UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended:
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Commission file No.:
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June 30, 2009
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1-4601
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SCHLUMBERGER N.V.
(SCHLUMBERGER LIMITED)
(Exact name of registrant as specified in its charter)
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NETHERLANDS ANTILLES
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52-0684746
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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42 RUE SAINT-DOMINIQUE
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PARIS, FRANCE
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75007
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5599 SAN FELIPE, 17
th
FLOOR
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HOUSTON, TEXAS, U.S.A.
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77056
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PARKSTRAAT 83
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THE HAGUE,
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THE NETHERLANDS
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2514 JG
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(Addresses of principal executive offices)
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(Zip Codes)
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Registrants telephone number: (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 and (2) has been subject to such filing requirements for the past 90 days.
YES
x
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
x
NO
¨
Indicate by check mark whether the
registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting
company in Rule 12b-2 of the Exchange Act.
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Large accelerated filer
x
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Accelerated filer
¨
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Non-accelerated filer
¨
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Smaller reporting company
¨
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
YES
¨
NO
x
Indicate the number of shares outstanding of each of the issuers classes of common stock, as of the latest
practicable date.
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Class
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Outstanding at June 30, 2009
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COMMON STOCK, $0.01 PAR VALUE PER SHARE
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1,197,822,535
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SCHLUMBERGER LIMITED
Table of Contents
Second Quarter 2009 Form 10-Q
2
PART I.
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FINANCIAL INFORMATION
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Item 1.
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Financial Statements.
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SCHLUMBERGER LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
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(Stated in millions, except per share amounts)
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Second Quarter
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Six Months
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2009
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2008
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2009
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2008
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Revenue
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$
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5,528
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$
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6,746
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$
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11,528
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$
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13,036
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Interest & other income, net
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60
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97
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137
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199
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Expenses
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Cost of goods sold and services
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4,409
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4,609
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8,897
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8,968
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Research & engineering
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197
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197
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386
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389
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Marketing
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23
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26
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45
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49
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General & administrative
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131
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146
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261
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284
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Interest
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61
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61
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116
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127
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|
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Income from Continuing Operations before taxes
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767
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1,804
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1,960
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3,418
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Taxes on income
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152
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|
378
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|
404
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|
686
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Income from Continuing Operations
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615
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1,426
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1,556
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2,732
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Discontinued Operations
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38
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|
|
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Net Income
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|
|
615
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|
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|
1,426
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1,556
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2,770
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Net income attributable to noncontrolling interests
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(2
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)
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(6
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)
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(4
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)
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(12
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)
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Net Income attributable to Schlumberger
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$
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613
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$
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1,420
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$
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1,552
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$
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2,758
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Schlumberger amounts attributable to:
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Income from Continuing Operations
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$
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613
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$
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1,420
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$
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1,552
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$
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2,720
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Discontinued Operations
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|
|
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38
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Net Income
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$
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613
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$
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1,420
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$
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1,552
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$
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2,758
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Basic earnings per share of Schlumberger:
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Income from Continuing Operations
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$
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0.51
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$
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1.19
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$
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1.30
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$
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2.28
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Discontinued Operations
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0.03
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Net Income
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$
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0.51
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$
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1.19
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$
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1.30
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$
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2.31
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Diluted earnings per share of Schlumberger:
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Income from Continuing Operations
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$
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0.51
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$
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1.16
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$
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1.28
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$
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2.22
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Income from Discontinued Operations
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0.03
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Net Income
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$
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0.51
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$
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1.16
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$
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1.28
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$
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2.25
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Average shares outstanding:
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Basic
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1,197
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1,195
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1,197
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1,196
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Assuming dilution
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1,214
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1,230
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1,212
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1,231
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See Notes to Consolidated Financial Statements
3
SCHLUMBERGER LIMITED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
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(Stated in millions )
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Jun. 30, 2009
(Unaudited)
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Dec. 31,
2008
|
|
ASSETS
|
|
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Current Assets
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Cash
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|
$
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216
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$
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189
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Short-term investments
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4,195
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3,503
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|
Receivables less allowance for doubtful accounts (2009$149; 2008$133)
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6,107
|
|
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6,258
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Inventories
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2,021
|
|
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1,919
|
|
Deferred taxes
|
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|
162
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|
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|
184
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|
Other current assets
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|
954
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|
|
841
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|
|
|
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13,655
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12,894
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|
Fixed Income Investments, held to maturity
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464
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|
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|
470
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|
Investments in Affiliated Companies
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1,985
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1,870
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|
Fixed Assets less accumulated depreciation
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9,688
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9,690
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|
Multiclient Seismic Data
|
|
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265
|
|
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287
|
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Goodwill
|
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5,266
|
|
|
|
5,189
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|
Intangible Assets
|
|
|
857
|
|
|
|
820
|
|
Deferred Taxes
|
|
|
406
|
|
|
|
565
|
|
Other Assets
|
|
|
374
|
|
|
|
206
|
|
|
|
|
|
|
|
|
|
|
|
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$
|
32,960
|
|
|
$
|
31,991
|
|
|
|
|
|
|
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LIABILITIES AND EQUITY
|
|
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Current Liabilities
|
|
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|
|
|
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Accounts payable and accrued liabilities
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$
|
4,710
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|
|
$
|
5,269
|
|
Estimated liability for taxes on income
|
|
|
924
|
|
|
|
1,007
|
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Dividend payable
|
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|
253
|
|
|
|
252
|
|
Long-term debtcurrent portion
|
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|
831
|
|
|
|
1,138
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|
Convertible debentures
|
|
|
321
|
|
|
|
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|
Bank & short-term loans
|
|
|
422
|
|
|
|
459
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,461
|
|
|
|
8,125
|
|
Convertible Debentures
|
|
|
|
|
|
|
321
|
|
Other Long-term Debt
|
|
|
4,291
|
|
|
|
3,372
|
|
Postretirement Benefits
|
|
|
1,596
|
|
|
|
2,369
|
|
Other Liabilities
|
|
|
878
|
|
|
|
870
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,226
|
|
|
|
15,057
|
|
|
|
|
|
|
|
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Equity
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
4,718
|
|
|
|
4,668
|
|
Treasury stock
|
|
|
(4,668
|
)
|
|
|
(4,796
|
)
|
Retained earnings
|
|
|
20,940
|
|
|
|
19,891
|
|
Accumulated other comprehensive loss
|
|
|
(2,363
|
)
|
|
|
(2,901
|
)
|
|
|
|
|
|
|
|
|
|
Schlumberger stockholders equity
|
|
|
18,627
|
|
|
|
16,862
|
|
Noncontrolling interests
|
|
|
107
|
|
|
|
72
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,734
|
|
|
|
16,934
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
32,960
|
|
|
$
|
31,991
|
|
|
|
|
|
|
|
|
|
|
See Notes to Consolidated Financial Statements
4
SCHLUMBERGER LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
(Stated in million)
|
|
|
|
Six Months Ended June 30,
|
|
|
|
2009
|
|
|
2008
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
Net Income
|
|
$
|
1,556
|
|
|
$
|
2,770
|
|
Less: Income from discontinued operations
|
|
|
|
|
|
|
(38
|
)
|
Adjustments to reconcile net income to cash provided by operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
(1)
|
|
|
1,235
|
|
|
|
1,073
|
|
Non-cash postretirement benefits curtailment charge
|
|
|
136
|
|
|
|
|
|
Earnings of companies carried at equity, less dividends received
|
|
|
(37
|
)
|
|
|
(119
|
)
|
Deferred income taxes
|
|
|
81
|
|
|
|
(4
|
)
|
Stock-based compensation expense
|
|
|
92
|
|
|
|
82
|
|
Provision for losses on accounts receivable
|
|
|
32
|
|
|
|
9
|
|
Other non-cash items
|
|
|
34
|
|
|
|
13
|
|
Change in assets and liabilities:
(2)
|
|
|
|
|
|
|
|
|
Decrease (increase) in receivables
|
|
|
130
|
|
|
|
(768
|
)
|
Increase in inventories
|
|
|
(101
|
)
|
|
|
(159
|
)
|
Increase in other current assets
|
|
|
(113
|
)
|
|
|
(150
|
)
|
(Decrease) increase in accounts payable and accrued liabilities
|
|
|
(515
|
)
|
|
|
181
|
|
Decrease in estimated liability for taxes on income
|
|
|
(120
|
)
|
|
|
(111
|
)
|
Decrease in postretirement benefits
|
|
|
(408
|
)
|
|
|
(3
|
)
|
Other - net
|
|
|
62
|
|
|
|
(46
|
)
|
|
|
|
|
|
|
|
|
|
NET CASH PROVIDED BY OPERATING ACTIVITIES
|
|
|
2,064
|
|
|
|
2,730
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
(1,252
|
)
|
|
|
(1,645
|
)
|
Multiclient seismic data capitalized
|
|
|
(89
|
)
|
|
|
(188
|
)
|
Business acquisitions, net of cash acquired
|
|
|
(198
|
)
|
|
|
(182
|
)
|
(Purchases) sale of investments, net
|
|
|
(680
|
)
|
|
|
263
|
|
Other
|
|
|
105
|
|
|
|
(105
|
)
|
|
|
|
|
|
|
|
|
|
NET CASH USED BY INVESTING ACTIVITIES
|
|
|
(2,114
|
)
|
|
|
(1,857
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
Dividends paid
|
|
|
(502
|
)
|
|
|
(460
|
)
|
Proceeds from employee stock purchase plan
|
|
|
1
|
|
|
|
96
|
|
Proceeds from exercise of stock options
|
|
|
41
|
|
|
|
138
|
|
Tax benefits on stock options
|
|
|
4
|
|
|
|
132
|
|
Stock repurchase plan
|
|
|
|
|
|
|
(1,119
|
)
|
Proceeds from issuance of long-term debt
|
|
|
1,405
|
|
|
|
524
|
|
Repayment of long-term debt
|
|
|
(833
|
)
|
|
|
(224
|
)
|
Net decrease in short-term debt
|
|
|
(38
|
)
|
|
|
(35
|
)
|
|
|
|
|
|
|
|
|
|
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
|
|
|
78
|
|
|
|
(948
|
)
|
|
|
|
|
|
|
|
|
|
Cash flow from discontinued operations - operating activities
|
|
|
|
|
|
|
63
|
|
Net increase (decrease) in cash before translation effect
|
|
|
28
|
|
|
|
(12
|
)
|
Translation effect on cash
|
|
|
(1
|
)
|
|
|
1
|
|
Cash, beginning of period
|
|
|
189
|
|
|
|
197
|
|
|
|
|
|
|
|
|
|
|
Cash, end of period
|
|
$
|
216
|
|
|
$
|
186
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Includes multiclient seismic data costs.
|
(2)
|
Net of the effect of business acquisitions.
|
See Notes to
Consolidated Financial Statements
5
SCHLUMBERGER LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EQUITY
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Stated in millions)
|
|
|
|
Common Stock
|
|
|
Retained
Earnings
|
|
|
Accumulated
Other
Comprehensive
Income
(Loss)
|
|
|
Noncontrolling
Interests
|
|
|
Total
|
|
January 1, 2008 - June 30, 2008
|
|
Issued
|
|
In Treasury
|
|
|
|
|
|
Balance, January 1, 2008
|
|
$
|
4,136
|
|
$
|
(3,549
|
)
|
|
$
|
15,462
|
|
|
$
|
(1,173
|
)
|
|
$
|
62
|
|
|
$
|
14,938
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
2,758
|
|
|
|
|
|
|
|
12
|
|
|
|
|
|
Currency translation adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
94
|
|
|
|
|
|
|
|
|
|
Changes in fair value of derivatives
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
Deferred employee benefits liabilities, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,896
|
|
Shares sold to optionees, less shares exchanged
|
|
|
22
|
|
|
116
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
138
|
|
Shares granted to directors
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
Proceeds from employee stock purchase plan
|
|
|
53
|
|
|
25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
78
|
|
Stock repurchase plan
|
|
|
|
|
|
(1,119
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,119
|
)
|
Stock-based compensation cost
|
|
|
82
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
82
|
|
Shares issued on conversion of debentures
|
|
|
79
|
|
|
329
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
408
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(13
|
)
|
|
|
(13
|
)
|
Dividends declared ($0.42 per share)
|
|
|
|
|
|
|
|
|
|
(503
|
)
|
|
|
|
|
|
|
|
|
|
|
(503
|
)
|
Tax benefits on stock options
|
|
|
132
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
132
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2008
|
|
$
|
4,505
|
|
$
|
(4,198
|
)
|
|
$
|
17,717
|
|
|
$
|
(1,047
|
)
|
|
$
|
61
|
|
|
$
|
17,038
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Stated in millions)
|
|
|
|
Common Stock
|
|
|
Retained
Earnings
|
|
|
Accumulated
Other
Comprehensive
Income (Loss)
|
|
|
Noncontrolling
Interests
|
|
Total
|
|
January 1, 2009 - June 30, 2009
|
|
Issued
|
|
|
In
Treasury
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, January 1, 2009
|
|
|
4,668
|
|
|
$
|
(4,796
|
)
|
|
$
|
19,891
|
|
|
$
|
(2,901
|
)
|
|
$
|
72
|
|
$
|
16,934
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
1,552
|
|
|
|
|
|
|
|
4
|
|
|
|
|
Currency translation adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(67
|
)
|
|
|
|
|
|
|
|
Changes in fair value of derivatives
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
155
|
|
|
|
|
|
|
|
|
Deferred employee benefits liabilities, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
450
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,094
|
|
Shares sold to optionees, less shares exchanged
|
|
|
(9
|
)
|
|
|
50
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
41
|
|
Shares granted to directors
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
Vesting of restricted stock
|
|
|
(15
|
)
|
|
|
15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from employee stock purchase plan
|
|
|
9
|
|
|
|
62
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
71
|
|
Stock-based compensation cost
|
|
|
92
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
92
|
|
Acquisition of noncontrolling interest
|
|
|
(6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6
|
)
|
Other
|
|
|
(25
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31
|
|
|
6
|
|
Dividends declared ($0.42 per share)
|
|
|
|
|
|
|
|
|
|
|
(503
|
)
|
|
|
|
|
|
|
|
|
|
(503
|
)
|
Tax benefits on stock options
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2009
|
|
$
|
4,718
|
|
|
$
|
(4,668
|
)
|
|
$
|
20,940
|
|
|
$
|
(2,363
|
)
|
|
$
|
107
|
|
$
|
18,734
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to Consolidated Financial Statements
6
SCHLUMBERGER LIMITED AND SUBSIDIARIES
SHARES OF COMMON STOCK
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Stated in millions)
|
|
|
Issued
|
|
In Treasury
|
|
|
Shares
Outstanding
|
Balance, January 1, 2009
|
|
1,334
|
|
(140
|
)
|
|
1,194
|
Shares sold to optionees, less shares exchanged
|
|
|
|
2
|
|
|
2
|
Employee stock purchase plan
|
|
|
|
2
|
|
|
2
|
|
|
|
|
|
|
|
|
Balance, June 30, 2009
|
|
1,334
|
|
(136
|
)
|
|
1,198
|
|
|
|
|
|
|
|
|
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, which include the accounts of Schlumberger Limited and its subsidiaries (Schlumberger), have been prepared in accordance with generally
accepted accounting principles 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 management, all adjustments considered necessary for a fair presentation have been included in the accompanying unaudited financial statements. All intercompany transactions and
balances have been eliminated in consolidation. Operating results for the six-month period ended June 30, 2009 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2009. The
December 31, 2008 balance sheet information has been derived from the audited 2008 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, 2008, filed with the Securities and Exchange Commission on February 11, 2009.
Subsequent
events have been evaluated through July 29, 2009, which is the date the financial statements were issued.
Recently Adopted Accounting
Pronouncement
Effective January 1, 2009, Schlumberger adopted SFAS 160,
Noncontrolling Interests in Consolidated Financial
Statements
,
an Amendment of ARB No. 51
(SFAS 160)
.
This standard changed the accounting for and reporting of minority interests (now referred to as noncontrolling interests). Noncontrolling interests are now
classified as equity in the Schlumberger financial statements.
SFAS 160 also changed the way the consolidated income statement is presented by requiring
net income to include the net income for both the parent and the noncontrolling interests, with disclosure of both amounts on the consolidated statement of income. The calculation of earnings per share continues to be based on income amounts
attributable to the parent.
As a result of the adoption of SFAS 160, prior period amounts related to noncontrolling interests have been reclassified to
conform to the current period presentation.
2.
Charges
Schlumberger recorded the following charges during the second quarter of 2009:
|
|
|
Schlumberger continued to reduce its global workforce as a result of the slowdown in oil and gas exploration and production spending and its effect on activity in
the oilfield services sector. As a result of these actions, Schlumberger recorded a pretax charge of $102 million ($85 million after-tax), which is classified in
Cost of goods sold and services
in the
Consolidated Statement of Income
.
Approximately $57 million of the charge remained unpaid as of June 30, 2009, most of which is expected to be paid during the third quarter of 2009.
|
|
|
|
As a consequence of these workforce reductions, Schlumberger recorded pretax non-cash pension and other postretirement benefit curtailment charges of $136 million
($122 million after-tax). These costs are classified in
Cost of goods sold and services
in the
Consolidated Statement of Income
. Refer to Note 15
Pension and Other Postretirement Benefits
for further details.
|
8
The following is a summary of these charges:
|
|
|
|
|
|
|
|
|
|
|
|
|
(Stated in millions)
|
|
|
Pretax
|
|
Tax
|
|
|
Net
|
Charges
|
|
|
|
|
|
|
|
|
|
|
- Workforce reductions
|
|
$
|
102
|
|
$
|
(17
|
)
|
|
$
|
85
|
- Postretirement benefits curtailment
|
|
|
136
|
|
|
(14
|
)
|
|
|
122
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
238
|
|
$
|
(31
|
)
|
|
$
|
207
|
|
|
|
|
|
|
|
|
|
|
|
3.
Earnings Per Share
The following is a reconciliation from basic earnings per share of Schlumberger from continuing operations to diluted earnings per share of Schlumberger from continuing operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Stated in millions, except per share amounts)
|
|
|
2009
|
|
2008
|
|
|
Schlumberger
Income from
Continuing
Operations
|
|
Average
Shares
Outstanding
|
|
Earnings
per Share
|
|
Schlumberger
Income from
Continuing
Operations
|
|
Average
Shares
Outstanding
|
|
Earnings
per Share
|
Second Quarter
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
613
|
|
1,197
|
|
$
|
0.51
|
|
$
|
1,420
|
|
1,195
|
|
$
|
1.19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assumed conversion of debentures
|
|
|
2
|
|
8
|
|
|
|
|
|
3
|
|
16
|
|
|
|
Assumed exercise of stock options
|
|
|
|
|
8
|
|
|
|
|
|
|
|
18
|
|
|
|
Unvested restricted stock
|
|
|
|
|
1
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
|
615
|
|
1,214
|
|
$
|
0.51
|
|
$
|
1,423
|
|
1,230
|
|
$
|
1.16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Schlumberger
Income from
Continuing
Operations
|
|
Average
Shares
Outstanding
|
|
Earnings
per Share
|
|
Schlumberger
Income from
Continuing
Operations
|
|
Average
Shares
Outstanding
|
|
Earnings
per Share
|
Six Months
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
1,552
|
|
1,197
|
|
$
|
1.30
|
|
$
|
2,720
|
|
1,196
|
|
$
|
2.28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assumed conversion of debentures
|
|
|
4
|
|
8
|
|
|
|
|
|
8
|
|
17
|
|
|
|
Assumed exercise of stock options
|
|
|
|
|
6
|
|
|
|
|
|
|
|
17
|
|
|
|
Unvested restricted stock
|
|
|
|
|
1
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
|
1,556
|
|
1,212
|
|
$
|
1.28
|
|
$
|
2,728
|
|
1,231
|
|
$
|
2.22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The number of outstanding options to purchase shares of Schlumberger common stock which were not included in the
computation of diluted earnings per share, because to do so would have had an antidilutive effect, were as follows:
|
|
|
|
|
|
|
(Stated in millions)
|
|
|
2009
|
|
2008
|
Second Quarter
|
|
17
|
|
|
Six Months
|
|
17
|
|
1
|
9
4.
Acquisitions
During the first six months of 2009, Schlumberger made certain acquisitions and minority interest investments, none of which were significant on an individual basis, for an aggregate amount of $198 million, net of cash acquired.
5.
Inventory
A summary of inventory follows:
|
|
|
|
|
|
|
|
|
(Stated in millions)
|
|
|
Jun. 30
2009
|
|
Dec. 31
2008
|
Raw materials & field materials
|
|
$
|
1,804
|
|
$
|
1,674
|
Work in process
|
|
|
76
|
|
|
113
|
Finished goods
|
|
|
141
|
|
|
132
|
|
|
|
|
|
|
|
|
|
$
|
2,021
|
|
$
|
1,919
|
|
|
|
|
|
|
|
6.
Fixed Assets
A summary of fixed assets follows:
|
|
|
|
|
|
|
|
|
(Stated in millions)
|
|
|
Jun. 30
2009
|
|
Dec. 31
2008
|
Property, plant & equipment
|
|
$
|
20,852
|
|
$
|
20,152
|
Less: Accumulated depreciation
|
|
|
11,164
|
|
|
10,462
|
|
|
|
|
|
|
|
|
|
$
|
9,688
|
|
$
|
9,690
|
|
|
|
|
|
|
|
Depreciation expense relating to fixed assets was as follows:
|
|
|
|
|
|
|
|
|
(Stated in millions)
|
|
|
2009
|
|
2008
|
Second Quarter
|
|
$
|
537
|
|
$
|
467
|
Six Months
|
|
$
|
1,067
|
|
$
|
909
|
7.
Multiclient Seismic Data
The change in the carrying amount of multiclient seismic data for the six months ended June 30, 2009 was as follows:
|
|
|
|
|
|
|
(Stated in millions)
|
|
Balance at December 31, 2008
|
|
$
|
287
|
|
Capitalized in period
|
|
|
89
|
|
Charged to cost of goods sold and services
|
|
|
(111
|
)
|
|
|
|
|
|
Balance at June 30, 2009
|
|
$
|
265
|
|
|
|
|
|
|
10
8.
Goodwill
The changes in the carrying amount of goodwill by business segment for the six months ended June 30, 2009 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Stated in millions)
|
|
|
|
Oilfield
Services
|
|
|
Western
Geco
|
|
Total
|
|
Balance at December 31, 2008
|
|
$
|
4,174
|
|
|
$
|
1,015
|
|
$
|
5,189
|
|
Additions
|
|
|
108
|
|
|
|
|
|
|
108
|
|
Impact of change in exchange rates
|
|
|
(31
|
)
|
|
|
|
|
|
(31
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2009
|
|
$
|
4,251
|
|
|
$
|
1,015
|
|
$
|
5,266
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9.
Intangible Assets
Intangible assets principally comprise software, technology and customer relationships. The gross book value and accumulated amortization of intangible assets were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Stated in millions)
|
|
|
Jun. 30, 2009
|
|
Dec. 31, 2008
|
|
|
Gross
Book Value
|
|
Accumulated
Amortization
|
|
Net Book
Value
|
|
Gross
Book Value
|
|
Accumulated
Amortization
|
|
Net Book
Value
|
Software
|
|
$
|
338
|
|
$
|
248
|
|
$
|
90
|
|
$
|
337
|
|
$
|
233
|
|
$
|
104
|
Technology
|
|
|
541
|
|
|
136
|
|
|
405
|
|
|
465
|
|
|
117
|
|
|
348
|
Customer Relationships
|
|
|
353
|
|
|
66
|
|
|
287
|
|
|
345
|
|
|
56
|
|
|
289
|
Other
|
|
|
122
|
|
|
47
|
|
|
75
|
|
|
124
|
|
|
45
|
|
|
79
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,354
|
|
$
|
497
|
|
$
|
857
|
|
$
|
1,271
|
|
$
|
451
|
|
$
|
820
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization expense charged to income was as follows:
|
|
|
|
|
|
|
|
|
(Stated in millions)
|
|
|
2009
|
|
2008
|
Second Quarter
|
|
$
|
28
|
|
$
|
32
|
Six Months
|
|
$
|
57
|
|
$
|
64
|
The weighted average amortization period for all intangible assets is approximately 12 years.
Based on the net book value of intangible assets at June 30, 2009, amortization charged to income for the subsequent five years is estimated to be: remainder of
2009 $59 million; 2010 $106 million; 2011 $97 million; 2012 $89 million; 2013 $74 million and 2014 $68 million.
10.
Derivative Instruments and Hedging Activities
Schlumberger is exposed to market risks related to fluctuations in foreign
currency exchange rates, commodity prices and interest rates. To mitigate these risks, Schlumberger utilizes derivative instruments. Schlumberger does not enter into derivatives for speculative purposes.
Foreign Currency Exchange Rate Risk
As a multinational company,
Schlumberger conducts its business in approximately 80 countries. Schlumbergers functional currency is primarily the US dollar, which is consistent with the oil and gas industry. However, outside the United States, a significant portion of
Schlumbergers expenses is incurred in foreign currencies.
11
Therefore, when the US dollar weakens (strengthens) in relation to the foreign currencies of the countries in which Schlumberger conducts business, the US
dollar reported expenses will increase (decrease).
Schlumberger is exposed to risks on future cash flows to the extent that local currency expenses
exceed revenues denominated in local currency that are other than the functional currency. Schlumberger uses foreign currency forward contracts and foreign currency options to provide a hedge against a portion of these cash flow risks. These
contracts are accounted for as cash flow hedges under the provisions of SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities
(SFAS No. 133), with the effective portion of changes in the fair value of the hedge
recorded on the
Consolidated Balance Sheet
and in
Other Comprehensive Income (Loss).
Amounts recorded in
Other Comprehensive Income (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 the hedged item is recorded directly to earnings.
At June 30, 2009,
Schlumberger recognized a cumulative net $52 million gain in
Equity
relating to revaluation of foreign currency forward contracts and foreign currency options designated as cash flow hedges at June 30, 2009.
Schlumberger is also exposed to changes in the fair value of assets and liabilities, including certain of its long-term debt, which are denominated in currencies other
than the functional currency. Schlumberger uses foreign currency forward contracts and foreign currency options to hedge this exposure as it relates to certain currencies. These contracts are accounted for as fair value hedges under the provisions
of SFAS No. 133, with the fair value of the contracts recorded on the
Consolidated Balance Sheet
and changes in the fair value recognized in the
Consolidated Statement of Income
along with the change in fair value of the hedged
item.
At June 30, 2009, contracts were outstanding for the US dollar equivalent of $4.9 billion in various foreign currencies. These contracts expire
on various dates during the next twelve months.
Commodity Price Risk
Schlumberger is exposed to the impact of market fluctuations in the price of commodities, such as copper and lead. Schlumberger has entered into forward contracts on these commodities to manage the price risk
associated with forecasted purchases. The objective of these contracts is to reduce the variability of cash flows associated with the forecasted purchase of those commodities. These contracts do not qualify for hedge accounting treatment under the
provisions of SFAS No. 133 and therefore, changes in the fair value of the forward contracts are recorded directly to earnings.
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 generally does not involve derivatives and instead primarily uses a mix of variable and fixed rate debt combined with its investment portfolio to mitigate the exposure to changes in interest rates. At June 30, 2009, Schlumberger
had fixed rate debt aggregating approximately $3.6 billion and variable rate debt aggregating approximately $2.2 billion.
Schlumbergers exposure to
interest rate risk associated with its debt is also partially mitigated by its investment portfolio. Both
Short-term investments
and
Fixed income investments
,
held to maturity
, which totaled approximately $4.7 billion at
June 30, 2009, are comprised primarily of money market funds, eurodollar time deposits, certificates of deposit, commercial paper, euro notes and Eurobonds, and are substantially all denominated in US dollars.
12
The fair values of outstanding derivative instruments is summarized as follows:
|
|
|
|
|
|
|
|
|
(Stated in millions)
|
|
|
|
|
|
|
|
|
Fair Value of Derivatives
|
|
Classifications
|
|
|
Jun. 30
2009
|
|
Dec. 31
2008
|
|
|
Derivative assets
|
|
|
|
|
|
|
|
|
Derivative designated as hedges:
|
|
|
|
|
|
|
|
|
Foreign exchange contracts
|
|
$
|
117
|
|
$
|
|
|
Other Assets
|
|
|
|
|
|
|
|
|
|
Derivative not designated as hedges:
|
|
|
|
|
|
|
|
|
Commodity contracts
|
|
$
|
1
|
|
$
|
|
|
Other Assets
|
Foreign exchange contracts
|
|
|
|
|
|
33
|
|
Other Assets
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1
|
|
$
|
33
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
118
|
|
$
|
33
|
|
|
|
|
|
|
|
|
|
|
|
Derivative Liabilities
|
|
|
|
|
|
|
|
|
Derivative designated as hedges:
|
|
|
|
|
|
|
|
|
Foreign exchange contracts
|
|
$
|
|
|
$
|
54
|
|
Accounts payable and accrued liabilities
|
Derivative not designated as hedges:
|
|
|
|
|
|
|
|
|
Commodity contracts
|
|
|
|
|
|
5
|
|
Accounts payable and accrued liabilities
|
|
|
|
|
|
|
|
|
|
|
|
$
|
|
|
$
|
59
|
|
|
|
|
|
|
|
|
|
|
|
The fair value of all outstanding derivatives are determined using a model with inputs that are observable in the
market or can be derived from or corroborated by observable data.
The effect of derivative instruments designated as fair value hedges and not designated
as hedges on the
Consolidated Statement of Income
was as follows:
|
|
|
|
|
|
|
|
|
|
(Stated in millions)
|
|
|
|
|
|
|
|
|
|
Gain/(Loss) Recognized in Income
|
|
|
|
|
|
2009
|
|
|
|
|
|
Second Quarter
|
|
Six Months
|
|
|
Classification
|
Derivatives designated as fair value hedges:
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts
|
|
$
|
61
|
|
$
|
39
|
|
|
Cost of goods sold and services
|
|
|
|
|
|
|
|
|
|
|
Derivatives not designated as hedges:
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts
|
|
$
|
1
|
|
$
|
(22
|
)
|
|
Cost of goods sold and services
|
Commodity contracts
|
|
|
1
|
|
|
|
|
|
Cost of goods sold and services
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2
|
|
$
|
(22
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
13
The effect of derivative instruments in cash flow hedging relationships on income and other comprehensive income (OCI)
was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Stated in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain/(Loss)
Recognized in OCI
|
|
Gain (Loss) Reclassified
from Accumulated OCI
into Income
|
|
|
|
|
|
2009
|
|
2009
|
|
|
|
|
|
Second
Quarter
|
|
Six
Months
|
|
Second
Quarter
|
|
|
Six
Months
|
|
|
Classification
|
Foreign exchange contracts
|
|
$
|
227
|
|
$
|
168
|
|
$
|
91
|
|
|
$
|
27
|
|
|
Cost of goods sold and services
|
|
|
|
|
|
|
|
|
|
(7
|
)
|
|
|
(14
|
)
|
|
Research & engineering
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
84
|
|
|
$
|
13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11.
Other Financial Instruments
Both
Short-term investments
and
Fixed Income Investments, held to maturity
are comprised primarily of money market funds, eurodollar time deposits, certificates of deposits, commercial paper, euro notes
and Eurobonds, and are substantially denominated in US dollars. The carrying value of these investments approximates fair value, which was estimated using quoted market prices for those or similar investments.
A summary of
Long-Term Debt
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Stated in millions)
|
|
|
Jun. 30, 2009
|
|
Dec. 31, 2008
|
|
|
Carrying
Amount
|
|
Fair
Value
|
|
Carrying
Amount
|
|
Fair
Value
|
5.25% Guaranteed Notes due 2013
|
|
$
|
703
|
|
$
|
741
|
|
$
|
714
|
|
$
|
731
|
6.5% Notes due 2012
|
|
|
649
|
|
|
695
|
|
|
647
|
|
|
651
|
5.875% Guaranteed Bonds due 2011
|
|
|
350
|
|
|
370
|
|
|
355
|
|
|
390
|
5.14% Guaranteed Notes due 2010
|
|
|
216
|
|
|
219
|
|
|
203
|
|
|
209
|
4.50% Guaranteed Notes due 2014
|
|
|
1,401
|
|
|
1,440
|
|
|
|
|
|
|
Commercial paper borrowings
|
|
|
385
|
|
|
385
|
|
|
771
|
|
|
771
|
Other variable rate debt
|
|
|
587
|
|
|
587
|
|
|
682
|
|
|
682
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
4,291
|
|
$
|
4,437
|
|
$
|
3,372
|
|
$
|
3,434
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At both June 30, 2009 and December 31, 2008, there were $321 million outstanding of 2.125% Series B
Convertible Debentures due June 1, 2023. On June 1, 2010, holders may require Schlumberger to repurchase their Series B debentures for cash. Accordingly, these debentures are classified within
Current Liabilities
on the
Consolidated Balance Sheet
at June 30, 2009. The fair value of these Series B debentures at June 30, 2009 and December 31, 2008 was $474 million and $398 million, respectively. For further information regarding the debentures
refer to Note 11 to the
Consolidated Financial Statements
included in the Schlumberger Annual Report on Form 10-K for the year ended December 31, 2008.
The fair value of Schlumbergers fixed rate
Long-Term Debt
was estimated based on quoted market prices.
During the first quarter of
2009, a subsidiary of Schlumberger entered into a 3.0 billion Euro Medium Term Note program which is guaranteed by Schlumberger Limited. This program provides for the issuance of various types of debt instruments such as fixed or floating rate
notes in Euro, US dollar or other currencies. Schlumberger issued 1.0 billion 4.50% Guaranteed Notes due 2014 in the second quarter under this program. Schlumberger entered into agreements to swap these Euro notes for US dollars on the date of
issue until maturity, effectively making this a US dollar denominated debt on which Schlumberger will pay interest in US dollars at a rate of 4.95%.
14
12.
Income Tax
Income from Continuing Operations before taxes
which were subject to US and non-US income taxes was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Stated in millions)
|
|
|
Second Quarter
|
|
Six Months
|
|
|
2009
|
|
|
2008
|
|
2009
|
|
2008
|
United States
|
|
$
|
(64
|
)
|
|
$
|
385
|
|
$
|
40
|
|
$
|
734
|
Outside United States
|
|
|
831
|
|
|
|
1,419
|
|
|
1,920
|
|
|
2,684
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
767
|
|
|
$
|
1,804
|
|
$
|
1,960
|
|
$
|
3,418
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During the second quarter of 2009, Schlumberger recorded pretax charges of $73 million in the US and $165 million
outside of the US. These charges are included in the above table and are more fully described in Note 2
Charges
.
The components of net
deferred tax assets were as follows:
|
|
|
|
|
|
|
|
|
|
|
(Stated in millions)
|
|
|
|
Jun. 30
2009
|
|
|
Dec. 31
2008
|
|
Postretirement benefits, net
|
|
$
|
406
|
|
|
$
|
556
|
|
Multiclient seismic data
|
|
|
111
|
|
|
|
121
|
|
Intangible assets
|
|
|
(116
|
)
|
|
|
(106
|
)
|
Other, net
|
|
|
167
|
|
|
|
178
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
568
|
|
|
$
|
749
|
|
|
|
|
|
|
|
|
|
|
The above deferred tax assets at June 30, 2009 and December 31, 2008 are net of valuation allowances
relating to net operating losses in certain countries of $195 million and $197 million, respectively. The deferred tax assets are also net of valuation allowances relating to a capital loss carryforward of $139 million at June 30, 2009 ($140
million at December 31, 2008), of which $123 million expires in 2009 and $16 million expires in 2010, and a foreign tax credit carryforward of $49 million at June 30, 2009 ($49 million at December 31, 2008) of which $3 million expires
in 2009, and $46 million expires in years 2010 through 2017.
The components of consolidated
Taxes on income
were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Stated in millions)
|
|
|
|
Second Quarter
|
|
|
Six Months
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States - Federal
|
|
$
|
(20
|
)
|
|
$
|
132
|
|
|
$
|
(55
|
)
|
|
$
|
215
|
|
United States - State
|
|
|
(1
|
)
|
|
|
12
|
|
|
|
(2
|
)
|
|
|
13
|
|
Outside United States
|
|
|
169
|
|
|
|
265
|
|
|
|
379
|
|
|
|
462
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
148
|
|
|
$
|
409
|
|
|
$
|
322
|
|
|
$
|
690
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States - Federal
|
|
$
|
(2
|
)
|
|
$
|
(7
|
)
|
|
$
|
72
|
|
|
$
|
1
|
|
United States - State
|
|
|
|
|
|
|
|
|
|
|
4
|
|
|
|
|
|
Outside United States
|
|
|
6
|
|
|
|
(11
|
)
|
|
|
7
|
|
|
|
5
|
|
Valuation allowance
|
|
|
|
|
|
|
(13
|
)
|
|
|
(1
|
)
|
|
|
(10
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
4
|
|
|
$
|
(31
|
)
|
|
$
|
82
|
|
|
$
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated taxes on income
|
|
$
|
152
|
|
|
$
|
378
|
|
|
$
|
404
|
|
|
$
|
686
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15
A reconciliation of the US statutory federal tax rate of 35% to the consolidated effective income tax rate follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second Quarter
|
|
|
Six Months
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
US federal statutory rate
|
|
35
|
%
|
|
35
|
%
|
|
35
|
%
|
|
35
|
%
|
Non-US income taxed at different rates
|
|
(16
|
)
|
|
(12
|
)
|
|
(15
|
)
|
|
(13
|
)
|
Effect of equity method investment
|
|
(1
|
)
|
|
(1
|
)
|
|
|
|
|
(1
|
)
|
Charges
|
|
2
|
|
|
|
|
|
2
|
|
|
|
|
Other
|
|
|
|
|
(1
|
)
|
|
(1
|
)
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective income tax rate
|
|
20
|
%
|
|
21
|
%
|
|
21
|
%
|
|
20
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13.
Contingencies
In July 2007, Schlumberger received an inquiry from the United States Department of Justice (DOJ) related to the DOJs investigation of whether certain freight forwarding and customs clearance
services of Panalpina, Inc., and other companies provided to oil and oilfield service companies, including Schlumberger, violated the Foreign Corrupt Practices Act. Schlumberger is cooperating with the DOJ and is continuing its own investigation
with respect to these services.
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. At this time the ultimate disposition of these proceedings is not determinable and therefore, it is not possible to estimate the amount of loss or range of possible losses that might result from
an adverse judgment or settlement in any of these matters. However, in the opinion of management, any liability that might ensue would not be material in relation to Schlumbergers consolidated liquidity, financial position or future results of
operations.
14.
Segment Information
Schlumberger operates two business segments: Oilfield Services and WesternGeco.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Stated in millions)
|
|
|
|
Second Quarter 2009
|
|
|
Second Quarter 2008
|
|
|
|
Revenue
|
|
Income
before taxes
|
|
|
Revenue
|
|
Income
before taxes
|
|
Oilfield Services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
|
$
|
819
|
|
$
|
8
|
|
|
$
|
1,438
|
|
$
|
344
|
|
Latin America
|
|
|
995
|
|
|
176
|
|
|
|
1,056
|
|
|
243
|
|
Europe/CIS/Africa
|
|
|
1,782
|
|
|
432
|
|
|
|
2,070
|
|
|
583
|
|
Middle East & Asia
|
|
|
1,312
|
|
|
421
|
|
|
|
1,444
|
|
|
525
|
|
Other
|
|
|
48
|
|
|
(15
|
)
|
|
|
58
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,956
|
|
|
1,022
|
|
|
|
6,066
|
|
|
1,704
|
|
|
|
|
|
|
WesternGeco
|
|
|
559
|
|
|
97
|
|
|
|
671
|
|
|
196
|
|
|
|
|
|
|
Corporate & Other
|
|
|
13
|
|
|
(77
|
)
|
|
|
9
|
|
|
(63
|
)
|
Interest Income
(1)
|
|
|
|
|
|
13
|
|
|
|
|
|
|
22
|
|
Interest Expense
(2)
|
|
|
|
|
|
(50
|
)
|
|
|
|
|
|
(55
|
)
|
Charges
|
|
|
|
|
|
(238
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
5,528
|
|
$
|
767
|
|
|
$
|
6,746
|
|
$
|
1,804
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.
|
Excludes interest income included in the segment results ($4 million in 2009; $3 million in 2008).
|
2.
|
Excludes interest expense included in the segment results ($11 million in 2009; $6 million in 2008).
|
16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Stated in millions)
|
|
|
|
Six Months 2009
|
|
|
Six Months 2008
|
|
|
|
Revenue
|
|
Income
before taxes
|
|
|
Revenue
|
|
Income
before taxes
|
|
Oilfield Services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
|
$
|
2,011
|
|
$
|
171
|
|
|
$
|
2,857
|
|
$
|
708
|
|
Latin America
|
|
|
2,024
|
|
|
378
|
|
|
|
1,978
|
|
|
428
|
|
Europe/CIS/Africa
|
|
|
3,585
|
|
|
899
|
|
|
|
3,967
|
|
|
1,082
|
|
Middle East & Asia
|
|
|
2,687
|
|
|
876
|
|
|
|
2,763
|
|
|
985
|
|
Other
|
|
|
88
|
|
|
(46
|
)
|
|
|
106
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,395
|
|
|
2,278
|
|
|
|
11,671
|
|
|
3,206
|
|
|
|
|
|
|
WesternGeco
|
|
|
1,110
|
|
|
151
|
|
|
|
1,347
|
|
|
393
|
|
|
|
|
|
|
Corporate & Other
|
|
|
23
|
|
|
(166
|
)
|
|
|
18
|
|
|
(127
|
)
|
Interest Income
(1)
|
|
|
|
|
|
27
|
|
|
|
|
|
|
59
|
|
Interest Expense
(2)
|
|
|
|
|
|
(92
|
)
|
|
|
|
|
|
(113
|
)
|
Charges
|
|
|
|
|
|
(238
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
11,528
|
|
$
|
1,960
|
|
|
$
|
13,036
|
|
$
|
3,418
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.
|
Excludes interest income included in the segment results ($9 million in 2009; $4 million in 2008).
|
2.
|
Excludes interest expense included in the segment results ($24 million in 2009; $14 million in 2008).
|
15.
Pension and Other Postretirement Benefits
Net pension cost for the Schlumberger pension plans included
the following components:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Stated in millions)
|
|
|
|
Second Quarter
|
|
|
Six Months
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
|
US
|
|
|
Intl
|
|
|
US
|
|
|
Intl
|
|
|
US
|
|
|
Intl
|
|
|
US
|
|
|
Intl
|
|
Service costbenefits earned during period
|
|
$
|
14
|
|
|
$
|
24
|
|
|
$
|
14
|
|
|
$
|
9
|
|
|
$
|
30
|
|
|
$
|
47
|
|
|
$
|
29
|
|
|
$
|
18
|
|
Interest cost on projected benefit obligation
|
|
|
38
|
|
|
|
45
|
|
|
|
33
|
|
|
|
15
|
|
|
|
77
|
|
|
|
90
|
|
|
|
65
|
|
|
|
30
|
|
Expected return on plan assets
|
|
|
(45
|
)
|
|
|
(40
|
)
|
|
|
(41
|
)
|
|
|
(20
|
)
|
|
|
(88
|
)
|
|
|
(80
|
)
|
|
|
(81
|
)
|
|
|
(40
|
)
|
Amortization of prior service cost
|
|
|
1
|
|
|
|
31
|
|
|
|
1
|
|
|
|
|
|
|
|
3
|
|
|
|
62
|
|
|
|
3
|
|
|
|
|
|
Amortization of net loss
|
|
|
9
|
|
|
|
|
|
|
|
3
|
|
|
|
3
|
|
|
|
18
|
|
|
|
|
|
|
|
9
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17
|
|
|
|
60
|
|
|
|
10
|
|
|
|
7
|
|
|
|
40
|
|
|
|
119
|
|
|
|
25
|
|
|
|
15
|
|
Curtailment charge
|
|
|
32
|
|
|
|
98
|
|
|
|
|
|
|
|
|
|
|
|
32
|
|
|
|
98
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
49
|
|
|
$
|
158
|
|
|
$
|
10
|
|
|
$
|
7
|
|
|
$
|
72
|
|
|
$
|
217
|
|
|
$
|
25
|
|
|
$
|
15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During the first six months of 2009, Schlumberger made contributions to its US and international defined benefit
pension plans of $212 million and $290 million, respectively.
Schlumberger currently anticipates contributing approximately $300 million to its defined
benefit pension plans during the last six months of 2009.
17
The net periodic benefit cost for the Schlumberger US postretirement medical plan included the following components:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Stated in millions)
|
|
|
|
Second Quarter
|
|
|
Six Months
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
Service costbenefits earned during period
|
|
$
|
5
|
|
|
$
|
6
|
|
|
$
|
12
|
|
|
$
|
12
|
|
Interest cost on accumulated postretirement benefit obligation
|
|
|
14
|
|
|
|
13
|
|
|
|
26
|
|
|
|
26
|
|
Expected return on plan assets
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
(1
|
)
|
Amortization of prior service cost
|
|
|
(7
|
)
|
|
|
(7
|
)
|
|
|
(14
|
)
|
|
|
(14
|
)
|
Amortization of net loss
|
|
|
2
|
|
|
|
2
|
|
|
|
5
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14
|
|
|
|
14
|
|
|
|
28
|
|
|
|
28
|
|
Curtailment charge
|
|
|
6
|
|
|
|
|
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
20
|
|
|
$
|
14
|
|
|
$
|
34
|
|
|
$
|
28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due to the actions Schlumberger has taken to reduce its global workforce (See Note 2
Charges
),
Schlumberger experienced a significant reduction in the expected aggregate years of future service of its employees in certain of its pension plans and its postretirement medical plan. Accordingly, Schlumberger recorded a curtailment charge of $136
million during the second quarter of 2009. The curtailment charge includes recognition of the change in benefit obligations as well as a portion of the previously unrecognized prior service costs, reflecting the reduction in expected future service
for the impacted plans.
As a result of the curtailment, Schlumberger performed a remeasurement of the impacted plans using a discount rate of 7.25% (as
compared to 6.50% at December 31, 2008). All other significant assumptions remained unchanged from the December 31, 2008 measurement date. The curtailment and remeasurement resulted in a net decrease in Schlumbergers liability for
Postretirement Benefits
of $361 million.
16.
Discontinued Operations
During the first quarter of 2008, Schlumberger recorded an after-tax gain of $38 million relating to a previously disposed of business that was accounted for as a discontinued operation.
18
Item 2.
|
Managements Discussion and Analysis of Financial Condition and Results of Operations.
|
BUSINESS REVIEW
Second Quarter 2009 Compared
to First Quarter 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Stated in millions)
|
|
|
|
Second Quarter
2009
|
|
First Quarter
2009
|
|
% chg
|
|
Oilfield Services
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
4,956
|
|
$
|
5,439
|
|
(9
|
)%
|
Pretax Operating Income
|
|
$
|
1,022
|
|
$
|
1,255
|
|
(19
|
)%
|
|
|
|
|
WesternGeco
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
559
|
|
$
|
551
|
|
1
|
%
|
Pretax Operating Income
|
|
$
|
97
|
|
$
|
55
|
|
77
|
%
|
Pretax operating income represents the segments income before taxes and noncontrolling interest. The pretax
operating income excludes such items as corporate expenses and interest income and interest expense not allocated to the segments as well as the charges described in detail in Note 2 to the
Consolidated Financial Statements
, amortization of
certain intangible assets, interest on postretirement medical benefits and stock-based compensation costs.
Second quarter 2009 revenue was $5.53 billion
versus $6.00 billion in the first quarter of 2009. Income from continuing operations attributable to Schlumberger for the second quarter of 2009 was $613 million compared to $938 million in the first quarter of 2009. The second quarter 2009 results
included after-tax charges of $207 million related to workforce reductions and postretirement benefits curtailment.
Compared to the first quarter, the
overall sequential rate of revenue decline slowed as a further precipitous drop in North America was offset by slowing rates of decline and some recovery in other parts of the world. In Russia, revenue recovered noticeably due to seasonal trends and
improving activity. North American gas drilling in both the US and Canada reached a five-year low as demand remained weak and storage remained at levels significantly above seasonal averages. While production has begun to show some decline and
summer demand has been strong, it will still require a further substantial increase in demand to stimulate and sustain higher levels of drilling. This is not anticipated to happen before 2010. At WesternGeco, there was some recovery in Multiclient
sales both in North America and overseas, although this, together with increased activity in Land, was offset by weaker Marine revenue. Marine pricing continued to decline due to excess capacity in the market. Several new marine and land contracts
were booked during the quarter giving better visibility on the next few months, however, multiclient sales remain difficult to forecast until there is better visibility on year-end oil prices.
Schlumbergers outlook for the remainder of 2009 assumes some stability but no major increase in the North American natural gas rig count and as a result service
pricing is expected to remain depressed. Overseas, further activity declines are expected to occur but be limited and the pricing concessions made in the first half of the year are expected to affect revenues in the second half. The current
volatility in the oil price makes it unlikely that customers will sanction any major increases in expenditures.
Schlumberger is aware that a number of
projects are continuing to be postponed or cancelled and is also concerned that the higher finding and development costs of new supply, coupled with lower oil and gas prices and more restrictive credit markets are stifling investment flows. This
situation, if it persists, will lead to inadequate supply when demand growth returns. The shape of the economic recovery beyond 2009 and the consequent recovery in oil and gas demand remain the determining factors for future activity increases.
19
OILFIELD SERVICES
Second quarter revenue of $4.96 billion was 9% lower sequentially driven by a 31% fall in North America moderated by a 3% decline internationally. The significant drop in North America revenue resulted primarily from
a further decrease in activity in the US Land GeoMarket*, the impact of spring break-up and generally reduced drilling activity in Canada, and additional pricing erosion across the Area. The reduction in revenue across the other Areas was primarily
due to lower overall activity levels, although improvements were noted in Russia, East Asia and Mexico/Central America. Across all Areas, revenue declines were most significant in Well Services, Drilling & Measurements and Wireline
activities.
Sequentially, second quarter pretax operating income of $1.02 billion was down 19%. Pretax operating margin decreased 245 basis points
(bps) sequentially to 20.6% primarily due to the impact of the severe reduction in activity and pricing in North America and the overall lower level of international activity.
North America
Revenue of $819 million was 31% lower compared to the first quarter of 2009. Pretax operating income
of $8 million decreased 95% versus the first quarter of 2009.
The US Land GeoMarket recorded a further steep drop in revenue as rig count declined
approximately 27% and pricing continued to erode. Canada GeoMarket revenue also dropped significantly due to the impact of the seasonal spring break-up, a general reduction in land drilling activity and significant pricing pressure. US Gulf of
Mexico revenue fell modestly as lower pricing and a further weakening in shelf drilling activity were partially offset by slightly higher deepwater activity.
Pretax operating margin decreased sequentially by 12.7 percentage points to 1.0% on the heavy pricing pressure across most of the Area and the sharp drop in activity primarily in the US Land and Canada GeoMarkets.
Latin America
Revenue of $995 million was 3% lower than the previous
quarter. Pretax operating income of $176 million was 13% lower sequentially.
Sequentially, Area revenue decreased primarily as the result of significantly
lower activity and the deferral of revenue pending finalization of certain contracts in the Venezuela/Trinidad & Tobago GeoMarket. This decrease, however, was partially offset by an increase in the Mexico/Central America GeoMarket from
higher Integrated Project Management (IPM) project efficiency and activity.
Pretax operating margin decreased 206 bps sequentially to 17.6% primarily due
to a less favorable revenue mix coupled with higher operating costs in the Brazil GeoMarket; currency revaluation losses and pricing pressure in the Peru/Colombia/Ecuador GeoMarket; and the impact of the lower activity in the
Venezuela/Trinidad & Tobago GeoMarket. These decreases were partially offset by increased IPM project efficiency and activity in Mexico/Central America.
Europe/CIS/Africa
Revenue of $1.78 billion was 1% lower sequentially. Pretax operating income of $432 million was 8% lower than the
previous quarter.
Russia revenue increased on the seasonal rebound of offshore activities in the East and generally improved activity levels in East and
West Siberia as well as through higher sales of Artificial Lift and Completions products. The North Africa GeoMarket also increased on strong demand for Testing Services technologies and
20
Completions products. These increases were offset by lower revenue in the Nigeria & Gulf of Guinea and the West & South Africa GeoMarkets
due to reduced activity levels that mainly impacted Drilling & Measurements and Wireline services. The Caspian and North Sea GeoMarkets were down primarily due to reduced demand for Drilling & Measurements and Well Services
technologies. Sequentially, revenue also declined in the Continental Europe GeoMarket due to lower Schlumberger Information Solutions (SIS) software sales as well as reduced demand for Drilling & Measurements, Wireline and Testing Services
technologies.
Pretax operating margin of 24.2% dropped 172 bps sequentially, primarily due to the lower activity levels and a less favorable revenue mix
in the Nigeria & Gulf of Guinea, West & South Africa and North Sea GeoMarkets. These decreases, however, were partially offset by the improving activity levels in Russia.
Middle East & Asia
Revenue of $1.31 billion was 5% lower
sequentially. Pretax operating income of $421 million was 8% lower than the previous quarter.
Sequentially, revenue decreased primarily due to lower
activity in the Gulf GeoMarkets as well as in the East Mediterranean, Arabian, Indonesia, Australia/Papua New Guinea and India GeoMarkets. Pricing pressure also began to impact revenue. These decreases were partially offset by an increase in revenue
in the East Asia GeoMarket on strong exploration-related demand for Testing Services, Wireline and Well Services technologies and a rebound in activity in the China/Japan/Korea GeoMarket following the winter slowdown in the prior quarter.
Pretax operating margin slipped 107 bps sequentially to 32.1% primarily as the result of the lower overall activity in the Area.
WESTERNGECO
Second quarter revenue of $559 million
increased 1% versus the first quarter of 2009. Pretax operating income of $97 million increased 77% sequentially.
Multiclient revenue improved primarily
in North America due to increased sales of the E-Octopus surveys, and in the North Sea following the announcement of licensing round awards. Land revenue increased slightly with the start of a new project in Asia. These increases were partially
offset by a decrease in Marine revenue on weaker activity.
Pretax operating margin increased 7.4 percentage points to 17.3% sequentially primarily due to
higher Multiclient sales and improved profitability in Marine as cost reduction initiatives more than offset the impact of the lower revenue.
Total
backlog was $1.2 billion at the end of the quarter compared to $1.5 billion at the end of the first quarter 2009 and $1.8 billion at December 31, 2008.
21
Second Quarter 2009 Compared to Second Quarter 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Stated in millions)
|
|
|
|
Second Quarter
|
|
|
|
2009
|
|
2008
|
|
% chg
|
|
Oilfield Services
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
4,956
|
|
$
|
6,066
|
|
(18
|
)%
|
Pretax Operating Income
|
|
$
|
1,022
|
|
$
|
1,704
|
|
(40
|
)%
|
|
|
|
|
WesternGeco
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
559
|
|
$
|
671
|
|
(17
|
)%
|
Pretax Operating Income
|
|
$
|
97
|
|
$
|
196
|
|
(51
|
)%
|
Second quarter 2009 revenue was $5.53 billion versus $6.75 billion in the second quarter of 2008.
Income from continuing operations attributable to Schlumberger was $613 million in the second quarter of 2009 as compared to $1.42 billion in the second quarter of 2008.
The second quarter 2009 results included after-tax charges of $207 million related to workforce reductions and postretirement benefits curtailment.
OILFIELD SERVICES
Second quarter 2009 revenue of $4.96 billion was 18% lower compared to the same period last year with declines in all
Areas. North America revenue was down as low natural gas prices resulted in a significant drop in activity and associated pricing pressure. Europe/CIS/Africa revenue decreased primarily due to the weakening of local currencies against the US dollar
and lower activity in the North Sea and Russia as the result of lower customer spending. Middle East & Asia revenue was lower due to reduced activity throughout most of the Area. Latin America revenue decreased as a result of the sharp drop
in activity in Venezuela/Trinidad & Tobago and the weakening of local currencies against the US dollar. Across the Areas, revenue declines were heaviest in Well Services, Wireline and Drilling & Measurements activities.
Second quarter 2009 pretax operating income of $1.02 billion was 40% lower year-on-year. Pretax operating margin declined 746 bps to 20.6% compared to the second
quarter of 2008 due to the significant drop in activity and pricing pressure in North America as well as the lower overall activity coupled with a less favorable revenue mix internationally.
North America
Second quarter 2009 revenue of $819 million was 43%
lower year-on-year. US Land and Canada revenue decreased significantly as lower natural gas prices and a lack of available credit for some customers resulted in a sharp decrease in activity coupled with heavy pricing pressure. Canada revenue was
adversely impacted by the weakening of the Canadian dollar against the US dollar. The US Gulf of Mexico revenue decreased on weaker shelf drilling activity and lower pricing.
Year-on-year, pretax operating margin decreased 23.0 percentage points to 1.0%, primarily due to the impact of lower activity across the Area and the related pricing erosion.
Latin America
Second quarter 2009 revenue of $995 million was 6%
below the same period last year primarily as the result of significantly reduced activity in Venezuela/Trinidad & Tobago and the weakening of local currencies against the US dollar. Peru/Colombia/Ecuador revenue also decreased on lower gain
share in IPM projects as well as
22
reduced demand for Drilling & Measurements and Wireline services while Argentina/Bolivia/Chile decreased on reduced demand for Well Services and
Drilling & Measurements technologies and Data & Consulting Services. These decreases were partially offset by increases in Mexico/Central America on higher IPM project activity and in Brazil due to stronger exploration related
activities that resulted in demand for Wireline, Testing Services and Drilling & Measurement technologies.
Year-on-year, pretax operating margin
was down 537 bps to 17.6% primarily due to the impact of the severe drop in activity in Venezuela/Trinidad & Tobago as well as the reduced gain share and pricing erosion in Peru/Colombia/Ecuador.
Europe/CIS/Africa
Second quarter 2009 revenue of $1.78 billion was
14% lower year-on-year primarily as the result of the weakening of local currencies against the US dollar. Additionally, revenue decreased in Russia and the North Sea on lower activity resulting from reduced customer spending, and from the
associated pricing pressure. Nigeria & Gulf of Guinea revenue was lower on a decrease in demand for Drilling & Measurements, Testing Services and Wireline technologies while Framo revenue was also lower. These decreases were
partially offset by an increase in Libya on commencement of exploration-related activities and higher demand for Artificial Lift and Completion products.
Year-on-year, pretax operating margin decreased by 394 bps to 24.2% primarily as the result of the lower overall activity and a less favorable revenue mix in the North Sea, Nigeria & Gulf of Guinea, and West & South
Africa.
Middle East & Asia
Second quarter
2009 revenue of $1.31 billion was 9% below the same period last year. Revenue in the Australia/Papua New Guinea and Arabian GeoMarkets decreased on lower exploration-related activity which resulted in reduced demand for Testing Services, Wireline,
Well Services and Drilling & Measurements technologies. The China/Japan/Korea GeoMarket was lower on reduced demand for Drilling & Measurements services and Artificial Lift products while the East Mediterranean GeoMarket dropped on
decreased demand for Drilling & Measurements and Well Services technologies.
Year-on-year, pretax operating margin decreased 428 bps to 32.1%
primarily due to the lower activity coupled with a less favorable revenue mix in the Arabian, Gulf, Indonesia, East Mediterranean and Australia/Papua New Guinea GeoMarkets.
WESTERNGECO
Second quarter 2009 revenue of $559 million was 17% lower year-on-year. Marine
revenue decreased as the result of reduced activity and increased vessel dry docks and transits. Multiclient revenue was down primarily due to reduced sales in North America. Land revenue was also below the same period last year mostly as the result
of the completion of contracts in Latin America.
Year-on-year, pretax operating margin decreased 11.9 percentage points to 17.3% primarily due to the
impact of the reduced activity in Marine and lower Multiclient sales. However, these decreases were partially offset by an improvement in Land as cost reductions more than offset the lower activity.
23
Six Months 2009 Compared to Six Months 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Stated in millions)
|
|
|
|
Six Months
|
|
|
|
2009
|
|
2008
|
|
% chg
|
|
Oilfield Services
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
10,395
|
|
$
|
11,671
|
|
(11
|
)%
|
Pretax Operating Income
|
|
$
|
2,278
|
|
$
|
3,206
|
|
(29
|
)%
|
|
|
|
|
WesternGeco
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
1,110
|
|
$
|
1,347
|
|
(18
|
)%
|
Pretax Operating Income
|
|
$
|
151
|
|
$
|
393
|
|
(61
|
)%
|
Six month revenue for the period ended June 30, 2009 was $11.53 billion versus $13.04 billion for the same
period last year. Income from continuing operations attributable to Schlumberger was $1.55 billion in the first six months of 2009 as compared to $2.72 billion for the same period in 2008. Results for the first six months of 2009 included after-tax
charges of $207 million related to workforce reductions and postretirement benefits curtailment.
OILFIELD SERVICES
Six month revenue of $10.40 billion was 11% lower compared to the same period last year. North America revenue was down significantly as low natural gas prices resulted
in a steep drop in activity and heavy pricing pressure in much of the Area. Europe/CIS/Africa revenue decreased primarily on the weakening of local currencies against the US dollar and lower activity in the North Sea and Russia due to reduced
customer spending. Middle East & Asia revenue decreased as the result of lower activity primarily in the Asia GeoMarkets. These decreases were partially offset by an increase in Latin America revenue primarily due to higher IPM activity in
Mexico/Central America and offshore activity in Brazil but partially offset by lower activity in Venezuela & Trinidad & Tobago and the impact of weakening local currencies in the Area against the US dollar.
Pretax operating margin decreased 556 bps to 21.9% as a result of the significant drop in activity and pricing pressure in North America as well as the lower overall
international activity.
North America
Revenue of
$2.01 billion was 30% lower than the same period last year. Revenue decreases were recorded across the Area but were most significant in US Land and Canada where lower natural gas prices and a lack of available credit for some customers resulted in
a steep drop in activity coupled with heavy pricing pressure. Canada revenue was also down due to the weakening of the Canadian dollar against the US dollar. The US Gulf of Mexico revenue decreased on weaker shelf drilling activity and lower
pricing.
Pretax operating margin decreased 16.3 percentage points to 8.5% primarily due to the impact of the lower activity across the Area and the
related pricing erosion.
Latin America
Revenue of
$2.02 billion grew 2% versus the same period last year primarily due to increased IPM activity in Mexico/Central America and higher offshore activity in Brazil. These increases, however, were partially offset by significantly lower activity across
Venezuela & Trinidad & Tobago and the impact of the weakening of local currencies in the Area against the US dollar.
Pretax operating
margin was down 294 bps to 18.7% primarily due to the impact of the severe drop in activity in Venezuela/Trinidad & Tobago.
24
Europe/CIS/Africa
Revenue of $3.58 billion was 10% lower than the same period last year primarily as the result of the weakening of local currencies against the US dollar. Additionally, revenue decreased in Russia and the North Sea as reduced customer
spending resulted in lower activity and associated pricing pressure. Nigeria & Gulf of Guinea was lower on a decrease in demand for Drilling & Measurements, Testing Services, Well Services and Wireline technologies while Framo
revenue also declined. These decreases were partially offset by an increase in Libya on commencement of exploration-related activities and higher demand for Artificial Lift and Completion products.
Year-on-year, pretax operating margin decreased by 221 bps to 25.1% primarily as the result of the lower overall activity and pricing pressure.
Middle East & Asia
Revenue of $2.69 billion was 3% below
the same period last year primarily in the Asia GeoMarkets where decreases were most significant in Australia/Papua New Guinea and East Asia on lower activity which resulted in reduced demand for Testing Services and Drilling & Measurements
technologies. Revenue for Middle East GeoMarkets was essentially flat with the same period last year.
Pretax operating margin decreased 303 bps to 32.6%,
primarily due to a less favorable revenue mix in the Arabian, Gulf, and Indonesia GeoMarkets.
WESTERNGECO
Six month revenue of $1.11 billion was 18% lower year-on-year. Multiclient decreased on reduced sales primarily in North America, Europe/Africa and Asia. Marine revenue
declined due to lower activity and rationalization of the fleet capacity as the result of weaker market conditions. Land revenue was lower following the completion of contracts in South America, Egypt and North East Africa while Data Processing was
also down primarily in Europe/Africa and in North America.
Pretax margin decreased 15.5 percentage points to 13.6% primarily due to the weaker Marine
activity and lower Multiclient sales.
Interest & Other Income
Interest & other income consisted of the following for the second quarter and six months ended June 30, 2009 and 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Stated in millions)
|
|
|
Second Quarter
|
|
Six Months
|
|
|
2009
|
|
2008
|
|
2009
|
|
2008
|
Interest income
|
|
$
|
17
|
|
$
|
25
|
|
$
|
36
|
|
$
|
63
|
Equity in net earnings of affiliated companies
|
|
|
43
|
|
|
72
|
|
|
101
|
|
|
136
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
60
|
|
$
|
97
|
|
$
|
137
|
|
$
|
199
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The decrease in interest income is attributable to the significant decline in interest rates experienced during
2009 as compared to 2008.
The decrease in equity in net earnings of affiliated companies was primarily due to the results of the MI-SWACO drilling fluids
joint venture between Schlumberger and Smith International, Inc.
25
Other
Gross
margin was 20.2% and 31.7% in the second quarter of 2009 and 2008, and 22.8% and 31.2% in the six-month periods ended June 30, 2009 and 2008, respectively. The decreases in gross margin were primarily driven by the significant drop in activity
and pricing pressure, particularly in North America for Oilfield Services.
As a percentage of Revenue, Research & engineering, Marketing and
General & administrative expenses for the second quarter and six months ended June 30, 2009 and 2008 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second Quarter
|
|
|
Six Months
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
Research & engineering
|
|
3.6
|
%
|
|
2.9
|
%
|
|
3.4
|
%
|
|
3.0
|
%
|
Marketing
|
|
0.4
|
%
|
|
0.4
|
%
|
|
0.4
|
%
|
|
0.4
|
%
|
General & administrative :
|
|
2.4
|
%
|
|
2.2
|
%
|
|
2.3
|
%
|
|
2.2
|
%
|
Research and engineering expenditures, by business segment, for the second quarter and six months ended
June 30, 2009 and 2008 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Stated in millions)
|
|
|
Second Quarter
|
|
Six Months
|
|
|
2009
|
|
2008
|
|
2009
|
|
2008
|
Oilfield Services
|
|
$
|
168
|
|
$
|
163
|
|
$
|
326
|
|
$
|
323
|
WesternGeco
|
|
|
26
|
|
|
30
|
|
|
53
|
|
|
59
|
Other
|
|
|
3
|
|
|
4
|
|
|
7
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
197
|
|
$
|
197
|
|
$
|
386
|
|
$
|
389
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The effective tax rate for the second quarter of 2009 was 19.8% compared to 20.9% for the same period in 2008.
This decrease was primarily attributable to the substantially lower proportion of pretax earnings in North America in the second quarter of 2009 as compared to the second quarter of 2008 partially offset by the fact that a significant portion of the
charges recorded during the second quarter of 2009 were not tax effective.
The effective tax rate for the six months ended June 30, 2009 was 20.6%
compared to 20.1% for the same period of the prior year. This increase was primarily attributable to the fact that a significant portion of the charges recorded during the six months ended June 30, 2009 were not tax effective.
CHARGES
Schlumberger recorded significant charges during the second
quarter of 2009. These charges, which are summarized below are more fully described in Note 2 to the
Consolidated Financial Statements
.
The
following is a summary of the second quarter 2009 Charges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Stated in millions)
|
|
|
|
|
Pretax
|
|
Tax
|
|
|
Net
|
|
Income Statement Classification
|
Charges
|
|
|
|
|
|
|
|
|
|
|
|
|
- Workforce reductions
|
|
$
|
102
|
|
$
|
(17
|
)
|
|
$
|
85
|
|
Cost of goods sold and services
|
- Postretirement benefits curtailment
|
|
|
136
|
|
|
(14
|
)
|
|
|
122
|
|
Cost of goods sold and services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
238
|
|
$
|
(31
|
)
|
|
$
|
207
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
There were no charges in either the first quarter of 2009 or the first six months of 2008.
26
CASH FLOW
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 indebtedness by reflecting cash and investments
that could be used to repay debt.
Details of Net Debt follow:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Stated in millions)
|
|
|
|
Jun. 30
2009
|
|
|
Jun. 30
2008
|
|
Net Debt, beginning of period
|
|
$
|
(1,129
|
)
|
|
$
|
(1,857
|
)
|
Net income
|
|
|
1,556
|
|
|
|
2,758
|
|
Depreciation and amortization
(1)
|
|
|
1,235
|
|
|
|
1,073
|
|
Non-cash postretirement benefits curtailment charge
|
|
|
136
|
|
|
|
|
|
Excess of equity income over dividends received
|
|
|
(37
|
)
|
|
|
(119
|
)
|
Stock-based compensation expense
|
|
|
92
|
|
|
|
82
|
|
Increase in working capital requirements
|
|
|
(675
|
)
|
|
|
(907
|
)
|
Capital expenditure
|
|
|
(1,252
|
)
|
|
|
(1,645
|
)
|
Multiclient seismic data capitalized
|
|
|
(89
|
)
|
|
|
(188
|
)
|
Dividends paid
|
|
|
(502
|
)
|
|
|
(460
|
)
|
Proceeds from employee stock plans
|
|
|
43
|
|
|
|
234
|
|
Business acquisitions
|
|
|
(198
|
)
|
|
|
(182
|
)
|
Pension plan funding
|
|
|
(502
|
)
|
|
|
|
|
Stock repurchase program
|
|
|
|
|
|
|
(1,119
|
)
|
Conversion of debentures
|
|
|
|
|
|
|
408
|
|
Other
|
|
|
368
|
|
|
|
(76
|
)
|
Translation effect on Net Debt
|
|
|
(36
|
)
|
|
|
(20
|
)
|
|
|
|
|
|
|
|
|
|
Net Debt, end of period
|
|
$
|
(990
|
)
|
|
$
|
(2,018
|
)
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Includes Multiclient seismic data costs.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Stated in millions)
|
|
Components of Net Debt
|
|
Jun. 30
2009
|
|
|
Jun. 30
2008
|
|
|
Dec. 31
2008
|
|
Cash
|
|
$
|
216
|
|
|
$
|
186
|
|
|
$
|
189
|
|
Short-term investments
|
|
|
4,195
|
|
|
|
2,714
|
|
|
|
3,503
|
|
Fixed income investments, held to maturity
|
|
|
464
|
|
|
|
449
|
|
|
|
470
|
|
Bank loans and current portion of long-term debt
|
|
|
(1,253
|
)
|
|
|
(1,248
|
)
|
|
|
(1,598
|
)
|
Convertible debentures
|
|
|
(321
|
)
|
|
|
(361
|
)
|
|
|
(321
|
)
|
Other long-term debt
|
|
|
(4,291
|
)
|
|
|
(3,758
|
)
|
|
|
(3,372
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(990
|
)
|
|
$
|
(2,018
|
)
|
|
$
|
(1,129
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Key liquidity events during the first six months of 2009 and 2008 included:
|
|
|
During the first quarter of 2009, a subsidiary of Schlumberger entered into a 3.0 billion Euro Medium Term Note program which is guaranteed by Schlumberger
Limited. This program provides for the issuance of various types of debt instruments such as fixed or floating rate notes in Euro, US dollar or other currencies.
|
During the first quarter of 2009, Schlumberger issued 1.0 billion 4.50% Guaranteed Notes due 2014 under this program. Schlumberger entered into
agreements to swap these Euro notes for US dollars on the date of issue until maturity, effectively making this a US dollar denominated debt on which
27
Schlumberger will pay interest in US dollars at a rate of 4.95%. The proceeds from these notes will be used to refinance existing debt obligations and for
general corporate purposes and will increase Schlumbergers financial flexibility.
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|
|
On April 20, 2006, the Board of Directors of Schlumberger approved a share repurchase program of up to 40 million shares of its common stock to be
acquired in the open market before April 2010, subject to market conditions. This program was completed during the second quarter of 2008. On April 17, 2008, the Board of Directors of Schlumberger approved an $8 billion share repurchase program
for shares of its common stock to be acquired in the open market before December 31, 2011, of which $934 million have been repurchased as of June 30, 2009. Given the current economic environment, Schlumberger has temporarily suspended the
share repurchase program and did not repurchase any shares during the first six months of 2009. The following table summarizes the activity under the April 20, 2006 share repurchase program during the six months ended June 30, 2008:
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|
|
|
|
|
|
|
|
|
|
|
|
|
(Stated in thousands, except per share amounts)
|
|
|
Total cost of
shares
purchased
|
|
Total number
of shares
purchased
|
|
Average
price paid per share
|
First six months of 2008
|
|
$
|
1,119,316
|
|
12,400.0
|
|
$
|
90.27
|
|
|
|
During the first six months of 2009 Schlumberger made contributions to its US and international defined benefit plans of $212 million and $290 million,
respectively. Schlumberger currently anticipates contributing approximately $300 million to its defined benefits pension plans during the last six months of 2009.
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|
|
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Cash flow provided by operations was $2.1 billion in the first six months of 2009 compared to $2.7 billion in the first six months of 2008. This was primarily
driven by the net income decrease experienced in the first six months of 2009 as compared to the first six months of 2008 and the significant pension plan contributions made during the first six months of 2009, offset by an improvement in working
capital requirements.
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|
|
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Capital expenditures were $1.3 billion in the first six months of 2009 compared to $1.6 billion during the first six months of 2008. Capital expenditures are
expected to approach $2.4 billion for the full year 2009.
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The reduction in cash flows being experienced by our customers resulting from
declines in commodity prices, together with the reduced availability of credit and increased costs of borrowing due to the tightening of the credit markets, could have significant adverse effects on the financial condition of some of our
customers. This could result in, among other things, delay in, or nonpayment of, amounts that are owed to Schlumberger, which could have a material adverse effect on Schlumbergers results of operations and cash flows. At times in
recent quarters, Schlumberger has experienced delays in payments from certain of its customers. Schlumberger operates in approximately 80 countries. As of June 30, 2009, only five of those countries individually accounted for greater
than 5% of Schlumbergers accounts receivable balance and only one, where cash collections continue to be received on a timely and regular basis, represented greater than 10%.
As of June 30, 2009, Schlumberger had approximately $4.9 billion of cash and investments on hand. Wholly-owned subsidiaries of Schlumberger had separate committed debt facility agreements aggregating $3.8 billion
with commercial banks, of which $2.3 billion was available and unused as of June 30, 2009. Schlumberger believes that these amounts are sufficient to meet future business requirements for at least the next twelve months.
Schlumbergers total outstanding debt at June 30, 2009 was $5.9 billion and included approximately $0.4 billion of commercial paper borrowings. The total
outstanding debt increased approximately $0.6 billion as compared to December 31, 2008. This increase was primarily attributable to the 1 billion of 4.50% Guaranteed Notes due 2014 that were issued during the first quarter, partially
offset by the repayment of $0.6 billion of commercial paper borrowings.
28
FORWARD-LOOKING STATEMENTS
This Report and 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 Oilfield Services and WesternGeco (and for specified products or geographic areas within each segment); oil and natural gas demand and production growth; operating
margins; capital expenditures by Schlumberger and the oil and gas industry; the business strategies of Schlumberger customers; the Schlumberger effective tax rate; and future results of operations. These statements are subject to risks and
uncertainties, including, but not limited to, the current global economic downturn; the current volatility in the price of oil; changes in exploration and production spending by Schlumberger customers and changes in the level of oil and natural gas
exploration and development; general economic and business conditions in key regions of the world; the financial condition of our suppliers and customers in light of current global economic conditions; delay in, or nonpayment of, amounts that are
owed to Schlumberger; pricing erosion; operational and project modifications, delays or cancelations; seasonal factors and weather-related events; and other risks and uncertainties detailed in our second-quarter 2009 earnings release, our most
recent Form 10-K, this Form 10-Q and other filings that we make with the Securities and Exchange Commission. If one or more of these risks or uncertainties materialize (or the consequences of such a development changes), or should underlying
assumptions prove incorrect, actual outcomes may vary materially from those forecasted or expected. 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.
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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, 2008. Schlumbergers exposure to market risk has not changed materially since December 31, 2008.
Item 4.
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Controls and Procedures.
|
Schlumberger has carried out an
evaluation under the supervision and with the participation of Schlumbergers management, including the Chief Executive Officer (CEO) and the Chief Financial Officer (CFO), of the effectiveness of Schlumbergers
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, Schlumbergers 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 Commissions rules and forms. Schlumbergers
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 has been no change in Schlumbergers internal control over financial reporting that occurred during the quarter to which this report relates that has
materially affected, or is reasonably likely to materially affect, Schlumbergers internal control over financial reporting.
* Mark of Schlumberger
29
PART
|
II. OTHER INFORMATION
|
Item 1.
|
Legal Proceedings.
|
The information with respect to
Item 1 is set forth under Note 13
Contingencies
to the
Consolidated Financial Statements
.
There have been no material changes from the
risk factors as previously disclosed in Part 1, Item 1A, of the Schlumberger Annual Report on Form 10-K for the fiscal year ended December 31, 2008.
Item 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds.
|
Unregistered Sales of Equity Securities
None.
Issuer Repurchases of Equity Securities
None.
Item 3.
|
Defaults Upon Senior Securities.
|
None.
Item 4.
|
Submission of Matters to a Vote of Security Holders.
|
None.
Item 5.
|
Other Information.
|
None.
Exhibit 3.1 - Articles of
Incorporation of Schlumberger Limited (Schlumberger N.V.) (incorporated by reference to Exhibit 3.1 to Schlumbergers Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2006).
Exhibit 3.2 - Amended and Restated Bylaws of Schlumberger Limited (Schlumberger N.V.) (incorporated by reference to Exhibit 3.1 to Schlumbergers
Current Report on Form 8-K filed on April 22, 2005).
* Exhibit 10.1 - Employment Agreement dated June 9, 2009 and effective as of May 1,
2009, between Schlumberger Limited and Dalton Boutte.
* Exhibit 31.1 - Certification of Chief Executive Officer pursuant to Rule 13a-14(a)
of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
* Exhibit 31.2 -
Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
** Exhibit 32.1 - Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
** Exhibit 32.2 - Certification Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.
** Exhibit 101 - The following materials from Schlumberger Limiteds Quarterly Report on Form 10-Q
for the quarter ended June 30, 2009, formatted in XBRL (Extensible Business Reporting Language): (i) Consolidated Statement of Income, (ii) Consolidated Balance Sheet, (iii) Consolidated Statement of Cash Flows,
(iv) Consolidated Statement of Equity and (v) Notes to Consolidated Financial Statements, tagged as blocks of text.
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*
|
Filed with this Form 10-Q.
|
|
**
|
Furnished with this Form 10-Q.
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30
SIGNATURE
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)
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Date: July 29, 2009
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/s/ H
OWARD
G
UILD
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Howard Guild
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Chief Accounting Officer and Duly Authorized Signatory
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31
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