Schlumberger Announces Third-Quarter 2010 Results

Net income attributable to Schlumberger, excluding charges and credits, was $875 million—an increase of 7% sequentially and 11% year-on-year. Diluted earnings-per-share, excluding charges and credits, was $0.70 versus $0.68 in the previous quarter, and $0.65 in the third quarter of 2009.
During the third quarter of 2010, Schlumberger recorded a gain of $0.98 per share on its investment in M-I SWACO as a result of the merger with Smith International, Inc. (Smith), which was offset in part by restructuring and merger-related charges of $0.30 per share. These items resulted in a net after-tax credit of $859 million. Diluted earnings-per-share, including charges and credits, was $1.38 versus $0.68 in the previous quarter, and $0.65 in the third quarter of 2009.
Oilfield Services revenue of $5.54 billion increased 2% sequentially and 12% year-on-year. Pretax segment operating income of $1.10 billion was up 3% sequentially and 6% year-on-year.
WesternGeco revenue of $478 million increased 1% sequentially and 3% year-on-year. Pretax segment operating income of $40 million decreased 14% sequentially and 34% year-on-year.
The third-quarter 2010 results reflect one month of activity from the acquired Smith businesses which contributed revenue of $810 million and pretax operating income of $84 million. The merger was dilutive to the third-quarter 2010 earnings-per-share by just under $0.02.
Schlumberger Chairman and CEO Andrew Gould commented, “The sequential revenue increase was largely driven by strong improvements in US land and Canada, which more than offset a sharp decline in the US Gulf of Mexico as the deepwater drilling moratorium took full effect. Favorable activity, coupled with robust pricing power for pressure pumping and the effects of our restructuring efforts led to a major improvement in margins.
Outside North America activity was mixed. Solid improvements were recorded in Asia, Russia, the North Sea, and West & South Africa, which offset continued weakness in North Africa and the Gulf of Guinea. Latin America performed well in all GeoMarkets except Mexico where budget constraints, weather and security concerns led to major reductions in IPM project activity.
At the end of the quarter, WesternGeco began a marine seismic acquisition and processing contract to acquire both wide-azimuth and conventional 3D surveys utilizing four vessels to explore for deep subsalt oil and gas reservoirs in the Red Sea.
We expect the fourth quarter to show continued strong activity in North America on land, but we do not expect any rapid return to deepwater drilling in the US Gulf of Mexico despite the lifting of the moratorium. Further clarification of the new rules and liabilities under which activity will be conducted will be necessary before any major increase takes place. Our restructuring efforts will continue to deliver margin improvements.
Outside North America, the delays induced by the knock-on effect of the Macondo well are now being reabsorbed. This and the recent strength in oil prices give us some optimism that the rate of recovery overseas will accelerate slightly. The normal seasonal declines in Russia will be present in the fourth quarter and the future of operations in Mexico will remain uncertain until next year.
WesternGeco will show improvement in the fourth quarter due to increased US Gulf of Mexico multiclient sales.
We are very pleased with the rapid progress that is being made on the integration of Smith and M-I SWACO. The integration teams and Area coordinators are rapidly indentifying both revenue and cost synergy opportunities that augur well for 2011. The enthusiasm of the employees of all the companies is obvious and constructive.
Recent robust demand increases as well as predictions of higher demand in 2011 will continue to support oil prices and activity—absent any further deterioration of the world economy. Further demand increases for natural gas will be necessary to sustain the current level of North American gas drilling activity beyond a certain point in time.”