UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended: March 31, 2016

Commission file No.: 1-4601

 

SCHLUMBERGER N.V.

(SCHLUMBERGER LIMITED)

(Exact name of registrant as specified in its charter)

 

 

Registrant’s telephone number in the United States, including area code, is:

(713) 513-2000

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.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 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  ¨    No  x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

 

 

 

 

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SCHLUMBERGER LIMITED

First Quarter 2016 Form 10-Q

Table of Contents

 

 

 

 

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PART I. FINANCIAL INFORMATION

Item 1.  Financial Statements.

 

SCHLUMBERGER LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF INCOME

(Unaudited)

 

    

See Notes to Consolidated Financial Statements

 

 

 

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SCHLUMBERGER LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(Unaudited)

 

 

See Notes to Consolidated Financial Statements

 

 

 

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SCHLUMBERGER LIMITED AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

 

 

See Notes to Consolidated Financial Statements

 

 

 

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SCHLUMBERGER LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS

(Unaudited)

 

 

 

See Notes to Consolidated Financial Statements

 

 

 

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SCHLUMBERGER LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF EQUITY

(Unaudited)

 

 

 

SHARES OF COMMON STOCK

(Unaudited)

 

 

See Notes to Consolidated Financial Statements

 

 

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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 (Schlumberger) 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 Schlumberger 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 three-month period ended March 31, 2016 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2016.  The December 31, 2015 balance sheet information has been derived from the Schlumberger 2015 audited financial statements.  For further information, refer to the Consolidated Financial Statements and notes thereto included in the Schlumberger Annual Report on Form 10-K for the year ended December 31, 2015, filed with the Securities and Exchange Commission on January 27, 2016.

Certain prior period items have been reclassified to conform to the current period presentation.

Merger with Cameron International Corporation

On April 1, 2016, Schlumberger acquired all of the outstanding shares of Cameron International Corporation (Cameron), a leading provider of flow equipment products, systems and services to the oil and gas industry worldwide.  The merger will create technology-driven growth by integrating Schlumberger’s reservoir and well technologies with Cameron wellhead and surface equipment, flow control and processing technology.  The combination of the two complementary technology portfolios provides the industry’s most comprehensive range of products and services, from exploration to production and integrated pore-to-pipeline solutions that optimize hydrocarbon recovery to deliver reservoir performance.  Cameron’s revenue for the year ended December 31, 2015 and the three months ended March 31, 2016 was $8.8 billion and $1.6 billion, respectively.

Under the terms of the merger agreement, Cameron became a wholly-owned subsidiary of Schlumberger.  Each share of Cameron common stock issued and outstanding immediately prior to the effective time of the merger was converted into the right to receive 0.716 share of Schlumberger stock and $14.44 in cash.  As a result, Schlumberger issued approximately 138 million shares of its common stock and paid cash of approximately $2.8 billion in connection with this transaction.  Based on the closing price of Schlumberger’s common stock on April 1, 2016, the total fair value of the consideration transferred to effect the acquisition of Cameron was approximately $12.9 billion.  Due to the fact that the acquisition just recently closed, the initial accounting for the transaction has not yet been completed.  Cameron reported net tangible assets of approximately $3.0 billion as of December 31, 2015, consisting of $2.4 billion of cash and short-term investments, $2.0 billion of accounts receivable, $2.4 billion of inventories, $1.7 billion of fixed assets, $2.8 billion of debt and $2.7 billion of other net liabilities.  

As this transaction closed subsequent to the end of the first quarter of 2016, the Consolidated Financial Statements and the related footnotes do not reflect any amounts relating to the acquired Cameron business.

New Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers. This ASU amends the existing accounting standards for revenue recognition and is based on the principle that revenue should be recognized to depict the transfer of goods or services to a customer at an amount that reflects the consideration a company expects to receive in exchange for those goods or services. Schlumberger is required to adopt this ASU on January 1, 2018, with early adoption permitted on January 1, 2017, and does not expect the adoption of this ASU to have a material impact on its consolidated financial statements.

In November 2015, the FASB issued ASU 2015-17, Balance Sheet Classification of Deferred Taxes, which amends existing guidance on income taxes to require the classification of all deferred tax assets and liabilities as non-current on the balance sheet.  Schlumberger is required to adopt this ASU no later than January 1, 2018, with early adoption permitted, and the guidance may be applied either prospectively or retrospectively.  Schlumberger does not expect the adoption of this ASU to have a material impact on its consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, Leases. This ASU requires lessees to recognize for all leases, with the exception of short-term leases, a liability equal to the present value of lease payments and a corresponding right-of-use asset also

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based on the present value of lease payments. Schlumberger is evaluating the impact that the adoption of this ASU will have on its consolidated financial statements.

2.   Charges and Credits

Schlumberger did not record any charges or credits during the first quarter of 2016.

2015

Schlumberger recorded the following charges and credits during the first quarter of 2015:

 

The following is a summary of these charges, all of which were classified as Restructuring & other in the Consolidated Statement of Income:

 

 

 

3.   Earnings Per Share

The following is a reconciliation from basic earnings per share of Schlumberger to diluted earnings per share of Schlumberger:

 

 

    

The number of outstanding options to purchase shares of Schlumberger common stock which were not included in the computation of diluted earnings per share, because to do so would have had an antidilutive effect, was as follows:

 

 

 

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4.   Inventories

A summary of inventories follows:  

 

 

 

 

5.   Fixed Assets

A summary of fixed assets follows:

 

 

Depreciation expense relating to fixed assets was $682 million and $827 million in the first quarter of 2016 and 2015, respectively.

 

 

 

6.   Multiclient Seismic Data

The change in the carrying amount of multiclient seismic data for the three months ended March 31, 2016 was as follows:

 

 

 

 

7.   Goodwill

The changes in the carrying amount of goodwill by reporting unit for the three months ended March 31, 2016 were as follows:

 

 

 

 

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8.   Intangible Assets

The gross book value, accumulated amortization and net book value of intangible assets were as follows:

 

 

Amortization expense charged to income was $89 million during the first quarter of 2016 and $88 million during the first quarter of 2015

Based on the net book value of intangible assets at March 31, 2016, amortization charged to income for the subsequent five years is estimated to be: remaining three quarters of 2016—$287 million; 2017—$372 million; 2018—$364 million; 2019—$351 million; 2020—$330 million; and 2021—$307 million.

 

 

9.   Long-term Debt

A summary of Long-term Debt follows:

 

 

The estimated fair value of Schlumberger’s Long-term Debt at March 31, 2016 and December 31, 2015, based on quoted market prices, was $17.5 billion and $14.4 billion, respectively.

Borrowings under the commercial paper program at March 31, 2016 were $4.8 billion, of which $2.6 billion was classified within Long-term debt and $2.2 billion was classified within Long-term debt – current portion in the Consolidated Balance Sheet.  At December 31, 2015, borrowings under the commercial paper program were $2.4 billion, of which $1.0 billion was classified within Long-term debt and $1.4 billion was classified within Long-term debt – current portion in the Consolidated Balance Sheet.

 

 

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10.   Derivative Instruments and Hedging Activities

Schlumberger is exposed to market risks related to fluctuations in foreign currency exchange rates and interest rates.  To mitigate these risks, Schlumberger utilizes derivative instruments.  Schlumberger does not enter into derivative transactions for speculative purposes.

Interest Rate Risk

Schlumberger is subject to interest rate risk on its debt and its investment portfolio.  Schlumberger maintains an interest rate risk management strategy that uses a mix of variable and fixed rate debt combined with its investment portfolio and occasionally interest rate swaps to mitigate the exposure to changes in interest rates.

During the fourth quarter of 2013, Schlumberger entered into a cross currency swap for a notional amount of €0.5 billion in order to hedge changes in the fair value of Schlumberger’s €0.5 billion 1.50% Guaranteed Notes due 2019.  Under the terms of this swap, Schlumberger receives interest at a fixed rate of 1.50% on the euro notional amount and pays interest at a floating rate of three-month LIBOR plus approximately 64 basis points on the US dollar notional amount.

This cross currency swap is designated as a fair value hedge of the underlying debt.  This derivative instrument is marked to market with gains and losses recognized in income to largely offset the respective gains and losses recognized on changes in the fair value of the hedged debt.  

At March 31, 2016, Schlumberger had fixed rate debt of $13.9 billion and variable rate debt of $7.6 billion after taking into account the effect of the swap.

Short-term investments and Fixed income investments, held to maturity totaled $12.8 billion at March 31, 2016.  The carrying value of these investments approximated fair value, which was estimated using quoted market prices for those or similar investments.

Foreign Currency Exchange Rate Risk

As a multinational company, Schlumberger conducts its business in more than 85 countries. Schlumberger’s functional currency is primarily the US dollar.  However, outside the United States, a significant portion of Schlumberger’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 Schlumberger conducts business, the US dollar–reported expenses will increase (decrease).  

Schlumberger 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.  Schlumberger is also exposed to risks on future cash flows relating to certain of its fixed rate debt which is denominated in currencies other than the functional currency. Schlumberger uses foreign currency forward contracts and foreign currency options to provide a hedge against a portion of these cash flow risks.  These contracts are accounted for as cash flow hedges, with the effective portion of changes in the fair value of the hedge 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. The ineffective portion of changes in the fair value of hedging instruments, if any, is recorded directly to earnings.

At March 31, 2016, Schlumberger recognized a cumulative net $30 million loss in Accumulated other comprehensive loss relating to revaluation of foreign currency forward contracts and foreign currency options designated as cash flow hedges, the majority of which is expected to be reclassified into earnings within the next 12 months.

Schlumberger is exposed to changes in the fair value of assets and liabilities which are denominated in currencies other than the functional currency.  While Schlumberger uses foreign currency forward contracts and foreign currency options 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 contracts 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 fair value of the hedged item.

At March 31, 2016, contracts were outstanding for the US dollar equivalent of $4.1 billion in various foreign currencies, of which $0.7 billion relate to hedges of debt denominated in currencies other than the functional currency.

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The fair values of outstanding derivative instruments were as follows:

 

 

The fair value of all outstanding derivatives was determined using a model with inputs that are observable in the market or that can be derived from, or corroborated by, observable data.

The effect of derivative instruments designated as fair value hedges and those not designated as hedges on the Consolidated Statement of Income was as follows:

 

 

 

 

11.   Income Taxes

Income before taxes subject to US and non-US income taxes was as follows:

 

 

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Schlumberger recorded pretax charges of $439 million during the three months ended March 31, 2015 ($93 million of charges in the US and $346 million of charges outside the US). See Note 2 – Charges and Credits.

The components of net deferred tax assets (liabilities) were as follows:

 

 

The above deferred tax balances at March 31, 2016 and December 31, 2015 were net of valuation allowances relating to net operating losses in certain countries of $155 million and $162 million, respectively.

The components of Taxes on income were as follows:

 

 

A reconciliation of the US statutory federal tax rate (35%) to the consolidated effective income tax rate follows:

 

 

 

12.   Contingencies

Schlumberger and its subsidiaries are party to various legal proceedings from time to time.  A liability is accrued when a loss is both probable and can be reasonably estimated. Management believes that the probability of a material loss with respect to any currently pending legal proceedings is remote.  However, litigation is inherently uncertain and it is not possible to predict the ultimate disposition of any of these proceedings.  

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13.   Segment Information

 

 

 

⁽¹⁾ Comprised principally of certain corporate expenses not allocated to the segments, stock-based compensation costs, amortization expense associated with certain intangible assets, certain centrally managed initiatives and other nonoperating items.

⁽²⁾  Interest income excludes amounts which are included in the segments’ income ($6 million in 2016; $5 million in 2015).

⁽³⁾   Interest expense excludes amounts which are included in the segments’ income ($13 million in 2016; $6 million in 2015).

⁽⁴⁾   See Note 2 – Charges and Credits.

 

 

 

14.   Pension and Other Postretirement Benefit Plans

Net pension cost for the Schlumberger pension plans included the following components:

 

 

The net periodic benefit cost for the Schlumberger US postretirement medical plan included the following components:

 

 

 

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15. Accumulated Other Comprehensive Loss

Accumulated other comprehensive loss consists of the following:

 

 

 

 

 

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Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations.

First Quarter 2016 Compared to Fourth Quarter 2015

Product Groups

 

 

Geographic Areas

 

 

⁽¹⁾   Comprised principally of certain corporate expenses not allocated to the segments, stock-based compensation costs, amortization expense associated with certain intangible assets, certain centrally managed initiatives and other nonoperating items.

⁽²⁾  Interest income excludes amounts which are included in the segments’ income ($6 million in the first quarter 2016; $6 million in the fourth quarter in 2015).

⁽³⁾  Interest expense excludes amounts which are included in the segments’ income ($13 million in the first quarter 2016; $8 million in the fourth quarter 2015).

 

During the first quarter of 2016, the decline in global activity and the rate of activity disruption reached unprecedented levels as the industry displayed clear signs of operating in a full-scale cash crisis.  Budgeted E&P spend fell again and substantially affected Schlumberger’s operating results. This environment is expected to continue deteriorating during the second quarter of 2016 given the magnitude and erratic nature of the disruptions in activity.

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First-quarter 2016 revenue of $6.5 billion decreased 16% sequentially and was driven by a continuing drop in activity and persistent pricing pressure throughout Schlumberger’s global operations, as well as from project delays, job cancellations and activity disruptions.

North America first-quarter 2016 revenue of $1.5 billion was 25% lower sequentially as the US land rig count declined 31% following customer budget cuts.  By the end of the first quarter, the US land rig count had fallen to approximately 400, representing a drop of 80% from the peak of October 2014.  

Revenue for the International Areas of $5.0 billion decreased 13% sequentially due to a combination of customer budget cuts, activity disruptions, seasonal winter slow-downs and persistent pricing pressure.

First-quarter 2016 pretax operating margins decreased 281 basis point (bps) to 13.8%.  North America pretax operating margin declined 777 bps sequentially to -1% as the downturn deepened causing further customer spending cuts and as widespread operational disruptions prevented prompt cost adjustments.  International Area pretax operating margin of 21% decreased 70 bps sequentially due to project cancellations, job delays and activity disruptions, particularly in the Europe/CIS/Africa Area.

Reservoir Characterization Group

Reservoir Characterization Group revenue of $1.7 billion declined 20% sequentially, primarily due to seasonal winter slowdowns and project cancellations that impacted Wireline activities.  Lower multiclient and SIS software sales and Testing Services revenue also contributed to the decline.

Pretax operating margin of 19% declined 480 bps sequentially primarily due to reduced high-margin Wireline services and SIS software sales.

Drilling Group

Drilling Group revenue of $2.5 billion decreased 16% sequentially as a result of a sharp drop in drilling activity combined with persistent pricing pressure and seasonal winter slowdowns.

Pretax operating margin of 15% declined 183 bps sequentially as a result of the lower activity and pricing pressure.

Production Group

Production Group revenue of $2.3 billion decreased 11% sequentially with 74% of the decrease attributable to a further decline in North America land activity, as additional customer spending cuts led to a further decline in rig count and increased pricing pressure.

Pretax operating margin of 9% decreased 258 bps sequentially primarily from further pricing weakness in pressure pumping services.

 

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First Quarter 2016 Compared to First Quarter 2015

Product Groups

 

 

Geographic Areas

 

 

⁽¹⁾ Comprised principally of certain corporate expenses not allocated to the segments, stock-based compensation costs, amortization expense associated with certain intangible assets, certain centrally managed initiatives and other nonoperating items.

⁽²⁾ Interest income excludes amounts which are included in the segments’ income ($6 million in 2016; $5 million in 2015).

⁽³⁾ Interest expense excludes amounts which are included in the segments’ income ($13 million in 2016; $6 million in 2015).

 First-quarter 2016 revenue of $6.5 billion was 36% lower year-on-year, while pretax operating income of $901 million was lower by 55%. Pretax operating margin decreased 563 bps to 13.8%

North America first-quarter 2016 revenue of $1.5 billion decreased 55% year-on-year as the US land rig count declined 62% and customer budgets were significantly reduced.  Land revenue declined 62%, in line with the rig count decline.  Offshore revenue decreased 30% as a result of lower activity, project delays and lower multiclient sales.

Revenue for the International Areas of $5.0 billion decreased 28% year-on-year due to a combination of customer budget cuts, activity disruptions and continued pricing pressure.

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North America pretax operating margin declined 1,357 bps year-on-year to -1% while International Area pretax operating margin of 21% decreased 277 bps year-on-year.  These decreases were primarily attributable to the severe activity decline and pricing pressure.  

Reservoir Characterization Group

First-quarter 2016 revenue of $1.7 billion was 34% lower than the same period of 2015 primarily due to lower customer spending on discretionary and exploration activities, which impacted Wireline and Testing Technologies as well as software and multiclient sales.

Year-on-year, pretax operating margin decreased 635 bps to 19% primarily as a result of the unfavorable revenue mix due to the decrease in high-margin exploration activities.

Drilling Group

First-quarter 2016 revenue of $2.5 billion was 36% lower than the same period of 2015, while pretax operating margin decreased 496 bps to 15%.  These declines were primarily due to the sharp drop in drilling activity combined with persistent pricing pressure that mainly affected Drilling & Measurements and M-I SWACO Technologies.

Production Group

First-quarter 2016 revenue of $2.3 billion decreased 37% year-on-year primarily attributable to Well Services pressure pumping technologies driven by the severe activity decline and pricing pressure as the land rig count declined dramatically in North America.

Year-on-year pretax operating margin decreased 580 bps to 9% as lower activity and pricing pressure continued in North America land.

Interest and Other Income

Interest & other income consisted of the following:

 

 

Other

Research & engineering and General & administrative expenses, as a percentage of Revenue, for the first quarter ended March 31, 2016 and 2015 were as follows:

 

 

Although Research & engineering and General & administrative costs have increased as a percentage of Revenue, they have decreased in absolute dollar terms as a result of cost control measures that Schlumberger has implemented.

Interest expense of $133 million for the first quarter of 2016 increased by $51 million compared to the same period of the prior year.  This increase was primarily due to the issuance of $6.0 billion of Senior Notes during the fourth quarter of 2015.

The effective tax rate for the first quarter of 2016 was 15.9% compared to 23.6% for the same period of the prior year.  The effective tax rate for the first quarter of 2015 was significantly impacted by the charges and credits described in Note 2 to the Consolidated Financial Statements.  Excluding the impact of the charges and credits, the effective tax rate for the first quarter of 2015 was 20.9%.  The decrease in the effective tax rate was primarily attributable to the geographic mix of earnings, as Schlumberger generated a smaller portion of its pretax earnings in North America during the first quarter of 2016 as compared to the same period last year.

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Charges and Credits

Schlumberger recorded charges during the first quarter of 2015, all of which were classified as Restructuring & other in the Consolidated Statement of Income.  These charges, which are summarized below, are more fully described in Note 2 to the Consolidated Financial Statements.

 

 

Schlumberger did not record any charges or credits during the first quarter of 2016.

Going forward, Schlumberger will continue to tailor its cost and resource levels to activity in order to protect its financial strength.  This will likely result in charges in future periods.

Net Debt

Net Debt represents gross debt less cash, short-term investments and fixed income investments, held to maturity. Management believes that Net Debt provides useful information regarding the level of Schlumberger indebtedness by reflecting cash and investments that could be used to repay debt.

Details of changes in Net Debt follow:

 

 

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Key liquidity events during the first three months of 2016 and 2015 included:

The following table summarizes the activity under this share repurchase program:

 

 

On January 21, 2016, the Board of directors approved a new $10 billion share repurchase program for Schlumberger common stock.  The new program will take effect once the remaining $0.9 billion authorized to be repurchased under the July 18, 2013 program is exhausted.

 

Schlumberger has experienced delays in payment from its customers in Venezuela.  In April 2016, Schlumberger announced that it will reduce its activity in Venezuela to align operations with cash collections as a result of insufficient payments received in recent quarters and a lack of progress in establishing new mechanisms that address past and future accounts receivable.  Schlumberger remains fully committed to supporting the Venezuelan exploration and production industry. The reduction in activity levels will be made in close coordination with all customers in Venezuela to continue servicing those customers with available cash flow, while allowing for a safe and orderly wind down of operations for others.  Venezuela represented less than 5% of Schlumberger’s consolidated revenue during the first quarter of 2016 and for the full-year 2015.

Schlumberger operates in more than 85 countries.  At March 31, 2016, only five of those countries individually accounted for greater than 5% of Schlumberger’s accounts receivable balances, of which only Venezuela accounted for greater than 10%.  Schlumberger’s net receivable balance in Venezuela as of March 31, 2016 was approximately $1.2 billion.

On April 1, 2016, Schlumberger acquired all of the outstanding shares of Cameron International Corporation (Cameron), a leading provider of flow equipment products, systems and services to the oil and gas industry worldwide.   Under the terms of the merger agreement, Cameron became a wholly-owned subsidiary of Schlumberger.  Each share of Cameron common stock issued and outstanding immediately prior to the effective time of the merger was converted into the right to receive 0.716 share of Schlumberger stock and $14.44 in cash.  As a result, Schlumberger issued approximately 138 million shares of its common stock and paid cash of

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approximately $2.8 billion in connection with this transaction.  Based on the closing price of Schlumberger’s common stock on April 1, 2016, the total fair value of the consideration transferred to effect the acquisition of Cameron was approximately $12.9 billion. Cameron’s revenue for the year ended December 31, 2015 and the three months ended March 31, 2016 was $8.8 billion and $1.6 billion, respectively.  

As of March 31, 2016, Schlumberger had $14.4 billion of cash and short-term investments on hand.  Schlumberger had separate committed debt facility agreements aggregating $6.8 billion with commercial banks, of which $2.1 billion was available and unused as of March 31, 2016.  The $6.8 billion of committed debt facility agreements included $6.5 billion of committed facilities that support commercial paper programs.  Schlumberger believes that these amounts are sufficient to meet future business requirements for at least the next 12 months.

Borrowings under the commercial paper programs at March 31, 2016 were $4.8 billion.

FORWARD-LOOKING STATEMENTS

This Form 10-Q and other statements we make contain “forward-looking statements” within the meaning of the federal securities laws, which include any statements that are not historical facts, such as our forecasts or expectations regarding business outlook; growth for Schlumberger as a whole and for each of its segments (and for specified products or geographic areas within each segment); oil and natural gas demand and production growth; oil and natural gas prices; improvements in operating procedures and technology; capital expenditures by Schlumberger and the oil and gas industry; the business strategies of Schlumberger’s customers; the integration of Cameron into our business; the anticipated benefits of the Cameron transaction; the success of Schlumberger’s joint ventures and alliances; future global economic conditions; and future results of operations. These statements are subject to risks and uncertainties, including, but not limited to, global economic conditions; changes in exploration and production spending by Schlumberger’s customers and changes in the level of oil and natural gas exploration and development; general economic, political and business conditions in key regions of the world; foreign currency risk; pricing erosion; weather and seasonal factors; operational modifications, delays or cancellations; production declines; changes in government regulations and regulatory requirements, including those related to offshore oil and gas exploration, radioactive sources, explosives, chemicals, hydraulic fracturing services and climate-related initiatives; the inability of technology to meet new challenges in exploration; the inability to successfully integrate Cameron and to realize expected synergies; the inability to retain key employees; and other risks and uncertainties detailed in this first-quarter 2016 Form 10-Q and our most recent Form 10-K and other filings that we make with the Securities and Exchange Commission. 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 outcomes may vary materially from those reflected in our forward-looking statements. Schlumberger 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 Schlumberger, see Item 7A, “Quantitative and Qualitative Disclosures about Market Risk,” of the Schlumberger Annual Report on Form 10-K for the fiscal year ended December 31, 2015. Schlumberger’s exposure to market risk has not changed materially since December 31, 2015.

Item 4. Controls and Procedures.

Schlumberger has carried out an evaluation under the supervision and with the participation of Schlumberger’s management, including the Chief Executive Officer (“CEO”) and the Chief Financial Officer (“CFO”), of the effectiveness of Schlumberger’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, Schlumberger’s disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in the reports that Schlumberger 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. Schlumberger’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 Schlumberger’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, Schlumberger’s internal control over financial reporting.

PART II. OTHER INFORMATION

 

Item 1. Legal Proceedings.

The information with respect to this Item 1 is set forth under Note 12—Contingencies, in the Consolidated Financial Statements.

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Item 1A. Risk Factors.

As of the date of this filing, there have been no material changes from the risk factors previously disclosed in Part 1, Item 1A, of Schlumberger’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Unregistered Sales of Equity Securities

None.

Issuer Repurchases of Equity Securities

On July 18, 2013, the Schlumberger Board of Directors (the “Board”) approved a $10 billion share repurchase program for shares of Schlumberger common stock, to be completed at the latest by June 30, 2018.  

Schlumberger’s common stock repurchase program activity for the three months ended March 31, 2016 was as follows:

 

 

In connection with the exercise of stock options under Schlumberger’s incentive compensation plans, Schlumberger routinely receives shares of its common stock from optionholders in consideration of the exercise price of the stock options. Schlumberger does not view these transactions as requiring disclosure under this Item as the number of shares of Schlumberger common stock received from optionholders is not material.

On January 21, 2016, the Board approved a new $10 billion share repurchase program for Schlumberger common stock.  This new program will take effect once the remaining $0.9 billion authorized to be repurchased under the July 18, 2013 program is exhausted.

 

Item 3. Defaults Upon Senior Securities.

None.

 

Item 4. Mine Safety Disclosures.

The barite and bentonite mining operations of M-I LLC, an indirect wholly-owned subsidiary, 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.

None.

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Item 6. Exhibits.

 

 

 

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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 and in his capacity as Chief Accounting Officer.

 

 

 

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