SLB (Schlumberger Limited) — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021. Unaudited consolidated results; amounts are in U.S. dollars unless noted. Schlumberger provides oilfield services and products worldwide.
Financial performance
| Metric | Q1 2021 | Q1 2020 |
|---|---|---|
| Revenue | $5.223 billion | $7.455 billion |
| Income (loss) attributable to Schlumberger | $299 million | $(7.376) billion |
| Diluted earnings (loss) per share | $0.21 | $(5.32) |
| Cash from operating activities | $429 million | $784 million |
| Free cash flow (company-defined, non-GAAP) | $159 million | $179 million |
- Revenue fell 30% year over year; excluding businesses divested in Q4 2020, management said the decline was 23%.
- Pretax segment operating margin was 13%, up 230 basis points year over year despite lower revenue. Cost actions, divestitures of previously lower-margin businesses, and lower depreciation and amortization after 2020 impairments supported margins.
- Q1 2021 net income included no charges or credits. Q1 2020 included $8.523 billion of pretax impairment and other charges, producing a $7.727 billion after-tax charge and materially affecting the comparison.
- Capital investments were $270 million; dividends paid were $174 million. The declared quarterly dividend was $0.125 per share.
Balance sheet and liquidity
- At March 31, 2021, cash was $1.268 billion and short-term investments were $1.642 billion. Gross debt was approximately $16.6 billion, including current debt; reported net debt was $13.673 billion.
- Cash and short-term investments increased from $3.006 billion at December 31, 2020 to $2.910 billion. Net debt declined by $207 million during the quarter, with foreign-exchange movements contributing to the change.
- The company reported $8.06 billion in committed debt facilities, of which $7.64 billion was available and unused, and said liquidity was sufficient for business needs for at least the next 12 months.
- Receivables were $5.269 billion, net of a $319 million doubtful-account allowance. Schlumberger reported approximately $700 million of receivables related to Mexico, including delayed payments from its primary customer there; the amounts were not in dispute, and the company reported no historical material write-offs for that customer.
Business changes and management outlook
- Sequential revenue declined 6%, reflecting divestitures and seasonal weakness. Excluding the divested businesses, management said global revenue was essentially flat sequentially; growth in several countries offset seasonal declines.
- International revenue declined 19% year over year, while North American revenue fell 55% (36% excluding divestitures). Management cited pandemic-related activity reductions and divestitures.
- Management expected international activity to increase through year-end and said it was increasingly confident international revenue would grow by double digits in the second half of 2021 versus the second half of 2020. It expected North American activity to level off at production-maintenance levels.
- Management cited expected economic and oil-demand recovery, while noting COVID-19 and uncertainty. Full-year 2021 capital investments were expected to be $1.5–$1.7 billion.
- Other key risks include changes in customer spending and commodity markets, pandemic effects, geopolitical and economic conditions, pricing pressure, foreign exchange, seasonality, supply-chain constraints, regulation, and execution of cost and business strategies. Management said no material risk-factor changes had occurred since its 2020 Form 10-K.
Contingencies and unusual disclosures
- Management considered material loss from pending legal proceedings remote, while noting litigation outcomes are inherently uncertain.
- Schlumberger disclosed residual dealings with Iranian government entities, consisting of taxes and other customary charges, and accounts maintained to receive amounts due for prior services and pay local expenses.
- The filing reported no material change in market-risk exposure since December 31, 2020. Management concluded disclosure controls were effective.
Important facts for investors to verify
- Whether the anticipated international activity recovery and second-half double-digit growth materialize.
- How collections from the Mexican customer progress and whether the receivables allowance remains adequate.
- Whether operating cash flow covers capital investment, dividends, and debt obligations as activity recovers.
- How much of the margin improvement reflects sustainable cost and portfolio changes versus lower depreciation following prior impairments.
- Whether 2021 capital investments remain within the stated $1.5–$1.7 billion range and liquidity remains adequate.