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EX-95 - EX-95 - SCHLUMBERGER LIMITED/NVslb-ex95_8.htm
EX-32.2 - EX-32.2 - SCHLUMBERGER LIMITED/NVslb-ex322_9.htm
EX-32.1 - EX-32.1 - SCHLUMBERGER LIMITED/NVslb-ex321_7.htm
EX-31.2 - EX-31.2 - SCHLUMBERGER LIMITED/NVslb-ex312_10.htm
EX-31.1 - EX-31.1 - SCHLUMBERGER LIMITED/NVslb-ex311_6.htm
EX-10.1 - EX-10.1 - SCHLUMBERGER LIMITED/NVslb-ex101_165.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended: September 30, 2018

Commission file No.: 1-4601

 

SCHLUMBERGER N.V.

(SCHLUMBERGER LIMITED)

(Exact name of registrant as specified in its charter)

 

 

CURAÇAO

 

52-0684746

(State or other jurisdiction of
incorporation or organization)

 

(I.R.S. Employer
Identification No.)

 

 

 

42 RUE SAINT-DOMINIQUE

 

 

PARIS, FRANCE

 

75007

 

 

 

5599 SAN FELIPE

 

 

HOUSTON, TEXAS, U.S.A.

 

77056

 

 

 

62 BUCKINGHAM GATE

 

 

LONDON, UNITED KINGDOM

 

SW1E 6AJ

 

 

 

PARKSTRAAT 83 THE HAGUE,

 

 

THE NETHERLANDS

 

2514 JG

(Addresses of principal executive offices)

 

(Zip Codes)

Registrant’s telephone number in the United States, including area code, is:   (713) 513-2000

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

  

Accelerated filer

 

Non-accelerated filer

 

  

  

Smaller reporting company

 

Emerging growth company

 

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

 

Class

Outstanding at September 30, 2018

COMMON STOCK, $0.01 PAR VALUE PER SHARE

1,384,801,810

 

 

 

 


 

SCHLUMBERGER LIMITED

Third Quarter 2018 Form 10-Q

Table of Contents

 

 

 

 

Page

 PART I

 

Financial Information

 

 

 

 

 

Item 1.

 

Financial Statements

3

 

 

 

 

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

18

 

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosures about Market Risk

23

 

 

 

 

Item 4.

 

Controls and Procedures

23

 

 

 

 

 PART II

 

Other Information

 

 

 

 

 

Item 1.

 

Legal Proceedings

24

 

 

 

 

Item 1A.

 

Risk Factors

24

 

 

 

 

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

24

 

 

 

 

Item 3.

 

Defaults Upon Senior Securities

24

 

 

 

 

Item 4.

 

Mine Safety Disclosures

24

 

 

 

 

Item 5.

 

Other Information

24

 

 

 

 

Item 6.

 

Exhibits

26

 

 

 

 

 

 

 

 

 

 

 

 

 

2


 

PART I. FINANCIAL INFORMATION

Item 1.  Financial Statements.

 

SCHLUMBERGER LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF INCOME

(Unaudited)

 

 

(Stated in millions, except per share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Third Quarter

 

 

Nine Months

 

 

2018

 

 

2017

 

 

2018

 

 

2017

 

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Services

$

6,345

 

 

$

5,763

 

 

$

18,222

 

 

$

15,928

 

Product sales

 

2,159

 

 

 

2,142

 

 

 

6,414

 

 

 

6,333

 

Total Revenue

 

8,504

 

 

 

7,905

 

 

 

24,636

 

 

 

22,261

 

Interest & other income

 

36

 

 

 

64

 

 

 

118

 

 

 

172

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of services

 

5,336

 

 

 

4,816

 

 

 

15,414

 

 

 

13,507

 

Cost of sales

 

1,988

 

 

 

1,981

 

 

 

5,892

 

 

 

5,836

 

Research & engineering

 

177

 

 

 

189

 

 

 

524

 

 

 

595

 

General & administrative

 

105

 

 

 

115

 

 

 

330

 

 

 

323

 

Impairments & other

 

-

 

 

 

-

 

 

 

184

 

 

 

510

 

Merger & integration

 

-

 

 

 

49

 

 

 

-

 

 

 

213

 

Interest

 

147

 

 

 

142

 

 

 

434

 

 

 

422

 

Income before taxes

 

787

 

 

 

677

 

 

 

1,976

 

 

 

1,027

 

Tax expense

 

129

 

 

 

121

 

 

 

348

 

 

 

269

 

Net income

 

658

 

 

 

556

 

 

 

1,628

 

 

 

758

 

Net income attributable to noncontrolling interests

 

14

 

 

 

11

 

 

 

29

 

 

 

9

 

Net income attributable to Schlumberger

$

644

 

 

$

545

 

 

$

1,599

 

 

$

749

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per share of Schlumberger

$

0.46

 

 

$

0.39

 

 

$

1.15

 

 

$

0.54

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted earnings per share of Schlumberger

$

0.46

 

 

$

0.39

 

 

$

1.15

 

 

$

0.54

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

1,385

 

 

 

1,385

 

 

 

1,385

 

 

 

1,388

 

Assuming dilution

 

1,392

 

 

 

1,392

 

 

 

1,393

 

 

 

1,395

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

See Notes to Consolidated Financial Statements

 

 

 

3


 

SCHLUMBERGER LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(Unaudited)

 

(Stated in millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Third Quarter

 

 

Nine Months

 

 

2018

 

 

2017

 

 

2018

 

 

2017

 

Net income

$

658

 

 

$

556

 

 

$

1,628

 

 

$

758

 

Currency translation adjustments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized net change arising during the period

 

(47

)

 

 

75

 

 

 

(128

)

 

 

49

 

Marketable securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized loss arising during the period

 

(12

)

 

 

(41

)

 

 

(33

)

 

 

(66

)

Cash flow hedges

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net gain (loss) on cash flow hedges

 

4

 

 

 

8

 

 

 

(6

)

 

 

19

 

Reclassification to net income of net realized (gain) loss

 

2

 

 

 

(4

)

 

 

(2

)

 

 

4

 

Pension and other postretirement benefit plans

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization to net income of net actuarial loss

 

47

 

 

 

40

 

 

 

141

 

 

 

119

 

Amortization to net income of net prior service (credit) cost

 

(1

)

 

 

20

 

 

 

(4

)

 

 

60

 

Income taxes on pension and other postretirement benefit plans

 

(2

)

 

 

-

 

 

 

(7

)

 

 

(2

)

Comprehensive income

 

649

 

 

 

654

 

 

 

1,589

 

 

 

941

 

Comprehensive income attributable to noncontrolling interests

 

14

 

 

 

11

 

 

 

29

 

 

 

9

 

Comprehensive income attributable to Schlumberger

$

635

 

 

$

643

 

 

$

1,560

 

 

$

932

 

 

See Notes to Consolidated Financial Statements

 

 

 

4


 

SCHLUMBERGER LIMITED AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

 

(Stated in millions)

 

 

 

 

 

 

 

 

 

 

Sept. 30,

 

 

 

 

 

 

2018

 

 

Dec. 31,

 

 

(Unaudited)

 

 

2017

 

ASSETS

 

 

 

 

 

 

 

Current Assets

 

 

 

 

 

 

 

Cash

$

1,493

 

 

$

1,799

 

Short-term investments

 

1,361

 

 

 

3,290

 

Receivables less allowance for doubtful accounts (2018 - $245; 2017 - $241)

 

8,409

 

 

 

8,084

 

Inventories

 

4,108

 

 

 

4,046

 

Other current assets

 

1,112

 

 

 

1,278

 

 

 

16,483

 

 

 

18,497

 

Investments in Affiliated Companies

 

1,497

 

 

 

1,519

 

Fixed Assets less accumulated depreciation

 

11,739

 

 

 

11,576

 

Multiclient Seismic Data

 

639

 

 

 

727

 

Goodwill

 

25,134

 

 

 

25,118

 

Intangible Assets

 

8,930

 

 

 

9,354

 

Other Assets

 

5,624

 

 

 

5,196

 

 

$

70,046

 

 

$

71,987

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

 

 

Accounts payable and accrued liabilities

$

9,419

 

 

$

10,036

 

Estimated liability for taxes on income

 

1,265

 

 

 

1,223

 

Short-term borrowings and current portion of long-term debt

 

3,215

 

 

 

3,324

 

Dividends payable

 

701

 

 

 

699

 

 

 

14,600

 

 

 

15,282

 

Long-term Debt

 

14,159

 

 

 

14,875

 

Postretirement Benefits

 

957

 

 

 

1,082

 

Deferred Taxes

 

1,529

 

 

 

1,650

 

Other Liabilities

 

1,853

 

 

 

1,837

 

 

 

33,098

 

 

 

34,726

 

Equity

 

 

 

 

 

 

 

Common stock

 

13,058

 

 

 

12,975

 

Treasury stock

 

(3,924

)

 

 

(4,049

)

Retained earnings

 

31,712

 

 

 

32,190

 

Accumulated other comprehensive loss

 

(4,313

)

 

 

(4,274

)

Schlumberger stockholders' equity

 

36,533

 

 

 

36,842

 

Noncontrolling interests

 

415

 

 

 

419

 

 

 

36,948

 

 

 

37,261

 

 

$

70,046

 

 

$

71,987

 

 

See Notes to Consolidated Financial Statements

 

 

 

5


 

SCHLUMBERGER LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS

(Unaudited)

 

(Stated in millions)

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30,

 

 

2018

 

 

2017

 

Cash flows from operating activities:

 

 

 

 

 

 

 

Net income

$

1,628

 

 

$

758

 

Adjustments to reconcile net income to cash provided by operating activities:

 

 

 

 

 

 

 

Impairments and other charges

 

184

 

 

 

723

 

Depreciation and amortization (1)

 

2,637

 

 

 

2,931

 

Stock-based compensation expense

 

259

 

 

 

261

 

Pension and other postretirement benefits funding

 

(69

)

 

 

(107

)

Earnings of equity method investments, less dividends received

 

(41

)

 

 

(52

)

Change in assets and liabilities: (2)

 

 

 

 

 

 

 

Increase in receivables

 

(114

)

 

 

(1,049

)

(Increase) decrease in inventories

 

(68

)

 

 

14

 

Decrease (increase) in other current assets

 

78

 

 

 

(86

)

(Increase) decrease in other assets

 

(167

)

 

 

202

 

Decrease in accounts payable and accrued liabilities

 

(1,011

)

 

 

(533

)

(Decrease) increase in estimated liability for taxes on income

 

(32

)

 

 

181

 

Decrease in other liabilities

 

(6

)

 

 

(74

)

Other

 

104

 

 

 

243

 

NET CASH PROVIDED BY OPERATING ACTIVITIES

 

3,382

 

 

 

3,412

 

Cash flows from investing activities:

 

 

 

 

 

 

 

Capital expenditures

 

(1,539

)

 

 

(1,482

)

SPM investments

 

(719

)

 

 

(492

)

Multiclient seismic data costs capitalized

 

(63

)

 

 

(223

)

Business acquisitions and investments, net of cash acquired

 

(290

)

 

 

(382

)

Sale of investments, net

 

1,922

 

 

 

3,310

 

Other

 

(36

)

 

 

(92

)

NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES

 

(725

)

 

 

639

 

Cash flows from financing activities:

 

 

 

 

 

 

 

Dividends paid

 

(2,077

)

 

 

(2,086

)

Proceeds from employee stock purchase plan

 

227

 

 

 

212

 

Proceeds from exercise of stock options

 

29

 

 

 

49

 

Stock repurchase program

 

(300

)

 

 

(868

)

Proceeds from issuance of long-term debt

 

220

 

 

 

681

 

Repayment of long-term debt

 

(900

)

 

 

(2,206

)

Net decrease in short-term borrowings

 

(103

)

 

 

(1,110

)

Other

 

(47

)

 

 

17

 

NET CASH USED IN FINANCING ACTIVITIES

 

(2,951

)

 

 

(5,311

)

Net decrease in cash before translation effect

 

(294

)

 

 

(1,260

)

Translation effect on cash

 

(12

)

 

 

21

 

Cash, beginning of period

 

1,799

 

 

 

2,929

 

Cash, end of period

$

1,493

 

 

$

1,690

 

 

 

(1) Includes depreciation of property, plant and equipment and amortization of intangible assets, multiclient seismic data costs and SPM investments.  

(2) Net of the effect of business acquisitions.

 

See Notes to Consolidated Financial Statements

 

 

 

6


 

SCHLUMBERGER LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

(Unaudited)

 

 

(Stated in millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Retained

 

 

Comprehensive

 

 

Noncontrolling

 

 

 

 

 

January 1, 2018 – September 30, 2018

Issued

 

 

In Treasury

 

 

Earnings

 

 

Loss

 

 

Interests

 

 

Total

 

Balance, January 1, 2018

$

12,975

 

 

$

(4,049

)

 

$

32,190

 

 

$

(4,274

)

 

$

419

 

 

$

37,261

 

Net income

 

 

 

 

 

 

 

 

 

1,599

 

 

 

 

 

 

 

29

 

 

 

1,628

 

Currency translation adjustments

 

 

 

 

 

 

 

 

 

 

 

 

 

(128

)

 

 

(4

)

 

 

(132

)

Changes in unrealized gain on marketable securities

 

 

 

 

 

 

 

 

 

 

 

 

 

(33

)

 

 

 

 

 

 

(33

)

Changes in fair value of cash flow hedges

 

 

 

 

 

 

 

 

 

 

 

 

 

(8

)

 

 

 

 

 

 

(8

)

Pension and other postretirement benefit plans

 

 

 

 

 

 

 

 

 

 

 

 

 

130

 

 

 

 

 

 

 

130

 

Shares sold to optionees, less shares exchanged

 

(37

)

 

 

66

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

29

 

Vesting of restricted stock

 

(63

)

 

 

63

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

-

 

Shares issued under employee stock purchase plan

 

(67

)

 

 

294

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

227

 

Stock repurchase program

 

 

 

 

 

(300

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(300

)

Stock-based compensation expense

 

259

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

259

 

Dividends declared ($1.50 per share)

 

 

 

 

 

 

 

 

 

(2,077

)

 

 

 

 

 

 

 

 

 

 

(2,077

)

Other

 

(9

)

 

 

2

 

 

 

 

 

 

 

 

 

 

 

(29

)

 

 

(36

)

Balance, September 30, 2018

$

13,058

 

 

$

(3,924

)

 

$

31,712

 

 

$

(4,313

)

 

$

415

 

 

$

36,948

 

 

 

(Stated in millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Retained

 

 

Comprehensive

 

 

Noncontrolling

 

 

 

 

 

January 1, 2017 – September 30, 2017

Issued

 

 

In Treasury

 

 

Earnings

 

 

Loss

 

 

Interests

 

 

Total

 

Balance, January 1, 2017

$

12,801

 

 

$

(3,550

)

 

$

36,470

 

 

$

(4,643

)

 

$

451

 

 

$

41,529

 

Net income

 

 

 

 

 

 

 

 

 

749

 

 

 

 

 

 

 

9

 

 

 

758

 

Currency translation adjustments

 

 

 

 

 

 

 

 

 

 

 

 

 

49

 

 

 

 

 

 

 

49

 

Changes in unrealized gain on marketable securities

 

 

 

 

 

 

 

 

 

 

 

 

 

(66

)

 

 

 

 

 

 

(66

)

Changes in fair value of cash flow hedges

 

 

 

 

 

 

 

 

 

 

 

 

 

23

 

 

 

 

 

 

 

23

 

Pension and other postretirement benefit plans

 

 

 

 

 

 

 

 

 

 

 

 

 

177

 

 

 

 

 

 

 

177

 

Shares sold to optionees, less shares exchanged

 

(39

)

 

 

88

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

49

 

Vesting of restricted stock

 

(98

)

 

 

98

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

-

 

Shares issued under employee stock purchase plan

 

(52

)

 

 

264

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

212

 

Stock repurchase program

 

 

 

 

 

(868

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(868

)

Stock-based compensation expense

 

261

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

261

 

Dividends declared ($1.50 per share)

 

 

 

 

 

 

 

 

 

(2,083

)

 

 

 

 

 

 

 

 

 

 

(2,083

)

Other

 

(10

)

 

 

2

 

 

 

 

 

 

 

 

 

 

 

(23

)

 

 

(31

)

Balance, September 30, 2017

$

12,863

 

 

$

(3,966

)

 

$

35,136

 

 

$

(4,460

)

 

$

437

 

 

$

40,010

 

 

SHARES OF COMMON STOCK

(Unaudited)

 

 

 

 

 

 

(Stated in millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

Issued

 

 

In Treasury

 

 

Outstanding

 

Balance, January 1, 2018

 

1,434

 

 

 

(50

)

 

 

1,384

 

Vesting of restricted stock

 

-

 

 

 

1

 

 

 

1

 

Shares issued under employee stock purchase plan

 

-

 

 

 

4

 

 

 

4

 

Stock repurchase program

 

-

 

 

 

(4

)

 

 

(4

)

Balance, September 30, 2018

 

1,434

 

 

 

(49

)

 

 

1,385

 

 

 

See Notes to Consolidated Financial Statements

 

 

7


 

SCHLUMBERGER LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

1.    Basis of Presentation

The accompanying unaudited consolidated financial statements of Schlumberger Limited and its subsidiaries (“Schlumberger”) have been prepared in accordance with generally accepted accounting principles in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.  In the opinion of Schlumberger management, all adjustments considered necessary for a fair statement have been included in the accompanying unaudited financial statements.  All intercompany transactions and balances have been eliminated in consolidation.  Operating results for the nine-month period ended September 30, 2018 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2018.  The December 31, 2017 balance sheet information has been derived from the Schlumberger 2017 audited financial statements.  For further information, refer to the Consolidated Financial Statements and notes thereto included in the Schlumberger Annual Report on Form 10-K for the year ended December 31, 2017, filed with the Securities and Exchange Commission on January 24, 2018.  

Recently Adopted Accounting Pronouncement

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers.  This ASU amended the existing accounting standards for revenue recognition and requires companies to recognize revenue when control of the promised goods or services is transferred to a customer at an amount that reflects the consideration a company expects to receive in exchange for those goods or services.  Schlumberger adopted this ASU on January 1, 2018 using the modified retrospective transition method applied to those contracts which were not completed as of January 1, 2018.   Prior period amounts have not been adjusted and continue to be reflected in accordance with Schlumberger’s historical accounting.  The adoption of this ASU did not have a material impact on Schlumberger’s Consolidated Financial Statements.  

Schlumberger recognizes revenue upon the transfer of control of promised products or services to customers at an amount that reflects the consideration it expects to receive in exchange for these products or services.  The vast majority of Schlumberger’s services and product offerings are short