Notes to Consolidated Financial Statements
1.
Business Description
Schlumberger Limited (Schlumberger N.V., incorporated in Curaçao) and its consolidated subsidiaries
(collectively, Schlumberger) form the worlds leading supplier of technology, integrated project management and information solutions to customers in the international oil and gas exploration and production industry.
2.
Summary of Accounting Policies
The
Consolidated Financial Statements
of Schlumberger have been prepared in accordance with accounting
principles generally accepted in the United States of America.
Principles of Consolidation
The accompanying
Consolidated Financial Statements
include the accounts of Schlumberger, its wholly-owned subsidiaries, and other
subsidiaries over which it exercises a controlling financial interest. All significant intercompany transactions and balances have been eliminated.
Reclassifications
Certain prior year items have been reclassified to
conform to the current year presentation.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. On an on-going
basis, Schlumberger evaluates its estimates, including those related to collectibility of accounts receivable; recoverability of goodwill, intangible assets and investments in affiliates; income taxes; multiclient seismic data; contingencies and
actuarial assumptions for employee benefit plans. Schlumberger bases its estimates on historical experience and on other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments
about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
Revenue Recognition
Schlumberger recognizes revenue based upon
purchase orders, contracts or other persuasive evidence of an arrangement with the customer that include fixed or determinable prices provided that collectibility is reasonably assured. Revenue is recognized for services when they are rendered.
Revenue is recognized for products upon delivery, when the customer assumes the risks and rewards of ownership.
Revenue from
seismic contract services performed on a dayrate basis is recognized as the service is performed. Revenue from other services, including pre-funded multiclient surveys, is recognized as the seismic data is acquired and/or processed on a
proportionate basis as work is performed. This method requires revenue to be recognized based upon quantifiable measures of progress, such as square kilometers acquired. Multiclient data surveys are licensed or sold to customers on a
non-transferable basis. Revenue from sales of completed multiclient data surveys is recognized upon obtaining a signed licensing agreement and providing customers with access to such data.
Revenue is occasionally generated from contractual arrangements that include multiple deliverables. Revenue from these arrangements is
recognized as each item is delivered based on their relative fair value and when the delivered items have stand-alone value to the customer.
Revenue derived from the sale of licenses of Schlumberger software may include installation, maintenance, consulting and training services. If services are not essential to the functionality of the
software, the revenue for each element of the contract is recognized separately based on its respective vendor specific objective evidence of fair value when all of the following conditions are met: a signed contract is obtained, delivery has
occurred, the fee is fixed or determinable and collectibility is probable.
39
Translation of Non-United States Currencies
The functional currency of Schlumberger is primarily the US dollar. Assets and liabilities recorded in functional currencies other than US
dollars are translated at period end exchange rates. The resulting adjustments are charged or credited directly to the
Equity section of the Consolidated Balance Sheet
. Revenue and expenses are translated at the weighted-average exchange
rates for the period. Realized and unrealized transaction gains and losses are included in income in the period in which they occur. Transaction losses of $37 million, $25 million and $27 million, net of hedging activities, were recognized in 2012,
2011 and 2010, respectively.
Short-term and Fixed Income Investments
The
Consolidated Balance Sheet
reflects the Schlumberger investment portfolio separated between current and long term, based on
maturity. Both
Short-term investments
and
Fixed Income Investments, held to maturity
are comprised primarily of money market funds, eurodollar time deposits, certificates of deposit, commercial paper, euro notes and Eurobonds, and are
substantially denominated in US dollars. Under normal circumstances it is the intent of Schlumberger to hold the investments until maturity, with the exception of investments that are considered trading (December 31, 2012 $194 million;
December 31, 2011 $190 million). Short-term investments that are designated as trading are stated at fair value, which is estimated using quoted market prices for those or similar investments. All other investments are stated at cost
plus accrued interest, which approximates market. The unrealized gains/losses on investments designated as trading were not significant at both December 31, 2012 and 2011.
For purposes of the
Consolidated Statement of Cash Flows
, Schlumberger does not consider
Short-term investments
to be cash equivalents.
Fixed Income Investments, held to maturity
at December 31, 2012 of $245 million mature as follows: $172 million in 2014, $51
million in 2015 and $5 million in 2016 and $17 million in 2017.
Inventories
Inventories
are stated at average cost or at market, whichever is lower. Costs included in
Inventories
consist of materials,
direct labor and manufacturing overhead.
Investments in Affiliated Companies
Investments in companies in which Schlumberger does not have a controlling financial interest, but over which it has significant influence
are accounted for using the equity method. Schlumbergers share of the after-tax earnings of equity method investees is included in
Interest and other income
. Investments in privately held companies in which Schlumberger does
not have the ability to exercise significant influence are accounted for using the cost method. Investments in publicly traded companies in which Schlumberger does not have significant influence are accounted for as available-for-sale
marketable securities. These marketable securities are reported at fair value, based on quoted market prices, with unrealized gains and losses reported as a component of
Accumulated other comprehensive loss
. The fair value and cost
basis of these marketable securities was $222 million and $81 million, respectively at December 31, 2012. Schlumberger did not have any investments in marketable securities at December 31, 2011.
Equity and cost method investments as well as investments in publicly traded companies are classified as
Investments in Affiliated
Companies
in the
Consolidated Balance Sheet
.
Fixed Assets and Depreciation
Fixed assets are stated at cost less accumulated depreciation, which is provided for by charges to income over the estimated useful lives
of the assets using the straight-line method. Fixed assets include the manufacturing cost of oilfield technical equipment manufactured or assembled by subsidiaries of Schlumberger. Expenditures for replacements and improvements are capitalized.
Maintenance and repairs are charged to operating expenses as incurred. Upon sale or other disposition, the applicable amounts of asset cost and accumulated depreciation are removed from the balance sheet and the net amount, less proceeds from
disposal, is charged or credited to income.
Multiclient Seismic Data
The multiclient library consists of completed and in-process seismic surveys that are licensed on a nonexclusive basis. Multiclient
surveys are primarily generated utilizing Schlumberger resources. Schlumberger capitalizes costs
40
directly incurred in acquiring and processing the multiclient seismic data. Such costs are charged to
Cost of revenue
based on the percentage of the total costs to the estimated
total revenue that Schlumberger expects to receive from the sales of such data. However, under no circumstance will an individual survey carry a net book value greater than a 4-year, straight-line amortized value.
The carrying value of the multiclient library is reviewed for impairment annually as well as when an event or change in circumstance
indicating impairment may have occurred. Adjustments to the carrying value are recorded when it is determined that estimated future cash flows, which involves significant judgment on the part of Schlumberger, would not be sufficient to recover the
carrying value of the surveys. Significant adverse changes in Schlumbergers estimated future cash flows could result in impairment charges in a future period.
Goodwill, Other Intangibles and Long-lived Assets
Schlumberger records
the excess of purchase price over the fair value of the tangible and identifiable intangible assets acquired as goodwill. The goodwill relating to each of Schlumbergers reporting units is tested for impairment annually as well as when an
event, or change in circumstances, indicates an impairment may have occurred.
Under generally accepted accounting principles,
Schlumberger has the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of one of its reporting units is greater than
its carrying amount. If, after assessing the totality of events or circumstances, Schlumberger determines it is more likely than not that the fair value of a reporting unit is greater than its carrying amount, then there is no need to perform any
further testing. However, if Schlumberger concludes otherwise, then it is required to perform the first step of a two-step impairment test by calculating the fair value of the reporting unit and comparing the fair value with the carrying amount of
the reporting unit. If the fair value of the reporting unit is less than its carrying value, an impairment loss is recorded to the extent that the implied fair value of the goodwill of the reporting unit is less than its carrying value.
Schlumberger has the option to bypass the qualitative assessment for any reporting unit in any period and proceed directly to performing
the first step of the two-step goodwill impairment test.
For purposes of performing the impairment test for goodwill,
Schlumbergers reporting units are its three Groups: Reservoir Characterization, Drilling and Production. Schlumberger elected to perform the qualitative assessment described above for purposes of its annual goodwill impairment test. Based on
this assessment, Schlumberger concluded that it was more likely than not that the fair value of each of its reporting units was greater than its carrying amount. Accordingly, no further testing was required.
Long-lived assets, including fixed assets and intangible assets, are reviewed for impairment whenever events or changes in circumstances
indicate that the carrying value may not be recoverable. In reviewing for impairment, the carrying value of such assets is compared to the estimated undiscounted future cash flows expected from the use of the assets and their eventual disposition.
If such cash flows are not sufficient to support the assets recorded value, an impairment charge is recognized to reduce the carrying value of the long-lived asset to its estimated fair value. The determination of future cash flows as well as
the estimated fair value of long-lived assets involve significant estimates on the part of management. If there is a material change in economic conditions or other circumstances influencing the estimate of future cash flows or fair value,
Schlumberger could be required to recognize impairment charges in the future.
Intangible assets consist primarily of customer
relationships, technology/technical know-how and tradenames acquired in business combinations. Customer relationships are generally amortized over periods ranging from 15 to 28 years, acquired technology/technical know-how are generally amortized
over periods ranging from 10 to 18 years and tradenames are generally amortized over periods ranging from 15 to 30 years.
Taxes on Income
Schlumberger computes taxes on income in accordance with the tax rules and regulations of the many taxing authorities
where the income is earned. The income tax rates imposed by these taxing authorities vary substantially. Taxable income may differ from pretax income for financial accounting purposes. To the extent that differences are due to revenue or expense
items reported in one period for tax purposes and in another period for financial accounting purposes, an appropriate provision for deferred income taxes is made. Any effect of changes in income tax rates or tax laws are included in the provision
for income taxes in the period of enactment. When it is more likely than not that a portion or all of the deferred tax asset will not be realized in the future, Schlumberger provides a corresponding valuation allowance against deferred tax assets.
41
Schlumbergers tax filings are subject to regular audit by the tax authorities in most
of the jurisdictions in which it conducts business. These audits may result in assessments for additional taxes which are resolved with the authorities or, potentially, through the courts. Schlumberger recognizes the impact of a tax position in its
financial statements if that position is more likely than not of being sustained on audit, based on the technical merits of the position. Tax liabilities are recorded based on estimates of additional taxes which will be due upon the conclusion of
these audits. Estimates of these tax liabilities are made based upon prior experience and are updated in light of changes in facts and circumstances. However, due to the uncertain and complex application of tax regulations, it is possible that the
ultimate resolution of audits may result in liabilities which could be materially different from these estimates. In such an event, Schlumberger will record additional tax expense or tax benefit in the year in which such resolution occurs.
Schlumberger generally does not provide income taxes relating to undistributed earnings, as the earnings either would not be
taxable when remitted or are considered to be indefinitely reinvested.
Concentration of Credit Risk
Schlumbergers assets that are exposed to concentrations of credit risk consist primarily of cash, short-term investments, fixed
income investments held to maturity, receivables from clients and derivative financial instruments. Schlumberger places its cash, short-term investments and fixed income investments held to maturity with financial institutions and corporations, and
limits the amount of credit exposure with any one of them. Schlumberger regularly evaluates the creditworthiness of the issuers in which it invests. The receivables from clients are spread over many countries and customers. Schlumberger maintains an
allowance for uncollectible accounts receivable based on expected collectibility and performs ongoing credit evaluations of its customers financial condition. By using derivative financial instruments to hedge exposure to changes in exchange
rates and commodity prices, Schlumberger exposes itself to some credit risk. Schlumberger minimizes this credit risk by entering into transactions with high-quality counterparties, limiting the exposure to each counterparty and monitoring the
financial condition of its counterparties.
Research & Engineering
All research and engineering expenditures are expensed as incurred.
Earnings per Share
Basic earnings per share of Schlumberger from
continuing operations is calculated by dividing income from continuing operations attributable to Schlumberger by the weighted average number of common shares outstanding during the year. Diluted earnings per share is calculated by dividing income
from continuing operations attributable to Schlumberger by the sum of (i) unvested restricted stock units and (ii) the weighted average number of common shares outstanding assuming dilution. The weighted average number of common shares
outstanding assuming dilution assumes that all stock options which are in the money are exercised at the beginning of the period and that the proceeds are used by Schlumberger to purchase shares at the average market price for the period.
42
The following is a reconciliation from basic to diluted earnings per share from continuing
operations of Schlumberger for each of the last three years:
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(Stated in million except
per share amounts)
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Schlumberger
Income from
Continuing
Operations
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Weighted
Average
Shares
Outstanding
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Earnings Per
Share from
from Continuing
Operations
|
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2012:
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Basic
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$
|
5,439
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|
1,330
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$
|
4.09
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Assumed exercise of stock options
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5
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Unvested restricted stock
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|
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4
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Diluted
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$
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5,439
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|
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|
1,339
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|
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$
|
4.06
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2011:
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Basic
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$
|
4,720
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|
1,349
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$
|
3.50
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Assumed exercise of stock options
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10
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Unvested restricted stock
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2
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|
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Diluted
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$
|
4,720
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|
|
1,361
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$
|
3.47
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2010:
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Basic
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$
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4,255
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1,250
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$
|
3.40
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Assumed conversion of debentures
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3
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2
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Assumed exercise of stock options
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9
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Unvested restricted stock
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2
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Diluted
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$
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4,258
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1,263
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$
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3.37
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Employee stock options to purchase approximately 21.0 million, 14.0 million and
12.5 million shares of common stock at December 31, 2012, 2011 and 2010, respectively, were outstanding but were not included in the computation of diluted earnings per share because the option exercise price was greater than the average
market price of the common stock, and therefore, the effect on diluted earnings per share would have been anti-dilutive.
3.
Charges and Credits
Schlumberger recorded the following charges and credits in continuing operations during 2012, 2011 and 2010:
2012
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Schlumberger recorded the following merger and integration-related charges in connection with its 2010 acquisitions of Smith International, Inc.
(Smith) and Geoservices (see Note 4
Acquisitions
).
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(Stated in millions)
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Pretax
|
|
|
Tax
|
|
|
Net
|
|
First quarter
|
|
$
|
14
|
|
|
$
|
1
|
|
|
$
|
13
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Second quarter
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22
|
|
|
|
1
|
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|
|
21
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Third quarter
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|
32
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|
|
|
4
|
|
|
|
28
|
|
Fourth quarter
|
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|
60
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|
|
10
|
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|
|
50
|
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|
|
|
|
|
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|
|
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$
|
128
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$
|
16
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$
|
112
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During the fourth quarter, Schlumberger recorded a pretax charge of $33 million ($27 million after-tax) relating to severance in connection with an
initiative to rationalize global overhead costs.
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The following is a summary of these charges:
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(Stated in millions)
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Pretax
|
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|
Tax
|
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|
Ne
t
|
|
|
Consolidated Statement
of Income Classification
|
Merger-related integration costs
|
|
$
|
128
|
|
|
$
|
16
|
|
|
$
|
112
|
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|
Merger & integration
|
Workforce reduction
|
|
|
33
|
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|
|
6
|
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|
|
27
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Restructuring & other
|
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|
|
|
|
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$
|
161
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$
|
22
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$
|
139
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43
2011
|
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Schlumberger recorded the following merger and integration-related charges in connection with its acquisitions of Smith and Geoservices.
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(Stated in millions)
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Pretax
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Tax
|
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|
Net
|
|
First quarter
|
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$
|
33
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|
|
$
|
5
|
|
|
$
|
28
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|
Second quarter
|
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|
32
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|
8
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|
24
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Third quarter
|
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|
26
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3
|
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|
|
23
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|
Fourth quarter
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|
22
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|
|
2
|
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|
|
20
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$
|
113
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|
$
|
18
|
|
|
$
|
95
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During the fourth quarter, Schlumberger was able to physically assess the status of its assets in Libya. This assessment resulted in Schlumberger
recording a pretax and after-tax charge of $60 million relating to certain assets that were no longer recoverable as a result of the political unrest in Libya.
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During the second quarter, Schlumberger made a $50 million grant to the Schlumberger Foundation to support the Foundations Faculty for the Future
program, which supports talented women scientists from the developing world by helping them pursue advanced graduate studies in scientific disciplines at leading universities worldwide. As a result, Schlumberger recorded a $50 million charge ($40
million after-tax).
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The following is a summary of these charges:
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(Stated in millions)
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Pretax
|
|
|
Tax
|
|
|
Net
|
|
|
Consolidated Statement
of Income Classification
|
Merger-related integration costs
|
|
$
|
113
|
|
|
$
|
18
|
|
|
$
|
95
|
|
|
Merger & integration
|
Donation to the Schlumberger Foundation
|
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|
50
|
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|
|
10
|
|
|
|
40
|
|
|
General & administrative
|
Write-off of assets in Libya
|
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|
60
|
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|
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|
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|
|
60
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|
|
Cost of revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
223
|
|
|
$
|
28
|
|
|
$
|
195
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|
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2010
Fourth quarter of 2010:
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In connection with the acquisition of Smith, Schlumberger recorded the following pretax charges: $115 million ($73 million after-tax) relating to the
amortization of purchase accounting adjustments associated with the write-up of acquired inventory to its estimated fair value, $17 million ($16 million after-tax) of professional and other fees and $15 million ($11 million after-tax) relating to
employee benefits.
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Schlumberger repurchased the following debt:
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(Stated in millions)
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Carrying
Value
|
|
6.50% Notes due 2012
|
|
$
|
297
|
|
6.75% Senior Notes due 2011
|
|
$
|
123
|
|
9.75% Senior Notes due 2019
|
|
$
|
212
|
|
6.00% Senior Notes due 2016
|
|
$
|
102
|
|
8.625% Senior Notes due 2014
|
|
$
|
88
|
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As a result of these transactions, Schlumberger incurred pretax charges of $32 million ($20 million
after-tax).
Third quarter of 2010:
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As a result of the decision to rationalize support costs across the organization as well as to restructure the North America land operations to provide
greater operating efficiency, Schlumberger recorded a pretax charge of $90 million ($77 million after-tax).
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44
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Following the successful introduction of UniQ, a new generation single-sensor land acquisition system, Schlumberger recorded a $78 million pretax
charge ($71 million after-tax) related to the impairment of WesternGecos first generation Q-Land system assets.
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A pretax and after-tax charge of $63 million primarily relating to the early termination of a vessel lease associated with WesternGecos
electromagnetic service offering as well as related assets, including a $30 million impairment related to an equity-method investment.
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In connection with the acquisition of Smith, Schlumberger recorded the following pretax charges: $56 million ($55 million after-tax) of merger-related
transaction costs including advisory and legal fees, $38 million ($32 million after-tax) relating to employee benefits for change in control payments and retention bonuses and $38 million ($24 million after-tax) relating to the amortization of
purchase accounting adjustments associated with the write-up of acquired inventory to its estimated fair value.
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$40 million pretax charge ($36 million after-tax) for the early termination of rig contracts and workforce reductions in Mexico due to the slowdown of
project activity.
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Schlumberger repurchased $352 million of its 6.50% Notes due 2012 and, as a result, incurred a pretax charge of $28 million ($18 million after-tax).
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Schlumberger recorded a pretax gain of $1.27 billion ($1.24 billion after-tax) as a result of remeasuring its previously held 40% equity interest in
the M-I SWACO joint venture. Refer to Note 4
Acquisitions
for further details.
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First quarter of 2010:
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Schlumberger incurred $35 million of pretax and after-tax merger-related costs in connection with the Smith and Geoservices acquisitions. These costs
primarily consisted of advisory and legal fees.
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During March 2010, the Patient Protection and Affordable Care Act (PPACA) was signed into law in the United States. Among other things, the PPACA
eliminated the tax deductibility of retiree prescription drug benefits to the extent of the Medicare Part D subsidy that companies, such as Schlumberger, receive. As a result of this change in law, Schlumberger recorded a $40 million charge to
adjust its deferred tax assets to reflect the loss of this future tax deduction.
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The following is a summary of 2010 charges
and credits:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Stated in millions)
|
|
|
|
|
|
Pretax
|
|
|
Tax
|
|
|
Net
|
|
|
Consolidated Statement
of Income Classification
|
Restructuring and Merger-related Charges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance and other
|
|
$
|
90
|
|
|
$
|
13
|
|
|
$
|
77
|
|
|
Restructuring & other
|
Impairment relating to WesternGecos first generation Q-Land acquisition system
|
|
|
78
|
|
|
|
7
|
|
|
|
71
|
|
|
Restructuring & other
|
Other WesternGeco-related charges
|
|
|
63
|
|
|
|
|
|
|
|
63
|
|
|
Restructuring & other
|
Professional fees and other
|
|
|
107
|
|
|
|
1
|
|
|
|
106
|
|
|
Merger & integration
|
Merger-related employee benefits
|
|
|
54
|
|
|
|
10
|
|
|
|
44
|
|
|
Merger & integration
|
Inventory fair value adjustments
|
|
|
153
|
|
|
|
56
|
|
|
|
97
|
|
|
Cost of revenue
|
Mexico restructuring
|
|
|
40
|
|
|
|
4
|
|
|
|
36
|
|
|
Restructuring & other
|
Repurchase of bonds
|
|
|
60
|
|
|
|
23
|
|
|
|
37
|
|
|
Restructuring & other
|
|
|
|
|
|
|
|
|
|
|
|
|
Total restructuring and merger-related charges
|
|
|
645
|
|
|
|
114
|
|
|
|
531
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on investment in M-I SWACO
|
|
|
(1,270
|
)
|
|
|
(32
|
)
|
|
|
(1,238
|
)
|
|
Gain on Investment in M-I SWACO
|
Impact of elimination of tax deduction related to Medicare Part D subsidy
|
|
|
|
|
|
|
(40
|
)
|
|
|
40
|
|
|
Taxes on income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(625
|
)
|
|
$
|
42
|
|
|
$
|
(667
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.
Acquisitions
Acquisition of Smith International, Inc.
On August 27, 2010, Schlumberger acquired all of the outstanding shares of Smith, a leading supplier of premium products and services to the oil and gas exploration and production industry. The
transaction brought together the complementary drilling and measurements technologies and expertise of Schlumberger and Smith in order to facilitate the engineering of complete drilling systems which optimize all of the components of the drill
string.
45
Under the terms of the transaction, Smith became a wholly-owned subsidiary of Schlumberger.
Each share of Smith common stock issued and outstanding immediately prior to the effective time of the acquisition was converted into the right to receive 0.6966 shares of Schlumberger common stock, with cash paid in lieu of fractional shares.
The following details the fair value of the consideration transferred to effect the acquisition of Smith.
|
|
|
|
|
(Stated in millions, except exchange ratio and per share amounts)
|
|
Number of shares of Smith common stock outstanding as of the acquisition date
|
|
|
248
|
|
Number of Smith unvested restricted stock units outstanding as of the acquisition date
|
|
|
4
|
|
|
|
|
|
|
252
|
|
Multiplied by the exchange ratio
|
|
|
0.6966
|
|
|
|
Equivalent Schlumberger shares of common stock issued
|
|
|
176
|
|
Schlumberger closing stock price on August 27, 2010
|
|
$
|
55.76
|
|
|
|
Common stock equity consideration
|
|
$
|
9,812
|
|
Fair value of Schlumberger equivalent stock options issued
|
|
|
16
|
|
|
|
Total fair value of the consideration transferred
|
|
$
|
9,828
|
|
|
|
|
|
|
Certain amounts reflect rounding adjustments
Prior to the completion of the acquisition, Smith and Schlumberger operated M-I SWACO, a drilling fluids joint venture that was 40% owned
by Schlumberger and 60% owned by Smith. Effective at the closing of the transaction, M-I SWACO became 100% owned by Schlumberger. As a result of obtaining control of this joint venture, Schlumberger was required under generally accepted accounting
principles to remeasure its previously held equity interest in the joint venture at its acquisition-date fair value and recognize the resulting pretax gain of $1.3 billion ($1.2 billion after-tax) in earnings. This gain is classified as
Gain on
Investment in M-I SWACO
in the
Consolidated Statement of Income
.
Prior to acquiring Smith, Schlumberger recorded
income relating to this joint venture using the equity method of accounting. Schlumbergers equity income from this joint venture was $78 million in 2010 (representing the period from January 1, 2010 to August 27, 2010). Schlumberger
received cash distributions from the joint venture of $50 million in 2010.
Acquisition of Geoservices
On April 23, 2010, Schlumberger completed the acquisition of Geoservices, a privately owned oilfield services company specializing in
mud logging, slickline and production surveillance operations, for $915 million in cash.
Other
Schlumberger has made other acquisitions and investments, none of which were significant on an individual basis, for cash payments, net of
cash acquired, of $845 million during 2012, $610 million during 2011, and $212 million during 2010.
On November 15, 2012,
Cameron International Corporation (Cameron) and Schlumberger announced that they had entered into an agreement with respect to the creation of OneSubsea, a joint venture to manufacture and develop products, systems and services for the
subsea oil and gas market. Schlumberger will own 40% of OneSubsea. The transaction is subject to regulatory approvals and other customary closing conditions and is expected to close by the second quarter of 2013. Under the terms of
the formation agreement, Cameron and Schlumberger will each contribute all of their respective subsea businesses to the joint venture and Schlumberger will make a $600 million cash payment to Cameron. In accordance with generally accepted
accounting principles, upon the closing of this transaction, Schlumberger will recognize a gain as a result of the deconsolidation of its subsea business. This pretax gain will be equal to the difference between the fair value of the
Schlumberger subsea businesses and their carrying value at the time of closing and is currently estimated to be in excess of $1.2 billion.
46
5.
Inventory
A summary of inventory follows:
|
|
|
|
|
|
|
|
|
(Stated in millions)
|
|
As at December 31,
|
|
2012
|
|
|
2011
|
|
Raw materials & field materials
|
|
$
|
2,519
|
|
|
$
|
2,066
|
|
Work in process
|
|
|
349
|
|
|
|
364
|
|
Finished goods
|
|
|
1,917
|
|
|
|
2,270
|
|
|
|
|
|
|
|
|
|
$
|
4,785
|
|
|
$
|
4,700
|
|
|
|
|
|
|
|
|
|
|
6.
Fixed Assets
A summary of fixed assets follows:
|
|
|
|
|
|
|
|
|
(Stated in millions)
|
|
As at December 31,
|
|
2012
|
|
|
2011
|
|
Land
|
|
$
|
366
|
|
|
$
|
362
|
|
Buildings & improvements
|
|
|
3,209
|
|
|
|
2,912
|
|
Machinery & equipment
|
|
|
27,690
|
|
|
|
24,404
|
|
Seismic vessels
|
|
|
1,903
|
|
|
|
1,873
|
|
|
|
|
|
|
|
|
|
|
33,168
|
|
|
|
29,551
|
|
Less accumulated depreciation
|
|
|
18,388
|
|
|
|
16,558
|
|
|
|
|
|
|
|
|
|
$
|
14,780
|
|
|
$
|
12,993
|
|
|
|
|
|
|
|
|
|
|
The estimated useful lives of Buildings & improvements are primarily 30 to 40 years. The
estimated useful lives of Machinery & equipment are primarily 5 to 10 years. Seismic vessels are depreciated over periods ranging from 20 to 30 years.
Depreciation expense relating to fixed assets was $2.9 billion, $2.7 billion and $2.4 billion in 2012, 2011 and 2010, respectively.
7.
Multiclient Seismic Data
The change in the carrying amount of multiclient seismic data is as follows:
|
|
|
|
|
|
|
|
|
(Stated in millions)
|
|
|
|
2012
|
|
|
2011
|
|
Balance at beginning of year
|
|
$
|
425
|
|
|
$
|
394
|
|
Capitalized in year
|
|
|
351
|
|
|
|
289
|
|
Charged to expense
|
|
|
(258
|
)
|
|
|
(258
|
)
|
|
|
|
|
|
|
|
|
$
|
518
|
|
|
$
|
425
|
|
|
|
|
|
|
|
|
|
|
8.
Goodwill
The changes in the carrying amount of goodwill by reporting unit were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Stated in millions)
|
|
|
|
Reservoir
Characterization
|
|
|
Drilling
|
|
|
Production
|
|
|
Distribution
|
|
|
Total
|
|
Balance at January 1, 2011
|
|
$
|
3,381
|
|
|
$
|
8,150
|
|
|
$
|
2,351
|
|
|
$
|
70
|
|
|
$
|
13,952
|
|
Adjustments relating to Smith acquisition
|
|
|
|
|
|
|
175
|
|
|
|
13
|
|
|
|
6
|
|
|
|
194
|
|
Other acquisitions
|
|
|
42
|
|
|
|
45
|
|
|
|
|
|
|
|
|
|
|
|
87
|
|
Divestiture of business
|
|
|
(51
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(51
|
)
|
Impact of changes in exchange rates
|
|
|
(12
|
)
|
|
|
(8
|
)
|
|
|
(8
|
)
|
|
|
|
|
|
|
(28
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2011
|
|
|
3,360
|
|
|
|
8,362
|
|
|
|
2,356
|
|
|
|
76
|
|
|
|
14,154
|
|
Acquisitions
|
|
|
391
|
|
|
|
93
|
|
|
|
|
|
|
|
|
|
|
|
484
|
|
Reallocation
|
|
|
|
|
|
|
(125
|
)
|
|
|
125
|
|
|
|
|
|
|
|
|
|
Divestiture of business
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(76
|
)
|
|
|
(76
|
)
|
Impact of changes in exchange rates
|
|
|
9
|
|
|
|
7
|
|
|
|
7
|
|
|
|
|
|
|
|
23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2012
|
|
$
|
3,760
|
|
|
$
|
8,337
|
|
|
$
|
2,488
|
|
|
$
|
|
|
|
$
|
14,585
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
47
9.
Intangible Assets
Intangible assets principally comprise technology/technical know-how, tradenames and customer relationships. At
December 31, intangible assets were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Stated in millions)
|
|
|
|
2012
|
|
|
2011
|
|
|
|
Gross
Book Value
|
|
|
Accumulated
Amortization
|
|
|
Net Book
Value
|
|
|
Gross
Book Value
|
|
|
Accumulated
Amortization
|
|
|
Net
Book
Value
|
|
Technology/Technical Know-How
|
|
$
|
1,967
|
|
|
$
|
474
|
|
|
$
|
1,493
|
|
|
$
|
1,875
|
|
|
$
|
341
|
|
|
$
|
1,534
|
|
Tradenames
|
|
|
1,647
|
|
|
|
188
|
|
|
|
1,459
|
|
|
|
1,677
|
|
|
|
131
|
|
|
|
1,546
|
|
Customer Relationships
|
|
|
2,115
|
|
|
|
312
|
|
|
|
1,803
|
|
|
|
1,954
|
|
|
|
209
|
|
|
|
1,745
|
|
Other
|
|
|
369
|
|
|
|
322
|
|
|
|
47
|
|
|
|
356
|
|
|
|
299
|
|
|
|
57
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
6,098
|
|
|
$
|
1,296
|
|
|
$
|
4,802
|
|
|
$
|
5,862
|
|
|
$
|
980
|
|
|
$
|
4,882
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization expense was $331 million in 2012, $324 million in 2011 and $190 million in 2010.
The weighted average amortization period for all intangible assets is approximately 20 years.
Amortization expense for the subsequent five years is estimated to be as follows: 2013 $325 million, 2014 $320 million, 2015
$311 million, 2016 $295 million and 2017 $284 million.
10.
Long-term Debt and Debt Facility Agreements
Long-term Debt
consists of the following:
|
|
|
|
|
|
|
|
|
(Stated in millions)
|
|
As at December 31,
|
|
2012
|
|
|
2011
|
|
3.30% Senior Notes due 2021
|
|
$
|
1,595
|
|
|
$
|
1,595
|
|
4.50% Guaranteed Notes due 2014
(1)
|
|
|
1,324
|
|
|
|
1,297
|
|
2.75% Guaranteed Notes due 2015
(1)
|
|
|
1,318
|
|
|
|
1,290
|
|
1.95% Senior Notes due 2016
|
|
|
1,099
|
|
|
|
1,099
|
|
4.20% Senior Notes due 2021
|
|
|
1,099
|
|
|
|
1,099
|
|
1.25% Senior Notes due 2017
|
|
|
999
|
|
|
|
|
|
2.40% Senior Notes due 2022
|
|
|
998
|
|
|
|
|
|
5.25% Guaranteed Notes due 2013
(2)
|
|
|
|
|
|
|
649
|
|
2.65% Senior Notes due 2016
(3)
|
|
|
500
|
|
|
|
498
|
|
3.00% Guaranteed Notes due 2013
|
|
|
|
|
|
|
450
|
|
Floating Rate Senior Notes due 2014
(4)
|
|
|
300
|
|
|
|
300
|
|
Other variable rate debt
|
|
|
277
|
|
|
|
271
|
|
|
|
|
|
|
|
|
|
|
9,509
|
|
|
|
8,548
|
|
Fair value adjustment hedging
(5)
|
|
|
|
|
|
|
8
|
|
|
|
|
|
|
|
|
|
$
|
9,509
|
|
|
$
|
8,556
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Schlumberger maintains a 3.0 billion Euro Medium Term Note program that 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 2.75% Guaranteed Notes due 2015 in the fourth quarter of 2010 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 2.56%. Schlumberger also issued 1.0 billion 4.50% Guaranteed
Notes due 2014 in the first quarter of 2009 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%.
|
(
2
)
|
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 pays interest in US dollars at a rate of 4.74%.
|
(
3
)
|
Schlumberger entered into agreements to swap these dollar notes for euros on the date of issue until maturity, effectively making this a
euro-denominated debt on which Schlumberger pays interest in euros at a rate of 2.39%.
|
(
4
)
|
These notes bear interest at a rate equal to three-month LIBOR plus 55 basis points per year.
|
48
(
5
)
|
Represents changes in the fair value of the portion of Schlumbergers fixed rate debt that is hedged through the use of interest rate swaps.
|
Schlumberger Limited fully and unconditionally guarantees the securities issued by certain of its
subsidiaries, including the securities by Schlumberger Investment SA, a 100% owned finance subsidiary of Schlumberger.
At December 31, 2012, Schlumberger had separate committed debt facility agreements aggregating $4.1 billion with commercial banks, of
which $3.8 billion was available and unused. This included $3.5 billion of committed facilities which support commercial paper programs in the United States and Europe, of which $0.5 billion mature in December 2013 and $3.0 billion mature in July
2016. Interest rates and other terms of borrowing under these lines of credit vary from country to country. There were no borrowings under the commercial paper programs at December 31, 2012. At December 31, 2011, Schlumberger had $0.9
billion of outstanding commercial paper borrowings, which were classified within
Long-term debt current portion
in the
Consolidated Balance Sheet
.
Commercial paper borrowings outstanding at December 31, 2011 included certain notes issued in currencies other than the US dollar which were swapped for US dollars and pounds sterling on the date of
issue until maturity. Commercial paper borrowings are classified as long-term debt to the extent of their backup by available and unused committed credit facilities maturing in more than one year and to the extent it is Schlumbergers intent to
maintain these obligations for longer than one year.
The weighted average interest rate on variable rate debt as of
December 31, 2012 was 3.6%.
Long-term Debt
as of December 31, 2012, is due as follows: $1.657 billion in
2014, $1.318 billion in 2015, $1.843 billion in 2016, $0.999 billion in 2017, $2.694 billion in 2021 and $0.998 billion in 2022.
The fair value of Schlumbergers
Long-term Debt
at December 31, 2012 and December 31, 2011 was $9.9 billion and $8.9
billion, respectively, and was estimated based on quoted market prices.
11.
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 85 countries. Schlumbergers functional currency is primarily the US dollar, which is consistent with the oil and gas industry. Approximately 75% of Schlumbergers revenue in 2012 was
denominated in US dollars. However, outside the United States, a significant portion of Schlumbergers expenses is incurred in foreign currencies. Therefore, when the US dollar weakens (strengthens) in relation to the foreign currencies of the
countries in which Schlumberger conducts business, the US dollar 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, with the effective portion of changes in the fair value of the hedge recorded on the
Consolidated Balance Sheet
and in
Accumulated other comprehensive loss.
Amounts recorded in
Accumulated other comprehensive loss
are
reclassified into earnings in the same period or periods that the hedged item is recognized in earnings. The ineffective portion of changes in the fair value of hedging instruments, if any, is recorded directly to earnings.
At December 31, 2012, Schlumberger recognized a cumulative net $30 million gain in
Accumulated other comprehensive loss
relating to revaluation of foreign currency forward contracts and foreign currency options designated as cash flow hedges, the majority of which is expected to be reclassified into earnings within the next twelve months.
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 for certain currencies. The fair value of these contracts are 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 December 31, 2012, contracts were outstanding for the US dollar equivalent of $7.5 billion in various foreign currencies, of which $3.9 billion relate to hedges of debt denominated in currencies
other than the functional currency.
49
Commodity Price Risk
Schlumberger is exposed to the impact of market fluctuations in the price of certain commodities, such as metals and fuel. Schlumberger utilizes forward contracts to manage a small percentage of the price
risk associated with forecasted metal 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
and therefore, changes in the fair value of the forward contracts are recorded directly to earnings.
The notional amount of
outstanding commodity forward contracts was $43 million at December 31, 2012.
Interest Rate Risk
Schlumberger is subject to interest rate risk on its debt and its investment portfolio. Schlumberger maintains an interest rate risk
management strategy that uses a mix of variable and fixed rate debt combined with its investment portfolio and, from time to time, interest rate swaps to mitigate the exposure to changes in interest rates.
During 2009, Schlumberger entered into an interest rate swap for a notional amount of $450 million in order to hedge changes in the fair
value of Schlumbergers $450 million 3.00% Notes due 2013. Under the terms of this swap, Schlumberger receives interest at a fixed rate of 3.0% annually and will pay interest quarterly at a floating rate of three-month LIBOR plus a spread of
0.765%. This interest rate swap is designated as a fair value hedge of the underlying debt. This derivative instrument is marked to market with gains and losses recognized currently in income to offset the respective losses and gains recognized on
changes in the fair value of the hedged debt. This results in no net gain or loss being recognized in the
Consolidated Statement of Income
.
At December 31, 2012, Schlumberger had fixed rate debt aggregating approximately $9.6 billion and variable rate debt aggregating approximately $2.0 billion, after taking into account the effect of
the interest rate swap.
The fair values of outstanding derivative instruments are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
(Stated in millions)
|
|
|
Fair Value
of
Derivatives
|
|
|
Consolidated Balance Sheet Classification
|
Derivative assets
|
|
Dec. 31,
2012
|
|
|
Dec. 31,
2011
|
|
|
Derivative designated as hedges:
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts
|
|
$
|
26
|
|
|
$
|
2
|
|
|
Other current assets
|
Foreign exchange contracts
|
|
|
22
|
|
|
|
4
|
|
|
Other Assets
|
Interest rate swaps
|
|
|
|
|
|
|
9
|
|
|
Other Assets
|
Interest rate swaps
|
|
|
2
|
|
|
|
|
|
|
Other current assets
|
|
|
|
|
|
|
|
|
|
|
|
50
|
|
|
|
15
|
|
|
|
|
|
|
|
|
|
|
|
Derivative not designated as hedges:
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts
|
|
|
10
|
|
|
|
8
|
|
|
Other current assets
|
Foreign exchange contracts
|
|
|
6
|
|
|
|
9
|
|
|
Other Assets
|
|
|
|
|
|
|
|
|
|
|
|
16
|
|
|
|
17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
66
|
|
|
$
|
32
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative Liabilities
|
|
|
|
|
|
|
|
|
|
|
Derivative designated as hedges:
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts
|
|
$
|
80
|
|
|
$
|
47
|
|
|
Accounts payable and accrued liabilities
|
Foreign exchange contracts
|
|
|
19
|
|
|
|
130
|
|
|
Other Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
99
|
|
|
|
177
|
|
|
|
|
|
|
|
|
|
|
|
Derivative not designated as hedges:
|
|
|
|
|
|
|
|
|
|
|
Commodity contracts
|
|
|
|
|
|
|
3
|
|
|
Accounts payable and accrued liabilities
|
Foreign exchange contracts
|
|
|
3
|
|
|
|
9
|
|
|
Accounts payable and accrued liabilities
|
|
|
|
|
|
|
|
|
|
|
|
3
|
|
|
|
12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
102
|
|
|
$
|
189
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The fair value of all outstanding derivatives is determined using a model with inputs that are observable
in the market or can be derived from or corroborated by observable data.
50
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
|
|
|
|
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
|
Consolidated Statement of Income Classifiaction
|
Derivatives designated as fair value hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts
|
|
$
|
|
|
|
$
|
|
|
|
$
|
(8
|
)
|
|
Cost of revenue
|
Interest rate swaps
|
|
|
1
|
|
|
|
9
|
|
|
|
22
|
|
|
Interest expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1
|
|
|
$
|
9
|
|
|
$
|
14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives not designated as hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts
|
|
$
|
5
|
|
|
$
|
(17
|
)
|
|
$
|
(13
|
)
|
|
Cost of revenue
|
Commodity contracts
|
|
|
1
|
|
|
|
(5
|
)
|
|
|
1
|
|
|
Cost of revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
6
|
|
|
$
|
(22
|
)
|
|
$
|
(12
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The effect of derivative instruments in cash flow hedging relationships on income and
Accumulated other comprehensive
loss
(AOCL) was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Stated in millions)
|
|
|
|
|
|
Gain (Loss) Reclassified from
AOCL into Income
|
|
|
|
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
|
Consolidated Statement of Income Classification
|
Foreign exchange contracts
|
|
$
|
49
|
|
|
$
|
(25
|
)
|
|
$
|
(260
|
)
|
|
Cost of revenue
|
Foreign exchange contracts
|
|
|
(13
|
)
|
|
|
17
|
|
|
|
(14
|
)
|
|
Research & engineering
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
36
|
|
|
$
|
(8
|
)
|
|
$
|
(274
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Stated in millions)
|
|
|
|
Gain (Loss) Recognized in AOCL
|
|
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
Foreign exchange contracts
|
|
$
|
92
|
|
|
$
|
(79
|
)
|
|
$
|
(269
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12.
Stockholders Equity
Schlumberger is authorized to issue 4,500,000,000 shares of common stock, par value $0.01 per share, of which
1,328,255,773 and 1,333,775,406 shares were outstanding on December 31, 2012 and 2011, respectively. Holders of common stock are entitled to one vote for each share of stock held. Schlumberger is also authorized to issue 200,000,000 shares of
preferred stock, par value $0.01 per share, which may be issued in series with terms and conditions determined by the Board of Directors. No shares of preferred stock have been issued.
Accumulated Other Comprehensive Loss
consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Stated in millions)
|
|
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
Currency translation adjustments
|
|
$
|
(918
|
)
|
|
$
|
(993
|
)
|
|
$
|
(912
|
)
|
Fair value of derivatives
|
|
|
30
|
|
|
|
(26
|
)
|
|
|
45
|
|
Pension and other postretirement benefit plans
|
|
|
(3,141
|
)
|
|
|
(2,538
|
)
|
|
|
(1,901
|
)
|
Unrealized gains on marketable securities
|
|
|
141
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(3,888
|
)
|
|
$
|
(3,557
|
)
|
|
$
|
(2,768
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive loss was $331 million, $789 million and $94 million in 2012, 2011 and 2010,
respectively.
13.
Stock-based Compensation Plans
Schlumberger has three types of stock-based compensation programs: stock options, a restricted stock and restricted
stock unit program (collectively referred to as restricted stock) and a discounted stock purchase plan (DSPP).
51
Stock Options
Key employees are granted stock options under Schlumberger stock option plans. For all of the stock options granted, the exercise price equals the average of the high and low sales prices of Schlumberger
stock on the date of grant; an options maximum term is ten years, and options generally vest in increments over four or five years.
The fair value of each stock option grant was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions and resulting weighted-average
fair value per share:
|
|
|
|
|
|
|
|
|
2012
|
|
2011
|
|
2010
|
Dividend yield
|
|
1.5%
|
|
1.2%
|
|
1.3%
|
Expected volatility
|
|
39%
|
|
37%
|
|
35%
|
Risk free interest rate
|
|
1.5%
|
|
2.8%
|
|
2.9%
|
Expected option life in years
|
|
6.9
|
|
6.9
|
|
6.9
|
Weighted-average fair value per share
|
|
$25.26
|
|
$31.38
|
|
$24.13
|
The following table summarizes information concerning options outstanding and options exercisable by five
ranges of exercise prices as of December 31, 2012:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Shares stated in thousands)
|
|
|
|
Options Outstanding
|
|
|
Options Exercisable
|
|
Exercise prices range
|
|
Options
Outstanding
|
|
|
Weighted-
average
remaining
contractual life
(in years)
|
|
|
Weighted-
average
exercise
price
|
|
|
Options
Exercisable
|
|
|
Weighted-
average
exercise price
|
|
$20.65 - $32.46
|
|
|
631
|
|
|
|
1.31
|
|
|
$
|
28.19
|
|
|
|
631
|
|
|
$
|
28.19
|
|
$32.62 - $37.85
|
|
|
4,988
|
|
|
|
5.68
|
|
|
$
|
37.45
|
|
|
|
2,670
|
|
|
$
|
37.11
|
|
$39.08 - $55.69
|
|
|
4,779
|
|
|
|
4.09
|
|
|
$
|
52.55
|
|
|
|
4,003
|
|
|
$
|
53.24
|
|
$56.61 - $74.57
|
|
|
18,519
|
|
|
|
7.49
|
|
|
$
|
68.22
|
|
|
|
5,645
|
|
|
$
|
63.42
|
|
$83.89 - $110.78
|
|
|
13,142
|
|
|
|
7.02
|
|
|
$
|
86.10
|
|
|
|
5,913
|
|
|
$
|
87.58
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
42,059
|
|
|
|
6.65
|
|
|
$
|
67.77
|
|
|
|
18,862
|
|
|
$
|
63.93
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The weighted average remaining contractual life of stock options exercisable as of December 31, 2012
was 5.1 years.
The following table summarizes stock option activity during the years ended December 31, 2012, 2011 and
2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Shares stated in thousands)
|
|
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
|
|
Shares
|
|
|
Weighted-
average
exercise
price
|
|
|
Shares
|
|
|
Weighted-
average
exercise
price
|
|
|
Shares
|
|
|
Weighted-
average
exercise
price
|
|
Outstanding at beginning of year
|
|
|
40,027
|
|
|
$
|
63.84
|
|
|
|
37,499
|
|
|
$
|
55.33
|
|
|
|
35,500
|
|
|
$
|
50.30
|
|
Granted
|
|
|
8,664
|
|
|
$
|
72.04
|
|
|
|
9,528
|
|
|
$
|
84.29
|
|
|
|
8,283
|
|
|
$
|
66.67
|
|
Assumed in Smith transaction
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
$
|
|
|
|
|
581
|
|
|
$
|
28.77
|
|
Exercised
|
|
|
(4,171
|
)
|
|
$
|
39.07
|
|
|
|
(5,470
|
)
|
|
$
|
42.36
|
|
|
|
(5,962
|
)
|
|
$
|
37.60
|
|
Forfeited
|
|
|
(2,461
|
)
|
|
$
|
67.50
|
|
|
|
(1,530
|
)
|
|
$
|
58.82
|
|
|
|
(903
|
)
|
|
$
|
61.28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at year-end
|
|
|
42,059
|
|
|
$
|
67.77
|
|
|
|
40,027
|
|
|
$
|
63.84
|
|
|
|
37,499
|
|
|
$
|
55.33
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The aggregate intrinsic value of stock options outstanding as of December 31, 2012 was approximately
$308 million.
The aggregate intrinsic value of stock options exercisable as of December 31, 2012 was approximately $209
million.
The total intrinsic value of options exercised during the years ended December 31, 2012, 2011 and 2010, was $142
million, $246 million and $188 million, respectively.
Restricted Stock
Restricted stock awards generally vest at the end of three years. As of December 31, 2012, there have not been any grants to date
that are subject to performance-based vesting.
52
The following table summarizes information about restricted stock transactions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Shares stated in thousands)
|
|
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
|
|
Restricted
Stock
|
|
|
Weighted
Average
Grant Date
Fair Value
|
|
|
Restricted
Stock
|
|
|
Weighted
Average
Grant Date
Fair Value
|
|
|
Restricted
Stock
|
|
|
Weighted
Average
Grant
Date
Fair Value
|
|
Unvested at beginning of year
|
|
|
2,433
|
|
|
$
|
72.25
|
|
|
|
2,223
|
|
|
$
|
64.27
|
|
|
|
1,343
|
|
|
$
|
62.75
|
|
Granted
|
|
|
1,668
|
|
|
|
71.09
|
|
|
|
1,136
|
|
|
|
84.61
|
|
|
|
1,261
|
|
|
|
65.79
|
|
Vested
|
|
|
(351
|
)
|
|
|
52.26
|
|
|
|
(767
|
)
|
|
|
67.36
|
|
|
|
(286
|
)
|
|
|
63.92
|
|
Forfeited
|
|
|
(184
|
)
|
|
|
73.38
|
|
|
|
(159
|
)
|
|
|
72.51
|
|
|
|
(95
|
)
|
|
|
64.16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested at end of year
|
|
|
3,566
|
|
|
$
|
73.62
|
|
|
|
2,433
|
|
|
$
|
72.25
|
|
|
|
2,223
|
|
|
$
|
64.27
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discounted Stock Purchase Plan
Under the terms of the DSPP, employees can choose to have a portion of their earnings withheld, subject to certain restrictions, to purchase Schlumberger common stock. The purchase price of the stock is
92.5% of the lower of the stock price at the beginning or end of the plan period at six-month intervals.
The fair value of the
employees purchase rights under the DSPP was estimated using the Black-Scholes model with the following assumptions and resulting weighted average fair value per share:
|
|
|
|
|
|
|
|
|
2012
|
|
2011
|
|
2010
|
Dividend yield
|
|
1.6%
|
|
1.2%
|
|
1.6%
|
Expected volatility
|
|
41%
|
|
28%
|
|
36%
|
Risk free interest rate
|
|
0.2%
|
|
0.2%
|
|
0.3%
|
Weighted average fair value per share
|
|
$12.71
|
|
$12.83
|
|
$10.30
|
Total Stock-based Compensation Expense
The following summarizes stock-based compensation expense recognized in income:
|
|
|
|
|
|
|
|
|
|
|
|
|
(Stated in millions)
|
|
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
Stock options
|
|
$
|
203
|
|
|
$
|
176
|
|
|
$
|
121
|
|
Restricted stock
|
|
|
82
|
|
|
|
60
|
|
|
|
44
|
|
DSPP
|
|
|
50
|
|
|
|
36
|
|
|
|
33
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
335
|
|
|
$
|
272
|
|
|
$
|
198
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2012, there was $565 million of total unrecognized compensation cost related to
nonvested stock-based compensation arrangements of which $234 million is expected to be recognized in 2013, $180 million in 2014, $108 million in 2015, $42 million in 2016 and $1 million in 2017.
14.
Income Taxes
Schlumberger operates in more than 100 tax jurisdictions, where statutory tax rates generally vary from 0% to 40%.
Income from continuing operations before taxes
which were subject to United States and non-United States income taxes
for each of the three years ended December 31, was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
(Stated in millions)
|
|
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
United States
|
|
$
|
1,980
|
|
|
$
|
2,246
|
|
|
$
|
617
|
|
Outside United States
|
|
|
5,211
|
|
|
|
3,993
|
|
|
|
4,515
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
7,191
|
|
|
$
|
6,239
|
|
|
$
|
5,132
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Schlumberger recorded $161 million of pretax charges in 2012 ($52 million in the US and $109 million
outside the US). Schlumberger recorded $223 million of net pretax charges in 2011 ($104 million in the US and $119 million
53
outside the US) and $625 million of pretax credits in 2010 ($222 million of net charges in the US and $847 million of net credits outside the US). These charges and credits are included in the
table above and are more fully described in Note 3
Charges and Credits
.
The components of net deferred tax
assets (liabilities) were as follows:
|
|
|
|
|
|
|
|
|
|
|
(Stated in millions)
|
|
|
|
2012
|
|
|
2011
|
|
Postretirement benefits
|
|
$
|
543
|
|
|
$
|
440
|
|
Intangible assets
|
|
|
(1,490
|
)
|
|
|
(1,498
|
)
|
Investments in non-US subsidiaries
|
|
|
(317
|
)
|
|
|
(349
|
)
|
Other, net
|
|
|
114
|
|
|
|
132
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(1,150
|
)
|
|
$
|
(1,275
|
)
|
|
|
|
|
|
|
|
|
|
The above deferred tax balances at December 31, 2012 and 2011 were net of valuation allowances
relating to net operating losses in certain countries of $256 million and $239 million, respectively.
The components of
Taxes on income
were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
(Stated in millions)
|
|
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
United States Federal
|
|
$
|
698
|
|
|
$
|
809
|
|
|
$
|
89
|
|
United States State
|
|
|
53
|
|
|
|
42
|
|
|
|
14
|
|
Outside United States
|
|
|
1,048
|
|
|
|
684
|
|
|
|
906
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,799
|
|
|
$
|
1,535
|
|
|
$
|
1,009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred:
|
|
|
|
|
|
|
|
|
|
|
|
|
United States Federal
|
|
$
|
(105
|
)
|
|
$
|
(73
|
)
|
|
$
|
161
|
|
United States State
|
|
|
(7
|
)
|
|
|
(7
|
)
|
|
|
2
|
|
Outside United States
|
|
|
22
|
|
|
|
75
|
|
|
|
(280
|
)
|
Valuation allowance
|
|
|
14
|
|
|
|
(21
|
)
|
|
|
(13
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(76
|
)
|
|
$
|
(26
|
)
|
|
$
|
(130
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated taxes on income
|
|
$
|
1,723
|
|
|
$
|
1,509
|
|
|
$
|
879
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A reconciliation of the United States statutory federal tax rate (35%) to the consolidated effective
tax rate is:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
US statutory federal rate
|
|
|
35
|
%
|
|
|
35
|
%
|
|
|
35
|
%
|
Non-US income taxed at different rates
|
|
|
(10
|
)
|
|
|
(10
|
)
|
|
|
(14
|
)
|
Charges and credit (See Note 3)
|
|
|
|
|
|
|
|
|
|
|
(3
|
)
|
Other
|
|
|
(1
|
)
|
|
|
(1
|
)
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective income tax rate
|
|
|
24
|
%
|
|
|
24
|
%
|
|
|
17
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Schlumberger conducts business in more than 100 tax jurisdictions, a number of which have tax laws that
are not fully defined and are evolving. Schlumbergers tax filings are subject to regular audit by the tax authorities. Tax liabilities are recorded based on estimates of additional taxes which will be due upon the conclusion of these audits.
54
A reconciliation of the beginning and ending amount of liabilities associated with uncertain
tax positions for the years ended December 31, 2012, 2011 and 2010 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Stated in millions)
|
|
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
Balance at beginning of year
|
|
$
|
1,353
|
|
|
$
|
1,338
|
|
|
$
|
1,026
|
|
Additions based on tax positions related to the current year
|
|
|
156
|
|
|
|
153
|
|
|
|
190
|
|
Additions for tax positions of prior years
|
|
|
98
|
|
|
|
49
|
|
|
|
8
|
|
Additions related to acquisitions
|
|
|
|
|
|
|
48
|
|
|
|
288
|
|
Impact of changes in exchange rates
|
|
|
12
|
|
|
|
(18
|
)
|
|
|
(3
|
)
|
Settlements with tax authorities
|
|
|
(17
|
)
|
|
|
(77
|
)
|
|
|
(36
|
)
|
Reductions for tax positions of prior years
|
|
|
(103
|
)
|
|
|
(102
|
)
|
|
|
(99
|
)
|
Reductions due to the lapse of the applicable statute of limitations
|
|
|
(46
|
)
|
|
|
(38
|
)
|
|
|
(36
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of year
|
|
$
|
1,453
|
|
|
$
|
1,353
|
|
|
$
|
1,338
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The amounts above exclude accrued interest and penalties of $250 million, $225 million and $210 million at
December 31, 2012, 2011 and 2010 respectively.
Schlumberger classifies interest and penalties relating to uncertain tax positions within
Taxes on income
in the
Consolidated Statement of Income
. During 2012, 2011 and 2010, Schlumberger recognized approximately $25 million, $15 million and $42 million in interest and penalties, respectively.
The following table summarizes the tax years that are either currently under audit or remain open and subject to examination by the tax
authorities in the most significant jurisdictions in which Schlumberger operates:
|
|
|
|
|
Brazil
|
|
|
2006 2012
|
|
Canada
|
|
|
2005 2012
|
|
Mexico
|
|
|
2007 2012
|
|
Norway
|
|
|
2003 2012
|
|
Russia
|
|
|
2009 2012
|
|
Saudi Arabia
|
|
|
2001 2012
|
|
United Kingdom
|
|
|
2009 2012
|
|
United States
|
|
|
2008 2012
|
|
In certain of the jurisdictions noted above, Schlumberger operates through more than one legal entity,
each of which has different open years subject to examination. The table above presents the open years subject to examination for the most material of the legal entities in each jurisdiction. Additionally, it is important to note that tax years are
technically not closed until the statute of limitations in each jurisdiction expires. In the jurisdictions noted above, the statute of limitations can extend beyond the open years subject to examination.
15.
Leases and Lease Commitments
Total rental expense was $1.9 billion in 2012, $1.6 billion in 2011, and $1.2 billion in 2010. Future minimum rental
commitments under noncancelable operating leases for each of the next five years are as follows:
|
|
|
|
|
(Stated in millions)
|
|
2013
|
|
$
|
371
|
|
2014
|
|
|
250
|
|
2015
|
|
|
192
|
|
2016
|
|
|
154
|
|
2017
|
|
|
129
|
|
Thereafter
|
|
|
519
|
|
|
|
|
|
|
|
|
$
|
1,615
|
|
|
|
|
|
|
16.
Contingencies
In 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.
In October 2012, Schlumberger was advised by the DOJ that it has closed its inquiry as it relates to Schlumberger.
55
In 2009, Schlumberger learned that United States officials began a grand jury investigation
and an associated regulatory inquiry, both related to certain Schlumberger operations in specified countries that are subject to United States trade and economic sanctions. Also in 2009, prior to being acquired by Schlumberger, Smith received an
administrative subpoena with respect to its historical business practices in certain countries that are subject to United States trade and economic sanctions. Schlumberger is cooperating with the governmental authorities.
On April 20, 2010, a fire and explosion occurred onboard the semisubmersible drilling rig
Deepwater Horizon
, owned by
Transocean Ltd. and under contract to a subsidiary of BP plc. Pursuant to a contract between M-I SWACO and BP, M-I SWACO provided certain services under the direction of BP. A number of legal actions, certain of which name an M-I SWACO entity as a
defendant, have been filed in connection with the
Deepwater Horizon
incident, and additional legal actions may be filed in the future. Based on information currently known, the amount of any potential loss attributable to M-I SWACO with
respect to potential liabilities related to the incident would not be material to Schlumbergers consolidated financial statements.
Schlumberger and its subsidiaries are party to various other legal proceedings from time to time. A liability is accrued when a loss is both probable and can be reasonably estimated. Management believes
that the probability of a material loss is remote. However, litigation is inherently uncertain and it is not possible to predict the ultimate disposition of these proceedings.
17.
Segment Information
Schlumbergers segments are as follows:
|
|
|
Reservoir Characterization Group
Consists of the principal technologies involved in finding and defining hydrocarbon deposits.
These include WesternGeco, Wireline, Testing Services, Schlumberger Information Services and PetroTechnical Services.
|
|
|
|
Drilling Group
Consists of the principal technologies involved in the drilling and positioning of oil and gas wells and is
comprised of Bits & Advanced Technologies, M-I SWACO, Geoservices, Drilling & Measurements, Pathfinder, Drilling Tools & Remedial Services, Dynamic Pressure Management and Integrated Project Management well construction
projects.
|
|
|
|
Production Group
Consists of the principal technologies involved in the lifetime production of oil and gas reservoirs and includes
Well Services, Completions, Artificial Lift, Well Intervention, Subsea, Water Services, Carbon Services and the Schlumberger Production Management field production projects.
|
The Groups are collectively referred to as Oilfield Services.
Financial information for the years ended December 31, 2012, 2011 and 2010, by segment, is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Stated in millions)
|
|
|
|
2012
|
|
|
|
Revenue
|
|
|
Income
before
taxes
|
|
|
Assets
|
|
|
Depn. &
Amortn.
|
|
|
Capital
Expenditures
|
|
OILFIELD SERVICES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reservoir Characterization
|
|
$
|
11,424
|
|
|
$
|
3,212
|
|
|
$
|
8,699
|
|
|
$
|
1,311
|
|
|
$
|
1,236
|
|
Drilling
(1)
|
|
|
15,971
|
|
|
|
2,824
|
|
|
|
11,027
|
|
|
|
1,086
|
|
|
|
1,668
|
|
Production
(1)
|
|
|
14,875
|
|
|
|
2,371
|
|
|
|
9,643
|
|
|
|
724
|
|
|
|
1,439
|
|
Eliminations & other
(2)
|
|
|
(121
|
)
|
|
|
(60
|
)
|
|
|
2,065
|
|
|
|
181
|
|
|
|
352
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
42,149
|
|
|
|
8,347
|
|
|
|
31,434
|
|
|
|
3,302
|
|
|
|
4,695
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill and intangible assets
(3)
|
|
|
|
|
|
|
|
|
|
|
19,387
|
|
|
|
|
|
|
|
|
|
All other assets
|
|
|
|
|
|
|
|
|
|
|
2,705
|
|
|
|
|
|
|
|
|
|
Corporate
(4)
|
|
|
|
|
|
|
(694
|
)
|
|
|
8,021
|
|
|
|
198
|
|
|
|
|
|
Interest income
(5)
|
|
|
|
|
|
|
30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
(6)
|
|
|
|
|
|
|
(331
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Charges & credits
(7)
|
|
|
|
|
|
|
(161
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
42,149
|
|
|
$
|
7,191
|
|
|
$
|
61,547
|
|
|
$
|
3,500
|
|
|
$
|
4,695
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
56
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Stated in millions)
|
|
|
|
2011
|
|
|
|
Revenue
|
|
|
Income
before
taxes
|
|
|
Assets
|
|
|
Depn. &
Amortn.
|
|
|
Capital
Expenditures
|
|
OILFIELD SERVICES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reservoir Characterization
|
|
$
|
9,929
|
|
|
$
|
2,449
|
|
|
$
|
7,621
|
|
|
$
|
1,285
|
|
|
$
|
1,057
|
|
Drilling
(1)
|
|
|
13,860
|
|
|
|
2,254
|
|
|
|
9,093
|
|
|
|
982
|
|
|
|
1,420
|
|
Production
(1)
|
|
|
13,136
|
|
|
|
2,637
|
|
|
|
8,007
|
|
|
|
643
|
|
|
|
1,383
|
|
Eliminations & other
(2)
|
|
|
34
|
|
|
|
(35
|
)
|
|
|
1,958
|
|
|
|
162
|
|
|
|
148
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36,959
|
|
|
|
7,305
|
|
|
|
26,679
|
|
|
|
3,072
|
|
|
|
4,008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill and intangible assets
(3)
|
|
|
|
|
|
|
|
|
|
|
18,932
|
|
|
|
|
|
|
|
|
|
Discontinued operations assets
|
|
|
|
|
|
|
|
|
|
|
1,055
|
|
|
|
|
|
|
|
|
|
All other assets
|
|
|
|
|
|
|
|
|
|
|
2,202
|
|
|
|
|
|
|
|
|
|
Corporates
(4)
|
|
|
|
|
|
|
(590
|
)
|
|
|
6,333
|
|
|
|
202
|
|
|
|
|
|
Interest income
(5)
|
|
|
|
|
|
|
37
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
(6)
|
|
|
|
|
|
|
(290
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Charges & credits
(7)
|
|
|
|
|
|
|
(223
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
36,959
|
|
|
$
|
6,239
|
|
|
$
|
55,201
|
|
|
$
|
3,274
|
|
|
$
|
4,008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Stated in millions)
|
|
|
|
2010
|
|
|
|
Revenue
|
|
|
Income
before
taxes
|
|
|
Assets
|
|
|
Depn. &
Amortn.
|
|
|
Capital
Expenditures
|
|
OILFIELD SERVICES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reservoir Characterization
|
|
$
|
9,321
|
|
|
$
|
2,321
|
|
|
$
|
7,338
|
|
|
$
|
1,246
|
|
|
$
|
885
|
|
Drilling
(1)
|
|
|
7,917
|
|
|
|
1,313
|
|
|
|
8,355
|
|
|
|
721
|
|
|
|
942
|
|
Production
(1)
|
|
|
9,366
|
|
|
|
1,389
|
|
|
|
6,254
|
|
|
|
571
|
|
|
|
850
|
|
Eliminations & other
(2)
|
|
|
68
|
|
|
|
48
|
|
|
|
1,801
|
|
|
|
142
|
|
|
|
234
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26,672
|
|
|
|
5,071
|
|
|
|
23,748
|
|
|
|
2,680
|
|
|
|
2,911
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill and intangible assets
(3)
|
|
|
|
|
|
|
|
|
|
|
19,014
|
|
|
|
|
|
|
|
|
|
Discontinued operations assets
|
|
|
|
|
|
|
|
|
|
|
862
|
|
|
|
|
|
|
|
|
|
All other assets
|
|
|
|
|
|
|
|
|
|
|
1,599
|
|
|
|
|
|
|
|
|
|
Corporate
(4)
|
|
|
|
|
|
|
(405
|
)
|
|
|
6,544
|
|
|
|
77
|
|
|
|
1
|
|
Interest income
(5)
|
|
|
|
|
|
|
43
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
(6)
|
|
|
|
|
|
|
(202
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Charges & credits
(7)
|
|
|
|
|
|
|
625
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
26,672
|
|
|
$
|
5,132
|
|
|
$
|
51,767
|
|
|
$
|
2,757
|
|
|
$
|
2,912
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Effective January 1, 2012, a component of the Drilling Group was reallocated to the Production Group. Historical information has been reclassified to conform to
this presentation.
|
(2)
|
Includes certain headquarter administrative costs which are not allocated to the segments, and certain other operations and other cost and income items maintained at
the Oilfield Services level.
|
(3)
|
Excludes goodwill and intangible assets relating to discontinued operations.
|
(4)
|
Comprised principally of corporate expenses not allocated to the segments, interest on postretirement medical benefits, stock-based compensation costs, amortization
expense associated with intangible assets recorded as a result of the acquisition of Smith and certain other nonoperating items. Corporate assets consist of cash, short-term investments, fixed income investments, held to maturity and investments in
affiliates.
|
(5)
|
Interest income excludes amounts which are included in the segments income (2012 $- million: 2011 $3 million; 2010 $7 million).
|
(6)
|
Interest expense excludes amounts which are included in the segments income (2012 $8 million; 2011 $8 million; 2010 $5 million).
|
(7)
|
See Note 3
Charges and Credits
.
|
57
Segment assets consist of receivables, inventories, fixed assets and multiclient seismic
data.
Depreciation & Amortization includes multiclient seismic data costs.
Revenue
for the years ended December 31, 2012, 2011 and 2010, by geographic area is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Stated in millions)
|
|
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
North America
|
|
$
|
13,485
|
|
|
$
|
12,323
|
|
|
$
|
6,730
|
|
Latin America
|
|
|
7,554
|
|
|
|
6,467
|
|
|
|
4,985
|
|
Europe/CIS/Africa
|
|
|
11,443
|
|
|
|
9,676
|
|
|
|
7,850
|
|
Middle East & Asia
|
|
|
9,194
|
|
|
|
8,102
|
|
|
|
6,652
|
|
Eliminations & other
|
|
|
473
|
|
|
|
391
|
|
|
|
455
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
42,149
|
|
|
$
|
36,959
|
|
|
$
|
26,672
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue is based on the location where services are provided.
During each of the three years ended December 31, 2012, 2011 and 2010, no single customer exceeded 10% of consolidated revenue.
Schlumberger did not have revenue from third-party customers in its country of domicile during the last three years. Revenue
in the United States in 2012, 2011 and 2010 was $11.8 billion, $10.7 billion and $5.8 billion, respectively.
Fixed Assets
less accumulated depreciation
by geographic area are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
(Stated in millions)
|
|
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
North America
|
|
$
|
4,868
|
|
|
$
|
4,230
|
|
|
$
|
3,624
|
|
Latin America
|
|
|
1,788
|
|
|
|
1,472
|
|
|
|
1,274
|
|
Europe/CIS/Africa
|
|
|
3,414
|
|
|
|
3,341
|
|
|
|
3,339
|
|
Middle East & Asia
|
|
|
2,908
|
|
|
|
2,233
|
|
|
|
2,004
|
|
Unallocated
(1)
|
|
|
1,802
|
|
|
|
1,717
|
|
|
|
1,830
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
14,780
|
|
|
$
|
12,993
|
|
|
$
|
12,071
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Represents seismic vessels, including the related on-board equipment, which frequently transition between geographic areas.
|
18.
Pension and Other Benefit Plans
Pension Plans
Schlumberger sponsors several defined benefit pension plans that cover substantially all US employees hired prior to October 1, 2004. The benefits are based on years of service and compensation, on a
career-average pay basis.
In addition to the United States defined benefit pension plans, Schlumberger sponsors several other
international defined benefit pension plans. The most significant of these international plans are the International Staff Pension Plan and the UK pension plan (collectively, the International plans). The International Staff Pension Plan
covers certain international employees and is based on years of service and compensation on a career-average pay basis. The UK plan covers employees hired prior to April 1, 1999, and is based on years of service and compensation, on a final
salary basis.
The weighted-average assumed discount rate, compensation increases and the expected long-term rate of return on
plan assets used to determine the net pension cost for the US and International plans were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US
|
|
|
International
|
|
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
Discount rate
|
|
|
5.00
|
%
|
|
|
5.50
|
%
|
|
|
6.00
|
%
|
|
|
4.95
|
%
|
|
|
5.47
|
%
|
|
|
5.89
|
%
|
Compensation increases
|
|
|
4.00
|
%
|
|
|
4.00
|
%
|
|
|
4.00
|
%
|
|
|
4.91
|
%
|
|
|
4.91
|
%
|
|
|
4.93
|
%
|
Return on plan assets
|
|
|
7.50
|
%
|
|
|
7.50
|
%
|
|
|
8.50
|
%
|
|
|
7.50
|
%
|
|
|
7.50
|
%
|
|
|
8.00
|
%
|
58
Net pension cost for 2012, 2011 and 2010 included the following components:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Stated in millions)
|
|
|
|
US
|
|
|
International
|
|
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
Service cost benefits earned during the period
|
|
$
|
68
|
|
|
$
|
59
|
|
|
$
|
56
|
|
|
$
|
86
|
|
|
$
|
64
|
|
|
$
|
51
|
|
Interest cost on projected benefit obligation
|
|
|
152
|
|
|
|
150
|
|
|
|
142
|
|
|
|
241
|
|
|
|
226
|
|
|
|
208
|
|
Expected return on plan assets
|
|
|
(185
|
)
|
|
|
(170
|
)
|
|
|
(191
|
)
|
|
|
(328
|
)
|
|
|
(279
|
)
|
|
|
(228
|
)
|
Amortization of net loss
|
|
|
93
|
|
|
|
90
|
|
|
|
60
|
|
|
|
76
|
|
|
|
31
|
|
|
|
19
|
|
Amortization of prior service cost
|
|
|
16
|
|
|
|
12
|
|
|
|
4
|
|
|
|
120
|
|
|
|
120
|
|
|
|
113
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
144
|
|
|
$
|
141
|
|
|
$
|
71
|
|
|
$
|
195
|
|
|
$
|
162
|
|
|
$
|
163
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The weighted-average assumed discount rate and compensation increases used to determine the projected
benefit obligations for the US and International plans were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US
|
|
|
International
|
|
|
|
2012
|
|
|
2011
|
|
|
2012
|
|
|
2011
|
|
Discount rate
|
|
|
4.25
|
%
|
|
|
5.00
|
%
|
|
|
4.38
|
%
|
|
|
4.95
|
%
|
Compensation increases
|
|
|
4.00
|
%
|
|
|
4.00
|
%
|
|
|
4.83
|
%
|
|
|
4.91
|
%
|
The changes in the projected benefit obligation, plan assets and funded status of the plans were as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Stated in millions)
|
|
|
|
US
|
|
|
International
|
|
|
|
2012
|
|
|
2011
|
|
|
2012
|
|
|
2011
|
|
Change in Projected Benefit Obligations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Projected benefit obligation at beginning of year
|
|
$
|
3,073
|
|
|
$
|
2,769
|
|
|
$
|
4,666
|
|
|
$
|
4,088
|
|
Service cost
|
|
|
68
|
|
|
|
59
|
|
|
|
86
|
|
|
|
64
|
|
Interest cost
|
|
|
152
|
|
|
|
150
|
|
|
|
241
|
|
|
|
226
|
|
Contributions by plan participants
|
|
|
|
|
|
|
|
|
|
|
97
|
|
|
|
102
|
|
Actuarial losses
|
|
|
399
|
|
|
|
225
|
|
|
|
786
|
|
|
|
321
|
|
Currency effect
|
|
|
|
|
|
|
|
|
|
|
62
|
|
|
|
(8
|
)
|
Benefits paid
|
|
|
(134
|
)
|
|
|
(130
|
)
|
|
|
(140
|
)
|
|
|
(127
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Projected benefit obligation at end of year
|
|
$
|
3,558
|
|
|
$
|
3,073
|
|
|
$
|
5,798
|
|
|
$
|
4,666
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in Plan Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan assets at fair value at beginning of year
|
|
$
|
2,655
|
|
|
$
|
2,635
|
|
|
$
|
4,097
|
|
|
$
|
3,764
|
|
Actual return on plan assets
|
|
|
336
|
|
|
|
78
|
|
|
|
490
|
|
|
|
|
|
Currency effect
|
|
|
|
|
|
|
|
|
|
|
62
|
|
|
|
(6
|
)
|
Company contributions
|
|
|
53
|
|
|
|
72
|
|
|
|
514
|
|
|
|
364
|
|
Contributions by plan participants
|
|
|
|
|
|
|
|
|
|
|
97
|
|
|
|
102
|
|
Benefits paid
|
|
|
(134
|
)
|
|
|
(130
|
)
|
|
|
(140
|
)
|
|
|
(127
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan assets at fair value at end of year
|
|
$
|
2,910
|
|
|
$
|
2,655
|
|
|
$
|
5,120
|
|
|
$
|
4,097
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unfunded Liability
|
|
$
|
(648
|
)
|
|
$
|
(418
|
)
|
|
$
|
(678
|
)
|
|
$
|
(569
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts Recognized in Balance Sheet
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Postretirement Benefits
|
|
$
|
(648
|
)
|
|
$
|
(418
|
)
|
|
$
|
(687
|
)
|
|
$
|
(569
|
)
|
Other Assets
|
|
|
|
|
|
|
|
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(648
|
)
|
|
$
|
(418
|
)
|
|
$
|
(678
|
)
|
|
$
|
(569
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts Recognized in Accumulated Other Comprehensive Loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actuarial losses
|
|
$
|
1,197
|
|
|
$
|
1,048
|
|
|
$
|
1,234
|
|
|
$
|
1,002
|
|
Prior service cost
|
|
|
90
|
|
|
|
101
|
|
|
|
598
|
|
|
|
729
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,287
|
|
|
$
|
1,149
|
|
|
$
|
1,832
|
|
|
$
|
1,731
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated benefit obligation
|
|
$
|
3,262
|
|
|
$
|
2,861
|
|
|
$
|
5,401
|
|
|
$
|
4,336
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
59
The unfunded liability represents the difference between the plan assets and the projected
benefit obligation (PBO). The PBO represents the actuarial present value of benefits based on employee service and compensation and includes an assumption about future compensation levels. The accumulated benefit obligation represents
the actuarial present value of benefits based on employee service and compensation, but does not include an assumption about future compensation levels.
The weighted-average allocation of plan assets and the target allocation by asset category are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US
|
|
|
International
|
|
|
|
Target
|
|
|
2012
|
|
|
2011
|
|
|
Target
|
|
|
2012
|
|
|
2011
|
|
Equity securities
|
|
|
45 55
|
%
|
|
|
47
|
%
|
|
|
47
|
%
|
|
|
50 70
|
%
|
|
|
56
|
%
|
|
|
51
|
%
|
Debt securities
|
|
|
33 45
|
|
|
|
42
|
|
|
|
39
|
|
|
|
25 40
|
|
|
|
35
|
|
|
|
38
|
|
Cash and cash equivalents
|
|
|
0 3
|
|
|
|
2
|
|
|
|
6
|
|
|
|
0 3
|
|
|
|
3
|
|
|
|
4
|
|
Alternative investments
|
|
|
0 10
|
|
|
|
9
|
|
|
|
8
|
|
|
|
0 20
|
|
|
|
6
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Schlumbergers investment policy includes various guidelines and procedures designed to ensure that
assets are prudently invested in a manner necessary to meet the future benefit obligation of the pension plans. The policy does not permit the direct investment of plan assets in any Schlumberger security. Schlumbergers investment horizon is
long-term and accordingly the target asset allocations encompass a strategic, long-term perspective of capital markets, expected risk and return behavior and perceived future economic conditions. The key investment principles of diversification,
assessment of risk and targeting the optimal expected returns for given levels of risk are applied. The target asset allocation is reviewed periodically and is determined based on a long-term projection of capital market outcomes, inflation rates,
fixed income yields, returns, volatilities and correlation relationships. The inclusion of any given asset class in the target asset allocation is considered in relation to its impact on the overall risk/return characteristics as well as its impact
on the overall investment return. As part of its strategy, Schlumberger may utilize certain derivative instruments, such as options, futures, swaps and forwards, within the plans to manage risks (currency, interest rate, etc.), as a substitute for
physical securities or to obtain exposure to different markets.
Asset performance is monitored frequently with an overall
expectation that plan assets will meet or exceed the weighted index of its target asset allocation and component benchmark over rolling five-year periods.
The expected long-term rate of return on assets assumptions reflect the average rate of earnings expected on funds invested or to be invested. The assumptions have been determined by reflecting
expectations regarding future rates of return for the portfolio considering the asset allocation and related historical rates of return. The appropriateness of the assumptions is reviewed annually.
The fair value of Schlumbergers pension plan assets at December 31, 2012 and 2011, by asset category, are presented below and
were determined based on valuation techniques categorized as follows:
|
|
|
Level One: The use of quoted prices in active markets for identical instruments.
|
|
|
|
Level Two: The use of quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are
not active or other inputs that are observable in the market or can be corroborated by observable market data.
|
|
|
|
Level Three: The use of significantly unobservable inputs that typically require the use of managements estimates of assumptions that market
participants would use in pricing.
|
60
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Stated in millions)
|
|
|
|
US Plan Assets
|
|
|
|
2012
|
|
|
2011
|
|
|
|
Total
|
|
|
Level
One
|
|
|
Level
Two
|
|
|
Level
Three
|
|
|
Total
|
|
|
Level
One
|
|
|
Level
Two
|
|
|
Level
Three
|
|
Asset Category:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents
|
|
$
|
56
|
|
|
$
|
5
|
|
|
$
|
51
|
|
|
$
|
|
|
|
$
|
147
|
|
|
$
|
39
|
|
|
$
|
108
|
|
|
$
|
|
|
Equity Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US
(a)
|
|
|
868
|
|
|
|
502
|
|
|
|
366
|
|
|
|
|
|
|
|
806
|
|
|
|
471
|
|
|
|
335
|
|
|
|
|
|
International
(b)
|
|
|
513
|
|
|
|
406
|
|
|
|
107
|
|
|
|
|
|
|
|
453
|
|
|
|
369
|
|
|
|
84
|
|
|
|
|
|
Debt Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate bonds
(c)
|
|
|
495
|
|
|
|
|
|
|
|
495
|
|
|
|
|
|
|
|
340
|
|
|
|
|
|
|
|
340
|
|
|
|
|
|
Government and government-related debt securities
(d)
|
|
|
638
|
|
|
|
157
|
|
|
|
481
|
|
|
|
|
|
|
|
545
|
|
|
|
146
|
|
|
|
399
|
|
|
|
|
|
Government agency collateralized mortgage obligations and mortgage backed securities
(e)
|
|
|
88
|
|
|
|
|
|
|
|
88
|
|
|
|
|
|
|
|
96
|
|
|
|
|
|
|
|
96
|
|
|
|
|
|
Other collateralized mortgage obligations and mortgage-backed securities
(f)
|
|
|
11
|
|
|
|
|
|
|
|
11
|
|
|
|
|
|
|
|
58
|
|
|
|
|
|
|
|
58
|
|
|
|
|
|
Alternative Investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Private equity
(g)
|
|
|
185
|
|
|
|
|
|
|
|
|
|
|
|
185
|
|
|
|
160
|
|
|
|
|
|
|
|
|
|
|
|
160
|
|
Real estate
(h)
|
|
|
56
|
|
|
|
|
|
|
|
|
|
|
|
56
|
|
|
|
50
|
|
|
|
|
|
|
|
|
|
|
|
50
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
2,910
|
|
|
$
|
1,070
|
|
|
$
|
1,599
|
|
|
$
|
241
|
|
|
$
|
2,655
|
|
|
$
|
1,025
|
|
|
$
|
1,420
|
|
|
$
|
210
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Stated in millions)
|
|
|
|
International Plan Assets
|
|
|
|
2012
|
|
|
2011
|
|
|
|
Total
|
|
|
Level
One
|
|
|
Level
Two
|
|
|
Level
Three
|
|
|
Total
|
|
|
Level
One
|
|
|
Level
Two
|
|
|
Level
Three
|
|
Asset Catergory:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents
|
|
$
|
168
|
|
|
$
|
157
|
|
|
$
|
11
|
|
|
$
|
|
|
|
$
|
152
|
|
|
$
|
152
|
|
|
$
|
|
|
|
$
|
|
|
Equity Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US
(a)
|
|
|
1,583
|
|
|
|
1,152
|
|
|
|
431
|
|
|
|
|
|
|
|
1,170
|
|
|
|
1,018
|
|
|
|
152
|
|
|
|
|
|
International
(b)
|
|
|
1,258
|
|
|
|
765
|
|
|
|
493
|
|
|
|
|
|
|
|
937
|
|
|
|
651
|
|
|
|
286
|
|
|
|
|
|
Debt Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate bonds
(c)
|
|
|
540
|
|
|
|
|
|
|
|
540
|
|
|
|
|
|
|
|
399
|
|
|
|
|
|
|
|
399
|
|
|
|
|
|
Government and government-related debt securities
(d)
|
|
|
976
|
|
|
|
|
|
|
|
976
|
|
|
|
|
|
|
|
808
|
|
|
|
|
|
|
|
808
|
|
|
|
|
|
Government agency collateralized mortgage obligations and mortgage backed securities
(e)
|
|
|
196
|
|
|
|
|
|
|
|
196
|
|
|
|
|
|
|
|
268
|
|
|
|
|
|
|
|
268
|
|
|
|
|
|
Other collateralized mortgage obligations and mortgage-backed securities
(f)
|
|
|
93
|
|
|
|
|
|
|
|
93
|
|
|
|
|
|
|
|
93
|
|
|
|
|
|
|
|
93
|
|
|
|
|
|
Alternative Investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Private equity
(g)
|
|
|
128
|
|
|
|
|
|
|
|
|
|
|
|
128
|
|
|
|
150
|
|
|
|
|
|
|
|
|
|
|
|
150
|
|
Real estate
(h)
|
|
|
55
|
|
|
|
|
|
|
|
|
|
|
|
55
|
|
|
|
62
|
|
|
|
|
|
|
|
|
|
|
|
62
|
|
Other
|
|
|
123
|
|
|
|
|
|
|
|
|
|
|
|
123
|
|
|
|
58
|
|
|
|
|
|
|
|
|
|
|
|
58
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
5,120
|
|
|
$
|
2,074
|
|
|
$
|
2,740
|
|
|
$
|
306
|
|
|
$
|
4,097
|
|
|
$
|
1,821
|
|
|
$
|
2,006
|
|
|
$
|
270
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
US equities include companies that are well diversified by industry sector and equity style (i.e., growth and value strategies). Active and passive management
strategies are employed. Investments are primarily in large capitalization stocks and, to a lesser extent, mid- and small-cap stocks.
|
(b)
|
International equities are invested in companies that are traded on exchanges outside the US and are well diversified by industry sector, country and equity style.
Active and passive strategies are employed. The vast majority of the investments are made in companies in developed markets with a small percentage in emerging markets.
|
(c)
|
Corporate bonds consist primarily of investment grade bonds from diversified industries.
|
(d)
|
Government and government-related debt securities are comprised primarily of inflation protected US treasuries and, to a lesser extent, other government-related
securities.
|
(e)
|
Government agency collateralized mortgage obligations and mortgage backed-securities are debt obligations that represent claims to the cash flows from pools of mortgage
loans which are purchased from banks, mortgage companies, and other originators and then assembled into pools by governmental and quasi-governmental entities.
|
(f)
|
Other collateralized mortgage obligations and mortgage-backed securities are debt obligations that represent claims to the cash flows from pools of mortgage loans which
are purchased from banks, mortgage companies, and other originators and then assembled into pools by private entities.
|
(g)
|
Private equity includes investments in several fund of funds limited partnerships.
|
(h)
|
Real estate primarily includes investments in real estate limited partnerships, concentrated in commercial real estate.
|
61
The funding policy is to annually contribute amounts that are based upon a number of factors
including the actuarial accrued liability, amounts that are deductible for income tax purposes, legal funding requirements and available cash flow. Schlumberger currently anticipates contributing approximately $650 million to its postretirement
benefit plans in 2013, subject to market and business conditions.
Postretirement Benefits Other than Pensions
Schlumberger provides certain health care benefits to former US employees who have retired.
The actuarial assumptions used to determine the accumulated postretirement benefit obligation and net periodic benefit cost for the US
postretirement medical plan were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit Obligation
at December
31,
|
|
|
Net Periodic Benefit Cost
for the year
|
|
|
|
2012
|
|
|
2011
|
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
Discount rate
|
|
|
4.25
|
%
|
|
|
5.00
|
%
|
|
|
5.00
|
%
|
|
|
5.50
|
%
|
|
|
6.00
|
%
|
Return on plan assets
|
|
|
|
|
|
|
|
|
|
|
7.00
|
%
|
|
|
7.00
|
%
|
|
|
8.00
|
%
|
Current medical cost trend rate
|
|
|
7.50
|
%
|
|
|
8.00
|
%
|
|
|
8.00
|
%
|
|
|
8.00
|
%
|
|
|
8.00
|
%
|
Ultimate medical cost trend rate
|
|
|
5.00
|
%
|
|
|
5.00
|
%
|
|
|
5.00
|
%
|
|
|
5.00
|
%
|
|
|
5.00
|
%
|
Year that the rate reaches the ultimate trend rate
|
|
|
2023
|
|
|
|
2018
|
|
|
|
2018
|
|
|
|
2017
|
|
|
|
2016
|
|
The net periodic benefit cost for the US postretirement medical plan included the following components:
|
|
|
|
|
|
|
|
|
|
|
|
|
(Stated in millions)
|
|
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
Service cost benefits earned during the period
|
|
$
|
29
|
|
|
$
|
24
|
|
|
$
|
23
|
|
Interest cost on projected benefit obligation
|
|
|
58
|
|
|
|
57
|
|
|
|
58
|
|
Expected return on plan assets
|
|
|
(30
|
)
|
|
|
(20
|
)
|
|
|
(6
|
)
|
Amortization of net loss
|
|
|
16
|
|
|
|
13
|
|
|
|
11
|
|
Amortization of prior service credit
|
|
|
(8
|
)
|
|
|
(12
|
)
|
|
|
(21
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
65
|
|
|
$
|
62
|
|
|
$
|
65
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The changes in the accumulated postretirement benefit obligation, plan assets and funded status were as
follows:
|
|
|
|
|
|
|
|
|
(Stated in millions)
|
|
|
|
2012
|
|
|
2011
|
|
Change in Accumulated Postretirement Benefit Obligation
|
|
|
|
|
|
|
|
|
Benefit obligation at beginning of year
|
|
$
|
1,188
|
|
|
$
|
1,051
|
|
Service cost
|
|
|
29
|
|
|
|
24
|
|
Interest cost
|
|
|
58
|
|
|
|
57
|
|
Contributions by plan participants
|
|
|
6
|
|
|
|
6
|
|
Actuarial losses
|
|
|
171
|
|
|
|
90
|
|
Benefits paid
|
|
|
(42
|
)
|
|
|
(40
|
)
|
|
|
|
|
|
|
Benefit obligation at end of year
|
|
$
|
1,410
|
|
|
$
|
1,188
|
|
|
|
|
|
|
|
|
|
|
Change in Plan Assets
|
|
|
|
|
|
|
|
|
Plan assets at fair value at beginning of year
|
|
$
|
443
|
|
|
$
|
290
|
|
Company contributions
|
|
|
106
|
|
|
|
165
|
|
Contributions by plan participants
|
|
|
6
|
|
|
|
6
|
|
Benefits paid
|
|
|
(42
|
)
|
|
|
(40
|
)
|
Actual return on plan assets
|
|
|
63
|
|
|
|
22
|
|
|
|
|
|
|
|
Plan assets at fair value at end of year
|
|
$
|
576
|
|
|
$
|
443
|
|
|
|
|
|
|
|
|
|
|
Unfunded Liability
|
|
$
|
(834
|
)
|
|
$
|
(745
|
)
|
|
|
|
|
|
|
|
|
|
Amounts Recognized in Accumulated
Other Comprehensive Loss
|
|
|
|
|
|
|
|
|
Actuarial losses
|
|
$
|
411
|
|
|
$
|
286
|
|
Prior service cost
|
|
|
(16
|
)
|
|
|
(24
|
)
|
|
|
|
|
|
|
|
|
$
|
395
|
|
|
$
|
262
|
|
|
|
|
|
|
|
|
|
|
The unfunded liability is included in
Postretirement Benefits
in the Consolidated Balance Sheet.
The assets of the US postretirement medical plan are invested 63% in US equity securities and 37% in government and
government-related debt securities. The fair value of these assets were determined based on quoted prices in active markets for identical instruments.
62
Assumed health care cost trend rates have a significant effect on the amounts reported for
the US postretirement medical plan. A one percentage point change in assumed health care cost trend rates would have the following effects:
|
|
|
|
|
|
|
|
|
(Stated in millions)
|
|
|
|
One percentage
point increase
|
|
|
One percentage
point decrease
|
|
Effect on total service and interest cost components
|
|
$
|
18
|
|
|
$
|
(14
|
)
|
Effect on accumulated postretirement benefit obligation
|
|
$
|
287
|
|
|
$
|
(203
|
)
|
Other Information
The expected benefits to be paid under the US and International pension plans as well as the postretirement medical plan (which is disclosed net of the annual Medicare Part D subsidy, which ranges from $4
million to $11 million per year) were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
(Stated in millions)
|
|
|
|
Pension Benefits
|
|
|
Postretirement
Medical Plan
|
|
|
|
US
|
|
|
International
|
|
|
2013
|
|
$
|
141
|
|
|
$
|
179
|
|
|
$
|
48
|
|
2014
|
|
|
145
|
|
|
|
193
|
|
|
|
51
|
|
2015
|
|
|
151
|
|
|
|
208
|
|
|
|
54
|
|
2016
|
|
|
158
|
|
|
|
223
|
|
|
|
58
|
|
2017
|
|
|
166
|
|
|
|
242
|
|
|
|
62
|
|
2018-2022
|
|
|
971
|
|
|
|
1,397
|
|
|
|
380
|
|
Included in
Accumulated other comprehensive loss
at December 31, 2012 are non-cash pretax
charges which have not yet been recognized in net periodic benefit cost. The estimated amounts that will be amortized from the estimated portion of each component of
Accumulated other comprehensive loss
which is expected to be recognized as a
component of net periodic benefit cost during the year ending December 31, 2013 are as follows:
|
|
|
|
|
|
|
|
|
(Stated in millions)
|
|
|
|
Pension
Plans
|
|
|
Postretirement
Medical
Plan
|
|
Net actuarial losses
|
|
$
|
249
|
|
|
$
|
27
|
|
Prior service cost (credit)
|
|
$
|
133
|
|
|
$
|
(4
|
)
|
In addition to providing defined pension benefits and a postretirement medical plan, Schlumberger and its
subsidiaries have other deferred benefit programs, primarily profit sharing and defined contribution pension plans. Expenses for these programs were $620 million, $582 million and $403 million in 2012, 2011 and 2010, respectively.
19.
Supplementary Information
Cash paid for interest and income taxes was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
(Stated in millions)
|
|
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
Interest
|
|
$
|
313
|
|
|
$
|
294
|
|
|
$
|
234
|
|
Income taxes
|
|
$
|
1,736
|
|
|
$
|
1,836
|
|
|
$
|
571
|
|
Accounts payable and accrued liabilities
are summarized as follows:
|
|
|
|
|
|
|
|
|
(Stated in millions)
|
|
|
|
2012
|
|
|
2011
|
|
Payroll, vacation and employee benefits
|
|
$
|
1,825
|
|
|
$
|
1,597
|
|
Trade
|
|
|
3,550
|
|
|
|
3,389
|
|
Other
|
|
|
3,078
|
|
|
|
2,593
|
|
|
|
|
|
|
|
|
|
$
|
8,453
|
|
|
$
|
7,579
|
|
|
|
|
|
|
|
|
|
|
63
Interest and other income
includes the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
(Stated in millions)
|
|
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
Interest income
|
|
$
|
30
|
|
|
$
|
40
|
|
|
$
|
50
|
|
Equity in net earnings of affiliated companies:
|
|
|
|
|
|
|
|
|
|
|
|
|
M-I SWACO
|
|
|
|
|
|
|
|
|
|
|
78
|
|
Others
|
|
|
142
|
|
|
|
90
|
|
|
|
87
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
172
|
|
|
$
|
130
|
|
|
$
|
215
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts
is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Stated in millions)
|
|
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
Balance at beginning of year
|
|
$
|
177
|
|
|
$
|
185
|
|
|
$
|
160
|
|
Provision
|
|
|
37
|
|
|
|
37
|
|
|
|
38
|
|
Amounts written off
|
|
|
(10
|
)
|
|
|
(45
|
)
|
|
|
(13
|
)
|
Divestiture of business
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of year
|
|
$
|
202
|
|
|
$
|
177
|
|
|
$
|
185
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued Operations
During the second quarter of 2012, Schlumberger sold its Wilson distribution business to National Oilwell Varco Inc. (NOV) for $906 million in cash. A pretax gain of $137 million ($16 million
after-tax) was recognized in connection with this transaction.
During the third quarter of 2012, Schlumberger completed the
sale of its 56% interest in CE Franklin Ltd. to NOV for $122 million in cash. A pretax gain of $30 million ($12 million after-tax) was recognized in connection with this transaction.
As Wilson and CE Franklin comprised Schlumbergers previously reported Distribution segment, the results of this entire segment have
been classified as discontinued operations in the
Consolidated Statement of Income
.
During the second quarter of 2011,
Schlumberger completed the divestiture of its Global Connectivity Services business for $385 million in cash. An after-tax gain of $220 million was recognized in connection with this transaction, and is classified in
Income from discontinued
operations
in the
Consolidated Statement of Income
. The historical results of this business were not significant to Schlumbergers consolidated financial statements and, as such, have not been reclassified to discontinued operations.
The following table summarizes the results of these discontinued operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
(Stated in
millions)
|
|
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
Revenue
|
|
$
|
982
|
|
|
$
|
2,581
|
|
|
$
|
1,908
|
|
|
|
|
|
|
|
|
|
|
|
Income before taxes
|
|
$
|
43
|
|
|
$
|
99
|
|
|
$
|
24
|
|
Tax expense
|
|
|
(15
|
)
|
|
|
(36
|
)
|
|
|
(11
|
)
|
Net income attributable to noncontrolling interests
|
|
|
(5
|
)
|
|
|
(6
|
)
|
|
|
(1
|
)
|
Gain on divestitures, net of tax
|
|
|
28
|
|
|
|
220
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued operations
|
|
$
|
51
|
|
|
$
|
277
|
|
|
$
|
12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
64
Managements Report on Internal Control Over Financial Reporting
Schlumberger management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in
Rule 13a 15(f) of the Securities Exchange Act of 1934, as amended. Schlumbergers internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
Because
of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Schlumberger management assessed the effectiveness of its internal control over financial reporting as of December 31, 2012. In
making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control Integrated Framework. Based on this assessment Schlumbergers management has
concluded that, as of December 31, 2012, its internal control over financial reporting is effective based on those criteria.
The effectiveness of Schlumbergers internal control over financial reporting as of December 31, 2012, has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting
firm, as stated in their report which appears herein.
65