoir Characterization segment saw its revenue fall 2.3% during the same period. Schlumberger accounts for 6.4% of the iShares U.S. Energy ETF (IYE). IYE increased 2% in the past year—compared to a 12% fall in Schlumberger’s stock price. During the same period, the Dow Jones Industrial Average (DJIA-INDEX) increased 31%.

In terms of geography, Schlumberger’s revenues from North America did much better in 4Q17—compared to 4Q16 (up ~59%), while its revenues from the Middle East and Asia region fell (down 4%) during the same period.

Negative factors 

  • negative change in the estimate on a long-term project in the Middle East
  • less seasonal wireline activity in Russia
  • negative change in the mix in Surface and Drilling Systems had a negative impact on the Cameron Group’s operating margin
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 Positive factors 

  • redeployment of additional pressure pumping fleet following strong hydraulic fracturing activity in North America
  • higher project volume and increased service revenue in the Cameron segment led by OneSubsea
  • increased contribution of high margin SIS software used by Schlumberger and higher WesternGeco multiclient seismic license sales
  • improved pricing in onshore North America benefited the Production segment’s margin

Schlumberger’s segment margin analysis

The Reservoir Characterization segment’s 4Q17 operating income margin increased to 22% from 19% last year. The Production segment also experienced an improved operating margin from 4Q16 to 4Q17 (10% versus 6%). The Drilling segment’s operating margin rose to 15% in 4Q17 from 12% in 4Q16.

Next, we’ll discuss Schlumberger’s returns.

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