Attached files

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EX-10.3 - EX-10.3 - SCHLUMBERGER LIMITED/NVslb-ex103_629.htm
EX-95 - EX-95 - SCHLUMBERGER LIMITED/NVslb-ex95_8.htm
EX-31.1 - EX-31.1 - SCHLUMBERGER LIMITED/NVslb-ex311_7.htm
EX-32.1 - EX-32.1 - SCHLUMBERGER LIMITED/NVslb-ex321_9.htm
EX-32.2 - EX-32.2 - SCHLUMBERGER LIMITED/NVslb-ex322_6.htm
EX-31.2 - EX-31.2 - SCHLUMBERGER LIMITED/NVslb-ex312_10.htm
EX-10.5 - EX-10.5 - SCHLUMBERGER LIMITED/NVslb-ex105_756.htm
EX-10.8 - EX-10.8 - SCHLUMBERGER LIMITED/NVslb-ex108_754.htm
EX-10.2 - EX-10.2 - SCHLUMBERGER LIMITED/NVslb-ex102_624.htm
EX-10.6 - EX-10.6 - SCHLUMBERGER LIMITED/NVslb-ex106_757.htm
EX-10.4 - EX-10.4 - SCHLUMBERGER LIMITED/NVslb-ex104_630.htm
EX-10.7 - EX-10.7 - SCHLUMBERGER LIMITED/NVslb-ex107_755.htm
EX-10.1 - EX-10.1 - SCHLUMBERGER LIMITED/NVslb-ex101_758.htm

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: June 30, 2015

Commission file No.: 1-4601

 

SCHLUMBERGER N.V.

(SCHLUMBERGER LIMITED)

(Exact name of registrant as specified in its charter)

 

 

CURAÇAO

 

52-0684746

(State or other jurisdiction of
incorporation or organization)

 

(I.R.S. Employer
Identification No.)

 

 

 

42 RUE SAINT-DOMINIQUE

 

 

PARIS, FRANCE

 

75007

 

 

 

5599 SAN FELIPE, 17th FLOOR

 

 

HOUSTON, TEXAS, U.S.A.

 

77056

 

 

 

62 BUCKINGHAM GATE

 

 

LONDON, UNITED KINGDOM

 

SW1E 6AJ

 

 

 

PARKSTRAAT 83 THE HAGUE,

 

 

THE NETHERLANDS

 

2514 JG

(Addresses of principal executive offices)

 

(Zip Codes)

Registrant’s telephone number in the United States, including area code, is:

(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.

 

Large accelerated filer

x

Accelerated filer

¨

 

 

 

 

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.

 

Class

Outstanding at June 30, 2015

COMMON STOCK, $0.01 PAR VALUE PER SHARE

1,265,449,047

 

 

 


SCHLUMBERGER LIMITED

Second Quarter 2015 Form 10-Q

Table of Contents

 

 

 

 

Page

 PART I

 

Financial Information

 

 

 

 

 

Item 1.

 

Financial Statements

3

 

 

 

 

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

18

 

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosures about Market Risk

27

 

 

 

 

Item 4.

 

Controls and Procedures

27

 

 

 

 

 PART II

 

Other Information

 

 

 

 

 

Item 1.

 

Legal Proceedings

28

 

 

 

 

Item 1A.

 

Risk Factors

28

 

 

 

 

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

28

 

 

 

 

Item 3.

 

Defaults Upon Senior Securities

28

 

 

 

 

Item 4.

 

Mine Safety Disclosures

28

 

 

 

 

Item 5.

 

Other Information

28

 

 

 

 

Item 6.

 

Exhibits

29

 

 

 

 

 

 

Certifications

 

 

 

 

2


PART I. FINANCIAL INFORMATION

Item 1.  Financial Statements.

 

SCHLUMBERGER LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF INCOME

(Unaudited)

 

 

(Stated in millions, except per share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Second Quarter

 

 

Six Months

 

 

2015

 

 

2014

 

 

2015

 

 

2014

 

Revenue

$

9,010

 

 

$

12,054

 

 

$

19,258

 

 

$

23,294

 

Interest & other income

 

47

 

 

 

64

 

 

 

96

 

 

 

141

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenue

 

7,136

 

 

 

9,269

 

 

 

15,231

 

 

 

18,017

 

Research & engineering

 

279

 

 

 

309

 

 

 

546

 

 

 

593

 

General & administrative

 

120

 

 

 

123

 

 

 

239

 

 

 

228

 

Restructuring & other

 

-

 

 

 

-

 

 

 

439

 

 

 

-

 

Interest

 

86

 

 

 

90

 

 

 

169

 

 

 

193

 

Income before taxes

 

1,436

 

 

 

2,327

 

 

 

2,730

 

 

 

4,404

 

Taxes on income

 

302

 

 

 

506

 

 

 

608

 

 

 

975

 

Income from continuing operations

 

1,134

 

 

 

1,821

 

 

 

2,122

 

 

 

3,429

 

Loss from discontinued operations

 

-

 

 

 

(205

)

 

 

-

 

 

 

(205

)

Net income

 

1,134

 

 

 

1,616

 

 

 

2,122

 

 

 

3,224

 

Net income attributable to noncontrolling interests

 

10

 

 

 

21

 

 

 

23

 

 

 

37

 

Net income attributable to Schlumberger

$

1,124

 

 

$

1,595

 

 

$

2,099

 

 

$

3,187

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Schlumberger amounts attributable to:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from continuing operations

 

1,124

 

 

 

1,800

 

 

 

2,099

 

 

 

3,392

 

Loss from discontinued operations

 

-

 

 

 

(205

)

 

 

-

 

 

 

(205

)

Net income

$

1,124

 

 

$

1,595

 

 

$

2,099

 

 

$

3,187

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per share of Schlumberger

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from continuing operations

$

0.89

 

 

$

1.38

 

 

$

1.65

 

 

$

2.60

 

Loss from discontinued operations

 

-

 

 

 

(0.16

)

 

 

-

 

 

 

(0.16

)

Net income (1)

$

0.89

 

 

$

1.23

 

 

$

1.65

 

 

$

2.45

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted earnings per share of Schlumberger

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from continuing operations

$

0.88

 

 

$

1.37

 

 

$

1.64

 

 

$

2.58

 

Loss from discontinued operations

 

-

 

 

 

(0.16

)

 

 

-

 

 

 

(0.16

)

Net income

$

0.88

 

 

$

1.21

 

 

$

1.64

 

 

$

2.42

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

1,269

 

 

 

1,300

 

 

 

1,273

 

 

 

1,303

 

Assuming dilution

 

1,280

 

 

 

1,315

 

 

 

1,282

 

 

 

1,316

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) Amounts may not add due to rounding.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

See Notes to Consolidated Financial Statements

 

 

 

3


SCHLUMBERGER LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(Unaudited)

 

(Stated in millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Second Quarter

 

 

Six Months

 

 

2015

 

 

2014

 

 

2015

 

 

2014

 

Net income

$

1,134

 

 

$

1,616

 

 

$

2,122

 

 

$

3,224

 

Currency translation adjustments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized net change arising during the period

 

19

 

 

 

58

 

 

 

(94

)

 

 

(30

)

Marketable securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gain (loss) arising during the period

 

8

 

 

 

19

 

 

 

(10

)

 

 

30

 

Cash flow hedges

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net gain (loss) on cash flow hedges

 

42

 

 

 

(3

)

 

 

(110

)

 

 

13

 

Reclassification to net income of net realized loss

 

22

 

 

 

9

 

 

 

140

 

 

 

6

 

Pension and other postretirement benefit plans

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Actuarial loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization to net income of net actuarial loss

 

69

 

 

 

59

 

 

 

143

 

 

 

100

 

Prior service cost

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization to net income of net prior service cost

 

24

 

 

 

24

 

 

 

51

 

 

 

56

 

Income taxes on pension and other postretirement benefit plans

 

(7

)

 

 

(10

)

 

 

(22

)

 

 

(20

)

Comprehensive income

 

1,311

 

 

 

1,772

 

 

 

2,220

 

 

 

3,379

 

Comprehensive income attributable to noncontrolling interests

 

10

 

 

 

21

 

 

 

23

 

 

 

37

 

Comprehensive income attributable to Schlumberger

$

1,301

 

 

$

1,751

 

 

$

2,197

 

 

$

3,342

 

 

See Notes to Consolidated Financial Statements

 

 

 

4


SCHLUMBERGER LIMITED AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

 

(Stated in millions)

 

 

 

 

 

 

 

 

 

 

Jun. 30,

 

 

 

 

 

 

2015

 

 

Dec. 31,

 

 

(Unaudited)

 

 

2014

 

ASSETS

 

 

 

 

 

 

 

Current Assets

 

 

 

 

 

 

 

Cash

$

3,541

 

 

$

3,130

 

Short-term investments

 

3,733

 

 

 

4,371

 

Receivables less allowance for doubtful accounts (2015 - $282; 2014 - $275)

 

9,569

 

 

 

11,171

 

Inventories

 

4,581

 

 

 

4,628

 

Deferred taxes

 

168

 

 

 

144

 

Other current assets

 

1,269

 

 

 

1,250

 

 

 

22,861

 

 

 

24,694

 

Fixed Income Investments, held to maturity

 

469

 

 

 

442

 

Investments in Affiliated Companies

 

3,362

 

 

 

3,235

 

Fixed Assets less accumulated depreciation

 

14,848

 

 

 

15,396

 

Multiclient Seismic Data

 

913

 

 

 

793

 

Goodwill

 

15,525

 

 

 

15,487

 

Intangible Assets

 

4,525

 

 

 

4,654

 

Other Assets

 

2,250

 

 

 

2,203

 

 

$

64,753

 

 

$

66,904

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

7,479

 

 

 

9,246

 

Estimated liability for taxes on income

 

1,424

 

 

 

1,647

 

Long-term debt - current portion

 

2,092

 

 

 

1,244

 

Short-term borrowings

 

2,139

 

 

 

1,521

 

Dividends payable

 

640

 

 

 

518

 

 

 

13,774

 

 

 

14,176

 

Long-term Debt

 

9,110

 

 

 

10,565

 

Postretirement Benefits

 

1,348

 

 

 

1,501

 

Deferred Taxes

 

1,333

 

 

 

1,296

 

Other Liabilities

 

1,003

 

 

 

1,317

 

 

 

26,568

 

 

 

28,855

 

Equity

 

 

 

 

 

 

 

Common stock

 

12,586

 

 

 

12,495

 

Treasury stock

 

(12,671

)

 

 

(11,772

)

Retained earnings

 

42,158

 

 

 

41,333

 

Accumulated other comprehensive loss

 

(4,108

)

 

 

(4,206

)

Schlumberger stockholders' equity

 

37,965

 

 

 

37,850

 

Noncontrolling interests

 

220

 

 

 

199

 

 

 

38,185

 

 

 

38,049

 

 

$

64,753

 

 

$

66,904

 

 

See Notes to Consolidated Financial Statements

 

 

 

5


SCHLUMBERGER LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS

(Unaudited)

 (Stated in millions)

 

 

 

 

 

 

 

 

 

 

Six Months Ended Jun. 30,

 

 

2015

 

 

2014

 

Cash flows from operating activities:

 

 

 

 

 

 

 

Net income

$

2,122

 

 

$

3,224

 

Add: Loss from discontinued operations

 

-

 

 

 

205

 

Adjustments to reconcile net income to cash provided by operating activities:

 

 

 

 

 

 

 

Restructuring and other charges

 

439

 

 

 

-

 

Depreciation and amortization (1)

 

2,089

 

 

 

1,997

 

Pension and other postretirement benefits expense

 

217

 

 

 

190

 

Stock-based compensation expense

 

167

 

 

 

162

 

Pension and other postretirement benefits funding

 

(214

)

 

 

(127

)

Earnings of equity method investments, less dividends received

 

(65

)

 

 

(90

)

Change in assets and liabilities: (2)

 

 

 

 

 

 

 

Decrease (increase) in receivables

 

1,682

 

 

 

(590

)

Decrease (increase) in inventories

 

39

 

 

 

(90

)

(Increase) decrease in other current assets

 

(13

)

 

 

82

 

Decrease (increase) in other assets

 

3

 

 

 

(60

)

Decrease in accounts payable and accrued liabilities

 

(2,126

)

 

 

(515

)

(Decrease) increase in estimated liability for taxes on income

 

(419

)

 

 

23

 

Decrease in other liabilities

 

(86

)

 

 

(204

)

Other

 

249

 

 

 

12

 

NET CASH PROVIDED BY OPERATING ACTIVITIES

 

4,084

 

 

 

4,219

 

Cash flows from investing activities:

 

 

 

 

 

 

 

Capital expenditures

 

(1,193

)

 

 

(1,786

)

SPM investments

 

(222

)

 

 

(377

)

Multiclient seismic data capitalized

 

(221

)

 

 

(154

)

Business acquisitions and investments, net of cash acquired

 

(171

)

 

 

(471

)

Sale of investments, net

 

610

 

 

 

349

 

Other

 

(119

)

 

 

3

 

NET CASH USED IN INVESTING ACTIVITIES

 

(1,316

)

 

 

(2,436

)

Cash flows from financing activities:

 

 

 

 

 

 

 

Dividends paid

 

(1,151

)

 

 

(932

)

Proceeds from employee stock purchase plan

 

144

 

 

 

134

 

Proceeds from exercise of stock options

 

112

 

 

 

358

 

Stock repurchase program

 

(1,239

)

 

 

(2,074

)

Proceeds from issuance of long-term debt

 

1,779

 

 

 

1,979

 

Repayment of long-term debt

 

(2,340

)

 

 

(2,104

)

Net increase (decrease) in short-term borrowings

 

586

 

 

 

(302

)

Other

 

(2

)

 

 

(32

)

NET CASH USED IN FINANCING ACTIVITIES

 

(2,111

)

 

 

(2,973

)

CASH FLOWS USED BY DISCONTINUED OPERATIONS - OPERATING ACTIVITIES

 

(233

)

 

 

-

 

Net increase (decrease) in cash before translation effect

 

424

 

 

 

(1,190

)

Translation effect on cash

 

(13

)

 

 

(15

)

Cash, beginning of period

 

3,130

 

 

 

3,472

 

Cash, end of period

$

3,541

 

 

$

2,267

 

 

(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.

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, 2015 – June 30, 2015

Issued

 

 

In Treasury

 

 

Earnings

 

 

Loss

 

 

Interest

 

 

Total

 

Balance, January 1, 2015

$

12,495

 

 

$

(11,772

)

 

$

41,333

 

 

$

(4,206

)

 

$

199

 

 

$

38,049

 

Net income

 

 

 

 

 

 

 

 

 

2,099

 

 

 

 

 

 

 

23

 

 

 

2,122

 

Currency translation adjustments

 

 

 

 

 

 

 

 

 

 

 

 

 

(94

)

 

 

 

 

 

 

(94

)

Changes in unrealized gain on marketable securities

 

 

 

 

 

 

 

 

 

 

 

 

 

(10

)

 

 

 

 

 

 

(10

)

Changes in fair value of cash flow hedges

 

 

 

 

 

 

 

 

 

 

 

 

 

30

 

 

 

 

 

 

 

30

 

Pension and other postretirement benefit plans

 

 

 

 

 

 

 

 

 

 

 

 

 

172

 

 

 

 

 

 

 

172

 

Shares sold to optionees, less shares exchanged

 

(25

)

 

 

137

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

112

 

Vesting of restricted stock

 

(67

)

 

 

67

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

-

 

Shares issued under employee stock purchase plan

 

9

 

 

 

135

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

144

 

Stock repurchase program

 

 

 

 

 

(1,239

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,239

)

Stock-based compensation expense

 

167

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

167

 

Dividends declared ($1.00 per share)

 

 

 

 

 

 

 

 

 

(1,274

)

 

 

 

 

 

 

 

 

 

 

(1,274

)

Other

 

7

 

 

 

1

 

 

 

 

 

 

 

 

 

 

 

(2

)

 

 

6

 

Balance, June 30, 2015

$

12,586

 

 

$

(12,671

)

 

$

42,158

 

 

$

(4,108

)

 

$

220

 

 

$

38,185

 

 

 

(Stated in millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Retained

 

 

Comprehensive

 

 

Noncontrolling

 

 

 

 

 

January 1, 2014 – June 30, 2014

Issued

 

 

In Treasury

 

 

Earnings

 

 

Loss

 

 

Interest

 

 

Total

 

Balance, January 1, 2014

$

12,192

 

 

$

(8,135

)

 

$

37,966

 

 

$

(2,554

)

 

$

166

 

 

$

39,635

 

Net income

 

 

 

 

 

 

 

 

 

3,187

 

 

 

 

 

 

 

37

 

 

 

3,224

 

Currency translation adjustments

 

 

 

 

 

 

 

 

 

 

 

 

 

(30

)

 

 

 

 

 

 

(30

)

Changes in unrealized gain on marketable securities

 

 

 

 

 

 

 

 

 

 

 

 

 

30

 

 

 

 

 

 

 

30

 

Changes in fair value of cash flow hedges

 

 

 

 

 

 

 

 

 

 

 

 

 

19

 

 

 

 

 

 

 

19

 

Pension and other postretirement benefit plans

 

 

 

 

 

 

 

 

 

 

 

 

 

136

 

 

 

 

 

 

 

136

 

Shares sold to optionees, less shares exchanged

 

(12

)

 

 

370

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

358

 

Vesting of restricted stock

 

(54

)

 

 

54

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

-

 

Shares issued under employee stock purchase plan

 

6

 

 

 

128

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

134

 

Stock repurchase program

 

 

 

 

 

(2,074

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,074

)

Stock-based compensation expense

 

162

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

162

 

Dividends declared ($0.80 per share)

 

 

 

 

 

 

 

 

 

(1,042

)

 

 

 

 

 

 

 

 

 

 

(1,042

)

Shares issued for acquisition

 

72

 

 

 

141

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

213

 

Other

 

(28

)

 

 

2

 

 

 

 

 

 

 

 

 

 

 

(37

)

 

 

(63

)

Balance, June 30, 2014

$

12,338

 

 

$

(9,514

)

 

$

40,111

 

 

$

(2,399

)

 

$

166

 

 

$

40,702

 

 

SHARES OF COMMON STOCK

(Unaudited)

 

 

 

 

 

 

(Stated in millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

Issued

 

 

In Treasury

 

 

Outstanding

 

Balance, January 1, 2015

 

1,434

 

 

 

(159

)

 

 

1,275

 

Shares sold to optionees, less shares exchanged

 

-

 

 

 

1

 

 

 

1

 

Vesting of restricted stock

 

-

 

 

 

1

 

 

 

1

 

Shares issued under employee stock purchase plan

 

-

 

 

 

2

 

 

 

2

 

Stock repurchase program

 

-

 

 

 

(14

)

 

 

(14

)

Balance, June 30, 2015

 

1,434

 

 

 

(169

)

 

 

1,265

 

 

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 six-month period ended June 30, 2015 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2015.  The December 31, 2014 balance sheet information has been derived from the Schlumberger 2014 audited 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, 2014, filed with the Securities and Exchange Commission on January 29, 2015.

Certain prior period items have been reclassified to conform to the current period presentation.

New Accounting Pronouncement

In May 2014, the Financial Accounting Standards Board (FASB) 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 no later than January 1, 2018 with early adoption permitted 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 quarter of 2015:

·

As a result of the severe fall in activity in North America, combined with the impact of lower international activity due to customer budget cuts driven by lower oil prices, Schlumberger decided to reduce its headcount during the first quarter of 2015.  Schlumberger recorded a $390 million charge during the first quarter associated with this headcount reduction as well as an incentivized leave of absence program.

 

·

During 2014, Venezuela enacted certain changes to its foreign exchange system such that, in addition to the official rate of 6.3 Venezuelan Bolivares per US dollar, there were two other legal exchange rates that could be obtained via different exchange rate mechanisms.  These changes included the expansion of the SICAD I auction rate and the introduction of what was known as the SICAD II auction process.  The SICAD I and SICAD II exchange rates were approximately 11 and 50 Venezuelan Bolivares to the US dollar, respectively, at December 31, 2014.

Although the functional currency of Schlumberger’s operations in Venezuela is the US dollar, a portion of the transactions in Venezuela are denominated in local currency.  Prior to December 31, 2014, Schlumberger had applied the official exchange rate to remeasure local currency transactions and balances into US dollars.

Effective December 31, 2014, Schlumberger concluded that it was appropriate to apply the SICAD II exchange rate, as it believed this rate best represented the economics of Schlumberger’s business activity in Venezuela.  As a result, Schlumberger recorded a $472 million devaluation charge during the fourth quarter of 2014.

In February 2015, the Venezuelan government replaced SICAD II with a new foreign exchange market system known as SIMADI.  The SIMADI exchange rate was approximately 192 Venezuela Bolivares to the US dollar as of March 31, 2015.  As a result, Schlumberger recorded a $49 million devaluation charge during the first quarter of 2015, reflecting the adoption of the SIMADI exchange rate.  

These changes result in a reduction in the US dollar reported amount of local currency denominated revenues, expenses and, consequently, income before taxes and net income in Venezuela.  For example, if Schlumberger had applied an exchange rate of 192 Venezuelan Bolivares to the US dollar throughout 2014, it would have reduced Schlumberger earnings by approximately $0.09 per share.

8


The following is a summary of these charges:

 

 

(Stated in millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pretax

 

 

Tax

 

 

Net

 

 

Classification

Workforce reduction

$

390

 

 

$

56

 

 

$

334

 

 

Restructuring & other

Currency devaluation loss in Venezuela

 

49

 

 

 

-

 

 

 

49

 

 

Restructuring & other

 

$

439

 

 

$

56

 

 

$

383

 

 

 

 

There were no charges or credits recorded during the second quarter of 2015 or the first six months of 2014.

 

 

3.   Earnings Per Share

The following is a reconciliation from basic earnings per share of Schlumberger to diluted earnings per share of Schlumberger:

 

(Stated in millions, except per share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2015

 

 

2014

 

 

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

 

Second Quarter

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

$

1,124

 

 

$

1,269

 

 

$

0.89

 

 

$

1,800

 

 

$

1,300

 

 

$

1.38

 

Assumed exercise of stock options

 

-

 

 

 

7

 

 

 

 

 

 

 

-

 

 

 

11

 

 

 

 

 

Unvested restricted stock

 

-

 

 

 

4

 

 

 

 

 

 

 

-

 

 

 

4

 

 

 

 

 

Diluted

$

1,124

 

 

$

1,280

 

 

$

0.88

 

 

$

1,800

 

 

$

1,315

 

 

$

1.37

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2015

 

 

2014

 

 

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

 

Six Months

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

$

2,099

 

 

$

1,273

 

 

$

1.65

 

 

$

3,392

 

 

$

1,303

 

 

$

2.60

 

Assumed exercise of stock options

 

-

 

 

 

5

 

 

 

 

 

 

 

-

 

 

 

9

 

 

 

 

 

Unvested restricted stock

 

-

 

 

 

4

 

 

 

 

 

 

 

-

 

 

 

4

 

 

 

 

 

Diluted

$

2,099

 

 

$

1,282

 

 

$

1.64

 

 

$

3,392

 

 

$

1,316

 

 

$

2.58

 

 

    

The number of outstanding options to purchase shares of Schlumberger common stock which were not included in the computation of diluted earnings per share, because to do so would have had an antidilutive effect, was as follows:

(Stated in millions)

 

 

 

 

 

 

 

 

2015

 

 

2014

 

Second Quarter

 

11

 

 

 

-

 

Six Months

 

13

 

 

 

5

 

 

 

9


 

4.   Inventories

A summary of inventories follows:  

(Stated in millions)

 

 

 

 

 

 

 

 

 

 

Jun. 30,

 

 

Dec. 31,

 

 

2015

 

 

2014

 

Raw, materials & field materials

$

2,774

 

 

$

2,666

 

Work in progress

 

225

 

 

 

273

 

Finished goods

 

1,582

 

 

 

1,689

 

 

$

4,581

 

 

$

4,628

 

 

 

 

5.   Fixed Assets

A summary of fixed assets follows:

(Stated in millions)

 

 

 

 

 

 

 

 

 

 

Jun. 30,

 

 

Dec. 31,

 

 

2015

 

 

2014

 

Property, plant & equipment

$

37,332

 

 

$

36,964

 

Less: Accumulated depreciation

 

22,484

 

 

 

21,568

 

 

$

14,848

 

 

$

15,396

 

 

Depreciation expense relating to fixed assets was as follows:

(Stated in millions)

 

 

 

 

 

 

 

 

 

 

2015

 

 

2014

 

Second Quarter

$

819

 

 

$

800

 

Six Months

 

1,646

 

 

 

1,593

 

 

 

 

 

6.   Multiclient Seismic Data

The change in the carrying amount of multiclient seismic data for the six months ended June 30, 2015 was as follows:

 

(Stated in millions)

 

 

 

 

 

Balance at December 31, 2014

$

793

 

Capitalized in period

 

221

 

Charged to expense

 

(101

)

Balance at June 30, 2015

$

913

 

 

 

 

7.   Goodwill

The changes in the carrying amount of goodwill by reporting unit for the six months ended June 30, 2015 were as follows:

 

 

(stated in millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reservoir

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Characterization

 

 

Drilling

 

 

Production

 

 

Total

 

Balance at December 31, 2014

$

3,812

 

 

$

8,488

 

 

$

3,187

 

 

$

15,487

 

Acquisitions

 

-

 

 

 

30

 

 

 

30

 

 

 

60

 

Impact of changes in exchange rates

 

(9

)

 

 

(6

)

 

 

(7

)

 

 

(22

)

Balance at June 30, 2015

$

3,803

 

 

$

8,512

 

 

$

3,210

 

 

$

15,525

 

 

 

 

10


8.   Intangible Assets

The gross book value, accumulated amortization and net book value of intangible assets were as follows:

 

 

(Stated in millions)

 

 

 

 

 

Jun. 30, 2015

 

 

Dec. 31, 2014

 

 

Gross

 

 

Accumulated

 

 

Net Book

 

 

Gross

 

 

Accumulated

 

 

Net Book

 

 

Book Value

 

 

Amortization

 

 

Value

 

 

Book Value

 

 

Amortization

 

 

Value

 

Technology/Technical Know-How

$

1,734

 

 

$

592

 

 

$

1,142

 

 

$

1,747

 

 

$

535

 

 

$

1,212

 

Tradenames

 

1,640

 

 

 

352

 

 

 

1,288

 

 

 

1,641

 

 

 

319

 

 

 

1,322

 

Customer Relationships

 

2,537

 

 

 

591

 

 

 

1,946

 

 

 

2,531

 

 

 

523

 

 

 

2,008

 

Other

 

416

 

 

 

267

 

 

 

149

 

 

 

380

 

 

 

268

 

 

 

112

 

 

$

6,327

 

 

$

1,802

 

 

$

4,525

 

 

$

6,299

 

 

$

1,645

 

 

$

4,654

 

 

Amortization expense charged to income was as follows:

(Stated in millions)

 

 

 

 

 

 

 

 

 

 

2015

 

 

2014

 

Second Quarter

$

93

 

 

$

86

 

Six Months

$

179

 

 

$

169

 

 

Based on the net book value of intangible assets at June 30, 2015, amortization charged to income for the subsequent five years is estimated to be: remainder of 2015—$174 million; 2016—$355 million; 2017—$347 million; 2018—$336 million; 2019—$327 million; and 2020—$306 million.

 

 

9.   Long-term Debt

A summary of Long-term Debt follows:

 

(Stated in millions)

 

 

 

 

 

 

 

 

 

 

Jun. 30,

 

 

Dec. 31,

 

 

2015

 

 

2014

 

3.30% Senior Notes due 2021

$

1,597

 

 

$

1,597

 

3.65% Senior Notes due 2023

 

1,496

 

 

 

1,495

 

1.95% Senior Notes due 2016

 

1,100

 

 

 

1,100

 

4.20% Senior Notes due 2021

 

1,100

 

 

 

1,100

 

1.25% Senior Notes due 2017

 

1,000

 

 

 

1,000

 

2.40% Senior Notes due 2022

 

999

 

 

 

999

 

1.50% Guaranteed Notes due 2019

 

576

 

 

 

628

 

2.65% Senior Notes due 2016

 

-

 

 

 

500

 

Commercial paper borrowings

 

510

 

 

 

1,538

 

Other

 

732

 

 

 

608

 

 

$

9,110

 

 

$

10,565

 

 

The estimated fair value of Schlumberger’s Long-term Debt at June 30, 2015 and December 31, 2014, based on quoted market prices, was $9.3 billion and $10.7 billion, respectively.

Borrowings under the commercial paper program at June 30, 2015 were $0.9 billion, of which $0.4 billion is classified within Long-term debt – current portion in the Consolidated Balance Sheet.  At December 31, 2014, borrowings under the commercial paper program were $1.5 billion, all of which were classified within Long-term Debt in the Consolidated Balance Sheet.  

 

 

10.   Derivative Instruments and Hedging Activities

Schlumberger is exposed to market risks related to fluctuations in foreign currency exchange rates and interest rates.  To mitigate these risks, Schlumberger utilizes derivative instruments.  Schlumberger does not enter into derivative transactions for speculative purposes.

11


Interest Rate Risk

Schlumberger is subject to interest rate risk on its debt and its investment portfolio.  Schlumberger maintains an interest rate risk management strategy that uses a mix of variable and fixed rate debt combined with its investment portfolio and occasionally interest rate swaps to mitigate the exposure to changes in interest rates.

During the fourth quarter of 2013, Schlumberger entered into a cross currency swap for a notional amount of €0.5 billion in order to hedge changes in the fair value of Schlumberger’s €0.5 billion 1.50% Guaranteed Notes due 2019.  Under the terms of this swap, Schlumberger will receive interest at a fixed rate of 1.50% on the euro notional amount and pay interest at a floating rate of three-month LIBOR plus approximately 64 basis points on the US dollar notional amount.

This cross currency swap is designated as a fair value hedge of the underlying debt.  This derivative instrument is marked to market with gains and losses recognized in income to largely offset the respective gains and losses recognized on changes in the fair value of the hedged debt.  

At June 30, 2015, Schlumberger had fixed rate debt aggregating $8.9 billion and variable rate debt aggregating $4.4 billion, after taking into account the effect of the swap.

Short-term investments and Fixed income investments, held to maturity, totaled $4.2 billion at June 30, 2015.  The carrying value of these investments approximated fair value, which was estimated using quoted market prices for those or similar investments.

Foreign Currency Exchange Rate Risk

As a multinational company, Schlumberger conducts its business in more than 85 countries. Schlumberger’s functional currency is primarily the US dollar.  However, outside the United States, a significant portion of Schlumberger’s expenses is incurred in foreign currencies.  Therefore, when the US dollar weakens (strengthens) in relation to the foreign currencies of the countries in which Schlumberger conducts business, the US dollar–reported expenses will increase (decrease).  

Schlumberger is exposed to risks on future cash flows to the extent that the local currency is not the functional currency and expenses denominated in local currency are not equal to revenues denominated in local currency.  Schlumberger is also exposed to risks on future cash flows relating to certain of its fixed rate debt which is denominated in currencies other than the functional currency. Schlumberger uses foreign currency forward contracts and foreign currency options to provide a hedge against a portion of these cash flow risks.  These contracts are accounted for as cash flow hedges, with the effective portion of changes in the fair value of the hedge recorded on the Consolidated Balance Sheet and in Accumulated other comprehensive loss.  Amounts recorded in Accumulated other comprehensive loss are reclassified into earnings in the same period or periods that the hedged item is recognized in earnings. The ineffective portion of changes in the fair value of hedging instruments, if any, is recorded directly to earnings.

At June 30, 2015, Schlumberger recognized a cumulative net $66 million loss in Accumulated other comprehensive loss relating to revaluation of foreign currency forward contracts and foreign currency options designated as cash flow hedges, the majority of which is expected to be reclassified into earnings within the next 12 months.

Schlumberger is exposed to changes in the fair value of assets and liabilities which are denominated in currencies other than the functional currency.  While Schlumberger uses foreign currency forward contracts and foreign currency options to economically hedge this exposure as it relates to certain currencies, these contracts are not designated as hedges for accounting purposes.  Instead, the fair value of the contracts is recorded on the Consolidated Balance Sheet, and changes in the fair value are recognized in the Consolidated Statement of Income as are changes in fair value of the hedged item.

At June 30, 2015, contracts were outstanding for the US dollar equivalent of $6.0 billion in various foreign currencies, of which $2.5 billion relate to hedges of debt denominated in currencies other than the functional currency.

12


The fair values of outstanding derivative instruments were as follows:

 

 

 

 

 

 

(Stated in millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair Value of Derivatives

 

 

Consolidated Balance Sheet Classification

 

Jun. 30,

 

 

Dec. 31,

 

 

 

 

2015

 

 

2014

 

 

 

Derivative Assets

 

 

 

 

 

 

 

 

 

Derivatives designated as hedges:

 

 

 

 

 

 

 

 

 

Foreign exchange contracts

$

5

 

 

$

3

 

 

Other current assets

Foreign exchange contracts

 

9

 

 

 

32

 

 

Other Assets

 

$

14

 

 

$

35

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivatives not designated as hedges:

 

 

 

 

 

 

 

 

 

Foreign exchange contracts

$

22

 

 

$

5

 

 

Other current assets

 

$

36

 

 

$

40

 

 

 

Derivative Liabilities

 

 

 

 

 

 

 

 

 

Derivatives designated as hedges:

 

 

 

 

 

 

 

 

 

Foreign exchange contracts

$

58

 

 

$

80

 

 

Accounts payable and accrued liabilities

Foreign exchange contracts

 

63

 

 

 

105

 

 

Other Liabilities

Cross currency swap

 

20

 

 

 

42

 

 

Other Liabilities

 

$

141

 

 

$

227

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivatives not designated as hedges:

 

 

 

 

 

 

 

 

 

Foreign exchange contracts

$

4

 

 

$

28

 

 

Accounts payable and accrued liabilities

 

$

145

 

 

$

255

 

 

 

 

 

The fair value of all outstanding derivatives was determined using a model with inputs that are observable in the market or that can be derived from, or corroborated by, observable data.

The effect of derivative instruments designated as fair value hedges and those not designated as hedges on the Consolidated Statement of Income was as follows:

 

 

 

 

 

 

 

 

 

(Stated in millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gain (Loss) Recognized in Income

 

 

 

 

Second Quarter

 

 

Six Months

 

 

 

 

2015

 

 

2014

 

 

2015

 

 

2014

 

 

Consolidated Statement

 of Income Classification

Derivatives designated as fair value hedges:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cross currency swap

$

19

 

 

$

(8

)

 

$

(51

)

 

$

(9

)

 

Interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivatives not designated as hedges:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign exchange contracts

$

57

 

 

$

(8

)

 

$

(61

)

 

$

5

 

 

Cost of revenue

 

 

 

 

11.   Income Taxes

Income before taxes subject to US and non-US income taxes was as follows:

 

(Stated in millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Second Quarter

 

 

Six Months

 

 

2015

 

 

2014

 

 

2015

 

 

2014

 

United States

$

115

 

 

$

625

 

 

$

280

 

 

$

1,150

 

Outside United States

 

1,321

 

 

 

1,702

 

 

 

2,450

 

 

 

3,254

 

 

$

1,436

 

 

$

2,327

 

 

$

2,730

 

 

$

4,404

 

13


 

Schlumberger recorded pretax charges of $439 million during the six months ended June 30, 2015 ($93 million of charges in the US and $346 million of charges outside the US). See Note 2 – Charges and Credits.

The components of net deferred tax assets (liabilities) were as follows:

(Stated in millions)

 

 

 

 

 

 

 

 

 

 

Jun. 30,

 

 

Dec. 31,

 

 

2015

 

 

2014

 

Postretirement benefits

$

299

 

 

$

327

 

Intangible assets

 

(1,470

)

 

 

(1,435

)

Investments in non-US subsidiaries

 

(188

)

 

 

(263

)

Other, net

 

194

 

 

 

219

 

 

$

(1,165

)

 

$

(1,152

)

 

The above deferred tax balances at June 30, 2015 and December 31, 2014 were net of valuation allowances relating to net operating losses in certain countries of $158 million and $190 million, respectively.

The components of consolidated Taxes on income were as follows:

(Stated in millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Second Quarter

 

 

Six Months

 

 

2015

 

 

2014

 

 

2015

 

 

2014

 

Current:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

United States-Federal

$

41

 

 

$

131

 

 

$

116

 

 

$

278

 

United States-State

 

9

 

 

 

12

 

 

 

14

 

 

 

19

 

Outside United States

 

302

 

 

 

355

 

 

 

550

 

 

 

691

 

 

 

352

 

 

 

498

 

 

 

680

 

 

 

988

 

Deferred:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

United States-Federal

$

(3

)

 

$

4

 

 

$

(29

)

 

$

11

 

United States-State

 

(1

)

 

 

3

 

 

 

(1

)

 

 

2

 

Outside United States

 

(25

)

 

 

1

 

 

 

(21

)

 

 

(26

)

Valuation Allowance

 

(21

)

 

 

-

 

 

 

(21

)

 

 

-

 

 

 

(50

)

 

 

8

 

 

 

(72

)

 

 

(13

)

 

$

302

 

 

$

506

 

 

$

608

 

 

$

975

 

 

 

A reconciliation of the US statutory federal tax rate of 35% to the consolidated effective income tax rate follows:

 

 

Second Quarter

 

 

Six Months

 

 

 

2015

 

 

2014

 

 

2015

 

 

2014

 

 

US federal statutory rate

 

35

%

 

 

35

%

 

 

35

%

 

 

35

%

 

Non-US income taxed at different rates

 

(13

)

 

 

(11

)

 

 

(12

)

 

 

(11

)

 

Charges and credits (See Note 2)

 

-

 

 

 

-

 

 

 

1

 

 

 

-

 

 

Other

 

(1

)

 

 

(2

)

 

 

(2

)

 

 

(2

)

 

 

 

21

%

 

 

22

%

 

 

22

%

 

 

22

%

 

 

 

 

12.   Contingencies

During 2015, Schlumberger resolved a previously disclosed investigation by the U.S. Department of Justice into past violations of US sanctions regarding its historical operations in Iran and Sudan that occurred between 2004 and 2010.  A non-US subsidiary of Schlumberger pleaded guilty to one criminal count of conspiracy to violate the International Emergency Economic Powers Act.  Under the terms of the plea agreement, Schlumberger paid a total amount of approximately $233 million in fines, penalties and assessments during the second quarter of 2015, which had been previously accrued.  This payment is reflected within Cash flows used in discontinued operations – operating activities in Schlumberger’s Consolidated Statement of Cash Flows.

Schlumberger and its subsidiaries are party to various other legal proceedings from time to time.  A liability is accrued when a loss is both probable and can be reasonably estimated. Management believes that the probability of a material loss with respect to these other

14


legal proceedings is remote.  However, litigation is inherently uncertain and it is not possible to predict the ultimate disposition of any of these proceedings.  

 

 

13.   Segment Information

 

 

 

 

 

 

(Stated in millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Second Quarter 2015

 

 

Second Quarter 2014

 

 

 

 

 

 

Income

 

 

 

 

 

 

Income

 

 

 

 

 

 

before

 

 

 

 

 

 

before

 

 

Revenue

 

 

Taxes

 

 

Revenue

 

 

Taxes

 

Reservoir Characterization

$

2,425

 

 

$

642

 

 

$

3,231

 

 

$

933

 

Drilling

 

3,511

 

 

 

685

 

 

 

4,653

 

 

 

981

 

Production

 

3,103

 

 

 

397

 

 

 

4,208

 

 

 

710

 

Eliminations & other

 

(29

)

 

 

(16

)

 

 

(38

)

 

 

(3

)

Pretax operating income

 

 

 

 

 

1,708

 

 

 

 

 

 

 

2,621

 

Corporate & other (1)

 

 

 

 

 

(199

)

 

 

 

 

 

 

(216

)

Interest income (2)

 

 

 

 

 

6

 

 

 

 

 

 

 

8

 

Interest expense (3)

 

 

 

 

 

(79

)

 

 

 

 

 

 

(86

)

 

$

9,010

 

 

$

1,436

 

 

$

12,054

 

 

$

2,327

 

 

 

(1)  Comprised principally of certain corporate expenses not allocated to the segments, stock-based compensation costs, amortization expense associated with certain intangible assets, certain centrally managed initiatives and other nonoperating items.

(2)  Interest income excludes amounts which are included in the segments’ income ($6 million in 2015; $5 million in 2014).

(3)   Interest expense excludes amounts which are included in the segments’ income ($7 million in 2015; $4 million in 2014).

 

 

 

 

 

 

(Stated in millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months 2015

 

 

Six Months 2014

 

 

 

 

 

 

Income

 

 

 

 

 

 

Income

 

 

 

 

 

 

before

 

 

 

 

 

 

before

 

 

Revenue

 

 

Taxes

 

 

Revenue

 

 

Taxes

 

Reservoir Characterization

$

4,977

 

 

$

1,297

 

 

$

6,214

 

 

$

1,726

 

Drilling

 

7,474

 

 

 

1,475

 

 

 

8,984

 

 

 

1,862

 

Production

 

6,870

 

 

 

946

 

 

 

8,193

 

 

 

1,433

 

Eliminations & other

 

(63

)

 

 

(17

)

 

 

(97

)

 

 

(32

)

Pretax operating income

 

 

 

 

 

3,701

 

 

 

 

 

 

 

4,989

 

Corporate & other (1)

 

 

 

 

 

(390

)

 

 

 

 

 

 

(417

)

Interest income (2)

 

 

 

 

 

14

 

 

 

 

 

 

 

15

 

Interest expense (3)

 

 

 

 

 

(156

)

 

 

 

 

 

 

(183

)

Charges and credits (4)

 

 

 

 

 

(439

)

 

 

 

 

 

 

-

 

 

$

19,258

 

 

$

2,730

 

 

$

23,294

 

 

$

4,404

 

 

(1) Comprised principally of certain corporate expenses not allocated to the segments, stock-based compensation costs, amortization expense associated with certain intangible assets, certain centrally managed initiatives and other nonoperating items.

(2) Interest income excludes amounts which are included in the segments’ income ($11 million in 2015; $10 million in 2014).

(3)   Interest expense excludes amounts which are included in the segments’ income ($13 million in 2015; $10 million in 2014).

(4) Charges and credits recorded during the six months of 2015 are described in detail in Note 2 to the Consolidated Financial Statements.  

 

 

 

15


14.   Pension and Other Postretirement Benefit Plans

Net pension cost for the Schlumberger pension plans included the following components:

 

(Stated in millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Second Quarter

 

 

Six Months

 

 

 

2015

 

 

2014

 

 

2015

 

 

2014

 

 

 

US

 

 

Int'l

 

 

US

 

 

Int'l

 

 

US

 

 

Int'l

 

 

US

 

 

Int'l

 

 

Service cost

$

21

 

 

$

50

 

 

$

16

 

 

$

29

 

 

$

43

 

 

$

99

 

 

$

35

 

 

$

60

 

 

Interest cost

 

44

 

 

 

75

 

 

 

35

 

 

 

56

 

 

 

85

 

 

 

149

 

 

 

76

 

 

 

128

 

 

Expected return on plan assets

 

(59

)

 

 

(129

)

 

 

(44

)

 

 

(88

)

 

 

(115

)

 

 

(257

)

 

 

(96

)

 

 

(200

)

 

Amortization of prior service cost

 

1

 

 

 

31

 

 

 

3

 

 

 

22

 

 

 

6

 

 

 

61

 

 

 

6

 

 

 

52

 

 

Amortization of net loss

 

31

 

 

 

36

 

 

 

24

 

 

 

32

 

 

 

62

 

 

 

74

 

 

 

44

 

 

 

52

 

 

 

$

38

 

 

$

63

 

 

$

34

 

 

$

51

 

 

$

81

 

 

$

126

 

 

$

65

 

 

$

92

 

 

 

The net periodic benefit cost for the Schlumberger US postretirement medical plan included the following components:

 

(Stated in millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Second Quarter

 

 

Six Months

 

 

2015

 

 

2014

 

 

2015

 

 

2014

 

Service cost

$

10

 

 

$

11

 

 

$

21

 

 

$

22

 

Interest cost

 

11

 

 

 

15

 

 

 

24

 

 

 

30

 

Expected return on plan assets

 

(13

)

 

 

(10

)

 

 

(26

)

 

 

(21

)

Amortization of prior service credit

 

(8

)

 

 

(1

)

 

 

(16

)

 

 

(2

)

Amortization of net loss

 

2

 

 

 

3

 

 

 

7

 

 

 

4

 

 

$

2

 

 

$

18

 

 

$

10

 

 

$

33

 

 

 

 

 

15. Accumulated Other Comprehensive Loss

Accumulated other comprehensive loss consists of the following:

 

 

(Stated in millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized

 

 

 

 

 

 

Pension and

 

 

 

 

 

 

Currency

 

 

Gain/(Loss) on

 

 

 

 

 

 

Other

 

 

 

 

 

 

Translation

 

 

Marketable

 

 

Cash Flow

 

 

Postretirement

 

 

 

 

 

 

Adjustments

 

 

Securities

 

 

Hedges

 

 

Benefit Plans

 

 

Total

 

Balance, January 1, 2015

$

(1,531

)

 

$

10

 

 

$

(96

)

 

$

(2,589

)

 

$

(4,206

)

Other comprehensive loss before reclassifications

 

(94

)

 

 

(10

)

 

 

(110

)

 

 

-

 

 

 

(214

)

Amounts reclassified from accumulated other comprehensive loss

 

-

 

 

 

-

 

 

 

140

 

 

 

194

 

 

 

334

 

Income taxes

 

-

 

 

 

-

 

 

 

-

 

 

 

(22

)

 

 

(22

)

Net other comprehensive income (loss)

 

(94

)

 

 

(10

)

 

 

30

 

 

 

172

 

 

 

98

 

Balance, June 30, 2015

$

(1,625

)

 

$

-

 

 

$

(66

)

 

$

(2,417

)

 

$

(4,108

)

16


 

 

(Stated in millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized

 

 

 

 

 

 

Pension and

 

 

 

 

 

 

Currency

 

 

Gain/(Loss) on

 

 

 

 

 

 

Other

 

 

 

 

 

 

Translation

 

 

Marketable

 

 

Cash Flow

 

 

Postretirement

 

 

 

 

 

 

Adjustments

 

 

Securities

 

 

Hedges

 

 

Benefit Plans

 

 

Total

 

Balance, January 1, 2014

$

(1,068

)

 

$

176

 

 

$

29

 

 

$

(1,691

)

 

$

(2,554

)

Other comprehensive (loss) income before reclassifications

 

(30

)

 

 

30

 

 

 

13

 

 

 

-

 

 

 

13

 

Amounts reclassified from accumulated other comprehensive loss

 

-

 

 

 

-

 

 

 

6

 

 

 

156

 

 

 

162

 

Income taxes

 

-

 

 

 

-

 

 

 

-

 

 

 

(20

)

 

 

(20

)

Net other comprehensive income (loss)

 

(30

)

 

 

30

 

 

 

19

 

 

 

136

 

 

 

155

 

Balance, June 30, 2014

$

(1,098

)

 

$

206

 

 

$

48

 

 

$

(1,555

)

 

$

(2,399

)

 

 

 

 

17


Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

Second Quarter 2015 Compared to First Quarter 2015

 

Product Groups

 

 

 

 

 

 

(Stated in millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Second Quarter 2015

 

 

First Quarter 2015

 

 

 

 

 

 

Income

 

 

 

 

 

 

Income

 

 

 

 

 

 

before

 

 

 

 

 

 

before

 

 

Revenue

 

 

Taxes

 

 

Revenue

 

 

Taxes

 

Reservoir Characterization

 

2,425

 

 

 

642

 

 

 

2,552

 

 

 

655

 

Drilling

 

3,511

 

 

 

685

 

 

 

3,963

 

 

 

790

 

Production

 

3,103

 

 

 

397

 

 

 

3,767

 

 

 

549

 

Eliminations & other

 

(29

)

 

 

(16

)

 

 

(34

)

 

 

(1

)

Pretax operating income

 

 

 

 

 

1,708

 

 

 

 

 

 

 

1,993

 

Corporate & other (1)

 

 

 

 

 

(199

)

 

 

 

 

 

 

(192

)

Interest income (2)

 

 

 

 

 

6

 

 

 

 

 

 

 

8

 

Interest expense (3)

 

 

 

 

 

(79

)

 

 

 

 

 

 

(76

)

Charges and credits (4)

 

 

 

 

 

-

 

 

 

 

 

 

 

(439

)

 

 

9,010

 

 

 

1,436

 

 

 

10,248

 

 

 

1,294

 

 

 

Geographic Areas

 

 

 

 

 

 

(Stated in millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Second Quarter 2015

 

 

First Quarter 2015

 

 

 

 

 

 

Income

 

 

 

 

 

 

Income

 

 

 

 

 

 

before

 

 

 

 

 

 

before

 

 

Revenue

 

 

Taxes

 

 

Revenue

 

 

Taxes

 

North America

 

2,361

 

 

 

242

 

 

 

3,222

 

 

 

416

 

Latin America

 

1,537

 

 

 

343

 

 

 

1,648

 

 

 

354

 

Europe/CIS/Africa

 

2,413

 

 

 

513

 

 

 

2,538

 

 

 

532

 

Middle East & Asia

 

2,575

 

 

 

740

 

 

 

2,703

 

 

 

774

 

Eliminations & other

 

124

 

 

 

(130

)

 

 

137

 

 

 

(83

)

Pretax operating income

 

 

 

 

 

1,708

 

 

 

 

 

 

 

1,993

 

Corporate & other (1)

 

 

 

 

 

(199

)

 

 

 

 

 

 

(192

)

Interest income (2)

 

 

 

 

 

6

 

 

 

 

 

 

 

8

 

Interest expense (3)

 

 

 

 

 

(79

)

 

 

 

 

 

 

(76

)

Charges and credits (4)

 

 

 

 

 

-

 

 

 

 

 

 

 

(439

)

 

 

9,010

 

 

 

1,436

 

 

 

10,248

 

 

 

1,294

 

 

 

(1)  Comprised principally of certain corporate expenses not allocated to the segments, stock-based compensation costs, amortization expense associated with certain intangible assets, certain centrally managed initiatives and other nonoperating items.

(2)  Interest income excludes amounts which are included in the segments’ income ($6 million in the second quarter 2015; $5 million   in the first quarter in 2015).

(3)  Interest expense excludes amounts which are included in the segments’ income ($7 million in the second quarter 2015; $6 million in the first quarter 2015).

(4) Charges and credits recorded during the first quarter of 2015 are described in detail in Note 2 to the Consolidated Financial Statements.  

 

18


Second-quarter 2015 revenue of $9.0 billion was 12% lower sequentially while pretax operating income of $1.7 billion was 14% lower sequentially.  Pretax operating margin decreased 49 basis points (bps) to 19.0%.  

 

North America second-quarter revenue of $2.4 billion decreased 27% sequentially. In the US and Western Canada, revenue fell on lower pressure pumping activity and persistent pricing pressure as the land rig count dropped 40%, exacerbated by the early onset of the Canadian spring break-up. In the US Gulf of Mexico, revenue declined as the deepwater rig count decreased and activity shifted from exploration to development and completion.  On land, pricing fell to unsustainable levels in some basins leading to pressure pumping equipment being stacked and crews reassigned. In other basins, hydraulic fracturing fleet deployment was maintained in pursuit of market share and new technology opportunities.

North America pretax operating margin declined 268 bps sequentially to 10.2% on decreased pressure pumping activity and pricing weakness on land. Offshore operating margin declined due to an unfavorable revenue mix as a result of the shift from high-margin deepwater exploration work to development and completion activity.  Despite the severity of the revenue decline in North America, focused execution and prompt action on cost management limited the sequential margin decline.

Revenue for the International Areas of $6.5 billion decreased 5% sequentially, driven by customer budget cuts and continued pricing concessions. Middle East & Asia Area revenue of $2.6 billion declined 5% sequentially, mainly due to lower activity in Asia-Pacific and Australia from customer exploration budget cuts.  Activity in India declined on project delays while activities in Iraq and China remained muted.  The Middle East GeoMarkets remained robust on higher activity, particularly in Saudi Arabia, the United Arab Emirates and Kuwait, but revenue in the region declined slightly as pricing concessions affected results for a full quarter.   Europe/CIS/Africa Area revenue of $2.4 billion decreased 5% sequentially, primarily due to Sub-Saharan Africa as exploration decreased and offshore rigs demobilized. Customer budget pressure in Angola and delays in Nigeria also affected results.  Russia rebounded on a seasonal increase in conventional land activity while the Russian ruble slightly recovered. North Sea revenue declined on lower rig count, pricing pressure and a continued shift from exploration to development activity.  North Africa activity increased slightly while work in Libya continued to be limited as the security situation remained unchanged. Revenue in the Latin America Area of $1.5 billion dropped 7% on lower activity in Mexico, Brazil and Colombia due to sustained customer budget cuts.  This reduction was partially offset by strong exploration and a ramp-up of activity in the Venezuela, Trinidad and Tobago GeoMarket.  Activities in Argentina and Ecuador remained resilient.

International Area pretax operating margin of 24.5% increased 35 bps sequentially.  Middle East & Asia pretax operating margin increased slightly by 8 bps to 28.7%, Latin America expanded 81 bps to 22.3%, and Europe/CIS/Africa grew 29 bps to 21.3%.  

Reservoir Characterization Group

Reservoir Characterization Group revenue of $2.4 billion declined 5% sequentially, primarily due to sustained cuts in exploration spending that impacted Wireline and Testing Services activities in Europe/CIS & Africa, the US Gulf of Mexico, and Australia. This decline was partially offset by increased software license sales and by WesternGeco revenue that improved slightly on higher land seismic activity in North Africa and the United Arab Emirates.

Pretax operating margin of 26.5% was 84 bps higher sequentially as an unfavorable revenue mix was offset by increased higher-margin software license sales.

 

Drilling Group

Drilling Group revenue of $3.5 billion decreased 11% sequentially, primarily due to a further drop in rig count in North America that impacted activities of Drilling & Measurements and M-I SWACO.  Lower drilling activity in Sub-Saharan Africa, Australia and Colombia also contributed to the decline.

Pretax operating margin of 19.5% declined 44 bps sequentially.  Despite the revenue decline, prompt action on cost management limited the operating margin decline.

Production Group

Production Group revenue of $3.1 billion decreased 18% sequentially with more than 80% of the decrease attributable to North America land.  Pressure pumping activity continued to fall and pricing pressure increased as the land rig count in North America extended its decline.  

Pretax operating margin of 12.8% declined 179 bps sequentially as lower activity and increasing pricing pressure continued during the quarter. Despite the severe revenue decline, prompt action on cost management and alignment of resources with activity limited the operating margin decline.

19


Second Quarter 2015 Compared to Second Quarter 2014

 

Product Groups

 

 

 

 

 

 

(Stated in millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Second Quarter 2015

 

 

Second Quarter 2014

 

 

 

 

 

 

Income

 

 

 

 

 

 

Income

 

 

 

 

 

 

before

 

 

 

 

 

 

before

 

 

Revenue

 

 

Taxes

 

 

Revenue

 

 

Taxes

 

Reservoir Characterization

$

2,425

 

 

$

642

 

 

$

3,231

 

 

$

933

 

Drilling

 

3,511

 

 

 

685

 

 

 

4,653

 

 

 

981

 

Production

 

3,103

 

 

 

397

 

 

 

4,208

 

 

 

710

 

Eliminations & other

 

(29

)

 

 

(16

)

 

 

(38

)

 

 

(3

)

Pretax operating income

 

 

 

 

 

1,708

 

 

 

 

 

 

 

2,621

 

Corporate & other (1)

 

 

 

 

 

(199

)

 

 

 

 

 

 

(216

)

Interest income (2)

 

 

 

 

 

6

 

 

 

 

 

 

 

8

 

Interest expense (3)

 

 

 

 

 

(79

)

 

 

 

 

 

 

(86

)

 

$

9,010

 

 

$

1,436

 

 

$

12,054

 

 

$

2,327

 

 

 

Geographic Areas

 

 

 

 

 

 

 

(Stated in millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Second Quarter 2015

 

 

Second Quarter 2014

 

 

 

 

 

 

Income

 

 

 

 

 

 

Income

 

 

 

 

 

 

before

 

 

 

 

 

 

before

 

 

Revenue

 

 

Taxes

 

 

Revenue

 

 

Taxes

 

North America

$

2,361

 

 

$

242

 

 

$

3,888

 

 

$

700

 

Latin America

 

1,537

 

 

 

343

 

 

 

1,852

 

 

 

393

 

Europe/CIS/Africa

 

2,413

 

 

 

513

 

 

 

3,268

 

 

 

723

 

Middle East & Asia

 

2,575

 

 

 

740

 

 

 

2,966

 

 

 

826

 

Eliminations & other

 

124

 

 

 

(130

)

 

 

80

 

 

 

(21

)

Pretax operating income

 

 

 

 

 

1,708

 

 

 

 

 

 

 

2,621

 

Corporate & other (1)

 

 

 

 

 

(199

)

 

 

 

 

 

 

(216

)

Interest income (2)

 

 

 

 

 

6

 

 

 

 

 

 

 

8

 

Interest expense (3)

 

 

 

 

 

(79

)

 

 

 

 

 

 

(86

)

 

$

9,010

 

 

$

1,436

 

 

$

12,054

 

 

$

2,327

 

 

(1)  Comprised principally of certain corporate expenses not allocated to the segments, stock-based compensation costs, amortization expense associated with certain intangible assets, certain centrally managed initiatives and other nonoperating items.

(2) Interest income excludes amounts which are included in the segments’ income ($6 million in 2015; $5 million in 2014).

(3) Interest expense excludes amounts which are included in the segments’ income ($7 million in 2015; $4 million in 2014).

    

Second-quarter 2015 revenue of $9.0 billion was 25% lower year-on-year while pretax operating income of $1.7 billion was lower by 35%. Pretax operating margin decreased 278 bps to 19.0%

North America second-quarter 2015 revenue of $2.4 billion decreased 39% year-on-year mainly from land, while offshore was down slightly compared to the same period of 2014.  The decrease in land was driven by severe activity and pricing declines as customer spending was cut and the average land rig count declined by more than 50%.  Offshore activity in the US Gulf of Mexico remained resilient, although revenue did decline as a result of a steady change in service mix from exploration towards development driven by customer budget cuts.

North America pretax operating margin declined 777 bps year-on-year to 10.2% on decreased pressure pumping activity and pricing weakness on land.  

20


Revenue for the International Areas of $6.5 billion decreased 19% year-on-year as a result of lower activities in a number of GeoMarkets, primarily offshore and in certain land markets, due to customer budget cuts and pricing concessions as customers responded to lower commodity prices.  Revenue was also impacted by the fall of certain currencies against the US dollar. Europe/CIS/Africa Area revenue decreased 26%, mainly due to the weakness in the Russian ruble.  Exploration activities in the UK and Norway fell as customer spending decelerated.  In Sub-Saharan Africa, offshore rigs demobilized as exploration activity decreased.  In North Africa, work progressed slowly while Libya activity remained muted as onshore operations were limited due to security concerns.  Revenue in the Latin America Area declined 17% due to decreased activity in Mexico, Brazil and Colombia as a result of sustained budget cuts.  This reduction was partially offset by resilient activity in Argentina, and a ramp-up of activity in the Venezuela, Trinidad and Tobago GeoMarket which was offset by the impact of the devaluation of the Venezuela bolivar.  Middle East & Asia Area revenue decreased 13% due to a double-digit drop in revenue in the Asia-Pacific region, including Australia.  This decrease was offset, in part, by robust activity in the Gulf Cooperation Council countries in the Middle East, particularly in Saudi Arabia and Kuwait, while Iraq activity continued to decline.

International Area pretax operating margin of 24.5% increased 44 bps year-on-year.  Middle East & Asia pretax operating margin increased 87 bps to 28.7%, Latin America expanded 111 bps to 22.3%, and Europe/CIS/Africa declined 85 bps to 21.3%.  Despite the revenue decline and increasingly unfavorable shift in revenue mix, pretax operating margins expanded as a result of proactive cost and resource management.

Reservoir Characterization Group

Second-quarter 2015 revenue of $2.4 billion was 25% lower than the same period last year primarily due to sustained cuts in exploration and discretionary spending that impacted Wireline Technologies and software sales.  Revenue also declined due to lower WesternGeco marine vessel utilization and reduced multiclient sales.

Year-on-year, pretax operating margin decreased 239 bps to 26.5% as a result of reduced high-margin multiclient and software sales as well as an unfavorable overall revenue mix due to the fall in high-margin exploration activity which impacted Wireline Technologies.

Drilling Group

Second-quarter 2015 revenue of $3.5 billion was 25% lower than the previous year, primarily due to the severe drop in rig count in North America that mainly affected Drilling & Measurements and M-I SWACO Technologies and unfavorable currency effects in Russia and Venezuela.

Year-on-year, pretax operating margin decreased 157 bps to 19.5%, primarily due to a decrease in higher-margin activities of Drilling & Measurements.  Despite the revenue decline, prompt action on cost management and the benefit of a local cost structure minimized the impact of  unfavorable currency effects on pretax operating income, which helped limit the operating margin decline.

Production Group

Second-quarter 2015 revenue of $3.1 billion decreased 26% year-on-year, with more than 70% of the decline attributable to Well Services pressure pumping technologies as a result of the fall in activity and pricing pressure as the land rig count declined dramatically in North America.

Year-on-year, pretax operating margin decreased 406 bps to 12.8% as lower activity and increasing pricing pressure continued in North America land.

21


Six Months 2015 Compared to Six Months 2014

 

Product Groups

 

 

 

 

 

(Stated in millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months 2015

 

 

Six Months 2014

 

 

 

 

 

 

Income

 

 

 

 

 

 

Income

 

 

 

 

 

 

before

 

 

 

 

 

 

before

 

 

Revenue

 

 

Taxes

 

 

Revenue

 

 

Taxes

 

Reservoir Characterization

$

4,977

 

 

$

1,297

 

 

$

6,214

 

 

$

1,726

 

Drilling

 

7,474

 

 

 

1,475

 

 

 

8,984

 

 

 

1,862

 

Production

 

6,870

 

 

 

946

 

 

 

8,193

 

 

 

1,433

 

Eliminations & other

 

(63

)

 

 

(17

)

 

 

(97

)

 

 

(32

)

Pretax operating income

 

 

 

 

 

3,701

 

 

 

 

 

 

 

4,989

 

Corporate & other (1)

 

 

 

 

 

(390

)

 

 

 

 

 

 

(417

)

Interest income (2)

 

 

 

 

 

14

 

 

 

 

 

 

 

15

 

Interest expense (3)

 

 

 

 

 

(156

)

 

 

 

 

 

 

(183

)

Charges and credits (4)

 

 

 

 

 

(439

)

 

 

 

 

 

 

-

 

 

$

19,258

 

 

$

2,730

 

 

$

23,294

 

 

$

4,404

 

 

Geographic Areas

 

 

 

 

 

(Stated in millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months 2015

 

 

Six Months 2014

 

 

 

 

 

 

Income

 

 

 

 

 

 

Income

 

 

 

 

 

 

before

 

 

 

 

 

 

before

 

 

Revenue

 

 

Taxes

 

 

Revenue

 

 

Taxes

 

North America

$

5,584

 

 

$

658

 

 

$

7,572

 

 

$

1,383

 

Latin America

 

3,184

 

 

 

697

 

 

 

3,610

 

 

 

764

 

Europe/CIS/Africa

 

4,951

 

 

 

1,046

 

 

 

6,149

 

 

 

1,308

 

Middle East & Asia

 

5,278

 

 

 

1,514

 

 

 

5,811

 

 

 

1,575

 

Eliminations & other

 

261

 

 

 

(214

)

 

 

152

 

 

 

(41

)

Pretax operating income

 

 

 

 

 

3,701

 

 

 

 

 

 

 

4,989

 

Corporate & other (1)

 

 

 

 

 

(390

)

 

 

 

 

 

 

(417

)

Interest income (2)

 

 

 

 

 

14

 

 

 

 

 

 

 

15

 

Interest expense (3)

 

 

 

 

 

(156

)

 

 

 

 

 

 

(183

)

Charges and credits (4)

 

 

 

 

 

(439

)

 

 

 

 

 

 

-

 

 

$

19,258

 

 

$

2,730

 

 

$

23,294

 

 

$

4,404

 

 

(1)  Comprised principally of certain corporate expenses not allocated to the segments, stock-based compensation costs, amortization expense associated with certain intangible assets, certain centrally managed initiatives and other nonoperating items.

(2)  Interest income excludes amounts which are included in the segments’ income ($11 million in 2015; $10 million in 2014).

(3)  Interest expense excludes amounts which are included in the segments’ income ($13 million in 2015; $10 million in 2014).

(4)  Charges and credits recorded during the first six months of 2015 are described in detail in Note 2 to the Consolidated Financial Statements.  

 

Six-month 2015 revenue of $19.3 billion was 17% lower as compared to the same period last year while pretax operating income of $3.7 billion was lower by 26%.  Pretax operating margin decreased 220 bps to 19.2%.

North America six-month 2015 revenue of $5.6 billion decreased 26% year-on-year mainly from land, while offshore was down slightly compared to the same period of 2014. The decrease in land was driven by severe activity and pricing declines as customer spending was cut and the average land rig count declined by more than 40%.  Offshore activity in the US Gulf of Mexico remained resilient, although revenue did decline as a result of a steady change in service mix from exploration towards development driven by customer budget cuts.

22


North America pretax operating margin declined 648 bps year-on-year to 11.8% on decreased pressure pumping activity and pricing weakness on land.  

Revenue for the International Areas of $13.4 billion decreased 14% year-on-year due to customer budget cuts and pricing concessions as customers responded to lower commodity prices.  Revenue was also impacted by the fall of certain currencies against the US dollar. Europe/CIS/Africa Area revenue decreased 20%, mainly due to the weakness in the Russian ruble.  Exploration activities in the UK and Norway fell as customer spending decelerated.  In Sub-Saharan Africa, offshore rigs demobilized as exploration decreased.  In North Africa, work has progressed slowly while Libya activity remained muted as onshore operations were limited due to security concerns.  Revenue in the Latin America Area declined 12% due to decreased activity in Mexico, Brazil and Colombia as a result of sustained budget cuts.  This reduction was partially offset by resilient activity in Argentina, and a ramp-up of activity in the Venezuela, Trinidad and Tobago GeoMarket, which was offset by the devaluation of the Venezuela bolivar.  Middle East & Asia Area revenue decreased 9% due to a double-digit drop in revenue in the Asia-Pacific region, including Australia.  This decrease was offset, however, by robust activity in the Gulf Cooperation Council countries in the Middle East, particularly in Saudi Arabia and Kuwait, while Iraq activity continued to decline.

International Area pretax operating margin of 24.3% increased 85 bps year-on-year.  Middle East & Asia pretax operating margin increased 157 bps to 28.7%, Latin America expanded 73 bps to 21.9%, and Europe/CIS/Africa declined 16 bps to 21.1%.  Despite the revenue decline and increasingly unfavorable shift in revenue mix, pretax operating margins expanded as a result of proactive cost and resource management.

Reservoir Characterization Group

Six-month 2015 revenue of $5.0 billion was 20% lower than the same period last year primarily due to sustained cuts in exploration and discretionary spending that impacted Wireline Services and software sales.  Revenue also decreased due to lower WesternGeco marine vessel utilization and reduced multiclient sales.

Year-on-year, pretax operating margin decreased 172 bps to 26.1% as a result of reduced high-margin multiclient and software sales as well as an unfavorable overall revenue mix from the fall in high-margin exploration activity.

Drilling Group

Six-month 2015 revenue of $7.5 billion was 17% lower than the previous year primarily due to the severe drop in rig count in North America that mainly affected Drilling & Measurements and M-I SWACO technologies and unfavorable currency effects in Russia and Venezuela.

Year-on-year, pretax operating margin decreased 99 bps to 19.7% primarily due to a decrease in higher-margin activities of Drilling & Measurements.  Despite the revenue decline, prompt action on cost management and the benefit of a local cost structure minimized the impact of unfavorable currency effects on pretax operating income, which helped limit the operating margin decline.

Production Group

Six-month 2015 revenue of $6.9 billion decreased 16% year-on-year, with more than 75% of the decline attributable to Well Services pressure pumping technologies as a result of the fall in activity and pricing pressure as the land rig count declined dramatically in North America.

Year-on-year, pretax operating margin decreased 371 bps to 13.8% as lower activity and increasing pricing pressure continued in North America land.  

Interest and Other Income

Interest & other income consisted of the following:

 

(Stated in millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Second Quarter

 

 

Six Months

 

 

2015

 

 

2014

 

 

2015

 

 

2014

 

Equity in net earnings of affiliated companies

$

35

 

 

$

51

 

 

$

71

 

 

$

115

 

Interest income

 

12

 

 

 

13

 

 

 

25

 

 

 

26

 

 

$

47

 

 

$

64

 

 

$

96

 

 

$

141

 

 

23


Other

Research & engineering and General & administrative expenses, as a percentage of Revenue, for the second quarter and six months ended June 30, 2015 and 2014 were as follows:

 

 

Second Quarter

 

 

Six Months

 

 

2015

 

 

2014

 

 

2015

 

 

2014

 

Research & engineering

 

3.1

%

 

 

2.6

%

 

 

2.8

%

 

 

2.5

%

General & administrative

 

1.3

%

 

 

1.0

%

 

 

1.2

%

 

 

1.0

%

 

The effective tax rate for the second quarter of 2015 was 21.1% compared to 21.7% for the same period of the prior year.  The decrease in the effective tax rate was primarily attributable to the geographic mix of earnings, as Schlumberger generated a smaller portion of its pretax earnings in North America during the second quarter of 2015 as compared to the same period last year.

The effective tax rate for the six months ended June 30, 2015 was 22.3% compared to 22.1% for the same period of 2014. The effective tax rate for the six months ended June 30, 2015 was impacted by the charges and credits described in Note 2 to the Consolidated Financial Statements. Excluding the impact of these charges and credits, the effective tax rate for the six months ended June 30, 2015 would have been 21.0%. The year-on-year decrease is attributable to the geographic mix of earnings as Schlumberger generated a smaller portion of its pretax earnings in North America during the six months ended June 30, 2015 as compared to the same period last year.

Charges and Credits

Schlumberger recorded significant charges and credits in continuing operations during the first quarter of 2015.  These charges and credits, which are summarized below, are more fully described in Note 2 to the Consolidated Financial Statements.

 

 

(Stated in millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pretax

 

 

Tax

 

 

Net

 

 

Classification

Workforce reduction

$

390

 

 

$

56

 

 

$

334

 

 

Restructuring & other

Currency devaluation loss in Venezuela

 

49

 

 

 

-

 

 

 

49

 

 

Restructuring & other

 

$

439

 

 

$

56

 

 

$

383

 

 

 

 

There were no charges or credits recorded during the second quarter of 2015 or the first six months of 2014.  

Discontinued Operations

In 2009, the U.S. Department of Justice began an investigation into past violations of US sanctions regarding Schlumberger’s historical operations in Iran and Sudan that occurred between 2004 and 2010.  During the second quarter of 2014, these discussions progressed to a point whereby Schlumberger determined that it was appropriate to increase its liability for this contingency. Accordingly, Schlumberger recorded a $205 million charge, which is reflected within Loss from discontinued operations in the Consolidated Statement of Income during the second quarter of 2014.  As further discussed in Note 12 to the Consolidated Financial Statements, during 2015, a non-US subsidiary of Schlumberger pleaded guilty to one criminal count of conspiracy to violate the International Emergency Economic Powers Act.  Under the terms of the plea agreement, Schlumberger paid a total amount of approximately $233 million in fines, penalties and assessments during the second quarter of 2015, which had been previously accrued.

 

 

 

24


Net Debt

Net Debt represents gross debt less cash, short-term investments and fixed income investments, held to maturity. Management believes that Net Debt provides useful information regarding the level of Schlumberger indebtedness by reflecting cash and investments that could be used to repay debt.

Details of Net Debt follow:

(Stated in millions)

 

 

 

 

 

 

 

 

 

 

Six Months ended Jun. 30,

 

 

2015

 

 

2014

 

Income from continuing operations

$

2,122

 

 

$

3,429

 

Restructuring and other charges

 

439

 

 

 

-

 

Depreciation and amortization (1)

 

2,089

 

 

 

1,997

 

Earnings of equity method investments, less dividends received

 

(65

)

 

 

(90

)

Pension and other postretirement benefits expense

 

217

 

 

 

190

 

Stock-based compensation expense

 

167

 

 

 

162

 

Pension and other postretirement benefits funding

 

(214

)

 

 

(127

)

Increase in working capital

 

(837

)

 

 

(1,090

)

Other

 

166

 

 

 

(252

)

Cash flow from operations

 

4,084

 

 

 

4,219

 

Capital expenditures

 

(1,193

)

 

 

(1,786

)

SPM investments

 

(222

)

 

 

(377

)

Multiclient seismic data capitalized

 

(221

)

 

 

(154

)

Free cash flow (2)

 

2,448

 

 

 

1,902

 

Dividends paid

 

(1,151

)

 

 

(2,074

)

Proceeds from employee stock plans

 

256

 

 

 

492

 

Stock repurchase program

 

(1,239

)

 

 

(932

)

 

 

314

 

 

 

(612

)

Business acquisitions and investments, net of cash acquired plus debt assumed

 

(206

)

 

 

(964

)

Discontinued operations - settlement with U.S. Department of Justice

 

(233

)

 

 

-

 

Other

 

(86

)

 

 

(47

)

Increase in Net Debt

 

(211

)

 

 

(1,623

)

Net Debt, Beginning of period

 

(5,387

)

 

 

(4,443

)

Net Debt, End of period

$

(5,598

)

 

$

(6,066

)

 

(1) 

Includes depreciation of property, plant and equipment and amortization of intangible assets, multiclient seismic data costs and SPM investments.

(2) 

“Free cash flow” represents cash flow from operations less capital expenditures, SPM investments and multiclient seismic data capitalized.  Management believes that this is an important measure because it represents funds available to reduce debt and pursue opportunities that enhance shareholder value, such as acquisitions and returning cash to shareholders through stock repurchases and dividends.

 

(Stated in millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Jun. 30,

 

 

Jun. 30,

 

 

Dec. 31,

 

Components of Net Debt

2015

 

 

2014

 

 

2014

 

Cash

$

3,541

 

 

$

2,267

 

 

$

3,130

 

Short-term investments

 

3,733

 

 

 

4,432

 

 

 

4,371

 

Fixed income investments, held to maturity

 

469

 

 

 

480

 

 

 

442

 

Long-term debt – current portion

 

(2,092

)

 

 

(837

)

 

 

(1,244

)

Short-term borrowings

 

(2,139

)

 

 

(668

)

 

 

(1,521

)

Long-term debt

 

(9,110

)

 

 

(11,740

)

 

 

(10,565

)

 

$

(5,598

)

 

$

(6,066

)

 

$

(5,387

)

 

Key liquidity events during the first six months of 2015 and 2014 included:

·

On July 18, 2013, the Board approved a $10 billion share repurchase program to be completed at the latest by June 30, 2018.  Schlumberger had repurchased $7.6 billion of shares under this new share repurchase program as of June 30, 2015.  

25


The following table summarizes the activity under this share repurchase program:

 

(Stated in millions, except per share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total cost

 

 

Total number

 

 

Average price

 

 

of shares

 

 

of shares

 

 

paid per

 

 

purchased

 

 

purchased

 

 

share

 

Six months ended June 30, 2015

$

1,239

 

 

 

14.4

 

 

$

85.80

 

Six months ended June 30, 2014

$

2,074

 

 

 

21.5

 

 

$

96.50

 

 

·

Capital expenditures were $1.2 billion during the first six months of 2015 compared to $1.8 billion during the first six months of 2014.  Capital expenditures for full-year 2015 are expected to be approximately $2.5 billion, as compared to expenditures of $4.0 billion in 2014.

At times in recent periods, Schlumberger has experienced delays in payments from its national oil company customer in Venezuela. Schlumberger operates in more than 85 countries.  At June 30, 2015, only four of those countries (including Venezuela) individually accounted for greater than 5% of Schlumberger’s accounts receivable balance, of which only one (the United States) was greater than 10%.  

On January 20, 2015, Schlumberger announced that it has entered into an agreement to acquire a minority ownership of approximately 46% in Eurasia Drilling Company Limited, the largest provider of onshore drilling services in Russia.  The total cost of this transaction, including an option which will allow Schlumberger, at its election, to purchase the remaining shares during a two-year period commencing on the third anniversary of the closing of the transaction, is approximately $1.7 billion in cash.  This transaction is expected to close during the second half of 2015.

As of June 30, 2015, Schlumberger had $7.3 billion of cash and short-term investments on hand.  Schlumberger had separate committed debt facility agreements aggregating $3.8 billion with commercial banks, of which $2.9 billion was available and unused as of June 30, 2015.  The $3.8 billion of committed debt facility agreements included $3.5 billion of committed facilities that support commercial paper programs.  Schlumberger believes that these amounts are sufficient to meet future business requirements for at least the next 12 months.

Borrowings under the commercial paper programs at June 30, 2015 were $0.9 billion.

Other Matters

As previously disclosed, during the second quarter of 2013, Schlumberger completed the wind down of its service operations in Iran.  Prior to this, certain non-U.S. subsidiaries of Schlumberger provided oilfield services to the National Iranian Oil Company and certain of its affiliates (“NIOC”).  The results of this business were reclassified as a discontinued operation.

Schlumberger’s residual transactions or dealings with the government of Iran in the quarter consisted of payments of taxes and other typical governmental charges.  Two non-U.S. subsidiaries of Schlumberger have depository accounts at the Dubai branch of Bank Saderat Iran (“Saderat”) and at Bank Tejarat (“Tejarat”) in Tehran for the deposit by NIOC of amounts owed to non-US subsidiaries of Schlumberger for prior services rendered in Iran.  One non-U.S. subsidiary also maintains an account at Tejarat for payment of local expenses such as taxes and utilities.  Schlumberger anticipates that it will discontinue its dealings with Saderat and Tejarat following the receipt of all amounts owed to Schlumberger for prior services rendered in Iran.

FORWARD-LOOKING STATEMENTS

This Form 10-Q and other statements we make, contain “forward-looking statements” within the meaning of the federal securities laws, which include any statements that are not historical facts, such as our forecasts or expectations regarding business outlook; growth for Schlumberger as a whole and for each of its segments (and for specified products or geographic areas within each segment); oil and natural gas demand and production growth; oil and natural gas prices; improvements in operating procedures and technology; capital expenditures by Schlumberger and the oil and gas industry; the business strategies of Schlumberger’s customers; the success of Schlumberger’s acquisitions, joint ventures and alliances; future global economic conditions; and future results of operations. These statements are subject to risks and uncertainties, including, but not limited to, global economic conditions; changes in exploration and production spending by Schlumberger’s customers and changes in the level of oil and natural gas exploration and development; general economic, political and business conditions in key regions of the world, including in Russia and the Ukraine; pricing erosion; weather and seasonal factors; operational delays; production declines; changes in government regulations and regulatory requirements, including those related to offshore oil and gas exploration, radioactive sources, explosives, chemicals, hydraulic fracturing services and climate-related initiatives; the inability of technology to meet new challenges in exploration; and other risks and uncertainties detailed in our second-quarter 2015 earnings release, our most recent Form 10-K, and other filings that we make with the Securities

26


and Exchange Commission. If one or more of these or other risks or uncertainties materialize (or the consequences of any such development changes), or should our underlying assumptions prove incorrect, actual outcomes may vary materially from those reflected in our forward-looking statements. Schlumberger disclaims any intention or obligation to update publicly or revise such statements, whether as a result of new information, future events or otherwise.

 

 

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

For quantitative and qualitative disclosures about market risk affecting Schlumberger, see Item 7A, “Quantitative and Qualitative Disclosures about Market Risk,” of the Schlumberger Annual Report on Form 10-K for the fiscal year ended December 31, 2014. Schlumberger’s exposure to market risk has not changed materially since December 31, 2014.

Item 4. Controls and Procedures.

Schlumberger has carried out an evaluation under the supervision and with the participation of Schlumberger’s management, including the Chief Executive Officer (“CEO”) and the Chief Financial Officer (“CFO”), of the effectiveness of Schlumberger’s “disclosure controls and procedures” (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)) as of the end of the period covered by this report. Based on this evaluation, the CEO and the CFO have concluded that, as of the end of the period covered by this report, Schlumberger’s disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in the reports that Schlumberger files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Schlumberger’s disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is accumulated and communicated to its management, including the CEO and the CFO, as appropriate, to allow timely decisions regarding required disclosure. There was no change in Schlumberger’s internal control over financial reporting during the quarter to which this report relates that has materially affected, or is reasonably likely to materially affect, Schlumberger’s internal control over financial reporting.

 

 

 

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PART II. OTHER INFORMATION

 

Item 1. Legal Proceedings.

The information with respect to this Item 1 is set forth under Note 12—Contingencies, in the Consolidated Financial Statements.

 

Item 1A. Risk Factors.

As of the date of this filing, there have been no material changes from the risk factors previously disclosed in Part 1, Item 1A, of Schlumberger’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Unregistered Sales of Equity Securities

None.

Issuer Repurchases of Equity Securities

On July 18, 2013, the Schlumberger Board of Directors approved a $10 billion share repurchase program for shares of Schlumberger common stock, to be completed at the latest by June 30, 2018.  

Schlumberger’s common stock repurchase program activity for the three months ended June 30, 2015 was as follows:

 

 

(Stated in thousands, except per share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total number of shares purchased

 

 

Average price paid per share

 

 

Total number of shares purchased as part of publicly announced program

 

 

Maximum value of shares that may yet be purchased under the program

 

April 1 through April 30, 2015

 

-

 

 

$

-

 

 

 

-

 

 

$

2,886,467

 

May 1 through May 31, 2015

 

802.0

 

 

$

91.15

 

 

 

802.0

 

 

$

2,813,360

 

June 1 through June 30, 2015

 

4,981.9

 

 

$

89.83

 

 

 

4,981.9

 

 

$

2,365,834

 

 

 

5,783.9

 

 

$

90.01

 

 

 

5,783.9

 

 

 

 

 

 

In connection with the exercise of stock options under Schlumberger’s incentive compensation plans, Schlumberger routinely receives shares of its common stock from optionholders in consideration of the exercise price of the stock options. Schlumberger does not view these transactions as requiring disclosure under this Item as the number of shares of Schlumberger common stock received from optionholders is not material.

 

Item 3. Defaults Upon Senior Securities.

None.

 

Item 4. Mine Safety Disclosures.

The barite and bentonite mining operations of M-I LLC, an indirect wholly-owned subsidiary, are subject to regulation by the federal Mine Safety and Health Administration under the Federal Mine Safety and Health Act of 1977. Information concerning mine safety violations or other regulatory matters required by section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K is included in Exhibit 95 to this report.

 

Item 5. Other Information.

None.

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Item 6. Exhibits.

Exhibit 3.1—Articles of Incorporation of Schlumberger Limited (Schlumberger N.V.) (incorporated by reference to Exhibit 3 to Schlumberger’s Current Report on Form 8-K filed on April 7, 2011)

Exhibit 3.2—Amended and Restated By-laws of Schlumberger Limited (Schlumberger N.V.) (incorporated by reference to Exhibit 3.1 to Schlumberger’s Current Report on Form 8-K filed on May 14, 2015)

* Exhibit 10.1—Form of Incentive Stock Option Agreement under the Schlumberger 2013 Omnibus Stock Incentive Plan

* Exhibit 10.2—Form of Restricted Stock Unit Award Agreement under the Schlumberger 2013 Omnibus Stock Incentive Plan

* Exhibit 10.3—Form of 2016 Three Year Performance Share Unit Award Agreement under the Schlumberger 2013 Omnibus Stock Incentive Plan, Applicable to Employees who did not receive a 2013 Transition Award

* Exhibit 10.4— Form of 2016 Three Year Performance Share Unit Award Agreement under the Schlumberger 2013 Omnibus Stock Incentive Plan, Applicable to Employees who received a 2013 Transition Award

* Exhibit 10.5—Form of Non-Qualified Stock Option Agreement under the Schlumberger 2013 Omnibus Stock Incentive Plan

* Exhibit 10.6—Form of Incentive Stock Option Agreement under the Schlumberger 2010 Omnibus Stock Incentive Plan

* Exhibit 10.7— Form of Restricted Stock Unit Award Agreement under the Schlumberger 2010 Omnibus Stock Incentive Plan

* Exhibit 10.8—Form of Non-Qualified Stock Option Agreement under the Schlumberger 2010 Omnibus Stock Incentive Plan

* Exhibit 31.1—Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

* Exhibit 31.2—Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

** Exhibit 32.1—Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

** Exhibit 32.2—Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

* Exhibit 95—Mine Safety Disclosures

* Exhibit 101—The following materials from Schlumberger Limited’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015, formatted in XBRL (Extensible Business Reporting Language): (i) Consolidated Statement of Income; (ii) Consolidated Statement of Comprehensive Income; (iii) Consolidated Balance Sheet; (iv) Consolidated Statement of Cash Flows; (v) Consolidated Statement of Equity and (vi) Notes to Consolidated Financial Statements.

* Filed with this Form 10-Q.

** Furnished with this Form 10-Q.

 

 

 

29


SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized and in his capacity as Chief Accounting Officer.

 

 

 

 

Schlumberger Limited

(Registrant)

Date:

July 22, 2015

 

/s/ Howard Guild

 

 

 

Howard Guild

 

 

 

Chief Accounting Officer and Duly Authorized Signatory

 

 

30