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: September 30, 2014
Commission file No.: 1-4601
SCHLUMBERGER N.V.
(SCHLUMBERGER LIMITED)
(Exact name of registrant as specified in its charter)
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CURAÇAO |
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52-0684746 |
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(State or other jurisdiction of |
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(I.R.S. Employer |
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42 RUE SAINT-DOMINIQUE |
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PARIS, FRANCE |
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75007 |
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5599 SAN FELIPE, 17th FLOOR |
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HOUSTON, TEXAS, U.S.A. |
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77056 |
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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 THE HAGUE, |
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THE NETHERLANDS |
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2514 JG |
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(Addresses of principal executive offices) |
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(Zip Codes) |
Registrant’s telephone number: (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.
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Large accelerated filer |
x |
Accelerated filer |
¨ |
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Non-accelerated filer |
¨ (Do not check if a smaller reporting company) |
Smaller reporting company |
¨ |
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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Class |
Outstanding at September 30, 2014 |
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COMMON STOCK, $0.01 PAR VALUE PER SHARE |
1,286,793,905 |
SCHLUMBERGER LIMITED
Third Quarter 2014 Form 10-Q
Table of Contents
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Page |
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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 |
18 |
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Item 3. |
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27 |
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Item 4. |
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27 |
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PART II |
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Other Information |
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Item 1. |
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28 |
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Item 1A. |
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28 |
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Item 2. |
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28 |
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Item 3. |
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28 |
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Item 4. |
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28 |
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Item 5. |
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28 |
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Item 6. |
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29 |
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Certifications |
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2
PART I. FINANCIAL INFORMATION
SCHLUMBERGER LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
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(Stated in millions, except per share amounts) |
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||||||||||||||
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Third Quarter |
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Nine Months |
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||||||||||
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2014 |
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2013 |
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2014 |
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2013 |
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||||
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Revenue |
$ |
12,646 |
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|
$ |
11,608 |
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$ |
35,939 |
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$ |
33,360 |
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Interest & other income |
|
79 |
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|
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43 |
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220 |
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|
|
105 |
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Gain on formation of OneSubsea |
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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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1,028 |
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Expenses |
|
|
|
|
|
|
|
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|
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|
|
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Cost of revenue |
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9,689 |
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|
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8,926 |
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|
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27,708 |
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|
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26,047 |
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Research & engineering |
|
301 |
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|
|
286 |
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|
|
893 |
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|
870 |
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General & administrative |
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125 |
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|
|
110 |
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|
|
353 |
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|
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305 |
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Impairment & other |
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— |
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|
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— |
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|
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— |
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|
|
456 |
|
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Interest |
|
90 |
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|
|
98 |
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|
|
282 |
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|
294 |
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Income from continuing operations before taxes |
|
2,520 |
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|
2,231 |
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6,923 |
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6,521 |
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Taxes on income |
|
556 |
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|
|
506 |
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|
|
1,530 |
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1,361 |
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Income from continuing operations |
|
1,964 |
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|
|
1,725 |
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5,393 |
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|
5,160 |
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Loss from discontinued operations |
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— |
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|
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— |
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|
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(205 |
) |
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|
(69 |
) |
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Net income |
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1,964 |
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|
|
1,725 |
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|
5,188 |
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|
5,091 |
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Net income attributable to noncontrolling interests |
|
15 |
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10 |
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52 |
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23 |
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Net income attributable to Schlumberger |
$ |
1,949 |
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$ |
1,715 |
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$ |
5,136 |
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$ |
5,068 |
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Schlumberger amounts attributable to: |
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Income from continuing operations |
$ |
1,949 |
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$ |
1,715 |
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$ |
5,341 |
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$ |
5,137 |
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Loss from discontinued operations |
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— |
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|
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— |
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(205 |
) |
|
|
(69 |
) |
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Net income |
$ |
1,949 |
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$ |
1,715 |
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$ |
5,136 |
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$ |
5,068 |
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Basic earnings per share of Schlumberger: |
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Income from continuing operations |
$ |
1.51 |
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$ |
1.30 |
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$ |
4.11 |
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$ |
3.87 |
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Loss from discontinued operations |
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— |
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— |
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(0.16 |
) |
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(0.05 |
) |
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Net income |
$ |
1.51 |
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$ |
1.30 |
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$ |
3.95 |
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$ |
3.82 |
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Diluted earnings per share of Schlumberger: |
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Income from continuing operations |
$ |
1.49 |
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$ |
1.29 |
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$ |
4.07 |
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$ |
3.84 |
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Loss from discontinued operations |
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— |
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— |
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(0.16 |
) |
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(0.05 |
) |
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Net income |
$ |
1.49 |
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$ |
1.29 |
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$ |
3.91 |
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$ |
3.79 |
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Average shares outstanding: |
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Basic |
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1,294 |
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1,322 |
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1,300 |
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1,326 |
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Assuming dilution |
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1,310 |
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1,333 |
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1,315 |
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1,336 |
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See Notes to Consolidated Financial Statements
3
SCHLUMBERGER LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(Unaudited)
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(Stated in millions) |
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|||||||||||||
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Third Quarter |
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Nine Months |
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2014 |
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2013 |
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2014 |
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2013 |
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Net income |
$ |
1,964 |
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$ |
1,725 |
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$ |
5,188 |
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$ |
5,091 |
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Currency translation adjustments |
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Unrealized net change arising during the period |
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(146 |
) |
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95 |
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(176 |
) |
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(139 |
) |
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Marketable securities |
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Unrealized (loss) gain arising during the period |
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(162 |
) |
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(25 |
) |
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(132 |
) |
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58 |
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Derivatives |
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Net derivatives (loss) gain on hedge transactions (see Note 11) |
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(151 |
) |
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76 |
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(138 |
) |
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(27 |
) |
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Reclassification to net income of net realized loss (gain) (see Note 11) |
|
53 |
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(30 |
) |
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59 |
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15 |
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Pension and other postretirement benefit plans |
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Actuarial loss |
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Actuarial loss arising during the period |
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— |
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(18 |
) |
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— |
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(23 |
) |
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Amortization to net income of net actuarial loss (see Note 15) |
|
32 |
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73 |
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132 |
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224 |
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Prior service cost |
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Amortization to net income of net prior service cost (see Note 15) |
|
40 |
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31 |
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|
96 |
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|
94 |
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Income taxes on pension and other postretirement benefit plans |
|
(8 |
) |
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(9 |
) |
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(28 |
) |
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(40 |
) |
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Comprehensive income |
|
1,622 |
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|
1,918 |
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|
5,001 |
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|
5,253 |
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Comprehensive income attributable to noncontrolling interests |
|
15 |
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|
10 |
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|
52 |
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|
23 |
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Comprehensive income attributable to Schlumberger |
$ |
1,607 |
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$ |
1,908 |
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$ |
4,949 |
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$ |
5,230 |
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See Notes to Consolidated Financial Statements
4
SCHLUMBERGER LIMITED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
|
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(Stated in millions) |
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|||||
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Sept. 30, 2014 |
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Dec. 31, |
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||
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(Unaudited) |
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2013 |
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ASSETS |
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Current Assets |
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Cash |
$ |
3,118 |
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$ |
3,472 |
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Short-term investments |
|
3,641 |
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|
|
4,898 |
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Receivables less allowance for doubtful accounts (2014 - $282; 2013 - $384) |
|
12,352 |
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|
|
11,497 |
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Inventories |
|
4,702 |
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|
4,603 |
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Deferred taxes |
|
287 |
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|
|
288 |
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Other current assets |
|
1,373 |
|
|
|
1,467 |
|
|
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|
25,473 |
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|
|
26,225 |
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Fixed Income Investments, held to maturity |
|
473 |
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|
363 |
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Investments in Affiliated Companies |
|
3,223 |
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|
3,317 |
|
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Fixed Assets less accumulated depreciation |
|
15,809 |
|
|
|
15,096 |
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Multiclient Seismic Data |
|
751 |
|
|
|
667 |
|
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Goodwill |
|
15,243 |
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|
14,706 |
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Intangible Assets |
|
4,690 |
|
|
|
4,709 |
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Other Assets |
|
2,658 |
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|
|
2,017 |
|
|
|
$ |
68,320 |
|
|
$ |
67,100 |
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LIABILITIES AND EQUITY |
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Current Liabilities |
|
|
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|
|
|
|
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Accounts payable and accrued liabilities |
$ |
8,916 |
|
|
$ |
8,837 |
|
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Estimated liability for taxes on income |
|
1,499 |
|
|
|
1,490 |
|
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Long-term debt - current portion |
|
27 |
|
|
|
1,819 |
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Short-term borrowings |
|
1,424 |
|
|
|
964 |
|
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Dividends payable |
|
522 |
|
|
|
415 |
|
|
|
|
12,388 |
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|
13,525 |
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Long-term Debt |
|
11,626 |
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|
10,393 |
|
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Postretirement Benefits |
|
606 |
|
|
|
670 |
|
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Deferred Taxes |
|
1,733 |
|
|
|
1,708 |
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Other Liabilities |
|
1,280 |
|
|
|
1,169 |
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|
|
|
27,633 |
|
|
|
27,465 |
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Equity |
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|
|
|
|
|
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Common stock |
|
12,428 |
|
|
|
12,192 |
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Treasury stock |
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(10,725 |
) |
|
|
(8,135 |
) |
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Retained earnings |
|
41,543 |
|
|
|
37,966 |
|
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Accumulated other comprehensive loss |
|
(2,741 |
) |
|
|
(2,554 |
) |
|
Schlumberger stockholders' equity |
|
40,505 |
|
|
|
39,469 |
|
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Noncontrolling interests |
|
182 |
|
|
|
166 |
|
|
|
|
40,687 |
|
|
|
39,635 |
|
|
|
$ |
68,320 |
|
|
$ |
67,100 |
|
See Notes to Consolidated Financial Statements
5
SCHLUMBERGER LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
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(Stated in millions) |
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|||||
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Nine Months Ended Sept. 30, |
|
|||||
|
|
2014 |
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|
2013 |
|
||
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
Net income |
$ |
5,188 |
|
|
$ |
5,091 |
|
|
Add: Loss from discontinued operations |
|
205 |
|
|
|
69 |
|
|
Adjustments to reconcile net income to cash provided by operating activities: |
|
|
|
|
|
|
|
|
Gain on formation of OneSubsea |
|
— |
|
|
|
(1,028 |
) |
|
Impairment of equity method investments and currency devaluation loss in Venezuela |
|
— |
|
|
|
456 |
|
|
Depreciation and amortization (1) |
|
3,029 |
|
|
|
2,891 |
|
|
Pension and other postretirement benefits expense |
|
266 |
|
|
|
388 |
|
|
Stock-based compensation expense |
|
246 |
|
|
|
255 |
|
|
Pension and other postretirement benefits funding |
|
(318 |
) |
|
|
(468 |
) |
|
Earnings of equity method investments, less dividends received |
|
(68 |
) |
|
|
(46 |
) |
|
Change in assets and liabilities: (2) |
|
|
|
|
|
|
|
|
Increase in receivables |
|
(779 |
) |
|
|
(1,215 |
) |
|
Increase in inventories |
|
(61 |
) |
|
|
(96 |
) |
|
Decrease in other current assets |
|
112 |
|
|
|
28 |
|
|
Increase in other assets |
|
(89 |
) |
|
|
(135 |
) |
|
(Decrease) increase in accounts payable and accrued liabilities |
|
(256 |
) |
|
|
189 |
|
|
(Decrease) increase in liability for taxes on income |
|
(7 |
) |
|
|
15 |
|
|
(Decrease) increase in other liabilities |
|
(78 |
) |
|
|
2 |
|
|
Other |
|
(108 |
) |
|
|
175 |
|
|
NET CASH PROVIDED BY OPERATING ACTIVITIES |
|
7,282 |
|
|
|
6,571 |
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
Capital expenditures |
|
(2,766 |
) |
|
|
(2,753 |
) |
|
SPM investments |
|
(569 |
) |
|
|
(633 |
) |
|
Multiclient seismic data capitalized |
|
(212 |
) |
|
|
(300 |
) |
|
Business acquisitions and investments, net of cash acquired |
|
(556 |
) |
|
|
(1,144 |
) |
|
Sale of investments, net |
|
1,147 |
|
|
|
963 |
|
|
Other |
|
3 |
|
|
|
131 |
|
|
NET CASH USED IN INVESTING ACTIVITIES |
|
(2,953 |
) |
|
|
(3,736 |
) |
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
Dividends paid |
|
(1,451 |
) |
|
|
(1,196 |
) |
|
Proceeds from employee stock purchase plan |
|
295 |
|
|
|
270 |
|
|
Proceeds from exercise of stock options |
|
500 |
|
|
|
145 |
|
|
Stock repurchase program |
|
(3,582 |
) |
|
|
(1,526 |
) |
|
Proceeds from issuance of long-term debt |
|
2,005 |
|
|
|
2,267 |
|
|
Repayment of long-term debt |
|
(2,857 |
) |
|
|
(1,211 |
) |
|
Net increase (decrease) in short-term borrowings |
|
455 |
|
|
|
(306 |
) |
|
Other |
|
(38 |
) |
|
|
3 |
|
|
NET CASH USED IN FINANCING ACTIVITIES |
|
(4,673 |
) |
|
|
(1,554 |
) |
|
Cash flows provided by (used in) discontinued operations - operating activities |
|
24 |
|
|
|
(2 |
) |
|
Cash flows provided by (used in) discontinued operations - investing activities |
|
— |
|
|
|
(28 |
) |
|
Cash flows provided by (used in) discontinued operations |
|
24 |
|
|
|
(30 |
) |
|
Net (decrease) increase in cash before translation effect |
|
(320 |
) |
|
|
1,251 |
|
|
Translation effect on cash |
|
(34 |
) |
|
|
(7 |
) |
|
Cash, beginning of period |
|
3,472 |
|
|
|
1,905 |
|
|
Cash, end of period |
$ |
3,118 |
|
|
$ |
3,149 |
|
|
(1) |
Includes depreciation of property, plant and equipment and amortization of intangible assets, multiclient seismic data costs and SPM investments. |
|
(2) |
Net of the effect of business acquisitions and divestitures. |
See Notes to Consolidated Financial Statements
6
SCHLUMBERGER LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EQUITY
(Unaudited)
|
|
|
(Stated in millions) |
|
|||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock |
|
|
Retained |
|
|
Comprehensive |
|
|
Noncontrolling |
|
|
|
|
|
||||||||
|
January 1, 2014 - September 30, 2014 |
|
Issued |
|
|
In Treasury |
|
|
Earnings |
|
|
Loss |
|
|
Interests |
|
|
Total |
|
||||||
|
Balance, January 1, 2014 |
|
$ |
12,192 |
|
|
$ |
(8,135 |
) |
|
$ |
37,966 |
|
|
$ |
(2,554 |
) |
|
$ |
166 |
|
|
$ |
39,635 |
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
5,136 |
|
|
|
|
|
|
|
52 |
|
|
|
5,188 |
|
|
Currency translation adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(176 |
) |
|
|
|
|
|
|
(176 |
) |
|
Changes in unrealized gain on marketable securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(132 |
) |
|
|
|
|
|
|
(132 |
) |
|
Changes in fair value of derivatives |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(79 |
) |
|
|
|
|
|
|
(79 |
) |
|
Pension and other postretirement benefit plans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
200 |
|
|
|
|
|
|
|
200 |
|
|
Shares sold to optionees, less shares exchanged |
|
|
(18 |
) |
|
|
518 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
500 |
|
|
Vesting of restricted stock |
|
|
(68 |
) |
|
|
68 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
Shares issued under employee stock purchase plan |
|
|
33 |
|
|
|
262 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
295 |
|
|
Stock repurchase program |
|
|
|
|
|
|
(3,582 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,582 |
) |
|
Stock-based compensation expense |
|
|
246 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
246 |
|
|
Dividends declared ($1.20 per share) |
|
|
|
|
|
|
|
|
|
|
(1,559 |
) |
|
|
|
|
|
|
|
|
|
|
(1,559 |
) |
|
Shares issued for acquisition |
|
|
72 |
|
|
|
141 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
213 |
|
|
Other |
|
|
(29 |
) |
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
(36 |
) |
|
|
(62 |
) |
|
Balance, September 30, 2014 |
|
$ |
12,428 |
|
|
$ |
(10,725 |
) |
|
$ |
41,543 |
|
|
$ |
(2,741 |
) |
|
$ |
182 |
|
|
$ |
40,687 |
|
|
|
|
(Stated in millions) |
|
|||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock |
|
|
Retained |
|
|
Comprehensive |
|
|
Noncontrolling |
|
|
|
|
|
||||||||
|
January 1, 2013 - September 30, 2013 |
|
Issued |
|
|
In Treasury |
|
|
Earnings |
|
|
Loss |
|
|
Interests |
|
|
Total |
|
||||||
|
Balance, January 1, 2013 |
|
$ |
11,912 |
|
|
$ |
(6,160 |
) |
|
$ |
32,887 |
|
|
$ |
(3,888 |
) |
|
$ |
107 |
|
|
$ |
34,858 |
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
5,068 |
|
|
|
|
|
|
|
23 |
|
|
|
5,091 |
|
|
Currency translation adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(139 |
) |
|
|
|
|
|
|
(139 |
) |
|
Changes in unrealized gain on marketable securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
58 |
|
|
|
|
|
|
|
58 |
|
|
Changes in fair value of derivatives. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(12 |
) |
|
|
|
|
|
|
(12 |
) |
|
Pension and other postretirement benefit plans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
255 |
|
|
|
|
|
|
|
255 |
|
|
Shares sold to optionees, less shares exchanged |
|
|
(31 |
) |
|
|
176 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
145 |
|
|
Vesting of restricted stock |
|
|
(48 |
) |
|
|
48 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
Shares issued under employee stock purchase plan |
|
|
18 |
|
|
|
252 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
270 |
|
|
Stock repurchase program |
|
|
|
|
|
|
(1,526 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,526 |
) |
|
Stock-based compensation expense |
|
|
255 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
255 |
|
|
Dividends declared ($0.9375 per share) |
|
|
|
|
|
|
|
|
|
|
(1,244 |
) |
|
|
|
|
|
|
|
|
|
|
(1,244 |
) |
|
Other |
|
|
2 |
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
16 |
|
|
|
20 |
|
|
Balance, September 30, 2013 |
|
$ |
12,108 |
|
|
$ |
(7,208 |
) |
|
$ |
36,711 |
|
|
$ |
(3,726 |
) |
|
$ |
146 |
|
|
$ |
38,031 |
|
SHARES OF COMMON STOCK
(Unaudited)
|
|
|
|
|
|
(Stated in millions) |
|
|||||
|
|
|
|
|
|
|
|
|
|
Shares |
|
|
|
|
Issued |
|
|
In Treasury |
|
|
Outstanding |
|
|||
|
Balance, January 1, 2014 |
|
1,434 |
|
|
|
(127 |
) |
|
|
1,307 |
|
|
Shares sold to optionees, less shares exchanged |
|
— |
|
|
|
8 |
|
|
|
8 |
|
|
Vesting of restricted stock |
|
— |
|
|
|
1 |
|
|
|
1 |
|
|
Shares issued under employee stock purchase plan |
|
— |
|
|
|
4 |
|
|
|
4 |
|
|
Shares issued for acquisition |
|
— |
|
|
|
2 |
|
|
|
2 |
|
|
Stock repurchase program |
|
— |
|
|
|
(35 |
) |
|
|
(35 |
) |
|
Balance, September 30, 2014 |
|
1,434 |
|
|
|
(147 |
) |
|
|
1,287 |
|
See Notes to Consolidated Financial Statements
7
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 nine-month period ended September 30, 2014 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2014. The December 31, 2013 balance sheet information has been derived from the Schlumberger 2013 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, 2013, filed with the Securities and Exchange Commission on January 31, 2014.
Certain prior year items have been reclassified to conform to the current year presentation. Beginning in the second quarter of 2014, Schlumberger revised its Consolidated Statement of Cash Flows to present certain cash outflows relating to Schlumberger Production Management (“SPM”) activities as a separate line item within investing activities, referred to as “SPM investments.” Schlumberger historically presented such cash outflows as an operating activity. This change is not considered material to prior periods.
New Accounting Pronouncement
In May 2014, the Financial Accounting Standards Board 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, 2017. Schlumberger does not expect this ASU to have a material impact on its consolidated financial statements.
2. Charges and Credits
Schlumberger recorded the following charges and credits in continuing operations during the first nine months of 2013:
Second quarter 2013:
|
· |
Schlumberger recorded a pretax and after-tax gain of $1.028 billion as a result of the deconsolidation of its subsea business in connection with the formation of the OneSubsea joint venture with Cameron International Corporation (“Cameron”). Refer to Note 4 – Acquisitions for further details. |
|
· |
Schlumberger recorded a $222 million pretax ($203 million after-tax) impairment charge relating to an investment in a company involved in developing drilling-related technology and a $142 million pretax and after-tax impairment charge relating to an investment in a contract drilling business. |
First quarter 2013:
|
· |
Although the functional currency of Schlumberger’s operations in Venezuela is the US dollar, a portion of the transactions are denominated in local currency. In February 2013, Venezuela’s currency was devalued from the prior exchange rate of 4.3 bolivar fuertes per US dollar to 6.3 bolivar fuertes per US dollar. As a result of this devaluation, Schlumberger recorded a pretax and after-tax foreign currency loss of $92 million during the first quarter of 2013. |
The following is a summary of the charges recorded during the first nine months of 2013:
|
|
(Stated in millions) |
|
|
|
|
|
|||||||||||||||
|
|
Pretax |
|
|
Tax |
|
|
Net |
|
|
Classification |
|
|
|||||||||
|
Gain on formation of OneSubsea joint venture |
$ |
(1,028 |
) |
|
$ |
— |
|
|
$ |
(1,028 |
) |
|
Gain on formation of OneSubsea |
|
|
||||||
|
Impairment of equity-method investments |
|
364 |
|
|
|
19 |
|
|
|
345 |
|
|
Impairment & other |
|
|
||||||
|
Currency devaluation loss in Venezuela |
|
92 |
|
|
$ |
— |
|
|
|
92 |
|
|
Impairment & other |
|
|
||||||
|
|
$ |
(572 |
) |
|
$ |
19 |
|
|
$ |
(591 |
) |
|
|
|
|
||||||
8
There were no charges or credits recorded in continuing operations during the first nine months of 2014.
3. Earnings Per Share
The following is a reconciliation from basic earnings per share from continuing operations of Schlumberger to diluted earnings per share from continuing operations of Schlumberger:
|
|
(Stated in millions, except per share amounts) |
|
|||||||||||||||||||||
|
|
2014 |
|
|
2013 |
|
||||||||||||||||||
|
|
Schlumberger Income from Continuing Operations |
|
|
Average Shares Outstanding |
|
|
Earnings per Share from Continuing Operations |
|
|
Schlumberger Income from Continuing Operations |
|
|
Average Shares Outstanding |
|
|
Earnings per Share from Continuing Operations |
|
||||||
|
Third Quarter |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
$ |
1,949 |
|
|
|
1,294 |
|
|
$ |
1.51 |
|
|
$ |
1,715 |
|
|
|
1,322 |
|
|
$ |
1.30 |
|
|
Assumed exercise of stock options |
|
— |
|
|
|
12 |
|
|
|
|
|
|
|
— |
|
|
|
7 |
|
|
|
|
|
|
Unvested restricted stock |
|
— |
|
|
|
4 |
|
|
|
|
|
|
|
— |
|
|
|
4 |
|
|
|
|
|
|
Diluted |
$ |
1,949 |
|
|
|
1,310 |
|
|
$ |
1.49 |
|
|
$ |
1,715 |
|
|
|
1,333 |
|
|
$ |
1.29 |
|
|
|
Schlumberger Income from Continuing Operations |
|
|
Average Shares Outstanding |
|
|
Earnings per Share from Continuing Operations |
|
|
Schlumberger Income from Continuing Operations |
|
|
Average Shares Outstanding |
|
|
Earnings per Share from Continuing Operations |
|
||||||
|
Nine Months |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
$ |
5,341 |
|
|
|
1,300 |
|
|
$ |
4.11 |
|
|
$ |
5,137 |
|
|
|
1,326 |
|
|
$ |
3.87 |
|
|
Assumed exercise of stock options |
|
— |
|
|
|
11 |
|
|
|
|
|
|
|
— |
|
|
|
6 |
|
|
|
|
|
|
Unvested restricted stock |
|
— |
|
|
|
4 |
|
|
|
|
|
|
|||||||||||