NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
The accompanying unaudited consolidated financial statements of Schlumberger Limited and its subsidiaries (“Schlumberger”) have been prepared in accordance with generally accepted accounting principles in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of Schlumberger management, all adjustments considered necessary for a fair statement have been included in the accompanying unaudited financial statements. All intercompany transactions and balances have been eliminated in consolidation. Operating results for the nine-month period ended September 30, 2019 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2019. The December 31, 2018 balance sheet information has been derived from the Schlumberger 2018 audited financial statements. For further information, refer to the Consolidated Financial Statements and notes thereto included in the Schlumberger Annual Report on Form 10-K for the year ended December 31, 2018, filed with the Securities and Exchange Commission on January 23, 2019.
Reclassifications
Certain prior period amounts have been reclassified to conform to the current period presentation.
2. Charges and Credits
2019
In connection with the preparation of its third quarter 2019 financial statements, Schlumberger recorded the following charges, all of which are classified as Impairments & other in the Consolidated Statement of Income (Loss):
|
(Stated in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pretax
|
|
|
Tax
|
|
|
Net
|
|
Goodwill
|
$
|
8,828
|
|
|
$
|
(43
|
)
|
|
$
|
8,785
|
|
Intangible assets
|
|
1,085
|
|
|
|
(248
|
)
|
|
|
837
|
|
North America pressure pumping
|
|
1,575
|
|
|
|
(344
|
)
|
|
|
1,231
|
|
Other North America-related
|
|
310
|
|
|
|
(53
|
)
|
|
|
257
|
|
Argentina
|
|
127
|
|
|
|
-
|
|
|
|
127
|
|
Equity-method investments
|
|
231
|
|
|
|
(12
|
)
|
|
|
219
|
|
Schlumberger Production Management
|
|
294
|
|
|
|
-
|
|
|
|
294
|
|
Other
|
|
242
|
|
|
|
(13
|
)
|
|
|
229
|
|
|
$
|
12,692
|
|
|
$
|
(713
|
)
|
|
$
|
11,979
|
|
|
•
|
During August 2019, Schlumberger’s market capitalization deteriorated significantly compared to the end of the second quarter of 2019. Schlumberger’s stock price reached a low not seen since 2005. Additionally, the Philadelphia Oil Services Sector Index, which is comprised of companies involved in the oil services sector, reached an 18-year low.
|
As a result of these facts, Schlumberger determined that it was more likely than not that the fair value of certain of its reporting units were less than their carrying value. Therefore, Schlumberger performed an interim goodwill impairment test as of August 31, 2019.
As of August 31, 2019, Schlumberger had 17 reporting units with goodwill balances aggregating $25.0 billion. Schlumberger determined that the fair value of seven of its reporting units, representing approximately $13.8 billion of the goodwill, was substantially in excess of their carrying value. Schlumberger performed a detailed quantitative impairment assessment of the remaining 10 reporting units, which represented $11.2 billion of goodwill. As a result of this assessment, Schlumberger concluded that the goodwill associated with nine of the 10 reporting units was impaired, resulting in an $8.8 billion goodwill impairment charge. This charge primarily relates to Schlumberger’s Drilling and Cameron segments.
9
Following the $8.8 billion goodwill impairment charge relating to these nine reporting units, only three had a remaining goodwill balance. These three reporting units had goodwill balances which ranged between $0.4 billion and $0.6 billion and aggregated to $1.5 billion as of August 31, 2019. The tenth reporting unit, which was determined not to be impaired, had $0.9 billion of goodwill.
Schlumberger primarily used the income approach to estimate the fair value of its reporting units, but also considered the market approach to validate the results. The income approach estimates the fair value by discounting each reporting unit’s estimated future cash flows using Schlumberger’s estimate of the discount rate, or expected return, that a marketplace participant would have required as of the valuation date. The market approach includes the use of comparative multiples to corroborate the discounted cash flow results. The market approach involves significant judgement involved in the selection of the appropriate peer group companies and valuation multiples.
Some of the more significant assumptions inherent in the income approach include the estimated future net annual cash flows for each reporting unit and the discount rate. Schlumberger selected the assumptions used in the discounted cash flow projections using historical data supplemented by current and anticipated market conditions and estimated growth rates. Schlumberger’s estimates are based upon assumptions believed to be reasonable. However, given the inherent uncertainty in determining the assumptions underlying a discounted cash flow analysis, actual results may differ from those used in Schlumberger’s valuations which could result in additional impairment charges in the future.
The discount rates utilized to value Schlumberger’s reporting units were between 12.5% and 14.0%, depending on the risks and uncertainty inherent in the respective reporting unit. Assuming all other assumptions and inputs used in each of the respective discounted cash flow analysis were held constant, a 50 basis point increase in the discount rate assumption would have increased the goodwill impairment charge by approximately $0.3 billion. Conversely, assuming all other assumptions and inputs used in each of the respective discounted cash flow analysis were held constant, a 50 basis point decrease in the discount rate assumption would have decreased the goodwill impairment charge by approximately $0.4 billion.
|
•
|
The negative market indicators described above combined with deteriorating market conditions in North America, as well as the results of the previously mentioned fair value determinations of certain of Schlumberger’s reporting units and the appointment of a new Chief Executive Officer (as described below), were all triggering events that indicated that certain of Schlumberger’s long-lived tangible and intangible assets may be impaired.
|
Recoverability testing, which was performed as of August 31, 2019, indicated that long-lived assets associated with certain asset groups were impaired. The estimated fair value of these asset groups was determined to be below their carrying value. As a result, Schlumberger recorded the following impairment and related charges:
|
-
|
$1.085 billion of intangible assets, of which $842 million relates to Schlumberger’s 2010 acquisition of Smith International, Inc. The remaining $243 million primarily relates to other acquisitions in North America.
|
|
-
|
$1.575 billion of charges relating to Schlumberger’s pressure pumping business in North America. This amount consists of $1.324 billion of pressure pumping equipment and related assets; $98 million of right-of-use assets under operating leases; $121 million relating to a supply contract; $19 million of inventory; and $13 million of severance.
|
|
-
|
$310 million of charges primarily relating to other businesses in North America, consisting of $230 million of fixed asset impairments, $70 million of inventory write-downs and $10 million of severance.
|
|
•
|
As a result of the ongoing economic challenges in Argentina, Schlumberger recorded $127 million of charges during the third quarter of 2019. This consists of $72 million of asset impairments, a $26 million devaluation charge and $29 million of severance.
|
|
•
|
Schlumberger also recorded the following impairment and restructuring charges:
|
|
-
|
$231 million relating to certain equity method investments that were determined to be other-than-temporarily impaired.
|
|
-
|
$294 million impairment relating to the carrying value of certain smaller Schlumberger Production Management (“SPM”) projects.
|
|
-
|
$242 million of restructuring charges consisting of: $62 million of severance; $57 million relating to the acceleration of stock-based compensation expense associated with certain individuals; $49 million of business divestiture costs; $29 million relating to the repurchase of certain Senior Notes (see Note 9 - Long-term Debt); and $45 million of other provisions.
|
The fair value of certain of these impaired assets was estimated based on the present value of projected future cash flows that the underlying assets are expected to generate. Such estimates included unobservable inputs that required significant judgment.
10
Substantially all of the charges recorded during the third quarter of 2019 will not result in any future cash outflows.
During the third quarter of 2019, Schlumberger’s Board of Directors announced the appointment of a new Chief Executive Officer. As the new Chief Executive Officer further develops and implements his strategy, it may result in additional restructuring charges in future periods. Furthermore, Schlumberger may be required to record additional impairment charges if industry conditions deteriorate.
There were no charges or credits recorded during the first six months of 2019.
2018
During the second quarter of 2018, Schlumberger recorded a $184 million pretax charge ($164 million after-tax) associated with headcount reductions, primarily to further streamline its support cost structure. This charge is classified in Impairments & other in the Consolidated Statement of Income (Loss).
There were no charges or credits recorded during the first and third quarters of 2018.
3. Earnings (Loss) Per Share
The following is a reconciliation from basic earnings (loss) per share of Schlumberger to diluted earnings (loss) per share of Schlumberger:
(Stated in millions, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
|
2018
|
|
|
Schlumberger
Net Income (Loss)
|
|
|
Average
Shares
Outstanding
|
|
|
Loss per
Share
|
|
|
Schlumberger
Net Income (Loss)
|
|
|
Average
Shares
Outstanding
|
|
|
Earnings per
Share
|
|
Third Quarter
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
$
|
(11,383
|
)
|
|
|
1,385
|
|
|
$
|
(8.22
|
)
|
|
$
|
644
|
|
|
|
1,385
|
|
|
$
|
0.46
|
|
Assumed exercise of stock options
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
Unvested restricted stock
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
|
|
7
|
|
|
|
|
|
Diluted
|
$
|
(11,383
|
)
|
|
|
1,385
|
|
|
$
|
(8.22
|
)
|
|
$
|
644
|
|
|
|
1,392
|
|
|
$
|
0.46
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
|
2018
|
|
|
Schlumberger
Net Income (Loss)
|
|
|
Average
Shares
Outstanding
|
|
|
Loss per
Share
|
|
|
Schlumberger
Net Income (Loss)
|
|
|
Average
Shares
Outstanding
|
|
|
Earnings per
Share
|
|
Nine Months
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
$
|
(10,470
|
)
|
|
$
|
1,385
|
|
|
$
|
(7.56
|
)
|
|
$
|
1,599
|
|
|
$
|
1,385
|
|
|
$
|
1.15
|
|
Assumed exercise of stock options
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
|
|
1
|
|
|
|
|
|
Unvested restricted stock
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
|
|
7
|
|
|
|
|
|
Diluted
|
$
|
(10,470
|
)
|
|
$
|
1,385
|
|
|
$
|
(7.56
|
)
|
|
$
|
1,599
|
|
|
$
|
1,393
|
|
|
$
|
1.15
|
|
The number of outstanding options to purchase shares of Schlumberger common stock that were not included in the computation of diluted earnings per share, because to do so would have had an antidilutive effect, was as follows:
(Stated in millions)
|
|
|
|
|
|
|
|
|
2019
|
|
|
2018
|
|
Third Quarter
|
|
47
|
|
|
|
40
|
|
Nine Months
|
|
47
|
|
|
|
40
|
|
11
4. Inventories
A summary of inventories, which are stated at the lower of average cost or net realizable value, is as follows:
(Stated in millions)
|
|
|
|
|
|
|
|
|
|
|
Sept. 30,
|
|
|
Dec. 31,
|
|
|
2019
|
|
|
2018
|
|
Raw materials & field materials
|
$
|
1,964
|
|
|
$
|
1,803
|
|
Work in progress
|
|
606
|
|
|
|
519
|
|
Finished goods
|
|
1,771
|
|
|
|
1,688
|
|
|
$
|
4,341
|
|
|
$
|
4,010
|
|
5. Fixed Assets
A summary of fixed assets follows:
(Stated in millions)
|
|
|
|
|
|
|
|
|
|
|
Sept. 30,
|
|
|
Dec. 31,
|
|
|
2019
|
|
|
2018
|
|
Property, plant & equipment
|
$
|
35,961
|
|
|
$
|
38,664
|
|
Less: Accumulated depreciation
|
|
26,356
|
|
|
|
26,985
|
|
|
$
|
9,605
|
|
|
$
|
11,679
|
|
Depreciation expense relating to fixed assets was as follows:
(Stated in millions)
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
|
2018
|
|
Third Quarter
|
$
|
499
|
|
|
$
|
516
|
|
Nine Months
|
$
|
1,525
|
|
|
$
|
1,564
|
|
6. Multiclient Seismic Data
The change in the carrying amount of multiclient seismic data for the nine months ended September 30, 2019 was as follows:
(Stated in millions)
|
|
|
|
|
|
Balance at December 31, 2018
|
$
|
601
|
|
Capitalized in period
|
|
181
|
|
Charged to expense
|
|
(189
|
)
|
Balance at September 30, 2019
|
$
|
593
|
|
12
7. Goodwill
A summary of goodwill follows:
|
(Stated in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reservoir
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Characterization
|
|
|
Drilling
|
|
|
Production
|
|
|
Cameron
|
|
|
Total
|
|
Balance at December 31, 2018
|
$
|
4,703
|
|
|
$
|
10,111
|
|
|
$
|
4,678
|
|
|
$
|
5,439
|
|
|
$
|
24,931
|
|
Impairment
|
|
(97
|
)
|
|
|
(3,025
|
)
|
|
|
(705
|
)
|
|
|
(5,001
|
)
|
|
|
(8,828
|
)
|
Impact of changes in exchange rates and other
|
|
7
|
|
|
|
3
|
|
|
|
(1
|
)
|
|
|
-
|
|
|
|
9
|
|
Balance at September 30, 2019
|
$
|
4,613
|
|
|
$
|
7,089
|
|
|
$
|
3,972
|
|
|
$
|
438
|
|
|
$
|
16,112
|
|
8. Intangible Assets
The gross book value, accumulated amortization and net book value of intangible assets were as follows:
|
(Stated in millions)
|
|
|
|
|
|
Sept. 30, 2019
|
|
|
Dec. 31, 2018
|
|
|
Gross
|
|
|
Accumulated
|
|
|
Net Book
|
|
|
Gross
|
|
|
Accumulated
|
|
|
Net Book
|
|
|
Book Value
|
|
|
Amortization
|
|
|
Value
|
|
|
Book Value
|
|
|
Amortization
|
|
|
Value
|
|
Customer relationships
|
$
|
3,859
|
|
|
$
|
853
|
|
|
$
|
3,006
|
|
|
$
|
4,768
|
|
|
$
|
1,243
|
|
|
$
|
3,525
|
|
Technology/technical know-how
|
|
2,526
|
|
|
|
735
|
|
|
|
1,791
|
|
|
|
3,494
|
|
|
|
1,246
|
|
|
|
2,248
|
|
Tradenames
|
|
1,911
|
|
|
|
248
|
|
|
|
1,663
|
|
|
|
2,799
|
|
|
|
628
|
|
|
|
2,171
|
|
Other
|
|
1,432
|
|
|
|
610
|
|
|
|
822
|
|
|
|
1,404
|
|
|
|
621
|
|
|
|
783
|
|
|
$
|
9,728
|
|
|
$
|
2,446
|
|
|
$
|
7,282
|
|
|
$
|
12,465
|
|
|
$
|
3,738
|
|
|
$
|
8,727
|
|
Amortization expense charged to income was as follows:
(Stated in millions)
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
|
2018
|
|
Third Quarter
|
$
|
156
|
|
|
$
|
167
|
|
Nine Months
|
$
|
480
|
|
|
$
|
506
|
|
Based on the net book value of intangible assets at September 30, 2019, amortization charged to income for the subsequent five years is estimated to be: fourth quarter of 2019—$138 million; 2020—$528 million; 2021—$518 million; 2022—$515 million; 2023—$497 million; and 2024—$477 million.
13
9. Long-term Debt
A summary of Long-term Debt follows:
(Stated in millions)
|
|
|
|
|
|
|
|
|
|
|
Sept. 30,
|
|
|
Dec. 31,
|
|
|
2019
|
|
|
2018
|
|
3.30% Senior Notes due 2021
|
$
|
1,597
|
|
|
$
|
1,596
|
|
3.65% Senior Notes due 2023
|
|
1,494
|
|
|
|
1,493
|
|
3.90% Senior Notes due 2028
|
|
1,442
|
|
|
|
-
|
|
4.20% Senior Notes due 2021
|
|
1,100
|
|
|
|
1,100
|
|
2.40% Senior Notes due 2022
|
|
998
|
|
|
|
997
|
|
4.00% Senior Notes due 2025
|
|
929
|
|
|
|
1,742
|
|
4.30% Senior Notes due 2029
|
|
845
|
|
|
|
-
|
|
3.75% Senior Notes due 2024
|
|
746
|
|
|
|
-
|
|
1.00% Guaranteed Notes due 2026
|
|
654
|
|
|
|
678
|
|
2.65% Senior Notes due 2022
|
|
598
|
|
|
|
598
|
|
0.00% Notes due 2024
|
|
544
|
|
|
|
-
|
|
0.25% Notes due 2027
|
|
543
|
|
|
|
-
|
|
0.50% Notes due 2031
|
|
536
|
|
|
|
-
|
|
2.20% Senior Notes due 2020
|
|
499
|
|
|
|
499
|
|
3.00% Senior Notes due 2020
|
|
415
|
|
|
|
1,596
|
|
3.63% Senior Notes due 2022
|
|
294
|
|
|
|
847
|
|
7.00% Notes due 2038
|
|
209
|
|
|
|
210
|
|
4.50% Notes due 2021
|
|
130
|
|
|
|
132
|
|
5.95% Notes due 2041
|
|
114
|
|
|
|
115
|
|
3.60% Notes due 2022
|
|
108
|
|
|
|
109
|
|
5.13% Notes due 2043
|
|
99
|
|
|
|
99
|
|
4.00% Notes due 2023
|
|
81
|
|
|
|
82
|
|
3.70% Notes due 2024
|
|
55
|
|
|
|
55
|
|
Commercial paper borrowings
|
|
2,128
|
|
|
|
2,433
|
|
Other
|
|
175
|
|
|
|
263
|
|
|
$
|
16,333
|
|
|
$
|
14,644
|
|
During the third quarter of 2019, Schlumberger issued €500 million of 0.00% Notes due 2024, €500 million of 0.25% Notes due 2027 and €500 million of 0.50% Notes due 2031.
In September 2019, Schlumberger repurchased $783 million of its 3.00% Senior Notes due 2020 and $321 million of its 3.625% Senior Notes due 2022. Schlumberger paid a premium of $29 million in connection with these repurchases. This premium was classified as Impairments & other in the Consolidated Statement of Income (Loss). (See Note 2 - Charges and Credits.)
In April 2019, Schlumberger completed a debt exchange offer, pursuant to which it issued $1.500 billion in principal of 3.90% Senior Notes due 2028 (the “New Notes”) in exchange for $401 million of 3.00% Senior Notes due 2020, $234 million of 3.63% Senior Notes due 2022 and $817 million of 4.00% Senior Notes due 2025. In connection with the exchange of principal, Schlumberger paid a premium of $48 million, substantially all of which was in the form of New Notes. This premium is being amortized as additional interest expense over the term of the New Notes.
The estimated fair value of Schlumberger’s Long-term Debt, based on quoted market prices at September 30, 2019 and December 31, 2018, was $16.9 billion and $14.6 billion, respectively.
At September 30, 2019, Schlumberger had separate committed credit facility agreements aggregating $6.5 billion with commercial banks, of which $4.1 billion was available and unused. These committed facilities support commercial paper programs in the United States and Europe, of which $1.0 billion matures in February 2020, $2.0 billion matures in February 2023, $2.0 billion matures in February 2024 and $1.5 billion matures in July 2024. Interest rates and other terms of borrowing under these lines of credit vary by facility.
14
Borrowings under Schlumberger’s commercial paper programs at September 30, 2019 were $2.4 billion, of which $0.3 billion was classified in Short-term borrowings and current portion of long-term debt and the remaining $2.1 billion was classified in Long-term Debt in the Consolidated Balance Sheet. At December 31, 2018, borrowings under the commercial paper programs were $2.4 billion, all of which was classified in Long-term debt in the Consolidated Balance Sheet.
10. Derivative Instruments and Hedging Activities
Schlumberger is exposed to market risks related to fluctuations in foreign currency exchange rates and interest rates. To mitigate these risks, Schlumberger utilizes derivative instruments. Schlumberger does not enter into derivative transactions for speculative purposes.
Interest Rate Risk
Schlumberger is subject to interest rate risk on its debt and its investment portfolio. Schlumberger maintains an interest rate risk management strategy that uses a mix of variable and fixed rate debt combined with its investment portfolio, to mitigate the exposure to changes in interest rates.
At September 30, 2019, Schlumberger had fixed rate debt aggregating $14.0 billion and variable rate debt aggregating $2.7 billion.
Foreign Currency Exchange Rate Risk
As a multinational company, Schlumberger generates revenue in more than 120 countries. Schlumberger’s functional currency is primarily the US dollar. However, outside the United States, a significant portion of Schlumberger’s expenses are 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 the local currency is not the functional currency and expenses denominated in local currency are not equal to revenues denominated in local currency. Schlumberger uses foreign currency forward contracts to provide a hedge against a portion of these cash flow risks. These contracts are accounted for as cash flow hedges, with the 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.
Schlumberger is also exposed to risks on future cash flows relating to certain of its fixed rate debt denominated in currencies other than the functional currency. Schlumberger uses cross-currency swaps to provide a hedge against these cash flow risks.
During 2017, a Canadian-dollar functional currency subsidiary of Schlumberger issued $1.1 billion of US-dollar denominated debt. Schlumberger entered into cross-currency swaps for an aggregate notional amount of $1.1 billion in order to hedge changes in the fair value of its $0.5 billion of 2.20% Senior Notes due 2020 and its $0.6 billion of 2.65% Senior Notes due 2022. These cross-currency swaps effectively convert the US-dollar denominated notes to Canadian-dollar denominated debt with fixed annual interest rates of 1.97% and 2.52%, respectively.
During the third quarter of 2019, a US-dollar functional currency subsidiary of Schlumberger issued €1.5 billion of Euro-denominated debt. Schlumberger entered into cross-currency swaps for an aggregate notional amount of €1.5 billion in order to hedge changes in the fair value of its €0.5 billion 0.00% Notes due 2024, €0.5 billion 0.25% Notes due 2027 and €0.5 billion Notes due 2031. These cross-currency swaps effectively convert the Euro-denominated notes to US-dollar denominated debt with fixed annual interest rates of 2.29%, 2.51% and 2.76%, respectively.
Schlumberger is exposed to changes in the fair value of assets and liabilities that are denominated in currencies other than the functional currency. While Schlumberger uses foreign currency forward contracts and foreign currency options to economically hedge this exposure as it relates to certain currencies, these contracts are not designated as hedges for accounting purposes. Instead, the fair value of the contracts is recorded on the Consolidated Balance Sheet, and changes in the fair value are recognized in the Consolidated Statement of Income (Loss) as are changes in fair value of the hedged item.
At September 30, 2019, contracts were outstanding for the US dollar equivalent of $6.8 billion in various foreign currencies, of which $2.8 billion relates to hedges of debt denominated in currencies other than the functional currency.
At September 30, 2019, Schlumberger recognized a cumulative $37 million loss in Accumulated Other Comprehensive Loss relating to changes in the fair value of foreign currency forward contracts and cross-currency swaps.
15
The effect of derivative instruments designated as fair value and cash flow hedges, and those not designated as hedges, on the Consolidated Statement of (Loss) Income was as follows:
|
|
|
|
|
|
|
|
|
(Stated in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain (Loss) Recognized in Income (Loss)
|
|
|
|
|
Third Quarter
|
|
|
Nine Months
|
|
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
|
Consolidated Statement of Income (Loss) Classification
|
Derivatives designated as fair value hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cross currency swaps
|
$
|
-
|
|
|
$
|
6
|
|
|
$
|
-
|
|
|
$
|
(6
|
)
|
|
Interest expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives designated as cash flow hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts
|
$
|
(3
|
)
|
|
$
|
(2
|
)
|
|
$
|
(7
|
)
|
|
$
|
3
|
|
|
Cost of services/sales
|
Cross currency swaps
|
|
(2
|
)
|
|
|
(30
|
)
|
|
|
(40
|
)
|
|
|
25
|
|
|
Interest expense
|
|
$
|
(5
|
)
|
|
$
|
(32
|
)
|
|
$
|
(47
|
)
|
|
$
|
28
|
|
|
|
Derivatives not designated as hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts
|
$
|
-
|
|
|
$
|
(17
|
)
|
|
$
|
(8
|
)
|
|
$
|
15
|
|
|
Cost of services/sales
|
11. Contingencies
Schlumberger is party to various legal proceedings from time to time. A liability is accrued when a loss is both probable and can be reasonably estimated. Management believes that the probability of a material loss with respect to any currently pending legal proceeding is remote. However, litigation is inherently uncertain and it is not possible to predict the ultimate disposition of any of these proceedings.
12. Segment Information
|
|
|
|
|
(Stated in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Third Quarter 2019
|
|
|
Third Quarter 2018
|
|
|
|
|
|
|
Income (Loss)
|
|
|
|
|
|
|
Income (Loss)
|
|
|
|
|
|
|
Before
|
|
|
|
|
|
|
Before
|
|
|
Revenue
|
|
|
Taxes
|
|
|
Revenue
|
|
|
Taxes
|
|
Reservoir Characterization
|
$
|
1,651
|
|
|
$
|
360
|
|
|
$
|
1,587
|
|
|
$
|
361
|
|
Drilling
|
|
2,470
|
|
|
|
305
|
|
|
|
2,429
|
|
|
|
339
|
|
Production
|
|
3,153
|
|
|
|
288
|
|
|
|
3,249
|
|
|
|
320
|
|
Cameron
|
|
1,363
|
|
|
|
173
|
|
|
|
1,386
|
|
|
|
160
|
|
Eliminations & other
|
|
(96
|
)
|
|
|
(30
|
)
|
|
|
(147
|
)
|
|
|
(28
|
)
|
|
|
|
|
|
|
1,096
|
|
|
|
|
|
|
|
1,152
|
|
Corporate & other (1)
|
|
|
|
|
|
(231
|
)
|
|
|
|
|
|
|
(234
|
)
|
Interest income (2)
|
|
|
|
|
|
7
|
|
|
|
|
|
|
|
8
|
|
Interest expense (3)
|
|
|
|
|
|
(151
|
)
|
|
|
|
|
|
|
(139
|
)
|
Charges and credits (4)
|
|
|
|
|
|
(12,692
|
)
|
|
|
|
|
|
|
-
|
|
|
$
|
8,541
|
|
|
$
|
(11,971
|
)
|
|
$
|
8,504
|
|
|
$
|
787
|
|
(1)
|
Comprised principally of certain corporate expenses not allocated to the segments, stock-based compensation costs, amortization expense associated with certain intangible assets, certain centrally managed initiatives and other nonoperating items.
|
(2)
|
Interest income excludes amounts which are included in the segments’ income ($1 million in 2019; $2 million in 2018).
|
(3)
|
Interest expense excludes amounts which are included in the segments’ income ($9 million in 2019; $8 million in 2018).
|
(4)
|
See Note 2 – Charges and Credits.
|
16
|
|
|
|
|
(Stated in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months 2019
|
|
|
Nine Months 2018
|
|
|
|
|
|
|
Income (Loss)
|
|
|
|
|
|
|
Income (Loss)
|
|
|
|
|
|
|
Before
|
|
|
|
|
|
|
Before
|
|
|
Revenue
|
|
|
Taxes
|
|
|
Revenue
|
|
|
Taxes
|
|
Reservoir Characterization
|
$
|
4,669
|
|
|
$
|
959
|
|
|
$
|
4,602
|
|
|
$
|
987
|
|
Drilling
|
|
7,279
|
|
|
|
913
|
|
|
|
6,789
|
|
|
|
921
|
|
Production
|
|
9,120
|
|
|
|
740
|
|
|
|
9,458
|
|
|
|
853
|
|
Cameron
|
|
3,949
|
|
|
|
486
|
|
|
|
4,175
|
|
|
|
522
|
|
Eliminations & other
|
|
(328
|
)
|
|
|
(126
|
)
|
|
|
(388
|
)
|
|
|
(63
|
)
|
|
|
|
|
|
|
2,972
|
|
|
|
|
|
|
|
3,220
|
|
Corporate & other (1)
|
|
|
|
|
|
(742
|
)
|
|
|
|
|
|
|
(699
|
)
|
Interest income (2)
|
|
|
|
|
|
25
|
|
|
|
|
|
|
|
44
|
|
Interest expense (3)
|
|
|
|
|
|
(433
|
)
|
|
|
|
|
|
|
(405
|
)
|
Charges and credits (4)
|
|
|
|
|
|
(12,692
|
)
|
|
|
|
|
|
|
(184
|
)
|
|
$
|
24,689
|
|
|
$
|
(10,870
|
)
|
|
$
|
24,636
|
|
|
$
|
1,976
|
|
(1)
|
Comprised principally of certain corporate expenses not allocated to the segments, stock-based compensation costs, amortization expense associated with certain intangible assets, certain centrally managed initiatives and other nonoperating items.
|
(2)
|
Interest income excludes amounts which are included in the segments’ income ($6 million in 2019; $7 million in 2018).
|
(3)
|
Interest expense excludes amounts which are included in the segments’ income ($29 million in both 2019 and 2018).
|
(4)
|
See Note 2 – Charges and Credits.
|
Revenue by geographic area was as follows:
|
|
|
|
|
|
|
|
|
(Stated in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Third Quarter
|
|
|
Nine Months
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
North America
|
$
|
2,850
|
|
|
$
|
3,189
|
|
|
$
|
8,389
|
|
|
$
|
9,164
|
|
Latin America
|
|
1,014
|
|
|
|
978
|
|
|
|
3,121
|
|
|
|
2,767
|
|
Europe/CIS/Africa
|
|
2,062
|
|
|
|
1,820
|
|
|
|
5,665
|
|
|
|
5,316
|
|
Middle East & Asia
|
|
2,553
|
|
|
|
2,417
|
|
|
|
7,343
|
|
|
|
7,079
|
|
Eliminations & other
|
|
62
|
|
|
|
100
|
|
|
|
171
|
|
|
|
310
|
|
|
$
|
8,541
|
|
|
$
|
8,504
|
|
|
$
|
24,689
|
|
|
$
|
24,636
|
|
17
North America and International revenue disaggregated by segment was as follows:
|
|
|
|
|
|
|
|
|
(Stated in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Third Quarter 2019
|
|
|
North
|
|
|
|
|
|
|
Eliminations
|
|
|
|
|
|
|
America
|
|
|
International
|
|
|
& other
|
|
|
Total
|
|
Reservoir Characterization
|
$
|
299
|
|
|
$
|
1,347
|
|
|
$
|
5
|
|
|
$
|
1,651
|
|
Drilling
|
|
553
|
|
|
|
1,861
|
|
|
|
56
|
|
|
|
2,470
|
|
Production
|
|
1,426
|
|
|
|
1,726
|
|
|
|
1
|
|
|
|
3,153
|
|
Cameron
|
|
589
|
|
|
|
772
|
|
|
|
2
|
|
|
|
1,363
|
|
Other
|
|
(17
|
)
|
|
|
(77
|
)
|
|
|
(2
|
)
|
|
|
(96
|
)
|
|
$
|
2,850
|
|
|
$
|
5,629
|
|
|
$
|
62
|
|
|
$
|
8,541
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Third Quarter 2018
|
|
|
North
|
|
|
|
|
|
|
Eliminations
|
|
|
|
|
|
|
America
|
|
|
International
|
|
|
& other
|
|
|
Total
|
|
Reservoir Characterization
|
$
|
242
|
|
|
$
|
1,312
|
|
|
$
|
33
|
|
|
$
|
1,587
|
|
Drilling
|
|
601
|
|
|
|
1,760
|
|
|
|
68
|
|
|
|
2,429
|
|
Production
|
|
1,724
|
|
|
|
1,524
|
|
|
|
1
|
|
|
|
3,249
|
|
Cameron
|
|
644
|
|
|
|
713
|
|
|
|
29
|
|
|
|
1,386
|
|
Other
|
|
(22
|
)
|
|
|
(94
|
)
|
|
|
(31
|
)
|
|
|
(147
|
)
|
|
$
|
3,189
|
|
|
$
|
5,215
|
|
|
$
|
100
|
|
|
$
|
8,504
|
|
|
|
|
|
|
(Stated in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months 2019
|
|
|
North
|
|
|
|
|
|
|
Eliminations
|
|
|
|
|
|
|
America
|
|
|
International
|
|
|
& other
|
|
|
Total
|
|
Reservoir Characterization
|
$
|
756
|
|
|
$
|
3,898
|
|
|
$
|
15
|
|
|
$
|
4,669
|
|
Drilling
|
|
1,683
|
|
|
|
5,435
|
|
|
|
161
|
|
|
|
7,279
|
|
Production
|
|
4,218
|
|
|
|
4,900
|
|
|
|
2
|
|
|
|
9,120
|
|
Cameron
|
|
1,771
|
|
|
|
2,146
|
|
|
|
32
|
|
|
|
3,949
|
|
Other
|
|
(39
|
)
|
|
|
(250
|
)
|
|
|
(39
|
)
|
|
|
(328
|
)
|
|
$
|
8,389
|
|
|
$
|
16,129
|
|
|
$
|
171
|
|
|
$
|
24,689
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months 2018
|
|
|
North
|
|
|
|
|
|
|
Eliminations
|
|
|
|
|
|
|
America
|
|
|
International
|
|
|
& other
|
|
|
Total
|
|
Reservoir Characterization
|
$
|
732
|
|
|
$
|
3,729
|
|
|
$
|
141
|
|
|
$
|
4,602
|
|
Drilling
|
|
1,733
|
|
|
|
4,884
|
|
|
|
172
|
|
|
|
6,789
|
|
Production
|
|
4,919
|
|
|
|
4,535
|
|
|
|
4
|
|
|
|
9,458
|
|
Cameron
|
|
1,842
|
|
|
|
2,250
|
|
|
|
83
|
|
|
|
4,175
|
|
Other
|
|
(62
|
)
|
|
|
(236
|
)
|
|
|
(90
|
)
|
|
|
(388
|
)
|
|
$
|
9,164
|
|
|
$
|
15,162
|
|
|
$
|
310
|
|
|
$
|
24,636
|
|
Revenue in excess of billings related to contracts where revenue is recognized over time was $0.2 billion at both September 30, 2019 and December 31, 2018. Such amounts are included within Receivables less allowance for doubtful accounts in the Consolidated Balance Sheet.
Due to the nature of its business, Schlumberger does not have significant backlog. Total backlog was $2.6 billion at September 30, 2019, of which approximately 60% is expected to be recognized as revenue over the next 12 months.
18
Billings and cash collections in excess of revenue was $0.9 billion at both September 30, 2019 and December 31, 2018. Such amounts are included within Accounts payable and accrued liabilities in the Consolidated Balance Sheet.
13. Pension and Other Postretirement Benefit Plans
Net pension cost (credit) for the Schlumberger pension plans included the following components:
(Stated in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Third Quarter
|
|
|
Nine Months
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
|
US
|
|
|
Int'l
|
|
|
US
|
|
|
Int'l
|
|
|
US
|
|
|
Int'l
|
|
|
US
|
|
|
Int'l
|
|
Service cost
|
$
|
14
|
|
|
$
|
32
|
|
|
$
|
14
|
|
|
$
|
35
|
|
|
$
|
41
|
|
|
$
|
96
|
|
|
$
|
44
|
|
|
$
|
105
|
|
Interest cost
|
|
45
|
|
|
|
82
|
|
|
|
41
|
|
|
|
77
|
|
|
|
136
|
|
|
|
248
|
|
|
|
125
|
|
|
|
229
|
|
Expected return on plan assets
|
|
(58
|
)
|
|
|
(148
|
)
|
|
|
(61
|
)
|
|
|
(149
|
)
|
|
|
(173
|
)
|
|
|
(446
|
)
|
|
|
(186
|
)
|
|
|
(442
|
)
|
Amortization of prior service cost
|
|
3
|
|
|
|
2
|
|
|
|
3
|
|
|
|
3
|
|
|
|
7
|
|
|
|
6
|
|
|
|
9
|
|
|
|
8
|
|
Amortization of net loss
|
|
7
|
|
|
|
16
|
|
|
|
12
|
|
|
|
35
|
|
|
|
23
|
|
|
|
47
|
|
|
|
36
|
|
|
|
105
|
|
|
$
|
11
|
|
|
$
|
(16
|
)
|
|
$
|
9
|
|
|
$
|
1
|
|
|
$
|
34
|
|
|
$
|
(49
|
)
|
|
$
|
28
|
|
|
$
|
5
|
|
The net periodic benefit credit for the Schlumberger US postretirement medical plan included the following components:
(Stated in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Third Quarter
|
|
|
Nine Months
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
Service cost
|
$
|
8
|
|
|
$
|
8
|
|
|
$
|
23
|
|
|
$
|
24
|
|
Interest cost
|
|
12
|
|
|
|
11
|
|
|
|
36
|
|
|
|
33
|
|
Expected return on plan assets
|
|
(16
|
)
|
|
|
(15
|
)
|
|
|
(49
|
)
|
|
|
(47
|
)
|
Amortization of prior service credit
|
|
(7
|
)
|
|
|
(7
|
)
|
|
|
(21
|
)
|
|
|
(21
|
)
|
|
$
|
(3
|
)
|
|
$
|
(3
|
)
|
|
$
|
(11
|
)
|
|
$
|
(11
|
)
|
19