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 First Quarter 2019 Earnings Call. Today's call is being hosted from Quito, Ecuador, following the Schlumberger Limited Board Meeting. Joining us on the call are Paul Kipsgaard, Chairman and Chief Executive Officer, Simon Eyre, Chief Financial Officer, and Olivier Lepouche, newly appointed Chief Operating Officer. 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 first quarter financial performance before Olivier 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 for 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 first quarter press release, which is on our website. Finally, after our prepared remarks, we ask that you please limit yourself to one question on 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 Hyatt.

Thank you, Simon. Ladies and gentlemen, thank you for participating in this conference call. First quarter earnings per share was 30 cents, excluding charges and credits. This represents a decrease of six cents sequentially and eight cents when compared to the same quarter last year. There were no charges or credit recorded during this quarter. Our first quarter revenue of $7.9 billion decreased 4% sequentially, largely driven by seasonal declines. Pre-tax operating margin decreased by 30 basis points to 11.5%. Highlights by product group were as follows. First quarter reservoir characterization revenue of $1.5 billion decreased 7% sequentially due to a seasonal decline in wildland activities, primarily in Russia, and lower SIS software and multi-client license sales, following their traditionally strong fourth quarter performance. Margin decreased 308 basis points to 19% due to the lower contribution from one line SIS and multi-client. Drilling group revenue of $2.4 billion decreased 3% sequentially, driven by seasonally lower drilling activity in the international area. Margins were essentially flat at 12.9%. Production and group revenue of $2.9 billion decreased 2% sequentially due to a decline in one stem revenue in North America land. Margins improved slightly by 76 basis points to 7.5%. Cameroon group revenue of $1.2 billion decreased 7% sequentially This decrease was primarily due to lower project volumes and reduced product sales of long-cycle businesses of one subsea and drilling systems. Lower surface system revenue also contributed to the decline. Despite the revenue declines, margin increase, 161 basis points to 11.6 percent, driven by improved profitability in drilling systems and volume measurements. The book-to-bill ratio for Cameron long-cycle business was 1.5 in Q1. The 1 sub C backlog increased to $2.1 billion at the end of the first quarter. Now turning to Schlumberger as a whole, the effective tax rate excluding charges and credits was 15.5% in the first quarter. This was essentially flat with the previous quarter. Our corporate and other expense line item increased sequentially by $35 million to $273 million in Q1. This increase was largely attributable to certain exceptional accounting for stock-based compensation costs in the quarter. In the second quarter, we expect these costs to return to a level more in line with where we were in Q4. We just recently completed a very successful debt exchange offer. As a result, we issued $1.5 billion of notes due in 2028 that bear interest at 3.9%. These new notes were exchanged for a similar amount of notes that were scheduled to be repaid in 2020, 2022, and 2025. This debt exchange, combined with other refinancing activities we completed during the quarter, serves to improve our debt maturity profile going forward. As a result, the net interest expense at the corporate level is expected to increase by approximately $10 to $15 million next quarter. We generated $326 million of cash flow from operations during the first quarter. This is despite the consumption of working capital that we typically experience during the first quarter, which is driven by the annual payments associated with employee compensation. Our inventory levels also increase in anticipation of higher activity levels in the coming quarters. Our net debt increased $1.1 billion during the quarter to $14.4 billion. we ended the quarter with total cash and investment of $2.2 billion. During the quarter, we spent $98 million to repurchase 2.3 million shares at an average price of 42.79. Other significant liquidity events during the quarter included capex of approximately $413 million and capitalized costs relating to SPM projects of $151 million During the quarter, we also made $692 million of dividend payment. Full year 2019 CAPEX, excluding SPM and multi-client investments, is still expected to be approximately $1.5 to $1.7 billion. And now, I will turn the conference call over to Olivier.