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Schlumberger NV (SLB) Paal Kibsgaard on Q1 2016 Results - Earnings Call Transcript

Q1 2016 Earnings Call

April 22, 2016 9:00 am ET

Executives

Simon Farrant - Vice President-Investor Relations

Simon Ayat - Chief Financial Officer & Executive Vice President

Paal Kibsgaard - Chairman & Chief Executive Officer

Analysts

Ole H. Slorer - Morgan Stanley & Co. LLC

J. David Anderson - Barclays Capital, Inc.

Angie M. Sedita - UBS Securities LLC

James West - Evercore ISI

James Wicklund - Credit Suisse Securities (NYSE:USA) LLC (Broker)

William Herbert - Simmons & Co. International

Waqar Syed - Goldman Sachs & Co.

Judson E. Bailey - Wells Fargo Securities LLC

Kurt Hallead - RBC Capital Markets LLC

Scott A. Gruber - Citigroup Global Markets, Inc. (Broker)

Operator

Ladies and gentlemen, thank you for standing by and welcome to the Schlumberger earnings conference call. At this time, all lines are in a listen-only mode. Later, we will conduct a question-and-answer session. Instructions will be given to you at that time. And as a reminder, today's conference call is being recorded.

I would now like to turn the conference over to Mr. Simon Farrant. Please go ahead.

Simon Farrant - Vice President-Investor Relations

Thank you, good morning and welcome to the Schlumberger Limited first quarter 2016 results conference call. Today's call is being hosted from Houston following the Schlumberger Limited board meeting.

Joining us on the call are Paal Kibsgaard, Chairman and Chief Executive Officer, and Simon Ayat, Chief Financial Officer. Our prepared comments will be provided by Simon and Paal. Simon will first review the financial results, and then Paal will discuss the operational and technical highlights.

However, before we begin with the opening remarks, I would like to remind the participants that some of the statements we will be making today are forward-looking. These matters involve risks and uncertainties that could cause our results to materially differ from those projected in these statements. I therefore refer you to our latest 10-K filings and other SEC filings.

Our comments today may also include non-GAAP financial measures. Additional details and reconciliations to the most directly comparable GAAP financial measures can be found in our first quarter press release, which is on our website. We welcome your questions after the prepared statements.

I'll now turn the call over to Simon.

Simon Ayat - Chief Financial Officer & Executive Vice President

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

First quarter earnings per share was $0.40. Excluding charges recorded in the first and fourth quarters of last year, this represents decreases of $0.25 sequentially and $0.66 when compared to the same quarter last year. Our first quarter revenue of $6.5 billion decreased 16% sequentially, while pre-tax operating margin decreased 281 basis points to 14%. These decreases, which were driven by continued activity decline and pricing pressures, resulted in decremental margins of 32%.

Highlights by product group were as follows. First quarter Reservoir Characterization revenue of $1.7 billion decreased 20% sequentially while margin decreased 480 basis points to 19%, resulting in decremental margins of 43%. These decreases were largely due to seasonally lower software sales and a hold in higher-margin exploration activity.

Drilling Group revenue of $2.5 billion decreased 16% sequentially while margin declined 183 basis points. These decreases were primarily driven by activity declines across all areas. Despite these declines, decremental margins were limited to 27% on strong cost controls.

Production Group revenue of $2.3 billion decreased 11% sequentially and margins fell by 335 basis points, primarily on lower pressure pumping activity and further pricing erosion in North America land. These declines, offset in part by strong contributions from SPM [Schlumberger Production Management], resulted in decremental margins of 33%.