SLB - Earnings call transcript Q1 2018

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Operator

Ladies and gentlemen, thank you for standing by and welcome to the Schlumberger Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I'd now like to turn the conference over to our host, Vice President, Investor Relations, Mr. Simon Farrant. Please go ahead, sir.

Simon Farrant

and Call. the afternoon, Quarter Limited good Earnings XXXX morning, welcome Schlumberger to First Good is hosted call board Today's being meeting. Schlumberger following Limited the from Moscow, Russia,

Executive Paal Joining Patrick and Vice Chairman call on Ventures. Executive Ayat, are New us and Financial the Schorn, Chief Officer; President, Officer; Simon Chief Kibsgaard,

through as for questions. go remarks, which, our will, We first we after prepared usual, will up open

Paal quarter will first updated financial Simon macro. our portfolio For will present results comments by our technology our today's a geography. before performance view with first close Patrick remarks industry our discussion reviews agenda, on of of the our and

before However, and I, uncertainties therefore, cause projected latest our be I'd we'll making statements. the remind today materially our XX-K in filing results are these filings. to that participants could differ SEC matters to from and that we forward-looking. those refer of risks statements begin, some to the These other you like involve

include financial Our comments non-GAAP measures. today also may

and details our website. be press on directly is reconciliations financial first which release, GAAP Additional in most our found measures quarter can to the comparable

Now, to Simon I the hand call over Ayat.

Simon Ayat

Simon. you, this conference Ladies participating thank and call. for Thank you in gentlemen,

decrease and an to earnings excluding quarter share, represents sequentially quarter last was same increase the $X.XX charges per This $X.XX. a of First $X.XX compared of and credits, when year.

XX%. seasonal Our first to quarter product as Pretax by operating declines. sequentially, by decreased revenue decreased margin XXX driven billion follows. of points Highlights $X.X group largely by basis X% were

North and end. the the to multi-client decreased billion activities following points usual, the areas. international impacted XX.X%, X% sequentially, to primarily during and the SIS lower in revenue book XX a margins largely to points market. seasonal XXX transient Wireline points to Production result a fell X.X%. of activity contributed headwinds markets sales contribution First as decreased Cameron The in Each of in decreased driven to Cameron's declining This Margin $X the lower by and of of muted offset These North basis while reflecting driven points were quarter X% sequentially. and $X.X impact XXX product basis OneSubsea lower of Cameron to was by group ratio Wireline basis volumes. America due hydraulic lines by decreased billion activity decrease reservoir $X.X and that basis software project bill decline international strong characterization for sequentially decreased to of by cycle year The of the but decreased decline. X% primarily results quarter. revenue the X.X. lower $X.X was Margins activity by group sequentially, software seasonal revenue America billion driven more drilling decreased XX.X%. fracturing basis lower X% from SIS in margins revenue license the XX.X%, billion other than revenue the Drilling also was XXX sales. long group

at backlog reflecting businesses. the book entire bill the ratio is the However, X, short for an group increasing of now cycle to

first tax in to effective and excluding the whole, XX% rate, credits, a as Schlumberger to was quarter the turning in approximately the quarter. Now charges previous XX% compared

of geographic sensitive ETR between of America the be Looking the mix the and forward, will the North earnings rest to world.

QX, experience course continued cash million next compensation. of increase we of the from the $XXX operations. capital working and employee typically is by the despite driven of year. ETR America, is quarter with With we during in will generated annual recovery consumption the that that flow We anticipate payment which North This the the associated over

quarter $XX.X billion. $X.X the with million ended and We during $XXX cash billion. Our investments net debt total to the increased quarter of

during events included price average $XX we approximately SPM spent $XXX million significant X.X million. quarter, of of million shares an repurchase liquidity to $XXX costs at CapEx capitalized project million and quarter relating the the $XX.XX. of to During Other

$XXX million be is we approximately payments. investments $X also billion. Full year to and quarter, the of During XXXX dividend made SPM expected CapEx still excluding multi-client

conference over will I the to Patrick. turn call Now,

Patrick Schorn

business underlying for good expected transitory pressure you, were product Revenue expected everyone. startup the planned XX%. together Thank costs pumping lines, with XXXX operating the by all activity, X% of In America, expected inefficiencies. including quarter in from by with international grow, the dropped markets, with decreasing In morning and impacted Northern headwinds lower the recent pricing the supply to performed and chain but Simon hemisphere income winter activity pressure project project and North associated our slowdown drilling the the and as in wins. seasonal contract sequentially than pretax first results continued negatively

lower, following of end and ramping as the North start activity and Looking measurement. of of shale Gulf Geco closer operators stronger approach oil the multi-client many a we quarter America in sequentially from a group valves North results, at the Western sales experienced surface revenue freezing was revenue more up drop to with activity systems conservative and and the improved US weather Gulf Mexico X% Mexico. product took America, revenue slow in Canada in seasonal the US than after year the to Onshore offsetting land sales and our the in holidays. increased due to Cameron offshore and Alaska,

increased high ramp to drill started In two fleet North above activity well higher activity drilling of Western year-over-year, rotary sand exit were vertical inefficiencies, associated control pressure our rates. Cameron business matching this pumping lower project driven with our softer was Canada with our stabilizing which to $XX, and our Despite to operations, and for rig integration impacting steerable grew in our the In systems sequentially. of half first increasing our quarter transformation X% operations. rail, ensured prices quarter healthy increase in land to demand issues continued continuity both capacity longer laterals overall less longer revenue, supply activity of the the add parts logistical was winter our oil These fleets, counts. showed environment, drilling ramp and planned utilization, XX% up to second and recognized excluding headwinds and sand due for continued we OneStim, in that but inefficiencies in with by over service market costs Growth the utilization the pricing. America disruptions with of customer market led than supply drilling However and own strong by on these up successfully the of quality by and and base. of logistics compounded

acquired these already new actively operational the pressure first business. pumping standard reached and of of crudes the equipment During fracturing our deploy spare the spreads performance the we first has continued including our to our quarter, newly from existing fleet

This XX% for projects decreased stage several turn Let's now international to we Starting new international our further. hydraulic fracturing in for operators with Venezuela was in Latin cash-based lower America, in to due areas. offshore and operations count as Argentina, that mobilized reduced the revenue sequentially. Brazil activity declined

in all contributed Seasonally due On continental onshore successful acreage seasonal well the that we X% lower acquired positive as for our revenue Cameron in by lower sequentially, Mexico and delays revenue drilling and also In product declines operations the Activity to decreased UK and activity primarily offshore and in Caspian quarter. continued where new Europe Sea as changes Russia seasonally were Mexico in Africa, weather in activity lines. the another seismic the revenue the newly background monetize grew increased Europe, as during back to Western impacted to workover library GeoMarkets decrease. multi-client of CIS side, the was and group hit on customer region GECO plans.

solid integrated and continental offset delays sales were in Revenue new Libya In performance were the onshore our addition, GeoMarket. projects as Cameron SIS license Africa Norwegian Ghana. expectations Russia in software GeoMarket line during the Central revenue and generally Nigeria license in seismic multi-client on quarter the GECO from GeoMarkets positive projects sales was our in group weaker license particularly multi-client related the several in despite Asia sequentially, and Western to from with for Scandinavia shelf. higher, further and sales Chad Gabon,

revenue India, expectations, In Thailand first slightly lower competition increased in in Middle East in East, was sequentially, revenue Paal. in was mobilized the was Middle solid comes drilling two activity in IDS Australia long quarter which to our surface with and we on move decreased the project contract which for on that, in encroachment the term by and lower call wells processing offset first quarter. Group equipment in X% reinforced on another land services as Asia, the above came let with driven progress The in Middle awarded region. of Turning and towards our the activity next pricing by in East. growth Iraq, and me project which of by in quarter Asia during wells fracturing seasonally by China. offset And the the rigs driven previously, pressure Arabia in stronger facility XX the pass revenue to revenue Egypt further for and hydraulic over turnkey activity XXX in land to Qatar based work performance won in long-term the at startups Saudi we accelerated lower more testing sale fourth and improved the Cameron end Middle addition and the East grilling first partially Asia, in

Paal Kibsgaard

good morning, and Thank you everyone.

year-over-year activity in was activity generally our Europe, our line business As Latin Russia in the expectations, subdued in land. described by transient weakness while recovery solid in and East, market Middle Patrick, Simon growth Africa positive quarter in continued Asia, and with America, America signs first North impacted with and

profitable associated market, into and the also capacity mobilization we reposition costs and international started to we look as capture During ability to in with quarters our in the startups our and to observed maximize quarter, new reactivation XXXX. coming spare projects we growth the

unfold how oil E&P emerging the year. one let upturn us, quarter selectivity global with you of So views and oil on me coming the investments the our behind over will latest give market,

underpinned in are a anticipated growths in China expected per for X.X US the XX% now by supply geopolitical oil at crude than risk is month. growth absence and are the expected oil growth in below and with outlook balance, million at in stage. already from levels both into first stocks the prices what market, These the five projected lower more barrels the global strong stock average and demand global this between with well stock forward bigger the continued be has and XXXX past continuing by days driven that to increased is Global which not growth of is the XXXX demonstrates demand clearly day Looking current and quarters. over coverage builds year trade tension escalate quarter war coming and X.X million stock combined up global to oil the normal current first the seasonal with

be and side, is Saudi dramatic Mexico, emerging trend decline X fully appearing into and the tier production countries capacity questions look weekly increase oil Based oil of of training a three supplies, investment spare oil refineries not the such to of well E&P land significant production no to fade are US base of capacity grow the the potential infill and UAE, expected for [Technical takes North the of is core current be the actual this growth increasingly XXXX. the and Libya expected Angola, the and only the Indonesia. present, supply levels only often clear short-term believe increasingly met, constraints growth Venezuelan global the global Lower This shale spread and as upwards as as bullish several with shale OPEC investments Russia, free to these inventories Norway, out swings industry XXXX to investment deficit. weakening very been of activity, drilling for processing production and the well and we E&P are industry well On capacity, in upstream million spending demand prior at has as interference collective after Kuwait, countries accelerate X Malaysia, and challenges alone, production consecutive The will and to as [Technical production evolution to more these in whether supply supply and coming XX% respectively. the production sources worldwide to to against significant that operators. strong with impact signs the years and of has of that producing share can it Iran, production likely indicator X% US underlying investments noticeable light market, is global a day. worldwide and in is linked per acreage and levels At steps Difficulty] China E&P for Difficulty] inventory address underinvestment place. on fall, infrastructure new the continues near-full declines in expected from as Nigeria of new continues the coming overcome With growing level years will around approach in import operators also and from There level sanctions required to global face face spite revision in as International the supply major challenges tightening US signs American oil. current in the range per impending three the growing barrels to growth the over outlook In year-over-year still of oil of range Arabia, as trend be US key the evolving to marks export demand. minimize there

the services we grow activity solid volume bit the first coming differentiated market, for In out to in Turning a North directional horizontal market, we and towards drill and we as strong longer customers this premium in of to expect services. continue land drilling America quarters again technologies of to quarter oilfield lateral. to be posted our still we our move and next growth as the continue complexity in sold our in command pricing more

our version are design enabled as optimization. downhole process system Rig new planning the all technology, In into our land as the drilling drilling that addition drilling the first the market DELFI ready execution well to to software covers Future US introduce to the our wellhead way well of platform from we now complete complete of and total and

step successful market focused of to the construction new introduction a we fully performance drilling well our change to land the provide aim as in are and customers. offering We our on unique into

market land throughout we growth in further as well our X continued activity a over deployed see XXXX course North share also underlying XXXX. pumping as the we driven as Next, strong business, America of pressure by horsepower million gains,

and continues high the efficiency activity as to vertical performance this customers, driven as technology softness individual chain We service new remain capacity coming pricing deliver our have program. investment us the are the we contracts driven In the being people capacity, quarters markets, clear Difficulty] Difficulty] that our on supply return pricing in added towards This many and pricing number have trend provides to local at be the new tendering we movements market new companies the and competitive four from likely will the advantage for performance differentiating first customers. bound likely integration with and means variations that activity benefits the our our to of offers we cost we any we [Technical set a frac we close the limited clearly capabilities scale demand the our be that inflation. very In seen technology capacity be as create leverage by equipment from deploy as level, frac we to will this factors upside, welcome benchmarks. to expect to With and financial remained increasing people in and based balanced that short-term systems, [Technical will a a standpoint. quarter fleet of our it international generating financial upwards move range passing significant superior or to and and our quality environment, expertise supply ensure with improvement meets business expectations, an clear

see the yet still market. and sufficient an standalone products In services there point inflection in basic we of terms capacity are to is and pricing for

see early market. proposition in evolve continues improving to and services where the rates, as rig pricing quarters, the become our the by to the first and [indiscernible] to we offered compared for products our international performance signs basic expect competitors rate land traction over However, coming this end attractive the of value of high increasingly is

In with the and our solid Sea for Middle for and East the our line terms the of remains North Russia, expectations geographical year. trends, in outlook

likely in Latin seems of of XXXX. be offset half pushed activity will the seeing emerging by second to trajectory Africa to out the where somewhat be a slower the upside start Asia now growth and the America, we in While are recovery

in with So markets about excited overall, expectations year are outlook international the we the Schlumberger. and are for line our evolving for the

our technology to returns clear We are and ready and industry, years offering in shareholders. to in the returns free and unmatched building the capital primed to provide scale discipline deliver and the superior expertise a growth, industry broader cash leading operational financial on cash our efficiency, desire strong flow coming by and

to open thank than that we the like make up for men women workforce. to Before more Schlumberger and would opportunity XXX,XXX the the questions, I take up

best company have commitment to in the the and few and are our for team your very over thank through together unwavering years industry past navigated I you to tough want your customers to jobs, market we where You conditions. the to the

I again and things Schlumberger all you. you. facing growth more for with Thank the together look forward Now, market new of brighter and looking the and challenges industry of to are the for energizing

We for will now open up questions.

Operator

[Operator SunTrust from question Sill will come Robinson. Instructions] First with Ken here

Ken Sill

a This environment is and a good here. quarter tough

questions first on my of pressure One pumping. is

million X put deploy QX. to horsepower planning actually in How did you out. much You're

Paal Kibsgaard

go the Well, much of deployed. to how details exactly I'm going we into not

that because we the We we continue to, deployed overall I to market. planned deploy in the and what that less softness we experienced say would than mainly

utilization. a the companies and wide significant had bit this in the expected an on growth to think, to fairly I lower addition impacted a and impact capacity market softening that, and other number also was market added overall stage than count it pricing of

of in quarter are to was our and but full plan horsepower on introduced we more loaded, we back rate QX X lower, of still the a of as first we deploy the is the and fleets it course our acquired somewhat enter plan backend during that million introduction we So XXXX. number lower

Ken Sill

to with on step you North And Are seeing optimistic makes inventories. a up estimates picture timing lot it like to America of in to given sense very concerned question, is big a recovery remain you're we're Okay. going seems the Street then XX%. slow, Wall what outlook, the the international of about or

it some very higher are like that, a people their but think CapEx raise moving seem doesn't than budgets bit estimate I is little just to quickly.

any positive, have very think the concerns in the growth do you So timing the is activity. trend I but of about

Paal Kibsgaard

front, an as But the this expecting. reasonable side, with minus see or out Schlumberger were unfolding operational which higher as planning earnings much execution of international quite in significantly that, expected. or internationally. we the of have North and because we rate X% Well, levels a from note in even in is The what is I generate investment, from mainly you we lower than America, year we investment think was plus market X% can increase here growth increase

internationally Our to margins North and is ability generate America. in generally also our higher are incremental than much higher

isn't. So growth I'm that, earnings. generate Difficulty] we investment international X if to is levels there Based even I to and sufficient, can investment positive on ask say on make it even in rate X [Technical would levels, quite a ability market the ratio But business is our what me, XXXX. if though the out on you this growth of no, in the

are are only where can do there but going today demand, to for market that, is to would would about produce and be the the but sufficient growth So I there is as concerned I international unfolding just there's in from I whether think say we producers able ability, the little and that to going international a beyond be forward. meet upside supply I expected us

Operator

the from next Evercore our with ISI. come West James And line of question will

James West

to early Paal, good about Thanks your first - in I wanted Paal, ask the Moscow to off, week. guess evening I you this in board meetings had and you. Russia,

the You major other saw maybe you kind obviously Could you what a to in color love in what mean you board reason transaction still around and you service had Saudi, that week, were that what that you and are market, very are some I to with very, for this like large it's that to pursuing of similar there doing? given Moscow board I us that and Eurasia. meetings a hear up places reason you've market. guys a why picked - give

Paal Kibsgaard

Yeah. James. Thanks, Yeah.

out in employees, also around you our board meeting operations to with into our and very the with selected various As engage customers field our one engaged business our board a and know, regions and industry dedicate is experts much world. we in year go the

year Russia if last Arabia, Arabia, and visit of Saudi had at the between in parts basically our look it you know, largest business, in there US. you the is Saudi great a As and

of more. reason or part very over close is picking is four It it has that shown So to for the business. a it wanted growth was Russia the this past is the and see something our huge And little year a business that board that three years. up bit a good strength

So to industry customers addition the number the our to we had some with oil Russian had week, employees. a It's of a selected also productive Russian the and the interact in with XX,XXX to of board this lead been some opportunity board very the opportunity of and week. the engaged experts normal board proceeding, partners,

the the country. also EDC to And transaction, further on briefly we board business plans the with where comment that? in Russia you as stand provided on for and want have we've investment to Simon, detailed broad industry update our a and do We

Simon Ayat

Yeah.

of Let was the transaction, our aspects shareholders, in this me of deal announcing and structure acquired update. authorities, EDC of including quick give entity the since the the respective Basically with all discussing the size a the the been state. participation we've

is as is remain to integration operations of deliver and and the more EDC say to raised deal result, through would best a operation behind were Schlumberger deployment respective of that authorities. objective that happy technology. closes. to driver the very As most which important transaction our satisfy remain to we efficient of clients unchanged, the the able our when all and are the and the address different by What concerns we the

Paal Kibsgaard

we them is than other them if this, is their engagement it with to follow-up have to say disposal need We are at for very to as them. do now authority. much good with more and time is James, do than further there we file when and that nothing any there job we Eurasian The if can required. their is closes, So give

James West

a on international Okay. for Paal, side. the Fair me, then Thanks, And enough. follow-up Paal. Thanks, Simon.

number momentum You international. is and to this in well at lag big of American last seems is as contract gains yet quarter, announced me it stuff and guess on major fair understanding heading spending point key hold year announced has to of we're into I a and a be the seems awards quarter like this inflection it really background as spending a there takes a comment? the that to North going lot to activity for that increase, but Is going pretty XX, this international that me recovery looking

Paal Kibsgaard

Yeah.

quite if fair that's these the think these bit performance significant about comment. activity even presently. bid, contracts, shifting that by of execute able There a financial you we now fair being are I of on certain towards that based we in which is, standards means a fairly are is tenders excited to they're competitive upside a note, these activities. have What as performance significant tendering

Russia, North in So, solid ramp say East, continue the expect to Middle performance during outlook we would and still year, I Sea. activity, to very

the is a Asia and little America. we're and dragging Africa bit a bit further surprising upside Latin on to

as the increasing in the start to year. second well of expect half We that

agree I with So you.

and is as be through XXXX. we year go outlook international this should strengthening even the stronger I think for in

Operator

comes line Angie question And with our UBS. from of next Sedita the

Angie Sedita

you a little then late XXXX, deepwater. specifically So potential on into and Paal, bit strengths maybe the as highlighted as XXXX. pricing you obvious your little the the and going for side international there it a touched on prepared on Maybe side, further your remarks in color pricing far on technology

further. you a can into little go bit maybe that So

Paal Kibsgaard

Yeah.

increase And to rate set emerging In land by as that which continue when in for us signs allow will look encouraging the we've point rig I and seen that. in even basic inflection I in to do pricing mention on the environment. prepared the no you in other remarks, sure contracts effective services. to I deepwater performing at wanted think as again and selected pricing, products evolve of very and certain projects point well shallow and to we're shift is towards on terms as performance well direction well But of our some water positive jackups the mentioned these up the ultra markets yet signs

So to when value attractive the execution when or basic of end high up, the services increasingly rate to rig and competitors. of starts and to technology is value become quickly quality come the going our and the service performance proposition our compared

start So I the first pricing will take of come that and expect to expect to where it's think to this shape we to this is think see I reasonable in half second year. the

Angie Sedita

bring or XXXX? set a EDC, to that we into and And think on opportunity by as opportunistic the Schlumberger. company what that Russia company of would and Drilling portion go What's back Russia Eurasia in be overall you to then going do just owning

Paal Kibsgaard

Eurasia the systems our bring drilling it firstly land Drilling Well, for total intensive opportunity to Today, market. happening. a no fact that It latest the allow to set technology drilling always on been market. Russia are us is will there the is very us real that has integration

Siberia We creating of purpose are rig R&D is investment the upside and of land we transaction. introduction Russia a It in and the we the on and drilling is well of very sulfur R&D package, version through Rig whole company, winterized Western Russia, excitement when this made in Eurasia have drilling performance by the as introduction downhole the very well-run within for I also the Future to around add offering acquisitions organic where as have a combination there both of Future we well. say, is a made company partly in built And would huge, working very organization. Rig we know strong that we've a Russia software the

position partnered in the side that number present years, of will them and for allow to but technology creates what I that on the driving a direction have being is think We worked us stronger with excitement. and ownership a take the

Operator

the will next line Citigroup. the Gruber question And of with from Scott come

Scott Gruber

a have I question on SPM.

given sanctioning quarter, last you spending the outlook base sales, in company it of it slowing we you're business, net base for the the for You're spending imagine, I'm I improving the CapEx, is nature free the above is maintenance still project should about here. when to income as is it a Is curious a just dilutive? CapEx. of or you're as the SPM about business how targets just maintenance mode. your cash of business conversion that conversion of given business, discussed out when think cash percent free the just conversion accretive

Paal Kibsgaard

do Patrick, to comment on want you that?

Patrick Schorn

I think bit mean it's initiative a downturn, had significant aware, a more are well Maybe mean I as around during general SPM. growth we've the I Yeah. little you goal.

that us our on As been avenue far this as a technology. has returns get growth best allowed to the

end We as our saw we that investment to cycle also the were very announced an we putting change countercyclical strong program.

ongoing we the So obviously also around becomes new very and we CapEx with in project that the that in project. investing with strong that invest the a discipline are

these value you're to that this a that bit strike always is you're of that you're Now, the in IBP type of balance assets. today and between generating long generating term trying the a

a maintain a of So ways significant going assets. of is we of flow also one do these to making and in start some going what these which obviously looking biggest forward investment disciplined dent and cash we're assets to that monetizing the is the we're at that very

right XXXX, have go some proven de-risk that sell but we we is most are to of we the sufficient value obviously then during that do time the as projects today at these want of can and monetizing make this time opportune assets we sure we some along. our at having we that looking So the and when also these of on we turn are

So build a we that expecting with best actually transaction. of maybe asking. are And over the give question we the the interesting fully and parties of seeing you're next are in engage that around is type that bit I quarters this the to here color interest can

Scott Gruber

projects it. on you in if Got update and Argentina. Nigeria and maybe Patrick, on Palliser could the progress us

Patrick Schorn

Yes. I can. certainly

we concluded we workover. and of year last a of end operations, started the variety the at operation started obviously we production So operations,

four drilling as wells, in to new had the on simultaneously up as project. we've Torxen drilling Canada up So rigs far

to around asset. And on that I date. the production to the focused added have oil key increasing is that our this from is thing We think XX remember fully wells investment

very be with you on partners oil. we When it comes detailed fee to and our closely working We're Nigeria, going have lot about think of date sites here, top a conversions, are an So focused we're work. there, of type in months through design are we team new with around to has hook would will in the FID in on later this once FPSO and in the the quite needing to prepared. and drilling is that the to pleased Everything And half track. here in these that we quite second asset finishes, again a put time in we're to up the wells into expect made the short organization year. production very looking do on there continue year. this start come turning to frankly, to a Canada progress And breakup

So in And from of the one, that Nigeria. a doing gives Argentina are idea bit where of an we is well. last that, you

our We the we have that drilled are a to very of wells, close moment well, at ones expectation. of producing very this PXX number type have

us then So, need comes no encourages with looping think field and but we're starting that I the the many, things to we well helps make be many is future. you're mean, good two that obviously there but seeing developed one of to individual performance wells. drilling clear very to up sure or as in let's it the now monetization wells, wells, also are when we very What are right about when

Operator

here RBC. question with Hallead come will Kurt from next your And

Kurt Hallead

handle I walk around wondering you, of if you on was trying still if I just And of in trying just guess market. I'm through some job dynamics frac that hands it. a my taking to I grab us sure great some US things. place did Paal. in the a got Hey, the quite I'm not these are to

if already that a update. apologize I'm may little the asking slow So have the I'm on answered, question you

yet I during the of some had of talk quarter. softer first the incremental pricing. the of And the for around about quarter, challenges Then into kind to system. that the second new then bringing picking the dynamics go couched first in mentioned for some creep So around up led the still you've positive quarter, into kind things heard capacity to you you as prospect some end capacity Patrick some industry,

mean still neutral quarters the as of into the point to going kind where companies into are pricing to stand? we a demand get put three stuck frac business do we or continue the be the in and where going year. is in to I So of the last exceeding available print and market supply capacity we we're at are power now

just more a can So, give would that, helpful. little around if be again that you color

Paal Kibsgaard

Yeah.

supply pretty I frac it's So industry first as demand on based available we that had QX, the stages clear an equipment of from and said a overcapacity quarter. during think is, we standpoint what in the

capacity more So we or today. are less our

being comes I think I to to market is think label frac forward going going balance. equipment in the it around when also

will have basins. you probably think I local in certain valuations

I undersupply the that market, to the a supply we're commoditized for been pretty You industry at there. But fact oversupply, new now basically that for the support companies we at some I and situation also stage think think need be second less service introduce year, accept industry the that a huge industry, think very not the it's year in row or capacity. surprise might we fact of I given growing and a a where that this and in now are it demand manufacturing going and duration the we in will that a to capacity has on steadily have have given market to is match fact is agile clear. more temporary fully service And that that based the

to don't think with is to expect I our standpoint, able margins kind the I to One inflation. provide beyond pass expect and and situation. any pricing. think operating are to continue have mentioned of remarks, from to be able quality any are to a people customers standpoint, profitability we But additional do of continuity as is net driven by how market you costs our to prepared I be on chain and effective pricing of in there that, major associated So supply we significant that execute. business from the tailwinds in my drivers. We four service kind And going

that We significant drives investments technology also fleet operating have individual into efficiency.

think to return, a but to As integration from that's some program, which much we this. a very add another to going market X of into benefits investments able million throughout say, and would also situation levers horse significant increasing the for XXXX, going power right? we course that over So, be see our give I challenging we confident to on, advantage fairly we make is vertical that scale have going us expectations makes what be are meet then it's I our XXXX, me that focused we we're the

Operator

The of the question here Wicklund will with from Credit line come James Suisse.

James Wicklund

want I drill performance if little the on to contracts. Paal bit down I International, a could based

contracts project business though they're Can even to this have first But especially You that, north been in is are kind of to much with in performance come, The market lumpsum on next your that basis. the based the some how, best guys internationally? Gabon. bit you first not you a there just how that, your everybody's more a know the of that Saudi wider you competitive, get I service disappointed about contracts more have a talk turnkey little and into two hire for uptake. do of performance you contract Can on your a you competitive, outperform. about technology pushing is and finish a going concerned those and in lumpsum is to addressed turnkey drilling and you with that saying might this realize matter too your well Arabia I client been big different, the board themselves at little talk couple regular companies, of you years opportunity a type this based how throwing do time

Paal Kibsgaard

good a question, That's Okay. Jim.

contract where company. ability that completely of any execute ultimate very of competitive though in as way a that's and the we drill with an on we've the to the focus with R&D that see we contract the even in level to win returns billing bid contract our been drive investments anything, of pricing, we with contract new that very a course and point from out - the the at to our So they performance a but are over creating standpoint healthy drilling complete total portfolio system, to generate competitively making type one we as can this are revolutionary as particular rightfully you

individual a do by package and it's digital system, superior the and technology that and execution DELFI this our the all our we wells have And is going the this is it like to blocks. well subsurface operational then Then domain of I firstly complete way on information. the this, application the we top do the data share as that with allows to on to from described. which every on bring So expertise this drilling on said as software is plan ups drill the planning I having and operating to together drill all is building ability sitting

and potential land is why to the are the as have rigs together Saudi we to increasingly we Arabia. and how investment Rig shallow water market whole and this the the see and can very a is and Future XX that performance really opportunities start drive have operation. important or with the and you than and digital get shallow well number XX. are approach we to also very performance do the of we in thing, Russia if is really the you significant The excited And can't drilled and in with board we up profitability in well that, the into with of is traditional drilling we now world. with even this rather a can ten the first markets major of the set well performance an And again year This we well now as drilling off also can going the the partnership to don't over contract well and course happy the would rigs want contract key generating well point forward the to performance how actively one. land and ideally gains lastly, this matching deployed environment. around and land any is play three as why turnkey that performance is third shallow how improve here of on generally your very also to XX the ourselves I to to our based say setting digital one one. similar second one that from beyond differentiator about water are strong experience US returns to wells the based that's and to start We world we are making drillers of number program investment off - interest apart. what we in to traditional want right good drilling or number introducing main contract this position EDC This markets made going move the introduce our see to lumpsum we we the the ourselves around I But then made described with is is move you linked how other system of the start apart drilling. into these environment performance that, key on our of want number water than you're an operations with you board and in is bore but contracts that faster number I have very on in We drilling obviously you part the of wells we So significantly the kind and on all ADC to

James Wicklund

staged effort ago I plans. know phase what the getting the of yet, My the follow the years started downturn the closer through we that point. ago, of in we or are deal are done about and about we was talking couple some of Schlumberger were was great a that up this and at if interrupted effort on us basis transformational couple a you tell Can of years kind is is I could, transformational going that a

Paal Kibsgaard

the, business past to the done your the where to to period the this investment difficult after good an our question, efficiency a have impact would say in to very continued monetize had very James. is years we the in transformation it mainly ring-fenced quarter. bottom grown line and downturn we That's it, what quarter environment it's because have during to they're is continues three deploy we shrink an that on program it. of has mention to I trying and have time that What we have continued evolve in

of internal backlog significant business we middle conduct basically of workflows, introduce the how we new processes. and we around deployment in are We systems our as seek how change how all our we

now of to think and finished are of start when going to starting growth think the impact our I to concession, So this we a margins factor progressing visible bit the to that's going soon And is generate that promised. international as all the and to be you would we I a critical us have the the is as I become little transformation with ability forward, the going in again. see pricing is in market say that generate very transformation incremental

activity and but we that are We we around is bring. for are demonstrating levels going utilization, investment this our CapEx, we're one doing billion way maintaining, as the this asset absorb it's downturn actually of a part the instance, increased is what increased entire $X low significant can as to been which throughout confirmation through a year, this the because are

in the forward continued of and that bring, here investments going impact bring us mid-innings this we but So XXXX. the have the we and of can I the go as are the we what transformation forward are advance of to optimistic very is so what that to it XXXX say would of still deployment we into

Operator

David Barclays. our And will question Anderson come of with line from next the

David Anderson

I wanted subject LSTK here. to on stick just the

execution execution I you tendering view more terms the turnkey help the the just SPM how you kind between activity say about versus Paal, a LSTK. of towards at you whether an those of types of contracts. So conceptually feels one have risk you difference was that contracts, in both if like of for of could you moving just lumpsum of It understand look more talk contracts. this of could not upside if wondering just and of us type is with either the just I or preference LSTK, was kind how in two types and wondering with the

Paal Kibsgaard

Okay.

is profile type pretty if debunk highest to that take the on bid, your LSTK, there risk on seen submit the firmly. great risk how is a there you are global we is curve beat not stipulate it can understand - can price on basically. basically we you for the before any we well, the take drilling The have costs On you based. basically the upfront how a And because that on there analyze we - execution there's and fixed of the is that can in database and most that risk is drill base take SPM. time contract experienced That study on and is can you the risk as to drill these more time takes the performance obviously well LSTK, So think you I you profile case. of you detail wells

close payment project we're wells a payment LSTK at from So for you generally fairly is. the looking base a is to paid of standpoint, and terms small - business. of the cash very is levels DSO risk what about It's business. of base profile the get this completing LSTK the to terms complete of on close the that SPM And a fraction risk profile also is in

and profitability than us again in extremely that our by And SPM. comfortable say outlined question margin. to you beat So contracts on previous is all I a curve typically is the makes wider we it cash in take what exposure, I that objective to see just limited type exposure beat generally there we much the ability these taking on, that and continue the for forward contracts more would with of the going

David Anderson

guess be the today, lower one to and up be are So in this. contracts these margins thinking going I that is measurably startup sort year improve uplift, margins if are maybe to care how is but should little the of going is year once getting sort you three, bit these fairly contracts we to, out, costs taken a fair costs and start these about these of as by should that expectations competitively the these that it that are idea maybe say these we of start the that all bit come thinking profitably to all idea is as about start that that

Paal Kibsgaard

not to profitability contracts really Yeah. are But some that Generally, significant earlier prospects. enable us in say we drilling, course and necessarily like the It's unless going Arabia. instance I the is say, would the experience mobilization. and as the basically what goal our LSTK once have the for isn't to currently you was linked forward curve. and your to the are wells they Saudi would in to linked mobilizing that improves that huge for mobilization improving drilling curve over to contracts, more more are build is there fact as contract on I They're of profitability I saying our system the fast question,

one. the they higher of as have these the be So past, able but the going course what were the in We early go to means the should projects our compared in be to the improve over a profitability isn't still want project. of number which to much forward parts way number we of well to traditional well graphical performance one that down level start line,

Operator

from Herbert the with our And Bill of come line next question will Simmons.

Bill Herbert

increase share. for do you upon that that do backdrop, that X% growth for in Paal, incremental you expectation I'm with spending, margins what than digit a to reasonable better bit should expectations market just little regard single mid capital based international are E&P this curious, off think revenue an so And a the against for high international year.

Paal Kibsgaard

a costs. work bit opposite directions, recent commitment a think right, to I straight there got we forces that have quarters. been early concessions too to are this, in of given it's the startup repositioning some still some there through We've there because some some - are giving but pricing playing costs, make Bill, on are in Yeah.

in couple a We're going commitment get So the give state market. the that, pricing growth but of are be too going sequential straight behind some it's to to quarters. what to improve QX. say to We and getting into we a you in going in we in think require incrementals to get say, into XX% place, be, Other have leveraging I fully sort there, then program. too tailwind pricing capitalize on of to behind international coming it's clear to but that, I still sustained think should as bit we performance early steadily the based contracts they incremental early and we've stand the plans margins steady stand traction, the what enormously QX made and very are transformation investments starting than to

It's yet. think give a to say, So, all you we of as ready but not for have number I I capitalized and be, QX ingredients say I'm on, to would there. going the QX

Bill Herbert

to premise. here, $X.XX. second we $X.XX can of a be quarter expectation or seems estimates more which Street And the tangible Okay. thereabouts, speak The high about

per tenable You delivered realization regard that of a with that $X.XX. proposition the to share? earnings Is

Paal Kibsgaard

Yes.

is There a of it on that. little is. color I bit think

we East, and QX, North saw trends continue see in both pumping. look to second see the through We're kind performance you going In of breakup in to the international quarter. Sea. we pressure drilling we at If market, strong Middle Russia, as growth the these, the that in a solid usual in work revenue

it's basically limited growth America, and list joining But then in and is now Latin Africa a in slight right. bit Asia upside that more Asia.

in pricing softer into with really is it line I and the EPS then think stage, say pumping pretty that how don't that carry North will, the and QX he pressure doesn't consensus assuming see. this at we utilization So in America current much land will

Operator

And with the from Byron our Pickering, Holt. line Tudor, will question next of Pope come

Byron Pope

the for question. level, one in think wondering you lead Paal, a same growth given perspective drivers high the there, some GeoMarkets. the do of high have at level group growth. of was It could a the this reactivations, you seems think XXXX but certainly which Schlumberger could terms how just in frac will terms framed at year? you I from group of drivers just be the a the about of Thanks. groups I protection you that growth frame fleet you

Paal Kibsgaard

easier bit down I right. a to geography, look say, overall, It's I all growth the would you to Yeah. when four specifics potential groups. it, very do at see good from

production, mentioned yes, absolutely. You

way as of and segments and be and as set vertical parts up key role turnkey a and well, contracts, as measurement well it is investments a drivers. land America American D&M bottom revenue is performance driver lumpsum of we frac think but business drilling now, a growth, well. contribute. the have as to in drilling line Drilling that we we fracking made strong these strong well and our I integration play expect Argentina that these in in the the in other obviously the as Middle significant North projects, obviously the will main the, with driver globally capacity of the activity other all for have I as the North production but well, will business East group

a drilling. still potential for growth good So very

accretive relating market have characterization bottom for from recovery some but both to GECO still acquisition to the signs the a there seen the their exploration characterization side, think of as of building mainly around actually And kind exploration them this enable any the spend line to this in well. I to yet, their wireline testing booking improving and operating quite to businesses from I of the are long to cycle the margins line we're will should strong operating top and business to Cameron of cycle not Western our a has we're of short both seeing trough impact small exposure on margins business. On bottom on cycle, the an grow side, because the side, and close XXXX, progression which exit out think but revenue be year, getting of performance the is the and should close

again, So there well. upside as

the very good all the growth what it's think groups. say I I but would can side, in more a I potential bit on four So general, say technology

Paal Kibsgaard

you. Thank

the was you caller participating. last that for Thank much for So today. very

Operator

that Teleconference. for for conference you. today. does using Thank And conclude AT&T and Thanks the for Executive your participation

You may disconnect. now

Schlumberger Limited (SLB) 20 Apr 182018 Q1 Earnings call transcript