Schlumberger plans to deleverage balance sheet with excess cash flow

By Devika Patel

Knoxville, Tenn., Oct. 16 – Schlumberger Ltd. generated $479 million of cash flow from operations last quarter, and management believes that the company will generate excess cash once it has completed its restructuring, allowing it to deleverage the balance sheet.

“I was again very pleased with our cash flow generation,” executive vice president and chief financial officer Stephane Biguet said on the company’s third quarter ended Sept. 30 earnings conference call on Friday.

“During the quarter, we generated $479 million of cash flow from operations and $226 million of free cash flow, despite making $273 million of severance payments.

“This performance confirms that our cash flow generation capabilities remain intact.

“As a result, we will generate excess cash once our restructuring efforts are complete and, therefore, be in a position to deleverage the balance sheet,” he said.

The company issued debt in the quarter and used the proceeds to repay notes due in November and commercial paper.

“We took further steps to strengthen the balance sheet during the quarter,” Biguet said.

“We issued $500 million of 1.4% notes due 2025.

“The proceeds will be used to repay 2.2% notes that mature in November.

“We also issued $350 million of 2.65% notes due 2030.

“The proceeds were used to pay down commercial paper borrowings,” he said.

Total cash and investments were $3.8 billion at the end of the quarter and net debt was $13.9 billion, an increase of $149 million compared to the prior quarter. Available liquidity was $10.8 billion as of Sept. 30.

On Aug. 6, Schlumberger Investment SA priced a $350 million reopening of its 2.65% notes due June 26, 2030 (A2/A) at 102.635.

The notes were priced at a spread of Treasuries plus 173 basis points, compared to talk at the Treasuries plus 180 bps to 185 bps area.

Citigroup Global Markets Inc. was the bookrunner.

Schlumberger originally sold $900 million of the notes on June 17 at 99.608 to yield 2.695%, or Treasuries plus 195 bps. The total outstanding is now $1.25 billion.

The issue is guaranteed by Schlumberger Ltd.

Proceeds will be used for general corporate purposes, including the repayment of outstanding commercial paper borrowings.

The issuer is based in Luxembourg.

On Sept. 9, Schlumberger Finance Canada Ltd. priced $500 million of 1.4% five-year notes (A2/A) at 99.88 to yield 1.425%, or a spread of Treasuries 115 plus basis points.

The notes were talked to print at the Treasuries plus 150 bps area.

BofA Securities Inc., Goldman Sachs & Co. LLC, J.P. Morgan Securities LLC, Morgan Stanley & Co. LLC, Deutsche Bank Securities Inc. and MUFG were the bookrunners.

The issue is guaranteed by Schlumberger Ltd.

Proceeds will be used for general corporate purposes, including debt repayment.

Schlumberger Finance is a Calgary, Alta.-based financing arm of Schlumberger.

Houston-based Schlumberger supplies technology, integrated project management and information solutions to customers in the oil and gas industries.

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