Schlumberger disclosed a 22% decline in its full-year 2016 revenue, despite gaining US$4.2 billion from the Cameron Group, which the oil services giant took over in April 2016.
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Image of Kibsgaard, from Schlumberger. |
Schlumberger’s full-year 2016 revenue came in at $27.8 billion, a drop of 22%, when compared to 2015’s $35.5 billion. The fall happened, despite the company’s three quarters of activity from Cameron, which contributed $4.2 billion in revenue. When excluding Cameron, Schlumberger’s consolidated revenue decreased 34%.
“We maintain our constructive view of the oil markets, as the tightening of the supply and demand balance continued in the Q4, as seen by a steady draw in OECD stocks. This trend was further strengthened by the December OPEC and non-OPEC agreements to cut production, which should, with a certain lag, accelerate inventory draws, support a further increase in oil prices, and lead to increased E&P investments,” Schlumberger Chairman and CEO Paal Kibsgaard said.
However, Kibsgaard remains hopeful, and expects to see a recovery this year.
“In the international markets, operators are more focused on full-cycle returns and E&P investments are generally governed by the operators’ free cash flow generation. Based on this, we expect the 2017 recovery in the international markets to start off more slowly, driven by the economic reality facing the E&P industry. This will likely lead to a third successive year of underinvestment, with a continued low rate of new project approvals and an accelerating production decline in the aging production base. These factors together are increasing the likelihood of a significant supply deficit in the medium term, which can only be avoided by a broad-based global increase in E&P spending, which we expect will start unfolding in the later parts of 2017 and leading into 2018.
“Against this backdrop and following nine consecutive quarters of relentless workforce reductions, cost cutting, and restructuring efforts, we are excited to restore focus on the pursuit of growth and improving returns. As we navigated this downturn, we have streamlined our cost and support structure, continued to drive the underlying efficiency and quality of our business workflows, expanded our offering through maintaining investments in R&E (research and engineering), and made a series of strategic acquisitions. The combination of these actions has enabled us to further strengthen our global market position during the downturn, which will enable us to maintain and extend our well-established margin and earnings leadership in both North America and in all parts of the International markets going forward,” Kibsgaard said.
Although revenue was up a mere 4% in North America, Schlumberger saw a decline in the offshore sector.
Revenue in the Latin America area declined 4% sequentially, mainly in the Mexico and Central America GeoMarket where customer budget constraints led to a sharp drop in overall rig count that impacted onshore and offshore operations, affecting both deepwater and shallow water projects. Revenue in Mexico also declined following the strong marine surveys and multiclient license seismic sales last quarter, according to the company’s report.
“While earnings growth continues to be a very important financial driver for us, full-cycle cash generation is even more critical, and here, we remain unique in the industry. Over the past two years of this downturn, we have generated $7.5 billion in free cash flow, which is more than the rest of our major competitors combined,” Kibsgaard said.
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