The world’s largest oilfield services company, Schlumberger (SLB, Financial), reported its earnings for the fourth quarter that ended December 31 on January 15 and reported numbers which beat the earnings estimates of the Street, but the stock remained unchanged in the after-hours trading. Let’s check in and find out the major highlights for the full year and the fourth quarter of the company, which surpassed estimates even in the era of declining crude oil prices. Here are the major takeaways from Schlumberger’s fourth quarter for the 2014 fiscal year.
Record revenue gets reported
The fourth quarter revenue in North America was up sequentially by 2%, led by continued efficiency improvements and new technology uptake in pressure pumping land and by the activity recovery in the U.S. Gulf of Mexico. In the international markets, growth has been the strongest in the Middle East and Asia area up 4% sequentially, driven by record revenue in Saudi Arabia and Bahrain, robust activity in Kuwait and year-end increases in product and software sales across the region. Revenue increased 6% year over year to $12.64 billion but missed the consensus estimate by 0.4%.
Revenue from the reservoir characterization segment fell 6% year over year to $3.08 billion where the seasonal decline in the marine seismic work served as the major headwind. The drilling segment also saw a dip of 5% in revenue year over year to $4.66 billion and mainly suffered from currency effects and seasonal declining activity in Russia. However, amid the decline in crude oil prices, the production segment’s revenue surged 17% year over year to $4.95 billion due to strong gains in the U.S.
On a full-year basis, revenue increased 7% YoY to $48.6 billion and marked the fifth consecutive year that the company registered a growth in annual revenue.
Company’s earnings remain firm
The considerable earnings potential of the company is well contemplated through the generation of over $6 billion in free cash flow in 2014, which has led the management to sanction the dividend hike for the fifth consecutive year resulting in the dividend doubling out within a span of five years. The company remains confident of its inherent potential to generate superior cash flow in spite of a more challenging environment.
The fourth-quarter earnings per share grew 11% year-over-year to $1.50 a share, and the board approved a 25% increase in dividends which would be effective from April this year. The fourth quarter EPS clearly outpaced the consensus estimate by 3%.
Cost cutting is at the peak
The company has announced to cut its capex by 25% this year as a result of declining crude oil prices which serves as a major negative in the segments it operates. Though the company has forecasted capex at $3 billion for the year, analysts expect the company to have a capital spending budget of $3.9 billion for 2015.
Also around 9,000 employees would be given the pink slip which is equivalent to about 7% of the total employee count that is about to see a reduction. Such a step is being taken to restructure the company for cost savings as the crude oil prices have declined more than 50% since June last year.
Ending note
Schlumberger knows well how to keep its top and bottom lines intact for the upcoming fiscal year, so it’s taken up cost-cutting measures that would aid in keeping its financial strength intact in 2015. Investors are also happy with the company and are hoping to hold the stock in the long term. So, let’s stay tuned!
