Exhibit 99.1
ONESTIM
NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019 COMBINED FINANCIAL STATEMENTS (UNAUDITED) | ||||
Combined Statement of Operations for the Nine Months ended September 30, 2020 and 2019 | F-2 | |||
Combined Statement of Comprehensive Loss for the Nine Months ended September 30, 2020 and 2019 | F-3 | |||
Combined Balance Sheet for September 30, 2020 and December 31, 2019 | F-4 | |||
Combined Statement of Cash Flows for the Nine Months ended September 30, 2020 and 2019 | F-5 | |||
Combined Statement of Parent’s Net Investment for the Nine Months ended September 30, 2020 and 2019 | F-6 | |||
Notes to Combined Financial Statements | F-7 |
ONESTIM
COMBINED STATEMENT OF OPERATIONS
For the Nine Months Ended September 30, 2020 and 2019
(Unaudited)
Nine Months September 30, | ||||||||
2020 | 2019 | |||||||
(Stated in millions) | ||||||||
Revenue | $ | 959 | $ | 2,621 | ||||
Expenses | ||||||||
Cost of revenue | 981 | 2,447 | ||||||
Research & engineering | 4 | 15 | ||||||
General & administrative | 97 | 133 | ||||||
Impairments & other | 942 | 1,575 | ||||||
Interest | 10 | 9 | ||||||
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Loss before taxes | (1,075 | ) | (1,558 | ) | ||||
Tax benefit | (247 | ) | (341 | ) | ||||
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Net loss | $ | (828 | ) | $ | (1,217 | ) | ||
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See the Notes to Combined Financial Statements
F-2
ONESTIM
COMBINED STATEMENT OF COMPREHENSIVE LOSS
For the Nine Months Ended September 30, 2020 and 2019
(Unaudited)
Nine Months Ended September 30, | ||||||||
2020 | 2019 | |||||||
(Stated in millions) | ||||||||
Net loss | $ | (828 | ) | $ | (1,217 | ) | ||
Currency translation adjustments | ||||||||
Net change arising during period | (6 | ) | 2 | |||||
Cash flow hedges | ||||||||
Net loss on cash flow hedges | (17 | ) | (17 | ) | ||||
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Comprehensive loss | $ | (851 | ) | $ | (1,232 | ) | ||
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See the Notes to Combined Financial Statements
F-3
ONESTIM
COMBINED BALANCE SHEET
As of September 30, 2020 and December 31, 2019
Sept. 30, 2020 (Unaudited) | Dec. 31, 2019 | |||||||
(Stated in millions) | ||||||||
ASSETS | ||||||||
Current Assets | ||||||||
Receivables less allowance for doubtful accounts (2020 - $5; 2019 - $1) | $ | 119 | $ | 359 | ||||
Inventories | 35 | 26 | ||||||
Other current assets | 17 | 28 | ||||||
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171 | 413 | |||||||
Fixed Assets less accumulated depreciation | 283 | 931 | ||||||
Deferred Taxes | 264 | 189 | ||||||
Operating Lease Right-of-use Assets | 19 | 45 | ||||||
Other Assets | 1 | 88 | ||||||
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$ | 738 | $ | 1,666 | |||||
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LIABILITIES AND EQUITY | ||||||||
Current Liabilities | ||||||||
Accounts payable and accrued liabilities | $ | 317 | $ | 517 | ||||
Current portion of operating lease liabilities | 102 | 44 | ||||||
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419 | 561 | |||||||
Deferred taxes | — | — | ||||||
Noncurrent portion of Operating Lease Liabilities | 173 | 107 | ||||||
Other Liabilities | 294 | 326 | ||||||
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886 | 994 | |||||||
Equity | ||||||||
Parent’s net investment | (148 | ) | 672 | |||||
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$ | 738 | $ | 1,666 | |||||
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See the Notes to Combined Financial Statements
F-4
ONESTIM
COMBINED STATEMENT OF CASH FLOWS
For the Nine Months Ended September 30, 2020 and 2019
(Unaudited)
Nine Months Ended September 30, | ||||||||
2020 | 2019 | |||||||
(Stated in millions) | ||||||||
Cash flows from operating activities: | ||||||||
Net loss | $ | (828 | ) | $ | (1,217 | ) | ||
Adjustments to reconcile net loss to cash provided by operating activities: | ||||||||
Impairments and other charges | 942 | 1,575 | ||||||
Depreciation and amortization | 65 | 240 | ||||||
Stock-based compensation expense | 4 | 3 | ||||||
Deferred taxes | (75 | ) | (343 | ) | ||||
Change in assets and liabilities: | ||||||||
Decrease (increase) in receivables | 240 | (15 | ) | |||||
Increase in inventories | (9 | ) | (8 | ) | ||||
(Increase) decrease in other current assets | (11 | ) | 3 | |||||
Increase in other assets | (5 | ) | ||||||
(Decrease) increase in accounts payable and accrued liabilities | (255 | ) | 63 | |||||
(Decrease) increase in other liabilities | (26 | ) | 2 | |||||
Other | (40 | ) | 10 | |||||
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NET CASH PROVIDED BY OPERATING ACTIVITIES | 7 | 308 | ||||||
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Cash flows from investing activities: | ||||||||
Capital expenditures | (35 | ) | (127 | ) | ||||
Other | 24 | — | ||||||
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NET CASH USED IN INVESTING ACTIVITIES | (11 | ) | (127 | ) | ||||
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Cash flows from financing activities: | ||||||||
Net transfers from (to) Parent | 27 | (160 | ) | |||||
Other | (23 | ) | (21 | ) | ||||
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NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES | 4 | (181 | ) | |||||
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Net change in cash | — | — | ||||||
Cash, beginning of period | — | — | ||||||
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Cash, end of period | $ | — | $ | — | ||||
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See the Notes to Combined Financial Statements
F-5
ONESTIM
COMBINED STATEMENT OF PARENT’S NET INVESTMENT
(Unaudited)
Parent’s Net Investment | ||||
(Stated in millions) | ||||
Balance, December 31, 2019 | $ | 672 | ||
Net loss | (828 | ) | ||
Stock-based compensation expense | 4 | |||
Currency translation adjustments | (6 | ) | ||
Change in fair value of cash flow hedge | (17 | ) | ||
Net transfers from Parent | 27 | |||
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Balance, September 30, 2020 | $ | (148 | ) | |
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Parent’s Net Investment | ||||
(Stated in millions) | ||||
Balance, December 31, 2018 | $ | 2,232 | ||
Net loss | (1,217 | ) | ||
Stock-based compensation expense | 3 | |||
Currency translation adjustments | 2 | |||
Change in fair value of cash flow hedge | (17 | ) | ||
Net transfers to Parent | (160 | ) | ||
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Balance, September 30, 2019 | $ | 843 | ||
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See the Notes to Combined Financial Statements
F-6
Notes to Combined Financial Statements
1. Basis of Presentation and Summary of Accounting Policies
Basis of Presentation
These combined financial statements reflect the combined historical results of operations, financial position and cash flows of the OneStim business of Schlumberger Limited (“Schlumberger” or “Parent”). OneStim provides a low cost-to-service and highly competitive service delivery platform in North America’s unconventional plays. The services include hydraulic fracturing, perforating and a vertically integrated product and logistics organization.
OneStim is indirectly 100% owned by Schlumberger. These combined financial statements were prepared on a stand-alone basis derived from the consolidated financial statements and accounting records of Schlumberger as if OneStim had been operating as a stand-alone company for all years presented.
The accompanying unaudited combined financial statements of OneStim have been prepared in accordance with generally accepted accounting principles in the United States of America for interim financial information. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of OneStim management, all adjustments considered necessary for a fair statement have been included in the accompanying unaudited financial statements. Operating results for the nine-month period ended September 30, 2020 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2020. The December 31, 2019 balance sheet information has been derived from the OneStim 2019 audited financial statements.
The assets and liabilities in the combined financial statements have been reflected on a historical cost basis, as included in the consolidated statements of position of Schlumberger. The Combined Statement of Operations include allocations of costs incurred by Schlumberger for functions such as corporate executive management, human resources, finance, information technology, facilities, and legal, among others. The total costs allocated to these combined financial statements were $59 million and $96 million for the first nine months of 2020 and 2019, respectively. These expenses, which are included in General & administrative in the Combined Statement of Operations, have been allocated to OneStim primarily on a proportional basis of revenue or other measures of the business or of Schlumberger.
Management believes that the assumptions underlying the combined financial statements, including assumptions regarding the allocation of general corporate expenses from Schlumberger, are reasonable. Nevertheless, the combined financial statements may not include all actual expenses that would have been incurred by OneStim and may not reflect the combined results of operations, financial position and cash flows had it operated as a stand-alone company during the years presented. Actual costs that would have been incurred if OneStim had been a stand-alone company would depend on multiple factors, including organizational structure and strategic decisions made in various areas, including information technology and infrastructure.
Principles of Combination
The combined financial statements include certain assets and liabilities that have historically been held at the Schlumberger level but are specifically identifiable or otherwise attributable to OneStim. All significant intercompany transactions and accounts within OneStim’s combined businesses have been eliminated. Transactions between OneStim and Schlumberger, including revenue from Schlumberger and expenses related to corporate allocations from Schlumberger, are considered to be effectively settled for cash at the time the transaction is recorded. The total net effect of the settlement of these transactions is reflected in the Combined Statement of Cash Flows as a financing activity and in the Combined Balance Sheet as Parent’s net investment.
F-7
Concentration of Credit Risk
OneStim’s assets that are exposed to concentrations of credit risk consist primarily of receivables from clients. OneStim performs ongoing credit evaluations of its customers’ financial condition. OneStim maintains an allowance for doubtful accounts in order to record receivables at their net realizable value. If the financial condition of its customers were to deteriorate resulting in an impairment of their ability to make payments, an adjustment to the allowance may be required. At September 30, 2020, two customers each accounted for more than 10% of Receivables. At December 31, 2019, no customer accounted for more than 10% of Receivables.
One customer accounted for 10% of Revenue during first nine months of 2020. No customer accounted for more than 10% of Revenue during the first nine months of 2019.
Cash Management
Cash is managed centrally by Schlumberger on behalf of OneStim. Accordingly, the cash held by Schlumberger at the corporate level was not attributed to OneStim for any of the periods presented. Transfers of cash, both to and from Schlumberger’s centralized cash management system, are reflected as a component of Parent’s net investment in the Combined Balance Sheet and as a financing activity on the accompanying Combined Statement of Cash Flows.
Due to OneStim’s participation in Schlumberger’s centralized cash management process, OneStim utilizes Schlumberger to fund its operations and meet its obligations. To ensure OneStim is able to continue its operations and meet its obligations, it has received a commitment from Schlumberger to provide financial support to enable it to continue its operations and fulfill its obligations through December 23, 2021. This commitment terminates upon a change of control of OneStim.
Inventories
Inventories, which are stated at the lower of average cost or net realizable value, consist primarily of materials, such as proppants, chemicals and other items, used in hydraulic fracturing.
Research and Engineering Costs
Research and engineering have been provided and managed by Schlumberger on a centralized basis. These expenses have been allocated to OneStim on the basis of estimated actual costs incurred.
Income Taxes
OneStim’s operations have, historically been included in the income tax filings of various subsidiaries of Schlumberger. The provision for income taxes in OneStim’s Combined Statement of Operations is based on a separate return methodology using the asset and liability approach of accounting for income taxes. Under this approach, the provision for income taxes represents income taxes paid or payable for the current year plus the change in deferred taxes during the year calculated as if OneStim was a stand-alone tax payer filing hypothetical income tax returns, where applicable. Payments to tax authorities are made by Schlumberger and not by OneStim. OneStim does not maintain taxes payable to/from Schlumberger as the related amounts are deemed to be immediately settled with Schlumberger as a component of Parent’s net investment.
Subsequent Events
Subsequent events have been evaluated through December 22, 2020, which is the date the financial statements were available to be issued.
F-8
2. Charges
OneStim recorded the following charges and credits during the first nine months of 2020, all of which are classified as Impairments & other in the Combined Statement of Operations:
Pretax | Tax | Net | ||||||||||
(Stated in millions) | ||||||||||||
First Quarter: | ||||||||||||
Pressure pumping equipment and related assets | $ | 587 | $ | 133 | $ | 454 | ||||||
Workforce reductions | 1 | — | 1 | |||||||||
Second Quarter: | ||||||||||||
Right-of-use asset impairments | 209 | 48 | 161 | |||||||||
Fixed asset impairments | 44 | 10 | 34 | |||||||||
Supply contracts | 39 | 9 | 30 | |||||||||
Workforce reductions | 35 | 8 | 27 | |||||||||
Other | 21 | 5 | 16 | |||||||||
Third Quarter: | ||||||||||||
Workforce reductions | 6 | 1 | 5 | |||||||||
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$ | 942 | $ | 214 | $ | 728 | |||||||
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First quarter 2020:
Geopolitical events that increased the supply of low-priced oil to the global market occurred at the same time that demand weakened due to the worldwide effects of the COVID-19 pandemic, leading to a collapse in oil prices during March 2020. As a result, Schlumberger’s market capitalization deteriorated significantly compared to the end of 2019.
The negative market indicators described above were triggering events that indicated that certain of OneStim’s long-lived assets may be impaired. Recoverability testing indicated that certain long-lived assets were impaired. The estimated fair value of these assets was determined to be below their carrying value. As a result, OneStim recorded $587 million of impairment charges relating to its pressure pumping equipment and related assets. OneStim also recorded a $1 million charge relating to workforce reductions.
Second quarter 2020:
As previously noted, late in the first quarter of 2020 geopolitical events that increased the supply of low-priced oil to the global market occurred at the same time as demand weakened due to the worldwide effects of the COVID-19 pandemic, which led to a collapse in oil prices. OneStim responded to these market conditions by taking actions to restructure its business and rationalize its asset base during the second quarter of 2020. These actions included reducing headcount and closing facilities. Additionally, due to the resulting activity decline, OneStim had assets that will no longer be utilized.
As a consequence of these circumstances and decisions, OneStim recorded the following restructuring and asset impairment charges:
• | $209 million write-down of right-of-use assets under operating leases primarily associated with excess equipment and leased facilities Schlumberger is exiting. |
• | $44 million of fixed asset impairments relating to facilities it is exiting. |
• | $39 million relating to certain supply contracts. |
• | $35 million of severance associated with workforce reductions. |
• | $21 million of other restructuring costs. |
Third quarter 2020:
During the third quarter of 2020 OneStim recorded a $6 million charge related to workforce reductions.
F-9
2019
OneStim reordered the following charges and credits during the third quarter of 2019, all of which are classified as Impairments & other in the Combined Statement of Operations:
Pretax | Tax | Net | ||||||||||
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Pressure pumping equipment and related assets | $ | 1,324 | $ | 289 | $ | 1,035 | ||||||
Supply Contracts | 121 | 27 | 94 | |||||||||
Right-of-use asset impairments | 98 | 22 | 76 | |||||||||
Inventory write-downs | 19 | 4 | 15 | |||||||||
Workforce reductions | 13 | 2 | 11 | |||||||||
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$ | 1,575 | $ | 344 | $ | 1,231 | |||||||
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Deteriorating market conditions in the United States during the third quarter of 2019, as well as the appointment of a new Chief Executive Officer of Schlumberger, were all triggering events that indicated that certain of OneStim’s long-lived assets may be impaired.
Recoverability testing indicated that certain long-lived assets were impaired. The estimated fair value of these assets were determined to be below their carrying value. As a result, OneStim recorded $1.575 billion of impairment and related charges which consisted of:
• | $1.324 billion pressure pumping equipment and related assets. |
• | $98 million of right-of-use assets under operating leases. |
• | $121 million relating to a supply contract, which remains unpaid and included in Accounts payable and accrued liabilities. |
• | $19 million of inventory. |
• | $13 million of severance. |
The fair value of certain of the impaired long-lived assets was estimated based on the present value of projected future cash flows that the underlying assets are expected to generate. Such estimates included unobservable inputs that required significant judgment.
There were no charges recorded during the first six months of 2019.
3. Fixed Assets
A summary of fixed assets follows:
Sept. 30, 2020 | Dec. 31, 2019 | |||||||
(Stated in millions) | ||||||||
Property, plant & equipment | $ | 1,404 | $ | 2,229 | ||||
Less: Accumulated depreciation | 1,121 | 1,298 | ||||||
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$ | 283 | $ | 931 | |||||
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Depreciation expense relating to fixed assets was $65 million and $240 million for the first nine months of 2020 and 2019, respectively.
4. Contingencies
OneStim is party to various legal proceedings from time to time. A liability is accrued when a loss is both probable and can be reasonably estimated. Management believes that the probability of a material loss with respect to any currently pending legal proceeding is remote. However, litigation is inherently uncertain and it is not possible to predict the ultimate disposition of any of these proceedings.
F-10