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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission file No.:
SCHLUMBERGER N.V.
(SCHLUMBERGER LIMITED)
(Exact name of registrant as specified in its charter)
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Curaçao |
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(State or other jurisdiction of |
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(IRS Employer |
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42 rue Saint-Dominique |
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Paris, France |
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75007 |
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62 Buckingham Gate |
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London, United Kingdom |
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SW1E 6AJ |
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Parkstraat 83, The Hague, |
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The Netherlands |
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2514 JG |
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(Addresses of principal executive offices) |
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(Zip Codes) |
Registrant’s telephone number in the United States, including area code, is: (
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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☒ |
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Accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
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Class |
Outstanding at June 30, 2022 |
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COMMON STOCK, $0.01 PAR VALUE PER SHARE |
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SCHLUMBERGER LIMITED
Second Quarter 2022 Form 10-Q
Table of Contents
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Page |
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PART I |
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Financial Information |
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Item 1. |
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3 |
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Item 2. |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
17 |
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Item 3. |
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23 |
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Item 4. |
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23 |
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PART II |
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Other Information |
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Item 1. |
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24 |
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Item 1A. |
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24 |
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Item 2. |
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24 |
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Item 3. |
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24 |
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Item 4. |
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24 |
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Item 5. |
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24 |
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Item 6. |
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25 |
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
SCHLUMBERGER LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
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(Stated in millions, except per share amounts) |
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Second Quarter |
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Six Months |
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2022 |
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2021 |
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2022 |
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2021 |
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Revenue |
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Services |
$ |
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$ |
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$ |
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$ |
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Product sales |
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Total Revenue |
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Interest & other income |
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Expenses |
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Cost of services |
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Cost of sales |
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Research & engineering |
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General & administrative |
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Interest |
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Income before taxes |
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Tax expense |
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Net income |
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Net income attributable to noncontrolling interests |
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Net income attributable to Schlumberger |
$ |
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$ |
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$ |
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$ |
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Basic income per share of Schlumberger |
$ |
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$ |
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$ |
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$ |
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Diluted income per share of Schlumberger |
$ |
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$ |
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$ |
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$ |
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Average shares outstanding: |
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Basic |
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Assuming dilution |
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See Notes to Consolidated Financial Statements
3
SCHLUMBERGER LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(Unaudited)
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(Stated in millions) |
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Second Quarter |
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Six Months |
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2022 |
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2021 |
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2022 |
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2021 |
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Net income |
$ |
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$ |
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$ |
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$ |
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Currency translation adjustments |
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Unrealized net change arising during the period |
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( |
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( |
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Cash flow hedges |
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Net gain (loss) on cash flow hedges |
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( |
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Reclassification to net income of net realized gain |
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( |
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( |
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( |
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( |
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Pension and other postretirement benefit plans |
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Amortization to net income of net actuarial loss |
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Amortization to net income of net prior service credit |
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( |
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( |
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( |
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( |
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Income taxes on pension and other postretirement benefit plans |
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( |
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( |
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Other |
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- |
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( |
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- |
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( |
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Comprehensive income |
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Comprehensive income attributable to noncontrolling interests |
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Comprehensive income attributable to Schlumberger |
$ |
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$ |
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$ |
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$ |
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See Notes to Consolidated Financial Statements
4
SCHLUMBERGER LIMITED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
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(Stated in millions) |
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Jun. 30, |
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2022 |
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Dec. 31, |
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(Unaudited) |
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2021 |
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ASSETS |
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Current Assets |
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Cash |
$ |
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$ |
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Short-term investments |
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Receivables less allowance for doubtful accounts (2022 - $ |
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Inventories |
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Other current assets |
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Investments in Affiliated Companies |
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Fixed Assets less accumulated depreciation |
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Goodwill |
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Intangible Assets |
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Other Assets |
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$ |
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$ |
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LIABILITIES AND EQUITY |
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Current Liabilities |
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Accounts payable and accrued liabilities |
$ |
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$ |
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Estimated liability for taxes on income |
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Short-term borrowings and current portion of long-term debt |
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Dividends payable |
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Long-term Debt |
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Postretirement Benefits |
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Deferred Taxes |
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Other Liabilities |
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Equity |
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Common stock |
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Treasury stock |
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( |
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( |
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Retained earnings |
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Accumulated other comprehensive loss |
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( |
) |
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( |
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Schlumberger stockholders’ equity |
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Noncontrolling interests |
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$ |
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$ |
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See Notes to Consolidated Financial Statements
5
SCHLUMBERGER LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
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(Stated in millions) |
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Six Months Ended June 30, |
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2022 |
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2021 |
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Cash flows from operating activities: |
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Net income |
$ |
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$ |
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Adjustments to reconcile net income to cash provided by operating activities: |
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Gain on sale of Liberty shares |
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( |
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- |
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Gain on sale of real estate |
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( |
) |
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- |
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Depreciation and amortization (1) |
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Deferred taxes |
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( |
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Stock-based compensation expense |
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Earnings of equity method investments, less dividends received |
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( |
) |
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( |
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Change in assets and liabilities: (2) |
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Increase in receivables |
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( |
) |
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( |
) |
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(Increase) decrease in inventories |
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( |
) |
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(Increase) decrease in other current assets |
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( |
) |
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Increase in other assets |
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( |
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( |
) |
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Decrease in accounts payable and accrued liabilities |
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( |
) |
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( |
) |
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Decrease in estimated liability for taxes on income |
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( |
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( |
) |
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Increase in other liabilities |
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Other |
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NET CASH PROVIDED BY OPERATING ACTIVITIES |
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Cash flows from investing activities: |
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Capital expenditures |
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( |
) |
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( |
) |
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APS investments |
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( |
) |
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( |
) |
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Exploration data costs capitalized |
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( |
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( |
) |
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Business acquisitions and investments, net of cash acquired |
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( |
) |
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( |
) |
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Proceeds from sale of Liberty shares |
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- |
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Proceeds from sale of real estate |
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- |
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Sale of short-term investments, net |
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Other |
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( |
) |
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( |
) |
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NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES |
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( |
) |
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Cash flows from financing activities: |
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Dividends paid |
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( |
) |
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( |
) |
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Taxes paid on net settled stock-based compensation awards |
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( |
) |
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( |
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Proceeds from employee stock purchase plan |
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Proceeds from exercise of stock options |
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- |
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Proceeds from issuance of long-term debt |
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- |
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Repayment of long-term debt |
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- |
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( |
) |
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Net decrease in short-term borrowings |
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( |
) |
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( |
) |
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Other |
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( |
) |
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|
( |
) |
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NET CASH USED IN FINANCING ACTIVITIES |
|
( |
) |
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( |
) |
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Net increase in cash before translation effect |
|
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Translation effect on cash |
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( |
) |
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Cash, beginning of period |
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Cash, end of period |
$ |
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$ |
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(1) |
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(2) |
|
See Notes to Consolidated Financial Statements
6
SCHLUMBERGER LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
(Unaudited)
|
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(Stated in millions, except per share amounts) |
|
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Accumulated |
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Other |
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Common Stock |
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Retained |
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Comprehensive |
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Noncontrolling |
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|
||||||||
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January 1, 2022 – June 30, 2022 |
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Issued |
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In Treasury |
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Earnings |
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Loss |
|
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Interests |
|
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Total |
|
||||||
|
Balance, January 1, 2022 |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
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|
$ |
( |
) |
|
$ |
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$ |
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Net income |
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|
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Currency translation adjustments |
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Changes in fair value of cash flow hedges |
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( |
) |
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( |
) |
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Pension and other postretirement benefit plans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares sold to optionees, less shares exchanged |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vesting of restricted stock, net of taxes withheld |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
Shares issued under employee stock purchase plan |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends declared ($ |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
Dividends paid to noncontrolling interest |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Other |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2022 |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock |
|
|
Retained |
|
|
Comprehensive |
|
|
Noncontrolling |
|
|
|
|
|
||||||||
|
January 1, 2021 – June 30, 2021 |
|
Issued |
|
|
In Treasury |
|
|
Earnings |
|
|
Loss |
|
|
Interests |
|
|
Total |
|
||||||
|
Balance, January 1, 2021 |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Currency translation adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Changes in fair value of cash flow hedges |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension and other postretirement benefit plans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vesting of restricted stock, net of taxes withheld |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
Shares issued under employee stock purchase plan |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends declared ($ |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
Deconsolidation of subsidiary |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Other |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Balance, June 30, 2021 |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock |
|
|
Retained |
|
|
Comprehensive |
|
|
Noncontrolling |
|
|
|
|
|
||||||||
|
April 1, 2022 – June 30, 2022 |
|
Issued |
|
|
In Treasury |
|
|
Earnings |
|
|
Loss |
|
|
Interests |
|
|
Total |
|
||||||
|
Balance, April 1, 2022 |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Currency translation adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in fair value of cash flow hedges |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
Pension and other postretirement benefit plans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares sold to optionees, less shares exchanged |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vesting of restricted stock |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
Shares issued under employee stock purchase plan |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
Stock-based compensation expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends declared ($ |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
Dividends paid to noncontrolling interest |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Other |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2022 |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
7
|
|
|
(Stated in millions, except per share amounts) |
|
|||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock |
|
|
Retained |
|
|
Comprehensive |
|
|
Noncontrolling |
|
|
|
|
|
||||||||
|
April 1, 2021 – June 30, 2021 |
|
Issued |
|
|
In Treasury |
|
|
Earnings |
|
|
Loss |
|
|
Interests |
|
|
Total |
|
||||||
|
Balance, April 1, 2021 |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Currency translation adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
Changes in fair value of cash flow hedges |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
Pension and other postretirement benefit plans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vesting of restricted stock |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
Stock-based compensation expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends declared ($ |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
Deconsolidation of subsidiary |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Other |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Balance, June 30, 2021 |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
SHARES OF COMMON STOCK
(Unaudited)
|
|
|
|
|
|
(Stated in millions) |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares |
|
|
|
|
Issued |
|
|
In Treasury |
|
|
Outstanding |
|
|||
|
Balance, January 1, 2022 |
|
|
|
|
|
( |
) |
|
|
|
|
|
Shares sold to optionees, less shares exchanged |
|
- |
|
|
|
|
|
|
|
|
|
|
Vesting of restricted stock |
|
- |
|
|
|
|
|
|
|
|
|
|
Shares issued under employee stock purchase plan |
|
- |
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2022 |
|
|
|
|
|
( |
) |
|
|
|
|
See Notes to Consolidated Financial Statements
8
SCHLUMBERGER LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
The accompanying unaudited consolidated financial statements of Schlumberger Limited and its subsidiaries (“Schlumberger”) have been prepared in accordance with generally accepted accounting principles in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of Schlumberger management, all adjustments considered necessary for a fair statement have been included in the accompanying unaudited financial statements. All intercompany transactions and balances have been eliminated in consolidation. Operating results for the six-month period ended June 30, 2022 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2022. The December 31, 2021 balance sheet information has been derived from the Schlumberger 2021 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, 2021, filed with the Securities and Exchange Commission on January 26, 2022.
2. Charges and Credits
2022
Schlumberger recorded the following credits during 2022, all of which are classified in Interest & other income in the Consolidated Statement of Income:
|
|
(Stated in millions) |
|
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pretax |
|
|
Tax |
|
|
Net |
|
|||
|
First quarter: |
|
|
|
|
|
|
|
|
|
|
|
|
Gain on sale of Liberty shares |
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
Second quarter: |
|
|
|
|
|
|
|
|
|
|
|
|
Gain on sale of Liberty shares |
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Gain on sale of real estate |
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
On December 31, 2020, Schlumberger contributed its onshore hydraulic fracturing business in the United States and Canada, including its pressure pumping, pumpdown perforating and Permian frac sand business to Liberty Energy Inc. (“Liberty”) in exchange for an equity interest in Liberty. During the first quarter of 2022, Schlumberger sold
During the second quarter of 2022, Schlumberger sold certain real estate and received proceeds of $
Schlumberger did
9
3. Earnings per Share
The following is a reconciliation from basic income per share of Schlumberger to diluted income per share of Schlumberger:
|
(Stated in millions, except per share amounts) |
|
||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2022 |
|
|
2021 |
|
||||||||||||||||||
|
|
Net Income Attributable to Schlumberger |
|
|
Average Shares Outstanding |
|
|
Earnings per Share |
|
|
Net Income Attributable to Schlumberger |
|
|
Average Shares Outstanding |
|
|
Earnings per Share |
|
||||||
|
Second Quarter |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
$ |
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
Unvested restricted stock |
|
- |
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
Diluted |
$ |
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2022 |
|
|
2021 |
|
||||||||||||||||||
|
|
Net Income Attributable to Schlumberger |
|
|
Average Shares Outstanding |
|
|
Income per Share |
|
|
Net Income Attributable to Schlumberger |
|
|
Average Shares Outstanding |
|
|
Loss per Share |
|
||||||
|
Six Months |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
$ |
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Unvested restricted stock |
|
- |
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
Diluted |
$ |
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
The number of outstanding options to purchase shares of Schlumberger common stock that were not included in the computation of diluted income per share, because to do so would have had an antidilutive effect, was as follows:
|
(Stated in millions) |
|
||||||||||||||
|
|
|
|
|
|
|
||||||||||
|
|
Second Quarter |
|
|
Six Months |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
|
Employee stock options |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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) |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
Jun. 30, |
|
|
Dec. 31, |
|
||
|
|
2022 |
|
|
2021 |
|
||
|
Raw materials & field materials |
$ |
|
|
|
$ |
|
|
|
Work in progress |
|
|
|
|
|
|
|
|
Finished goods |
|
|
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
10
5. Fixed Assets
A summary of fixed assets follows:
|
(Stated in millions) |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
Jun. 30, |
|
|
Dec. 31, |
|
||
|
|
2022 |
|
|
2021 |
|
||
|
Property, plant & equipment |
$ |
|
|
|
$ |
|
|
|
Less: Accumulated depreciation |
|
|
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
Depreciation expense relating to fixed assets was as follows:
|
(Stated in millions) |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
2022 |
|
|
2021 |
|
||
|
Second Quarter |
$ |
|
|
|
$ |
|
|
|
Six Months |
$ |
|
|
|
$ |
|
|
6. Intangible Assets
The gross book value, accumulated amortization and net book value of intangible assets were as follows:
|
|
(Stated in millions) |
|
|||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||
|
|
Jun. 30, 2022 |
|
|
Dec. 31, 2021 |
|
||||||||||||||||||
|
|
Gross |
|
|
Accumulated |
|
|
Net Book |
|
|
Gross |
|
|
Accumulated |
|
|
Net Book |
|
||||||
|
|
Book Value |
|
|
Amortization |
|
|
Value |
|
|
Book Value |
|
|
Amortization |
|
|
Value |
|
||||||
|
Customer relationships |
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Technology/technical know-how |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tradenames |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Amortization expense charged to income was as follows:
|
(Stated in millions) |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
2022 |
|
|
2021 |
|
||
|
Second Quarter |
$ |
|
|
|
$ |
|
|
|
Six Months |
$ |
|
|
|
$ |
|
|
Based on the net book value of intangible assets at June 30, 2022, amortization expense for the subsequent five years is estimated to be: remaining two quarters of 2022—$
11
7. Long-term Debt
A summary of Long-term Debt follows:
|
(Stated in millions) |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
Jun. 30, |
|
|
Dec. 31, |
|
||
|
|
2022 |
|
|
2021 |
|
||
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
The estimated fair value of Schlumberger’s Long-term Debt, based on quoted market prices at June 30, 2022 and December 31, 2021, was $
Schlumberger has a €
In addition to the revolving credit facility described above, at June 30, 2022, Schlumberger had separate committed credit facility agreements aggregating $
There were
Schlumberger Limited fully and unconditionally guarantees the securities issued by certain of its subsidiaries, including securities issued by Schlumberger Investment SA and Schlumberger Finance Canada Ltd., both wholly-owned subsidiaries of Schlumberger.
8. Derivative Instruments and Hedging Activities
As a multinational company, Schlumberger conducts its business in over
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.
12
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. Included in Other Liabilities was $
During 2019, a US-dollar functional currency subsidiary of Schlumberger issued €
During 2020, a US-dollar functional currency subsidiary of Schlumberger issued €
During 2020, a US-dollar functional currency subsidiary of Schlumberger issued €
During 2020, a Canadian dollar functional currency subsidiary of Schlumberger issued $
During the fourth quarter of 2021 and the first quarter of 2022, Schlumberger entered into derivative contracts that hedge the price of oil relating to approximately
Schlumberger is exposed to changes in the fair value of assets and liabilities denominated in currencies other than the functional currency. While Schlumberger uses foreign currency forward contracts to economically hedge this exposure as it relates to certain currencies, these contracts are not designated as hedges for accounting purposes. Instead, the fair value of the contracts is recorded on the Consolidated Balance Sheet and changes in the fair value are recognized in the Consolidated Statement of Income, as are changes in the fair value of the hedged item.
At June 30, 2022, contracts were outstanding for the US dollar equivalent of $
Other than the previously mentioned cross-currency swaps and commodity hedges, the fair value of the other outstanding derivatives was
13
The effect of derivative instruments designated as cash flow hedges, and those not designated as hedges, on the Consolidated Statement of Income was as follows:
|
|
|
|
|
|
|
|
|
|
(Stated in millions) |
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain (Loss) Recognized in Income |
|
|
|
|||||||||||||
|
|
Second Quarter |
|
|
Six Months |
|
|
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
|
Consolidated Statement of Income Classification |
||||
|
Derivatives designated as cash flow hedges: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cross currency swaps |
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
( |
) |
|
Cost of services/sales |
|
Commodity contracts |
|
( |
) |
|
|
- |
|
|
|
( |
) |
|
|
- |
|
|
Revenue |
|
Foreign exchange contracts |
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Cost of services/sales |
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
Derivatives not designated as hedges: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts |
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
Cost of services/sales |
9. 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.
10. Segment Information
|
|
|
|
|
|
(Stated in millions) |
|
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second Quarter 2022 |
|
|
Second Quarter 2021 |
|
||||||||||
|
|
|
|
|
|
Income |
|
|
|
|
|
|
Income |
|
||
|
|
Revenue |
|
|
Before Taxes |
|
|
Revenue |
|
|
Before Taxes |
|
||||
|
Digital & Integration |
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Reservoir Performance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Well Construction |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Production Systems |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eliminations & other |
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Pretax segment operating income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate & other (1) |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
Interest income (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense (3) |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
Charges and credits (4) |
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
(1) |
|
|
(2) |
|
|
(3) |
|
|
(4) |
|
14
|
|
|
|
|
|
(Stated in millions) |
|
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months 2022 |
|
|
Six Months 2021 |
|
||||||||||
|
|
|
|
|
|
Income |
|
|
|
|
|
|
Income |
|
||
|
|
Revenue |
|
|
Before Taxes |
|
|
Revenue |
|
|
Before Taxes |
|
||||
|
Digital & Integration |
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Reservoir Performance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Well Construction |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Production Systems |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eliminations & other |
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Pretax segment operating income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate & other (1) |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
Interest income (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense (3) |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
Charges and credits (4) |
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
(1) |
Comprised principally of certain corporate expenses not allocated to the segments, stock-based compensation costs, amortization expense associated with certain intangible assets, certain centrally managed initiatives and other nonoperating items. |
|
(2) |
|
|
(3) |
|
|
(4) |
See Note 2 – Charges and Credits. |
Revenue by geographic area was as follows:
|
|
|
|
|
|
|
|
|
|
(Stated in millions) |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second Quarter |
|
|
Six Months |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
|
North America |
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Latin America |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Europe/CIS/Africa |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Middle East & Asia |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eliminations & other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
15
North America and International revenue disaggregated by segment was as follows:
|
|
|
|
|
|
|
|
|
|
(Stated in millions) |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second Quarter 2022 |
|
|||||||||||||
|
|
North |
|
|
|
|
|
|
Eliminations |
|
|
|
|
|
||
|
|
America |
|
|
International |
|
|
& other |
|
|
Total |
|
||||
|
Digital & Integration |
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Reservoir Performance |
|
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
Well Construction |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Production Systems |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eliminations & other |
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second Quarter 2021 |
|
|||||||||||||
|
|
North |
|
|
|
|
|
|
Eliminations |
|
|
|
|
|
||
|
|
America |
|
|
International |
|
|
& other |
|
|
Total |
|
||||
|
Digital & Integration |
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Reservoir Performance |
|
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
Well Construction |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Production Systems |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eliminations & other |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months 2022 |
|
|||||||||||||
|
|
North |
|
|
|
|
|
|
Eliminations |
|
|
|
|
|
||
|
|
America |
|
|
International |
|
|
& other |
|
|
Total |
|
||||
|
Digital & Integration |
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Reservoir Performance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Well Construction |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Production Systems |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eliminations & other |
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months 2021 |
|
|||||||||||||
|
|
North |
|
|
|
|
|
|
Eliminations |
|
|
|
|
|
||
|
|
America |
|
|
International |
|
|
& other |
|
|
Total |
|
||||
|
Digital & Integration |
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Reservoir Performance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Well Construction |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Production Systems |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eliminations & other |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Revenue in excess of billings related to contracts where revenue is recognized over time was $
Due to the nature of its business, Schlumberger does not have significant backlog. Total backlog was $
Billings and cash collections in excess of revenue was $
16
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
This section of the Form 10-Q discusses second-quarter 2022 results of operations and comparisons to first-quarter 2022, as well as the first six months of 2022 results of operations and comparisons to the first six months of 2021. Detailed financial information with respect to first-quarter 2022 can be found in Part I, Item 1, “Financial Statements” of Schlumberger’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2022.
Second Quarter 2022 Compared to First Quarter 2022
|
|
|
|
|
|
(Stated in millions) |
|
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second Quarter 2022 |
|
|
First Quarter 2022 |
|
||||||||||
|
|
|
|
|
|
Income Before |
|
|
|
|
|
|
Income Before |
|
||
|
|
Revenue |
|
|
Taxes |
|
|
Revenue |
|
|
Taxes |
|
||||
|
Digital & Integration |
$ |
955 |
|
|
$ |
379 |
|
|
$ |
857 |
|
|
$ |
292 |
|
|
Reservoir Performance |
|
1,333 |
|
|
|
195 |
|
|
|
1,210 |
|
|
|
160 |
|
|
Well Construction |
|
2,686 |
|
|
|
470 |
|
|
|
2,398 |
|
|
|
388 |
|
|
Production Systems |
|
1,893 |
|
|
|
171 |
|
|
|
1,604 |
|
|
|
114 |
|
|
Eliminations & other |
|
(94 |
) |
|
|
(56 |
) |
|
|
(107 |
) |
|
|
(60 |
) |
|
Pretax segment operating income |
|
|
|
|
|
1,159 |
|
|
|
|
|
|
|
894 |
|
|
Corporate & other (1) |
|
|
|
|
|
(148 |
) |
|
|
|
|
|
|
(164 |
) |
|
Interest income (2) |
|
|
|
|
|
3 |
|
|
|
|
|
|
|
2 |
|
|
Interest expense (3) |
|
|
|
|
|
(121 |
) |
|
|
|
|
|
|
(120 |
) |
|
Charges and credits (4) |
|
|
|
|
|
259 |
|
|
|
|
|
|
|
26 |
|
|
|
$ |
6,773 |
|
|
$ |
1,152 |
|
|
$ |
5,962 |
|
|
$ |
638 |
|
|
(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 ($16 million in Q2 2022; $12 million in Q1 2022). |
|
(3) |
Interest expense excludes amounts which are included in the segments’ income ($3 million in Q2 2022; $3 million in Q1 20221). |
|
(4) |
Charges and credits are described in detail in Note 2 to the Consolidated Financial Statements. |
The second quarter saw a strong acceleration of revenue and earnings growth, with revenue growing 14% sequentially, driven by an increase in activity internationally, in North America, and across all Divisions.
Sequentially, all Divisions posted double-digit revenue growth—outpacing rig count growth both in North America and internationally. The quarter was also characterized by a favorable mix of exploration and offshore activity and the increasing impact of improved pricing, resulting in the largest sequential quarterly growth since 2010.
Second-quarter sequential revenue growth was broad-based, with international revenue increasing 12% and North America revenue growing 20%. The international growth was widespread across all areas with almost all of the GeoUnits experiencing revenue growth. International revenue growth was led by Europe/CIS/Africa, which experienced a 20% sequential increase. Latin America experienced sequential revenue growth of 10% while revenue in the Middle East & Asia increased 7%. In North America, the 20% sequential revenue growth was driven by a significant increase in land and offshore drilling activity and higher exploration data licensing in the US Gulf of Mexico.
Overall, second-quarter pretax segment operating income increased 30% sequentially, and pretax segment operating margin expanded sequentially by 212 basis points (“bps”) to 17.1%—the highest quarterly operating margin level since 2015. All four Divisions expanded their margins sequentially.
Despite near-term concerns over a global economic slowdown, the combination of energy security, favorable break-even prices, and the urgency to grow oil and gas production capacity is expected to continue to support strong upstream E&P spending growth. Consequently, Schlumberger expects a decoupling of upstream spending from near-term demand volatility, resulting in resilient global oil and gas activity growth in 2022 and beyond.
17
The strength of the second-quarter performance highlights Schlumberger’s ability to comprehensively participate in drilling and completion activity growth globally. The multiyear upcycle continued to gain momentum with upstream activity and service pricing steadily increasing both internationally and in North America, resulting in a strengthened outlook for Schlumberger.
Digital & Integration
Digital & Integration revenue of $955 million increased 11% sequentially primarily due to higher exploration data licensing sales, including $95 million in transfer fees.
Digital & Integration pretax operating margin of 40% expanded 570 bps sequentially due to higher exploration data licensing sales in the US Gulf of Mexico and increased profitability in APS projects, particularly in Canada.
Reservoir Performance
Reservoir Performance revenue of $1.3 billion increased 10% sequentially due to higher activity on land and offshore beyond the impact of the seasonal rebound in the Northern Hemisphere, along with improved pricing.
Reservoir Performance pretax operating margin of 15% expanded 143 bps sequentially. Profitability was boosted by the seasonal recovery in the Northern Hemisphere, higher offshore and exploration activity, favorable technology mix, and improved pricing.
Well Construction
Well Construction revenue of $2.7 billion increased 12% sequentially due to higher land and offshore drilling activity both in North America and internationally, beyond the impact of the seasonal rebound in the Northern Hemisphere, in addition to improved pricing.
Well Construction pretax operating margin of 18% expanded 134 bps sequentially due to improved profitability across most of its business lines, particularly in the Europe/CIS/Africa and Middle East & Asia areas. Margin expansion was due to the seasonal recovery in the Northern Hemisphere, higher offshore and exploration activity, favorable technology mix, and improved pricing.
Production Systems
Production Systems revenue of $1.9 billion increased 18% sequentially as supply chain and logistics constraints abated, facilitating increased product deliveries and backlog conversion, mostly internationally.
Production Systems pretax operating margin of 9% expanded 190 bps sequentially due to improved profitability from higher sales of surface, well, and subsea production systems.
Six Months 2022 Compared to Six Months 2021
|
|
|
|
|
|
|
(Stated in millions) |
|
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months 2022 |
|
|
Six Months 2021 |
|
||||||||||
|
|
|
|
|
|
|
Income |
|
|
|
|
|
|
Income |
|
||
|
|
|
|
|
|
|
Before |
|
|
|
|
|
|
Before |
|
||
|
|
|
Revenue |
|
|
Taxes |
|
|
Revenue |
|
|
Taxes |
|
||||
|
Digital & Integration |
|
$ |
1,813 |
|
|
$ |
671 |
|
|
$ |
1,590 |
|
|
$ |
521 |
|
|
Reservoir Performance |
|
|
2,543 |
|
|
|
355 |
|
|
|
2,119 |
|
|
|
258 |
|
|
Well Construction |
|
|
5,083 |
|
|
|
858 |
|
|
|
4,045 |
|
|
|
482 |
|
|
Production Systems |
|
|
3,497 |
|
|
|
285 |
|
|
|
3,271 |
|
|
|
309 |
|
|
Eliminations & other |
|
|
(201 |
) |
|
|
(115 |
) |
|
|
(168 |
) |
|
|
(99 |
) |
|
Pretax segment operating income |
|
|
|
|
|
|
2,054 |
|
|
|
|
|
|
|
1,471 |
|
|
Corporate & other (1) |
|
|
|
|
|
|
(313 |
) |
|
|
|
|
|
|
(288 |
) |
|
Interest income (2) |
|
|
|
|
|
|
5 |
|
|
|
|
|
|
|
9 |
|
|
Interest expense (3) |
|
|
|
|
|
|
(241 |
) |
|
|
|
|
|
|
(264 |
) |
|
Charges and credits (4) |
|
|
|
|
|
|
285 |
|
|
|
|
|
|
|
- |
|
|
|
|
$ |
12,735 |
|
|
$ |
1,790 |
|
|
$ |
10,857 |
|
|
$ |
928 |
|
18
|
(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 ($28 million in 2022; $1 million in 2021). |
|
(3) |
Interest expense excludes amounts which are included in the segments’ income ($6 million in 2022; $8 million in 2021). |
|
(4) |
Charges and credits are described in detail in Note 2 to the Consolidated Financial Statements. |
Six-month 2022 revenue of $12.7 billion increased 17% year-on-year driven by an increase in activity internationally, in North America, and across all Divisions. International revenue increased 13% and North America revenue grew 37%. International growth was widespread, led by Latin America, which increased 21% due to higher drilling and stimulation activity. Europe/CIS/Africa experienced 14% growth, while revenue in the Middle East & Asia increased 7%. In North America, the revenue growth was driven by robust onshore drilling activity and higher sales of production systems, coupled with a strong contribution from the APS project in Canada and increased exploration data licensing in the US Gulf of Mexico.
Six-month 2022 pretax segment operating margin of 16% was 258 bps higher compared to the same period last year due to improved operating leverage from higher activity, a favorable activity mix, and an improving pricing environment.
Digital & Integration
Six-month 2022 revenue of $1.8 billion increased 14% year-on-year, primarily in North America, driven by higher exploration data license sales and increased revenue from APS projects due to higher production and improved oil prices, particularly in Canada.
Year-on-year, pretax operating margin expanded 425 bps to 37% primarily due to the higher revenue from exploration data licenses and improved profitability from APS projects.
Reservoir Performance
Six-month 2022 revenue of $2.5 billion increased 20% year-on-year driven by strong international activity led by Latin America and the Middle East & Asia. Double-digit growth was posted in intervention, evaluation, and stimulation services both on land and offshore, with higher exploration-related activity and improved pricing.
Year-on-year, pretax operating margin increased by 178 bps to 14% due to improved profitability in evaluation and intervention activity.
Well Construction
Six-month 2022 revenue of $5.1 billion grew 26% year-on-year with growth across all areas, led by North America and Latin America which grew 57% and 45%, respectively. Double-digit growth was recorded in drilling fluids, measurements, and integrated drilling—both on higher land and offshore activity—along with improved pricing.
Year-on-year, pretax operating margin increased 497 bps to 17% driven by higher activity and improved pricing.
Production Systems
Six-month 2022 revenue of $3.5 billion increased 7% primarily driven by new projects and increased sales activity mainly in Europe/CIS/Africa, North America, and Latin America. Double-digit growth was posted in subsea and midstream production systems.
Year-on-year, pretax operating margin decreased 131 bps to 8% due to reduced profitability in midstream and well production systems largely as a result of higher logistics costs and less favorable revenue mix.
19
Interest and Other Income
Interest & other income consisted of the following:
|
(Stated in millions) |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second Quarter |
|
|
First Quarter |
|
|
Six Months |
|
|||||||
|
|
2022 |
|
|
2022 |
|
|
2022 |
|
|
2021 |
|
||||
|
Gain on sale of Liberty shares |
$ |
216 |
|
|
$ |
26 |
|
|
$ |
242 |
|
|
$ |
- |
|
|
Gain on sale of real estate |
|
43 |
|
|
|
- |
|
|
|
43 |
|
|
|
- |
|
|
Earnings of equity method investments |
|
33 |
|
|
|
10 |
|
|
|
43 |
|
|
|
25 |
|
|
Interest income |
|
19 |
|
|
|
14 |
|
|
|
33 |
|
|
|
10 |
|
|
|
$ |
311 |
|
|
$ |
50 |
|
|
$ |
361 |
|
|
$ |
35 |
|
Other
Research & engineering and General & administrative expenses, as a percentage of Revenue, for the second quarter and first quarter of 2022 and six months ended June 30, 2022 and 2021 were as follows:
|
|
Second |
|
|
|
|
|
|
|
|
||||||
|
|
Quarter |
|
|
First Quarter |
|
|
Six Months |
|
|||||||
|
|
2022 |
|
|
2022 |
|
|
2022 |
|
|
2021 |
|
||||
|
Research & engineering |
|
2.3 |
% |
|
|
2.4 |
% |
|
|
2.3 |
% |
|
|
2.5 |
% |
|
General & administrative |
|
1.3 |
% |
|
|
1.6 |
% |
|
|
1.4 |
% |
|
|
1.4 |
% |
The effective tax rate for the second quarter of 2022 was 15.8%, as compared to 18.4% for the first quarter of 2022. The decrease in the effective tax rate was primarily due to the credits described in Note 2 to the Consolidated Financial Statements. These credits reduced the effective tax rate during the second quarter by three percentage points.
The effective tax rate for the six months of 2022 was 16.8%, as compared to 18.6% for the same period of 2021. The decrease in the effective tax rate was primarily due to the credits described in Note 2 to the Consolidated Financial Statements. These credits reduced the effective tax rate during the first six months of 2022 by two percentage points.
Charges and Credits
Schlumberger recorded the following credits during 2022, all of which are classified in Interest & other income in the Consolidated Statement of Income.
|
|
(Stated in millions) |
|
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pretax |
|
|
Tax |
|
|
Net |
|
|||
|
First quarter: |
|
|
|
|
|
|
|
|
|
|
|
|
Gain on sale of Liberty shares |
$ |
(26 |
) |
|
$ |
(4 |
) |
|
$ |
(22 |
) |
|
Second quarter: |
|
|
|
|
|
|
|
|
|
|
|
|
Gain on sale of Liberty shares |
|
(216 |
) |
|
|
(13 |
) |
|
|
(203 |
) |
|
Gain on sale of real estate |
|
(43 |
) |
|
|
(2 |
) |
|
|
(41 |
) |
|
|
$ |
(285 |
) |
|
$ |
(19 |
) |
|
$ |
(266 |
) |
Schlumberger did not record any charges or credits during the first six months of 2021.
20
Liquidity and Capital Resources
Details of the components of liquidity as well as changes in liquidity follow:
|
|
(Stated in millions) |
|
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jun. 30, |
|
|
Jun. 30, |
|
|
Dec. 31, |
|
|||
|
Components of Liquidity: |
2022 |
|
|
2021 |
|
|
2021 |
|
|||
|
Cash |
$ |
1,893 |
|
|
$ |
1,439 |
|
|
$ |
1,757 |
|
|
Short-term investments |
|
923 |
|
|
|
1,243 |
|
|
|
1,382 |
|
|
Short-term borrowings and current portion of long-term debt |
|
(901 |
) |
|
|
(36 |
) |
|
|
(909 |
) |
|
Long-term debt |
|
(12,946 |
) |
|
|
(15,687 |
) |
|
|
(13,286 |
) |
|
Net debt (1) |
$ |
(11,031 |
) |
|
$ |
(13,041 |
) |
|
$ |
(11,056 |
) |
|
|
Six Months Ended Jun. 30, |
|
|||||
|
Changes in Liquidity: |
2022 |
|
|
2021 |
|
||
|
Net income |
$ |
1,490 |
|
|
$ |
755 |
|
|
Gain on sale of Liberty shares |
|
(242 |
) |
|
|
- |
|
|
Gain on sale of real estate |
|
(43 |
) |
|
|
- |
|
|
Depreciation and amortization (2) |
|
1,065 |
|
|
|
1,058 |
|
|
Earnings of equity method investments, less dividends received |
|
(22 |
) |
|
|
(15 |
) |
|
Deferred taxes |
|
11 |
|
|
|
(18 |
) |
|
Stock-based compensation expense |
|
160 |
|
|
|
156 |
|
|
Increase in working capital (3) |
|
(1,884 |
) |
|
|
(758 |
) |
|
US Federal tax refund |
|
- |
|
|
|
477 |
|
|
Other |
|
4 |
|
|
|
(6 |
) |
|
Cash flow from operations |
|
539 |
|
|
|
1,649 |
|
|
Capital expenditures |
|
(664 |
) |
|
|
(421 |
) |
|
APS investments |
|
(311 |
) |
|
|
(188 |
) |
|
Exploration data costs capitalized |
|
(64 |
) |
|
|
(12 |
) |
|
Free cash flow (4) |
|
(500 |
) |
|
|
1,028 |
|
|
Dividends paid |
|
(352 |
) |
|
|
(349 |
) |
|
Proceeds from employee stock plans |
|
93 |
|
|
|
62 |
|
|
Taxes paid on net settled stock-based compensation awards |
|
(85 |
) |
|
|
(18 |
) |
|
Business acquisitions and investments, net of cash acquired plus debt assumed |
|
(8 |
) |
|
|
(35 |
) |
|
Proceeds from sale of Liberty shares |
|
513 |
|
|
|
- |
|
|
Proceeds from sale of real estate |
|
120 |
|
|
|
- |
|
|
Other |
|
(86 |
) |
|
|
(12 |
) |
|
Change in net debt before impact of changes in foreign exchange rates on net debt |
|
(305 |
) |
|
|
676 |
|
|
Impact of changes in foreign exchange rates on net debt |
|
330 |
|
|
|
163 |
|
|
(Increase) decrease in net debt |
|
25 |
|
|
|
839 |
|
|
Net debt, beginning of period (1) |
|
(11,056 |
) |
|
|
(13,880 |
) |
|
Net debt, end of period (1) |
$ |
(11,031 |
) |
|
$ |
(13,041 |
) |
|
(1) |
“Net debt” represents gross debt less cash and short-term investments. Management believes that Net debt provides useful information regarding the level of Schlumberger’s indebtedness by reflecting cash and investments that could be used to repay debt. Net debt is a non-GAAP financial measure that should be considered in addition to, not as a substitute for or superior to, total debt. |
|
(2) |
Includes depreciation of property, plant and equipment and amortization of intangible assets, exploration data costs, and APS investments. |
|
(3) |
Includes severance payments of $38 million and $184 million during the six months ended June 30, 2022 and 2021, respectively. |
|
(4) |
“Free cash flow” represents cash flow from operations less capital expenditures, APS investments and exploration data costs capitalized. Management believes that free cash flow is an important liquidity measure for the company and that it is useful to investors and management as a measure of our ability to generate cash. Once business needs and obligations are met, this cash can be used to reinvest in the company for future growth or to return to shareholders through dividend payments or share repurchases. Free cash flow does not represent the residual cash flow available for discretionary expenditures. Free cash flow is a non-GAAP financial measure that should be considered in addition to, not as a substitute for or superior to, cash flow from operations. |
21
Key liquidity events during the first six months of 2022 and 2021 included:
|
• |
Capital investments (consisting of capital expenditures, APS investments and exploration data capitalized) were $1.0 billion during the first six months of 2022 compared to $0.6 billion during the first six months of 2021. Capital investments during the full year of 2022 are expected to be approximately $2 billion as compared to $1.7 billion for the full year 2021. |
|
• |
During the first six months of 2022 working capital consumed $1.9 billion of liquidity as compared to $758 million during the same period of 2021. The year-on-year increase in working capital consumption was primarily driven by an increase in receivables due to the significant revenue growth. Inventory also increased as lead times were managed in anticipation of continued growth in the second half of the year. |
|
• |
During the first six months of 2022, Schlumberger sold 33.8 million of its shares in Liberty and received proceeds of $513 million. |
|
• |
During the second quarter of 2022, Schlumberger sold certain real estate and received proceeds of $120 million. |
|
• |
On January 21, 2016, the Board approved a $10 billion share repurchase program for Schlumberger common stock. Schlumberger had repurchased $1.0 billion of Schlumberger common stock under this program as of June 30, 2022. Schlumberger did not repurchase any of its common stock during the first six months of 2022. |
As of June 30, 2022, Schlumberger had $2.82 billion of cash and short-term investments on hand. Schlumberger had committed debt facility agreements aggregating $6.54 billion, all of which was available and unused. Schlumberger believes these amounts are sufficient to meet future business requirements for at least the next 12 months.
There were no borrowings under the commercial paper programs at June 30, 2022.
In April 2022, Schlumberger announced a 40% increase to its quarterly cash dividend from $0.125 per share of outstanding common stock to $0.175 per share.
Schlumberger maintains an allowance for doubtful accounts in order to record accounts receivable at their net realizable value. Judgment is involved in recording and making adjustments to this reserve. Allowances have been recorded for receivables believed to be uncollectible, including amounts for the resolution of potential credit and other collection issues such as disputed invoices. Adjustments to the allowance may be required in future periods depending on how such potential issues are resolved, or if the financial condition of Schlumberger’s customers were to deteriorate resulting in an impairment of their ability to make payments. As a large multinational company with a long history of operating in a cyclical industry, Schlumberger has extensive experience in working with its customers during difficult times to manage its accounts receivable.
Schlumberger generates revenue in more than 120 countries. As of June 30, 2022, only four of those countries individually accounted for greater than 5% of Schlumberger’s net receivable balance, of which only the United States accounted for greater than 10% of such receivables.
Additional Information
In March 2022, Schlumberger decided to immediately suspend new investment and technology deployment to its Russia operations.
Russia represented approximately 5% of Schlumberger’s worldwide revenue during the first six months of 2022. The carrying value of Schlumberger’s net assets in Russia was approximately $1.0 billion as of June 30, 2022. This consisted of $0.4 billion of receivables, $0.5 billion of other current assets, $0.4 billion of fixed assets, $0.1 billion of other non-current assets and $0.4 billion of current liabilities.
Schlumberger continues to actively monitor the dynamic situation in Ukraine and comply with applicable international laws and sanctions. The extent to which Schlumberger’s operations and financial results may be affected by the ongoing conflict in Ukraine will depend on various factors, including the extent and duration of the conflict; the effects of the conflict on regional and global economic and geopolitical conditions; the effect of further international sanctions and trade control restrictions on Schlumberger’s business, the global economy and global supply chains; and the impact of fluctuations in the exchange rate of the ruble. Continuation or escalation of the conflict may also aggravate the risk factors that Schlumberger identified in its Annual Report on Form 10-K for the year ended December 31, 2021, including cybersecurity risks.
22
FORWARD-LOOKING STATEMENTS
This second-quarter 2022 Form 10-Q, as well as other statements we make, contains “forward-looking statements” within the meaning of the federal securities laws, which include any statements that are not historical facts. Such statements often contain words such as “expect,” “may,” “can,” “believe,” “predict,” “plan,” “potential,” “projected,” “projections,” “precursor,” “forecast,” “outlook,” “expectations,” “estimate,” “intend,” “anticipate,” “ambition,” “goal,” “target,” “scheduled,” “think,” “should,” “could,” “would,” “will,” “see,” “likely,” and other similar words. Forward-looking statements address matters that are, to varying degrees, uncertain, such as statements about Schlumberger’s financial and performance targets and other forecasts or expectations regarding, or dependent on, its business outlook; growth for Schlumberger as a whole and for each of its Divisions (and for specified business lines, geographic areas or technologies within each Division); oil and natural gas demand and production growth; oil and natural gas prices; forecasts or expectations regarding energy transition and global climate change; improvements in operating procedures and technology; capital expenditures by Schlumberger and the oil and gas industry; the business strategies of Schlumberger, including digital and “fit for basin,” as well as the strategies of Schlumberger’s customers; Schlumberger’s effective tax rate; Schlumberger’s APS projects, joint ventures, and other alliances; Schlumberger’s response to the COVID-19 pandemic and its preparedness for other widespread health emergencies; the impact of the ongoing conflict in Ukraine on global energy supply; access to raw materials; future global economic and geopolitical conditions; future liquidity; and future results of operations, such as margin levels. These statements are subject to risks and uncertainties, including, but not limited to, changing global economic and geopolitical conditions; changes in exploration and production spending by Schlumberger’s customers and changes in the level of oil and natural gas exploration and development; the results of operations and financial condition of Schlumberger’s customers and suppliers; Schlumberger’s inability to achieve its financial and performance targets and other forecasts and expectations; Schlumberger’s inability to achieve net-zero carbon emissions goals or interim emissions reduction goals; general economic, geopolitical and business conditions in key regions of the world; the ongoing conflict in Ukraine; foreign currency risk; inflation; pricing pressure; weather and seasonal factors; unfavorable effects of health pandemics; availability and cost of raw materials; operational modifications, delays or cancellations; challenges in Schlumberger’s supply chain; production declines; the extent of future charges; Schlumberger’s inability to recognize efficiencies and other intended benefits from its business strategies and initiatives, such as digital or Schlumberger New Energy, as well as its cost reduction strategies; changes in government regulations and regulatory requirements, including those related to offshore oil and gas exploration, radioactive sources, explosives, chemicals and climate-related initiatives; the inability of technology to meet new challenges in exploration; the competitiveness of alternative energy sources or product substitutes; and other risks and uncertainties detailed in this Form 10-Q and our most recent Form 10-K and Forms 8-K filed with or furnished to the SEC. If one or more of these or other risks or uncertainties materialize (or the consequences of any such development changes), or should our underlying assumptions prove incorrect, actual results or outcomes may vary materially from those reflected in our forward-looking statements. Forward-looking and other statements in this Form 10-Q regarding our environmental, social and other sustainability plans and goals are not an indication that these statements are necessarily material to investors or required to be disclosed in our filings with the SEC. In addition, historical, current, and forward-looking environmental, social and sustainability-related statements may be based on standards for measuring progress that are still developing, internal controls and processes that continue to evolve, and assumptions that are subject to change in the future. Statements in this second-quarter 2022 Form 10-Q are made as of July 27, 2022, and Schlumberger disclaims any intention or obligation to update publicly or revise such statements, whether as a result of new information, future events or otherwise.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
For quantitative and qualitative disclosures about market risk affecting Schlumberger, see Item 7A, “Quantitative and Qualitative Disclosures about Market Risk,” of the Schlumberger Annual Report on Form 10-K for the fiscal year ended December 31, 2021. Schlumberger’s exposure to market risk has not changed materially since December 31, 2021.
Item 4. Controls and Procedures.
Schlumberger has carried out an evaluation under the supervision and with the participation of Schlumberger’s management, including the Chief Executive Officer (“CEO”) and the Chief Financial Officer (“CFO”), of the effectiveness of Schlumberger’s “disclosure controls and procedures” (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)) as of the end of the period covered by this report. Based on this evaluation, the CEO and the CFO have concluded that, as of the end of the period covered by this report, Schlumberger’s disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in the reports that Schlumberger files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Schlumberger’s disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is accumulated and communicated to its management, including the CEO and the CFO, as appropriate, to allow timely decisions regarding required disclosure. There was no change in Schlumberger’s internal control over financial reporting during the quarter to which this report relates that has materially affected, or is reasonably likely to materially affect, Schlumberger’s internal control over financial reporting.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
The information with respect to this Item 1 is set forth under Note 9—Contingencies, in the accompanying Consolidated Financial Statements.
Item 1A. Risk Factors.
As of the date of this filing, there have been no material changes from the risk factors disclosed in Part 1, Item 1A, of Schlumberger’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Unregistered Sales of Equity Securities
None.
Issuer Repurchases of Equity Securities
As of June 30, 2022, Schlumberger had repurchased $1.0 billion of Schlumberger common stock under its $10 billion share repurchase program. Schlumberger did not repurchase any of its common stock during the first six months of 2022.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Our mining operations are subject to regulation by the federal Mine Safety and Health Administration under the Federal Mine Safety and Health Act of 1977. Information concerning mine safety violations or other regulatory matters required by section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K is included in Exhibit 95 to this report.
Item 5. Other Information.
In 2013, Schlumberger completed the wind down of its service operations in Iran. Prior to this, certain non-US subsidiaries provided oilfield services to the National Iranian Oil Company and certain of its affiliates (“NIOC”).
Schlumberger’s residual transactions or dealings with the government of Iran during the second quarter of 2022 consisted of payments of taxes and other typical governmental charges. Certain non-US subsidiaries of Schlumberger maintain depository accounts at the Dubai branch of Bank Saderat Iran (“Saderat”), and at Bank Tejarat (“Tejarat”) in Tehran and in Kish for the deposit by NIOC of amounts owed to non-US subsidiaries of Schlumberger for prior services rendered in Iran and for the maintenance of such amounts previously received. One non-US subsidiary also maintained an account at Tejarat for payment of local expenses such as taxes. Schlumberger anticipates that it will discontinue dealings with Saderat and Tejarat following the receipt of all amounts owed to Schlumberger for prior services rendered in Iran.
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Item 6. Exhibits.
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* Exhibit 10.1—Schlumberger Discounted Stock Purchase Plan, as amended and restated effective July 1, 2022 (+) |
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* Exhibit 22—Issuers of Registered Guaranteed Debt Securities |
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* Exhibit 95—Mine Safety Disclosures |
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* Exhibit 101.INS—Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document |
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* Exhibit 101.SCH—Inline XBRL Taxonomy Extension Schema Document |
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* Exhibit 101.CAL—Inline XBRL Taxonomy Extension Calculation Linkbase Document |
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* Exhibit 101.DEF—Inline XBRL Taxonomy Extension Definition Linkbase Document |
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* Exhibit 101.LAB—Inline XBRL Taxonomy Extension Label Linkbase Document |
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* Exhibit 101.PRE—Inline XBRL Taxonomy Extension Presentation Linkbase Document |
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Exhibit 104—Cover Page Interactive Data File (embedded within the Inline XBRL document) |
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Filed with this Form 10-Q. |
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Furnished with this Form 10-Q. |
(+) Management contracts or compensatory plans or arrangements.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized and in his capacity as Chief Accounting Officer.
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Schlumberger Limited (Registrant) |
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Date: |
July 27, 2022 |
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/s/ Howard Guild |
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Howard Guild |
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Chief Accounting Officer and Duly Authorized Signatory |
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