Schlumberger Limited (NYSE:SLB) Q1 2018 Earnings Conference Call Transcript

Apr 20, 2018 • 08:30 am ET

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Schlumberger Limited (NYSE:SLB) Q1 2018 Earnings Conference Call Transcript

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Q & A
Operator
Operator

(Operator Instructions) Your first question here will come from Ken Sill with SunTrust Robinson.

Analyst
Ken Sill

Yeah. Can you hear me? Hello.

Executive
Paal Kibsgaard

Yeah, we hear you.

Analyst
Ken Sill

For a minute there I thought I dropped the call. I was surprised to hear my name first. This is a good quarter and a tough environment here. One of my first questions is on pressure pumping. You're planning to put 1 million horsepower out. How much did you actually deploy in Q1?

Executive
Paal Kibsgaard

Well, I'm not going to go into the details of exactly how much we deployed. We continue to deploy and I would say that we deployed less than what we planned to, mainly because the overall softness that we experienced in the market. I think, the overall stage count growth market wide was a bit lower than expected and in addition to that, a number of other companies added fairly significant capacity to the market and this had an impact on softening pricing and also it impacted utilization. So we introduced somewhat lower, a lower number of fleets in the first quarter and it was more backend loaded, but we are back on our plan rate of introduction now as we enter Q2 and our plan is still to deploy the full 1 million horsepower that we acquired during the course of 2018.

Analyst
Ken Sill

Okay. And then to step to a big picture question, you're very optimistic about the outlook, makes a lot of sense given what we're seeing in inventories. Are you concerned with the Wall Street estimates on timing of the recovery or it seems like international is going to remain slow, North America up 20%. I think some estimate is a little bit higher than that, but it just doesn't seem like people are moving to raise their CapEx budgets very quickly. So I think the trend is very positive, but do you have any concerns about the timing of the growth in activity.

Executive
Paal Kibsgaard

Well, from an operational planning and execution front, from the Schlumberger side, international is unfolding this year as we were expecting. The rate of increase in investment levels is as you note significantly lower than what we see in North America, which was expected. But even with the 5% or plus or minus 5% increase in investment, we can generate I think quite a reasonable earnings growth out of that, mainly because we have a much higher market here internationally. Our margins are generally higher and our ability to generate incremental is also much higher internationally than in North America.

So even though there is a 4:1 ratio on investment growth levels, the (technical difficulty) business and our ability to generate earnings. Based on that, I'm quite positive on what we can make out of this growth rate even in 2018. But if you ask me, if the investment levels in the international market is sufficient, I would say no, it isn't. So from a supply ability, I would be concerned whether the international market and the producers