UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: September 30, 20172019
Commission file No.: 1-4601
SCHLUMBERGER N.V.
(SCHLUMBERGER LIMITED)
(Exact name of registrant as specified in its charter)
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| 52-0684746 |
(State or other jurisdiction of |
| (I.R.S. Employer |
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42 RUE SAINT-DOMINIQUE |
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PARIS, FRANCE |
| 75007 |
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5599 SAN FELIPE |
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HOUSTON, |
| 77056 |
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62 BUCKINGHAM GATE |
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LONDON, UNITED KINGDOM |
| SW1E 6AJ |
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PARKSTRAAT 83 THE HAGUE, |
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THE NETHERLANDS |
| 2514 JG |
(Addresses of principal executive offices) |
| (Zip Codes) |
Registrant’s telephone number in the United States, including area code, is: (713) 513-2000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
common stock, par value $0.01 per share | SLB | New York Stock Exchange |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
| ☒ |
| Accelerated filer |
| ☐ |
Non-accelerated filer |
| ☐ |
| Smaller reporting company |
| ☐ |
Emerging growth company |
| ☐ |
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|
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Class | Outstanding at September 30, |
COMMON STOCK, $0.01 PAR VALUE PER SHARE |
|
SCHLUMBERGER LIMITED
Third Quarter 20172019 Form 10-Q
Table of Contents
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| Page |
PART I |
| Financial Information |
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Item 1. |
| 3 | |
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Item 2. |
| Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
| 27 | |
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Item 4. |
| 27 | |
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PART II |
| Other Information |
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Item 1. |
| 27 | |
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Item 1A. |
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Item 2. |
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Item 3. |
| 28 | |
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Item 4. |
| 28 | |
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Item 5. |
| 28 | |
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Item 6. |
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2
SCHLUMBERGER LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME (LOSS)
(Unaudited)
| (Stated in millions, except per share amounts) |
| (Stated in millions, except per share amounts) |
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| Third Quarter |
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| Nine Months |
| Third Quarter |
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| Nine Months |
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| 2017 |
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| 2016 |
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| 2017 |
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| 2016 |
| 2019 |
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| 2018 |
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| 2019 |
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| 2018 |
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Revenue |
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Services | $ | 5,895 |
|
| $ | 5,023 |
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| $ | 16,308 |
|
| $ | 15,741 |
| $ | 6,332 |
|
| $ | 6,345 |
|
| $ | 18,390 |
|
| $ | 18,222 |
|
Product sales |
| 2,010 |
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|
| 1,996 |
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|
| 5,953 |
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|
| 4,962 |
|
| 2,209 |
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| 2,159 |
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| 6,299 |
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| 6,414 |
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Total Revenue |
| 7,905 |
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| 7,019 |
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| 22,261 |
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| 20,703 |
|
| 8,541 |
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| 8,504 |
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| 24,689 |
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| 24,636 |
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Interest & other income |
| 64 |
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|
| 54 |
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|
| 172 |
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| 153 |
|
| 21 |
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| 36 |
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| 61 |
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| 118 |
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Expenses |
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Cost of services |
| 4,939 |
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| 4,355 |
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| 13,816 |
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| 13,482 |
|
| 5,371 |
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| 5,336 |
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| 15,794 |
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| 15,414 |
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Cost of sales |
| 1,858 |
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|
| 1,936 |
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| 5,527 |
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| 4,734 |
|
| 2,014 |
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| 1,988 |
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| 5,800 |
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| 5,892 |
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Research & engineering |
| 189 |
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|
| 253 |
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| 595 |
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|
| 750 |
|
| 176 |
|
|
| 177 |
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|
| 527 |
|
|
| 524 |
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General & administrative |
| 115 |
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|
| 92 |
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|
| 323 |
|
|
| 305 |
|
| 120 |
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|
| 105 |
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|
| 345 |
|
|
| 330 |
|
Impairments & other |
| - |
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|
| - |
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|
| 510 |
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| 2,573 |
|
| 12,692 |
|
|
| - |
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|
| 12,692 |
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|
| 184 |
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Merger & integration |
| 49 |
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|
| 88 |
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|
| 213 |
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| 272 |
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Interest |
| 142 |
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|
| 149 |
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| 422 |
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|
| 431 |
|
| 160 |
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| 147 |
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| 462 |
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| 434 |
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Income (loss) before taxes |
| 677 |
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|
| 200 |
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| 1,027 |
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| (1,691 | ) |
| (11,971 | ) |
|
| 787 |
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| (10,870 | ) |
|
| 1,976 |
|
Taxes on income (loss) |
| 121 |
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| 10 |
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|
| 269 |
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| (259 | ) | |||||||||||||||
Tax expense (benefit) |
| (598 | ) |
|
| 129 |
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|
| (420 | ) |
|
| 348 |
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Net income (loss) |
| 556 |
|
|
| 190 |
|
|
| 758 |
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|
| (1,432 | ) |
| (11,373 | ) |
|
| 658 |
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| (10,450 | ) |
|
| 1,628 |
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Net income attributable to noncontrolling interests |
| 11 |
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| 14 |
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| 9 |
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| 50 |
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| 10 |
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| 14 |
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| 20 |
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| 29 |
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Net income (loss) attributable to Schlumberger | $ | 545 |
|
| $ | 176 |
|
| $ | 749 |
|
| $ | (1,482 | ) | $ | (11,383 | ) |
| $ | 644 |
|
| $ | (10,470 | ) |
| $ | 1,599 |
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Basic earnings (loss) per share of Schlumberger | $ | 0.39 |
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| $ | 0.13 |
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| $ | 0.54 |
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| $ | (1.10 | ) | $ | (8.22 | ) |
| $ | 0.46 |
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| $ | (7.56 | ) |
| $ | 1.15 |
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Diluted earnings (loss) per share of Schlumberger | $ | 0.39 |
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| $ | 0.13 |
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| $ | 0.54 |
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| $ | (1.10 | ) | $ | (8.22 | ) |
| $ | 0.46 |
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| $ | (7.56 | ) |
| $ | 1.15 |
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Average shares outstanding: |
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Basic |
| 1,385 |
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| 1,392 |
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| 1,388 |
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| 1,345 |
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| 1,385 |
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| 1,385 |
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| 1,385 |
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| 1,385 |
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Assuming dilution |
| 1,392 |
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| 1,401 |
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| 1,395 |
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| 1,345 |
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| 1,385 |
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| 1,392 |
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| 1,385 |
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| 1,393 |
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See Notes to Consolidated Financial Statements
SCHLUMBERGER LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
(Stated in millions) |
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| Third Quarter |
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| Nine Months |
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| 2019 |
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| 2018 |
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| 2019 |
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| 2018 |
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Net income (loss) | $ | (11,373 | ) |
| $ | 658 |
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| $ | (10,450 | ) |
| $ | 1,628 |
|
Currency translation adjustments |
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Unrealized net change arising during the period |
| (21 | ) |
|
| (47 | ) |
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| 18 |
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| (128 | ) |
Marketable securities |
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Unrealized loss arising during the period |
| - |
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| (12 | ) |
|
| - |
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| (33 | ) |
Cash flow hedges |
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Net gain (loss) on cash flow hedges |
| (27 | ) |
|
| 4 |
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| (31 | ) |
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| (6 | ) |
Reclassification to net income (loss) of net realized (gain) loss |
| 3 |
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| 2 |
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| 7 |
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| (2 | ) |
Pension and other postretirement benefit plans |
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Amortization to net income (loss) of net actuarial loss |
| 23 |
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| 47 |
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| 70 |
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| 141 |
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Amortization to net income (loss) of net prior service credit |
| (2 | ) |
|
| (1 | ) |
|
| (8 | ) |
|
| (4 | ) |
Income taxes on pension and other postretirement benefit plans |
| (1 | ) |
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| (2 | ) |
|
| (3 | ) |
|
| (7 | ) |
Comprehensive income (loss) |
| (11,398 | ) |
|
| 649 |
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| (10,397 | ) |
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| 1,589 |
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Comprehensive income attributable to noncontrolling interests |
| 10 |
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| 14 |
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| 20 |
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| 29 |
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Comprehensive income (loss) attributable to Schlumberger | $ | (11,408 | ) |
| $ | 635 |
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| $ | (10,417 | ) |
| $ | 1,560 |
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See Notes to Consolidated Financial Statements
3
SCHLUMBERGER LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)BALANCE SHEET
(Stated in millions) |
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| Third Quarter |
|
| Nine Months |
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| 2017 |
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| 2016 |
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| 2017 |
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| 2016 |
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Net income (loss) | $ | 556 |
|
| $ | 190 |
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| $ | 758 |
|
| $ | (1,432 | ) |
Currency translation adjustments |
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Unrealized net change arising during the period |
| 75 |
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|
| 27 |
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| 49 |
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| (26 | ) |
Marketable securities |
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Unrealized loss arising during the period |
| (41 | ) |
|
| (5 | ) |
|
| (66 | ) |
|
| (2 | ) |
Cash flow hedges |
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Net gain (loss) on cash flow hedges |
| 8 |
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|
| (18 | ) |
|
| 19 |
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|
| (86 | ) |
Reclassification to net income (loss) of net realized loss (gain) |
| (4 | ) |
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| 29 |
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| 4 |
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| 109 |
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Pension and other postretirement benefit plans |
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Actuarial loss |
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Amortization to net income (loss) of net actuarial loss |
| 40 |
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| 40 |
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|
| 119 |
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| 119 |
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Prior service cost |
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Amortization to net income (loss) of net prior service cost |
| 20 |
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| 25 |
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| 60 |
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|
| 76 |
|
Income taxes on pension and other postretirement benefit plans |
| - |
|
|
| (6 | ) |
|
| (2 | ) |
|
| (20 | ) |
Comprehensive income (loss) |
| 654 |
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|
| 282 |
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|
| 941 |
|
|
| (1,262 | ) |
Comprehensive income attributable to noncontrolling interests |
| 11 |
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| 14 |
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| 9 |
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|
| 50 |
|
Comprehensive income (loss) attributable to Schlumberger | $ | 643 |
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| $ | 268 |
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| $ | 932 |
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| $ | (1,312 | ) |
(Stated in millions) |
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| Sept. 30, |
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| 2019 |
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| Dec. 31, |
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| (Unaudited) |
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| 2018 |
| |||
ASSETS |
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Current Assets |
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Cash | $ | 1,183 |
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| $ | 1,433 |
| |
Short-term investments |
| 1,109 |
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|
| 1,344 |
| |
Receivables less allowance for doubtful accounts (2019 - $238; 2018 - $249) |
| 8,332 |
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|
| 7,881 |
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Inventories |
| 4,341 |
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|
| 4,010 |
| |
Other current assets |
| 1,186 |
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|
| 1,063 |
| |
|
| 16,151 |
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| 15,731 |
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Investments in Affiliated Companies |
| 1,335 |
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|
| 1,538 |
| |
Fixed Assets less accumulated depreciation |
| 9,605 |
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|
| 11,679 |
| |
Multiclient Seismic Data |
| 593 |
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|
| 601 |
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Goodwill |
| 16,112 |
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|
| 24,931 |
| |
Intangible Assets |
| 7,282 |
|
|
| 8,727 |
| |
Other Assets |
| 6,912 |
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|
| 7,300 |
| |
| $ | 57,990 |
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| $ | 70,507 |
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LIABILITIES AND EQUITY |
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Current Liabilities |
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Accounts payable and accrued liabilities | $ | 10,364 |
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| $ | 10,223 |
| |
Estimated liability for taxes on income |
| 1,078 |
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|
| 1,155 |
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Short-term borrowings and current portion of long-term debt |
| 340 |
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|
| 1,407 |
| |
Dividends payable |
| 701 |
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|
| 701 |
| |
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| 12,483 |
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| 13,486 |
| |
Long-term Debt |
| 16,333 |
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|
| 14,644 |
| |
Postretirement Benefits |
| 1,101 |
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|
| 1,153 |
| |
Deferred Taxes |
| 591 |
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|
| 1,441 |
| |
Other Liabilities |
| 3,155 |
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|
| 3,197 |
| |
|
| 33,663 |
|
|
| 33,921 |
| |
Equity |
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Common stock |
| 13,012 |
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|
| 13,132 |
| |
Treasury stock |
| (3,641 | ) |
|
| (4,006 | ) | |
Retained earnings |
| 19,111 |
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|
| 31,658 |
| |
Accumulated other comprehensive loss |
| (4,569 | ) |
|
| (4,622 | ) | |
Schlumberger stockholders' equity |
| 23,913 |
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|
| 36,162 |
| |
Noncontrolling interests |
| 414 |
|
|
| 424 |
| |
|
| 24,327 |
|
|
| 36,586 |
| |
| $ | 57,990 |
|
| $ | 70,507 |
|
See Notes to Consolidated Financial Statements
4
SCHLUMBERGER LIMITED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETSTATEMENT OF CASH FLOWS
(Unaudited)
(Stated in millions) |
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| Sept. 30, |
|
|
|
|
| |
| 2017 |
|
| Dec. 31, |
| ||
| (Unaudited) |
|
| 2016 |
| ||
ASSETS |
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Current Assets |
|
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Cash | $ | 1,690 |
|
| $ | 2,929 |
|
Short-term investments |
| 3,262 |
|
|
| 6,328 |
|
Receivables less allowance for doubtful accounts (2017 - $321; 2016 - $397) |
| 9,436 |
|
|
| 9,387 |
|
Inventories |
| 4,308 |
|
|
| 4,225 |
|
Other current assets |
| 1,218 |
|
|
| 1,058 |
|
|
| 19,914 |
|
|
| 23,927 |
|
Fixed Income Investments, held to maturity |
| - |
|
|
| 238 |
|
Investments in Affiliated Companies |
| 1,481 |
|
|
| 1,243 |
|
Fixed Assets less accumulated depreciation |
| 12,338 |
|
|
| 12,821 |
|
Multiclient Seismic Data |
| 992 |
|
|
| 1,073 |
|
Goodwill |
| 25,113 |
|
|
| 24,990 |
|
Intangible Assets |
| 9,540 |
|
|
| 9,855 |
|
Other Assets |
| 4,191 |
|
|
| 3,809 |
|
| $ | 73,569 |
|
| $ | 77,956 |
|
LIABILITIES AND EQUITY |
|
|
|
|
|
|
|
Current Liabilities |
|
|
|
|
|
|
|
Accounts payable and accrued liabilities | $ | 9,715 |
|
| $ | 10,016 |
|
Estimated liability for taxes on income |
| 1,310 |
|
|
| 1,188 |
|
Short-term borrowings and current portion of long-term debt |
| 1,289 |
|
|
| 3,153 |
|
Dividends payable |
| 700 |
|
|
| 702 |
|
|
| 13,014 |
|
|
| 15,059 |
|
Long-term Debt |
| 15,871 |
|
|
| 16,463 |
|
Postretirement Benefits |
| 1,340 |
|
|
| 1,495 |
|
Deferred Taxes |
| 1,893 |
|
|
| 1,880 |
|
Other Liabilities |
| 1,441 |
|
|
| 1,530 |
|
|
| 33,559 |
|
|
| 36,427 |
|
Equity |
|
|
|
|
|
|
|
Common stock |
| 12,863 |
|
|
| 12,801 |
|
Treasury stock |
| (3,966 | ) |
|
| (3,550 | ) |
Retained earnings |
| 35,136 |
|
|
| 36,470 |
|
Accumulated other comprehensive loss |
| (4,460 | ) |
|
| (4,643 | ) |
Schlumberger stockholders' equity |
| 39,573 |
|
|
| 41,078 |
|
Noncontrolling interests |
| 437 |
|
|
| 451 |
|
|
| 40,010 |
|
|
| 41,529 |
|
| $ | 73,569 |
|
| $ | 77,956 |
|
(Stated in millions) |
| ||||||
|
|
|
|
|
|
|
|
| Nine Months Ended September 30, |
| |||||
| 2019 |
|
| 2018 |
| ||
Cash flows from operating activities: |
|
|
|
|
|
|
|
Net income (loss) | $ | (10,450 | ) |
| $ | 1,628 |
|
Adjustments to reconcile net (loss) income to cash provided by operating activities: |
|
|
|
|
|
|
|
Impairments and other charges |
| 12,692 |
|
|
| 184 |
|
Depreciation and amortization (1) |
| 2,741 |
|
|
| 2,637 |
|
Deferred taxes |
| (833 | ) |
|
| (67 | ) |
Stock-based compensation expense |
| 329 |
|
|
| 259 |
|
Earnings of equity method investments, less dividends received |
| 2 |
|
|
| (41 | ) |
Change in assets and liabilities: (2) |
|
|
|
|
|
|
|
Increase in receivables |
| (429 | ) |
|
| (114 | ) |
Increase in inventories |
| (400 | ) |
|
| (68 | ) |
(Increase) decrease in other current assets |
| (127 | ) |
|
| 78 |
|
Increase in other assets |
| (12 | ) |
|
| (167 | ) |
Decrease in accounts payable and accrued liabilities |
| (266 | ) |
|
| (1,011 | ) |
Decrease in estimated liability for taxes on income |
| (118 | ) |
|
| (32 | ) |
Decrease in other liabilities |
| (19 | ) |
|
| (6 | ) |
Other |
| 69 |
|
|
| 102 |
|
NET CASH PROVIDED BY OPERATING ACTIVITIES |
| 3,179 |
|
|
| 3,382 |
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
Capital expenditures |
| (1,230 | ) |
|
| (1,539 | ) |
SPM investments |
| (526 | ) |
|
| (719 | ) |
Multiclient seismic data costs capitalized |
| (181 | ) |
|
| (63 | ) |
Business acquisitions and investments, net of cash acquired |
| (21 | ) |
|
| (290 | ) |
Sale of investments, net |
| 238 |
|
|
| 1,922 |
|
Other |
| (88 | ) |
|
| (36 | ) |
NET CASH USED IN INVESTING ACTIVITIES |
| (1,808 | ) |
|
| (725 | ) |
Cash flows from financing activities: |
|
|
|
|
|
|
|
Dividends paid |
| (2,077 | ) |
|
| (2,077 | ) |
Proceeds from employee stock purchase plan |
| 196 |
|
|
| 227 |
|
Proceeds from exercise of stock options |
| 23 |
|
|
| 29 |
|
Stock repurchase program |
| (278 | ) |
|
| (300 | ) |
Proceeds from issuance of long-term debt |
| 3,973 |
|
|
| 220 |
|
Repayment of long-term debt |
| (3,396 | ) |
|
| (900 | ) |
Net decrease in short-term borrowings |
| (44 | ) |
|
| (103 | ) |
Other |
| (18 | ) |
|
| (47 | ) |
NET CASH USED IN FINANCING ACTIVITIES |
| (1,621 | ) |
|
| (2,951 | ) |
Net decrease in cash before translation effect |
| (250 | ) |
|
| (294 | ) |
Translation effect on cash |
| - |
|
|
| (12 | ) |
Cash, beginning of period |
| 1,433 |
|
|
| 1,799 |
|
Cash, end of period | $ | 1,183 |
|
| $ | 1,493 |
|
(1) | Includes depreciation of property, plant and equipment and amortization of intangible assets, multiclient seismic data costs and SPM investments. |
(2) | Net of the effect of business acquisitions. |
See Notes to Consolidated Financial Statements
5
SCHLUMBERGER LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWSSTOCKHOLDERS’ EQUITY
(Unaudited)
(Stated in millions) |
| ||||||
|
|
|
|
|
|
|
|
| Nine Months Ended September 30, |
| |||||
| 2017 |
|
| 2016 |
| ||
Cash flows from operating activities: |
|
|
|
|
|
|
|
Net income (loss) | $ | 758 |
|
| $ | (1,432 | ) |
Adjustments to reconcile net income (loss) to cash provided by operating activities: |
|
|
|
|
|
|
|
Impairments and other charges |
| 723 |
|
|
| 3,144 |
|
Depreciation and amortization (1) |
| 2,931 |
|
|
| 3,078 |
|
Pension and other postretirement benefits expense |
| 79 |
|
|
| 139 |
|
Stock-based compensation expense |
| 261 |
|
|
| 210 |
|
Pension and other postretirement benefits funding |
| (107 | ) |
|
| (127 | ) |
Earnings of equity method investments, less dividends received |
| (52 | ) |
|
| (51 | ) |
Change in assets and liabilities: (2) |
|
|
|
|
|
|
|
(Increase) decrease in receivables |
| (1,049 | ) |
|
| 851 |
|
Decrease in inventories |
| 14 |
|
|
| 556 |
|
(Increase) decrease in other current assets |
| (86 | ) |
|
| 241 |
|
Decrease (increase) in other assets |
| 202 |
|
|
| (335 | ) |
Decrease in accounts payable and accrued liabilities |
| (533 | ) |
|
| (1,684 | ) |
Increase (decrease) in estimated liability for taxes on income |
| 181 |
|
|
| (187 | ) |
(Decrease) increase in other liabilities |
| (74 | ) |
|
| 40 |
|
Other |
| 164 |
|
|
| (195 | ) |
NET CASH PROVIDED BY OPERATING ACTIVITIES |
| 3,412 |
|
|
| 4,248 |
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
Capital expenditures |
| (1,482 | ) |
|
| (1,401 | ) |
SPM investments |
| (492 | ) |
|
| (869 | ) |
Multiclient seismic data costs capitalized |
| (223 | ) |
|
| (497 | ) |
Business acquisitions and investments, net of cash acquired |
| (382 | ) |
|
| (2,251 | ) |
Sale of investments, net |
| 3,310 |
|
|
| 4,439 |
|
Other |
| (92 | ) |
|
| (13 | ) |
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES |
| 639 |
|
|
| (592 | ) |
Cash flows from financing activities: |
|
|
|
|
|
|
|
Dividends paid |
| (2,086 | ) |
|
| (1,951 | ) |
Proceeds from employee stock purchase plan |
| 212 |
|
|
| 231 |
|
Proceeds from exercise of stock options |
| 49 |
|
|
| 113 |
|
Stock repurchase program |
| (868 | ) |
|
| (662 | ) |
Proceeds from issuance of long-term debt |
| 681 |
|
|
| 3,586 |
|
Repayment of long-term debt |
| (2,206 | ) |
|
| (4,749 | ) |
Net (decrease) increase in short-term borrowings |
| (1,110 | ) |
|
| 401 |
|
Other |
| 17 |
|
|
| (8 | ) |
NET CASH USED IN FINANCING ACTIVITIES |
| (5,311 | ) |
|
| (3,039 | ) |
Net (decrease) increase in cash before translation effect |
| (1,260 | ) |
|
| 617 |
|
Translation effect on cash |
| 21 |
|
|
| 31 |
|
Cash, beginning of period |
| 2,929 |
|
|
| 2,793 |
|
Cash, end of period | $ | 1,690 |
|
| $ | 3,441 |
|
|
| (Stated in millions, except per share amounts) |
| |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other |
|
|
|
|
|
|
|
|
| |
|
| Common Stock |
|
| Retained |
|
| Comprehensive |
|
| Noncontrolling |
|
|
|
|
| ||||||||
January 1, 2019 – September 30, 2019 |
| Issued |
|
| In Treasury |
|
| Earnings |
|
| Loss |
|
| Interests |
|
| Total |
| ||||||
Balance, January 1, 2019 |
| $ | 13,132 |
|
| $ | (4,006 | ) |
| $ | 31,658 |
|
| $ | (4,622 | ) |
| $ | 424 |
|
| $ | 36,586 |
|
Net income (loss) |
|
|
|
|
|
|
|
|
|
| (10,470 | ) |
|
|
|
|
|
| 20 |
|
|
| (10,450 | ) |
Currency translation adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 18 |
|
|
| (4 | ) |
|
| 14 |
|
Changes in fair value of cash flow hedges |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (24 | ) |
|
|
|
|
|
| (24 | ) |
Pension and other postretirement benefit plans |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 59 |
|
|
|
|
|
|
| 59 |
|
Shares sold to optionees, less shares exchanged |
|
| (26 | ) |
|
| 49 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 23 |
|
Vesting of restricted stock |
|
| (146 | ) |
|
| 146 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| - |
|
Shares issued under employee stock purchase plan |
|
| (249 | ) |
|
| 445 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 196 |
|
Stock repurchase program |
|
|
|
|
|
| (278 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (278 | ) |
Stock-based compensation expense |
|
| 329 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 329 |
|
Dividends declared ($1.50 per share) |
|
|
|
|
|
|
|
|
|
| (2,077 | ) |
|
|
|
|
|
|
|
|
|
| (2,077 | ) |
Other |
|
| (28 | ) |
|
| 3 |
|
|
|
|
|
|
|
|
|
|
| (26 | ) |
|
| (51 | ) |
Balance, September 30, 2019 |
| $ | 13,012 |
|
| $ | (3,641 | ) |
| $ | 19,111 |
|
| $ | (4,569 | ) |
| $ | 414 |
|
| $ | 24,327 |
|
|
| (Stated in millions, except per share amounts) |
| |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other |
|
|
|
|
|
|
|
|
| |
|
| Common Stock |
|
| Retained |
|
| Comprehensive |
|
| Noncontrolling |
|
|
|
|
| ||||||||
January 1, 2018 – September 30, 2018 |
| Issued |
|
| In Treasury |
|
| Earnings |
|
| Loss |
|
| Interests |
|
| Total |
| ||||||
Balance, January 1, 2018 |
| $ | 12,975 |
|
| $ | (4,049 | ) |
| $ | 32,190 |
|
| $ | (4,274 | ) |
| $ | 419 |
|
| $ | 37,261 |
|
Net income |
|
|
|
|
|
|
|
|
|
| 1,599 |
|
|
|
|
|
|
| 29 |
|
|
| 1,628 |
|
Currency translation adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (128 | ) |
|
| (4 | ) |
|
| (132 | ) |
Changes in unrealized gain on marketable securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (33 | ) |
|
|
|
|
|
| (33 | ) |
Changes in fair value of cash flow hedges |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (8 | ) |
|
|
|
|
|
| (8 | ) |
Pension and other postretirement benefit plans |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 130 |
|
|
|
|
|
|
| 130 |
|
Shares sold to optionees, less shares exchanged |
|
| (37 | ) |
|
| 66 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 29 |
|
Vesting of restricted stock |
|
| (63 | ) |
|
| 63 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| - |
|
Shares issued under employee stock purchase plan |
|
| (67 | ) |
|
| 294 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 227 |
|
Stock repurchase program |
|
|
|
|
|
| (300 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (300 | ) |
Stock-based compensation expense |
|
| 259 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 259 |
|
Dividends declared ($1.50 per share) |
|
|
|
|
|
|
|
|
|
| (2,077 | ) |
|
|
|
|
|
|
|
|
|
| (2,077 | ) |
Other |
|
| (9 | ) |
|
| 2 |
|
|
|
|
|
|
|
|
|
|
| (29 | ) |
|
| (36 | ) |
Balance, September 30, 2018 |
| $ | 13,058 |
|
| $ | (3,924 | ) |
| $ | 31,712 |
|
| $ | (4,313 | ) |
| $ | 415 |
|
| $ | 36,948 |
|
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
(Unaudited)
|
| (Stated in millions, except per share amounts) |
| |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other |
|
|
|
|
|
|
|
|
| |
|
| Common Stock |
|
| Retained |
|
| Comprehensive |
|
| Noncontrolling |
|
|
|
|
| ||||||||
July 1, 2019 – September 30, 2019 |
| Issued |
|
| In Treasury |
|
| Earnings |
|
| Loss |
|
| Interests |
|
| Total |
| ||||||
Balance, July 1, 2019 |
| $ | 13,037 |
|
| $ | (3,827 | ) |
| $ | 31,186 |
|
| $ | (4,544 | ) |
| $ | 421 |
|
| $ | 36,273 |
|
Net income (loss) |
|
|
|
|
|
|
|
|
|
| (11,383 | ) |
|
|
|
|
|
| 10 |
|
|
| (11,373 | ) |
Currency translation adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (21 | ) |
|
| (4 | ) |
|
| (25 | ) |
Changes in fair value of cash flow hedges |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (24 | ) |
|
|
|
|
|
| (24 | ) |
Pension and other postretirement benefit plans |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 20 |
|
|
|
|
|
|
| 20 |
|
Vesting of restricted stock |
|
| (20 | ) |
|
| 20 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| - |
|
Shares issued under employee stock purchase plan |
|
| (134 | ) |
|
| 245 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 111 |
|
Stock repurchase program |
|
|
|
|
|
| (79 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (79 | ) |
Stock-based compensation expense |
|
| 135 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 135 |
|
Dividends declared ($0.50 per share) |
|
|
|
|
|
|
|
|
|
| (692 | ) |
|
|
|
|
|
|
|
|
|
| (692 | ) |
Other |
|
| (6 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (13 | ) |
|
| (19 | ) |
Balance, September 30, 2019 |
| $ | 13,012 |
|
| $ | (3,641 | ) |
| $ | 19,111 |
|
| $ | (4,569 | ) |
| $ | 414 |
|
| $ | 24,327 |
|
| (Stated in millions, except per share amounts) |
| |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Other |
|
|
|
|
|
|
|
|
| |
| Common Stock |
|
| Retained |
|
| Comprehensive |
|
| Noncontrolling |
|
|
|
|
| ||||||||
July 1, 2018 – September 30, 2018 | Issued |
|
| In Treasury |
|
| Earnings |
|
| Loss |
|
| Interests |
|
| Total |
| ||||||
Balance, July 1, 2018 | $ | 13,030 |
|
| $ | (4,001 | ) |
| $ | 31,760 |
|
| $ | (4,305 | ) |
| $ | 413 |
|
| $ | 36,897 |
|
Net income |
|
|
|
|
|
|
|
|
| 644 |
|
|
|
|
|
|
| 14 |
|
|
| 658 |
|
Currency translation adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
| (47 | ) |
|
| (3 | ) |
|
| (50 | ) |
Changes in unrealized gain on marketable securities |
|
|
|
|
|
|
|
|
|
|
|
|
| (12 | ) |
|
|
|
|
|
| (12 | ) |
Changes in fair value of cash flow hedges |
|
|
|
|
|
|
|
|
|
|
|
|
| 6 |
|
|
|
|
|
|
| 6 |
|
Pension and other postretirement benefit plans |
|
|
|
|
|
|
|
|
|
|
|
|
| 44 |
|
|
|
|
|
|
| 44 |
|
Shares sold to optionees, less shares exchanged |
| (7 | ) |
|
| 13 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 6 |
|
Vesting of restricted stock |
| (10 | ) |
|
| 10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| - |
|
Shares issued under employee stock purchase plan |
| (34 | ) |
|
| 154 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 120 |
|
Stock repurchase program |
|
|
|
|
| (100 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (100 | ) |
Stock-based compensation expense |
| 83 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 83 |
|
Dividends declared ($0.50 per share) |
|
|
|
|
|
|
|
|
| (692 | ) |
|
|
|
|
|
|
|
|
|
| (692 | ) |
Other |
| (4 | ) |
|
|
|
|
|
|
|
|
|
| 1 |
|
|
| (9 | ) |
|
| (12 | ) |
Balance, September 30, 2018 | $ | 13,058 |
|
| $ | (3,924 | ) |
| $ | 31,712 |
|
| $ | (4,313 | ) |
| $ | 415 |
|
| $ | 36,948 |
|
(1)Includes depreciation of property, plant and equipment and amortization of intangible assets, multiclient seismic data costs and SPM investments.
(2)Net of the effect of business acquisitions.
See Notes to Consolidated Financial Statements
6
SCHLUMBERGER LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTSHARES OF EQUITYCOMMON STOCK
(Unaudited)
| (Stated in millions) |
| |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Other |
|
|
|
|
|
|
|
|
| |
| Common Stock |
|
| Retained |
|
| Comprehensive |
|
| Noncontrolling |
|
|
|
|
| ||||||||
January 1, 2017 – September 30, 2017 | Issued |
|
| In Treasury |
|
| Earnings |
|
| Loss |
|
| Interests |
|
| Total |
| ||||||
Balance, January 1, 2017 | $ | 12,801 |
|
| $ | (3,550 | ) |
| $ | 36,470 |
|
| $ | (4,643 | ) |
| $ | 451 |
|
| $ | 41,529 |
|
Net income |
|
|
|
|
|
|
|
|
| 749 |
|
|
|
|
|
|
| 9 |
|
|
| 758 |
|
Currency translation adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
| 49 |
|
|
|
|
|
|
| 49 |
|
Changes in unrealized gain on marketable securities |
|
|
|
|
|
|
|
|
|
|
|
|
| (66 | ) |
|
|
|
|
|
| (66 | ) |
Changes in fair value of cash flow hedges |
|
|
|
|
|
|
|
|
|
|
|
|
| 23 |
|
|
|
|
|
|
| 23 |
|
Pension and other postretirement benefit plans |
|
|
|
|
|
|
|
|
|
|
|
|
| 177 |
|
|
|
|
|
|
| 177 |
|
Shares sold to optionees, less shares exchanged |
| (39 | ) |
|
| 88 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 49 |
|
Vesting of restricted stock |
| (98 | ) |
|
| 98 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| - |
|
Shares issued under employee stock purchase plan |
| (52 | ) |
|
| 264 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 212 |
|
Stock repurchase program |
|
|
|
|
| (868 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (868 | ) |
Stock-based compensation expense |
| 261 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 261 |
|
Dividends declared ($1.50 per share) |
|
|
|
|
|
|
|
|
| (2,083 | ) |
|
|
|
|
|
|
|
|
|
| (2,083 | ) |
Other |
| (10 | ) |
|
| 2 |
|
|
|
|
|
|
|
|
|
|
| (23 | ) |
|
| (31 | ) |
Balance, September 30, 2017 | $ | 12,863 |
|
| $ | (3,966 | ) |
| $ | 35,136 |
|
| $ | (4,460 | ) |
| $ | 437 |
|
| $ | 40,010 |
|
| (Stated in millions) |
| |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Other |
|
|
|
|
|
|
|
|
| |
| Common Stock |
|
| Retained |
|
| Comprehensive |
|
| Noncontrolling |
|
|
|
|
| ||||||||
January 1, 2016 – September 30, 2016 | Issued |
|
| In Treasury |
|
| Earnings |
|
| Loss |
|
| Interests |
|
| Total |
| ||||||
Balance, January 1, 2016 | $ | 12,693 |
|
| $ | (13,372 | ) |
| $ | 40,870 |
|
| $ | (4,558 | ) |
| $ | 272 |
|
| $ | 35,905 |
|
Net loss |
|
|
|
|
|
|
|
|
| (1,482 | ) |
|
|
|
|
|
| 50 |
|
|
| (1,432 | ) |
Currency translation adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
| (26 | ) |
|
|
|
|
|
| (26 | ) |
Changes in unrealized gain on marketable securities |
|
|
|
|
|
|
|
|
|
|
|
|
| (2 | ) |
|
|
|
|
|
| (2 | ) |
Changes in fair value of cash flow hedges |
|
|
|
|
|
|
|
|
|
|
|
|
| 23 |
|
|
|
|
|
|
| 23 |
|
Pension and other postretirement benefit plans |
|
|
|
|
|
|
|
|
|
|
|
|
| 175 |
|
|
|
|
|
|
| 175 |
|
Shares sold to optionees, less shares exchanged |
| (52 | ) |
|
| 165 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 113 |
|
Vesting of restricted stock |
| (84 | ) |
|
| 84 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| - |
|
Shares issued under employee stock purchase plan |
| (55 | ) |
|
| 286 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 231 |
|
Stock repurchase program |
|
|
|
|
| (662 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (662 | ) |
Stock-based compensation expense |
| 210 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 210 |
|
Dividends declared ($1.50 per share) |
|
|
|
|
|
|
|
|
| (2,018 | ) |
|
|
|
|
|
|
|
|
|
| (2,018 | ) |
Acquisition of Cameron International Corporation |
| 103 |
|
|
| 9,924 |
|
|
|
|
|
|
|
|
|
|
| 57 |
|
|
| 10,084 |
|
Other |
| 8 |
|
|
| 4 |
|
|
|
|
|
|
|
|
|
|
| (39 | ) |
|
| (27 | ) |
Balance, September 30, 2016 | $ | 12,823 |
|
| $ | (3,571 | ) |
| $ | 37,370 |
|
| $ | (4,388 | ) |
| $ | 340 |
|
| $ | 42,574 |
|
SHARES OF COMMON STOCK
(Unaudited)
|
|
|
|
| (Stated in millions) |
|
|
|
|
| (Stated in millions) |
| ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Shares |
|
|
|
|
|
|
|
|
| Shares |
| ||
| Issued |
|
| In Treasury |
|
| Outstanding |
| Issued |
|
| In Treasury |
|
| Outstanding |
| ||||||
Balance, January 1, 2017 |
| 1,434 |
|
|
| (43 | ) |
|
| 1,391 |
| |||||||||||
Balance, January 1, 2019 |
| 1,434 |
|
|
| (51 | ) |
|
| 1,383 |
| |||||||||||
Shares sold to optionees, less shares exchanged |
| - |
|
|
| 1 |
|
|
| 1 |
|
| - |
|
|
| 1 |
|
|
| 1 |
|
Vesting of restricted stock |
| - |
|
|
| 1 |
|
|
| 1 |
|
| - |
|
|
| 1 |
|
|
| 1 |
|
Shares issued under employee stock purchase plan |
| - |
|
|
| 4 |
|
|
| 4 |
|
| - |
|
|
| 6 |
|
|
| 6 |
|
Stock repurchase program |
| - |
|
|
| (12 | ) |
|
| (12 | ) |
| - |
|
|
| (7 | ) |
|
| (7 | ) |
Balance, September 30, 2017 |
| 1,434 |
|
|
| (49 | ) |
|
| 1,385 |
| |||||||||||
Balance, September 30, 2019 |
| 1,434 |
|
|
| (50 | ) |
|
| 1,384 |
|
See Notes to Consolidated Financial Statements
7
SCHLUMBERGER LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
The accompanying unaudited consolidated financial statements of Schlumberger Limited and its subsidiaries (Schlumberger)(“Schlumberger”) have been prepared in accordance with generally accepted accounting principles in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. 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 Schlumberger management, all adjustments considered necessary for a fair statement have been included in the accompanying unaudited financial statements. All intercompany transactions and balances have been eliminated in consolidation. Operating results for the nine-month period ended September 30, 20172019 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2017.2019. The December 31, 20162018 balance sheet information has been derived from the Schlumberger 20162018 audited financial statements. For further information, refer to the Consolidated Financial Statements and notes thereto included in the Schlumberger Annual Report on Form 10-K for the year ended December 31, 2016,2018, filed with the Securities and Exchange Commission on January 25, 2017.23, 2019.
New Accounting PronouncementsReclassifications
In May 2014,Certain prior period amounts have been reclassified to conform to the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers. This ASU amends the existing accounting standards for revenue recognition and is based on the principle that revenue should be recognized to depict the transfer of goods or services to a customer at an amount that reflects the consideration a company expects to receive in exchange for those goods or services. Schlumberger will adopt this ASU on January 1, 2018. Schlumberger has concluded that the adoption of this ASU will not have a material impact on its consolidated financial statements.
In February 2016, the FASB issued ASU No. 2016-02, Leases. This ASU requires lessees to recognize a right of use asset and lease liability on the balance sheet for all leases, with the exception of short-term leases. Schlumberger will adopt this ASU on January 1, 2019. Based on its current lease portfolio, Schlumberger estimates that the adoption of this ASU will result in approximately $1.3 billion of additional assets and liabilities being reflected on its Consolidated Balance Sheet.period presentation.
2. Charges and Credits
2019
In connection with the preparation of its third quarter 2019 financial statements, Schlumberger recorded the following charges and credits during the first nine months of 2017:
Third quarter 2017:
In connection with Schlumberger’s 2016 acquisition of Cameron International Corporation (“Cameron”) (See Note 4 – Acquisition of Cameron), Schlumberger recorded $49 million of charges relating to employee benefits, facility closures and other merger and integration-related costs. These charges are classified in Merger & integration in the Consolidated Statement of Income (Loss).
Second quarter 2017:
During the second quarter of 2017, Schlumberger entered into a financing agreement with its primary customer in Venezuela. This agreement resulted in the exchange of $700 million of outstanding accounts receivable for a promissory note with a three-year term that bears interest at the rate of 6.50% per annum. Schlumberger recorded this note at its estimated fair value on the date of the exchange, which resulted in a charge of $460 million. Schlumberger is accounting for the promissory note as an available-for-sale security reported at fair value in OtherAssets, with unrealized gains and losses included as a component of Accumulated other comprehensive loss. The fair value of the promissory notes, which was $184 million as of September 30, 2017, is based on management’s estimate of pricing assumptions that market participants would use.
During the second quarter of 2017, Schlumberger also entered into discussions with another customer relating to certain of its outstanding accounts receivable. As a result of these ongoing discussions, Schlumberger recorded a charge of $50 million to adjust these receivables to their estimated net realizable value.
These charges are classified in Impairments & other in the Consolidated Statement of Income (Loss).
8
First quarter of 2017:
In connection with Schlumberger’s acquisition of Cameron, Schlumberger recorded $82 million of charges relating to employee benefits, facility closures and other merger and integration-related costs. These charges are classified in Merger & integration in the Consolidated Statement of Income (Loss).
The following is a summary of the charges and credits recorded during the first nine months of 2017:
| (Stated in millions) |
| |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Noncontrolling |
|
|
|
|
| |
| Pretax |
|
| Tax |
|
| Interests |
|
| Net |
| ||||
Promissory note fair value adjustment and other | $ | 510 |
|
| $ | - |
|
| $ | 12 |
|
| $ | 498 |
|
Merger & integration |
| 213 |
|
|
| 44 |
|
|
| - |
|
|
| 169 |
|
| $ | 723 |
|
| $ | 44 |
|
| $ | 12 |
|
| $ | 667 |
|
Schlumberger recorded the following charges and credits during the first nine months of 2016:
Third quarter of 2016:
In connection with Schlumberger’s acquisition of Cameron, Schlumberger recorded $88 million of charges, classified in Merger & integration in the Consolidated Statement of Income (Loss), relating to employee benefits, facility closures; and other merger and integration-related costs. Additionally, Schlumberger recorded $149 million of charges relating to the amortization of purchase accounting adjustments associated with the write-up of acquired inventory to its estimated fair value, which is classified in Cost of sales in the Consolidated Statement of Income (Loss). This amortization was historically presented as a component of Merger & integration in the prior year; however, Schlumberger reclassified this prior period item to Cost of Sales in the current year.
Second quarter of 2016:
As a result of the persistent unfavorable oil and gas industry market conditions that continued to deteriorate in the first half of 2016, and the related impact on 2016 first-half operating results and expected customer activity levels, Schlumberger determined that the carrying values of certain assets were no longer recoverable and took certain decisions that resulted in the following impairments and other charges, all of which are classified in as Impairments & other in the Consolidated Statement of Income (Loss):
| (Stated in millions) |
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| Pretax |
|
| Tax |
|
| Net |
| |||
Goodwill | $ | 8,828 |
|
| $ | (43 | ) |
| $ | 8,785 |
|
Intangible assets |
| 1,085 |
|
|
| (248 | ) |
|
| 837 |
|
North America pressure pumping |
| 1,575 |
|
|
| (344 | ) |
|
| 1,231 |
|
Other North America-related |
| 310 |
|
|
| (53 | ) |
|
| 257 |
|
Argentina |
| 127 |
|
|
| - |
|
|
| 127 |
|
Equity-method investments |
| 231 |
|
|
| (12 | ) |
|
| 219 |
|
Schlumberger Production Management |
| 294 |
|
|
| - |
|
|
| 294 |
|
Other |
| 242 |
|
|
| (13 | ) |
|
| 229 |
|
| $ | 12,692 |
|
| $ | (713 | ) |
| $ | 11,979 |
|
|
| During August 2019, Schlumberger’s market capitalization deteriorated significantly compared to the end of the second quarter of 2019. Schlumberger’s stock price reached a low not seen since 2005. Additionally, the Philadelphia Oil Services Sector Index, which is comprised of companies involved in the oil services sector, reached an 18-year low. |
As a result of these facts, Schlumberger determined that it was more likely than not that the fair value of certain of its reporting units were less than their carrying value. Therefore, Schlumberger performed an interim goodwill impairment test as of August 31, 2019.
As of August 31, 2019, Schlumberger had 17 reporting units with goodwill balances aggregating $25.0 billion. Schlumberger determined that the fair value of 7 of its reporting units, representing approximately $13.8 billion of the goodwill, was substantially in excess of their carrying value. Schlumberger performed a detailed quantitative impairment assessment of the remaining 10 reporting units, which represented $11.2 billion of goodwill. As a result of this assessment, Schlumberger concluded that the goodwill associated with 9 of the 10 reporting units was impaired, resulting in an $8.8 billion goodwill impairment charge. This charge primarily relates to Schlumberger’s Drilling and Cameron segments.
Following the $8.8 billion goodwill impairment charge relating to these nine reporting units, only three had a remaining goodwill balance. These 3 reporting units had goodwill balances which ranged between $0.4 billion and $0.6 billion and aggregated to $1.5 billion as of August 31, 2019. The 10th reporting unit, which was determined not to be impaired, had $0.9 billion of goodwill.
Schlumberger primarily used the income approach to estimate the fair value of its reporting units, but also considered the market approach to validate the results. The income approach estimates the fair value by discounting each reporting unit’s estimated future cash flows using Schlumberger’s estimate of the discount rate, or expected return, that a marketplace participant would have required as of the valuation date. The market approach includes the use of comparative multiples to corroborate the discounted cash flow results. The market approach involves significant judgement involved in the selection of the appropriate peer group companies and valuation multiples.
Some of the more significant assumptions inherent in the income approach include the estimated future net annual cash flows for each reporting unit and the discount rate. Schlumberger selected the assumptions used in the discounted cash flow projections using historical data supplemented by current and anticipated market conditions and estimated growth rates. Schlumberger’s estimates are based upon assumptions believed to be reasonable. However, given the inherent uncertainty in determining the assumptions underlying a discounted cash flow analysis, actual results may differ from those used in Schlumberger’s valuations which could result in additional impairment charges in the future.
The discount rates utilized to value Schlumberger’s reporting units were between 12.5% and 14.0%, depending on the risks and uncertainty inherent in the respective reporting unit. Assuming all other assumptions and inputs used in each of the respective discounted cash flow analysis were held constant, a 50 basis point increase in the discount rate assumption would have increased the goodwill impairment charge by approximately $0.3 billion. Conversely, assuming all other assumptions and inputs used in each of the respective discounted cash flow analysis were held constant, a 50 basis point decrease in the discount rate assumption would have decreased the goodwill impairment charge by approximately $0.4 billion.
• | The negative market indicators described above combined with deteriorating market conditions in North America, as well as the results of the previously mentioned fair value determinations of certain of Schlumberger’s reporting units and the appointment of a new Chief Executive Officer (as described below), were all triggering events that indicated that certain of Schlumberger’s long-lived tangible and intangible assets may be impaired. |
Recoverability testing, which was performed as of August 31, 2019, indicated that long-lived assets associated with certain asset groups were impaired. The estimated fair value of these asset groups was determined to be below their carrying value. As a result, Schlumberger recorded the following impairment and related charges:
- | $ |
| - | $ |
| - | $ |
• | As a result of the ongoing economic challenges in Argentina, Schlumberger recorded $127 million of charges during the third quarter of 2019. This consists of $72 million of asset impairments, a $26 million devaluation charge and $29 million of severance. |
• | Schlumberger also recorded the following impairment and restructuring charges: |
| - | $ |
| - | $ |
| - | $ |
Senior Notes (see Note 9 - |
|
The fair value of certain of these impaired 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.
In connection with Schlumberger’s acquisition of Cameron, Schlumberger recorded $185 million of charges, classified in Merger & integration in the Consolidated Statement of Income (Loss), consistingSubstantially all of the following: $47 million relatingcharges recorded during the third quarter of 2019 will not result in any future cash outflows.
During the third quarter of 2019, Schlumberger’s Board of Directors announced the appointment of a new Chief Executive Officer. As the new Chief Executive Officer further develops and implements his strategy, it may result in additional restructuring charges in future periods. Furthermore, Schlumberger may be required to employee benefits for change-in-control arrangements and retention bonuses; $45 million of transaction costs, including advisory and legal fees; $40 million of facility closure costs, and $53 million of other merger and integration-related costs.Additionally, Schlumberger recorded $150 million ofrecord additional impairment charges related to the amortization of purchase accounting adjustments associated with the write-up of acquired inventory to its estimated fair value, which is classified in Cost of sales in the Consolidated Statement of Income (Loss). if industry conditions deteriorate.
9
There were no0 charges or credits recorded during the first six months of 2019.
2018
During the second quarter of 2016.2018, Schlumberger recorded a $184 million pretax charge ($164 million after-tax) associated with headcount reductions, primarily to further streamline its support cost structure. This charge is classified in Impairments & other in the Consolidated Statement of Income (Loss).
The following is a summary of theThere were 0 charges andor credits recorded during the first nine monthsand third quarters of 2016:
| (Stated in millions) |
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| Pretax |
|
| Tax |
|
| Net |
| |||
Impairments & other |
|
|
|
|
|
|
|
|
|
|
|
Workforce reduction | $ | 646 |
|
| $ | 63 |
|
| $ | 583 |
|
North America pressure pumping asset impairments |
| 209 |
|
|
| 67 |
|
|
| 142 |
|
Facilities impairments |
| 165 |
|
|
| 58 |
|
|
| 107 |
|
Other fixed asset impairments |
| 684 |
|
|
| 52 |
|
|
| 632 |
|
Inventory write-downs |
| 616 |
|
|
| 49 |
|
|
| 567 |
|
Multiclient seismic data impairment |
| 198 |
|
|
| 62 |
|
|
| 136 |
|
Other restructuring charges |
| 55 |
|
|
| - |
|
|
| 55 |
|
Merger & integration |
|
|
|
|
|
|
|
|
|
|
|
Merger-related employee benefits |
| 93 |
|
|
| 17 |
|
|
| 76 |
|
Professional fees |
| 45 |
|
|
| 10 |
|
|
| 35 |
|
Facility closure costs |
| 51 |
|
|
| 13 |
|
|
| 38 |
|
Other merger and integration-related |
| 83 |
|
|
| 11 |
|
|
| 72 |
|
Cost of sales |
|
|
|
|
|
|
|
|
|
|
|
Amortization of inventory fair value adjustment |
| 299 |
|
|
| 90 |
|
|
| 209 |
|
| $ | 3,144 |
|
| $ | 492 |
|
| $ | 2,652 |
|
2018.
3. Earnings (Loss) Per Share
The following is a reconciliation from basic earnings (loss) per share of Schlumberger to diluted earnings (loss) per share of Schlumberger:
(Stated in millions, except per share amounts) | (Stated in millions, except per share amounts) |
| (Stated in millions, except per share amounts) |
| ||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 2017 |
|
| 2016 |
| 2019 |
|
| 2018 |
| ||||||||||||||||||||||||||||||||||||
| Schlumberger Net Income |
|
| Average Shares Outstanding |
|
| Earnings per Share |
|
| Schlumberger Net Income |
|
| Average Shares Outstanding |
|
| Earnings per Share |
| Schlumberger Net Income (Loss) |
|
| Average Shares Outstanding |
|
| Loss per Share |
|
| Schlumberger Net Income (Loss) |
|
| Average Shares Outstanding |
|
| Earnings per Share |
| ||||||||||||
Third Quarter |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic | $ | 545 |
|
|
| 1,385 |
|
| $ | 0.39 |
|
| $ | 176 |
|
|
| 1,392 |
|
| $ | 0.13 |
| $ | (11,383 | ) |
|
| 1,385 |
|
| $ | (8.22 | ) |
| $ | 644 |
|
|
| 1,385 |
|
| $ | 0.46 |
|
Assumed exercise of stock options |
| - |
|
|
| 1 |
|
|
|
|
|
|
| - |
|
|
| 4 |
|
|
|
|
|
| - |
|
|
| - |
|
|
|
|
|
|
| - |
|
|
| - |
|
|
|
|
|
Unvested restricted stock |
| - |
|
|
| 6 |
|
|
|
|
|
|
| - |
|
|
| 5 |
|
|
|
|
|
| - |
|
|
| - |
|
|
|
|
|
|
| - |
|
|
| 7 |
|
|
|
|
|
Diluted | $ | 545 |
|
|
| 1,392 |
|
| $ | 0.39 |
|
| $ | 176 |
|
|
| 1,401 |
|
| $ | 0.13 |
| $ | (11,383 | ) |
|
| 1,385 |
|
| $ | (8.22 | ) |
| $ | 644 |
|
|
| 1,392 |
|
| $ | 0.46 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 2017 |
|
| 2016 |
| 2019 |
|
| 2018 |
| ||||||||||||||||||||||||||||||||||||
| Schlumberger Net Income |
|
| Average Shares Outstanding |
|
| Earnings per Share |
|
| Schlumberger Net Loss |
|
| Average Shares Outstanding |
|
| Loss per Share |
| Schlumberger Net Income (Loss) |
|
| Average Shares Outstanding |
|
| Loss per Share |
|
| Schlumberger Net Income (Loss) |
|
| Average Shares Outstanding |
|
| Earnings per Share |
| ||||||||||||
Nine Months |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic | $ | 749 |
|
| $ | 1,388 |
|
| $ | 0.54 |
|
| $ | (1,482 | ) |
| $ | 1,345 |
|
| $ | (1.10 | ) | $ | (10,470 | ) |
| $ | 1,385 |
|
| $ | (7.56 | ) |
| $ | 1,599 |
|
| $ | 1,385 |
|
| $ | 1.15 |
|
Assumed exercise of stock options |
| - |
|
|
| 2 |
|
|
|
|
|
|
| - |
|
|
| - |
|
|
|
|
|
| - |
|
|
| - |
|
|
|
|
|
|
| - |
|
|
| 1 |
|
|
|
|
|
Unvested restricted stock |
| - |
|
|
| 5 |
|
|
|
|
|
|
| - |
|
|
| - |
|
|
|
|
|
| - |
|
|
| - |
|
|
|
|
|
|
| - |
|
|
| 7 |
|
|
|
|
|
Diluted | $ | 749 |
|
| $ | 1,395 |
|
| $ | 0.54 |
|
| $ | (1,482 | ) |
| $ | 1,345 |
|
| $ | (1.10 | ) | $ | (10,470 | ) |
| $ | 1,385 |
|
| $ | (7.56 | ) |
| $ | 1,599 |
|
| $ | 1,393 |
|
| $ | 1.15 |
|
10
The number of outstanding options to purchase shares of Schlumberger common stock that were not included in the computation of diluted earnings per share, because to do so would have had an antidilutive effect, was as follows:
(Stated in millions) | (Stated in millions) |
| (Stated in millions) |
| ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||
| 2017 |
|
| 2016 |
| 2019 |
|
| 2018 |
| ||||
Third Quarter |
| 43 |
|
|
| 24 |
|
| 47 |
|
|
| 40 |
|
Nine Months |
| 30 |
|
|
| 47 |
|
| 47 |
|
|
| 40 |
|
4. Acquisition of Cameron
On April 1, 2016, Schlumberger acquired all of the outstanding shares of Cameron, a leading provider of flow equipment products, systems and services to the oil and gas industry worldwide. Schlumberger issued approximately 138 million shares of its common stock, which were valued at $9.9 billion at the time of closing, and paid cash of $2.8 billion.
Supplemental Pro Forma Financial Information
The following supplemental pro forma results of operations assume that Cameron had been acquired as of January 1, 2015. The supplemental pro forma financial information was prepared based on the historical financial information of Schlumberger and Cameron and has been adjusted to give effect to pro forma adjustments that are both directly attributable to the transaction and factually supportable. The pro forma amounts reflect certain adjustments to intangible asset amortization expense, interest and income taxes resulting from purchase accounting. The pro forma amounts also reflect adjustments to the 2016 results to exclude the amortization of purchase accounting adjustments associated with the write-up of acquired inventory to its estimated fair value and other merger and integration costs of $177 million and $430 million, net of taxes, for the three and nine months ended September 30, 2016, respectively.
The supplemental pro forma financial information presented below does not include any anticipated cost savings or the expected realization of other synergies associated with this transaction. Accordingly, this supplemental pro forma financial information is presented for informational purposes only and is not necessarily indicative of what the actual results of operations of the combined company would have been had the acquisition occurred on January 1, 2015, nor is it indicative of future results of operations.
| (Stated in millions, except per share amounts) |
| |||||
|
|
|
|
|
|
|
|
| 2016 |
| |||||
| Third Quarter |
|
| Nine Months |
| ||
Revenue | $ | 7,019 |
|
| $ | 22,331 |
|
Net income (loss) attributable to Schlumberger | $ | 353 |
|
| $ | (1,028 | ) |
Diluted earnings (loss) per share | $ | 0.25 |
|
| $ | (0.74 | ) |
5. Inventories
A summary of inventories, which are stated at the lower of average cost or market,net realizable value, is as follows:
(Stated in millions) | (Stated in millions) |
| (Stated in millions) |
| ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Sept. 30, |
|
| Dec. 31, |
| Sept. 30, |
|
| Dec. 31, |
| ||||
| 2017 |
|
| 2016 |
| 2019 |
|
| 2018 |
| ||||
Raw materials & field materials | $ | 1,898 |
|
| $ | 1,720 |
| $ | 1,964 |
|
| $ | 1,803 |
|
Work in progress |
| 537 |
|
|
| 610 |
|
| 606 |
|
|
| 519 |
|
Finished goods |
| 1,873 |
|
|
| 1,895 |
|
| 1,771 |
|
|
| 1,688 |
|
| $ | 4,308 |
|
| $ | 4,225 |
| $ | 4,341 |
|
| $ | 4,010 |
|
11
A summary of fixed assets follows:
(Stated in millions) | (Stated in millions) |
| (Stated in millions) |
| ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Sept. 30, |
|
| Dec. 31, |
| Sept. 30, |
|
| Dec. 31, |
| ||||
| 2017 |
|
| 2016 |
| 2019 |
|
| 2018 |
| ||||
Property, plant & equipment | $ | 40,421 |
|
| $ | 40,008 |
| $ | 35,961 |
|
| $ | 38,664 |
|
Less: Accumulated depreciation |
| 28,083 |
|
|
| 27,187 |
|
| 26,356 |
|
|
| 26,985 |
|
| $ | 12,338 |
|
| $ | 12,821 |
| $ | 9,605 |
|
| $ | 11,679 |
|
Depreciation expense relating to fixed assets was as follows:
(Stated in millions) | (Stated in millions) |
| (Stated in millions) |
| ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 2017 |
|
| 2016 |
| 2019 |
|
| 2018 |
| ||||
Third Quarter | $ | 591 |
|
| $ | 627 |
| $ | 499 |
|
| $ | 516 |
|
Nine Months | $ | 1,796 |
|
| $ | 2,053 |
| $ | 1,525 |
|
| $ | 1,564 |
|
7. 6. Multiclient Seismic Data
The change in the carrying amount of multiclient seismic data for the nine months ended September 30, 20172019 was as follows:
(Stated in millions) | (Stated in millions) |
| (Stated in millions) |
| ||
|
|
|
|
|
|
|
Balance at December 31, 2016 | $ | 1,073 |
| |||
Balance at December 31, 2018 | $ | 601 |
| |||
Capitalized in period |
| 223 |
|
| 181 |
|
Charged to expense |
| (304 | ) |
| (189 | ) |
Balance at September 30, 2017 | $ | 992 |
| |||
Balance at September 30, 2019 | $ | 593 |
|
7. Goodwill
A summary of goodwill follows:
| (Stated in millions) |
| |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Reservoir |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| Characterization |
|
| Drilling |
|
| Production |
|
| Cameron |
|
| Total |
| |||||
Balance at December 31, 2018 | $ | 4,703 |
|
| $ | 10,111 |
|
| $ | 4,678 |
|
| $ | 5,439 |
|
| $ | 24,931 |
|
Impairment |
| (97 | ) |
|
| (3,025 | ) |
|
| (705 | ) |
|
| (5,001 | ) |
|
| (8,828 | ) |
Impact of changes in exchange rates and other |
| 7 |
|
|
| 3 |
|
|
| (1 | ) |
|
| - |
|
|
| 9 |
|
Balance at September 30, 2019 | $ | 4,613 |
|
| $ | 7,089 |
|
| $ | 3,972 |
|
| $ | 438 |
|
| $ | 16,112 |
|
8. Intangible Assets
The gross book value, accumulated amortization and net book value of intangible assets were as follows:
| (Stated in millions) |
| (Stated in millions) |
| ||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||||||
| Sept. 30, 2017 |
|
| Dec. 31, 2016 |
| Sept. 30, 2019 |
|
| Dec. 31, 2018 |
| ||||||||||||||||||||||||||||||||||||
| Gross |
|
| Accumulated |
|
| Net Book |
|
| Gross |
|
| Accumulated |
|
| Net Book |
| Gross |
|
| Accumulated |
|
| Net Book |
|
| Gross |
|
| Accumulated |
|
| Net Book |
| ||||||||||||
| Book Value |
|
| Amortization |
|
| Value |
|
| Book Value |
|
| Amortization |
|
| Value |
| Book Value |
|
| Amortization |
|
| Value |
|
| Book Value |
|
| Amortization |
|
| Value |
| ||||||||||||
Customer relationships | $ | 4,969 |
|
| $ | 1,053 |
|
| $ | 3,916 |
|
| $ | 4,938 |
|
| $ | 865 |
|
| $ | 4,073 |
| $ | 3,859 |
|
| $ | 853 |
|
| $ | 3,006 |
|
| $ | 4,768 |
|
| $ | 1,243 |
|
| $ | 3,525 |
|
Technology/technical know-how |
| 3,661 |
|
|
| 1,019 |
|
|
| 2,642 |
|
|
| 3,655 |
|
|
| 835 |
|
|
| 2,820 |
|
| 2,526 |
|
|
| 735 |
|
|
| 1,791 |
|
|
| 3,494 |
|
|
| 1,246 |
|
|
| 2,248 |
|
Tradenames |
| 2,847 |
|
|
| 537 |
|
|
| 2,310 |
|
|
| 2,847 |
|
|
| 458 |
|
|
| 2,389 |
|
| 1,911 |
|
|
| 248 |
|
|
| 1,663 |
|
|
| 2,799 |
|
|
| 628 |
|
|
| 2,171 |
|
Other |
| 1,284 |
|
|
| 612 |
|
|
| 672 |
|
|
| 1,122 |
|
|
| 549 |
|
|
| 573 |
|
| 1,432 |
|
|
| 610 |
|
|
| 822 |
|
|
| 1,404 |
|
|
| 621 |
|
|
| 783 |
|
| $ | 12,761 |
|
| $ | 3,221 |
|
| $ | 9,540 |
|
| $ | 12,562 |
|
| $ | 2,707 |
|
| $ | 9,855 |
| $ | 9,728 |
|
| $ | 2,446 |
|
| $ | 7,282 |
|
| $ | 12,465 |
|
| $ | 3,738 |
|
| $ | 8,727 |
|
Amortization expense charged to income was as follows:
(Stated in millions) | (Stated in millions) |
| (Stated in millions) |
| ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 2017 |
|
| 2016 |
| 2019 |
|
| 2018 |
| ||||
Third Quarter | $ | 165 |
|
| $ | 156 |
| $ | 156 |
|
| $ | 167 |
|
Nine Months | $ | 501 |
|
| $ | 405 |
| $ | 480 |
|
| $ | 506 |
|
Based on the net book value of intangible assets at September 30, 2017,2019, amortization charged to income for the subsequent five years is estimated to be: fourth quarter of 2017—$170 million; 2018—$687 million; 2019—$675138 million; 2020—$628528 million; 2021—$603518 million; 2022—$515 million; 2023—$497 million; and 2022—2024—$592477 million.
12
A summary of Long-term Debt follows:
(Stated in millions) | (Stated in millions) |
| (Stated in millions) |
| ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Sept. 30, |
|
| Dec. 31, |
| Sept. 30, |
|
| Dec. 31, |
| ||||
| 2017 |
|
| 2016 |
| 2019 |
|
| 2018 |
| ||||
Commercial paper borrowings | $ | 2,393 |
|
| $ | 2,421 |
| |||||||
4.00% Senior Notes due 2025 |
| 1,741 |
|
|
| 1,740 |
| |||||||
3.30% Senior Notes due 2021 |
| 1,595 |
|
|
| 1,594 |
| $ | 1,597 |
|
| $ | 1,596 |
|
3.00% Senior Notes due 2020 |
| 1,593 |
|
|
| 1,591 |
| |||||||
3.65% Senior Notes due 2023 |
| 1,492 |
|
|
| 1,491 |
|
| 1,494 |
|
|
| 1,493 |
|
2.35% Senior Notes due 2018 |
| 1,298 |
|
|
| 1,297 |
| |||||||
3.90% Senior Notes due 2028 |
| 1,442 |
|
|
| - |
| |||||||
4.20% Senior Notes due 2021 |
| 1,100 |
|
|
| 1,100 |
|
| 1,100 |
|
|
| 1,100 |
|
2.40% Senior Notes due 2022 |
| 996 |
|
|
| 996 |
|
| 998 |
|
|
| 997 |
|
4.00% Senior Notes due 2025 |
| 929 |
|
|
| 1,742 |
| |||||||
4.30% Senior Notes due 2029 |
| 845 |
|
|
| - |
| |||||||
3.75% Senior Notes due 2024 |
| 746 |
|
|
| - |
| |||||||
1.00% Guaranteed Notes due 2026 |
| 654 |
|
|
| 678 |
| |||||||
2.65% Senior Notes due 2022 |
| 598 |
|
|
| 598 |
| |||||||
0.00% Notes due 2024 |
| 544 |
|
|
| - |
| |||||||
0.25% Notes due 2027 |
| 543 |
|
|
| - |
| |||||||
0.50% Notes due 2031 |
| 536 |
|
|
| - |
| |||||||
2.20% Senior Notes due 2020 |
| 499 |
|
|
| 499 |
| |||||||
3.00% Senior Notes due 2020 |
| 415 |
|
|
| 1,596 |
| |||||||
3.63% Senior Notes due 2022 |
| 846 |
|
|
| 845 |
|
| 294 |
|
|
| 847 |
|
0.63% Guaranteed Notes due 2019 |
| 704 |
|
|
| 622 |
| |||||||
1.50% Guaranteed Notes due 2019 |
| 599 |
|
|
| 536 |
| |||||||
7.00% Notes due 2038 |
| 213 |
|
|
| 214 |
|
| 209 |
|
|
| 210 |
|
4.50% Notes due 2021 |
| 136 |
|
|
| 137 |
|
| 130 |
|
|
| 132 |
|
5.95% Notes due 2041 |
| 115 |
|
|
| 116 |
|
| 114 |
|
|
| 115 |
|
3.60% Notes due 2022 |
| 110 |
|
|
| 110 |
|
| 108 |
|
|
| 109 |
|
5.13% Notes due 2043 |
| 99 |
|
|
| 99 |
|
| 99 |
|
|
| 99 |
|
4.00% Notes due 2023 |
| 82 |
|
|
| 83 |
|
| 81 |
|
|
| 82 |
|
3.70% Notes due 2024 |
| 56 |
|
|
| 56 |
|
| 55 |
|
|
| 55 |
|
6.38% Notes due 2018 |
| - |
|
|
| 297 |
| |||||||
Commercial paper borrowings |
| 2,128 |
|
|
| 2,433 |
| |||||||
Other |
| 703 |
|
|
| 1,118 |
|
| 175 |
|
|
| 263 |
|
| $ | 15,871 |
|
| $ | 16,463 |
| $ | 16,333 |
|
| $ | 14,644 |
|
During the third quarter of 2019, Schlumberger issued €500 million of 0.00% Notes due 2024, €500 million of 0.25% Notes due 2027 and €500 million of 0.50% Notes due 2031.
In September 2019, Schlumberger repurchased $783 million of its 3.00% Senior Notes due 2020 and $321 million of its 3.625% Senior Notes due 2022. Schlumberger paid a premium of $29 million in connection with these repurchases. This premium was classified as Impairments & other in the Consolidated Statement of Income (Loss). (See Note 2 - Charges and Credits.)
In April 2019, Schlumberger completed a debt exchange offer, pursuant to which it issued $1.500 billion in principal of 3.90% Senior Notes due 2028 (the “New Notes”) in exchange for $401 million of 3.00% Senior Notes due 2020, $234 million of 3.63% Senior Notes due 2022 and $817 million of 4.00% Senior Notes due 2025. In connection with the exchange of principal, Schlumberger paid a premium of $48 million, substantially all of which was in the form of New Notes. This premium is being amortized as additional interest expense over the term of the New Notes.
The estimated fair value of Schlumberger’s Long-term Debt, based on quoted market prices at September 30, 20172019 and December 31, 2016,2018, was $16.2$16.9 billion and $16.8$14.6 billion, respectively.
At September 30, 2019, Schlumberger had separate committed credit facility agreements aggregating $6.5 billion with commercial banks, of which $4.1 billion was available and unused. These committed facilities support commercial paper programs in the United States and Europe, of which $1.0 billion matures in February 2020, $2.0 billion matures in February 2023, $2.0 billion matures in February 2024 and $1.5 billion matures in July 2024. Interest rates and other terms of borrowing under these lines of credit vary by facility.
Borrowings under Schlumberger’s commercial paper programs at September 30, 2019 were $2.4 billion, of which $0.3 billion was classified in Short-term borrowings and current portion of long-term debt and the remaining $2.1 billion was classified in Long-term Debt in the Consolidated Balance Sheet. At December 31, 2018, borrowings under the commercial paper program at September 30, 2017programs were $2.4 billion, all of which was classified within in Long-term Debtdebt in the Consolidated Balance Sheet. At December 31, 2016, borrowings under the commercial paper program were $2.6 billion, of which $2.4 billion was classified within Long-term debt and $0.2 billion was classified in Short-term borrowings and current portion of long-term debt in the Consolidated Balance Sheet.
10. Derivative Instruments and Hedging Activities
Schlumberger is exposed to market risks related to fluctuations in foreign currency exchange rates and interest rates. To mitigate these risks, Schlumberger utilizes derivative instruments. Schlumberger does not enter into derivative transactions for speculative purposes.
Interest Rate Risk
Schlumberger is subject to interest rate risk on its debt and its investment portfolio. Schlumberger maintains an interest rate risk management strategy that uses a mix of variable and fixed rate debt combined with its investment portfolio, and occasionally interest rate swaps, to mitigate the exposure to changes in interest rates.
During 2013, Schlumberger entered into a cross currency swap for a notional amount of €0.5 billion in order to hedge changes in the fair value of Schlumberger’s €0.5 billion 1.50% Guaranteed Notes due 2019. Under the terms of this swap, Schlumberger will receive interest at a fixed rate of 1.50% on the euro notional amount and pay interest at a floating rate of three-month LIBOR plus approximately 64 basis points on the US dollar notional amount.
This cross currency swap is designated as a fair value hedge of the underlying debt. This derivative instrument is marked to market with gains and losses recognized currently in income to largely offset the respective gains and losses recognized on changes in the fair value of the hedged debt.
13
At September 30, 2017,2019, Schlumberger had fixed rate debt of $13.0aggregating $14.0 billion and variable rate debt of $4.2 billion after taking into account the effect of the swap.
Short-term investments were $3.3 billion at September 30, 2017. The carrying value of these investments approximated fair value, which was estimated using quoted market prices for those or similar investments.aggregating $2.7 billion.
Foreign Currency Exchange Rate Risk
As a multinational company, Schlumberger conducts its businessgenerates revenue in over 85more than 120 countries. Schlumberger’s functional currency is primarily the US dollar. However, outside the United States, a significant portion of Schlumberger’s expenses isare incurred in foreign currencies. Therefore, when the US dollar weakens (strengthens) in relation to the foreign currencies of the countries in which Schlumberger conducts business, the US dollar–reporteddollar-reported expenses will increase (decrease).
Schlumberger is exposed to risks on future cash flows to the extent that the local currency is not the functional currency and expenses denominated in local currency are not equal to revenues denominated in local currency. Schlumberger is also exposed to risks on future cash flows relating to certain of its fixed rate debt that is denominated in currencies other than the functional currency. Schlumberger uses foreign currency forward contracts to provide a hedge against a portion of these cash flow risks. These contracts are accounted for as cash flow hedges, with the effective portion of changes in the fair value of the hedge recorded on the Consolidated Balance Sheet and in Accumulated Other Comprehensive Loss. Amounts recorded in Accumulated Other Comprehensive Loss are reclassified into earnings in the same period or periods that the hedged item is recognized in earnings. The ineffective portion
Schlumberger is also exposed to risks on future cash flows relating to certain of its fixed rate debt denominated in currencies other than the functional currency. Schlumberger uses cross-currency swaps to provide a hedge against these cash flow risks.
During 2017, a Canadian-dollar functional currency subsidiary of Schlumberger issued $1.1 billion of US-dollar denominated debt. Schlumberger entered into cross-currency swaps for an aggregate notional amount of $1.1 billion in order to hedge changes in the fair value of hedging instruments, if any, is recorded directlyits $0.5 billion of 2.20% Senior Notes due 2020 and its $0.6 billion of 2.65% Senior Notes due 2022. These cross-currency swaps effectively convert the US-dollar denominated notes to earnings.Canadian-dollar denominated debt with fixed annual interest rates of 1.97% and 2.52%, respectively.
At September 30, 2017,During the third quarter of 2019, a US-dollar functional currency subsidiary of Schlumberger recognized a cumulative net gainissued €1.5 billion of $4 millionEuro-denominated debt. Schlumberger entered into cross-currency swaps for an aggregate notional amount of €1.5 billion in Accumulated other comprehensive loss relatingorder to revaluationhedge changes in the fair value of foreign currency forward contractsits €0.5 billion 0.00% Notes due 2024, €0.5 billion 0.25% Notes due 2027 and foreign currency options designated as cash flow hedges,€0.5 billion Notes due 2031. These cross-currency swaps effectively convert the majorityEuro-denominated notes to US-dollar denominated debt with fixed annual interest rates of which is expected to be reclassified into earnings within the next 12 months.2.29%, 2.51% and 2.76%, respectively.
Schlumberger is exposed to changes in the fair value of assets and liabilities that are denominated in currencies other than the functional currency. While Schlumberger uses foreign currency forward contracts and foreign currency options to economically hedge this exposure as it relates to certain currencies, these contracts are not designated as hedges for accounting purposes. Instead, the fair value of the contracts is recorded on the Consolidated Balance Sheet, and changes in the fair value are recognized in the Consolidated Statement of Income (Loss) as are changes in fair value of the hedged item.
At September 30, 2017,2019, contracts were outstanding for the US dollar equivalent of $3.6$6.8 billion in various foreign currencies, of which $0.8$2.8 billion relatedrelates to hedges of debt denominated in currencies other than the functional currency.
The fair values of outstanding derivative instruments were as follows:
|
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| (Stated in millions) |
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| |
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|
|
|
| Fair Value of Derivatives |
|
| Consolidated Balance Sheet Classification | |||||
| Sept. 30, |
|
| Dec. 31, |
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| ||
| 2017 |
|
| 2016 |
|
|
| ||
Derivative Assets |
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|
|
|
|
|
|
|
Derivatives designated as hedges: |
|
|
|
|
|
|
|
|
|
Foreign exchange contracts | $ | 6 |
|
| $ | 1 |
|
| Other current assets |
|
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|
|
|
|
|
|
|
|
Derivatives not designated as hedges: |
|
|
|
|
|
|
|
|
|
Foreign exchange contracts | $ | 18 |
|
| $ | 42 |
|
| Other current assets |
| $ | 24 |
|
| $ | 43 |
|
|
|
Derivative Liabilities |
|
|
|
|
|
|
|
|
|
Derivatives designated as hedges: |
|
|
|
|
|
|
|
|
|
Foreign exchange contracts | $ | 1 |
|
| $ | 18 |
|
| Accounts payable and accrued liabilities |
Cross currency swap |
| 44 |
|
|
| 49 |
|
| Other Liabilities |
| $ | 45 |
|
| $ | 67 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives not designated as hedges: |
|
|
|
|
|
|
|
|
|
Foreign exchange contracts | $ | 38 |
|
| $ | 59 |
|
| Accounts payable and accrued liabilities |
| $ | 83 |
|
| $ | 126 |
|
|
|
14
TheAt September 30, 2019, Schlumberger recognized a cumulative $37 million loss in Accumulated Other Comprehensive Loss relating to changes in the fair value of all outstanding derivatives was determined using a model with inputs that are observable in the market or that can be derived from, or corroborated by, observable data.foreign currency forward contracts and cross-currency swaps.
The effect of derivative instruments designated as fair value and cash flow hedges, and those not designated as hedges, on the Consolidated Statement of (Loss) Income (Loss) was as follows:
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| (Stated in millions) |
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| (Stated in millions) |
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| ||||||||||
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|
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| Gain (Loss) Recognized in Income (Loss) |
|
|
| Gain (Loss) Recognized in Income (Loss) |
|
|
| ||||||||||||||||||||||||||
| Third Quarter |
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| Nine Months |
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| Third Quarter |
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| Nine Months |
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| ||||||||||||||||||||
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
|
| Consolidated Statement of Income (Loss) Classification | 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
|
| Consolidated Statement of Income (Loss) Classification | ||||||||
Derivatives designated as fair value hedges: |
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Cross currency swap | $ | 19 |
|
| $ | 5 |
|
| $ | 66 |
|
| $ | 9 |
|
| Interest | |||||||||||||||||
Cross currency swaps | $ | - |
|
| $ | 6 |
|
| $ | - |
|
| $ | (6 | ) |
| Interest expense | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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| |||||||||||||||||
Derivatives designated as cash flow hedges: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Foreign exchange contracts | $ | (3 | ) |
| $ | (2 | ) |
| $ | (7 | ) |
| $ | 3 |
|
| Cost of services/sales | |||||||||||||||||
Cross currency swaps |
| (2 | ) |
|
| (30 | ) |
|
| (40 | ) |
|
| 25 |
|
| Interest expense | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| $ | (5 | ) |
| $ | (32 | ) |
| $ | (47 | ) |
| $ | 28 |
|
|
|
Derivatives not designated as hedges: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts | $ | (10 | ) |
| $ | (28 | ) |
| $ | (3 | ) |
| $ | (166 | ) |
| Cost of services/sales | $ | - |
|
| $ | (17 | ) |
| $ | (8 | ) |
| $ | 15 |
|
| Cost of services/sales |
11. Contingencies
Schlumberger 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.
15
|
|
|
|
| (Stated in millions) |
|
|
|
|
| (Stated in millions) |
| ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Third Quarter 2017 |
|
| Third Quarter 2016 |
| Third Quarter 2019 |
|
| Third Quarter 2018 |
| ||||||||||||||||||||
|
|
|
|
| Income |
|
|
|
|
|
| Income |
|
|
|
|
| Income (Loss) |
|
|
|
|
|
| Income (Loss) |
| ||||
|
|
|
|
| Before |
|
|
|
|
|
| Before |
|
|
|
|
| Before |
|
|
|
|
|
| Before |
| ||||
| Revenue |
|
| Taxes |
|
| Revenue |
|
| Taxes |
| Revenue |
|
| Taxes |
|
| Revenue |
|
| Taxes |
| ||||||||
Reservoir Characterization | $ | 1,771 |
|
| $ | 311 |
|
| $ | 1,667 |
|
| $ | 329 |
| $ | 1,651 |
|
| $ | 360 |
|
| $ | 1,587 |
|
| $ | 361 |
|
Drilling |
| 2,120 |
|
|
| 301 |
|
|
| 2,021 |
|
|
| 218 |
|
| 2,470 |
|
|
| 305 |
|
|
| 2,429 |
|
|
| 339 |
|
Production |
| 2,876 |
|
|
| 283 |
|
|
| 2,104 |
|
|
| 91 |
|
| 3,153 |
|
|
| 288 |
|
|
| 3,249 |
|
|
| 320 |
|
Cameron |
| 1,297 |
|
|
| 194 |
|
|
| 1,341 |
|
|
| 215 |
|
| 1,363 |
|
|
| 173 |
|
|
| 1,386 |
|
|
| 160 |
|
Eliminations & other |
| (159 | ) |
|
| (30 | ) |
|
| (114 | ) |
|
| (38 | ) |
| (96 | ) |
|
| (30 | ) |
|
| (147 | ) |
|
| (28 | ) |
Pretax operating income |
|
|
|
|
| 1,059 |
|
|
|
|
|
|
| 815 |
| |||||||||||||||
|
|
|
|
|
| 1,096 |
|
|
|
|
|
|
| 1,152 |
| |||||||||||||||
Corporate & other (1) |
|
|
|
|
| (234 | ) |
|
|
|
|
|
| (267 | ) |
|
|
|
|
| (231 | ) |
|
|
|
|
|
| (234 | ) |
Interest income (2) |
|
|
|
|
| 30 |
|
|
|
|
|
|
| 24 |
|
|
|
|
|
| 7 |
|
|
|
|
|
|
| 8 |
|
Interest expense (3) |
|
|
|
|
| (129 | ) |
|
|
|
|
|
| (135 | ) |
|
|
|
|
| (151 | ) |
|
|
|
|
|
| (139 | ) |
Charges and credits (4) |
|
|
|
|
| (49 | ) |
|
|
|
|
|
| (237 | ) |
|
|
|
|
| (12,692 | ) |
|
|
|
|
|
| - |
|
| $ | 7,905 |
|
| $ | 677 |
|
| $ | 7,019 |
|
| $ | 200 |
| $ | 8,541 |
|
| $ | (11,971 | ) |
| $ | 8,504 |
|
| $ | 787 |
|
(1) |
|
(2) | Interest income excludes amounts which are included in the segments’ income ($1 million in 2019; $2 million in 2018). |
(3) | Interest expense excludes amounts which are included in the segments’ income ($9 million in 2019; $8 million in 2018). |
(4) | See Note 2 – Charges and Credits. |
|
|
|
|
| (Stated in millions) |
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Nine Months 2019 |
|
| Nine Months 2018 |
| ||||||||||
|
|
|
|
| Income (Loss) |
|
|
|
|
|
| Income (Loss) |
| ||
|
|
|
|
| Before |
|
|
|
|
|
| Before |
| ||
| Revenue |
|
| Taxes |
|
| Revenue |
|
| Taxes |
| ||||
Reservoir Characterization | $ | 4,669 |
|
| $ | 959 |
|
| $ | 4,602 |
|
| $ | 987 |
|
Drilling |
| 7,279 |
|
|
| 913 |
|
|
| 6,789 |
|
|
| 921 |
|
Production |
| 9,120 |
|
|
| 740 |
|
|
| 9,458 |
|
|
| 853 |
|
Cameron |
| 3,949 |
|
|
| 486 |
|
|
| 4,175 |
|
|
| 522 |
|
Eliminations & other |
| (328 | ) |
|
| (126 | ) |
|
| (388 | ) |
|
| (63 | ) |
|
|
|
|
|
| 2,972 |
|
|
|
|
|
|
| 3,220 |
|
Corporate & other (1) |
|
|
|
|
| (742 | ) |
|
|
|
|
|
| (699 | ) |
Interest income (2) |
|
|
|
|
| 25 |
|
|
|
|
|
|
| 44 |
|
Interest expense (3) |
|
|
|
|
| (433 | ) |
|
|
|
|
|
| (405 | ) |
Charges and credits (4) |
|
|
|
|
| (12,692 | ) |
|
|
|
|
|
| (184 | ) |
| $ | 24,689 |
|
| $ | (10,870 | ) |
| $ | 24,636 |
|
| $ | 1,976 |
|
(1) | Comprised principally of certain corporate expenses not allocated to the segments, stock-based compensation costs, amortization expense associated with certain intangible assets, certain centrally managed initiatives and other nonoperating items. |
(2) | Interest income excludes amounts which are included in the segments’ income ($6 million in 2019; $7 million in 2018). |
(3) | Interest expense excludes amounts which are included in the segments’ income ($29 million in both 2019 and 2018). |
(4) | See Note 2 – Charges and Credits. |
Revenue by geographic area was as follows:
|
|
|
|
|
|
|
|
| (Stated in millions) |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Third Quarter |
|
| Nine Months |
| ||||||||||
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
| ||||
North America | $ | 2,850 |
|
| $ | 3,189 |
|
| $ | 8,389 |
|
| $ | 9,164 |
|
Latin America |
| 1,014 |
|
|
| 978 |
|
|
| 3,121 |
|
|
| 2,767 |
|
Europe/CIS/Africa |
| 2,062 |
|
|
| 1,820 |
|
|
| 5,665 |
|
|
| 5,316 |
|
Middle East & Asia |
| 2,553 |
|
|
| 2,417 |
|
|
| 7,343 |
|
|
| 7,079 |
|
Eliminations & other |
| 62 |
|
|
| 100 |
|
|
| 171 |
|
|
| 310 |
|
| $ | 8,541 |
|
| $ | 8,504 |
|
| $ | 24,689 |
|
| $ | 24,636 |
|
North America and International revenue disaggregated by segment was as follows:
|
|
|
|
|
|
|
|
| (Stated in millions) |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Third Quarter 2019 |
| |||||||||||||
| North |
|
|
|
|
|
| Eliminations |
|
|
|
|
| ||
| America |
|
| International |
|
| & other |
|
| Total |
| ||||
Reservoir Characterization | $ | 299 |
|
| $ | 1,347 |
|
| $ | 5 |
|
| $ | 1,651 |
|
Drilling |
| 553 |
|
|
| 1,861 |
|
|
| 56 |
|
|
| 2,470 |
|
Production |
| 1,426 |
|
|
| 1,726 |
|
|
| 1 |
|
|
| 3,153 |
|
Cameron |
| 589 |
|
|
| 772 |
|
|
| 2 |
|
|
| 1,363 |
|
Other |
| (17 | ) |
|
| (77 | ) |
|
| (2 | ) |
|
| (96 | ) |
| $ | 2,850 |
|
| $ | 5,629 |
|
| $ | 62 |
|
| $ | 8,541 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Third Quarter 2018 |
| |||||||||||||
| North |
|
|
|
|
|
| Eliminations |
|
|
|
|
| ||
| America |
|
| International |
|
| & other |
|
| Total |
| ||||
Reservoir Characterization | $ | 242 |
|
| $ | 1,312 |
|
| $ | 33 |
|
| $ | 1,587 |
|
Drilling |
| 601 |
|
|
| 1,760 |
|
|
| 68 |
|
|
| 2,429 |
|
Production |
| 1,724 |
|
|
| 1,524 |
|
|
| 1 |
|
|
| 3,249 |
|
Cameron |
| 644 |
|
|
| 713 |
|
|
| 29 |
|
|
| 1,386 |
|
Other |
| (22 | ) |
|
| (94 | ) |
|
| (31 | ) |
|
| (147 | ) |
| $ | 3,189 |
|
| $ | 5,215 |
|
| $ | 100 |
|
| $ | 8,504 |
|
|
|
|
|
| (Stated in millions) |
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Nine Months 2019 |
| |||||||||||||
| North |
|
|
|
|
|
| Eliminations |
|
|
|
|
| ||
| America |
|
| International |
|
| & other |
|
| Total |
| ||||
Reservoir Characterization | $ | 756 |
|
| $ | 3,898 |
|
| $ | 15 |
|
| $ | 4,669 |
|
Drilling |
| 1,683 |
|
|
| 5,435 |
|
|
| 161 |
|
|
| 7,279 |
|
Production |
| 4,218 |
|
|
| 4,900 |
|
|
| 2 |
|
|
| 9,120 |
|
Cameron |
| 1,771 |
|
|
| 2,146 |
|
|
| 32 |
|
|
| 3,949 |
|
Other |
| (39 | ) |
|
| (250 | ) |
|
| (39 | ) |
|
| (328 | ) |
| $ | 8,389 |
|
| $ | 16,129 |
|
| $ | 171 |
|
| $ | 24,689 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Nine Months 2018 |
| |||||||||||||
| North |
|
|
|
|
|
| Eliminations |
|
|
|
|
| ||
| America |
|
| International |
|
| & other |
|
| Total |
| ||||
Reservoir Characterization | $ | 732 |
|
| $ | 3,729 |
|
| $ | 141 |
|
| $ | 4,602 |
|
Drilling |
| 1,733 |
|
|
| 4,884 |
|
|
| 172 |
|
|
| 6,789 |
|
Production |
| 4,919 |
|
|
| 4,535 |
|
|
| 4 |
|
|
| 9,458 |
|
Cameron |
| 1,842 |
|
|
| 2,250 |
|
|
| 83 |
|
|
| 4,175 |
|
Other |
| (62 | ) |
|
| (236 | ) |
|
| (90 | ) |
|
| (388 | ) |
| $ | 9,164 |
|
| $ | 15,162 |
|
| $ | 310 |
|
| $ | 24,636 |
|
Revenue in excess of billings related to contracts where revenue is recognized over time was $0.2 billion at both September 30, 2019 and December 31, 2018. Such amounts are included within Receivables less allowance for doubtful accounts in the Consolidated Balance Sheet.
Due to the segments, stock-based compensation costs, amortization expense associated with certain intangible assets, certain centrally managed initiativesnature of its business, Schlumberger does not have significant backlog. Total backlog was $2.6 billion at September 30, 2019, of which approximately 60% is expected to be recognized as revenue over the next 12 months.
Billings and other nonoperating items.
(2)Interest income excludescash collections in excess of revenue was $0.9 billion at both September 30, 2019 and December 31, 2018. Such amounts which are included within Accounts payable and accrued liabilitiesin the segments’ income ($4 million in 2017; $7 million in 2016)Consolidated Balance Sheet.
(3) Interest expense excludes amounts which are included in the segments’ income ($13 million in 2017; $14 million in 2016).
(4) See Note 2 – Charges and Credits.
Certain prior period items have been reclassified to conform to the current period presentation.
|
|
|
|
| (Stated in millions) |
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Nine Months 2017 |
|
| Nine Months 2016 |
| ||||||||||
|
|
|
|
| Income |
|
|
|
|
|
| Income |
| ||
|
|
|
|
| Before |
|
|
|
|
|
| Before |
| ||
| Revenue |
|
| Taxes |
|
| Revenue |
|
| Taxes |
| ||||
Reservoir Characterization | $ | 5,148 |
|
| $ | 891 |
|
| $ | 4,972 |
|
| $ | 930 |
|
Drilling |
| 6,212 |
|
|
| 832 |
|
|
| 6,548 |
|
|
| 760 |
|
Production |
| 7,559 |
|
|
| 614 |
|
|
| 6,601 |
|
|
| 379 |
|
Cameron |
| 3,791 |
|
|
| 530 |
|
|
| 2,865 |
|
|
| 465 |
|
Eliminations & other |
| (449 | ) |
|
| (101 | ) |
|
| (283 | ) |
|
| (72 | ) |
Pretax operating income |
|
|
|
|
| 2,766 |
|
|
|
|
|
|
| 2,462 |
|
Corporate & other (1) |
|
|
|
|
| (715 | ) |
|
|
|
|
|
| (679 | ) |
Interest income (2) |
|
|
|
|
| 82 |
|
|
|
|
|
|
| 61 |
|
Interest expense (3) |
|
|
|
|
| (383 | ) |
|
|
|
|
|
| (391 | ) |
Charges and credits (4) |
|
|
|
|
| (723 | ) |
|
|
|
|
|
| (3,144 | ) |
| $ | 22,261 |
|
| $ | 1,027 |
|
| $ | 20,703 |
|
| $ | (1,691 | ) |
(1)Comprised principally of certain corporate expenses not allocated to the segments, stock-based compensation costs, amortization expense associated with certain intangible assets, certain centrally managed initiatives and other nonoperating items.
(2)Interest income excludes amounts which are included in the segments’ income ($15 million in 2017; $20 million in 2016).
(3) Interest expense excludes amounts which are included in the segments’ income ($39 million in 2017; $40 million in 2016).
(4) See Note 2 – Charges and Credits.
Certain prior period items have been reclassified to conform to the current period presentation.
16
13. Pension and Other Postretirement Benefit Plans
Net pension cost (credit) for the Schlumberger pension plans included the following components:
(Stated in millions) | (Stated in millions) |
|
| (Stated in millions) |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Third Quarter |
|
| Nine Months |
|
| Third Quarter |
|
| Nine Months |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
|
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
| ||||||||||||||||||||||||||||||||||||||||
| US |
|
| Int'l |
|
| US |
|
| Int'l |
|
| US |
|
| Int'l |
|
| US |
|
| Int'l |
|
| US |
|
| Int'l |
|
| US |
|
| Int'l |
|
| US |
|
| Int'l |
|
| US |
|
| Int'l |
| ||||||||||||||||
Service cost | $ | 14 |
|
| $ | 24 |
|
| $ | 16 |
|
| $ | 27 |
|
| $ | 44 |
|
| $ | 71 |
|
| $ | 47 |
|
| $ | 83 |
|
| $ | 14 |
|
| $ | 32 |
|
| $ | 14 |
|
| $ | 35 |
|
| $ | 41 |
|
| $ | 96 |
|
| $ | 44 |
|
| $ | 105 |
|
Interest cost |
| 44 |
|
|
| 76 |
|
|
| 44 |
|
|
| 78 |
|
|
| 131 |
|
|
| 230 |
|
|
| 133 |
|
|
| 235 |
|
|
| 45 |
|
|
| 82 |
|
|
| 41 |
|
|
| 77 |
|
|
| 136 |
|
|
| 248 |
|
|
| 125 |
|
|
| 229 |
|
Expected return on plan assets |
| (60 | ) |
|
| (135 | ) |
|
| (60 | ) |
|
| (128 | ) |
|
| (181 | ) |
|
| (406 | ) |
|
| (178 | ) |
|
| (391 | ) |
|
| (58 | ) |
|
| (148 | ) |
|
| (61 | ) |
|
| (149 | ) |
|
| (173 | ) |
|
| (446 | ) |
|
| (186 | ) |
|
| (442 | ) |
Amortization of prior service cost |
| 3 |
|
|
| 24 |
|
|
| 3 |
|
|
| 30 |
|
|
| 9 |
|
|
| 73 |
|
|
| 9 |
|
|
| 91 |
|
|
| 3 |
|
|
| 2 |
|
|
| 3 |
|
|
| 3 |
|
|
| 7 |
|
|
| 6 |
|
|
| 9 |
|
|
| 8 |
|
Amortization of net loss |
| 10 |
|
|
| 30 |
|
|
| 20 |
|
|
| 20 |
|
|
| 29 |
|
|
| 90 |
|
|
| 60 |
|
|
| 59 |
|
|
| 7 |
|
|
| 16 |
|
|
| 12 |
|
|
| 35 |
|
|
| 23 |
|
|
| 47 |
|
|
| 36 |
|
|
| 105 |
|
| $ | 11 |
|
| $ | 19 |
|
| $ | 23 |
|
| $ | 27 |
|
| $ | 32 |
|
| $ | 58 |
|
| $ | 71 |
|
| $ | 77 |
|
| $ | 11 |
|
| $ | (16 | ) |
| $ | 9 |
|
| $ | 1 |
|
| $ | 34 |
|
| $ | (49 | ) |
| $ | 28 |
|
| $ | 5 |
|
The net periodic benefit credit for the Schlumberger US postretirement medical plan included the following components:
(Stated in millions) | (Stated in millions) |
| (Stated in millions) |
| ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Third Quarter |
|
| Nine Months |
| Third Quarter |
|
| Nine Months |
| ||||||||||||||||||||
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
| ||||||||
Service cost | $ | 7 |
|
| $ | 8 |
|
| $ | 22 |
|
| $ | 23 |
| $ | 8 |
|
| $ | 8 |
|
| $ | 23 |
|
| $ | 24 |
|
Interest cost |
| 11 |
|
|
| 11 |
|
|
| 35 |
|
|
| 35 |
|
| 12 |
|
|
| 11 |
|
|
| 36 |
|
|
| 33 |
|
Expected return on plan assets |
| (15 | ) |
|
| (14 | ) |
|
| (46 | ) |
|
| (43 | ) |
| (16 | ) |
|
| (15 | ) |
|
| (49 | ) |
|
| (47 | ) |
Amortization of prior service credit |
| (7 | ) |
|
| (8 | ) |
|
| (22 | ) |
|
| (24 | ) |
| (7 | ) |
|
| (7 | ) |
|
| (21 | ) |
|
| (21 | ) |
| $ | (4 | ) |
| $ | (3 | ) |
| $ | (11 | ) |
| $ | (9 | ) | $ | (3 | ) |
| $ | (3 | ) |
| $ | (11 | ) |
| $ | (11 | ) |
14. Accumulated Other Comprehensive Loss
Accumulated other comprehensive loss consists of the following:
| (Stated in millions) |
| |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Pension and |
|
|
|
|
| |
| Currency |
|
|
|
|
|
|
|
|
|
| Other |
|
|
|
|
| ||
| Translation |
|
| Marketable |
|
| Cash Flow |
|
| Postretirement |
|
|
|
|
| ||||
| Adjustments |
|
| Securities |
|
| Hedges |
|
| Benefit Plans |
|
| Total |
| |||||
Balance, January 1, 2017 | $ | (2,136 | ) |
| $ | 21 |
|
| $ | (19 | ) |
| $ | (2,509 | ) |
| $ | (4,643 | ) |
Other comprehensive gain (loss) before reclassifications |
| 49 |
|
|
| (66 | ) |
|
| 19 |
|
|
| - |
|
|
| 2 |
|
Amounts reclassified from accumulated other comprehensive loss |
| - |
|
|
| - |
|
|
| 4 |
|
|
| 179 |
|
|
| 183 |
|
Income taxes |
| - |
|
|
| - |
|
|
| - |
|
|
| (2 | ) |
|
| (2 | ) |
Net other comprehensive (loss) income |
| 49 |
|
|
| (66 | ) |
|
| 23 |
|
|
| 177 |
|
|
| 183 |
|
Balance, September 30, 2017 | $ | (2,087 | ) |
| $ | (45 | ) |
| $ | 4 |
|
| $ | (2,332 | ) |
| $ | (4,460 | ) |
17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Pension and |
|
|
|
|
| |
| Currency |
|
|
|
|
|
|
|
|
|
| Other |
|
|
|
|
| ||
| Translation |
|
| Marketable |
|
| Cash Flow |
|
| Postretirement |
|
|
|
|
| ||||
| Adjustments |
|
| Securities |
|
| Hedges |
|
| Benefit Plans |
|
| Total |
| |||||
Balance, January 1, 2016 | $ | (2,053 | ) |
| $ | - |
|
| $ | (39 | ) |
| $ | (2,466 | ) |
| $ | (4,558 | ) |
Other comprehensive gain (loss) before reclassifications |
| (26 | ) |
|
| (2 | ) |
|
| (86 | ) |
|
| - |
|
|
| (114 | ) |
Amounts reclassified from accumulated other comprehensive loss |
| - |
|
|
| - |
|
|
| 109 |
|
|
| 195 |
|
|
| 304 |
|
Income taxes |
| - |
|
|
| - |
|
|
| - |
|
|
| (20 | ) |
|
| (20 | ) |
Net other comprehensive income |
| (26 | ) |
|
| (2 | ) |
|
| 23 |
|
|
| 175 |
|
|
| 170 |
|
Balance, September 30, 2016 | $ | (2,079 | ) |
| $ | (2 | ) |
| $ | (16 | ) |
| $ | (2,291 | ) |
| $ | (4,388 | ) |
18
Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Third Quarter 20172019 Compared to Second Quarter 20172019
|
|
|
|
| (Stated in millions) |
|
|
|
|
| (Stated in millions) |
| ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Third Quarter 2017 |
|
| Second Quarter 2017 |
| Third Quarter 2019 |
|
| Second Quarter 2019 |
| ||||||||||||||||||||
|
|
|
|
| Income |
|
|
|
|
|
| Income |
|
|
|
|
| Income (Loss) |
|
|
|
|
|
| Income (Loss) |
| ||||
|
|
|
|
| Before |
|
|
|
|
|
| Before |
|
|
|
|
| Before |
|
|
|
|
|
| Before |
| ||||
| Revenue |
|
| Taxes |
|
| Revenue |
|
| Taxes |
| Revenue |
|
| Taxes |
|
| Revenue |
|
| Taxes |
| ||||||||
Reservoir Characterization | $ | 1,771 |
|
| $ | 311 |
|
| $ | 1,759 |
|
| $ | 299 |
| $ | 1,651 |
|
| $ | 360 |
|
| $ | 1,558 |
|
| $ | 317 |
|
Drilling |
| 2,120 |
|
|
| 301 |
|
|
| 2,107 |
|
|
| 302 |
|
| 2,470 |
|
|
| 305 |
|
|
| 2,421 |
|
|
| 300 |
|
Production |
| 2,876 |
|
|
| 283 |
|
|
| 2,496 |
|
|
| 221 |
|
| 3,153 |
|
|
| 288 |
|
|
| 3,077 |
|
|
| 235 |
|
Cameron |
| 1,297 |
|
|
| 194 |
|
|
| 1,265 |
|
|
| 174 |
|
| 1,363 |
|
|
| 173 |
|
|
| 1,328 |
|
|
| 165 |
|
Eliminations & other |
| (159 | ) |
|
| (30 | ) |
|
| (165 | ) |
|
| (46 | ) |
| (96 | ) |
|
| (30 | ) |
|
| (115 | ) |
|
| (49 | ) |
Pretax operating income |
|
|
|
|
| 1,059 |
|
|
|
|
|
|
| 950 |
| |||||||||||||||
|
|
|
|
|
| 1,096 |
|
|
|
|
|
|
| 968 |
| |||||||||||||||
Corporate & other (1) |
|
|
|
|
| (234 | ) |
|
|
|
|
|
| (242 | ) |
|
|
|
|
| (231 | ) |
|
|
|
|
|
| (238 | ) |
Interest income (2) |
|
|
|
|
| 30 |
|
|
|
|
|
|
| 28 |
|
|
|
|
|
| 7 |
|
|
|
|
|
|
| 9 |
|
Interest expense (3) |
|
|
|
|
| (129 | ) |
|
|
|
|
|
| (128 | ) |
|
|
|
|
| (151 | ) |
|
|
|
|
|
| (146 | ) |
Charges and credits (4) |
|
|
|
|
| (49 | ) |
|
|
|
|
|
| (591 | ) |
|
|
|
|
| (12,692 | ) |
|
|
|
|
|
| - |
|
| $ | 7,905 |
|
| $ | 677 |
|
| $ | 7,462 |
|
| $ | 17 |
| $ | 8,541 |
|
| $ | (11,971 | ) |
| $ | 8,269 |
|
| $ | 593 |
|
(1) | Comprised principally of certain corporate expenses not allocated to the segments, stock-based compensation costs, amortization expense associated with certain intangible assets, certain centrally managed initiatives and other nonoperating items. |
(2) |
|
(3) | Interest expense excludes amounts which are included in the segments’ income ($9 million in Q3 2019; $10 million in Q2 2019). |
(4) | Charges and credits are described in detail in Note 2 to the Consolidated Financial Statements. |
Third-quarter revenue of $8.5 billion increased 3% sequentially with North America revenue of $2.8 billion increasing 2%, while international revenue of $5.6 billion increased 3%.
International revenue increased 3% sequentially, led by Europe/CIS/Africa where revenue increased 9% sequentially driven by the peak summer activity campaigns in the segments’ income ($4 millionNorthern Hemisphere as well as the start of new projects in Africa. Sequential international revenue growth was also driven by double-digit growth in Asia. Latin America revenue decreased 9% sequentially on lower activity in Argentina and Mexico. International activity in the fourth quarter will be affected by the usual winter slowdown, particularly in the Northern Hemisphere.
North America revenue improved 2% sequentially, driven by WesternGeco® multiclient seismic license sales. Land revenue was slightly higher as a modest increase in OneStim® activity was off-set by softer pricing while land drilling revenue was essentially flat despite the lower rig count. As Schlumberger exited the third quarter, OneStim activity decelerated as frac programs were either deferred or cancelled due to customer budget and cash flow constraints.
The third quarter’s results reflected a macro environment of 2017; $6 millionslowing production growth rate in the second quarter of 2017).North American land as operators maintained capital discipline and reduced drilling and frac activity. Year-to-date high single-digit international revenue growth continues to be underpinned by international investment levels. Market uncertainty, however, is weighing on future oil demand outlook in a climate where trade concerns are seen as challenging global economic growth.
(3)Interest expense excludes amounts which are included in the segments’ income ($13 million in the third quarter of 2017; $14 million in the second quarter of 2017).
(4)Charges and credits are described in detail in Note 2 to the Consolidated Financial Statements.Reservoir Characterization
Reservoir Characterization Grouprevenue of $1.7 billion increased 6% sequentially due to peak summer activity campaigns. Growth was led by Wireline international activity, increased Integrated Service Management (ISM) project activity in India and higher WesternGeco multiclient seismic license sales in North America.
Reservoir Characterization Grouppretax operating margin of 22% was 149 basis points (bps) higher sequentially due to the peak summer campaign for Wireline and stronger WesternGeco multiclient seismic license sales.
Drilling
Drilling revenue of $1.8$2.5 billion increased 1%2% sequentially led by stronger international activity in Russia from the peak summer drilling campaign that mainly benefited Drilling & Measurements. Higher drilling activity in China and Australia also contributed to the sequential growth.
Drilling pretax operating margin of 12% was essentially flat sequentially.
Production
Production revenue of $3.2 billion increased 2% sequentially, primarily due to seasonallydriven by higher Wireline and Testinginternational activity for Completions in the Far East, Asia & Process activities in theAustralia, Russia & Central Asia, and Norway & DenmarkSub-Sahara Africa GeoMarkets. This increase was partially offset by lower WesternGeco multiclient license sales, which declined $55 million, following
Recent production shut-ins in Ecuador due to the strong sales in Mexico during the previous quarter.ongoing civil unrest may potentially impact fourth quarter revenue.
PretaxProduction pretax operating margin of 18% was 56 basis points (bps) higher9% expanded 148 bps sequentially as the increased contribution from high-margin Wireline activities was offset by reduced profitability in WesternGeco due to lower multiclient sales.
Drilling Group
Drilling Group revenue of $2.1 billion increased 1% sequentiallylargely due to improved directional drilling-relatedinternational margins from higher activity. Additionally, the reduction in depreciation and amortization expense as a result of the third quarter 2019 impairment charges (see Note 2 - Charges & Credits) accounted for just under half of the sequential margin improvement.
Cameron
Cameron revenue in North America land.of $1.4 billion increased 3% sequentially driven by higher international revenue for Surface Systems, OneSubsea, and Drilling Systems.
PretaxCameron pretax operating margin of 14%13% was essentially flat sequentially.
Production GroupThird Quarter 2019 Compared to Third Quarter 2018
Production Group
|
|
|
|
| (Stated in millions) |
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Third Quarter 2019 |
|
| Third Quarter 2018 |
| ||||||||||
|
|
|
|
| Income (Loss) |
|
|
|
|
|
| Income (Loss) |
| ||
|
|
|
|
| Before |
|
|
|
|
|
| Before |
| ||
| Revenue |
|
| Taxes |
|
| Revenue |
|
| Taxes |
| ||||
Reservoir Characterization | $ | 1,651 |
|
| $ | 360 |
|
| $ | 1,587 |
|
| $ | 361 |
|
Drilling |
| 2,470 |
|
|
| 305 |
|
|
| 2,429 |
|
|
| 339 |
|
Production |
| 3,153 |
|
|
| 288 |
|
|
| 3,249 |
|
|
| 320 |
|
Cameron |
| 1,363 |
|
|
| 173 |
|
|
| 1,386 |
|
|
| 160 |
|
Eliminations & other |
| (96 | ) |
|
| (30 | ) |
|
| (147 | ) |
|
| (28 | ) |
|
|
|
|
|
| 1,096 |
|
|
|
|
|
|
| 1,152 |
|
Corporate & other (1) |
|
|
|
|
| (231 | ) |
|
|
|
|
|
| (234 | ) |
Interest income (2) |
|
|
|
|
| 7 |
|
|
|
|
|
|
| 8 |
|
Interest expense (3) |
|
|
|
|
| (151 | ) |
|
|
|
|
|
| (139 | ) |
Charges and credits (4) |
|
|
|
|
| (12,692 | ) |
|
|
|
|
|
| - |
|
| $ | 8,541 |
|
| $ | (11,971 | ) |
| $ | 8,504 |
|
| $ | 787 |
|
(1) | Comprised principally of certain corporate expenses not allocated to the segments, stock-based compensation costs, amortization expense associated with certain intangible assets, certain centrally managed initiatives and other nonoperating items. |
(2) | Interest income excludes amounts which are included in the segments’ income ($1 million in 2019; $2 million in 2018). |
(3) | Interest expense excludes amounts which are included in the segments’ income ($9 million in 2019; $8 million in 2018). |
(4) | Charges and credits are described in detail in Note 2 to the Consolidated Financial Statements. |
Third-quarter 2019 revenue of $2.9$8.5 billion was 15% higher sequentially primarily from continued market share gains in the hydraulic fracturing market inessentially flat year-on-year as North America land.revenue declined 11% while international revenue increased 8%. The international results were underpinned by increased investment levels. In contrast, the North America results reflect a slowing production growth rate on land as operators maintained capital discipline and reduced drilling and frac activity.
Reservoir Characterization
PretaxThird-quarter 2019 revenue of $1.7 billion was 4% higher year-on-year. Revenue in Wireline, Testing, and ISM drove the increase as a result of higher international activity.
Year-on-year, pretax operating margin of 10% increased 97decreased 90 bps sequentially due to increased activity and improved pricing on land in North America. 22%.
Drilling
19
Cameron GroupThird-quarter 2019 revenue of $1.3$2.5 billion increased 3% sequentially2% year-on-year primarily due to higher product salesdemand for drilling services, largely in Surface Systemsthe international markets.
Year-on-year, pretax operating margin decreased 161 bps to 12% despite higher revenue as margins were affected by competitive pricing and higher costs associated with a number of integrated contracts internationally.
Production
Third-quarter 2019 revenue of $3.2 billion decreased 3% year-on-year with most of the revenue decrease attributable to lower OneStim activity in North America land.as customers reduced spending due to higher cost of capital, lower borrowing capacity and expectation of better returns from their shareholders.
PretaxYear-on-year, pretax operating margin decreased 72 bps to 9% primarily due to reduced profitability in OneStim in North America.
Cameron
Third-quarter 2019 revenue of 15% increased 116 bps sequentially,$1.4 billion decreased 2% year-on-year due mainly to increasing profitability on higher product sales and improved pricing in Surface Systemslower revenue for OneSubsea and Valves & Measurement in North America land.Process Systems.
Third Quarter 2017 Compared to Third Quarter 2016
|
|
|
|
| (Stated in millions) |
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Third Quarter 2017 |
|
| Third Quarter 2016 |
| ||||||||||
|
|
|
|
| Income |
|
|
|
|
|
| Income |
| ||
|
|
|
|
| Before |
|
|
|
|
|
| Before |
| ||
| Revenue |
|
| Taxes |
|
| Revenue |
|
| Taxes |
| ||||
Reservoir Characterization | $ | 1,771 |
|
| $ | 311 |
|
| $ | 1,667 |
|
| $ | 329 |
|
Drilling |
| 2,120 |
|
|
| 301 |
|
|
| 2,021 |
|
|
| 218 |
|
Production |
| 2,876 |
|
|
| 283 |
|
|
| 2,104 |
|
|
| 91 |
|
Cameron |
| 1,297 |
|
|
| 194 |
|
|
| 1,341 |
|
|
| 215 |
|
Eliminations & other |
| (159 | ) |
|
| (30 | ) |
|
| (114 | ) |
|
| (38 | ) |
Pretax operating income |
|
|
|
|
| 1,059 |
|
|
|
|
|
|
| 815 |
|
Corporate & other (1) |
|
|
|
|
| (234 | ) |
|
|
|
|
|
| (267 | ) |
Interest income (2) |
|
|
|
|
| 30 |
|
|
|
|
|
|
| 24 |
|
Interest expense (3) |
|
|
|
|
| (129 | ) |
|
|
|
|
|
| (135 | ) |
Charges and credits (4) |
|
|
|
|
| (49 | ) |
|
|
|
|
|
| (237 | ) |
| $ | 7,905 |
|
| $ | 677 |
|
| $ | 7,019 |
|
| $ | 200 |
|
(1)Comprised principally of certain corporate expenses not allocated to the segments, stock-based compensation costs, amortization expense associated with certain intangible assets, certain centrally managed initiatives and other nonoperating items.
(2)Interest income excludes amounts which are included in the segments’ income ($4 million in 2017; $7 million in 2016).
(3)Interest expense excludes amounts which are included in the segments’ income ($13 million in 2017; $14 million in 2016).
(4)Charges and credits are described in detail in Note 2 to the Consolidated Financial Statements.
Certain prior period items have been reclassified to conform to the current period presentation.
Third-quarter 2017 revenue of $7.9 billion increased 13% year-on-year. North America land rig count increased more than 90% versus the same period last year, while the international land rig count increased 3%. The North America offshore rig count decreased by 13%, while the international offshore rig count was 4% lower. Driven by the accelerated land activity growth in North America, Production Group revenue increased 37% year-on-year while Reservoir Characterization Group revenue increased by 6% due to increased Wireline activities and Testing & Process projects. Drilling Group revenue increased by 5% and Cameron Group revenue declined 3%.
Third-quarter 2017Year-on-year, pretax operating margin increased 178117 bps to 13% due to improved profitability in OneSubsea.
Nine Months 2019 Compared to Nine Months 2018
|
|
|
|
| (Stated in millions) |
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Nine Months 2019 |
|
| Nine Months 2018 |
| ||||||||||
|
|
|
|
| Income (Loss) |
|
|
|
|
|
| Income (Loss) |
| ||
|
|
|
|
| Before |
|
|
|
|
|
| Before |
| ||
| Revenue |
|
| Taxes |
|
| Revenue |
|
| Taxes |
| ||||
Reservoir Characterization | $ | 4,669 |
|
| $ | 959 |
|
| $ | 4,602 |
|
| $ | 987 |
|
Drilling |
| 7,279 |
|
|
| 913 |
|
|
| 6,789 |
|
|
| 921 |
|
Production |
| 9,120 |
|
|
| 740 |
|
|
| 9,458 |
|
|
| 853 |
|
Cameron |
| 3,949 |
|
|
| 486 |
|
|
| 4,175 |
|
|
| 522 |
|
Eliminations & other |
| (328 | ) |
|
| (126 | ) |
|
| (388 | ) |
|
| (63 | ) |
|
|
|
|
|
| 2,972 |
|
|
|
|
|
|
| 3,220 |
|
Corporate & other (1) |
|
|
|
|
| (742 | ) |
|
|
|
|
|
| (699 | ) |
Interest income (2) |
|
|
|
|
| 25 |
|
|
|
|
|
|
| 44 |
|
Interest expense (3) |
|
|
|
|
| (433 | ) |
|
|
|
|
|
| (405 | ) |
Charges and credits (4) |
|
|
|
|
| (12,692 | ) |
|
|
|
|
|
| (184 | ) |
| $ | 24,689 |
|
| $ | (10,870 | ) |
| $ | 24,636 |
|
| $ | 1,976 |
|
(1) | Comprised principally of certain corporate expenses not allocated to the segments, stock-based compensation costs, amortization expense associated with certain intangible assets, certain centrally managed initiatives and other nonoperating items. |
(2) | Interest income excludes amounts which are included in the segments’ income ($6 million in 2019; $7 million in 2018). |
(3) | Interest expense excludes amounts which are included in the segments’ income ($29 million in both 2019 and 2018). |
(4) | Charges and credits are described in detail in Note 2 to the Consolidated Financial Statements. |
Nine-month 2019 revenue of $24.7 billion was essentially flat year-on-year with North America drivenrevenue decreasing 8% and international revenue increasing 6%. The international results were underpinned by acceleratedincreased investment levels. In contrast, the North America results reflect a slowing production growth rate on land activity growth that benefited the Productionas operators maintained capital discipline and Drilling Groups. As a result, Production Group pretax operating margin expanded 552 bps to 10%, while the Drilling Group increased 339 bps to 14%. Reservoir Characterization Group pretax operating margin declined 217 bps to 18%reduced drilling and the Cameron Group declined 110 bps to 15%.frac activity.
Reservoir Characterization Group
Third-quarter 2017Nine-month 2019 revenue of $1.8$4.7 billion increased 6%1% year-on-year primarily due to higher Wireline activities in North America land and Russia anddriven by increased Testing & Process revenue on projects in the Middle East & Asia Area. international activity.
Year-on-year, pretax operating margin declined 217decreased 91 bps to 18% as the increased revenue was offset by higher project costs in Testing & Process.
20%.
Drilling Group
20
Third-quarter 2017Nine-month 2019 revenue of $2.1$7.3 billion increased 5%7% year-on-year primarily due to higher demand for directional drilling technologies on land in North America.
Year-on-year, pretax operating margin increased 339 bps to 14% primarily due to improved profitability in North America due to accelerated land activity and improved pricing.
Production Group
Third-quarter 2017 revenue of $2.9 billion increased 37% year-on-year, as a result of the accelerated land activity growth in North America that benefited the pressure pumping business.
Year-on-year, pretax operating margin increased 552 bps to 10% primarily as a result of improved profitability in North America due to accelerated land activity and improved pricing.
Cameron Group
Third-quarter revenue of $1.3 billion declined 3% year-on-year due to a declining backlog for the long-cycle businesses of Drilling Systems and OneSubsea.
Pretax operating margin of 15% declined 110 bps primarily due to the decline in high-margin Drilling Systems project volumes.
Nine Months 2017 Compared to Nine Months 2016
|
|
|
|
| (Stated in millions) |
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Nine Months 2017 |
|
| Nine Months 2016 |
| ||||||||||
|
|
|
|
| Income |
|
|
|
|
|
| Income |
| ||
|
|
|
|
| Before |
|
|
|
|
|
| before |
| ||
| Revenue |
|
| Taxes |
|
| Revenue |
|
| Taxes |
| ||||
Reservoir Characterization | $ | 5,148 |
|
| $ | 891 |
|
| $ | 4,972 |
|
| $ | 930 |
|
Drilling |
| 6,212 |
|
|
| 832 |
|
|
| 6,548 |
|
|
| 760 |
|
Production |
| 7,559 |
|
|
| 614 |
|
|
| 6,601 |
|
|
| 379 |
|
Cameron |
| 3,791 |
|
|
| 530 |
|
|
| 2,865 |
|
|
| 465 |
|
Eliminations & other |
| (449 | ) |
|
| (101 | ) |
|
| (283 | ) |
|
| (72 | ) |
Pretax operating income |
|
|
|
|
| 2,766 |
|
|
|
|
|
|
| 2,462 |
|
Corporate & other (1) |
|
|
|
|
| (715 | ) |
|
|
|
|
|
| (679 | ) |
Interest income (2) |
|
|
|
|
| 82 |
|
|
|
|
|
|
| 61 |
|
Interest expense (3) |
|
|
|
|
| (383 | ) |
|
|
|
|
|
| (391 | ) |
Charges and credits (4) |
|
|
|
|
| (723 | ) |
|
|
|
|
|
| (3,144 | ) |
| $ | 22,261 |
|
| $ | 1,027 |
|
| $ | 20,703 |
|
| $ | (1,691 | ) |
(1)Comprised principally of certain corporate expenses not allocated to the segments, stock-based compensation costs, amortization expense associated with certain intangible assets, certain centrally managed initiatives and other nonoperating items.
(2)Interest income excludes amounts which are included in the segments’ income ($15 million in 2017; $20 million in 2016).
(3)Interest expense excludes amounts which are included in the segments’ income ($39 million in 2017; $40 million in 2016).
(4)Charges and credits recorded are described in detail in Note 2 to the Consolidated Financial Statements.
Certain prior period items have been reclassified to conform to the current period presentation.
Nine-month 2017 revenue of $22.3 billion increased 8% year-on-year. This included a full nine months of activity from the acquired Cameron businesses versus two quarters of activity for the same period in 2016. Excluding the impact of the Cameron Group, revenue for the nine months ended September 30, 2017 increased 3% year-on-year. The growth was primarily driven by North America where the land rig count increased 90% versus the same period last year.
Nine-month revenue for the Drilling Group declined 5% primarily driven by the 4% declineservices, largely in the international rig count combined with Schlumberger’s decision in April 2016 to reduce its activities in Venezuela to align operations with cash collections. Production
21
Group revenue increased 15% due to the accelerated land pressure pumping activity growth in North America, while the Reservoir Characterization Group revenue improved 4%.
Nine-month 2017 pretax operating margin was essentially flat at 12%, as improved profitability in North America due to the land activity growthmarkets that benefited the ProductionDrilling & Measurements, M-I SWACO, and Integrated Drilling Groups was offset by margin declines in the Reservoir Characterization and Cameron Groups.
Reservoir Characterization Group
Nine-month 2017 revenue of $5.1 billion increased 4% year-on-year primarily due to higher WesternGeco and Testing & Process revenue on projects in the Middle East & Asia Area. Services (IDS).
Year-on-year, pretax operating margin decreased 140103 bps to 17% due to reduced profitability in Testing & Process12% despite higher revenue as projectmargins were affected by competitive pricing and higher costs increased.associated with a number of integrated contracts internationally.
Drilling GroupProduction
Nine-month 20172019 revenue of $6.2$9.1 billion decreased 5% year-on-year primarily due to the rig count declines internationally and in offshore North America combined with pricing pressure. Revenue also declined as a result of Schlumberger’s decision in April 2016 to reduce its activities in Venezuela to align operations with cash collections.
Year-on-year, pretax operating margin increased 178 bps to 13% primarily due to improved profitability in North America due to accelerated land activity and improved pricing. This improvement was partially offset by the negative impact of reduced activity in Venezuela.
Production Group
Nine-month 2017 revenue of $7.6 billion increased 15%4% year-on-year with most of the revenue increasedecline attributable to the accelerated landlower OneStim activity growth in North America that benefited the pressure pumping business which grew 34%. Lower Schlumberger Production Management (SPM) production levels in Ecuador partially offset the revenue increase.as customers reduced spending due to higher cost of capital lower, borrowing capacity and expectation of better returns from their shareholders.
Year-on-year, pretax operating margin increased 238decreased 90 bps to 8% as a result of improvedprimarily due to reduced profitability in OneStim in North America due to the accelerated land activity and improved pricing. This was partially offset by reduced margins in SPMAmerica.
Cameron
Nine-month 2019 revenue of $3.9 billion decreased 5% year-on-year due to lower production in Ecuador.revenue for OneSubsea and Valves & Process Systems.
Cameron GroupYear-on-year, pretax operating margin decreased 19 bps to 12%.
Interest and Other Income
Interest & other income consisted of the following:
(Stated in millions) |
| ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Third Quarter |
|
| Nine Months |
| ||||||||||
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
| ||||
Equity in net earnings of affiliated companies | $ | 13 |
|
| $ | 26 |
|
| $ | 30 |
|
| $ | 67 |
|
Interest income |
| 8 |
|
|
| 10 |
|
|
| 31 |
|
|
| 51 |
|
| $ | 21 |
|
| $ | 36 |
|
| $ | 61 |
|
| $ | 118 |
|
The Cameron Group contributed nine-month revenue of $3.8 billion. Cameron Group revenuedecreases in earnings from equity method investments primarily relates to lower income associated with Schlumberger's equity investments in rig- and seismic-related businesses.
Interest income for the first nine months of 2016 included only two quarters2019 declined $20 million to $31 million as compared to the same period of revenue following the closing of the acquisition in April 2016. Revenue in 2017 was impacted by a declining project backlog, particularly for the long-cycle businesses of Drilling Systems and OneSubsea.
Year-on-year, pretax operating margin of 14% decreased 224 bps2018 as a result of lower Drilling Systems project volumes.short-term investment balances.
Other
Interest and Other Income
Interest & other income consisted of the following:
(Stated in millions) |
| ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Third Quarter |
|
| Nine months |
| ||||||||||
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
| ||||
Equity in net earnings of affiliated companies | $ | 30 |
|
| $ | 23 |
|
| $ | 75 |
|
| $ | 72 |
|
Interest income |
| 34 |
|
|
| 31 |
|
|
| 97 |
|
|
| 81 |
|
| $ | 64 |
|
| $ | 54 |
|
| $ | 172 |
|
| $ | 153 |
|
Other
22
Research & engineering and General & administrative expenses, as a percentage of Revenue, for the third quarter and nine months ended September 30, 20172019 and 20162018 were as follows:
| Third Quarter |
|
| Nine Months |
| Third Quarter |
|
| Nine Months |
| ||||||||||||||||||||
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
| ||||||||
Research & engineering |
| 2.4 | % |
|
| 3.6 | % |
|
| 2.7 | % |
|
| 3.6 | % |
| 2.1 | % |
|
| 2.1 | % |
|
| 2.1 | % |
|
| 2.1 | % |
General & administrative |
| 1.5 | % |
|
| 1.3 | % |
|
| 1.5 | % |
|
| 1.5 | % |
| 1.4 | % |
|
| 1.2 | % |
|
| 1.4 | % |
|
| 1.3 | % |
Research & engineering costs for the third quarter of 2017 and the nine months ended September 30, 2017 have decreased as compared to the same periods in 2016 by $64 million and $155 million, respectively, as a result of cost control measures.
The effective tax rate for the third quarter of 20172019 was 17.9%5%, as compared to 5.1%16% for the same period of 2016.2018. The lower effective tax rate was almost entirely due to the charges described in Note 2 to the Consolidated Financial Statements, which were primarily related to non-deductible goodwill.
The effective tax rate for the first nine months of 2019 was 4%, as compared to 18% for the same period of 2018. The charges described in Note 2 to the Consolidated Financial Statements decreased reduced the effective tax rate for the third quarterfirst nine months of 20172019 by one percentage point and by 1112 percentage points, foras the same period of 2016. Excluding the impact of these charges, the effective tax rate increased as a resultmajority of the change in the geographic mix of earnings as Schlumberger generated a greater portion of its pretax earnings in North America during the third quarter of 2017 as comparedcharges related to the same period last year.non-deductible goodwill.
The effective tax rate for the nine months ended September 30, 2017 was 26.2% as compared to 15.3% for the same period of 2016. The charges described in Note 2 to the Consolidated Financial Statements increased the effective tax rate for the nine months ended September 30, 2017 by eight percentage points and decreased the effective tax rate by one percentage point for the same period of 2016. Excluding the impact of these charges, the effective tax rate increased as a result of the change in the geographic mix of earnings as Schlumberger generated a greater portion of its pretax earnings in North America during the nine months ended September 30, 2017 as compared to the same period last year.
Charges and Credits
2019
Schlumberger recorded the following charges duringin connection with the first, second andpreparation of its third quarters of 2017quarter 2019 financial statements, which are fully described in Note 2 to the Consolidated Financial Statements. The following is a summaryStatements, all of which are classified in Impairment & other in the charges recorded during the first nine monthsConsolidated Statement of 2017:Income (Loss):
| (Stated in millions) |
| |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Noncontrolling |
|
|
|
|
| |
| Pretax |
|
| Tax |
|
| Interests |
|
| Net |
| ||||
Promissory note fair value adjustment and other | $ | 510 |
|
| $ | - |
|
| $ | 12 |
|
| $ | 498 |
|
Merger & integration |
| 213 |
|
|
| 44 |
|
|
| - |
|
|
| 169 |
|
| $ | 723 |
|
| $ | 44 |
|
| $ | 12 |
|
| $ | 667 |
|
| (Stated in millions) |
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| Pretax |
|
| Tax |
|
| Net |
| |||
Goodwill | $ | 8,828 |
|
| $ | (43 | ) |
| $ | 8,785 |
|
Intangible assets |
| 1,085 |
|
|
| (248 | ) |
|
| 837 |
|
North America pressure pumping |
| 1,575 |
|
|
| (344 | ) |
|
| 1,231 |
|
Other North America-related |
| 310 |
|
|
| (53 | ) |
|
| 257 |
|
Argentina |
| 127 |
|
|
| - |
|
|
| 127 |
|
Equity-method investments |
| 231 |
|
|
| (12 | ) |
|
| 219 |
|
Schlumberger Production Management |
| 294 |
|
|
| - |
|
|
| 294 |
|
Other |
| 242 |
|
|
| (13 | ) |
|
| 229 |
|
| $ | 12,692 |
|
| $ | (713 | ) |
| $ | 11,979 |
|
23
DuringAs these impairment charges were effective as of August 31, 2019, the third quarter 2019 results include a one month reduction in depreciation and amortization expense of 2016, Schlumberger recorded $237$27 million. Approximately $21 million of charges associated withthis amount relates to the acquisition of Cameron. DuringProduction segment. The remaining $6 million is reflected in the second quarter of 2016, Schlumberger recorded $2.573 billion of asset impairment and workforce reduction charges and $334 million of charges associated with the acquisition of Cameron. “Corporate & other” line item.
There were no charges or credits recorded during the first six months of 2019.
2018
During the second quarter of 2016. These2018, Schlumberger recorded a $184 million pretax charge ($164 million after-tax) associated with headcount reductions, primarily to further streamline its support cost structure. This charge is classified in Impairments & other in the Consolidated Statement of Income (Loss).
There were no charges which are summarized below, are more fully described in Note 2 toor credits recorded during the Consolidated Financial Statements.first and third quarters of 2018.
| (Stated in millions) |
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| Pretax |
|
| Tax |
|
| Net |
| |||
Impairments & other |
|
|
|
|
|
|
|
|
|
|
|
Workforce reduction | $ | 646 |
|
| $ | 63 |
|
| $ | 583 |
|
North America pressure pumping asset impairments |
| 209 |
|
|
| 67 |
|
|
| 142 |
|
Facilities impairments |
| 165 |
|
|
| 58 |
|
|
| 107 |
|
Other fixed asset impairments |
| 684 |
|
|
| 52 |
|
|
| 632 |
|
Inventory write-downs |
| 616 |
|
|
| 49 |
|
|
| 567 |
|
Multiclient seismic data impairment |
| 198 |
|
|
| 62 |
|
|
| 136 |
|
Other restructuring charges |
| 55 |
|
|
| - |
|
|
| 55 |
|
Merger & integration |
|
|
|
|
|
|
|
|
|
|
|
Merger-related employee benefits |
| 93 |
|
|
| 17 |
|
|
| 76 |
|
Professional fees |
| 45 |
|
|
| 10 |
|
|
| 35 |
|
Facility closure costs |
| 51 |
|
|
| 13 |
|
|
| 38 |
|
Other merger and integration-related |
| 83 |
|
|
| 11 |
|
|
| 72 |
|
Cost of sales |
|
|
|
|
|
|
|
|
|
|
|
Amortization of inventory fair value adjustment |
| 299 |
|
|
| 90 |
|
|
| 209 |
|
| $ | 3,144 |
|
| $ | 492 |
|
| $ | 2,652 |
|
Liquidity and Capital Resources
Details of the components of liquidity as well as changes in liquidity follow:
| (Stated in millions) |
| (Stated in millions) |
| ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Sept. 30, |
|
| Sept. 30, |
|
| Dec. 31, |
| Sept. 30, |
|
| Sept. 30, |
|
| Dec. 31, |
| ||||||
Components of Liquidity | 2017 |
|
| 2016 |
|
| 2016 |
| ||||||||||||||
Components of Liquidity: | 2019 |
|
| 2018 |
|
| 2018 |
| ||||||||||||||
Cash | $ | 1,690 |
|
| $ | 3,441 |
|
| $ | 2,929 |
| $ | 1,183 |
|
| $ | 1,493 |
|
| $ | 1,433 |
|
Short-term investments |
| 3,262 |
|
|
| 7,315 |
|
|
| 6,328 |
|
| 1,109 |
|
|
| 1,361 |
|
|
| 1,344 |
|
Fixed income investments, held to maturity |
| - |
|
|
| 354 |
|
|
| 238 |
| |||||||||||
Short-term borrowings and current portion of long-term debt |
| (1,289 | ) |
|
| (3,739 | ) |
|
| (3,153 | ) |
| (340 | ) |
|
| (3,215 | ) |
|
| (1,407 | ) |
Long-term debt |
| (15,871 | ) |
|
| (17,538 | ) |
|
| (16,463 | ) |
| (16,333 | ) |
|
| (14,159 | ) |
|
| (14,644 | ) |
Net debt (1) | $ | (12,208 | ) |
| $ | (10,167 | ) |
| $ | (10,121 | ) | $ | (14,381 | ) |
| $ | (14,520 | ) |
| $ | (13,274 | ) |
24
Nine Months Ended Sept. 30, |
| Nine Months Ended Sept. 30, |
| |||||||||||
| 2017 |
|
| 2016 |
| 2019 |
|
| 2018 |
| ||||
Net income (loss) | $ | 758 |
|
| $ | (1,432 | ) | $ | (10,450 | ) |
| $ | 1,628 |
|
Impairment and other charges |
| 723 |
|
|
| 3,144 |
|
| 12,692 |
|
|
| 184 |
|
Depreciation and amortization (2) |
| 2,931 |
|
|
| 3,078 |
|
| 2,741 |
|
|
| 2,637 |
|
Earnings of equity method investments, less dividends received |
| (52 | ) |
|
| (51 | ) |
| 2 |
|
|
| (41 | ) |
Pension and other postretirement benefits expense |
| 79 |
|
|
| 139 |
| |||||||
Deferred taxes |
| (833 | ) |
|
| (67 | ) | |||||||
Stock-based compensation expense |
| 261 |
|
|
| 210 |
|
| 329 |
|
|
| 259 |
|
Pension and other postretirement benefits funding |
| (107 | ) |
|
| (127 | ) | |||||||
Increase in working capital (3) |
| (1,473 | ) |
|
| (223 | ) |
| (1,340 | ) |
|
| (1,147 | ) |
US federal tax refund |
| 685 |
|
|
| - |
| |||||||
Other |
| (393 | ) |
|
| (490 | ) |
| 38 |
|
|
| (71 | ) |
Cash flow from operations |
| 3,412 |
|
|
| 4,248 |
|
| 3,179 |
|
|
| 3,382 |
|
Capital expenditures |
| (1,482 | ) |
|
| (1,401 | ) |
| (1,230 | ) |
|
| (1,539 | ) |
SPM investments |
| (492 | ) |
|
| (869 | ) |
| (526 | ) |
|
| (719 | ) |
Multiclient seismic data costs capitalized |
| (223 | ) |
|
| (497 | ) |
| (181 | ) |
|
| (63 | ) |
Free cash flow (4) |
| 1,215 |
|
|
| 1,481 |
|
| 1,242 |
|
|
| 1,061 |
|
Dividends paid |
| (2,086 | ) |
|
| (1,951 | ) |
| (2,077 | ) |
|
| (2,077 | ) |
Proceeds from employee stock plans |
| 261 |
|
|
| 344 |
|
| 196 |
|
|
| 227 |
|
Proceeds from exercise of stock options |
| 23 |
|
|
| 29 |
| |||||||
Stock repurchase program |
| (868 | ) |
|
| (662 | ) |
| (278 | ) |
|
| (300 | ) |
|
| (1,478 | ) |
|
| (788 | ) | |||||||
Business acquisitions and investments, net of cash acquired plus debt assumed |
| (382 | ) |
|
| (3,866 | ) |
| (21 | ) |
|
| (290 | ) |
Other |
| (227 | ) |
|
| 34 |
|
| (192 | ) |
|
| (60 | ) |
Increase in net debt |
| (2,087 | ) |
|
| (4,620 | ) |
| (1,107 | ) |
|
| (1,410 | ) |
Net debt, beginning of period |
| (10,121 | ) |
|
| (5,547 | ) |
| (13,274 | ) |
|
| (13,110 | ) |
Net debt, end of period | $ | (12,208 | ) |
| $ | (10,167 | ) | $ | (14,381 | ) |
| $ | (14,520 | ) |
(1) | “Net debt” represents gross debt less cash and short-term |
(2) | Includes depreciation of property, plant and equipment and amortization of intangible assets, multiclient seismic data costs and SPM investments. |
(3) | Includes severance payments of approximately |
(4) | “Free cash flow” represents cash flow from operations less capital expenditures, SPM investments and multiclient seismic data costs capitalized. Management believes that free cash flow is an important liquidity measure for the company and that it is useful to investors and management as a measure of our ability to generate cash. Once business needs and obligations are met, this cash can be used to reinvest in the company for future growth or to return to shareholders through dividend payments or share repurchases. Free cash flow does not represent the residual cash flow available for discretionary expenditures. Free cash flow is a non-GAAP financial measure that should be considered in addition to, not as substitute for or superior to, cash flow from operations. |
Key liquidity events during the first nine months of 20172019 and 20162018 included:
• | On January 21, 2016, the Board approved a $10 billion share repurchase program for Schlumberger common stock. Schlumberger had repurchased $1.0 billion of Schlumberger common stock under this program as of September 30, 2019. |
On July 18, 2013, the Schlumberger Board of Directors (the “Board”) approved a $10 billion share repurchase program to be completed at the latest by June 30, 2018. This program was completed during May 2017. On January 21, 2016, the Board approved a new $10 billion share repurchase program for Schlumberger common stock. Schlumberger had repurchased $223 million of shares under the new program as of September 30, 2017.
The following table summarizes the activity under thesethe share repurchase programs:program:
(Stated in millions, except per share amounts) |
| ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| Total cost |
|
| Total number |
|
| Average price |
| |||
| of shares |
|
| of shares |
|
| paid per |
| |||
| purchased |
|
| purchased |
|
| share |
| |||
Nine months ended September 30, 2017 | $ | 868 |
|
|
| 11.7 |
|
| $ | 74.21 |
|
Nine months ended September 30, 2016 | $ | 662 |
|
|
| 9.5 |
|
| $ | 69.64 |
|
(Stated in millions, except per share amounts) |
| ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| Total cost |
|
| Total number |
|
| Average price |
| |||
| of shares |
|
| of shares |
|
| paid per |
| |||
| purchased |
|
| purchased |
|
| share |
| |||
Nine months ended September 30, 2019 | $ | 278 |
|
|
| 7.0 |
|
| $ | 39.92 |
|
Nine months ended September 30, 2018 | $ | 300 |
|
|
| 4.4 |
|
| $ | 67.67 |
|
25
• | During the third quarter of 2019, Schlumberger issued €500 million of 0.00% Notes due 2024, €500 million of 0.25% Notes due 2027 and €500 million of 0.50% Notes due 2031. |
• | In September 2019, Schlumberger repurchased $783 million of its 3.00% Senior Notes due 2020 and $321 million of its 3.625% Senior Notes due 2022. |
• | In April 2019, Schlumberger completed a debt exchange offer, pursuant to which it issued $1.500 billion in principal of 3.90% Senior Notes due 2028 in exchange for $401 million of 3.00% Senior Notes due 2020, $234 million of 3.63% Senior Notes due 2022 and $817 million of 4.00% Senior Notes due 2025. |
• | During the first quarter of 2019, Schlumberger issued $750 million of 3.75% Senior Notes due 2024 and $850 million of 4.30% Senior Notes due 2029. |
In October 2019, Schlumberger maintains an allowance for doubtful accounts in orderand Rockwell Automation closed their previously announced joint venture, Sensia. Rockwell Automation owns 53% of the joint venture and Schlumberger owns 47%. At closing, Rockwell Automation made a $250 million cash payment to record accounts receivable at their net realizable value. Judgment is involved in recording and making adjustments to this reserve. Allowances have been recorded for receivables believed to be uncollectible, including amounts for the resolution of potential credit and other collection issues such as disputed invoices. Adjustments to the allowance may be required in future periods depending on how such potential issues are resolved, or if the financial condition of Schlumberger’s customers were to deteriorate resulting in an impairment of their ability to make payments.Schlumberger.
During weak economic environments or when there is an extended period of weakness in oil and gas prices, Schlumberger typically experiences delays in the payment of its receivables. However, Schlumberger has not had material write-offs due to uncollectible accounts receivable over the recent industry downturn. Schlumberger operatesgenerates revenue in more than 85120 countries. As a large multinational company with a long history of operating in a cyclical industry, Schlumberger has extensive experience in working with its customers during difficult times to manage its accounts receivable. As of September 30, 2017, only2019, five of those countries individually accounted for greater than 5% of Schlumberger’s net receivablereceivables balance, of which only two (thethe United States and Ecuador) accounted for greater than 10% of such receivables.
In April 2016, Schlumberger announced that it would reduce its activity in Venezuela to align operations with cash collections as a result of insufficient payments received in recent quarters. As of September 30, 2017, Schlumberger’s net accounts receivable balance in Venezuela was approximately $0.5 billion, which excludes the $0.2 billion of the promissory notes described below.
Included in Receivables, less allowance for doubtful accounts in the Consolidated Balance Sheet as of September 30, 2017 is approximately $1.1 billion of receivables relating to Ecuador.
Schlumberger’s receivables from its primary customers in Venezuela and Ecuador are not in dispute and Schlumberger has not historically had any material write-offs due to uncollectible accounts receivable relating to these customers.
During October 2017, Schlumberger reached an agreement to settle its overdue receivables in Ecuador.
During the second quarter of 2017, Schlumberger entered into a financing agreement with its primary customer in Venezuela. This agreement resulted in the exchange of $700 million of outstanding accounts receivable for promissory notes with a three-year term that bear interest at the rate of 6.50% per annum. Schlumberger recorded these notes at their estimated fair value on the date of the exchange, which resulted in a pretax and after-tax charge of $460 million. As a result, the cost basis of the promissory note is $240 million. Schlumberger is accounting for the promissory notes as available-for-sale securities reported at fair value in Other Assets, with unrealized gains and losses included as a component of Accumulated other comprehensive loss. The fair value of the promissory notes, which is based on management’s estimate of the pricing assumptions that market participants would use, was $184 million at September 30, 2017. If Schlumberger were to conclude that these securities were other-than-temporarily impaired, it would be required to write-down its cost basis to fair value and record a corresponding charge to earnings.
Schlumberger’s judgment regarding the collectibility of its receivables and promissory notes in Venezuela is sensitive to the political and economic conditions in the country. If conditions in Venezuela worsen, Schlumberger may be required to record adjustments to the carrying value of these assets.
Cash flow from operations for the nine months ended September 30, 2017 decreased by approximately $0.8 billion as compared to the same period in 2016. This decrease was primarily driven by delays in collecting certain receivables combined with the working capital effects of the activity growth experienced during the nine months ended September 30, 2017. These effects were partially offset by the collection of a US federal tax refund of approximately $685 million during the third quarter of 2017.
On March 24, 2017, Schlumberger and Weatherford announced an agreement to create OneStimSM, a joint venture to deliver completions products and services for the development of unconventional resource plays in the United States and Canada land markets. The joint venture will offer one of the broadest multistage completions portfolios in the market combined with one of the largest hydraulic fracturing fleets in the industry. Schlumberger and Weatherford will have a 70%/30% ownership of the joint venture, respectively. The transaction is expected to close in the fourth quarter of 2017 and is subject to regulatory approvals and other customary closing conditions. Under the terms of the formation agreement, Schlumberger and Weatherford will contribute all their respective North America land hydraulic fracturing pressure pumping assets, multistage completions, and pump-down perforating businesses. Subject to the terms of the agreement, Schlumberger will also make a cash payment of up to $535 million to Weatherford. Schlumberger will manage the joint venture and consolidate it for financial reporting purposes.
In October 2017, Schlumberger announced that it and Torxen Energy have entered into a definitive agreement for the purchase of the Palliser Block located in Alberta, Canada, from Cenovus Energy, an integrated Canadian oil company, for cash consideration of
26
approximately $1 billion. Under the agreement, which is subject to customary closing conditions, Schlumberger will be the majority non-operating owner and Torxen Energy will be the operator.
As of September 30, 2017,2019, Schlumberger had $5.0$2.3 billion of cash and short-term investments on hand. Schlumberger had separate committed debt facility agreements aggregating $6.6$6.5 billion withthat support commercial banks,paper programs, of which $4.2$4.1 billion was available and unused as of September 30, 2017. The $6.6 billion of committed debt facility agreements included $6.3 billion of committed facilities that support commercial paper programs.unused. Schlumberger believes these amounts are sufficient to meet future business requirements for at least the next 12 months.
Borrowings under the commercial paper programs at September 30, 20172019 were $2.4 billion.
FORWARD-LOOKING STATEMENTS
This third-quarter 2019 Form 10-Q, as well as other statements we make, contain “forward-looking statements” within the meaning of the federal securities laws, which include any statements that are not historical facts, such as our forecasts or expectations regarding business outlook; our expectations regarding the amount of cash expenditures estimated to be incurred as a result of the impairment charges described in Note 2 to the Consolidated Financial Statements; growth for Schlumberger as a whole and for each of its segments (and for specified products or geographic areas within each segment); oil and natural gas demand and production growth; oil and natural gas prices; improvements in operating procedures and technology, including our transformation program; capital expenditures by Schlumberger and the oil and gas industry; the business strategies of Schlumberger’s customers; the anticipated benefits of the Cameron transaction; the success of Schlumberger’s SPM projects, joint ventures and alliances;our effective tax rate; future global economic conditions; and future results of operations. These statements are subject to risks and uncertainties, including, but not limited to, global economic conditions; changes in exploration and production spending by Schlumberger’s customers and changes in the level of oil and natural gas exploration and development; general economic, political and business conditions in key regions of the world; foreign currency risk; pricing pressure; weather and seasonal factors; operational modifications, delays or cancellations; production declines; changes in government regulations and regulatory requirements, including those related to offshore oil and gas exploration, radioactive sources, explosives, chemicals, hydraulic fracturing services and climate-related initiatives; the inability of technology to meet new challenges in exploration; the inability to retain key employees; and other risks and uncertainties detailed in this third-quarter 20172019 Form 10-Q and our most recent FormForms 10-K, and Forms 10-Q, and 8-K filed with or furnished to the Securities and Exchange Commission. If
one or more of these or other risks or uncertainties materialize (or the consequences of any such development changes), or should our underlying assumptions prove incorrect, actual outcomes may vary materially from those reflected in our forward-looking statements. Schlumberger disclaims any intention or obligation to update publicly or revise such statements, whether as a result of new information, future events or otherwise.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
For quantitative and qualitative disclosures about market risk affecting Schlumberger, see Item 7A, “Quantitative and Qualitative Disclosures about Market Risk,” of the Schlumberger Annual Report on Form 10-K for the fiscal year ended December 31, 2016.2018. Schlumberger’s exposure to market risk has not changed materially since December 31, 2016.2018.
Item 4. Controls and Procedures.
Schlumberger has carried out an evaluation under the supervision and with the participation of Schlumberger’s management, including the Chief Executive Officer (“CEO”) and the Chief Financial Officer (“CFO”), of the effectiveness of Schlumberger’s “disclosure controls and procedures” (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)) as of the end of the period covered by this report. Based on this evaluation, the CEO and the CFO have concluded that, as of the end of the period covered by this report, Schlumberger’s disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in the reports that Schlumberger files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Schlumberger’s disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is accumulated and communicated to its management, including the CEO and the CFO, as appropriate, to allow timely decisions regarding required disclosure. There was no change in Schlumberger’s internal control over financial reporting during the quarter to which this report relates that has materially affected, or is reasonably likely to materially affect, Schlumberger’s internal control over financial reporting.
PART II. OTHER INFORMATION
The information with respect to this Item 1 is set forth under Note 11—Contingencies, in the Consolidated Financial Statements.
27
Item 1A. Risk Factors.
As of the date of this filing, there have been no material changes from the risk factors previously disclosed in Part 1, Item 1A, of Schlumberger’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016.2018.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Unregistered Sales of Equity Securities
None.
Issuer Repurchases of Equity Securities
On July 18, 2013, the Board approved aAs of September 30, 2019, Schlumberger had repurchased $1.0 billion of Schlumberger common stock under its $10 billion share repurchase program for shares of Schlumberger common stock, to be completed at the latest by June 30, 2018. This program was completed during May 2017. On January 21, 2016, the Board approved a new $10 billion share repurchase program for Schlumberger common stock. This new program took effect once the July 18, 2013 program was exhausted.program.
Schlumberger’s common stock repurchase activity for the three months ended September 30, 20172019 was as follows:
(Stated in thousands, except per share amounts) |
| ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total number of shares purchased |
|
| Average price paid per share |
|
| Total number of shares purchased as part of publicly announced programs |
|
| Maximum value of shares that may yet be purchased under the programs |
| ||||
July 2017 |
| 815.0 |
|
| $ | 66.22 |
|
|
| 815.0 |
|
| $ | 9,821,155 |
|
August 2017 |
| 352.7 |
|
| $ | 65.27 |
|
|
| 352.7 |
|
| $ | 9,798,137 |
|
September 2017 |
| 316.2 |
|
| $ | 66.42 |
|
|
| 316.2 |
|
| $ | 9,777,135 |
|
|
| 1,483.9 |
|
| $ | 66.04 |
|
|
| 1,483.9 |
|
|
|
|
|
| (Stated in thousands, except per share amounts) |
| |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total number of shares purchased |
|
| Average price paid per share |
|
| Total number of shares purchased as part of publicly announced programs |
|
| Maximum value of shares that may yet be purchased under the programs |
| ||||
July 2019 |
| 846.7 |
|
| $ | 39.69 |
|
|
| 846.7 |
|
| $ | 9,044,087 |
|
August 2019 |
| 999.7 |
|
| $ | 34.46 |
|
|
| 999.7 |
|
| $ | 9,009,642 |
|
September 2019 |
| 317.6 |
|
| $ | 35.35 |
|
|
| 317.6 |
|
| $ | 8,998,416 |
|
|
| 2,164.0 |
|
| $ | 36.64 |
|
|
| 2,164.0 |
|
|
|
|
|
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Our mining operations are subject to regulation by the federal Mine Safety and Health Administration under the Federal Mine Safety and Health Act of 1977. Information concerning mine safety violations or other regulatory matters required by section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K is included in Exhibit 95 to this report.
In 2013, Schlumberger completed the wind down of its service operations in Iran during 2013.Iran. Prior to this, certain non-US subsidiaries of Schlumberger provided oilfield services to the National Iranian Oil Company and certain of its affiliates (“NIOC”).
Schlumberger’s residual transactions or dealings with the government of Iran induring the third quarter of 20172019 consisted of payments of taxes and other typical governmental charges. Certain non-US subsidiaries of Schlumberger maintain depository accounts at the Dubai branch of Bank Saderat Iran (“Saderat”), and at Bank Tejarat (“Tejarat”) in Tehran and in Kish for the deposit by NIOC of amounts owed to non-US subsidiaries of Schlumberger for prior services rendered in Iran and for the maintenance of such amounts previously received. One non-US subsidiary also maintainsmaintained an account at Tejarat for payment of local expenses such as taxes. Schlumberger anticipates that it will discontinue dealings with Saderat and Tejarat following the receipt of all amounts owed to Schlumberger for prior services rendered in Iran.
At Schlumberger’s 2017 Annual General Meeting of Stockholders, Schlumberger’s stockholders voted on, among other matters, a proposal regarding the frequency of future advisory votes on executive compensation (say on pay). As previously reported, the Board views an annual advisory vote on executive compensation as the most appropriate option, and a majority of the votes cast on the
28
frequency proposal supported the Board’s recommendation of holding an advisory vote to approve executive compensation on an annual basis. Accordingly, Schlumberger will hold an annual advisory vote to approve executive compensation.
29
|
|
|
|
|
|
* Exhibit 95—Mine Safety Disclosures |
|
* Exhibit |
* Exhibit 101.SCH—Inline XBRL Taxonomy Extension Schema Document |
* Exhibit 101.CAL—Inline XBRL Taxonomy Extension Calculation Linkbase Document |
* Exhibit 101.DEF—Inline XBRL Taxonomy Extension Definition Linkbase Document |
* Exhibit 101.LAB—Inline XBRL Taxonomy Extension Label Linkbase Document |
* Exhibit 101.PRE—Inline XBRL Taxonomy Extension Presentation Linkbase Document |
Exhibit 104—Cover Page Interactive Data File (formatted as inline XBRL and contained in |
|
* Filed with this Form 10-Q. |
** Furnished with this Form 10-Q. |
|
30
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized and in his capacity as Chief Accounting Officer.
|
|
| Schlumberger Limited (Registrant) |
Date: | October |
| /s/ Howard Guild |
|
|
| Howard Guild |
|
|
| Chief Accounting Officer and Duly Authorized Signatory |
3130