SLB (Schlumberger Limited) 2021 Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2021. The filing also reports fourth-quarter results; amounts are in U.S. dollars unless noted.
Business context
Schlumberger provides digital solutions, technology, equipment and services to the global energy industry through four divisions: Digital & Integration, Reservoir Performance, Well Construction and Production Systems. Its 2021 results reflected a recovering oil and gas market, with stronger activity in the second half of the year. The company operates in more than 120 countries; approximately 85% of 2021 revenue came from outside the United States.
Financial performance and liquidity
- Revenue: $22.929 billion, down 3% from $23.601 billion in 2020. Excluding $1.3 billion of 2020 revenue from divested businesses, revenue grew 3% year over year.
- Profit: Net income attributable to Schlumberger was $1.881 billion, compared with a $10.518 billion attributable loss in 2020. Diluted EPS was $1.32, versus a loss of $7.57 per diluted share. Pretax income was $2.374 billion, versus a $11.298 billion loss.
- Margins: Management reported full-year pretax operating margin of 15%, up 450 basis points. Division margins were 35% for Digital & Integration, 14% for Reservoir Performance, 14% for Well Construction and 9% for Production Systems.
- Fourth quarter: Revenue was $6.225 billion, up 6% sequentially; pretax segment operating margin was 16%, up 31 basis points sequentially. Fourth-quarter net income is not clearly provided in the supplied filing text.
- Cash flow: Operating cash flow was $4.651 billion, versus $2.944 billion in 2020. Free cash flow, as defined by the company, was $2.997 billion, versus $1.424 billion.
- Capital and shareholder returns: Capital investments were $1.654 billion, including capital expenditures, APS investments and capitalized multiclient seismic data. Dividends paid were $699 million; no shares were repurchased in 2021.
- Debt and liquidity: Year-end cash and short-term investments totaled $3.139 billion; total debt was $14.195 billion and net debt was $11.056 billion. Debt declined $2.7 billion year over year. The company also reported $5.75 billion of committed credit facilities, available and unused.
- Other balance-sheet items: Total assets were $41.511 billion and equity was $15.286 billion at year-end. Receivables were $5.315 billion, net of a $319 million allowance.
Material changes versus 2020
- The 2020 comparison included $12.515 billion of impairment and other charges; 2021 recorded a net $65 million credit. This was a major contributor to the return to reported profitability.
- Revenue was affected by the 2020 divestitures of OneStim and the North America low-flow artificial lift business. Adjusted for those divestitures, 2021 revenue increased 3%; North America grew 8% and international revenue grew 2% on that basis.
- Profitability benefited from portfolio changes, cost controls and lower depreciation and amortization following 2020 impairments. The 2021 effective tax rate was 19%, compared with 7% in 2020, partly because many 2020 charges were not tax-effective.
- Cash flow from operations improved, supported by stronger earnings, a $477 million U.S. federal tax refund and lower severance payments. Dividends paid fell from $1.734 billion in 2020 following the 2020 dividend reduction.
Outlook, management commentary and risks
- Management expected a material increase in 2022 industry capital spending, with double-digit growth in both international and North American markets, assuming no further significant COVID-related disruption. It described industry fundamentals as favorable and anticipated a multiyear growth cycle.
- 2022 capital investments were expected to be $1.9 billion to $2.0 billion. Backlog was $2.8 billion at year-end, with approximately half expected to be recognized as revenue in 2022.
- Schlumberger committed to net-zero greenhouse gas emissions by 2050, with 2019 as the baseline: 30% lower Scope 1 and 2 emissions by 2025, 50% lower Scope 1 and 2 by 2030, and 30% lower Scope 3 by 2030. These are targets, not guarantees.
- Key risks include the cyclicality of customer spending and commodity prices; geopolitical, regulatory and foreign-exchange exposure; COVID-19 and supply-chain disruptions; competition and technology execution; climate-transition and environmental regulation; cybersecurity; severe weather; and potential liability from operational incidents.
- Customer collection risk warrants attention: approximately $0.5 billion of receivables related to Mexico at year-end, including amounts owed by its primary customer; the filing says these receivables were not in dispute and notes historical payment delays.
- Management considered material losses from pending legal proceedings remote, while acknowledging litigation uncertainty. The filing reports $1.001 billion of liabilities for uncertain tax positions, plus $164 million of accrued interest and penalties.
- Auditors issued unqualified opinions on the financial statements and internal control over financial reporting. Uncertain tax positions were identified as a critical audit matter.
Important facts for investors to verify
- Reconcile reported revenue decline with the divestiture-adjusted growth figures and assess the sustainability of the recovery.
- Review the composition and definition of free cash flow, and whether the planned 2022 investment level is supported by operating cash generation.
- Monitor debt repayment, credit-facility availability, dividend policy and the remaining maturity schedule.
- Track collection timing and credit exposure in Mexico, as well as uncertain tax positions and their potential resolution.
- Assess execution against the 2022 growth outlook, including pricing, supply-chain constraints, and division-level margin trends.
- Evaluate progress toward emissions targets and the commercial returns and funding needs of new-energy initiatives.