Revenue dropped 33% year-over-year in the third quarter driven by the continuing decline in North American onshore activity and pricing pressure throughout the company’s global operations.
Third-quarter revenues declined sequentially by 6% globally and 4% in North America. The company’s CEO, Paal Kibsgaard, said that the focus in North America was on balancing margins and market share. Internationally, revenues dropped 7% due to customers’ budget cuts, activity disruptions, and service pricing erosion.
Kibsgaard also said:
As we enter the last quarter of the year, the oil market is still weighed down by fears of reduced growth in Chinese demand and the expectations regarding the timing and magnitude of additional Iranian supply. However, the fundamental balance of supply and demand continues to tighten, driven by both solid global macroeconomic growth and by weakening supply as the dramatic cuts in E&P investments are starting to take effect. We expect this trend to continue as the oil market further recognizes the magnitude of the industry’s annual production replacement challenge. … However, for oilfield services, the market outlook for the coming quarters looks increasingly challenging with activity expected to be reduced further, as lack of available cash flow exhausts capital spending for a number of our customers, leading them to take a conservative view on 2016 E&P spending in spite of any gradual improvement in oil prices. In addition, the winter season will have the normal impact on activity in the fourth quarter, which this year is unlikely to be offset by the usual year-end sales of software, products and multiclient licenses.
The company’s operating margin slipped by more than 4 percentage points compared with the third quarter of 2014. Pre-tax operating margin in the quarter came to 18%.
Schlumberger continues to expect capex in 2015 to total about $2.5 billion. The company repurchased 6.9 million shares of stock at an average price of $78.76 per share for a total cost of $545 million. As of the end of September the company had repurchased $8.2 billion worth of stock under a $10 billion buyback plan authorized in July 2013.
The company did not provide guidance in its press release, saying it would provide information in a conference call Friday morning. The consensus estimates for the fourth quarter call for EPS of $0.74 on revenues of $8.43 billion. For the full year, EPS is pegged at $3.46 on revenues of $36.24 billion.
Shares traded down about 0.4% in after-hours trading at $75.88 after closing at $76.16. The stock’s 52-week range is $66.57 to $100.54. Thomson Reuters had a consensus analyst price target of $93.53 before today’s results were announced.
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