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: March 31, 20172018
Commission file No.: 1-4601
SCHLUMBERGER N.V.
(SCHLUMBERGER LIMITED)
(Exact name of registrant as specified in its charter)
CURAÇAO |
| 52-0684746 |
(State or other jurisdiction of |
| (I.R.S. Employer |
|
|
|
42 RUE SAINT-DOMINIQUE |
|
|
PARIS, FRANCE |
| 75007 |
|
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5599 SAN FELIPE |
|
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HOUSTON, TEXAS, U.S.A. |
| 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
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 |
| ☐ (Do not check if a smaller reporting company) |
| Smaller reporting company |
| ☐ |
Emerging growth company |
| ☐ |
|
|
|
|
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 March 31, |
COMMON STOCK, $0.01 PAR VALUE PER SHARE |
|
First Quarter 20172018 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. |
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Item 4. |
| 20 | |
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PART II |
| Other Information |
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Item 1. |
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Item 1A. |
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Item 2. |
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Item 3. |
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Item 4. |
| 21 | |
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Item 5. |
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Item 6. |
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| Certifications |
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2
SCHLUMBERGER LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
(Stated in millions, except per share amounts) |
| (Stated in millions, except per share amounts) |
| |||||||||||
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| Three Months Ended March 31, |
| Three Months Ended March 31, |
| ||||||||||
| 2017 |
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| 2016 |
| 2018 |
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| 2017 |
| ||||
Revenue |
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Services | $ | 4,937 |
|
| $ | 5,763 |
| $ | 5,736 |
|
| $ | 4,828 |
|
Product sales |
| 1,957 |
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|
| 757 |
|
| 2,093 |
|
|
| 2,066 |
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Total Revenue |
| 6,894 |
|
|
| 6,520 |
|
| 7,829 |
|
|
| 6,894 |
|
Interest & other income |
| 46 |
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|
| 45 |
|
| 42 |
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| 46 |
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Expenses |
|
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Cost of services |
| 4,251 |
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| 4,795 |
|
| 4,880 |
|
|
| 4,181 |
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Cost of sales |
| 1,825 |
|
|
| 665 |
|
| 1,922 |
|
|
| 1,895 |
|
Research & engineering |
| 211 |
|
|
| 240 |
|
| 172 |
|
|
| 211 |
|
General & administrative |
| 98 |
|
|
| 110 |
|
| 111 |
|
|
| 98 |
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Merger & integration |
| 82 |
|
|
| - |
|
| - |
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|
| 82 |
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Interest |
| 139 |
|
|
| 133 |
|
| 143 |
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|
| 139 |
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Income before taxes |
| 334 |
|
|
| 622 |
|
| 643 |
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|
| 334 |
|
Taxes on income |
| 50 |
|
|
| 99 |
|
| 113 |
|
|
| 50 |
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Net income |
| 284 |
|
|
| 523 |
|
| 530 |
|
|
| 284 |
|
Net income attributable to noncontrolling interests |
| 5 |
|
|
| 22 |
|
| 5 |
|
|
| 5 |
|
Net income attributable to Schlumberger | $ | 279 |
|
| $ | 501 |
| $ | 525 |
|
| $ | 279 |
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Basic earnings per share of Schlumberger | $ | 0.20 |
|
| $ | 0.40 |
| $ | 0.38 |
|
| $ | 0.20 |
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Diluted earnings per share of Schlumberger | $ | 0.20 |
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| $ | 0.40 |
| $ | 0.38 |
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| $ | 0.20 |
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Average shares outstanding: |
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Basic |
| 1,393 |
|
|
| 1,254 |
|
| 1,385 |
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| 1,393 |
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Assuming dilution |
| 1,402 |
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| 1,259 |
|
| 1,394 |
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| 1,402 |
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See Notes to Consolidated Financial Statements
3
SCHLUMBERGER LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(Unaudited)
(Stated in millions) | (Stated in millions) |
| (Stated in millions) |
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| Three Months Ended March 31, |
| Three Months Ended March 31, |
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| 2017 |
|
| 2016 |
| 2018 |
|
| 2017 |
| ||||
Net income | $ | 284 |
|
| $ | 523 |
| $ | 530 |
|
| $ | 284 |
|
Currency translation adjustments |
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Unrealized net change arising during the period |
| 45 |
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| 17 |
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| 39 |
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| 45 |
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Marketable securities |
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Unrealized gain (loss) arising during the period |
| (4 | ) |
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| 3 |
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| 19 |
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| (4 | ) |
Cash flow hedges |
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Net loss on cash flow hedges |
| 11 |
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| (85 | ) | |||||||
Reclassification to net income of net realized loss |
| - |
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| 94 |
| |||||||
Net gain on cash flow hedges |
| 5 |
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| 11 |
| |||||||
Reclassification to net income of net realized gain |
| (3 | ) |
|
| - |
| |||||||
Pension and other postretirement benefit plans |
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Actuarial loss |
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Amortization to net income of net actuarial loss |
| 43 |
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| 45 |
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| 56 |
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| 43 |
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Prior service cost |
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Amortization to net income of net prior service cost |
| 20 |
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| 25 |
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Amortization to net income of net prior service (credit) cost |
| (1 | ) |
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| 20 |
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Income taxes on pension and other postretirement benefit plans |
| (1 | ) |
|
| (7 | ) |
| - |
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|
| (1 | ) |
Comprehensive income |
| 398 |
|
|
| 615 |
|
| 645 |
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| 398 |
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Comprehensive income attributable to noncontrolling interests |
| 5 |
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|
| 22 |
|
| 5 |
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|
| 5 |
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Comprehensive income attributable to Schlumberger | $ | 393 |
|
| $ | 593 |
| $ | 640 |
|
| $ | 393 |
|
See Notes to Consolidated Financial Statements
4
SCHLUMBERGER LIMITED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Stated in millions) | (Stated in millions) |
| (Stated in millions) |
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| Mar. 31, |
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| Mar. 31, |
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| 2017 |
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| Dec. 31, |
| 2018 |
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| Dec. 31, |
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| (Unaudited) |
|
| 2016 |
| (Unaudited) |
|
| 2017 |
| ||||
ASSETS |
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Current Assets |
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Cash | $ | 1,902 |
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| $ | 2,929 |
| $ | 1,865 |
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| $ | 1,799 |
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Short-term investments |
| 5,451 |
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| 6,328 |
|
| 2,300 |
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| 3,290 |
|
Receivables less allowance for doubtful accounts (2017 - $356; 2016 - $397) |
| 8,636 |
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| 9,387 |
| |||||||
Receivables less allowance for doubtful accounts (2018 - $235; 2017 - $241) |
| 8,472 |
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| 8,084 |
| |||||||
Inventories |
| 4,288 |
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|
| 4,225 |
|
| 4,174 |
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| 4,046 |
|
Other current assets |
| 1,606 |
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|
| 1,058 |
|
| 1,244 |
|
|
| 1,278 |
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| 21,883 |
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|
| 23,927 |
|
| 18,055 |
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| 18,497 |
|
Fixed Income Investments, held to maturity |
| 238 |
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|
| 238 |
| |||||||
Investments in Affiliated Companies |
| 1,482 |
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|
| 1,243 |
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| 1,483 |
|
|
| 1,519 |
|
Fixed Assets less accumulated depreciation |
| 12,507 |
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|
| 12,821 |
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| 11,556 |
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| 11,576 |
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Multiclient Seismic Data |
| 1,089 |
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| 1,073 |
|
| 707 |
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| 727 |
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Goodwill |
| 25,045 |
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|
| 24,990 |
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| 25,120 |
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| 25,118 |
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Intangible Assets |
| 9,743 |
|
|
| 9,855 |
|
| 9,217 |
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|
| 9,354 |
|
Other Assets |
| 4,188 |
|
|
| 3,809 |
|
| 5,340 |
|
|
| 5,196 |
|
| $ | 76,175 |
|
| $ | 77,956 |
| $ | 71,478 |
|
| $ | 71,987 |
|
LIABILITIES AND EQUITY |
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Current Liabilities |
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Accounts payable and accrued liabilities | $ | 9,408 |
|
| $ | 10,016 |
| $ | 9,598 |
|
| $ | 10,036 |
|
Estimated liability for taxes on income |
| 1,215 |
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|
| 1,188 |
|
| 1,311 |
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|
| 1,223 |
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Short-term borrowings and current portion of long-term debt |
| 2,449 |
|
|
| 3,153 |
|
| 4,586 |
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|
| 3,324 |
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Dividends payable |
| 704 |
|
|
| 702 |
|
| 700 |
|
|
| 699 |
|
|
| 13,776 |
|
|
| 15,059 |
|
| 16,195 |
|
|
| 15,282 |
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Long-term Debt |
| 16,538 |
|
|
| 16,463 |
|
| 13,526 |
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|
| 14,875 |
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Postretirement Benefits |
| 1,457 |
|
|
| 1,495 |
|
| 1,027 |
|
|
| 1,082 |
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Deferred Taxes |
| 1,908 |
|
|
| 1,880 |
|
| 1,579 |
|
|
| 1,650 |
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Other Liabilities |
| 1,442 |
|
|
| 1,530 |
|
| 1,825 |
|
|
| 1,837 |
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|
| 35,121 |
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|
| 36,427 |
|
| 34,152 |
|
|
| 34,726 |
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Equity |
|
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Common stock |
| 12,780 |
|
|
| 12,801 |
|
| 12,998 |
|
|
| 12,975 |
|
Treasury stock |
| (3,697 | ) |
|
| (3,550 | ) |
| (3,937 | ) |
|
| (4,049 | ) |
Retained earnings |
| 36,052 |
|
|
| 36,470 |
|
| 32,022 |
|
|
| 32,190 |
|
Accumulated other comprehensive loss |
| (4,529 | ) |
|
| (4,643 | ) |
| (4,159 | ) |
|
| (4,274 | ) |
Schlumberger stockholders' equity |
| 40,606 |
|
|
| 41,078 |
|
| 36,924 |
|
|
| 36,842 |
|
Noncontrolling interests |
| 448 |
|
|
| 451 |
|
| 402 |
|
|
| 419 |
|
|
| 41,054 |
|
|
| 41,529 |
|
| 37,326 |
|
|
| 37,261 |
|
| $ | 76,175 |
|
| $ | 77,956 |
| $ | 71,478 |
|
| $ | 71,987 |
|
See Notes to Consolidated Financial Statements
5
SCHLUMBERGER LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(Stated in millions) | (Stated in millions) |
| (Stated in millions) |
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| Three Months Ended March 31, |
| Three Months Ended March 31, |
| ||||||||||
| 2017 |
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| 2016 |
| 2018 |
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| 2017 |
| ||||
Cash flows from operating activities: |
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Net income | $ | 284 |
|
| $ | 523 |
| $ | 530 |
|
| $ | 284 |
|
Adjustments to reconcile net income to cash provided by operating activities: |
|
|
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|
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Merger & integration charges |
| 82 |
|
|
| - |
|
| - |
|
|
| 82 |
|
Depreciation and amortization (1) |
| 989 |
|
|
| 967 |
|
| 874 |
|
|
| 989 |
|
Pension and other postretirement benefits expense |
| 37 |
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|
| 60 |
|
| 18 |
|
|
| 37 |
|
Stock-based compensation expense |
| 88 |
|
|
| 61 |
|
| 90 |
|
|
| 88 |
|
Pension and other postretirement benefits funding |
| (29 | ) |
|
| (45 | ) |
| (39 | ) |
|
| (29 | ) |
Earnings of equity method investments, less dividends received |
| (10 | ) |
|
| (25 | ) |
| (5 | ) |
|
| (10 | ) |
Change in assets and liabilities: (2) |
|
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Decrease in receivables |
| 58 |
|
|
| 414 |
| |||||||
(Increase) decrease in inventories |
| (33 | ) |
|
| 125 |
| |||||||
(Increase) decrease in other current assets |
| (115 | ) |
|
| 85 |
| |||||||
(Increase) decrease in other assets |
| (56 | ) |
|
| 5 |
| |||||||
(Increase) decrease in receivables |
| (152 | ) |
|
| 58 |
| |||||||
Increase in inventories |
| (81 | ) |
|
| (33 | ) | |||||||
Increase in other current assets |
| (48 | ) |
|
| (115 | ) | |||||||
Increase in other assets |
| (70 | ) |
|
| (56 | ) | |||||||
Decrease in accounts payable and accrued liabilities |
| (670 | ) |
|
| (983 | ) |
| (600 | ) |
|
| (670 | ) |
Decrease in estimated liability for taxes on income |
| (31 | ) |
|
| (104 | ) | |||||||
(Decrease) increase in other liabilities |
| (28 | ) |
|
| 2 |
| |||||||
Increase (decrease) in estimated liability for taxes on income |
| 45 |
|
|
| (31 | ) | |||||||
Decrease in other liabilities |
| (7 | ) |
|
| (28 | ) | |||||||
Other |
| 90 |
|
|
| 125 |
|
| 13 |
|
|
| 90 |
|
NET CASH PROVIDED BY OPERATING ACTIVITIES |
| 656 |
|
|
| 1,210 |
|
| 568 |
|
|
| 656 |
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
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|
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|
|
Capital expenditures |
| (381 | ) |
|
| (549 | ) |
| (454 | ) |
|
| (381 | ) |
SPM investments |
| (144 | ) |
|
| (597 | ) |
| (240 | ) |
|
| (144 | ) |
Multiclient seismic data costs capitalized |
| (116 | ) |
|
| (167 | ) |
| (26 | ) |
|
| (116 | ) |
Business acquisitions and investments, net of cash acquired |
| (273 | ) |
|
| (81 | ) |
| (13 | ) |
|
| (273 | ) |
Sale (purchase) of investments, net |
| 883 |
|
|
| (2,093 | ) | |||||||
Sale of investments, net |
| 980 |
|
|
| 883 |
| |||||||
Other |
| (24 | ) |
|
| (26 | ) |
| 35 |
|
|
| (24 | ) |
NET CASH USED IN INVESTING ACTIVITIES |
| (55 | ) |
|
| (3,513 | ) | |||||||
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES |
| 282 |
|
|
| (55 | ) | |||||||
Cash flows from financing activities: |
|
|
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|
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Dividends paid |
| (696 | ) |
|
| (629 | ) |
| (692 | ) |
|
| (696 | ) |
Proceeds from employee stock purchase plan |
| 96 |
|
|
| 116 |
|
| 107 |
|
|
| 96 |
|
Proceeds from exercise of stock options |
| 39 |
|
|
| 47 |
|
| 20 |
|
|
| 39 |
|
Stock repurchase program |
| (372 | ) |
|
| (475 | ) |
| (97 | ) |
|
| (372 | ) |
Proceeds from issuance of long-term debt |
| 334 |
|
|
| 3,542 |
|
| 12 |
|
|
| 334 |
|
Repayment of long-term debt |
| (1 | ) |
|
| (500 | ) |
| (51 | ) |
|
| (1 | ) |
Net decrease in short-term borrowings |
| (1,015 | ) |
|
| (561 | ) |
| (105 | ) |
|
| (1,015 | ) |
Other |
| (22 | ) |
|
| 47 |
|
| 19 |
|
|
| (22 | ) |
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES |
| (1,637 | ) |
|
| 1,587 |
| |||||||
Net decrease in cash before translation effect |
| (1,036 | ) |
|
| (716 | ) | |||||||
NET CASH USED IN FINANCING ACTIVITIES |
| (787 | ) |
|
| (1,637 | ) | |||||||
Net increase (decrease) in cash before translation effect |
| 63 |
|
|
| (1,036 | ) | |||||||
Translation effect on cash |
| 9 |
|
|
| 3 |
|
| 3 |
|
|
| 9 |
|
Cash, beginning of period |
| 2,929 |
|
|
| 2,793 |
|
| 1,799 |
|
|
| 2,929 |
|
Cash, end of period | $ | 1,902 |
|
| $ | 2,080 |
| $ | 1,865 |
|
| $ | 1,902 |
|
(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 STATEMENT OF EQUITY
(Unaudited)
| (Stated in millions) |
| (Stated in millions) |
| ||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
|
|
|
| Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other |
|
|
|
|
|
|
|
|
| ||
| Common Stock |
|
| Retained |
|
| Comprehensive |
|
| Noncontrolling |
|
|
|
|
| Common Stock |
|
| Retained |
|
| Comprehensive |
|
| Noncontrolling |
|
|
|
|
| ||||||||||||||||
January 1, 2017 – March 31, 2017 | Issued |
|
| In Treasury |
|
| Earnings |
|
| Loss |
|
| Interests |
|
| Total |
| |||||||||||||||||||||||||||||
Balance, January 1, 2017 | $ | 12,801 |
|
| $ | (3,550 | ) |
| $ | 36,470 |
|
| $ | (4,643 | ) |
| $ | 451 |
|
| $ | 41,529 |
| |||||||||||||||||||||||
January 1, 2018 – March 31, 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 |
|
|
|
|
|
|
|
|
| 279 |
|
|
|
|
|
|
| 5 |
|
|
| 284 |
|
|
|
|
|
|
|
|
|
| 525 |
|
|
|
|
|
|
| 5 |
|
|
| 530 |
|
Currency translation adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
| 45 |
|
|
|
|
|
|
| 45 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 39 |
|
|
| 5 |
|
|
| 44 |
|
Changes in unrealized gain on marketable securities |
|
|
|
|
|
|
|
|
|
|
|
|
| (4 | ) |
|
|
|
|
|
| (4 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
| 19 |
|
|
|
|
|
|
| 19 |
|
Changes in fair value of cash flow hedges |
|
|
|
|
|
|
|
|
|
|
|
|
| 11 |
|
|
|
|
|
|
| 11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 2 |
|
|
|
|
|
|
| 2 |
|
Pension and other postretirement benefit plans |
|
|
|
|
|
|
|
|
|
|
|
|
| 62 |
|
|
|
|
|
|
| 62 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 55 |
|
|
|
|
|
|
| 55 |
|
Shares sold to optionees, less shares exchanged |
| (29 | ) |
|
| 68 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 39 |
|
| (20 | ) |
|
| 40 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 20 |
|
Vesting of restricted stock |
| (49 | ) |
|
| 49 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| - |
|
| (29 | ) |
|
| 29 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| - |
|
Shares issued under employee stock purchase plan |
| (12 | ) |
|
| 108 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 96 |
|
| (33 | ) |
|
| 140 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 107 |
|
Stock repurchase program |
|
|
|
|
| (372 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (372 | ) |
|
|
|
|
| (97 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (97 | ) |
Stock-based compensation expense |
| 88 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 88 |
|
| 90 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 90 |
|
Dividends declared ($0.50 per share) |
|
|
|
|
|
|
|
|
| (697 | ) |
|
|
|
|
|
|
|
|
|
| (697 | ) |
|
|
|
|
|
|
|
|
| (693 | ) |
|
|
|
|
|
|
|
|
|
| (693 | ) |
Other |
| (19 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (8 | ) |
|
| (27 | ) |
| 15 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (27 | ) |
|
| (12 | ) |
Balance, March 31, 2017 | $ | 12,780 |
|
| $ | (3,697 | ) |
| $ | 36,052 |
|
| $ | (4,529 | ) |
| $ | 448 |
|
| $ | 41,054 |
| |||||||||||||||||||||||
Balance, March 31, 2018 | $ | 12,998 |
|
| $ | (3,937 | ) |
| $ | 32,022 |
|
| $ | (4,159 | ) |
| $ | 402 |
|
| $ | 37,326 |
|
| (Stated in millions) |
| (Stated in millions) |
| ||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
|
|
|
| Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other |
|
|
|
|
|
|
|
|
| ||
| Common Stock |
|
| Retained |
|
| Comprehensive |
|
| Noncontrolling |
|
|
|
|
| Common Stock |
|
| Retained |
|
| Comprehensive |
|
| Noncontrolling |
|
|
|
|
| ||||||||||||||||
January 1, 2016 – March 31, 2016 | Issued |
|
| In Treasury |
|
| Earnings |
|
| Loss |
|
| Interests |
|
| Total |
| |||||||||||||||||||||||||||||
Balance, January 1, 2016 | $ | 12,693 |
|
| $ | (13,372 | ) |
| $ | 40,870 |
|
| $ | (4,558 | ) |
| $ | 272 |
|
| $ | 35,905 |
| |||||||||||||||||||||||
January 1, 2017 – March 31, 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 |
|
|
|
|
|
|
|
|
| 501 |
|
|
|
|
|
|
| 22 |
|
|
| 523 |
|
|
|
|
|
|
|
|
|
| 279 |
|
|
|
|
|
|
| 5 |
|
|
| 284 |
|
Currency translation adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
| 17 |
|
|
|
|
|
|
| 17 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 45 |
|
|
|
|
|
|
| 45 |
|
Changes in unrealized gain on marketable securities |
|
|
|
|
|
|
|
|
|
|
|
|
| 3 |
|
|
|
|
|
|
| 3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (4 | ) |
|
|
|
|
|
| (4 | ) |
Changes in fair value of cash flow hedges |
|
|
|
|
|
|
|
|
|
|
|
|
| 9 |
|
|
| �� |
|
|
| 9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 11 |
|
|
|
|
|
|
| 11 |
|
Pension and other postretirement benefit plans |
|
|
|
|
|
|
|
|
|
|
|
|
| 63 |
|
|
|
|
|
|
| 63 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 62 |
|
|
|
|
|
|
| 62 |
|
Shares sold to optionees, less shares exchanged |
| (17 | ) |
|
| 64 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 47 |
|
| (29 | ) |
|
| 68 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 39 |
|
Vesting of restricted stock |
| (28 | ) |
|
| 28 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| - |
|
| (49 | ) |
|
| 49 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| - |
|
Shares issued under employee stock purchase plan |
| (19 | ) |
|
| 135 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 116 |
|
| (12 | ) |
|
| 108 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 96 |
|
Stock repurchase program |
|
|
|
|
| (475 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (475 | ) |
|
|
|
|
| (372 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (372 | ) |
Stock-based compensation expense |
| 61 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 61 |
|
| 88 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 88 |
|
Dividends declared ($0.50 per share) |
|
|
|
|
|
|
|
|
| (626 | ) |
|
|
|
|
|
|
|
|
|
| (626 | ) |
|
|
|
|
|
|
|
|
| (697 | ) |
|
|
|
|
|
|
|
|
|
| (697 | ) |
Other |
| 10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 9 |
|
|
| 19 |
|
| (19 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (8 | ) |
|
| (27 | ) |
Balance, March 31, 2016 | $ | 12,700 |
|
| $ | (13,620 | ) |
| $ | 40,745 |
|
| $ | (4,466 | ) |
| $ | 303 |
|
| $ | 35,662 |
| |||||||||||||||||||||||
Balance, March 31, 2017 | $ | 12,780 |
|
| $ | (3,697 | ) |
| $ | 36,052 |
|
| $ | (4,529 | ) |
| $ | 448 |
|
| $ | 41,054 |
|
SHARES OF COMMON STOCK
(Unaudited)
|
|
|
|
| (Stated in millions) |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Shares |
| |
| Issued |
|
| In Treasury |
|
| Outstanding |
| |||
Balance, January 1, 2017 |
| 1,434 |
|
|
| (43 | ) |
|
| 1,391 |
|
Shares sold to optionees, less shares exchanged |
| - |
|
|
| 1 |
|
|
| 1 |
|
Vesting of restricted stock |
| - |
|
|
| 1 |
|
|
| 1 |
|
Shares issued under employee stock purchase plan |
| - |
|
|
| 1 |
|
|
| 1 |
|
Stock repurchase program |
| - |
|
|
| (5 | ) |
|
| (5 | ) |
Balance, March 31, 2017 |
| 1,434 |
|
|
| (45 | ) |
|
| 1,389 |
|
|
|
|
|
| (Stated in millions) |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Shares |
| |
| Issued |
|
| In Treasury |
|
| Outstanding |
| |||
Balance, January 1, 2018 |
| 1,434 |
|
|
| (50 | ) |
|
| 1,384 |
|
Shares issued under employee stock purchase plan |
| - |
|
|
| 2 |
|
|
| 2 |
|
Stock repurchase program |
| - |
|
|
| (1 | ) |
|
| (1 | ) |
Balance, March 31, 2018 |
| 1,434 |
|
|
| (49 | ) |
|
| 1,385 |
|
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) 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 three-month period ended March 31, 20172018 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2017.2018. The December 31, 20162017 balance sheet information has been derived from the Schlumberger 20162017 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, 2016,2017, filed with the Securities and Exchange Commission on January 25, 2017.24, 2018.
NewRecently Adopted Accounting PronouncementsPronouncement
In May 2014, the Financial Accounting Standards Board (FASB)(“FASB”) issued Accounting Standards Update (ASU)(“ASU”) 2014-09, Revenue from Contracts with Customers. This ASU amendsamended the existing accounting standards for revenue recognition and is based onrequires companies to recognize revenue when control of the principle that revenue should be recognized to depict the transfer ofpromised goods or services is transferred to a customer at an amount that reflects the consideration a company expects to receive in exchange for those goods or services. Schlumberger will adoptadopted this ASU on January 1, 2018 using the modified retrospective transition method applied to those contracts which were not completed as of January 1, 2018. Schlumberger doesPrior period amounts have not expect thebeen adjusted and continue to be reflected in accordance with Schlumberger’s historical accounting. The adoption of this ASU todid not have a material impact on Schlumberger’s Consolidated Financial Statements.
Schlumberger recognizes revenue upon the transfer of control of promised products or services to customers at an amount that reflects the consideration it expects to receive in exchange for these products or services. The vast majority of Schlumberger’s services and product offerings are short-term in nature. The time between invoicing and when payment is due under these arrangements is generally 30 to 60 days.
Revenue is occasionally generated from contractual arrangements that include multiple performance obligations. Revenue from these arrangements is allocated to each performance obligation based on its consolidated financial statements. relative standalone selling price. Standalone selling prices are generally based on the prices charged to customers or using expected costs plus margin.
Revenue is recognized for certain long-term construction-type contracts over time. These contracts involve significant design and engineering efforts in order to satisfy custom designs for customer-specific applications. Revenue is recognized as work progresses on each contract. Progress is measured by the ratio of actual costs incurred to date on the project in relation to total estimated project costs. The estimate of total project costs has a significant impact on both the amount of revenue recognized as well as the related profit on a project. Revenue and profits on contracts can also be significantly affected by change orders and claims. Due to the nature of these projects, adjustments to estimates of contract revenue and total contract costs may be required as work progresses. Progress billings are generally issued upon completion of certain phases of work as stipulated in the contract. Any expected losses on a project are recorded in full in the period in which they became probable.
Revenue in excess of billings related to contracts where revenue is recognized over time was $0.3 billion at both March 31, 2018 and December 31, 2017. Such amounts are included within Receivables less allowance for doubtful accounts in the Consolidated Balance Sheet.
Due to the nature of its business Schlumberger does not have significant backlog. Total backlog was $2.8 billion at March 31, 2018, of which approximately 50% is expected to be recognized as revenue over the next 12 months.
Billings and cash collections in excess of revenue was $0.9 billion at March 31, 2018 and $0.8 billion at December 31, 2017. Such amounts are included within Accounts payable and accrued liabilities in the Consolidated Balance Sheet.
Recently Issued Accounting Pronouncement
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. This ASU is effective for Schlumberger will adopt this ASU on
8
January 1, 2019.2019, with early adoption permitted. 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.
2. Charges and Credits
2018
There were no charges or credits recorded during the first quarter of 2018.
2017
In connection with Schlumberger’s acquisition of Cameron (See Note 4 – Acquisition of CameronInternational Corporation (“Cameron”), Schlumberger recorded $82 million of pretax charges ($68 million after-tax) consistingduring the first quarter of 2017 relating to employee benefits, facility consolidationclosures and other merger and integration-related costs during the first quarter of 2017. This charge iscosts. These charges are classified in Merger & integration in the Consolidated Statement of Income.
There were no charges or creditsOn December 22, 2017, the US enacted the Tax Cuts and Jobs Act (the “Act”). The Act, which is also commonly referred to as “US tax reform”, significantly changes US corporate income tax laws by, among other things, reducing the US corporate income tax rate to 21% starting in 2018 and creating a territorial tax system with a one-time mandatory tax on previously deferred foreign earnings of US subsidiaries. As a result, Schlumberger recorded a net charge of $76 million during the firstfourth quarter of 2016.2017. This amount consisted of two components: (i) a $410 million charge relating to the one-time mandatory tax on previously deferred earnings of certain non-US subsidiaries that are owned either wholly or partially by a US subsidiary of Schlumberger, and (ii) a $334 million credit resulting from the remeasurement of Schlumberger’s net deferred tax liabilities in the US based on the new lower corporate income tax rate.
Although the $76 million net charge represents a reasonable estimate of the impact of the income tax effects of the Act on Schlumberger’s Consolidated Financial Statements as of December 31, 2017, it should be considered provisional. Once Schlumberger finalizes certain tax positions when it files its 2017 US tax return, it will be able to conclude whether any further adjustments are required. Any adjustments to these provisional amounts will be reported as a component of Taxes on income in the reporting period in which any such adjustments are determined, which will be no later than the fourth quarter of 2018.
3. Earnings Per Share
The following is a reconciliation from basic earnings per share of Schlumberger to diluted earnings 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) |
| ||||||||||||||||||||||||||||||||||||||||||
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|
| 2017 |
|
| 2016 |
| 2018 |
|
| 2017 |
| ||||||||||||||||||||||||||||||||||||
| Schlumberger Net Income |
|
| Average Shares Outstanding |
|
| Earnings per Share |
|
| Schlumberger Net Income |
|
| Average Shares Outstanding |
|
| Earnings per Share |
| Schlumberger Net Income |
|
| Average Shares Outstanding |
|
| Earnings per Share |
|
| Schlumberger Net Income |
|
| Average Shares Outstanding |
|
| Earnings per Share |
| ||||||||||||
First Quarter |
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|
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|
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|
|
Basic | $ | 279 |
|
|
| 1,393 |
|
| $ | 0.20 |
|
| $ | 501 |
|
|
| 1,254 |
|
| $ | 0.40 |
| $ | 525 |
|
|
| 1,385 |
|
| $ | 0.38 |
|
| $ | 279 |
|
|
| 1,393 |
|
| $ | 0.20 |
|
Assumed exercise of stock options |
| - |
|
|
| 4 |
|
|
|
|
|
|
| - |
|
|
| 1 |
|
|
|
|
|
| - |
|
|
| 1 |
|
|
|
|
|
|
| - |
|
|
| 4 |
|
|
|
|
|
Unvested restricted stock |
| - |
|
|
| 5 |
|
|
|
|
|
|
| - |
|
|
| 4 |
|
|
|
|
|
| - |
|
|
| 8 |
|
|
|
|
|
|
| - |
|
|
| 5 |
|
|
|
|
|
Diluted | $ | 279 |
|
|
| 1,402 |
|
| $ | 0.20 |
|
| $ | 501 |
|
|
| 1,259 |
|
| $ | 0.40 |
| $ | 525 |
|
|
| 1,394 |
|
| $ | 0.38 |
|
| $ | 279 |
|
|
| 1,402 |
|
| $ | 0.20 |
|
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|
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 |
| 2018 |
|
| 2017 |
| ||||
First Quarter |
| 23 |
|
|
| 32 |
|
| 39 |
|
|
| 23 |
|
9
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. Prior to being acquired by Schlumberger, Cameron reported revenue of approximately $1.6 billion during the first quarter of 2016.
5. Inventories
A summary of inventories, which are stated at the lower of average cost or market,net realizable value, follows:
(Stated in millions) | (Stated in millions) |
| (Stated in millions) |
| ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Mar. 31, |
|
| Dec. 31, |
| Mar. 31, |
|
| Dec. 31, |
| ||||
| 2017 |
|
| 2016 |
| 2018 |
|
| 2017 |
| ||||
Raw materials & field materials | $ | 1,633 |
|
| $ | 1,720 |
| $ | 1,910 |
|
| $ | 1,846 |
|
Work in progress |
| 597 |
|
|
| 610 |
|
| 556 |
|
|
| 503 |
|
Finished goods |
| 2,058 |
|
|
| 1,895 |
|
| 1,708 |
|
|
| 1,697 |
|
| $ | 4,288 |
|
| $ | 4,225 |
| $ | 4,174 |
|
| $ | 4,046 |
|
6.5. Fixed Assets
A summary of fixed assets follows:
(Stated in millions) | (Stated in millions) |
| (Stated in millions) |
| ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Mar. 31, |
|
| Dec. 31, |
| Mar. 31, |
|
| Dec. 31, |
| ||||
| 2017 |
|
| 2016 |
| 2018 |
|
| 2017 |
| ||||
Property, plant & equipment | $ | 39,857 |
|
| $ | 40,008 |
| $ | 38,104 |
|
| $ | 37,813 |
|
Less: Accumulated depreciation |
| 27,350 |
|
|
| 27,187 |
|
| 26,548 |
|
|
| 26,237 |
|
| $ | 12,507 |
|
| $ | 12,821 |
| $ | 11,556 |
|
| $ | 11,576 |
|
Depreciation expense relating to fixed assets was $523 million and $613 million and $682 million in the first quarter of 20172018 and 2016,2017, respectively.
7.6. Multiclient Seismic Data
The change in the carrying amount of multiclient seismic data for the three months ended March 31, 20172018 was as follows:
(Stated in millions) | (Stated in millions) |
| (Stated in millions) |
| ||
|
|
|
|
|
|
|
Balance at December 31, 2016 | $ | 1,073 |
| |||
Balance at December 31, 2017 | $ | 727 |
| |||
Capitalized in period |
| 116 |
|
| 26 |
|
Charged to expense |
| (100 | ) |
| (46 | ) |
Balance at March 31, 2017 | $ | 1,089 |
| |||
Balance at March 31, 2018 | $ | 707 |
|
The gross book value, accumulated amortization and net book value of intangible assets were as follows:
| (Stated in millions) |
| (Stated in millions) |
| ||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||||||
| Mar. 31, 2017 |
|
| Dec. 31, 2016 |
| Mar. 31, 2018 |
|
| Dec. 31, 2017 |
| ||||||||||||||||||||||||||||||||||||
| 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 | $ | 4,960 |
|
| $ | 927 |
|
| $ | 4,033 |
|
| $ | 4,938 |
|
| $ | 865 |
|
| $ | 4,073 |
| $ | 4,833 |
|
| $ | 1,079 |
|
| $ | 3,754 |
|
| $ | 4,832 |
|
| $ | 1,020 |
|
| $ | 3,812 |
|
Technology/technical know-how |
| 3,655 |
|
|
| 896 |
|
|
| 2,759 |
|
|
| 3,655 |
|
|
| 835 |
|
|
| 2,820 |
|
| 3,619 |
|
|
| 1,127 |
|
|
| 2,492 |
|
|
| 3,634 |
|
|
| 1,078 |
|
|
| 2,556 |
|
Tradenames |
| 2,847 |
|
|
| 484 |
|
|
| 2,363 |
|
|
| 2,847 |
|
|
| 458 |
|
|
| 2,389 |
|
| 2,806 |
|
|
| 558 |
|
|
| 2,248 |
|
|
| 2,806 |
|
|
| 533 |
|
|
| 2,273 |
|
Other |
| 1,166 |
|
|
| 578 |
|
|
| 588 |
|
|
| 1,122 |
|
|
| 549 |
|
|
| 573 |
|
| 1,326 |
|
|
| 603 |
|
|
| 723 |
|
|
| 1,295 |
|
|
| 582 |
|
|
| 713 |
|
| $ | 12,628 |
|
| $ | 2,885 |
|
| $ | 9,743 |
|
| $ | 12,562 |
|
| $ | 2,707 |
|
| $ | 9,855 |
| $ | 12,584 |
|
| $ | 3,367 |
|
| $ | 9,217 |
|
| $ | 12,567 |
|
| $ | 3,213 |
|
| $ | 9,354 |
|
10
Amortization expense charged to income was $169$165 million during the first quarter of 20172018 and $89$169 million during the firstfist quarter of 2016.2017.
Based on the net book value of intangible assets at March 31, 2017,2018, amortization charged to income for the subsequent five years is estimated to be: remaining three quarters of 2017—$526 million; 2018—$668519 million; 2019—$627672 million; 2020—$599640 million; 2021—$576617 million; 2022—$607 million; and 2022—2023—$571594 million.
9.8. Long-term Debt
A summary of Long-term Debt follows:
(Stated in millions) | (Stated in millions) |
| (Stated in millions) |
| ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Mar. 31, |
|
| Dec. 31, |
| Mar. 31, |
|
| Dec. 31, |
| ||||
| 2017 |
|
| 2016 |
| 2018 |
|
| 2017 |
| ||||
4.00% Senior Notes due 2025 | $ | 1,740 |
|
| $ | 1,740 |
| $ | 1,742 |
|
| $ | 1,741 |
|
3.30% Senior Notes due 2021 |
| 1,594 |
|
|
| 1,594 |
|
| 1,595 |
|
|
| 1,595 |
|
3.00% Senior Notes due 2020 |
| 1,591 |
|
|
| 1,591 |
|
| 1,594 |
|
|
| 1,593 |
|
3.65% Senior Notes due 2023 |
| 1,491 |
|
|
| 1,491 |
|
| 1,492 |
|
|
| 1,492 |
|
2.35% Senior Notes due 2018 |
| 1,297 |
|
|
| 1,297 |
| |||||||
4.20% Senior Notes due 2021 |
| 1,100 |
|
|
| 1,100 |
|
| 1,100 |
|
|
| 1,100 |
|
2.40% Senior Notes due 2022 |
| 996 |
|
|
| 996 |
|
| 997 |
|
|
| 996 |
|
3.63% Senior Notes due 2022 |
| 845 |
|
|
| 845 |
|
| 846 |
|
|
| 846 |
|
0.63% Guaranteed Notes due 2019 |
| 645 |
|
|
| 622 |
| |||||||
1.50% Guaranteed Notes due 2019 |
| 551 |
|
|
| 536 |
| |||||||
6.38% Notes due 2018 |
| 294 |
|
|
| 297 |
| |||||||
2.65% Senior Notes due 2022 |
| 598 |
|
|
| 598 |
| |||||||
2.20% Senior Notes due 2020 |
| 498 |
|
|
| 498 |
| |||||||
7.00% Notes due 2038 |
| 214 |
|
|
| 214 |
|
| 212 |
|
|
| 212 |
|
4.50% Notes due 2021 |
| 137 |
|
|
| 137 |
|
| 134 |
|
|
| 135 |
|
5.95% Notes due 2041 |
| 116 |
|
|
| 116 |
|
| 115 |
|
|
| 115 |
|
3.60% Notes due 2022 |
| 110 |
|
|
| 110 |
|
| 109 |
|
|
| 110 |
|
5.13% Notes due 2043 |
| 99 |
|
|
| 99 |
|
| 99 |
|
|
| 99 |
|
4.00% Notes due 2023 |
| 82 |
|
|
| 83 |
|
| 82 |
|
|
| 82 |
|
3.70% Notes due 2024 |
| 56 |
|
|
| 56 |
|
| 56 |
|
|
| 56 |
|
0.63% Guaranteed Notes due 2019 |
| - |
|
|
| 712 |
| |||||||
1.50% Guaranteed Notes due 2019 |
| - |
|
|
| 603 |
| |||||||
Commercial paper borrowings |
| 2,503 |
|
|
| 2,421 |
|
| 1,700 |
|
|
| 1,694 |
|
Other |
| 1,077 |
|
|
| 1,118 |
|
| 557 |
|
|
| 598 |
|
| $ | 16,538 |
|
| $ | 16,463 |
| $ | 13,526 |
|
| $ | 14,875 |
|
The estimated fair value of Schlumberger’s Long-term Debt, based on quoted market prices at March 31, 2018 and December 31, 2017 was $16.8$13.6 billion and $15.2 billion, respectively.
Borrowings under Schlumberger’s commercial paper programs at both March 31, 20172018 and December 31, 2016.
Borrowings under the commercial paper program at March 31, 2017 were $2.9$3.0 billion, of which $2.5$1.3 billion was classified within Long-term Debt and $0.4 billion was classified withinin Short-term borrowings and current portion of long-term debt 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.
10.9. 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 currencycross-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
11
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 currencycross-currency swap is designated as a fair value hedge of the underlying debt. This derivative instrumentdebt and is marked to market, with gains and losses recognized currentlyimmediately in income to largely offset the respective gains and losses recognizedeffects on changes in the fair value of the hedged debt.
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 its $0.5 billion 2.20% Senior Notes due 2020 and its $0.6 billion 2.65% Senior Notes due 2022. These cross-currency swaps effectively convert the US dollar notes to Canadian dollar denominated debt with fixed annual interest rates of 1.97% and 2.52%, respectively.
These cross-currency swaps are designated as cash flow hedges. The changes in the fair values of the hedges are recorded on the Consolidated Balance Sheet and in Accumulated Other Comprehensive Loss. Amounts recorded in Accumulated Other Comprehensive Loss are reclassified to earnings in the same periods that the underlying hedged item affects net income.
At March 31, 2017,2018, Schlumberger had fixed rate debt of $14.2aggregating $13.6 billion and variable rate debt of $4.8aggregating $4.5 billion, after taking into account the effect of the swap.interest rate swaps.
Short-term investments and Fixed income investments, held to maturity totaled $5.7were $2.3 billion at March 31, 2017.2018. The carrying value of these investments approximated fair value, which was estimated using quoted market prices for those or similar investments.value.
Foreign Currency Exchange Rate Risk
As a multinational company, Schlumberger conducts its business in over 85 countries. Schlumberger’s functional currency is primarily the US dollar. However, outside the United States, a significant portion of Schlumberger’s expenses is 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 of changes in the fair value of hedging instruments, if any, is recorded directly to earnings.
At March 31, 2017,2018, Schlumberger recognized a cumulative net loss of $8$5 million gain in Accumulated other comprehensive loss relating to revaluation of foreign currency forward contracts and foreign currency options designated as cash flow hedges, the majority of which is expected to be reclassified into earnings within the next 12 months.
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 as are changes in fair value of the hedged item.
At March 31, 2017,2018, contracts were outstanding for the US dollar equivalent of $3.8$5.0 billion in various foreign currencies, of which $0.7$1.8 billion relatedrelates to hedges of debt denominated in currencies other than the functional currency.
12
The fair values of outstanding derivative instruments were as follows:
|
|
|
|
| (Stated in millions) |
|
|
| |
|
|
|
|
|
|
|
|
|
|
| Fair Value of Derivatives |
|
| Consolidated Balance Sheet Classification | |||||
| Mar. 31, |
|
| Dec. 31, |
|
|
| ||
| 2017 |
|
| 2016 |
|
|
| ||
Derivative Assets |
|
|
|
|
|
|
|
|
|
Derivatives designated as hedges: |
|
|
|
|
|
|
|
|
|
Foreign exchange contracts | $ | 2 |
|
| $ | 1 |
|
| Other current assets |
|
|
|
|
|
|
|
|
|
|
Derivatives not designated as hedges: |
|
|
|
|
|
|
|
|
|
Foreign exchange contracts | $ | 35 |
|
| $ | 42 |
|
| Other current assets |
| $ | 37 |
|
| $ | 43 |
|
|
|
Derivative Liabilities |
|
|
|
|
|
|
|
|
|
Derivatives designated as hedges: |
|
|
|
|
|
|
|
|
|
Foreign exchange contracts | $ | 7 |
|
| $ | 18 |
|
| Accounts payable and accrued liabilities |
Cross currency swap |
| 37 |
|
|
| 49 |
|
| Other Liabilities |
| $ | 44 |
|
| $ | 67 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives not designated as hedges: |
|
|
|
|
|
|
|
|
|
Foreign exchange contracts | $ | 21 |
|
| $ | 59 |
|
| Accounts payable and accrued liabilities |
| $ | 65 |
|
| $ | 126 |
|
|
|
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.
The effect of derivative instruments designated as fair value and cash flow hedges, and those not designated as hedges, on the Consolidated Statement of Income was as follows:
| (Stated in millions) |
|
|
| (Stated in millions) |
|
|
| ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Gain (Loss) Recognized in Income |
|
|
| Gain Recognized in Income |
|
|
| ||||||||||
| First Quarter |
|
|
| First Quarter |
|
|
| ||||||||||
| 2017 |
|
| 2016 |
|
| Consolidated Statement of Income Classification | 2018 |
|
| 2017 |
|
| Consolidated Statement of Income Classification | ||||
Derivatives designated as fair value hedges: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cross currency swap | $ | 18 |
|
| $ | 10 |
|
| Interest | $ | 27 |
|
| $ | 18 |
|
| Interest expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives designated as cash flow hedges: |
|
|
|
|
|
|
|
|
| |||||||||
Foreign exchange contracts | $ | 4 |
|
| $ | - |
|
| Cost of services/sales | |||||||||
Cross currency swap |
| 19 |
|
|
| - |
|
| Interest expense | |||||||||
| $ | 23 |
|
| $ | - |
|
|
| |||||||||
Derivatives not designated as hedges: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts | $ | 6 |
|
| $ | (81 | ) |
| Cost of services/sales | $ | 28 |
|
| $ | 6 |
|
| Cost of services/sales |
11.10. Contingencies
Schlumberger and its subsidiaries are 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.
|
|
|
|
| (Stated in millions) |
|
|
|
|
| (Stated in millions) |
| ||||||||||||||||||
|
|
|
|
|
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|
|
|
|
|
| First Quarter 2017 |
|
| First Quarter 2016 |
| First Quarter 2018 |
|
| First Quarter 2017 |
| ||||||||||||||||||||
|
|
|
|
| Income |
|
|
|
|
|
| Income |
|
|
|
|
| Income |
|
|
|
|
|
| Income |
| ||||
|
|
|
|
| Before |
|
|
|
|
|
| Before |
|
|
|
|
| Before |
|
|
|
|
|
| Before |
| ||||
| Revenue |
|
| Taxes |
|
| Revenue |
|
| Taxes |
| Revenue |
|
| Taxes |
|
| Revenue |
|
| Taxes |
| ||||||||
Reservoir Characterization | $ | 1,618 |
|
| $ | 281 |
|
| $ | 1,719 |
|
| $ | 334 |
| $ | 1,556 |
|
| $ | 307 |
|
| $ | 1,618 |
|
| $ | 281 |
|
Drilling |
| 1,985 |
|
|
| 229 |
|
|
| 2,493 |
|
|
| 371 |
|
| 2,126 |
|
|
| 293 |
|
|
| 1,985 |
|
|
| 229 |
|
Production |
| 2,187 |
|
|
| 110 |
|
|
| 2,376 |
|
|
| 206 |
|
| 2,959 |
|
|
| 216 |
|
|
| 2,187 |
|
|
| 110 |
|
Cameron |
| 1,229 |
|
|
| 162 |
|
|
| - |
|
|
| - |
|
| 1,310 |
|
|
| 166 |
|
|
| 1,229 |
|
|
| 162 |
|
Eliminations & other |
| (125 | ) |
|
| (25 | ) |
|
| (68 | ) |
|
| (10 | ) |
| (122 | ) |
|
| (8 | ) |
|
| (125 | ) |
|
| (25 | ) |
Pretax operating income |
|
|
|
|
| 757 |
|
|
|
|
|
|
| 901 |
|
|
|
|
|
| 974 |
|
|
|
|
|
|
| 757 |
|
Corporate & other (1) |
|
|
|
|
| (239 | ) |
|
|
|
|
|
| (172 | ) |
|
|
|
|
| (225 | ) |
|
|
|
|
|
| (239 | ) |
Interest income (2) |
|
|
|
|
| 24 |
|
|
|
|
|
|
| 13 |
|
|
|
|
|
| 25 |
|
|
|
|
|
|
| 24 |
|
Interest expense (3) |
|
|
|
|
| (126 | ) |
|
|
|
|
|
| (120 | ) |
|
|
|
|
| (131 | ) |
|
|
|
|
|
| (126 | ) |
Charges and credits (4) |
|
|
|
|
| (82 | ) |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
| (82 | ) |
| $ | 6,894 |
|
| $ | 334 |
|
| $ | 6,520 |
|
| $ | 622 |
| $ | 7,829 |
|
| $ | 643 |
|
| $ | 6,894 |
|
| $ | 334 |
|
(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. The first quarter of 2017 includes $63 million of intangible asset amortization expense resulting from the April 2016 acquisition of Cameron.
(2)(2) Interest income excludes amounts which are included in the segments’ income ($53 million in 2017; $62018; $5 million in 2016)2017).
(3) Interest expense excludes amounts which are included in the segments’ income ($1312 million in 2017;2018; $13 million in 2016)2017).
(4) See Note 2 – Charges and Credits.
Certain prior period items have been reclassified to conform to the current period presentation.
13
Revenue by geographic area was as follows:
|
|
|
|
| (Stated in millions) |
| |
|
|
|
|
|
|
|
|
| First Quarter |
| |||||
| 2018 |
|
| 2017 |
| ||
North America | $ | 2,835 |
|
| $ | 1,871 |
|
Latin America |
| 870 |
|
|
| 952 |
|
Europe/CIS/Africa |
| 1,704 |
|
|
| 1,652 |
|
Middle East & Asia |
| 2,309 |
|
|
| 2,318 |
|
Eliminations & other |
| 111 |
|
|
| 101 |
|
| $ | 7,829 |
|
| $ | 6,894 |
|
13.North America and International revenue disaggregated by Group was as follows:
|
|
|
|
|
|
|
|
| (Stated in millions) |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| First Quarter 2018 |
| |||||||||||||
| North |
|
|
|
|
|
| Eliminations |
|
|
|
|
| ||
| America |
|
| International |
|
| & other |
|
| Total |
| ||||
Reservoir Characterization | $ | 222 |
|
| $ | 1,197 |
|
| $ | 137 |
|
| $ | 1,556 |
|
Drilling |
| 564 |
|
|
| 1,513 |
|
|
| 49 |
|
|
| 2,126 |
|
Production |
| 1,500 |
|
|
| 1,458 |
|
|
| 1 |
|
|
| 2,959 |
|
Cameron |
| 550 |
|
|
| 736 |
|
|
| 24 |
|
|
| 1,310 |
|
Other |
| (1 | ) |
|
| (21 | ) |
|
| (100 | ) |
|
| (122 | ) |
| $ | 2,835 |
|
| $ | 4,883 |
|
| $ | 111 |
|
| $ | 7,829 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| First Quarter 2017 |
| |||||||||||||
| North |
|
|
|
|
|
| Eliminations |
|
|
|
|
| ||
| America |
|
| International |
|
| & other |
|
| Total |
| ||||
Reservoir Characterization | $ | 231 |
|
| $ | 1,267 |
|
| $ | 120 |
|
| $ | 1,618 |
|
Drilling |
| 455 |
|
|
| 1,468 |
|
|
| 62 |
|
|
| 1,985 |
|
Production |
| 739 |
|
|
| 1,451 |
|
|
| (3 | ) |
|
| 2,187 |
|
Cameron |
| 444 |
|
|
| 792 |
|
|
| (7 | ) |
|
| 1,229 |
|
Other |
| 2 |
|
|
| (56 | ) |
|
| (71 | ) |
|
| (125 | ) |
| $ | 1,871 |
|
| $ | 4,922 |
|
| $ | 101 |
|
| $ | 6,894 |
|
12. Pension and Other Postretirement Benefit Plans
Net pension cost for the Schlumberger pension plans included the following components:
(Stated in millions) |
|
| ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| First Quarter |
|
| |||||||||||||
| 2018 |
|
| 2017 |
|
| ||||||||||
| US |
|
| Int'l |
|
| US |
|
| Int'l |
|
| ||||
Service cost | $ | 16 |
|
| $ | 32 |
|
| $ | 15 |
|
| $ | 29 |
|
|
Interest cost |
| 43 |
|
|
| 77 |
|
|
| 44 |
|
|
| 78 |
|
|
Expected return on plan assets |
| (62 | ) |
|
| (147 | ) |
|
| (60 | ) |
|
| (136 | ) |
|
Amortization of prior service cost |
| 3 |
|
|
| 3 |
|
|
| 3 |
|
|
| 24 |
|
|
Amortization of net loss |
| 12 |
|
|
| 44 |
|
|
| 10 |
|
|
| 33 |
|
|
| $ | 12 |
|
| $ | 9 |
|
| $ | 12 |
|
| $ | 28 |
|
|
14
(Stated in millions) |
|
| ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| First Quarter |
|
| |||||||||||||
| 2017 |
|
| 2016 |
|
| ||||||||||
| US |
|
| Int'l |
|
| US |
|
| Int'l |
|
| ||||
Service cost | $ | 15 |
|
| $ | 29 |
|
| $ | 18 |
|
| $ | 37 |
|
|
Interest cost |
| 44 |
|
|
| 78 |
|
|
| 44 |
|
|
| 80 |
|
|
Expected return on plan assets |
| (60 | ) |
|
| (136 | ) |
|
| (61 | ) |
|
| (134 | ) |
|
Amortization of prior service cost |
| 3 |
|
|
| 24 |
|
|
| 3 |
|
|
| 30 |
|
|
Amortization of net loss |
| 10 |
|
|
| 33 |
|
|
| 23 |
|
|
| 22 |
|
|
| $ | 12 |
|
| $ | 28 |
|
| $ | 27 |
|
| $ | 35 |
|
|
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) |
| ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| First Quarter |
| First Quarter |
| ||||||||||
| 2017 |
|
| 2016 |
| 2018 |
|
| 2017 |
| ||||
Service cost | $ | 8 |
|
| $ | 8 |
| $ | 8 |
|
| $ | 8 |
|
Interest cost |
| 11 |
|
|
| 12 |
|
| 11 |
|
|
| 11 |
|
Expected return on plan assets |
| (15 | ) |
|
| (14 | ) |
| (15 | ) |
|
| (15 | ) |
Amortization of prior service credit |
| (7 | ) |
|
| (8 | ) |
| (7 | ) |
|
| (7 | ) |
| $ | (3 | ) |
| $ | (2 | ) | $ | (3 | ) |
| $ | (3 | ) |
14.13. Accumulated Other Comprehensive Loss
Accumulated other comprehensive loss consists of the following:
| (Stated in millions) |
| |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Unrealized |
|
|
|
|
|
| Pension and |
|
|
|
|
| ||
| Currency |
|
| Gain on |
|
|
|
|
|
| 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 |
| 45 |
|
|
| (4 | ) |
|
| 11 |
|
|
| - |
|
|
| 52 |
|
Amounts reclassified from accumulated other comprehensive loss |
| - |
|
|
| - |
|
|
| - |
|
|
| 63 |
|
|
| 63 |
|
Income taxes |
| - |
|
|
| - |
|
|
| - |
|
|
| (1 | ) |
|
| (1 | ) |
Net other comprehensive (loss) income |
| 45 |
|
|
| (4 | ) |
|
| 11 |
|
|
| 62 |
|
|
| 114 |
|
Balance, March 31, 2017 | $ | (2,091 | ) |
| $ | 17 |
|
| $ | (8 | ) |
| $ | (2,447 | ) |
| $ | (4,529 | ) |
| (Stated in millions) |
| |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Unrealized |
|
|
|
|
|
| Pension and |
|
|
|
|
| ||
| Currency |
|
| Gain on |
|
|
|
|
|
| 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 |
| 17 |
|
|
| 3 |
|
|
| (85 | ) |
|
| - |
|
|
| (65 | ) |
Amounts reclassified from accumulated other comprehensive loss |
| - |
|
|
| - |
|
|
| 94 |
|
|
| 70 |
|
|
| 164 |
|
Income taxes |
| - |
|
|
| - |
|
|
| - |
|
|
| (7 | ) |
|
| (7 | ) |
Net other comprehensive income |
| 17 |
|
|
| 3 |
|
|
| 9 |
|
|
| 63 |
|
|
| 92 |
|
Balance, March 31, 2016 | $ | (2,036 | ) |
| $ | 3 |
|
| $ | (30 | ) |
| $ | (2,403 | ) |
| $ | (4,466 | ) |
| (Stated in millions) |
| |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Pension and |
|
|
|
|
| |
| Currency |
|
|
|
|
|
|
|
|
|
| Other |
|
|
|
|
| ||
| Translation |
|
| Marketable |
|
| Cash Flow |
|
| Postretirement |
|
|
|
|
| ||||
| Adjustments |
|
| Securities |
|
| Hedges |
|
| Benefit Plans |
|
| Total |
| |||||
Balance, January 1, 2018 | $ | (2,139 | ) |
| $ | 13 |
|
| $ | 3 |
|
| $ | (2,151 | ) |
| $ | (4,274 | ) |
Other comprehensive gain before reclassifications |
| 39 |
|
|
| 19 |
|
|
| 5 |
|
|
| - |
|
|
| 63 |
|
Amounts reclassified from accumulated other comprehensive loss |
| - |
|
|
| - |
|
|
| (3 | ) |
|
| 55 |
|
|
| 52 |
|
Net other comprehensive income |
| 39 |
|
|
| 19 |
|
|
| 2 |
|
|
| 55 |
|
|
| 115 |
|
Balance, March 31, 2018 | $ | (2,100 | ) |
| $ | 32 |
|
| $ | 5 |
|
| $ | (2,096 | ) |
| $ | (4,159 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 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 |
| 45 |
|
|
| (4 | ) |
|
| 11 |
|
|
| - |
|
|
| 52 |
|
Amounts reclassified from accumulated other comprehensive loss |
| - |
|
|
| - |
|
|
| - |
|
|
| 63 |
|
|
| 63 |
|
Income taxes |
| - |
|
|
| - |
|
|
| - |
|
|
| (1 | ) |
|
| (1 | ) |
Net other comprehensive income |
| 45 |
|
|
| (4 | ) |
|
| 11 |
|
|
| 62 |
|
|
| 114 |
|
Balance, March 31, 2017 | $ | (2,091 | ) |
| $ | 17 |
|
| $ | (8 | ) |
| $ | (2,447 | ) |
| $ | (4,529 | ) |
15
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
First Quarter 20172018 Compared to FourthFirst Quarter 2016
2017
|
|
|
|
| (Stated in millions) |
|
|
|
|
| (Stated in millions) |
| ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| First Quarter 2017 |
|
| Fourth Quarter 2016 |
| First Quarter 2018 |
|
| First Quarter 2017 |
| ||||||||||||||||||||
|
|
|
|
| Income |
|
|
|
|
|
| Income |
|
|
|
|
| Income |
|
|
|
|
|
| Income |
| ||||
|
|
|
|
| Before |
|
|
|
|
|
| Before |
|
|
|
|
| Before |
|
|
|
|
|
| Before |
| ||||
| Revenue |
|
| Taxes |
|
| Revenue |
|
| Taxes |
| Revenue |
|
| Taxes |
|
| Revenue |
|
| Taxes |
| ||||||||
Reservoir Characterization | $ | 1,618 |
|
| $ | 281 |
|
| $ | 1,676 |
|
| $ | 319 |
| $ | 1,556 |
|
| $ | 307 |
|
| $ | 1,618 |
|
| $ | 281 |
|
Drilling |
| 1,985 |
|
|
| 229 |
|
|
| 2,013 |
|
|
| 234 |
|
| 2,126 |
|
|
| 293 |
|
|
| 1,985 |
|
|
| 229 |
|
Production |
| 2,187 |
|
|
| 110 |
|
|
| 2,203 |
|
|
| 128 |
|
| 2,959 |
|
|
| 216 |
|
|
| 2,187 |
|
|
| 110 |
|
Cameron |
| 1,229 |
|
|
| 162 |
|
|
| 1,346 |
|
|
| 188 |
|
| 1,310 |
|
|
| 166 |
|
|
| 1,229 |
|
|
| 162 |
|
Eliminations & other |
| (125 | ) |
|
| (25 | ) |
|
| (131 | ) |
|
| (59 | ) |
| (122 | ) |
|
| (8 | ) |
|
| (125 | ) |
|
| (25 | ) |
Pretax operating income |
|
|
|
|
| 757 |
|
|
|
|
|
|
| 810 |
|
|
|
|
|
| 974 |
|
|
|
|
|
|
| 757 |
|
Corporate & other (1) |
|
|
|
|
| (239 | ) |
|
|
|
|
|
| (245 | ) |
|
|
|
|
| (225 | ) |
|
|
|
|
|
| (239 | ) |
Interest income (2) |
|
|
|
|
| 24 |
|
|
|
|
|
|
| 23 |
|
|
|
|
|
| 25 |
|
|
|
|
|
|
| 24 |
|
Interest expense (3) |
|
|
|
|
| (126 | ) |
|
|
|
|
|
| (126 | ) |
|
|
|
|
| (131 | ) |
|
|
|
|
|
| (126 | ) |
Charges and credits (4) |
|
|
|
|
| (82 | ) |
|
|
|
|
|
| (675 | ) |
|
|
|
|
| - |
|
|
|
|
|
|
| (82 | ) |
| $ | 6,894 |
|
| $ | 334 |
|
| $ | 7,107 |
|
| $ | (213 | ) | $ | 7,829 |
|
| $ | 643 |
|
| $ | 6,894 |
|
| $ | 334 |
|
(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 ($53 million in 2017; $72018; $5 million in 2016)2017).
(3) Interest expense excludes amounts which are included in the segments’ income ($1312 million in 2017;2018; $13 million in 2016)2017).
(4) Charges and credits are described in detail in Note 2 to the Consolidated Financial Statements.
Certain prior period items have been reclassifiedFirst-quarter 2018 revenue of $7.8 billion increased 14% year-on-year as the global rig count increased by the same percentage. The North America land rig count increased by 21% year-on-year, while the international rig count was up 8%. Production Group revenue increased 35% while Drilling Group revenue increased by 7%, both driven by strong land activity in North America. Cameron Group revenue increased by 7%, while Reservoir Characterization Group revenue declined 4%.
First-quarter 2018 pretax operating margin increased 145 basis points (“bps”) year-on-year to conform12%, as a result of improved profitability in North America due to the current period presentation.land activity growth that benefited the Production and Drilling Groups. As a result, Production Group pretax operating margin expanded 227 bps to 7% and the Drilling Group increased 222 bps to 14%. Reservoir Characterization Group pretax operating margin increased 240 bps to 20% while the Cameron Group was essentially flat at 13%.
Reservoir Characterization Group
Reservoir Characterization GroupFirst-quarter 2018 revenue of $1.6 billion decreased 3% sequentially primarily due to project completions in Testing & Process systems and lower SIS software license sales. These decreases were partly offset by Wireline revenue growth as a result of infrastructure-led exploration activity in North America.
Pretax operating margin of 17% decreased 170 basis points (bps) sequentially as the increased contribution from high-margin Wireline exploration activities was more than offset by reduced profitability in WesternGeco and lower contributions from SIS software license sales.
Drilling Group
Drilling Group revenue of $2.0 billion decreased 1% sequentially as strong directional drilling activity in North America land was more than offset by lower drilling activity and pricing pressure in the International Areas.
Pretax operating margin of 12% was essentially flat sequentially despite the slight revenue decline. This was due to pricing improvements in the US offset by pricing pressure in the international markets.
Production Group
Production Group revenue of $2.2 billion was 1% lower sequentially primarily due to a combination of decreased revenue on SPM projects in Ecuador, reduced hydraulic fracturing activity on land in the Middle East and lower Completions product sales. These decreases were partially mitigated by strong hydraulic fracturing activity and pricing recovery that led to a 19% growth in revenue in North America land.
Pretax operating margin of 5% decreased 78 bps sequentially as the positive effects of increased activity and pricing recovery on land in North America were more than offset by margin contraction from lower SPM revenue.
Cameron Group revenue of $1.2 billion decreased 9% sequentially driven by declining project volumes in OneSubsea and reduced product sales in Surface Systems. The revenue decline for OneSubsea was due to falling project volumes in Brazil and reduced activity in the US Gulf of Mexico. Surface Systems sales were lower in the Europe/CIS/Africa and Latin America Areas, which more than offset the double-digit revenue growth in North America land.
Pretax operating margin of 13% declined 80 bps sequentially as continued strong project execution in OneSubsea and tight cost control in Drilling Systems limited the impact of lower product volume in Surface Systems.
First Quarter 2017 Compared to First Quarter 2016
|
|
|
|
| (Stated in millions) |
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| First Quarter 2017 |
|
| First Quarter 2016 |
| ||||||||||
|
|
|
|
| Income |
|
|
|
|
|
| Income |
| ||
|
|
|
|
| Before |
|
|
|
|
|
| before |
| ||
| Revenue |
|
| Taxes |
|
| Revenue |
|
| Taxes |
| ||||
Reservoir Characterization | $ | 1,618 |
|
| $ | 281 |
|
| $ | 1,719 |
|
| $ | 334 |
|
Drilling |
| 1,985 |
|
|
| 229 |
|
|
| 2,493 |
|
|
| 371 |
|
Production |
| 2,187 |
|
|
| 110 |
|
|
| 2,376 |
|
|
| 206 |
|
Cameron |
| 1,229 |
|
|
| 162 |
|
|
| - |
|
|
| - |
|
Eliminations & other |
| (125 | ) |
|
| (25 | ) |
|
| (68 | ) |
|
| (10 | ) |
Pretax operating income |
|
|
|
|
| 757 |
|
|
|
|
|
|
| 901 |
|
Corporate & other (1) |
|
|
|
|
| (239 | ) |
|
|
|
|
|
| (172 | ) |
Interest income (2) |
|
|
|
|
| 24 |
|
|
|
|
|
|
| 13 |
|
Interest expense (3) |
|
|
|
|
| (126 | ) |
|
|
|
|
|
| (120 | ) |
Charges and credits (4) |
|
|
|
|
| (82 | ) |
|
|
|
|
|
| - |
|
| $ | 6,894 |
|
| $ | 334 |
|
| $ | 6,520 |
|
| $ | 622 |
|
(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. The first quarter of 2017 includes $63 million of intangible asset amortization expense resulting from the April 2016 acquisition of Cameron.
(2)Interest income excludes amounts which are included in the segments’ income ($5 million in 2017; $6 million in 2016).
(3)Interest expense excludes amounts which are included in the segments’ income ($13 million in 2017; $13 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.
First-quarter 2017 revenue of $6.9 billion increased 6% year-on-year. This included a full quarter of activity from the acquired Cameron businesses, which contributed revenue of $1.2 billion. Excluding the impact of the Cameron acquisition, revenue declined 13% year-on-year. During the first-quarter of 2017 the North America land rig count returned to prior year levels. However, the international land rig count was lower by 8%, the North America offshore rig count was lower by 25%, and the International offshore rig count was lower by 18%. As a result, Drilling Group revenue decreased 20% while Production Group and Reservoir Characterization Group were lower by 8% and 6%, respectively. In addition to the impact of the rig count, revenue also declined year-on-year as a result of reduced activity levels in Venezuela following Schlumberger’s decision in April 2016 to align activity with cash collections.
First-quarter 2017 pretax operating margin decreased 284 bps to 11%, as a result of the overall decline in activity and pervasive pricing pressure internationally. The margin decrease was the highest in the Production Group, which contracted by 365 bps to 5%. Drilling Group pretax operating margin fell 334 bps to 12%, while the Reservoir Characterization Group decreased 206 bps to 17%, and the Cameron Group posted a pretax margin of 13%.
Reservoir Characterization Group
First-quarter 2017 revenue of $1.6 billion decreased 6%4% year-on-year primarily due to lower exploration and reduced discretionary spending by customersrevenue on a long-term surface facility project in the offshore markets which impacted Wireline and SIS softwareMiddle East.
Year-on-year, pretax operating margin increased 240 bps to 20% due to improved profitability for WesternGeco primarily as a result of a favorable mix of multiclient seismic license sales as well as reduced activity in Venezuela. These decreases were partly offset by higher revenue from increased land seismic andamortization following the multiclient activity in WesternGeco and increased revenue in Testing & Process relating to progress on early production facilities inimpairment charge recorded during the Middle East & Asia Area.
Year-on-year pretax operating margin decreased 206 bps to 17% due to reduced higher-margin Wireline activities partly offset by improved profitability in WesternGeco.fourth quarter of 2017.
Drilling Group
First-quarter 20172018 revenue of $2.0$2.1 billion decreased 20%increased 7% year-on-year primarily due to the declinehigher demand for directional drilling technologies on land in the international and offshoreboth North America rig counts and lower activity in Venezuela combined with pricing pressureRussia..
Year-on-year, pretax operating margin decreased 334increased 222 bps to 12%14% primarily due to a decline in higher-margin activities of Drilling & Measurements combined with the impact of pricing pressure.
Production Group
First-quarter 2017 revenue of $2.2 billion decreased 8% year-on-year due primarily to the decline in international activity as well as decreased revenue on SPM projects in Ecuador. These decreases were partially offset by increased hydraulic fracturing activityimproved profitability in North America land. due to the increased land activity and improved pricing.
16
First-quarter 2018 revenue of $3.0 billion increased 35% year-on-year primarily due to the significant land activity growth in North America that benefited the hydraulic fracturing business.
Year-on-year, pretax operating margin decreased 365increased 227 bps to 5%7% as a result of lower international activity and increased pricing pressure.
Cameron Group
On April 1, 2016, Schlumberger acquired all of the outstanding shares of Cameron, a leading provider of flow equipment products, systems and servicesimproved profitability in North America due 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. Prior to being acquired by Schlumberger, Cameron reported revenue of approximately $1.6 billion duringgrowth in North America land activity combined with improved pricing.
During the first quarter of 2016.2018, the US land pressure pumping business was impacted by weaker-than-expected activity as well as softer pricing as compared to the fourth quarter of 2017, rising supply chain costs, and rail logistical challenges. In spite of these factors, Schlumberger continued to deploy available fracturing assets, including equipment from our newly acquired capacity. Schlumberger expects the US land hydraulic fracturing market to improve during the second quarter of 2018, both in terms of pricing and in operational efficiency and it is, therefore continuing with its aggressive fleet reactivation and recommissioning program.
Cameron Group
First-quarter 2018 revenue of $1.3 billion increased 7% year-on-year due to improvements on land in North America that benefited the short-cycle businesses of Valves & Measurement and Surface Systems.
Pretax operating margin of 13% was essentially flat year-on-year.
Interest and Other Income
Interest & other income consisted of the following:
(Stated in millions) | (Stated in millions) |
| (Stated in millions) |
| ||||||||||
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|
|
| First Quarter |
| First Quarter |
| ||||||||||
| 2017 |
|
| 2016 |
| 2018 |
|
| 2017 |
| ||||
Equity in net earnings of affiliated companies | $ | 17 |
|
| $ | 25 |
| $ | 14 |
|
| $ | 17 |
|
Interest income |
| 29 |
|
|
| 20 |
|
| 28 |
|
|
| 29 |
|
| $ | 46 |
|
| $ | 45 |
| $ | 42 |
|
| $ | 46 |
|
The decrease in earnings of equity method investments primarily reflects the effects of the downturn in the oil and gas industry, which has negatively impacted the majority of Schlumberger’s investments in affiliates, particularly those in North America.
Other
Research & engineering and General & administrative expenses, as a percentage of Revenue, for the first quarter ended March 31,of both 2018 and 2017 and 2016 were as follows:
| First Quarter |
| First Quarter |
| ||||||||||
| 2017 |
|
| 2016 |
| 2018 |
|
| 2017 |
| ||||
Research & engineering |
| 3.1 | % |
|
| 3.7 | % |
| 2.2 | % |
|
| 3.1 | % |
General & administrative |
| 1.4 | % |
|
| 1.7 | % |
| 1.4 | % |
|
| 1.4 | % |
Research & engineering and General & administrative costs for the first quarter of 2018 have decreased $29 million and $12 million, respectively,as compared to the same period in 2017 as a result of cost control measures, offset in part by the impact of the Cameron acquisition.measures.
The effective tax rate for the first quarter of 20172018 was 15%17.6% as compared to 16%14.8% for the same period of the prior year.2017. The charges described in Note 2 to the Consolidated Financial Statements reduced the first-quarter 2017 effective tax rate by 0.4 percentage points. 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 first quarter of 2018 as compared to the same period last year.
Charges and Credits
2018
There were no charges or credits recorded during the first quarter of 2016.2018.
Charges and Credits2017
In connection with Schlumberger’s acquisition of Cameron, (See Note 4 – Acquisition of Cameron), Schlumberger recorded $82 million of pretax charges ($68 million after-tax) consisting ofrelating to employee benefits, facility consolidation,closures and other merger and integration-related costs during the first quarter of 2017. This charge iscosts. These charges are classified in Merger & integration in the Consolidated Statement of Income.
There were no charges or credits recorded during the first quarter of 2016.17
Liquidity and Capital Resources
Details of the components of liquidity as well as changes in liquidity follows:follow:
| (Stated in millions) |
| (Stated in millions) |
| ||||||||||||||||||
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Mar. 31, |
|
| Mar. 31, |
|
| Dec. 31, |
| Mar. 31, |
|
| Mar. 31, |
|
| Dec. 31, |
| ||||||
Components of Liquidity | 2017 |
|
| 2016 |
|
| 2016 |
| 2018 |
|
| 2017 |
|
| 2017 |
| ||||||
Cash | $ | 1,902 |
|
| $ | 2,080 |
|
| $ | 2,929 |
| $ | 1,865 |
|
| $ | 1,902 |
|
| $ | 1,799 |
|
Short-term investments |
| 5,451 |
|
|
| 12,352 |
|
|
| 6,328 |
|
| 2,300 |
|
|
| 5,451 |
|
|
| 3,290 |
|
Fixed income investments, held to maturity |
| 238 |
|
|
| 401 |
|
|
| 238 |
|
| - |
|
|
| 238 |
|
|
| - |
|
Short-term borrowings and current portion of long-term debt |
| (2,449 | ) |
|
| (4,254 | ) |
|
| (3,153 | ) |
| (4,586 | ) |
|
| (2,449 | ) |
|
| (3,324 | ) |
Long-term debt |
| (16,538 | ) |
|
| (17,233 | ) |
|
| (16,463 | ) |
| (13,526 | ) |
|
| (16,538 | ) |
|
| (14,875 | ) |
Net debt (1) | $ | (11,396 | ) |
| $ | (6,654 | ) |
| $ | (10,121 | ) | $ | (13,947 | ) |
| $ | (11,396 | ) |
| $ | (13,110 | ) |
Changes in Liquidity: | Three Months Ended Mar. 31, |
| Three Months Ended Mar. 31, |
| ||||||||||
| 2017 |
|
| 2016 |
| 2018 |
|
| 2017 |
| ||||
Net income | $ | 284 |
|
| $ | 523 |
| $ | 530 |
|
| $ | 284 |
|
Impairment and other charges |
| - |
|
|
| 68 |
| |||||||
Depreciation and amortization (2) |
| 989 |
|
|
| 967 |
|
| 874 |
|
|
| 989 |
|
Earnings of equity method investments, less dividends received |
| (10 | ) |
|
| (25 | ) |
| (5 | ) |
|
| (10 | ) |
Pension and other postretirement benefits expense |
| 37 |
|
|
| 60 |
|
| 18 |
|
|
| 37 |
|
Stock-based compensation expense |
| 88 |
|
|
| 61 |
|
| 90 |
|
|
| 88 |
|
Pension and other postretirement benefits funding |
| (29 | ) |
|
| (45 | ) |
| (39 | ) |
|
| (29 | ) |
Increase in working capital (3) |
| (791 | ) |
|
| (463 | ) |
| (836 | ) |
|
| (791 | ) |
Other |
| 88 |
|
|
| 132 |
|
| (64 | ) |
|
| 20 |
|
Cash flow from operations |
| 656 |
|
|
| 1,210 |
|
| 568 |
|
|
| 656 |
|
Capital expenditures |
| (381 | ) |
|
| (549 | ) |
| (454 | ) |
|
| (381 | ) |
SPM investments |
| (144 | ) |
|
| (597 | ) |
| (240 | ) |
|
| (144 | ) |
Multiclient seismic data costs capitalized |
| (116 | ) |
|
| (167 | ) |
| (26 | ) |
|
| (116 | ) |
Free cash flow (4) |
| 15 |
|
|
| (103 | ) |
| (152 | ) |
|
| 15 |
|
Dividends paid |
| (696 | ) |
|
| (629 | ) |
| (692 | ) |
|
| (696 | ) |
Proceeds from employee stock plans |
| 135 |
|
|
| 163 |
|
| 127 |
|
|
| 135 |
|
Stock repurchase program |
| (372 | ) |
|
| (475 | ) |
| (97 | ) |
|
| (372 | ) |
|
| (918 | ) |
|
| (1,044 | ) |
| (814 | ) |
|
| (918 | ) |
Business acquisitions and investments, net of cash acquired plus debt assumed |
| (273 | ) |
|
| (81 | ) |
| (13 | ) |
|
| (273 | ) |
Other |
| (84 | ) |
|
| 18 |
|
| (10 | ) |
|
| (84 | ) |
Increase in net debt |
| (1,275 | ) |
|
| (1,107 | ) |
| (837 | ) |
|
| (1,275 | ) |
Net debt, beginning of period |
| (10,121 | ) |
|
| (5,547 | ) |
| (13,110 | ) |
|
| (10,121 | ) |
Net debt, end of period | $ | (11,396 | ) |
| $ | (6,654 | ) | $ | (13,947 | ) |
| $ | (11,396 | ) |
(1) | “Net debt” represents gross debt less cash, short-term investments and fixed income investments, held to maturity. Management believes that Net debt provides useful information regarding the level of Schlumberger’s indebtedness by reflecting cash and investments that could be used to repay debt. Net debt is a non-GAAP financial measure that should be considered in addition to, not as a substitute for or superior to, total debt. |
(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. |
18
Key liquidity events during the first three months of 2018 and 2017 and 2016 included:
On July 18, 2013, the Schlumberger Board of Directors (the “Board”(“the Board”) approved a $10 billion share repurchase program for Schlumberger common stock to be completed at the latest by June 30, 2018. Schlumberger had repurchased $9.7 billion of shares under this new share repurchaseThis program as of March 31,was completed during May 2017.
The following table summarizes the activity under this share repurchase program:
(Stated in millions, except per share amounts) |
| ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| Total cost |
|
| Total number |
|
| Average price |
| |||
| of shares |
|
| of shares |
|
| paid per |
| |||
| purchased |
|
| purchased |
|
| share |
| |||
Three months ended March 31, 2017 | $ | 372 |
|
|
| 4.7 |
|
| $ | 78.97 |
|
Three months ended March 31, 2016 | $ | 475 |
|
|
| 7.1 |
|
| $ | 67.34 |
|
On January 21, 2016, the Board approved a new $10 billion share repurchase program forprogram. Schlumberger common stock. Thehad repurchased $421 million under the new program will take effect onceas of March 31, 2018.
The following table summarizes the remaining $0.3 billion authorized to be repurchasedactivity under the July 18, 2013 program is exhausted.these share repurchase programs:
(Stated in millions, except per share amounts) |
| ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| Total cost |
|
| Total number |
|
| Average price |
| |||
| of shares |
|
| of shares |
|
| paid per |
| |||
| purchased |
|
| purchased |
|
| share |
| |||
Three months ended March 31, 2018 | $ | 97 |
|
|
| 1.4 |
|
| $ | 69.79 |
|
Three months ended March 31, 2017 | $ | 372 |
|
|
| 4.7 |
|
| $ | 78.97 |
|
Capital expenditures were $0.5 billion during the first three months of 2018 compared to $0.4 billion during the first three months of 2017 compared to $0.5 billion during the first three months of 2016.2017. Capital expenditures for full-year 20172018 are expected to be approximately $2.2$2.0 billion as compared to expenditures of $2.1 billion in 2016.2017.
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 second half 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. Schlumberger will also make a $535 million cash payment to Weatherford. Schlumberger will manage the joint venture and consolidate it for financial reporting purposes.
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 and a lack of progress in establishing new mechanisms that address past and future accounts receivable. Schlumberger’s total net receivable balance in Venezuela as of March 31, 2017 was approximately $1.2 billion. During the first quarter of 2017, Schlumberger reclassified $700 million of this balance from Receivables less allowance for doubtful accounts to long-term within Other Assets in the Consolidated Balance Sheet.
Schlumberger continues to experience payment delays from certain other customers as well, primarily as a result of the impact of lower oil prices in the industry. In this regard, included in Receivables less allowance for doubtful accounts in the Consolidated Balance Sheet at March 31, 2017, is approximately $1.2 billion of receivables relating to Ecuador.
Schlumberger operates in more than 85 countries. At MarchAs of December 31, 2017, only five of those countries individually accounted for greater than 5% of Schlumberger’s net receivablereceivables balance, of which only threeone (the United States, Venezuela and Ecuador)States) accounted for greater than 10%. of such receivables.
As of March 31, 2017,2018, Schlumberger had $7.4$4.2 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 $3.7$3.5 billion was available and unused as of March 31, 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 March 31, 20172018 were $2.9$3.0 billion.
FORWARD-LOOKING STATEMENTS
This first-quarter 2018 Form 10-Q, andas 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; 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 benefitseffects of the Cameron transaction;US tax reform; our effective tax rate; the success of Schlumberger’s SPM projects, joint ventures and alliances; 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; payment delays; 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 integrate the Cameron business and to realize expected synergies; the inability to retain key employees; and other risks and uncertainties detailed in this first-quarter 20172018 Form 10-Q and our most recent FormForms 10-K, 10-Q, and Forms 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, 2016.2017. Schlumberger’s exposure to market risk has not changed materially since December 31, 2016.2017.
19
Item 4. ControlsControls 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.
The information with respect to this Item 1 is set forth under Note 11—10—Contingencies, in the Consolidated Financial Statements.
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, 2016.2017.
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 March 31, 2018, Schlumberger had repurchased $421 million 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.program.
Schlumberger’s common stock repurchase program activity for the three months ended March 31, 20172018 was as follows:
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| Total number of shares purchased |
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| Average price paid per share |
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| Total number of shares purchased as part of publicly announced program |
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| Maximum value of shares that may yet be purchased under the program |
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January 1 through January 1, 2017 |
| - |
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| $ | - |
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| - |
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| $ | 645,040 |
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February 1 through February 28, 2017 |
| 638.3 |
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| $ | 80.76 |
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| 638.3 |
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| $ | 593,491 |
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March 1 through March 31, 2017 |
| 4,076.1 |
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| $ | 78.69 |
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| 4,076.1 |
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| $ | 272,727 |
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| 4,714.4 |
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| $ | 78.97 |
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| 4,714.4 |
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(Stated in thousands, except per share amounts) |
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| Total number of shares purchased |
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| Average price paid per share |
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| Total number of shares purchased as part of publicly announced programs |
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| Maximum value of shares that may yet be purchased under the programs |
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January 2018 |
| 448.5 |
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| $ | 74.88 |
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| 448.5 |
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| $ | 9,642,781 |
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February 2018 |
| 441.6 |
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| $ | 68.63 |
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| 441.6 |
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| $ | 9,612,478 |
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March 2018 |
| 506.9 |
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| $ | 66.30 |
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| 506.9 |
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| $ | 9,578,866 |
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| 1,397.0 |
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| $ | 69.79 |
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| 1,397.0 |
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In connection with the exercise of stock options under Schlumberger’s incentive compensation plans, Schlumberger routinely receives shares of its common stock from optionholders in consideration of the exercise price of the stock options. Schlumberger does not view these transactions as requiring disclosure under this Item as the number of shares of Schlumberger common stock received from optionholders is not material.
On January 21, 2016, the Board approved a new $10 billion share repurchase program for Schlumberger common stock. This new program will take effect once the remaining $0.3 billion authorized to be repurchased under the July 18, 2013 program is exhausted.
Item 3. Defaults Upon Senior Securities.
None.
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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.
ItemItem 5. Other Information.
In 2013, Schlumberger completed the wind downwind-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 first quarter of 20172018 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 maintains 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.
During the fourth quarter of 2016, a non-US subsidiary entered into a memorandum of understanding (“MOU”) with NIOC relating to the non-disclosure of data required for the technical evaluation of an oilfield project. In the first quarter of 2017, the Schlumberger subsidiary provided NIOC with written notice that it was terminating the MOU, effective March 11, 2017. The MOU did not involve the provision of services.
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*Exhibit |
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* Exhibit 95—Mine Safety Disclosures |
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* Exhibit 101—The following materials from Schlumberger Limited’s Quarterly Report on Form 10-Q for the quarter ended March 31, |
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* Filed with this Form 10-Q. |
** Furnished with this Form 10-Q. (+) Supersedes Exhibit 23 to Schlumberger Limited’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017, filed with the Securities and Exchange Commission on January 24, 2018. |
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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.
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| Schlumberger Limited (Registrant) |
Date: | April |
| /s/ Howard Guild |
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| Howard Guild |
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| Chief Accounting Officer and Duly Authorized Signatory |
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