SLB Limited (Schlumberger Limited) — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022. Amounts are in U.S. dollars; financial statement amounts are in millions unless noted.
Business context and results
SLB provides oilfield services and technology in more than 120 countries. Revenue was $5.962 billion, up 14% year over year, led by Well Construction and Reservoir Performance. International revenue grew 10% and North America grew 32% year over year.
| Metric | Q1 2022 | Q1 2021 |
|---|---|---|
| Revenue | $5.962 billion | $5.223 billion |
| Income before taxes | $638 million | $386 million |
| Net income attributable to SLB | $510 million | $299 million |
| Diluted earnings per share | $0.36 | $0.21 |
| Cash flow from operations | $131 million | $429 million |
| Free cash flow | $(381) million | $159 million |
Financial position and liquidity
- Cash was $1.600 billion and short-term investments were $1.049 billion at quarter-end. Net debt was $11.437 billion, compared with $11.056 billion at December 31, 2021. Total debt comprised $923 million of short-term borrowings and current maturities plus $13.163 billion of long-term debt.
- Operating cash flow was pressured by a $948 million working-capital use, including inventory build and higher receivables. Capital expenditures, APS investments, and capitalized multiclient seismic costs totaled approximately $512 million.
- Committed credit facilities totaling $6.58 billion were available and unused; no commercial paper was outstanding. Management said liquidity was sufficient for at least the next 12 months.
- Capital investments for full-year 2022 were expected to be $1.9–$2.0 billion, versus $1.7 billion in 2021.
Changes and operating performance
- Compared with Q1 2021, revenue rose 14%; net income attributable to SLB increased to $510 million from $299 million. The effective tax rate was 18%, versus 19%.
- Compared with Q4 2021, revenue fell 4% to $5.962 billion, primarily reflecting seasonal activity declines, ruble depreciation, and supply-chain constraints. International revenue declined 5% sequentially; North America was flat.
- Year-over-year segment revenue and pretax operating margins were: Digital & Integration, $857 million and 34%; Reservoir Performance, $1.210 billion and 13%; Well Construction, $2.398 billion and 16%; Production Systems, $1.604 billion and 7%. Production Systems margin was affected by supply and logistics constraints.
- SLB sold 7.2 million Liberty Energy shares for $84 million and recorded a $26 million gain; it retained a 27% Liberty interest at March 31.
Outlook, risks, and other items
- Management maintained its full-year ambition for year-over-year revenue growth in the mid-teens. It expected a seasonal rebound in Q2 and significant growth in the second half, particularly internationally, citing accelerating customer investment, activity, technology adoption, and pricing momentum. It anticipated continued market growth into 2023 and beyond, subject to economic conditions.
- The Ukraine conflict creates uncertainty. Russia represented approximately 5% of Q1 worldwide revenue; SLB suspended new investment and technology deployment there in March. Net assets in Russia were approximately $0.8 billion. Further sanctions, ruble depreciation, or escalation could affect operations and asset values.
- Other cited risks include inflation, supply-chain and logistics constraints, pricing pressure, customer spending changes, foreign-exchange exposure, and geopolitical and economic uncertainty. Management considered material loss from pending legal proceedings remote, while noting litigation uncertainty.
- On April 21, 2022, the board approved a 40% quarterly dividend increase, from $0.125 to $0.175 per share, beginning with the dividend payable July 14, 2022.
Important facts for investors to verify
- Whether working-capital investment converts to cash as activity and revenue grow.
- Whether supply-chain constraints, especially in Production Systems, ease and margins recover.
- The ongoing effect of the Ukraine conflict, sanctions, and ruble movements on Russian operations and the carrying value of assets.
- Whether the mid-teens full-year revenue-growth ambition and planned capital-investment range remain achievable.
- Dividend funding and net-debt trajectory given negative Q1 free cash flow.