Schlumberger Ltd. (SLB) Tops Q1 EPS by 1c, Cuts Dividend

Schlumberger Ltd. (NYSE: SLB) reported Q1 EPS of $0.25, $0.01 better than the analyst estimate of $0.24. Revenue for the quarter came in at $7.5 billion versus the consensus estimate of $7.52 billion.

“The first quarter results include an $8.5 billion pretax charge primarily relating to the impairment of goodwill, intangible assets, and other long-lived assets. This charge, which is almost entirely non-cash, was driven by the significant decline in market valuations during March 2020.

“The operating environment that has now emerged is characterized by simultaneous shocks to both supply and demand. The spread of COVID-19 has caused more than 50 countries to implement lockdown measures affecting three billion people. Worldwide economic activity is falling sharply, and oil demand destruction is leading to an unprecedented supply-demand imbalance in the range of 20–30 million bbl/d. This is translating to near term uncertainties in activity and budget projections.

“At this time, customer feedback and our analysis indicate global capex spend is expected to decline by about 20% in 2020, with the largest share of the reduction affecting North America, which is estimated to drop by about 40%. In contrast, international E&P capex is expected to decline by about 15%. As it relates to customers, Independents are expected to decrease their spending faster than IOCs, while NOCs have reduced the least to this point but might adjust following the recent OPEC+ agreement. FID sanctions are expected to fall back to trough levels of 2015, which would indicate project delays to 2021 and beyond.

“In this environment—the duration of which remains uncertain—we have planned for a range of scenarios and have taken a number of actions. To protect our workforce in the wake of COVID-19, we have taken the steps necessary to keep our people safe by supporting those affected, mandating that as many employees and contractors as possible work from home, and monitoring those who cannot do so and are required to be present at work. To reinforce our cost control and cash discipline, we are reducing our structural and variable costs, and restructuring our organization to match activity where necessary, including furloughing personnel, cutting salaries, lowering headcount, and closing facilities. In addition, our Board of Directors and executive officers have voluntarily agreed to reductions in their cash compensation. We have reduced our capital investment program by more than 30% and will allocate resources to the more resilient markets while remaining focused on capital stewardship and maintaining our commitment to a strong balance sheet.

“We are also leveraging three factors of our market differentiation. In North America, we have accelerated our land strategy to high-grade our portfolio and resize our operational footprint. Globally, we have emphasized our executional capability, operational resilience, and organizational agility. In new technology, we are using to the greatest extent the capabilities we have developed to support remote operations and are focusing on our digital strategy.

“In view of the uncertainty of the depth and extent of the contraction in oil demand due to the COVID-19 pandemic combined with the weaker commodity price environment, we have turned our strategic focus to cash conservation and protecting our balance sheet. We have therefore taken the prudent decision to reduce our dividend by 75%. The revised dividend supports Schlumberger’s value proposition through a balanced approach of shareholder distributions and organic investment, while providing the flexibility to weather the uncertain environment. This decision reflects our focus on our capital stewardship program as well as our commitment to maintain both a strong liquidity position and a strong investment grade credit rating that provides privileged access to the financial markets.

“The enormity of the task ahead will require levels of response and depths of resilience that have yet to be fully realized. Our immediate actions have been focused on those things we can control in protecting our business in an uncertain industry and global environment. We will continue to take the steps necessary to protect the safety and health of our people and pursue our desire to be the performance partner of choice for our customers. The future of our industry poses difficult challenges—for people and for the environment—but in challenge lies opportunity. Backed by the resilience and performance of our people, technology leadership, and financial strength, we believe we are well-placed to succeed as the industry recovers from this unprecedented downturn.”

For earnings history and earnings-related data on Schlumberger Ltd. (SLB) click here.

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