Schlumberger’s Segment-Wise Revenue and Margin Performance

Schlumberger’s 2Q15 Earnings Reflect Industry Slowdown

(Continued from Prior Part)

Schlumberger’s segment-wise revenue

We have already discussed Schlumberger’s (SLB) 2Q15 operating results. We will now look into Schlumberger’s segment-wise performance in 2Q15.

Each of Schlumberger’s three product group segments witnessed revenue declines in 2Q15 over 2Q14. The production segment witnessed the highest revenue decline at 26%, followed by reservoir characterization at 25%, and drilling at 24.5%. The falls can be attributed to:

• The sharp decrease in exploration-related services negatively affected wireline and testing services’ activities in Europe/CIS & Africa, the US Gulf of Mexico, and Australia.

• The drop in the North American rig count impacted the company’s drilling and measurements and M-I SWACO services. M-I SWACO supplies drilling fluid systems for wells.

Schlumberger’s segment margin analysis

The drilling group’s 2Q15 EBT (earnings before tax) margins remained resilient at 19.5%, as strong cost management limited margin decline compared to a year ago. The production group, on the other hand, experienced a huge margin decline from 2Q14 to 2Q15 of 17% versus 13%. This was due to sharp decline in North America E&P activity and pricing for pressure pumping services in North America.

In 1Q15, in comparison to National Oilwell Varco’s (NOV) 23% EBITDA (or earnings before interest, tax, depreciation, and amortization) decrease over 1Q14, Weatherford International’s (WFT) 1Q15 EBITDA declined 24% over 1Q14, while Ensco’s (ESV) EBITDA increased 21% over the same period. Schlumberger accounts for 6.8% of the iShares US Energy ETF (IYE).

Continue to Next Part

Browse this series on Market Realist:

• Part 1 - A Snapshot of Schlumberger’s 2Q15 Revenues and Earnings

• Part 2 - Schlumberger’s Adjusted Earnings Beat Estimates in 2Q15

• Part 3 - Diving Deeper into Schlumberger’s 2Q15 Earnings