SLB Limited Common Shares

Ladies and gentlemen, thank you for standing by. Welcome to the Schlumberger Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Instructions will be given at that time. If you need assistance during the call, please press star, then zero. As a reminder, today's call is being recorded. I would now like to turn the conference over to our host, Vice President of Investor Relations, Mr. Simon Ferrant. Please go ahead.

Good morning, good afternoon, and welcome to the Schlumberger Limited fourth quarter and full year 2018 earnings call. Today's call is being hosted from Houston, following the Schlumberger Limited board meeting. Joining us on the call are Paul Kipschart, Chairman and Chief Executive Officer, Simon Eyatt, Chief Financial Officer, and Patrick Shawn, Executive Vice President, Wells. We will, as usual, first go through our prepared remarks, after which we'll open up for questions. For today's agenda, Simon will first present comments on our fourth quarter financial performance before Patrick reviews our results by geography. Paul will close our remarks with a discussion of our technology portfolio and our updated view of the industry macro. However, before we begin, I'd like to remind the participants that some of the statements we'll be making today are forward-looking. These matters involve risks and uncertainties that could cause our results to differ materially from those projected in these statements. I therefore refer you to our latest 10-K filing and other SEC filings. Our comments today may also include non-GAAP financial measures. Additional details and reconciliations to the most directly comparable GAAP financial measures can be found in our fourth quarter press release, which is on our website. Finally, after our prepared remarks, we ask that you please limit yourself to one question or one related follow-up during the Q&A period in order to allow more time for others who may be in the queue. Now, I'll hand the call over to Simon Ayat.

Thank you, Simon. Ladies and gentlemen, thank you for participating in this conference call. Fourth quarter earnings per share, excluding charges and credits, was $0.36. This represents a decrease of 10 cents sequentially and 12 cents when compared to the same quarter of last year. During the quarter, we recorded the net credit of 3 cents per share. This consisted of a gain on the divestiture of the Western GECO marine seismic business, partially offset by certain asset impairment charges. Our fourth quarter revenue of $8.2 billion decreased 3.8 percent sequentially. Pre-tax operating margin decreased 172 basis points to 11.8 percent. Highlights by product group were as follows. Fourth quarter reservoir characterization revenue of $1.7 billion decreased 1 percent sequentially. A seasonal decline in one-line activity in Russia and reduced one service revenue in the Middle East were partially offset by year-end SIS software sales. As a result, pre-tax operating margins of 22% was essentially flat as compared to the previous quarter. The revenue of $2.5 billion increased 1% sequentially primarily driven by higher activity in Latin America and the Middle East, offset by a seasonal decline in Russia. Margins decreased 105 basis points to 12.9%, largely reflecting against seasonal decline in activity in Russia and increased mobilization costs, which impacted IDS internationally. Production group revenue of $2.9 billion decreased 10% sequentially, while margin decreased 310 basis points to 6.8%. These results were driven by reduced pricing and activity in the one-stream hydraulic fracturing business in North America land. Cameron Group revenue of $1.3 billion decreased 3% sequentially as increased sales in service systems were more than offset by lower revenue from 1 sub C and valve and measurements. Cameron margin declined 140 basis points to 10% largely driven by 1 sub C. On the positive side, the book to bill ratio for the Cameron long cycle business increased to 1.5 in Q4 and the one subsidy backlog increased to $1.9 billion. This all bodes well for the future. The effective tax rate excluding charges and credits was 16% in the fourth quarter. This is similar to the previous quarter. Before discussing cash, I want to share with you something I constantly repeat within Schlumberger. Profit is an opinion but cash is a fact. During 2018, we returned $3.2 billion of cash to our shareholders through dividends and share buybacks. During the quarter, we spent $100 million to repurchase 2.1 million shares at an average price of $48.44. We generated $5.7 billion of cash flow from operation for the full year 2018 and $2.3 billion during the fourth quarter. Our free cash flow was $1.4 billion for the fourth quarter and $2.5 billion for the full year of 2018. This is all despite making severance payments of approximately $340 million during 2018. Additionally, during the quarter, we completed the sale of our Western Jikku Marine Seismic business and received cash proceeds of $600 million. As a result, our net debt decreased by $1.2 billion during the quarter to $13.3 billion. We ended the quarter with total cash and investments of $2.8 billion. We expect that we will meet all of our cash commitments for 2019 without having to increase net debt year over year. And now I will turn the conference call over to Patrick.