Schlumberger’s Q3 revenue misses analysts’ expectations, stock falls

Oil field services giant Schlumberger Ltd. (NYSE: SLB), which has a primary office in Houston, reported revenue of nearly $5.26 billion in the third quarter.

That’s down 38% from $8.54 billion in revenue in the same period a year earlier but down just 2% from the company’s Q2 revenue of nearly $5.36 billion, according to an Oct. 16 press release. However, analysts had predicted Q3 revenue would come in higher than the Q2 figure, with an average estimate of $5.38 billion, according to Yahoo Finance.

Schlumberger’s stock opened Oct. 16 at $15.62 per share, down almost 5% from the Oct. 15 closing price, and continued to fall throughout the day, landing just under $15 each, down nearly 9%, shortly before markets closed. It’s the biggest one-day post-earnings drop for Schlumberger since October 2007, MarketWatch reports.

But Schlumberger is seeing improvements elsewhere.

The company reported a net loss of $82 million for the quarter, a significant improvement from losses of over $3 billion in Q2 and over $11 billion in the third quarter of 2019. When excluding $350 million in charges — most of which came from facility exit charges — and credits, Schlumberger’s Q3 net income was $228 million, or diluted earnings of 16 cents per share. That beat analysts’ average estimate of 12 cents per share.

In an Oct. 16 earnings call, Schlumberger CEO Olivier Le Peuchnoted that the company was making progress on its “intermediate goal of restoring 2019 EBITDA margins before the end of 2021.” The company’s organizational restructuring efforts are also going well.

“We are on track to realize most of our permanent structural cost savings as we exit this year,” Le Peuch said. “We also began the transition to our leaner, customer-aligned structure, comprised of Divisions and Basins, designed to support the basin-specific innovation that will solidify Schlumberger’s position as the performance partner of choice.”

In North America, Schlumberger achieved two key milestones: an agreement to combine the company’s OneStim pressure pumping business with Denver-based Liberty Oilfield Services Inc. and an agreement to divest Schlumberger’s low-flow artificial lift business in a cash transaction.

“The closing of these transactions will not only enhance our EBITDA margins at the global level but will further support lower capital intensity and an accelerated path to our financial goals for North America,” Le Peuch said.

However, the company’s short- to- midterm outlook is uncertain as the economic recovery remains fragile and the threat of another Covid-19 resurgence looms.

“Absent of a pause in demand recovery or higher Covid-19 disruption, the fourth-quarter activity will likely extend the trends experienced as we closed the third quarter, with the continuation of a modest activity uptake in North America and the stabilization towards a steady activity internationally, albeit with visible seasonal variations; the combination of which resulting into an about flat outlook overall for the quarter,” Le Peuch said.

“Looking out farther, the prevailing uncertainties make it much too early to call. However, directionally, and absent of a slowdown in the pace of economic recovery, we anticipate the overall activity to consolidate gradually during 2021. In line with the most recent IEA projections, we see that the conditions will exist to rebalance demand and supply, with improving demand recovery supported by economic stimulus measures and continued supply discipline from the major producers, ultimately resulting in a visible activity rebound.”

Schlumberger employed about 82,000 people worldwide as of Sept. 30, down from 85,000 as of June 30 and 103,000 as of the end of Q1.

By Olivia Pulsinelli – Assistant Managing Editor

Courtesy of The Houston Business Journal

https://www.bizjournals.com/houston/news/2020/10/16/schlumberger-q3-2020.html