UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission file No.:
(Schlumberger Limited)
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of |
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(IRS Employer |
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42 rue Saint-Dominique |
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Paris, France |
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75007 |
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62 Buckingham Gate |
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London, United Kingdom |
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SW1E 6AJ |
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Parkstraat 83 |
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The Hague, The Netherlands |
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2514 JG |
(Addresses of principal executive offices) |
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(Zip Codes) |
Registrant’s telephone number in the United States, including area code, is: (
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Class |
Outstanding at September 30, 2023 |
COMMON STOCK, $0.01 PAR VALUE PER SHARE |
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SCHLUMBERGER LIMITED
Third Quarter 2023 Form 10-Q
Table of Contents
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Page |
PART I |
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Financial Information |
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Item 1. |
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3 |
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Item 2. |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
16 |
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Item 3. |
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21 |
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Item 4. |
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21 |
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PART II |
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Other Information |
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Item 1. |
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22 |
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Item 1A. |
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22 |
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Item 2. |
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22 |
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Item 3. |
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22 |
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Item 4. |
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22 |
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Item 5. |
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22 |
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Item 6. |
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23 |
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
SCHLUMBERGER LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
(Stated in millions, except per share amounts) |
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Third Quarter |
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Nine Months |
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2023 |
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2022 |
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2023 |
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2022 |
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Revenue |
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Services |
$ |
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$ |
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$ |
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$ |
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Product sales |
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Total Revenue |
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Interest & other income |
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Expenses |
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Cost of services |
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Cost of sales |
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Research & engineering |
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General & administrative |
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Interest |
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Income before taxes |
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Tax expense |
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Net income |
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Net income attributable to noncontrolling interests |
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Net income attributable to SLB |
$ |
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$ |
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$ |
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$ |
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Basic income per share of SLB |
$ |
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$ |
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$ |
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$ |
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Diluted income per share of SLB |
$ |
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$ |
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$ |
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$ |
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Average shares outstanding: |
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Basic |
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Assuming dilution |
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See Notes to Consolidated Financial Statements
3
SCHLUMBERGER LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(Unaudited)
(Stated in millions) |
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Third Quarter |
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Nine Months |
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2023 |
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2022 |
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2023 |
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2022 |
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Net income |
$ |
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$ |
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$ |
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$ |
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Currency translation adjustments |
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Unrealized net change arising during the period |
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Cash flow hedges |
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Net gain (loss) on cash flow hedges |
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Reclassification to net income of net realized (gain) loss |
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Pension and other postretirement benefit plans |
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Amortization to net income of net actuarial (gain) loss |
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Amortization to net income of net prior service credit |
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Income taxes on pension and other postretirement benefit plans |
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Comprehensive income |
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Comprehensive income attributable to noncontrolling interests |
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Comprehensive income attributable to SLB |
$ |
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$ |
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$ |
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$ |
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See Notes to Consolidated Financial Statements
4
SCHLUMBERGER LIMITED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Stated in millions) |
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Sept. 30, |
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2023 |
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Dec. 31, |
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(Unaudited) |
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2022 |
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ASSETS |
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Current Assets |
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Cash |
$ |
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$ |
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Short-term investments |
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Receivables less allowance for doubtful accounts (2023 - $ |
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Inventories |
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Other current assets |
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Investments in Affiliated Companies |
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Fixed Assets less accumulated depreciation |
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Goodwill |
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Intangible Assets |
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Other Assets |
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$ |
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$ |
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LIABILITIES AND EQUITY |
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Current Liabilities |
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Accounts payable and accrued liabilities |
$ |
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$ |
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Estimated liability for taxes on income |
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Short-term borrowings and current portion of long-term debt |
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Dividends payable |
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Long-term Debt |
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Postretirement Benefits |
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Deferred Taxes |
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Other Liabilities |
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Equity |
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Common stock |
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Treasury stock |
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Retained earnings |
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Accumulated other comprehensive loss |
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SLB stockholders’ equity |
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Noncontrolling interests |
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$ |
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$ |
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See Notes to Consolidated Financial Statements
5
SCHLUMBERGER LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(Stated in millions) |
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Nine Months Ended September 30, |
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2023 |
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2022 |
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Cash flows from operating activities: |
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Net income |
$ |
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$ |
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Adjustments to reconcile net income to net cash provided by operating activities: |
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Gain on sale of Liberty shares |
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Gain on sale of real estate |
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- |
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Depreciation and amortization (1) |
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Deferred taxes |
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Stock-based compensation expense |
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Earnings of equity method investments, less dividends received |
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Change in assets and liabilities: (2) |
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Increase in receivables |
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Increase in inventories |
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Decrease (increase) in other current assets |
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Decrease (increase) in other assets |
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( |
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(Decrease) increase in accounts payable and accrued liabilities |
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(Decrease) increase in estimated liability for taxes on income |
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Decrease in other liabilities |
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- |
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Other |
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NET CASH PROVIDED BY OPERATING ACTIVITIES |
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Cash flows from investing activities: |
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Capital expenditures |
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APS investments |
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( |
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Exploration data costs capitalized |
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( |
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( |
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Business acquisitions and investments, net of cash acquired |
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( |
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Proceeds from sale of Liberty shares |
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Proceeds from sale of real estate |
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- |
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Purchase of short-term investments, net |
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Other |
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NET CASH USED IN INVESTING ACTIVITIES |
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Cash flows from financing activities: |
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Dividends paid |
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Proceeds from employee stock purchase plan |
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Proceeds from exercise of stock options |
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Stock repurchase program |
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- |
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Proceeds from issuance of long-term debt |
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- |
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Net decrease in short-term borrowings |
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( |
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Taxes paid on net settled stock-based compensation awards |
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( |
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Other |
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( |
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NET CASH USED IN FINANCING ACTIVITIES |
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( |
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Net increase in cash before translation effect |
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Translation effect on cash |
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( |
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Cash, beginning of period |
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Cash, end of period |
$ |
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$ |
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See Notes to Consolidated Financial Statements
6
SCHLUMBERGER LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
(Unaudited)
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(Stated in millions, except per share amounts) |
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Accumulated |
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Other |
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Common Stock |
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Retained |
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Comprehensive |
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Noncontrolling |
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January 1, 2023 – September 30, 2023 |
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Issued |
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In Treasury |
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Earnings |
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Loss |
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Interests |
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Total |
Balance, January 1, 2023 |
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$ |
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$( |
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$ |
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$( |
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$ |
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$ |
Net income |
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Currency translation adjustments |
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( |
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( |
Changes in fair value of cash flow hedges |
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Pension and other postretirement benefit plans |
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( |
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( |
Shares sold to optionees, less shares exchanged |
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Vesting of restricted stock, net of taxes withheld |
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( |
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( |
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Employee stock purchase plan |
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( |
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Stock repurchase program |
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( |
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( |
Stock-based compensation expense |
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Dividends declared ($ |
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( |
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( |
Dividends paid to noncontrolling interests |
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( |
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( |
Other |
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( |
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( |
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Balance, September 30, 2023 |
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$ |
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$( |
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$ |
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$( |
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$ |
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$ |
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Accumulated |
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Other |
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Common Stock |
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Retained |
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Comprehensive |
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Noncontrolling |
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January 1, 2022 – September 30, 2022 |
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Issued |
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In Treasury |
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Earnings |
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Loss |
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Interests |
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Total |
Balance, January 1, 2022 |
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$ |
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$( |
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$ |
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$( |
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$ |
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$ |
Net income |
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Currency translation adjustments |
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Changes in fair value of cash flow hedges |
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Pension and other postretirement benefit plans |
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Shares sold to optionees, less shares exchanged |
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( |
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Vesting of restricted stock, net of taxes withheld |
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( |
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( |
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Employee stock purchase plan |
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( |
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Stock-based compensation expense |
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Dividends declared ($ |
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( |
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( |
Dividends paid to noncontrolling interest |
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( |
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( |
Other |
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( |
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Balance, September 30, 2022 |
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$ |
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$( |
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$ |
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$( |
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$ |
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$ |
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Accumulated |
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Other |
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Common Stock |
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Retained |
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Comprehensive |
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Noncontrolling |
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July 1, 2023 – September 30, 2023 |
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Issued |
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In Treasury |
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Earnings |
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Loss |
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Interests |
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Total |
Balance, July 1, 2023 |
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$ |
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$( |
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$ |
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$( |
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$ |
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$ |
Net income |
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Currency translation adjustments |
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( |
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( |
Changes in fair value of cash flow hedges |
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Pension and other postretirement benefit plans |
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( |
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( |
Shares sold to optionees, less shares exchanged |
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( |
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|
|
|
|
|
|
|
||
Vesting of restricted stock, net of taxes withheld |
|
( |
|
|
|
|
|
|
|
|
( |
|
Employee stock purchase plan |
|
( |
|
|
|
|
|
|
|
|
||
Stock repurchase program |
|
|
|
( |
|
|
|
|
|
|
|
( |
Stock-based compensation expense |
|
|
|
|
|
|
|
|
|
|
||
Dividends declared ($ |
|
|
|
|
|
( |
|
|
|
( |
|
( |
Other |
|
( |
|
|
|
|
( |
|
|
|
- |
|
Balance, September 30, 2023 |
|
$ |
|
$( |
|
$ |
|
$( |
|
$ |
|
$ |
7
|
|
(Stated in millions, except per share amounts) |
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
Common Stock |
|
Retained |
|
Comprehensive |
|
Noncontrolling |
|
|
||
July 1, 2022– September 30, 2022 |
|
Issued |
|
In Treasury |
|
Earnings |
|
Loss |
|
Interests |
|
Total |
Balance, July 1, 2022 |
|
$ |
|
$( |
|
$ |
|
$( |
|
$ |
|
$ |
Net income |
|
|
|
|
|
|
|
|
|
|||
Currency translation adjustments |
|
|
|
|
|
|
|
( |
|
|
|
( |
Changes in fair value of cash flow hedges |
|
|
|
|
|
|
|
|
|
|
||
Pension and other postretirement benefit plans |
|
|
|
|
|
|
|
|
|
|
||
Shares sold to optionees, less shares exchanged |
|
( |
|
|
|
|
|
|
|
|
( |
|
Vesting of restricted stock, net of taxes withheld |
|
( |
|
|
|
|
|
|
|
|
||
Stock-based compensation expense |
|
|
|
|
|
|
|
|
|
|
||
Dividends declared ($ |
|
|
|
|
|
( |
|
|
|
|
|
( |
Other |
|
|
|
( |
|
|
|
|
|
|
- |
|
Balance, September 30, 2022 |
|
$ |
|
$( |
|
$ |
|
$( |
|
$ |
|
$ |
SHARES OF COMMON STOCK
(Unaudited)
|
|
|
|
(Stated in millions) |
|
||||||
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
Shares |
|
|||
|
Issued |
|
|
In Treasury |
|
|
Outstanding |
|
|||
Balance, January 1, 2023 |
|
|
|
|
( |
) |
|
|
|
||
Shares sold to optionees, less shares exchanged |
|
- |
|
|
|
|
|
|
|
||
Vesting of restricted stock |
|
- |
|
|
|
|
|
|
|
||
Shares issued under employee stock purchase plan |
|
- |
|
|
|
|
|
|
|
||
Stock repurchase program |
|
- |
|
|
|
( |
) |
|
|
( |
) |
Balance, September 30, 2023 |
|
|
|
|
( |
) |
|
|
|
||
See Notes to Consolidated Financial Statements
8
SCHLUMBERGER LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
The accompanying unaudited consolidated financial statements of Schlumberger Limited and its subsidiaries (“SLB”) have been prepared in accordance with generally accepted accounting principles in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of SLB management, all adjustments considered necessary for a fair statement have been included in the accompanying unaudited financial statements. All intercompany transactions and balances have been eliminated in consolidation. Operating results for the nine-month period ended September 30, 2023 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2023. The December 31, 2022 balance sheet information has been derived from the SLB 2022 audited financial statements. For further information, refer to the Consolidated Financial Statements and notes thereto included in the SLB Annual Report on Form 10-K for the year ended December 31, 2022, filed with the Securities and Exchange Commission on January 25, 2023.
2. Charges and Credits
2023
On December 31, 2020, SLB contributed its onshore hydraulic fracturing business in the United States and Canada, including its pressure pumping, pumpdown perforating and Permian frac sand business to Liberty Energy Inc. (“Liberty”) in exchange for an equity interest in Liberty. During the first quarter of 2023, SLB sold all of its remaining approximately
SLB did
2022
SLB recorded the following credits during the first nine months of 2022, all of which are classified in Interest & other income in the Consolidated Statement of Income:
|
(Stated in millions) |
|
|||||||||
|
|
|
|
|
|
|
|
|
|||
|
Pretax Credit |
|
|
Tax Expense |
|
|
Net |
|
|||
First quarter: |
|
|
|
|
|
|
|
|
|||
Gain on sale of Liberty shares |
$ |
|
|
$ |
|
|
$ |
|
|||
Second quarter: |
|
|
|
|
|
|
|
|
|||
Gain on sale of Liberty shares |
|
|
|
|
|
|
|
|
|||
Gain on sale of real estate |
|
|
|
|
|
|
|
|
|||
|
$ |
|
|
$ |
|
|
$ |
|
|||
During the first quarter of 2022, SLB sold
During the second quarter of 2022, SLB sold certain real estate and received proceeds of $
9
3. Earnings per Share
The following is a reconciliation from basic earnings per share of SLB to diluted earnings per share of SLB:
|
(Stated in millions, except per share amounts) |
|
|||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
2023 |
|
|
2022 |
|
||||||||||||||||||
|
Net Income |
|
|
Average |
|
|
Earnings per |
|
|
Net Income |
|
|
Average |
|
|
Earnings per |
|
||||||
Third Quarter |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Basic |
$ |
|
|
|
|
|
$ |
|
|
$ |
|
|
|
|
|
$ |
|
||||||
Assumed exercise of stock options |
|
- |
|
|
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
|||
Unvested restricted stock |
|
- |
|
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
||||
Diluted |
$ |
|
|
|
|
|
$ |
|
|
$ |
|
|
|
|
|
$ |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
2023 |
|
|
2022 |
|
||||||||||||||||||
|
Net Income |
|
|
Average |
|
|
Earnings per |
|
|
Net Income |
|
|
Average |
|
|
Earnings per |
|
||||||
Nine Months |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Basic |
$ |
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Assumed exercise of stock options |
|
- |
|
|
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
|||
Unvested restricted stock |
|
- |
|
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
||||
Diluted |
$ |
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
The number of outstanding options to purchase shares of SLB common stock that were not included in the computation of diluted income per share, because to do so would have had an antidilutive effect, was as follows:
(Stated in millions) |
|
||||||||||||||
|
|
|
|
|
|||||||||||
|
Third Quarter |
|
|
Nine Months |
|
||||||||||
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Employee stock options |
|
|
|
|
|
|
|
|
|
|
|
||||
4. Inventories
A summary of inventories, which are stated at the lower of average cost or net realizable value, is as follows:
(Stated in millions) |
|
||||||
|
|
|
|
|
|
||
|
Sept. 30, |
|
|
Dec. 31, |
|
||
|
2023 |
|
|
2022 |
|
||
Raw materials & field materials |
$ |
|
|
$ |
|
||
Work in progress |
|
|
|
|
|
||
Finished goods |
|
|
|
|
|
||
|
$ |
|
|
$ |
|
||
5. Fixed Assets
Fixed assets consist of the following:
(Stated in millions) |
|
||||||
|
|
|
|
|
|
||
|
Sept. 30, |
|
|
Dec. 31, |
|
||
|
2023 |
|
|
2022 |
|
||
Property, plant & equipment |
$ |
|
|
$ |
|
||
Less: Accumulated depreciation |
|
|
|
|
|
||
|
$ |
|
|
$ |
|
||
Depreciation expense was as follows:
10
(Stated in millions) |
|
||||||
|
|
|
|
|
|
||
|
2023 |
|
|
2022 |
|
||
Third Quarter |
$ |
|
|
$ |
|
||
Nine Months |
$ |
|
|
$ |
|
||
6. Intangible Assets
Intangible assets consist of the following
|
(Stated in millions) |
|
|||||||||||||||||||||
|
|
|
|||||||||||||||||||||
|
Sept. 30, 2023 |
|
|
Dec. 31, 2022 |
|
||||||||||||||||||
|
Gross |
|
|
Accumulated |
|
|
Net Book |
|
|
Gross |
|
|
Accumulated |
|
|
Net Book |
|
||||||
|
Book Value |
|
|
Amortization |
|
|
Value |
|
|
Book Value |
|
|
Amortization |
|
|
Value |
|
||||||
Customer relationships |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Technology/technical know-how |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Tradenames |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Amortization expense was as follows:
(Stated in millions) |
|
||||||
|
|
|
|
|
|
||
|
2023 |
|
|
2022 |
|
||
Third Quarter |
$ |
|
|
$ |
|
||
Nine Months |
$ |
|
|
$ |
|
||
Based on the carrying value of intangible assets at September 30, 2023, amortization expense for the subsequent five years is estimated to be: fourth quarter of 2023—$
7. Long-term Debt
Long-term Debt consists of the following:
(Stated in millions) |
|
||||||
|
|
|
|
|
|
||
|
Sept. 30, |
|
|
Dec. 31, |
|
||
|
2023 |
|
|
2022 |
|
||
$ |
|
|
$ |
|
|||
|
|
|
|
|
|||
|
|
|
|
|
|||
|
|
|
|
|
|||
|
|
|
|
|
|||
|
|
|
|
|
|||
|
|
|
|
|
|||
|
|
|
|
|
|||
|
|
|
|
|
|||
|
|
|
|
|
|||
|
|
|
|
|
|||
|
|
|
|
- |
|
||
|
|
|
|
- |
|
||
|
|
|
|
|
|||
|
|
|
|
|
|||
|
|
|
|
|
|||
|
- |
|
|
|
|
||
|
- |
|
|
|
|
||
|
$ |
|
|
$ |
|
||
11
During the second quarter of 2023 SLB issued $
The estimated fair value of SLB’s Long-term Debt, based on quoted market prices at September 30, 2023 and December 31, 2022, was $
At September 30, 2023, SLB had committed credit facility agreements aggregating $
There were
Schlumberger Limited fully and unconditionally guarantees the securities issued by certain of its subsidiaries, including securities issued by Schlumberger Investment S.A. and Schlumberger Finance Canada Ltd., both indirect wholly-owned subsidiaries of Schlumberger Limited.
8. Derivative Instruments and Hedging Activities
SLB’s functional currency is primarily the US dollar. However, outside the United States, a significant portion of SLB’s expenses is incurred in foreign currencies. Therefore, when the US dollar weakens (strengthens) in relation to the foreign currencies of the countries in which SLB conducts business, the US dollar-reported expenses will increase (decrease).
SLB is exposed to risks on future cash flows relating to its fixed rate debt denominated in currencies other than the functional currency. SLB uses cross-currency interest rate swaps to provide a hedge against these risks. These contracts are accounted for as cash flow hedges, with the fair value of the derivative recorded on the Consolidated Balance Sheet and in Accumulated other comprehensive loss. Amounts recorded in Accumulated other comprehensive loss are reclassified into earnings in the same period or periods that the hedged item is recognized in earnings.
Details regarding SLB’s outstanding cross-currency interest rate swaps as of September 30, 2023, were as follows:
A summary of the amounts included in the Consolidated Balance Sheet relating to cross currency interest rate swaps was as follows:
|
(Stated in millions) |
|
|||||
|
|
|
|
|
|
||
|
Sept. 30, 2023 |
|
|
Dec. 31, 2022 |
|
||
$ |
|
|
$ |
|
|||
$ |
|
|
$ |
|
|||
The fair values were determined using a model with inputs that are observable in the market or can be derived or corroborated by observable data.
SLB has entered into derivative contracts that hedge the price of oil related to approximately
12
fair value of the hedge recorded in Accumulated other comprehensive loss. Amounts recorded in Accumulated other comprehensive loss are reclassified to earnings in the same period or periods that the hedged item is recognized in earnings.
SLB is exposed to risks on future cash flows to the extent that the local currency is not the functional currency and expenses denominated in local currency are not equal to revenues denominated in local currency. SLB uses foreign currency forward contracts to provide a hedge against a portion of these cash flow risks. These contracts are accounted for as cash flow hedges.
SLB is also exposed to changes in the fair value of assets and liabilities denominated in currencies other than the functional currency. While SLB uses foreign currency forward contracts to economically hedge this exposure as it relates to certain currencies, these contracts are not designated as hedges for accounting purposes. Instead, the fair value of the derivative is recorded on the Consolidated Balance Sheet and changes in the fair value are recognized in the Consolidated Statement of Income, as are changes in the fair value of the hedged item.
Foreign currency forward contracts were outstanding for the US dollar equivalent of $
Other than the previously mentioned cross-currency interest rate swaps, the fair value of the other outstanding derivatives was
The effect of derivative instruments designated as cash flow hedges, and those not designated as hedges, on the Consolidated Statement of Income was as follows:
|
|
|
|
|
|
|
(Stated in millions) |
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Gain (Loss) Recognized in Income |
|
|
|
|||||||||||||
|
Third Quarter |
|
|
Nine Months |
|
|
|
||||||||||
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
|
Consolidated Statement of Income Classification |
||||
Derivatives designated as cash flow hedges: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
Cost of services/sales |
|
|
( |
) |
|
|
- |
|
|
|
( |
) |
|
|
- |
|
|
Interest expense |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Revenue |
||
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Cost of services/sales |
|||
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
Derivatives not designated as hedges: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
Cost of services/sales |
|||
9. Contingencies
10. Segment Information
|
|
|
|
(Stated in millions) |
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Third Quarter 2023 |
|
|
Third Quarter 2022 |
|
||||||||||
|
|
|
|
Income |
|
|
|
|
|
Income |
|
||||
|
Revenue |
|
|
Before Taxes |
|
|
Revenue |
|
|
Before Taxes |
|
||||
Digital & Integration |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Reservoir Performance |
|
|
|
|
|
|
|
|
|
|
|
||||
Well Construction |
|
|
|
|
|
|
|
|
|
|
|
||||
Production Systems |
|
|
|
|
|
|
|
|
|
|
|
||||
Eliminations & other |
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Pretax segment operating income |
|
|
|
|
|
|
|
|
|
|
|
||||
Corporate & other (1) |
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Interest income (2) |
|
|
|
|
|
|
|
|
|
|
|
||||
Interest expense (3) |
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
13
|
|
|
|
(Stated in millions) |
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Nine Months 2023 |
|
|
Nine Months 2022 |
|
||||||||||
|
|
|
|
Income |
|
|
|
|
|
Income |
|
||||
|
Revenue |
|
|
Before Taxes |
|
|
Revenue |
|
|
Before Taxes |
|
||||
Digital & Integration |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Reservoir Performance |
|
|
|
|
|
|
|
|
|
|
|
||||
Well Construction |
|
|
|
|
|
|
|
|
|
|
|
||||
Production Systems |
|
|
|
|
|
|
|
|
|
|
|
||||
Eliminations & other |
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Pretax segment operating income |
|
|
|
|
|
|
|
|
|
|
|
||||
Corporate & other (1) |
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Interest income (2) |
|
|
|
|
|
|
|
|
|
|
|
||||
Interest expense (3) |
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Charges and credits (4) |
|
|
|
|
|
|
|
|
|
|
|
||||
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Revenue by geographic area was as follows:
|
|
|
|
|
|
|
(Stated in millions) |
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Third Quarter |
|
|
Nine Months |
|
||||||||||
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
North America |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Latin America |
|
|
|
|
|
|
|
|
|
|
|
||||
Europe & Africa (1) |
|
|
|
|
|
|
|
|
|
|
|
||||
Middle East & Asia |
|
|
|
|
|
|
|
|
|
|
|
||||
Other |
|
|
|
|
|
|
|
|
|
|
|
||||
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
14
North America and International revenue disaggregated by segment was as follows:
|
|
|
|
|
|
|
(Stated in millions) |
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Third Quarter 2023 |
|
|||||||||||||
|
North |
|
|
|
|
|
|
|
|
|
|
||||
|
America |
|
|
International |
|
|
Other |
|
|
Total |
|
||||
Digital & Integration |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Reservoir Performance |
|
|
|
|
|
|
|
|
|
|
|
||||
Well Construction |
|
|
|
|
|
|
|
|
|
|
|
||||
Production Systems |
|
|
|
|
|
|
|
|
|
|
|
||||
Eliminations & other |
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Third Quarter 2022 |
|
|||||||||||||
|
North |
|
|
|
|
|
|
|
|
|
|
||||
|
America |
|
|
International |
|
|
Other |
|
|
Total |
|
||||
Digital & Integration |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Reservoir Performance |
|
|
|
|
|
|
|
|
|
|
|
||||
Well Construction |
|
|
|
|
|
|
|
|
|
|
|
||||
Production Systems |
|
|
|
|
|
|
|
|
|
|
|
||||
Eliminations & other |
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Nine Months 2023 |
|
|||||||||||||
|
North |
|
|
|
|
|
|
|
|
|
|
||||
|
America |
|
|
International |
|
|
Other |
|
|
Total |
|
||||
Digital & Integration |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Reservoir Performance |
|
|
|
|
|
|
|
|
|
|
|
||||
Well Construction |
|
|
|
|
|
|
|
|
|
|
|
||||
Production Systems |
|
|
|
|
|
|
|
|
|
|
|
||||
Eliminations & other |
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Nine Months 2022 |
|
|||||||||||||
|
North |
|
|
|
|
|
|
|
|
|
|
||||
|
America |
|
|
International |
|
|
Other |
|
|
Total |
|
||||
Digital & Integration |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Reservoir Performance |
|
|
|
|
|
|
|
|
|
|
|
||||
Well Construction |
|
|
|
|
|
|
|
|
|
|
|
||||
Production Systems |
|
|
|
|
|
|
|
|
|
|
|
||||
Eliminations & other |
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Revenue in excess of billings related to contracts where revenue is recognized over time was $
Due to the nature of its business, SLB does not have significant backlog. Total backlog was $
Billings and cash collections in excess of revenue was $
15
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
This section of the Form 10-Q discusses third-quarter 2023 results of operations with comparisons to the second-quarter 2023, as well as the first nine months of 2023 results of operations with comparisons to the first nine months of 2022. Detailed financial information with respect to second-quarter 2023 can be found in Part I, Item 1, “Financial Statements” of SLB’s Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2023.
Third Quarter 2023 Compared to Second Quarter 2023
|
|
|
|
(Stated in millions) |
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Third Quarter 2023 |
|
|
Second Quarter 2023 |
|
||||||||||
|
|
|
|
Income Before |
|
|
|
|
|
Income Before |
|
||||
|
Revenue |
|
|
Taxes |
|
|
Revenue |
|
|
Taxes |
|
||||
Digital & Integration |
$ |
982 |
|
|
$ |
314 |
|
|
$ |
947 |
|
|
$ |
322 |
|
Reservoir Performance |
|
1,680 |
|
|
|
344 |
|
|
|
1,643 |
|
|
|
306 |
|
Well Construction |
|
3,430 |
|
|
|
759 |
|
|
|
3,362 |
|
|
|
731 |
|
Production Systems |
|
2,367 |
|
|
|
319 |
|
|
|
2,313 |
|
|
|
278 |
|
Eliminations & other |
|
(149 |
) |
|
|
(53 |
) |
|
|
(166 |
) |
|
|
(56 |
) |
Pretax segment operating income |
|
|
|
|
1,683 |
|
|
|
|
|
|
1,581 |
|
||
Corporate & other (1) |
|
|
|
|
(182 |
) |
|
|
|
|
|
(183 |
) |
||
Interest income (2) |
|
|
|
|
20 |
|
|
|
|
|
|
19 |
|
||
Interest expense (3) |
|
|
|
|
(126 |
) |
|
|
|
|
|
(124 |
) |
||
|
$ |
8,310 |
|
|
$ |
1,395 |
|
|
$ |
8,099 |
|
|
$ |
1,293 |
|
SLB’s third-quarter 2023 results continue to reflect strong year-to-date performance with revenue growth of 19%. These results were driven by sustained growth in the international markets, where SLB reported its ninth consecutive quarter of double-digit year-on-year revenue growth.
Compared to the same quarter a year ago, international revenue grew 12%, outpacing North America, which increased 6%. Year on year, global third-quarter revenue grew 11% and pretax segment operating margin expanded 153 basis points (bps) to 20%.
Third-quarter 2023 revenue increased 3% sequentially—by more than $200 million—driven by the Middle East & Asia, which increased 8% in the quarter and continues to demonstrate positive investment momentum. Our strong quarterly performance was propelled by broad-based growth across Saudi Arabia, the United Arab Emirates, Indonesia, China, Malaysia, Kuwait, and Oman.
Third-quarter 2023 pretax segment operating margin expanded 73 bps sequentially.
Looking ahead, SLB believes the market fundamentals remain very compelling for its business. The oil and gas industry continues to benefit from a multiyear growth cycle that has shifted to the international and offshore markets where we are the clear leader. Concurrently, upstream spending is accelerating as operators continue to invest in long-cycle developments, production capacity expansions, exploration and appraisal, and enhanced gas production. The long-term nature of these global investments underscores the breadth, durability, and resilience of this cycle, and SLB expects these market dynamics to continue to drive profitable growth in the years ahead.
Digital & Integration
Digital & Integration revenue of $982 million increased 4% sequentially due to increased Asset Performance Solutions ("APS") revenue in Ecuador and increased digital revenue, which includes higher exploration data sales in Angola, the US Gulf of Mexico, and Malaysia.
Digital & Integration pretax operating margin of 32% contracted 200 bps sequentially due to lower profitability in APS, more than offsetting improved digital margins.
Reservoir Performance
Reservoir Performance revenue of $1.68 billion grew 2% sequentially primarily due to increased evaluation and stimulation activity internationally. More than 70% of the revenue growth came from Europe & Africa, mainly in offshore Angola, Namibia, and the United Kingdom. Strong growth was also achieved in Saudi Arabia from robust stimulation activity.
16
Reservoir Performance pretax operating margin of 20% expanded 190 bps sequentially. This increase was primarily driven by higher activity, pricing, and improved operating leverage across evaluation and stimulation.
Well Construction
Well Construction revenue of $3.43 billion increased 2% sequentially led by strong growth in the Middle East & Asia, which was partially offset by lower revenue in North America, which declined 8%.
Well Construction pretax operating margin of 22% expanded 38 bps sequentially driven by the international markets, mainly in Europe & Africa and the Middle East & Asia.
Production Systems
Production Systems revenue of $2.37 billion increased 2% sequentially primarily driven by strong sales of completions, artificial lift, and surface production systems. Strong international sequential revenue growth of 7% was led by the Middle East & Asia, with double-digit growth, followed by Latin America. North America revenue declined 8% due to lower subsea activity.
Production Systems pretax operating margin expanded 147 bps sequentially to 13%. The expansion was driven primarily by higher sales of completions, artificial lift, and surface production systems.
Nine Months 2023 Compared to Nine Months 2022
|
|
|
|
|
(Stated in millions) |
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
Nine Months 2023 |
|
|
Nine Months 2022 |
|
||||||||||
|
|
|
|
|
Income |
|
|
|
|
|
Income |
|
||||
|
|
|
|
|
Before |
|
|
|
|
|
Before |
|
||||
|
|
Revenue |
|
|
Taxes |
|
|
Revenue |
|
|
Taxes |
|
||||
Digital & Integration |
|
$ |
2,822 |
|
|
$ |
901 |
|
|
$ |
2,713 |
|
|
$ |
976 |
|
Reservoir Performance |
|
|
4,826 |
|
|
|
892 |
|
|
|
3,999 |
|
|
|
598 |
|
Well Construction |
|
|
10,052 |
|
|
|
2,162 |
|
|
|
8,168 |
|
|
|
1,522 |
|
Production Systems |
|
|
6,888 |
|
|
|
802 |
|
|
|
5,647 |
|
|
|
509 |
|
Eliminations & other |
|
|
(443 |
) |
|
|
(102 |
) |
|
|
(314 |
) |
|
|
(151 |
) |
Pretax segment operating income |
|
|
|
|
|
4,655 |
|
|
|
|
|
|
3,454 |
|
||
Corporate & other (1) |
|
|
|
|
|
(536 |
) |
|
|
|
|
|
(468 |
) |
||
Interest income (2) |
|
|
|
|
|
57 |
|
|
|
|
|
|
13 |
|
||
Interest expense (3) |
|
|
|
|
|
(363 |
) |
|
|
|
|
|
(360 |
) |
||
Charges and credits (4) |
|
|
|
|
|
36 |
|
|
|
|
|
|
285 |
|
||
|
|
$ |
24,145 |
|
|
$ |
3,849 |
|
|
$ |
20,213 |
|
|
$ |
2,924 |
|
Nine-month 2023 revenue of $24.15 billion increased 19% year on year led by Well Construction and Production Systems. On a geographic basis, year-on-year revenue growth was broad-based with North America revenue increasing 17% due to strong land and offshore drilling and higher sales of production systems, while international revenue grew 20%. International growth was widespread across all areas, led by the Middle East & Asia, which grew 21% due to higher drilling and intervention activity. Europe & Africa grew 19% primarily from higher sales of production systems in Europe and increased activity in offshore Africa, while Latin America revenue increased 22% due to robust drilling activity and higher sale of production systems.
Nine-month 2023 pretax segment operating margin of 19% expanded by 219 bps as compared to the same period last year driven by higher activity, improved pricing, and a more favorable activity mix.
Digital & Integration
Nine-month 2023 revenue of $2.82 billion increased 4% year on year, as strong growth in digital sales were largely offset by lower revenue in APS projects and decreased exploration data licensing sales. The APS revenue decline resulted primarily from a temporary production interruption in the projects in Ecuador during the first quarter of 2023 due to a pipeline disruption and lower commodity prices that impacted
17
the project in Canada. The lower exploration data licensing sales were driven by the absence of the $95 million of transfer fees recorded in the second quarter of 2022.
Year on year, pretax segment operating margin contracted 405 bps to 32% primarily due to the lower revenue from exploration data licenses and reduced profitability from APS projects.
Reservoir Performance
Nine-month 2023 revenue of $4.83 billion increased 21% year on year due primarily to increased activity internationally.
Year on year, pretax segment operating margin expanded 352 bps to 18% primarily due to higher activity levels and improved pricing.
Well Construction
Nine-month 2023 revenue of $10.05 billion increased 23% year on year with double-digit growth across all areas. North America grew 26% while international revenue increased 22% This growth was driven by drilling fluids and measurements—both on higher land and offshore activity—along with improved pricing.
Year on year, pretax segment operating margin expanded 286 bps to 22% with profitability improving across all geographic areas driven by the higher activity and improved pricing.
Production Systems
Nine-month 2023 revenue of $6.89 billion increased 22% driven by strong growth across all areas led by Latin America and the Middle East & Asia.
Year on year, pretax segment operating margin expanded 263 bps to 12% mainly driven by higher artificial lift, surface production system, and subsea production system sales, improved pricing, and the easing of supply chain constraints.
Interest and Other Income
Interest & other income consisted of the following:
(Stated in millions) |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Third Quarter |
|
|
Second Quarter |
|
|
Nine Months |
|
|||||||
|
2023 |
|
|
2023 |
|
|
2023 |
|
|
2022 |
|
||||
Earnings of equity method investments |
$ |
51 |
|
|
$ |
63 |
|
|
$ |
152 |
|
|
$ |
85 |
|
Interest income |
|
22 |
|
|
|
19 |
|
|
|
59 |
|
|
|
66 |
|
Gain on sale of Liberty shares |
|
- |
|
|
|
- |
|
|
|
36 |
|
|
|
242 |
|
Gain on sale of real estate |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
43 |
|
|
$ |
73 |
|
|
$ |
82 |
|
|
$ |
247 |
|
|
$ |
436 |
|
Earnings of equity method investments for the first nine months of 2023 increased $67 million as compared to the same period of 2022 driven primarily by increased profitability of certain seismic-related investments.
Other
Research & engineering and General & administrative expenses, as a percentage of Revenue, for the third quarter and second quarter of 2023 and the first nine months of 2023 and 2022 were as follows:
|
Third |
|
|
Second |
|
|
|
|
|||||||
|
Quarter |
|
|
Quarter |
|
|
Nine Months |
|
|||||||
|
2023 |
|
|
2023 |
|
|
2023 |
|
|
2022 |
|
||||
Research & engineering |
|
2.2 |
% |
|
|
2.0 |
% |
|
|
2.2 |
% |
|
|
2.3 |
% |
General & administrative |
|
1.0 |
% |
|
|
1.2 |
% |
|
|
1.1 |
% |
|
|
1.4 |
% |
The effective tax rate was 19.0% for both the third and second quarters of 2023.
The effective tax rate for the first nine months of 2023 was 19%, as compared to 18% for the same period of 2022. The increase in the effective tax rate was primarily due to the credits described in Note 2 to the Consolidated Financial Statements, which lowered the effective tax rate during the first nine months of 2022 by one percentage point.
Charges and Credits
On December 31, 2020, SLB contributed its onshore hydraulic fracturing business in the United States and Canada, including its pressure pumping, pumpdown perforating and Permian frac sand business to Liberty in exchange for an equity interest in Liberty. During the first
18
quarter of 2023, SLB sold all of its remaining approximately 9 million shares of Liberty and received net proceeds of $137 million. As a result, SLB recognized a pretax gain of $36 million ($28 million after-tax) which is classified in Interest & other income in the Consolidated Statement of Income.
SLB did not record any charges or credits during the third quarter of 2023.
SLB recorded the following credits during the first nine months of 2022, all of which are classified in Interest & other income in the Consolidated Statement of Income.
|
(Stated in millions) |
|
|||||||||
|
|
|
|
|
|
|
|
|
|||
|
Pretax Credit |
|
|
Tax Expense |
|
|
Net |
|
|||
First quarter: |
|
|
|
|
|
|
|
|
|||
Gain on sale of Liberty shares |
$ |
26 |
|
|
$ |
4 |
|
|
$ |
22 |
|
Second quarter: |
|
|
|
|
|
|
|
|
|||
Gain on sale of Liberty shares |
|
216 |
|
|
|
13 |
|
|
|
203 |
|
Gain on sale of real estate |
|
43 |
|
|
|
2 |
|
|
|
41 |
|
|
$ |
285 |
|
|
$ |
19 |
|
|
$ |
266 |
|
Liquidity and Capital Resources
Details of the components of liquidity as well as changes in liquidity are as follows:
|
(Stated in millions) |
|
|||||||||
|
|
|
|
|
|
|
|
|
|||
|
Sept. 30, |
|
|
Sept. 30, |
|
|
Dec. 31, |
|
|||
Components of Liquidity: |
2023 |
|
|
2022 |
|
|
2022 |
|
|||
Cash |
$ |
2,488 |
|
|
$ |
2,180 |
|
|
$ |
1,655 |
|
Short-term investments |
|
1,247 |
|
|
|
1,429 |
|
|
|
1,239 |
|
Short-term borrowings and current portion of long-term debt |
|
(1,998 |
) |
|
|
(899 |
) |
|
|
(1,632 |
) |
Long-term debt |
|
(11,147 |
) |
|
|
(12,452 |
) |
|
|
(10,594 |
) |
Net debt (1) |
$ |
(9,410 |
) |
|
$ |
(9,742 |
) |
|
$ |
(9,332 |
) |
|
Nine Months Ended Sept. 30, |
|
|||||
Changes in Liquidity: |
2023 |
|
|
2022 |
|
||
Net income |
$ |
3,127 |
|
|
$ |
2,410 |
|
Gain on sale of Liberty shares |
|
(36 |
) |
|
|
(242 |
) |
Gain on sale of real estate |
|
- |
|
|
|
(43 |
) |
Depreciation and amortization (2) |
|
1,703 |
|
|
|
1,598 |
|
Earnings of equity method investments, less dividends received |
|
(120 |
) |
|
|
(52 |
) |
Deferred taxes |
|
94 |
|
|
|
3 |
|
Stock-based compensation expense |
|
218 |
|
|
|
236 |
|
Increase in working capital |
|
(1,353 |
) |
|
|
(1,814 |
) |
Other |
|
(18 |
) |
|
|
10 |
|
Cash flow from operations |
|
3,615 |
|
|
|
2,106 |
|
Capital expenditures |
|
(1,345 |
) |
|
|
(1,046 |
) |
APS investments |
|
(391 |
) |
|
|
(420 |
) |
Exploration data costs capitalized |
|
(121 |
) |
|
|
(77 |
) |
Free cash flow (3) |
|
1,758 |
|
|
|
563 |
|
Dividends paid |
|
(961 |
) |
|
|
(600 |
) |
Stock repurchase program |
|
(594 |
) |
|
|
- |
|
Proceeds from employee stock plans |
|
191 |
|
|
|
142 |
|
Proceeds from stock options |
|
85 |
|
|
|
29 |
|
Taxes paid on net settled stock-based compensation awards |
|
(162 |
) |
|
|
(92 |
) |
Business acquisitions and investments, net of cash acquired |
|
(280 |
) |
|
|
(45 |
) |
Proceeds from sale of Liberty shares |
|
137 |
|
|
|
513 |
|
Proceeds from sale of real estate |
|
- |
|
|
|
120 |
|
Other |
|
(272 |
) |
|
|
(118 |
) |
(Increase) decrease in net debt before impact of changes in foreign exchange rates |
|
(98 |
) |
|
|
512 |
|
Impact of changes in foreign exchange rates on net debt |
|
20 |
|
|
|
802 |
|
(Increase) decrease in net debt |
|
(78 |
) |
|
|
1,314 |
|
Net debt, beginning of period (1) |
|
(9,332 |
) |
|
|
(11,056 |
) |
Net debt, end of period (1) |
$ |
(9,410 |
) |
|
$ |
(9,742 |
) |
19
Key liquidity events during the first nine months of 2023 and 2022 included:
As of September 30, 2023, SLB had $3.74 billion of cash and short-term investments on hand and committed debt facility agreements with commercial banks aggregating $6.54 billion, all of which was available and unused. SLB believes these amounts are sufficient to meet future business requirements for at least the next 12 months and beyond.
There were no borrowings under SLB's commercial paper programs at September 30, 2023.
SLB has a global footprint in more than 100 countries. As of September 30, 2023, only four of those countries individually accounted for greater than 5% of SLB’s net receivable balance. Two of these countries, the United States and Mexico, each represented greater than 10% of such receivables.
Included in Receivables, less allowance for doubtful accounts in the Consolidated Balance Sheet as of September 30, 2023 was approximately $1.2 billion of receivables relating to Mexico. SLB’s receivables from its primary customer in Mexico are not in dispute and SLB has not historically had any material write-offs due to uncollectible accounts receivable relating to this customer.
Additional Information
On October 2, 2023, SLB, Aker Solutions and Subsea7 closed their previously announced joint venture. The new business, OneSubsea, will drive innovation and efficiency in subsea production by helping customers unlock reserves and reduce cycle time. OneSubsea now comprises SLB’s and Aker Solution’s subsea businesses, which include an extensive complementary subsea production and processing technology portfolio, world-class manufacturing scale and capacity, access to industry-leading reservoir and digital domain expertise, unique pore-to-process integration capabilities, and strengthened research and development capabilities.
In addition to contributing its subsea business to the joint venture, at closing SLB issued to Aker Solutions 5.1 million shares of SLB common stock valued at $306.5 million. Concurrently, Subsea7 purchased its 10% interest in exchange for $306.5 million in cash to Aker Solutions. The joint venture also issued a promissory note to Aker Solutions for $87.5 million. SLB owns 70% of the joint venture, and will consolidate it for financial reporting purposes, while Aker Solutions owns 20% and Subsea7 owns 10%.
Aker Solutions reported revenue for its subsea business of approximately $1.5 billion for the year ended December 31, 2022 and $0.9 billion for the six months ended June 30, 2023. As this transaction closed subsequent to the end of the third quarter of 2023, the Consolidated Financial Statements do not reflect any amounts relating to the acquired Aker Solutions subsea business. Additionally, because this transaction just recently closed, the initial purchase accounting has not yet been completed.
In March 2022, SLB decided to immediately suspend new investment and technology deployment to its Russia operations. In July 2023, SLB announced that it was halting shipments of products and technology into Russia from all SLB facilities worldwide in response to the continued expansion of international sanctions. This follows SLB’s previous ban on shipments from SLB facilities in the United States, United Kingdom, the European Union and Canada into Russia. Russia represented approximately 5% of SLB’s worldwide revenue during the first nine months of 2023. The carrying value of SLB’s net assets in Russia was approximately $0.7 billion as of September 30, 2023. This consisted of $0.2 billion of receivables, $0.3 billion of fixed assets, $0.5 billion of other assets and $0.3 billion of current liabilities.
20
SLB continues to actively monitor the dynamic situation in Ukraine and applicable laws, sanctions, and trade control restrictions resulting from the conflict. The extent to which SLB’s operations and financial results may be affected by the ongoing conflict in Ukraine will depend on various factors, including the extent and duration of the conflict; the effects of the conflict on regional and global economic and geopolitical conditions; the effect of further laws, sanctions, and trade control restrictions on SLB’s business, the global economy and global supply chains; and the impact of fluctuations in the exchange rate of the ruble. Continuation or escalation of the conflict may also aggravate the risk factors that SLB identified in its Annual Report on Form 10-K for the year ended December 31, 2022, including cybersecurity, regulatory, and reputational risks.
FORWARD-LOOKING STATEMENTS
This third-quarter 2023 Form 10-Q, as well as other statements we make, contains “forward-looking statements” within the meaning of the federal securities laws, which include any statements that are not historical facts. Such statements often contain words such as “expect,” “may,” “can,” “believe,” “predict,” “plan,” “potential,” “projected,” “projections,” “precursor,” “forecast,” “outlook,” “expectations,” “estimate,” “intend,” “anticipate,” “ambition,” “goal,” “target,” “scheduled,” “think,” “should,” “could,” “would,” “will,” “see,” “likely,” and other similar words. Forward-looking statements address matters that are, to varying degrees, uncertain, such as statements about SLB’s financial and performance targets and other forecasts or expectations regarding, or dependent on, its business outlook; growth for SLB as a whole and for each of its Divisions (and for specified business lines, geographic areas or technologies within each Division); oil and natural gas demand and production growth; oil and natural gas prices; forecasts or expectations regarding energy transition and global climate change; improvements in operating procedures and technology; capital expenditures by SLB and the oil and gas industry; the business strategies of SLB, including digital and “fit for basin,” as well as the strategies of SLB’s customers; SLB’s capital allocation plans, including dividend plans and share repurchase programs; SLB’s APS projects, joint ventures, and other alliances; the impact of the ongoing conflict in Ukraine on global energy supply; access to raw materials; future global economic and geopolitical conditions; future liquidity, including free cash flow; and future results of operations, such as margin levels. These statements are subject to risks and uncertainties, including, but not limited to, changing global economic and geopolitical conditions; changes in exploration and production spending by SLB’s customers and changes in the level of oil and natural gas exploration and development; the results of operations and financial condition of SLB’s customers and suppliers; SLB’s inability to achieve its financial and performance targets and other forecasts and expectations; SLB’s inability to achieve net-zero carbon emissions goals or interim emissions reduction goals; general economic, geopolitical and business conditions in key regions of the world; the ongoing conflict in Ukraine; foreign currency risk; inflation; changes in monetary policy by governments; pricing pressure; weather and seasonal factors; unfavorable effects of health pandemics; availability and cost of raw materials; operational modifications, delays or cancellations; challenges in SLB’s supply chain; production declines; the extent of future charges; SLB’s inability to recognize efficiencies and other intended benefits from its business strategies and initiatives, such as digital or new energy, as well as its cost reduction strategies; changes in government regulations and regulatory requirements, including those related to offshore oil and gas exploration, radioactive sources, explosives, chemicals and climate-related initiatives; the inability of technology to meet new challenges in exploration; the competitiveness of alternative energy sources or product substitutes; and other risks and uncertainties detailed in this Form 10-Q and our most recent Form 10-K and Forms 8-K filed with or furnished to the SEC. If one or more of these or other risks or uncertainties materialize (or the consequences of any such development changes), or should our underlying assumptions prove incorrect, actual results or outcomes may vary materially from those reflected in our forward-looking statements. Forward-looking and other statements in this Form 10-Q regarding our environmental, social, and other sustainability plans and goals are not an indication that these statements are necessarily material to investors or required to be disclosed in our filings with the SEC. In addition, historical, current, and forward-looking environmental, social, and sustainability-related statements may be based on standards for measuring progress that are still developing, internal controls and processes that continue to evolve, and assumptions that are subject to change in the future. Statements in this Form 10-Q are made as of October 25, 2023, and SLB disclaims any intention or obligation to update publicly or revise such statements, whether as a result of new information, future events or otherwise.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
For quantitative and qualitative disclosures about market risk affecting SLB, see Item 7A, “Quantitative and Qualitative Disclosures about Market Risk,” of the SLB Annual Report on Form 10-K for the fiscal year ended December 31, 2022. SLB’s exposure to market risk has not changed materially since December 31, 2022.
Item 4. Controls and Procedures.
SLB has carried out an evaluation under the supervision and with the participation of SLB’s management, including the Chief Executive Officer (“CEO”) and the Chief Financial Officer (“CFO”), of the effectiveness of SLB’s “disclosure controls and procedures” (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)) as of the end of the period covered by this report. Based on this evaluation, the CEO and the CFO have concluded that, as of the end of the period covered by this report, SLB’s disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in the reports that SLB files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. SLB’s disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is accumulated and communicated to its management, including the CEO and the CFO, as appropriate, to allow timely decisions regarding required disclosure. There was no change in SLB’s internal control over financial reporting during the quarter to which this report relates that has materially affected, or is reasonably likely to materially affect, SLB’s internal control over financial reporting.
21
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
The information with respect to this Item 1 is set forth under Note 9—Contingencies, in the accompanying Consolidated Financial Statements.
Item 1A. Risk Factors.
As of the date of this filing, there have been no material changes from the risk factors disclosed in Part 1, Item 1A, of SLB’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Unregistered Sales of Equity Securities
None.
Issuer Repurchases of Equity Securities
On January 21, 2016, the SLB Board of Directors approved a $10 billion share repurchase program for SLB common stock. As of September 30, 2023, SLB had repurchased $1.6 billion of SLB common stock under this program.
SLB's common stock repurchase activity for the three months ended September 30, 2023 was as follows:
|
(Stated in thousands, except per share amounts) |
|
|||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Total number |
|
|
Average price |
|
|
Total number |
|
|
Maximum |
|
||||
July 2023 |
|
930.2 |
|
|
$ |
54.61 |
|
|
|
930.2 |
|
|
$ |
8,478,147 |
|
August 2023 |
|
999.7 |
|
|
$ |
57.97 |
|
|
|
999.7 |
|
|
$ |
8,420,189 |
|
September 2023 |
|
691.1 |
|
|
$ |
57.46 |
|
|
|
691.1 |
|
|
$ |
8,378,332 |
|
|
|
2,621.0 |
|
|
$ |
57.46 |
|
|
|
2,621.0 |
|
|
|
|
|
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Our mining operations are subject to regulation by the federal Mine Safety and Health Administration under the Federal Mine Safety and Health Act of 1977. Information concerning mine safety violations or other regulatory matters required by section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K is included in Exhibit 95 to this report.
Item 5. Other Information.
In 2013, SLB completed the wind down of its service operations in Iran. Prior to this, certain non-US subsidiaries provided oilfield services to the National Iranian Oil Company and certain of its affiliates (“NIOC”).
SLB’s residual transactions or dealings with the government of Iran during the third quarter of 2023 consisted of payments of taxes and other typical governmental charges. Certain non-US subsidiaries of SLB maintain depository accounts at the Dubai branch of Bank Saderat Iran (“Saderat”), and at Bank Tejarat (“Tejarat”) in Tehran and in Kish for the deposit by NIOC of amounts owed to non-US subsidiaries of SLB for prior services rendered in Iran and for the maintenance of such amounts previously received. One non-US subsidiary also maintained an account at Tejarat for payment of local expenses such as taxes. SLB anticipates that it will discontinue dealings with Saderat and Tejarat following the receipt of all amounts owed to SLB for prior services rendered in Iran.
22
Item 6. Exhibits.
|
|
* (+) Exhibit 10.1—Schlumberger Limited Supplementary Benefit Plan, as established effective June 1, 1995 and conformed to include amendments through January 1, 2023 |
|
* (+) Exhibit 10.2—Schlumberger Limited Restoration Savings Plan, as established effective June 1, 1995 and conformed to include amendments through January 1, 2023 |
|
* Exhibit 22—Issuers of Registered Guaranteed Debt Securities |
|
|
|
|
|
* Exhibit 95—Mine Safety Disclosures |
|
* Exhibit 101.INS—Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document |
|
* Exhibit 101.SCH—Inline XBRL Taxonomy Extension Schema Document |
|
* Exhibit 101.CAL—Inline XBRL Taxonomy Extension Calculation Linkbase Document |
|
* Exhibit 101.DEF—Inline XBRL Taxonomy Extension Definition Linkbase Document |
|
* Exhibit 101.LAB—Inline XBRL Taxonomy Extension Label Linkbase Document |
|
* Exhibit 101.PRE—Inline XBRL Taxonomy Extension Presentation Linkbase Document |
|
* Exhibit 104—Cover Page Interactive Data File (embedded within the Inline XBRL document) |
* Filed with this Form 10-Q.
** Furnished with this Form 10-Q.
(+) Management contracts or compensatory plans or arrangements.
23
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
|
SCHLUMBERGER LIMITED |
Date: |
October 25, 2023 |
|
/s/ Howard Guild |
|
|
|
Howard Guild |
|
|
|
Chief Accounting Officer and Duly Authorized Signatory |
24