SLB Limited (Schlumberger Limited) — Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2020. This annual report also discusses fourth-quarter 2020 results. The filing identifies the registrant as Schlumberger Limited (Schlumberger N.V.), trading on the NYSE as SLB.
Business context and reporting period
Schlumberger provides technology, digital solutions, products and services to the global energy industry. In 2020 it reorganized around four customer-workflow divisions: Digital & Integration, Reservoir Performance, Well Construction and Production Systems. Results were severely affected by the COVID-19 demand shock, low oil prices and reduced customer spending.
Financial results and key metrics
| Metric | 2020 | 2019 |
|---|---|---|
| Revenue | $23.601 billion | $32.917 billion |
| Net income (loss) attributable to Schlumberger | $(10.518) billion | $(10.137) billion |
| Diluted earnings (loss) per share | $(7.57) | $(7.32) |
| Cash flow from operations | $2.944 billion | $5.431 billion |
| Free cash flow (company-defined, non-GAAP) | $1.424 billion | $2.695 billion |
| Capital investments | $1.520 billion | $2.736 billion |
| Cash and short-term investments at year-end | $3.006 billion | $2.167 billion |
| Total debt at year-end | $16.886 billion | $15.294 billion |
| Net debt at year-end (company-defined, non-GAAP) | $13.880 billion | $13.127 billion |
| Working capital at year-end | $2.428 billion | $2.432 billion |
Full-year gross margin was $2.601 billion, compared with $4.197 billion in 2019. The reported 2020 loss included $12.515 billion of pretax charges and credits, principally asset impairments and restructuring; these items included $11.474 billion of net after-tax charges.
2020 revenue fell 28% year over year. North America revenue decreased 48% to $5.5 billion; international revenue decreased 19%. International markets represented approximately 81% of consolidated revenue.
Fourth-quarter 2020
Revenue was $5.532 billion, up 5% sequentially from $5.258 billion, but down about 33% from $8.228 billion in fourth-quarter 2019. Net income attributable to Schlumberger was $374 million, versus $333 million a year earlier; the fourth quarter included net after-tax credits of $65 million. Gross margin was $704 million, compared with $1.101 billion a year earlier.
All four divisions grew revenue sequentially. Division revenue and pretax operating margin were: Digital & Integration, $833 million and 32%; Reservoir Performance, $1.247 billion and 8%; Well Construction, $1.866 billion and 10%; Production Systems, $1.649 billion and 9%. These are segment-level measures, not consolidated margins.
Material changes versus prior comparable period
- Full-year revenue declined $9.316 billion from 2019, as pandemic disruption and customer budget cuts reduced activity, especially in North America.
- Cash flow from operations fell $2.487 billion, while free cash flow declined $1.271 billion.
- Significant impairment and restructuring charges continued after the large 2019 impairment year. 2020 included $3.070 billion of goodwill impairments, $3.321 billion of intangible asset impairments, and workforce, asset and inventory-related charges.
- Total debt rose $1.592 billion and net debt rose $753 million. Cash and short-term investments increased by $839 million.
- The quarterly cash dividend was reduced by 75% in April 2020; dividends declared were $0.88 per share for 2020 versus $2.00 in 2019.
Outlook, management commentary, risks and unusual items
- Management expected 2021 capital investments of $1.5–$1.7 billion. It anticipated North American activity moving toward maintenance levels in the first half of 2021 and stronger international spending from the second quarter, subject to OPEC+ policy and the economic recovery.
- Management said oil demand could recover to 2019 levels no later than 2023, and cited a path to double-digit North American margins and international margin improvement in 2021. These are expectations, not guarantees.
- On December 31, 2020, Schlumberger contributed its North American OneStim business to Liberty Oilfield Services for a 37% equity interest and recognized a $104 million gain. It also divested its North America low-flow rod-lift business for cash.
- Liquidity included $3.0 billion of cash and short-term investments, $5.9 billion of available and unused committed bank facilities, and $0.4 billion of commercial paper borrowings. The company said liquidity was adequate for at least 12 months. It expected a roughly $0.5 billion income-tax refund in 2021 and had approximately $0.5 billion of severance provision, most expected to be paid in the first half of 2021.
- Material risks include continued oil and gas market volatility, pandemic effects, customer spending and payment risk, international political and currency exposures, regulation and climate-transition impacts, environmental liabilities, operational incidents and cybersecurity threats. Management also cautioned that further restructuring or impairment charges may occur.
- Legal proceedings were disclosed in the financial statement notes; management considered a material loss from currently pending proceedings remote. The filing reported approximately $1.3 billion of uncertain tax-position liabilities, with timing of any related cash outflows not reliably estimable.
Important facts for investors to verify
- How much of the reported loss and future earnings comparisons reflect recurring operations versus impairments, restructuring and other unusual items.
- Whether cash generation recovers as activity improves, and whether capital investment, dividends and severance payments remain within stated plans.
- Debt maturities, refinancing needs and liquidity availability, including the revolving facility due to expire in 2021 unless extended.
- Execution of the OneStim transaction and the value, earnings contribution and liquidity implications of the Liberty equity investment.
- Whether management’s 2021 activity and margin expectations materialize amid uncertain oil demand, customer budgets and pandemic conditions.
- The impact of impairment assumptions, customer receivable collectability and tax contingencies; the auditor identified goodwill/intangible impairment and uncertain tax positions as critical audit matters.