Schlumberger discussed the latest developments and opportunities across its various divisions in the region when the company announced its Q1 2011 results.
Oilfield Services
First-quarter revenue of US$8.12 billion decreased 4 per cent sequentially but increased 45 per cent year-on-year. The impacts of extraordinary geopolitical events in North Africa and the Middle East as well as severe weather in the US and Australia during the quarter affected all three Product Groups and accounted for approximately half of the sequential decrease in total Oilfield Services revenue.
Excluding the impact of these geopolitical and weather events, sequential revenue performance varied by Group. Reservoir Characterization revenue decreased primarily on lower WesternGeco multiclient and Schlumberger Information Solutions (SIS) software sales following their fourth-quarter 2010 seasonal highs as well as on lower Testing Services activity, but these effects were partially offset by higher Wireline activity, particularly in North America.
Drilling revenue increased on higher IPM Well Construction activity in the Middle East & Asia, Latin America and Europe/CIS/Africa Areas, which was partially offset by a decrease in M-I SWACO revenue following the high product sales of the fourth quarter, and by lower Drilling & Measurements revenue through a less favorable activity mix and lower pricing in Europe/CIS/Africa. Reservoir Production revenue increased sequentially on higher pricing and activity in North America, although this was partially offset by the absence of the Integrated Project Management (IPM) gain share payout in North America and the absence of the Artificial Lift and Completions Systems equipment sales seen in the fourth quarter.
On a geographical basis, Europe/CIS/Africa revenue decreased sequentially primarily due to disruptions resulting from the political unrest in North Africa, a less favorable revenue mix coupled with lower software sales in the North Sea GeoMarket, and seasonally lower activity in Russia. Middle East & Asia revenue was lower as increasing IPM activity in Iraq and shale gas activity in India were insufficient to offset the impact of geopolitical events in the Middle East, seasonally lower software and equipment sales.
First-quarter pretax operating income of US$1.46 billion decreased 14 per cent sequentially but increased 40 per cent year-on-year. Pretax operating margin decreased 206 basis points (bps) sequentially to 17.9 per cent primarily due to the reduced software and equipment sales as well as the lower WesternGeco multiclient sales; the non-recurrence of the IPM gain share payout; the impact of the geopolitical events in North Africa and the Middle East; and the weather-related slowdowns in the US and Australia.
The quarter's technical highlights were led by rapid growth in the deployment of Well Services HiWAY flow-channel hydraulic fracturing technology. Total job count is now approaching 1,000 with 528 stages completed in the first quarter of 2011 compared to 102 in the fourth quarter of 2010. The first horizontal openhole well in the Bakken shale with 19 stages has been successfully completed while the first job has been conducted in the Middle East. A significant number of opportunities for future jobs are now under evaluation and new fields for HiWAY technology deployment are under discussion in the US, Canada, Argentina, India, Oman, Saudi Arabia, Egypt, Algeria, Congo and Angola.
A number of contract awards that illustrate the Schlumberger geographical footprint were recorded. BP Iraq N.V. awarded Schlumberger a two-year contract for bundled services to complete the drilling of 46 re-entry wells and 25 new wells that will require a total of 4 rigs. The contract covers technologies from Wireline, Drilling & Measurements, Geoservices, M-I SWACO and Well Services.
Reservoir Characterization Group
First-quarter revenue of $2.19 billion was 12 per cent lower sequentially and decreased 2 per cent year-on-year. Pretax operating income of US$460 million was 32 per cent lower sequentially and decreased 19 per cent year-on-year.
Sequentially, Group revenue was severely impacted by disruptions from the geopolitical events in North Africa and the Middle East. WesternGeco revenue decreased following the fourth-quarter surge in multiclient sales in the US Gulf of Mexico and through lower Land activity as a consequence of the geopolitical events while Marine revenue increased due to a more favorable revenue mix. SIS revenue fell sharply from seasonally lower software sales across all geographic Areas.
Testing revenue decreased on reduced equipment sales and activity, especially in Latin America; on completion of projects in the Australia/Papua New Guinea and East Asia GeoMarkets; on the winter seasonal slowdown in Russia; and on the geopolitical events. Wireline revenue was flat sequentially as strong winter activity in Canada was offset by the impact of the geopolitical events and weather slowdowns in Australia.
Reservoir Characterization Group activities saw a number of new or significant technology deployments in the quarter. Wireline Dielectric Scanner technology continued deployment in Saudi Arabia, being run in an exploration well that was expected to contain heavy oil. The results indicated one formation to be saturated with fresh water, and this was later confirmed with MDT* modular formation dynamics tester technology. In this well, the Dielectric Scanner service provided timely information to optimize the wireline formation tester sampling program and avoid unnecessary drill stem tests.
First-quarter revenue of US$3.20 billion was 1 per cent lower sequentially but 120 per cent higher year-on-year. Pretax operating income of US$467 million was flat sequentially but increased 71 per cent year-on-year.
Sequentially, the decrease in Group revenue was primarily due to disruptions resulting from geopolitical events in North Africa and the Middle East. Excluding the impact of these disruptions, Group revenue increased sequentially but varied by Technology. IPM Well Construction revenue increased on strong activity growth in Iraq, Mexico and Russia. Drilling & Measurements revenue declined from lower activity and pricing in Europe and Africa and the completion of offshore exploration projects in Australia/Papua New Guinea - although these effects were mitigated by the return of some deepwater work in the US Gulf of Mexico and by an increase in activity in Latin America and Russia.
Following strong product sales in the fourth quarter of 2010 and despite continued strong activity in North America, M-I SWACO revenue decreased as a result of the weather-related slowdowns in Australia as well as a result of delayed projects in the Europe/CIS/Africa Area. Sequentially, pretax operating margin was essentially flat at 14.6 per cent as the contribution from the increased IPM Well Construction activity was offset by the impact of activity declines for M-I SWACO and reduced pricing for Drilling & Measurements services.
Drilling Group Technologies helped customers improve performance in a number of key areas. Growth in IPM Well Construction activity was evidenced by technical highlights in Iraq.New Schlumberger technologies and processes are also contributing to continuing performance improvements on the Rumaila contract for BP in Iraq.
In addition to an IPM real-time enabled operations cell, casing drilling, advanced cement slurries, logging-while-drilling services and cased-hole logs have led to a time reduction of 37 per cent between the first and second groups of wells drilled. The third group of wells has yielded further improvement to reach a 50 per cent reduction over the first wells. Several step changes in procedure implemented over the project contributed to these savings as well as to enhanced operational safety.
Reservoir Production Group
First-quarter revenue of US$2.72 billion decreased 2 per cent sequentially but increased 44 per cent year-on-year. Pretax operating income of US$528 million was 9 per cent lower sequentially but more than tripled year-on-year.
Sequentially, the decrease in Group revenue was largely due to the impact of geopolitical events in North Africa and the Middle East as well as to the severe weather in the US and Australia. Excluding these impacts, Group revenue increased as higher pricing and strong demand for Well Services technologies in North America more than offset the non-recurring prior quarter's IPM gain share payout in North America and the seasonally lower Artificial Lift and Completions Systems equipment sales.
First-quarter pretax operating margin decreased 145 bps to 19.4 per cent, primarily due to the non-repetition of the IPM gain share payout, the lower Artificial Lift and Completion Systems equipment sales, and the impact of geopolitical events and weather.
Reservoir Production Group highlights included technology deployments in a number of key areas. As part of IPM operations on the Rumaila field in Iraq, Well Services LiteFIL* cement additive for low-density slurries and CemNET advanced fiber technology are helping overcome lost circulation challenges during 9 5/8-in casing cementing operations. The new technologies have led to reduced time and lower operational risk by allowing the 9 5/8-in jobs to be performed in a single stage rather than using the two-stage technique standard in this field since the 1970s.
New Well Services ACTive in-well live performance technology and Jet Blaster* jetting scale removal service were used to remove scale in a natural gas well in Saudi Arabia. The ACTive fiber-optic system provided real-time bottom-hole pressure measurements for continuous monitoring of solids within the coiled tubing and the completion annulus—factors critical for cleanout optimization and stuck pipe prevention. The wellbore was cleaned of scale at the first attempt enabling a whipstock to be run successfully.
Well Services Losseal fiber-based lost-circulation pills were pumped to control fluid loss in a well offshore Saudi Arabia. Prior to treatment, a total of 12 standard 100-bbl pills and 7 conventional and thixotropic cement plugs had been pumped. After 12 days of using standard treatments, it was decided to proceed with Losseal technology, which consists of three key components—the base viscous fluid, an optimized solids package and a dual-fiber material. After treatment, the loss rate had been reduced by more than 95 per cent.
In Kuwait, Well Services ACTive in-well live performance technology was deployed in an openhole horizontal well in a carbonate reservoir to shut-off water production using a combination of mechanical and chemical isolation techniques. Real-time downhole measurements from the ACTive fiber-optic cable enabled reliable bridge plug inflation under sub-hydrostatic conditions and played a vital role in fine-tuning the gel concentration required to achieve successful cut-off. As a result of this holistic approach, 4,000 bbl/d of water production was eliminated with a 30 per cent gain in oil production.
A combination of new Schlumberger production technologies helped clean a production well in the Hassi Messaoud field for Sonatrach in Algeria. ACTive in-well live performance coiled-tubing with fiber-optic capability was used with the Discovery MLT multilateral tool to access both laterals of the well in substatic reservoir conditions. The integrated technologies minimized orienting time downhole and successfully restored production.
In Tunisia, new Well Services coiled-tubing technology was introduced on a number of operations. On one well for BG Tunisia, CTL coiled-tubing logging was used to deploy the Wireline FloScan Imager horizontal and deviated well production logging system to acquire the data needed to enable BG Tunisia to reduce water cut in the well.
Elsewhere, Vantage intelligent coiled-tubing intervention tools were used with PURE clean perforating technology in the challenging environment of high temperature and high hydrogen-sulphide content. A total of six runs were performed without problem on what was the first Vantage operation in Tunisia, and the first worldwide under such conditions.
