Schlumberger Announces First-Quarter 2015 Results
• First-quarter revenue of $10.2 billion decreased 19% sequentially
• First-quarter EPS of $1.06, excluding charges and credits, declined 29% sequentially
• First-quarter free cash flow of $1.2 billion, excluding restructuring payments, increased 74% year-on-year
• 8.7 million shares were repurchased during the quarter for $719 million
• First-quarter restructuring and other charges amounted to $0.30 per share

Houston, April 16, 2015—Schlumberger Limited (NYSE:SLB) today reported results for the first-quarter 2015.

(Stated in millions, except per share amounts)
Three Months Ended Change
Mar. 31, 2015 Dec. 31, 2014 Mar. 31, 2014 Sequential Year-on-year
Revenue $10,248 $12,641 $11,239 -19% -9%
Pretax operating income 1,993 2,781 2,368 -28% -16%
Schlumberger net income, excluding charges and credits* 1,358 1,941 1,592 -30% -15%
Diluted EPS, excluding charges and credits* $1.06 $1.50 $1.21 -29% -12%
Pretax operating margin 19.4% 22.0% 21.1% -255 bps -162 bps

North America revenue $3,222 $4,324 $3,684 -25% -13%
North America pretax operating income 416 849 683 -51% -39%
North America pretax operating margin 12.9% 19.6% 18.5% -670 bps -561 bps

International revenue $6,889 $8,210 $7,484 -16% -8%
International pretax operating income 1,661 1,990 1,706 -17% -3%
International pretax operating margin 24.1% 24.2% 22.8% -13 bps +131 bps

*Schlumberger net income, including charges and credits was $975 million in the first quarter of 2015, $302 million in the fourth quarter of 2014 and $1.592 billion in the first quarter of 2014. Diluted EPS, including charges and credits, was $0.76 in the first quarter of 2015, $0.23 in the fourth quarter of 2014 and $1.21 in the first quarter of 2014. See section entitled "Charges & Credits" for details.
Schlumberger Chairman and CEO Paal Kibsgaard commented, “Schlumberger first-quarter revenue decreased 19% sequentially driven by the severe decline in North American land activity and associated pricing pressure. International operations were impacted by reduced customer spend in addition to seasonal effects in the Northern Hemisphere and the fall in value of the Russian ruble and the Venezuelan bolivar. Three-quarters of the overall sequential decline was due to lower activity and pricing, while the remainder was the result of currency effects and non-recurring year-end sales.

“Among the Technologies, Production Group revenue declined 22% sequentially from lower pressure pumping services in North America, while Reservoir Characterization and Drilling Group revenues fell by 21% and 15% respectively on a sharp decrease in exploration-related services and development drilling activity. Product, software and multiclient sales also declined as customers further curtailed exploration and discretionary spending.

“Despite the severity of the sequential revenue decline, we have been able to minimize its impact on our margins through prompt and proactive cost management as well as through acceleration of our transformation program across product lines and GeoMarkets. These actions have successfully improved financial performance compared to previous industry cycles, with an overall sequential decremental operating margin of 33% as North America and the International Areas reported 39% and 25%, respectively.

“In spite of the detailed preparations we made in the fourth quarter, the abruptness of the fall in activity, particularly in North America, required us to take additional actions during the quarter. These included the difficult decision to make a further reduction in our workforce of 11,000 employees, leading to a total reduction of about 15% compared to the peak of the third quarter of 2014.

“Looking at the macro environment, the global economy continues its steady recovery, and oil demand is still expected to increase by 1 million bbl/d in 2015. However, the significant reductions in E&P spend are starting to impact supply in both North America and internationally, and supply is expected to tighten further in the second half of the year.

“The largest drop in E&P investment is occurring in North America, where 2015 spend is expected to be down by more than 30%. We believe that a recovery in US land drilling activity will be pushed out in time, as the inventory of uncompleted wells builds and as the re-fracturing market expands. We also anticipate that a recovery in activity will fall well short of reaching previous levels, hence extending the period of pricing weakness.

“Internationally, we expect 2015 E&P spending to fall around 15%, which will create challenges in terms of both activity and pricing levels, but these challenges will be considerably less than the headwinds we are facing in North America. By geography, we anticipate growth in our key markets in the Middle East as the core OPEC producers continue to pursue market share as the non-OPEC part of the international supply base continues to weaken. Elsewhere, we expect to see overall activity reductions in Latin America, Europe, Sub-Saharan Africa, and in Asia, while in Russia, we believe that conventional land activity in Western Siberia will continue to be resilient, but that the revenue contribution from the region will remain subdued until the currency effects have normalized.

“Amid the rapid decline in activity, we remain focused on what we can control, including our cost and resource base, the deployment of our technology and expertise, and the quality and integrity of the products and services we provide. We continue to work closely with our customers in meeting their objectives of lowering cost per barrel, through the introduction of new technologies, continuous improvements in both reliability and operational efficiency, and through more integrated workflows and performance-based contracts.

“In this environment, we remain confident in our ability to grow market share, deliver superior performance in earnings per share compared to industry peers, and reduce working capital and capex intensity. Our favorable international leverage, our technological differentiation in North America, the acceleration of our transformation program and our unmatched execution capabilities continue to provide the foundations for our financial and technical outperformance."

Other Events
During the quarter, Schlumberger repurchased 8.7 million shares of its common stock at an average price of $82.98 per share for a total purchase price of $719 million.

On January 20, 2015, Schlumberger agreed to acquire a minority ownership of approximately 46% in Eurasia Drilling Company Limited (“EDC”). The total cost of acquiring this minority interest, including an option which will allow Schlumberger at its election, to purchase the remaining shares during a two-year period commencing on the third anniversary of the closing of the transaction, is approximately $1.7 billion. This transaction is currently under review by the Russian Federal Anti-Monopoly Service and the Commission on Foreign Investment.

North America
North America first-quarter revenue of $3.2 billion decreased 25% sequentially. In the US and Western Canada, revenue fell on lower pressure pumping activity and increased pricing pressure, precipitated by the sharp drop in land rig count and the early onset of the Canadian spring break-up. In the US Gulf of Mexico, offshore activity was flat sequentially but revenue declined due mainly to lower multiclient seismic license sales.

North America pretax operating margin declined 670 basis points (bps) sequentially to 12.9% on decreased pressure pumping activity and pricing weakness in North America land. North America offshore operating margin declined due to an unfavorable revenue mix resulting from a shift from exploration to development activity and reduced high-margin multiclient license sales. Despite the severity of the revenue decline, focused execution and prompt action on cost management limited the sequential decremental margin to 39%.

During the first quarter, new technologies and engineered workflows helped increased production and operational efficiency in North American unconventional resource development.

In South Texas, Well Services BroadBand Sequence* fracturing service was deployed for Pioneer Natural Resources to increase production from a previously fractured horizontal shale well in the Eagle Ford formation. BroadBand Sequence technology enabled the effective refracturing treatment through an engineered application using a proprietary, fully degradable composite fluid comprising a blend of particles and fibers. As a result, the well’s oil and gas production increased by approximately 120% and 89%, respectively, over the first 45 days after refracturing.

In Louisiana, BroadBand Sequence fracturing service was deployed for Comstock in the Haynesville shale to re-fracture a well. The well was producing 0.5 MMscf/d before being treated. After the re-fracturing treatment, production increased to 4 MMscf/d with a three-fold increase in flowing pressure.

Also in Louisiana, Well Services used the BroadBand Sequence fracturing technique to hydraulically refracture a well operated by Sabine Oil and Gas in the Haynesville shale play. The well was previously producing 0.1 MMscf/d with 1,000 psi of casing pressure. After the refracturing treatment, production increased to 2.75 MMscf/d with 5,500 psi of casing pressure.

In West Texas, Drilling Group technologies were deployed for Cimarex Energy to improve drilling efficiency in a development well in the Avalon Shale play. The combination of Drilling & Measurements G2 drilling motor and StingBlade* conical diamond element bit technologies delivered excellent directional control, and drilled the curve section of the well in a single run with an average rate of penetration 23% faster than the best offset drilled in 2014 with hybrid roller cone bits.

International Areas
Revenue for the International Areas of $6.9 billion decreased 16% sequentially.

Middle East & Asia Area revenue of $2.7 billion declined 13% sequentially due mainly to double-digit drops in China, Asia-Pacific and Australia. The Middle East GeoMarkets remained robust on new projects and higher activity, but revenue declined on reduced product and software sales following the year-end high of the previous quarter. India GeoMarket revenue also grew sequentially while activity in Iraq continued to be muted.

Europe/CIS/Africa Area revenue of $2.5 billion fell 17% sequentially due mainly to continued weakness in the Russian ruble and the seasonal activity decline in Russia. As customer spending decelerated, exploration in the UK North Sea fell to its lowest level, while rig count in the Norway sector was flat compared with the previous quarter. Sub-Saharan activity was mixed, with offshore and exploration work declining in the East Africa, Chad, and Nigeria GeoMarkets. North Africa showed some early but slow signs of increasing activity, while work in Libya was limited to offshore operations.

Revenue in the Latin America Area of $1.6 billion dropped 20% on the exchange rate effect in Venezuela and decreased activity in Mexico, Brazil and Colombia due to budgetary cuts. These effects, however, were partially offset by slight but steady activity increases in Argentina, Venezuela, Trinidad and the Caribbean.

International Area pretax operating margin of 24.1% was essentially flat sequentially. Middle East & Asia pretax operating margin increased slightly by 30 bps to 28.6%, Latin America increased 59 bps to 21.5%, and Europe/CIS/Africa fell 133 bps to 21.0%. Despite the severity of the sequential revenue decline and the increasingly unfavorable shift in revenue mix, the impact on margins was minimized by focused execution, prompt action on all variable cost categories, and acceleration of our transformation program across the GeoMarkets. The positive effects of these limited sequential decremental margins to 25%. Compared to the first quarter of 2014, international margins increased by 131 bps.

During the quarter, the International Areas saw a number of contract awards and integration-related highlights.

In Abu Dhabi, the Abu Dhabi Marine Operating Company (ADMA-OPCO) awarded Schlumberger a contract valued at approximately $185 million for the supply of integrated well construction services on the Satah Al Razboot (SARB) North artificial island. The five-year contract covers directional drilling, measurement-while-drilling, logging-while-drilling, drill bits, fishing, cementing, drilling fluids, mud logging, coiled tubing, wellbore clean out, well testing, and wireline services. The integrated services model provides access to key well construction technologies and multidisciplinary work processes, enabling cost-efficient operations through standardization and a focus on quality of execution.

In Angola, Testing Services was awarded a contract by Total Exploration & Production Angola of approximately $200 million for subsea test trees and associated services in the Block 32 Kaombo ultra-deepwater development project. The five-year contract includes provision of SenTREE HP* subsea test tree and SenTURIAN* electrohydraulic operating systems to install completions on 59 subsea wells.

Chevron Energy Technology Company (ETC), a division of Chevron U.S.A. Inc., and SIS signed a software agreement to provide Chevron’s entire earth sciences organization universal access to the Petrel* E&P software platform. The long-term contract includes software in the geological, geophysical and reservoir evaluation domains, including the Techlog* wellbore software platform, OFM* well and reservoir analysis software, and the ProSource* E&P data management and delivery system. The award follows more than a decade of innovation and collaboration between ETC and SIS, and aligns with the customer’s business objective of advancing continuous improvement for capital efficiency.

Nexen, a wholly-owned subsidiary of CNOOC Limited, awarded SIS a five-year global contract for Petrel Shale software for geoscience workflows. The decision to adopt the Petrel Shale solution to deliver a step change in efficiency, collaboration and technical staff development is aligned with Nexen’s objective to reduce the cost and complexity associated with the use of multiple software tools.

In Gabon, ENI Gabon S.A. awarded Schlumberger an integrated services contract to drill one exploration well in offshore Block D3, targeting the presalt Gamba and Coniquet formations. The contract includes the provision of directional drilling, measurement-while-drilling, logging-while-drilling, mud logging, drilling fluids, solids control, cementing, drill bits, wireline logging, borehole seismic, well testing, lower completions, fishing, and coiled tubing services. In addition, Schlumberger will provide integrated services coordination as well as logistical and operational coordination of up to 14 third-party companies. The integrated services model provides the customer with access to key drilling and completions technologies and multidisciplinary work processes, enabling cost-efficient operations and a focus on quality of execution.

WesternGeco has been awarded a 1,000-km2 survey in the Gulf Cooperation Council (GCC) countries using 170,000 channels of UniQ* point-receiver technology, making this one of the largest point-receiver surveys ever conducted in the Middle East. UniQ technology has been widely used in the region since its introduction in 2011 due to its ability to efficiently image complex reservoirs.

Petrobras Tanzania awarded WesternGeco a contract for the Mamba 3D, a 3,000-km2 survey offshore Tanzania, using Amazon Warrior in its first 14-streamer survey. The survey, which was completed in the first quarter, used ObliQ* sliding-notch broadband acquisition and imaging technology and included onboard fast-track processing. PetroTechnical Services performed data processing.
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