Schlumberger Ltd. (NYSE: SLB) reported Q1 EPS of $0.21, $0.02 better than the analyst estimate of $0.19. Revenue for the quarter came in at $5.22 billion versus the consensus estimate of $5.09 billion.

• Worldwide revenue was $5.2 billion
• International revenue was $4.2 billion and North America revenue was $972 million
• EPS was $0.21
• Cash flow from operations was $429 million and free cash flow was $159 million
• Board approved quarterly cash dividend of $0.125 per share

Schlumberger CEO Olivier Le Peuch commented, “We started the year with conviction in our strategic direction and our resulting outlook for 2021. The combination of the promising first-quarter results and an increasingly constructive macroeconomic view are strengthening this conviction. With recovery sentiment improving and the execution of our returns-focused strategy progressing well, I am extremely proud of the women and men of Schlumberger for delivering yet another solid quarter.

“First-quarter revenue declined 6% sequentially, reflecting the expected reduction in North America following divestitures during the fourth quarter of last year that were focused on the high-grading and rationalizing of our business portfolio to expand our margins, minimize earnings volatility, and focus on less capital-intensive businesses. Excluding the impact of these divestitures, our global revenue was essentially flat sequentially as the impact of seasonally lower activity in the Northern Hemisphere was fully offset by growth in multiple countries. Notwithstanding the effects of seasonality, the first quarter affirmed the activity recovery that commenced last quarter.

“In North America, excluding the effects of divestitures, revenue grew 10% sequentially driven by land revenue which increased 24% due to higher drilling activity, despite the Texas freeze. Offshore revenue declined 10% sequentially following the seasonal fourth-quarter year-end product sales.

“International revenue in the quarter reflects the usual seasonal dip, though China and Russia experienced a particularly severe winter. However, the sequential revenue decline was less pronounced than in prior years due to strong growth in Latin America and in several key countries in the Middle East and Africa. The first-quarter revenue sequential decline was the shallowest since 2008, while international rig count experienced the strongest first-quarter sequential growth since 2011, affirming the international recovery.

“First-quarter revenue was also characterized by growth in Well Construction and Reservoir Performance, excluding the effects of divestitures and despite seasonality in the Northern Hemisphere. Well Construction revenue increased 4% sequentially due to higher drilling activity in North America and Latin America. Reservoir Performance decreased 20% due to the OneStim® divesture in North America—but excluding this, the Division grew by 3% driven by robust international land and offshore activity. Digital & Integration revenue decreased 7% sequentially due to seasonally lower sales of software and multiclient seismic data licenses. Production Systems revenue declined 4%, mostly due to lower product sales following the strong year-end sales of the previous quarter.

“Sequentially, despite the revenue decline, first-quarter pretax segment operating income increased 1%. Pretax segment operating income margin expanded by 88 bps to 13% while EBITDA margin was maintained at 20%. These margins represent a more than 200 basis-point improvement compared to the first quarter of 2020 despite a 30% revenue decline year-on-year. This performance represents a promising start to our margin expansion ambition this year and highlights the impact of our capital stewardship and cost-out measures, which provide us with significant operating leverage.

“First-quarter cash flow from operations was $429 million and free cash flow was $159 million despite severance payments of $112 million and typical first-quarter consumption of working capital. We are pleased with the cash flow performance this quarter and expect cash flow to grow further throughout the year, allowing for net debt reduction.

“Looking ahead, we continue to be encouraged by constructive macroeconomic drivers. While the world is still grappling with COVID-19 infection rates, vaccination programs and fiscal stimulus packages are expected to support a rebound of economic activity and oil demand recovery through the year. Industry analysis estimates 5–6 million bbl/d of oil demand will be added by the end of the year as demand recovery is projected to improve in the second quarter, exiting the year just 2 million bbl/d short of 2019 levels.

“With the gradual return of oil demand, we anticipate North America activity to level off at production maintenance levels, while international activity is poised to ramp up through year-end 2021 and beyond. We expect to significantly benefit from this anticipated shift to increased international activity due to the strength and breadth of our international franchise. Consequently, we are increasingly confident that our international revenue will see double-digit growth in the second half of 2021 as compared to the same period last year, which implies potential upside to the already robust growth that is anticipated in 2022 and beyond.

“There is an increasingly positive sentiment in the industry outlook as the recovery strengthens despite the lingering concerns regarding the COVID-19 crisis. The strategic pivot we initiated two years ago has proven effective and positions us to outperform in this vastly different landscape that presents new imperatives and opportunities that play to our strengths.

“Building on the strength of our Well Construction and Reservoir Performance Divisions, we are accelerating our digital offerings, positioning the company to lead in the production and recovery market, and building our New Energy portfolio to embrace the energy transition—all fully aligned with our customers. A new growth cycle has finally commenced, and we are prepared to deliver growth and returns that outperform the market.”

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