Fourth quarter write downs by Schlumberger suggest tax moves

Energy Fix:

The oilfield services company Schlumberger reported a $2.3 billion loss in the fourth quarter as one-time tax charges and write-downs offset strong revenue growth.

Schlumberger's revenues jumped 15 percent to$8.2 billion in the fourth quarter, up from $7.1 billion during the same period in 2016. Excluding the one-time charges, Schlumberger said, it would have earned $668 million in the fourth quarter, up 15 percent from $581 million in the third quarter.

Schlumberger, however said it is scuttling its less profitable WesternGeo seismic business, including more than a $1 billion write-down charge, and also taking another nearly $1 billion write down on the loss of value of its business in Venezuela, which is rapidly decreasing its oil production amid geopolitical and economic turmoil. The company also took another temporary loss on one-time taxes on foreign earnings that are being moved to the U.S. as part of the nation's new tax law.

For the full year, Schlumberger posted a $1.51 billion loss versus a bigger $1.69 billion loss in 2016.

Still, Schlumberger is continuing to expand in the U.S. along with the ongoing shale boom, including the recent $430 million acquisition of Weatherford International's pressure pumping and hydraulic fracturing fleet.

For all of 2017, Schlumberger's activity in the onshore U.S. skyrocketed by 82 percent from the oil bust year of 2016. That jump followed the surge in drilling rigs added to oilfields last year, said Chairman and CEO Paal Kibsgaard.
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By taking the losses in 2017 they probably will apply to the much higher tax rates on income in that year.  If companies waited until 2018 with the much lower tax rates the write-downs would not be nearly as "valuable."  It will be interesting to see how previous years' losses are treated carried forward into 2018 and beyond.