Schlumberger
Annual Report 2017

Plain-text annual report

Schlumberger Limited 42 rue Saint-Dominique 75007 Paris France 5599 San Felipe Houston, Texas 77056 United States 62 Buckingham Gate London SW1E 6AJ United Kingdom Parkstraat 83 2514 JG The Hague The Netherlands www.slb.com 2017 Annual Report Schlumberger Limited 14781schD1R2.indd 1 2/15/18 9:13 AM Board of Directors Corporate Officers Paal Kibsgaard Chairman and Chief Executive Officer Simon Ayat Executive Vice President and Chief Financial Officer Alexander C. Juden Secretary and General Counsel Ashok Belani Executive Vice President Technology Jean-François Poupeau Executive Vice President Corporate Engagement Patrick Schorn Executive Vice President New Ventures Aaron Gatt Floridia President Western Hemisphere Khaled Al Mogharbel President Eastern Hemisphere Stephane Biguet Vice President Finance Pierre Cheréque Vice President and Director of Taxes Stephanie Cox Vice President Human Resources Catherine MacGregor President Drilling Group Hinda Gharbi President Reservoir Characterization Group Olivier Le Peuch President Cameron Group Abdellah Merad President Production Group Imran Kizilbash Vice President Schlumberger Venture Fund Simon Farrant Vice President Investor Relations Howard Guild Chief Accounting Officer Kevin Fyfe Vice President Controller Operations Claudia Jaramillo Vice President and Treasurer Vijay Kasibhatla Director Mergers and Acquisitions Guy Arrington Vice President Operations Planning and Resource Management Saul Laureles Director Corporate Legal and Assistant Secretary Eileen Hardell Assistant Secretary Corporate Information Stockholder Information Schlumberger’s common stock is listed on the New York Stock Exchange, trading symbol “SLB,” and on the Euronext Paris, London, and SIX Swiss Stock Exchanges. For quarterly earnings dividend announcements and other informa- tion, please call (800) 997-5299 from the United States and Canada, or +1 (813) 774-5043 outside North America. You may also visit www.slb.com/ir. Stock Transfer Agent and Registrar Computershare Trust Company, N.A. P.O. Box 30170 College Station, Texas 77842 +1 (877) 745-9341 +1 (781) 575-2707 For Overnight Delivery: Computershare Trust Company, N.A. 211 Quality Circle, Suite 210 College Station, Texas 77845 +1 (877) 745-9341 +1 (781) 575-2707 General stockholder information is available on the Computershare website at www.computershare.com. E-mail Alerts To receive Schlumberger press releases and daily news, sign up at www.slb.com/ir. Form 10-K The Schlumberger 2017 annual report on Form 10-K filed with the Securities and Exchange Commission is available without charge. To obtain a copy, call (800) 997-5299 within North America and +1 (813) 774-5043 outside North America. Alternatively, you can view and print all of our SEC filings online at www.slb.com/ir or write to: Vice President Investor Relations Schlumberger Limited 5599 San Felipe, 17th Floor Houston, Texas, 77056. Duplicate Mailings When a stockholder owns shares in more than one account, or when stockholders live at the same address, duplicate mailings may result. If you receive duplicate reports, you can help eliminate the added expense by requesting that only one copy be sent. To elimi- nate duplicate mailings, contact Computershare Trust Company, N.A., Stock Transfer Agent and Registrar. Nonprofit Community Development Programs Schlumberger supports and encourages a range of community development programs—both local and global—many of which are supported by employee volunteers. We have chosen to focus on science, technology, engineering, and mathematics (STEM) education and community health and safety. To learn more about these programs, please see the latest edition of the Schlumberger Global Stewardship Report at www.slb.com. World Wide Web For information on Schlumberger technology, services and solutions, visit www.slb.com. For information on career and job opportunities at Schlumberger, visit www.careers.slb.com. * Mark of Schlumberger Other company, product, and service names are the properties of their respective owners. Photography by John Hafemeister and Gary Ranos (cover, 3c, 13a); Stuart Conway (inside front cover); Robert Seale (3a); Ken Childress (3d, 9); John Hafemeister (12); Ragnar Vikoeren (16). Peter L.S. Currie 2, 4 President, Currie Capital LLC Palo Alto, California V. Maureen Kempston Darkes 1, 3 Former Group Vice President General Motors Corporation Detroit, Michigan Paal Kibsgaard Chairman and Chief Executive Officer Schlumberger Nikolay Kudryavtsev 1, 3, 5 Rector Moscow Institute of Physics and Technology Moscow, Russia Helge Lund 1, 3 Former Chief Executive Officer BG Group plc Michael E. Marks 1 Managing Partner Riverwood Capital, LLC Palo Alto, California Indra K. Nooyi 1, 2 Chairman and Chief Executive Officer PepsiCo Purchase, New York Lubna S. Olayan 3, 4 Chief Executive Officer Olayan Financing Company Riyadh, Saudi Arabia Leo Rafael Reif 2, 4, 5 President Massachusetts Institute of Technology Cambridge, Massachusetts Tore I. Sandvold 3, 4 Executive Chairman Sandvold Energy AS Oslo, Norway Henri Seydoux 3, 4, 5 Chairman and Chief Executive Officer Parrot S.A. Paris, France Miguel Galuccio 3, 5 Chairman and Chief Executive Officer Vista Oil and Gas Mexico City, Mexico 1 Member, Audit Committee 2 Member, Compensation Committee 3 Member, Finance Committee 4 Member, Nominating and Governance Committee 5 Member, Science and Technology Committee Financial Performance (Stated in millions, except per-share amounts) Year ended December 31 Revenue Net income (loss) attributable to Schlumberger Diluted earnings (loss) per share Cash dividends per share Cash flow from operations Safety Performance Year ended December 31 Combined Lost Time Injury Frequency (CLTIF)—Industry Recognized Auto Accident Rate mile (AARm)—Industry Recognized 2017 $ 30,440 $ (1,505) $ (1.08) $ 2.00 $ 5,663 2017 0.90 0.34 2016 $ 27,810 $ (1,687) $ (1.24) 2.00 $ 6,261 $ 2016 0.90 0.25 2015 $ 35,475 $ 2,072 $ 1.63 2.00 $ 8,805 $ 2015 0.95 0.21 14781schD1R2.indd 2 2/14/18 5:18 PM Schlumberger is the world’s leading provider of technology for reservoir characterization, drilling, production, and processing to the oil and gas industry. Working in more than 85 countries and employing approximately 100,000 people who represent over 140 nationalities, Schlumberger supplies the industry’s most comprehensive range of products and services, from exploration through production, and integrated pore to pipeline solutions that optimize hydrocarbon recovery to deliver reservoir performance. Front Cover Digital technology is helping the E&P industry make better use of all the data and expertise it possesses by getting the right information to the right people at the right time. Engineers will be able to use digital well construction planning and operations software in the DELFI* cognitive E&P environment to enhance collaboration and optimize the drilling process. For example, the DrillPlan* digital well construction planning solution provides a new way of working for drilling engineers in the field collaborating with domain experts at remote monitoring centers. Inside Front Cover The sun sets on an Integrated Production Services well intervention plug and abandonment operation in Brunei. Contents Financial and Safety Performance Inside Front Cover 2 Letter to Shareholders 5 Performed by Schlumberger 6 Digital Technology Integration 8 Establish a New Way of Working 8 System-Level Optimization 11 Reduce Uncertainty, Accelerate Decision Making 11 Increase Efficiency, Minimize Risks 13 Decrease Cost per Barrel 16 Digitally Enable End-to-End Solutions 17 Annual Report on Form 10-K Directors, Officers, and Corporate Information Inside Back Cover 1 14781schD2R3.nar.indd 1 2/13/18 11:18 PM Letter to Shareholders In 2017, Schlumberger celebrated the 90th anniversary of the first well logging survey, which took place in the Pechelbronn oil field in France in September 1927. This log established the science of subsurface metrology and provided the impetus for the business venture that eventually became Schlumberger. Paal Kibsgaard Chairman and Chief Executive Officer Schlumberger full-year 2017 revenue of $30.4 billion increased 9% year on year. This reflects a full year of activity from the acquired Cameron businesses compared with only three quarters of activity in 2016. In addition to the impact of Cameron, revenue growth was driven by unconventional land resource developments in North America due to the recovery in activity combined with market share gains and improved pricing as the oil and gas industry began to emerge from the longest and deepest downturn in 30 years. Following two successive years of E&P investment cuts, operators increased their upstream spend in North America by more than 30% in 2017. The increase in oil price afforded by the OPEC agreement gave US producers a means to increase their investment in tight oil. However, apprehension related to growing US supply, and uncertainty surrounding the duration of OPEC- and Russia-led production cuts held international spending to a level 3% below 2016. During 2017, the outlook improved for international markets, evidenced by a significant increase in the sanctioning of new projects. The number of final investment decisions tripled in 2017 compared with 2016, with 75% of the new projects planned for shallow and deepwater offshore environments. After starting the year at $55 per barrel, Brent prices fell to $44 in June and then recovered to $67 by the end of the year. The price increase resulted from 2017 demand growth of 1.5 million barrels per day and strong adherence to a production agreement between OPEC and Russia, which served to reduce oil production by an average of 1.6 million barrels per day compared with the fourth quarter of 2016. Strong demand and restricted supply accelerated the depletion of stocks as the year progressed. By September, OECD crude and product stocks had returned to 2015 levels. As the oil market began to rebalance in 2017, replacement of conventional oil reserves remained a challenge. In 2017, discoveries were at an all-time low due to lower exploration activity, and more than 60% of discovered resources were gas. Oil discoveries accounted for only 3.4 billion barrels—while about 30 billion barrels of conventional oil is produced each year—representing a reserves replacement ratio of only 11%. In the natural gas markets, low Henry Hub prices and flat domestic consumption allowed the US to transition from importer to exporter of natural gas for the first time since 1957, and Liquefied Natural Gas was the enabler. Global LNG trading increased 11% year on year driven by demand in Asia. LNG supply growth was also strong, with the addition of six new liquefaction trains in 2017. In today’s well-supplied market, both producers and consumers are reluctant to invest in new projects. While the short- term market outlook remains challenged, strong longer-term demand growth signals a future need for new LNG supply capacity. 2 14781schD2R4.nar.indd 2 2/14/18 3:05 PM Schlumberger financial performance in 2017 was driven by land activity in North America, where revenue increased over 80% in line with the average rig count increase. Continued expansion of the Schlumberger hydraulic fracturing presence in North America resulted in additional fleet redeployments, which benefited the Production Group. Drilling Group revenue in North America land increased due to the continuing high demand for longer horizontal lateral sections in shale oil wells. Increased Cameron Surface and Drilling Systems product sales and services also contributed to the strong financial performance in North America. North America revenue, including offshore, grew 42% year on year. International revenue decreased 2% compared with 2016. This decline was driven by soft demand for exploration- and development-related products and services as E&P budgets remained tight. Activity in Latin America decreased due to the Schlumberger decision to align operations with cash collections in Venezuela. Robust activity in the Middle East and Russia, driven by integrated drilling and production projects, as well as an additional quarter of activity from the acquired Cameron businesses partially offset these decreases. During the past three years of unprecedented market downturn, Schlumberger has proactively sought to strengthen its technology offering and presence in key markets around the world. The most recent example is the expansion of its hydraulic fracturing presence in North America land through the purchase of the US fracturing and pumpdown perforating businesses from Weatherford. In line with the challenging business environment, over the same period Schlumberger has restructured all relevant parts of the company in terms of both size and organizational structure to maximize its market competitiveness and operational agility. With the significant changes seen in customer priorities and buying habits in recent years, Schlumberger has continued to evaluate the present and future return prospects for all of its product lines as it seeks to maximize its long-term financial performance. Based on this in-depth analysis, Schlumberger identified the seismic acquisition business as the only product line that does not meet Schlumberger return expectations going forward, even after factoring in an eventual market recovery. Schlumberger has, therefore, taken the difficult decision to exit the marine and land seismic acquisition market and instead operate the WesternGeco product line as an asset-light business, built on its leading position within multiclient, data processing, and geophysical interpretation. Looking at the oil market, the strong growth in demand is projected to continue in 2018 on the back of a robust global economy. On the supply side, the extension of the OPEC- and Russia-led production 14781schD2R3.nar.indd 3 2/13/18 11:18 PM 3 cuts is already translating into higher-than-expected inventory draws. In North America, 2018 shale oil production is set for another year of strong growth as the positive oil market sentiments will likely increase both investment appetite and availability of financing. At the same time, the production base in the rest of the world is showing fatigue after three years of unprecedented underinvestment. The underlying signs of weakness will likely become more evident in the coming year as the production additions from investments made in the previous upcycle start to noticeably fall off. Taken together, this means the oil market is now in balance and the previous over-supply discount is gradually being replaced by a market tightness premium, which makes Schlumberger increasingly positive on the global outlook for its business. Schlumberger financial “ performance in 2017 was driven by land activity in North America, where revenue increased over 80% in line with the average rig count increase.” This year, new technology sales from all Groups contributed to 24% of total sales, which is a 4% increase over the previous year. The Schlumberger commitment to developing innovative technology included commercialization of key technologies such as the DELFI cognitive E&P environment, which enables collaboration across E&P teams and leverages the full potential of all available data and science to optimize assets; DrillPlan digital well construction planning solution, the first application in the DELFI environment; and Lift IQ* production life cycle management service that provides monitoring, diagnostics, and optimization of artificial lift systems in real time. One measure of our health and safety performance held steady as our combined lost time injury frequency was the same as 2016. Although Schlumberger maintains a constant focus on safety, our auto accident injury rate deteriorated slightly compared with 2016. Regretfully, we suffered one driving-related fatality in North America involving a contractor. We will continue to guard against the risks that road journeys present by seeking continuous improvement of the measures we have in place to keep our people safe through our global network of Journey Management Centers. Over the last few years, our transformation efforts have resulted in the design of a new way of working through which our operational processes have been reengineered and our product lines and GeoMarket* organizations restructured. In 2017, we completed the first deployment phase of our SAP-based IT system in North America and continued to see service delivery efficiency gains due to improved resource planning and delivery and reliability-centered asset engineering, manufacturing, and maintenance. This new way of working at Schlumberger is a comprehensive program of change that is being systematically deployed around the globe. This year also marked the third release of the Schlumberger Global Stewardship Report, the results of which are filed with seven major environmental, social, and governance (ESG) rating agencies. The report details our ESG program, the seeds of which began with initiatives launched nearly 20 years ago. We believe that the oil market is now in balance as the previous oversupply discount is gradually being replaced by a market tightness premium. We expect to see increases in E&P investment in the main producing regions around the world to replace production that has been lost because of natural decline. On behalf of Schlumberger people around the world, I want to thank our stakeholders for their confidence and support. I also want to personally thank our employees for their dedication and commitment. Paal Kibsgaard Chairman and Chief Executive Officer 4 14781schD2R3.nar.indd 4 2/13/18 11:18 PM Performed by Schlumberger Schlumberger people have a steadfast commitment to customers, innovative technology, safety, and quality. We are people who thrive on the challenge to excel in our quest to exceed expectations. In 2001, the company established the Performed by Schlumberger program to recognize projects and their team members who have demonstrated exceptional levels of teamwork, innovation, and business impact for Schlumberger and its customers. In 2017, 444 projects competed for the Chairman’s Award. As the program’s highest honor, the award recognizes one project as an outstanding example of the company’s core values: our people, our commitment to technology, and our determination to produce superior profits. The team for the Achieving Excellence: The Longest Well Ever project won this year’s Chairman’s Award for its work with the Sakhalin-1 Consortium to drill a 49,212-ft extended-reach well on the Orlan Platform offshore Sakhalin, Russia. The Achieving Excellence: The Longest Well Ever team received the Performed by Schlumberger Award from Chairman and CEO Paal Kibsgaard (far left) and Senior VP of Marketing & Technology Justin Rounce (third from left). Also pictured, from the left, Jon Acquaviva, Dmitriy Kofman, Sheldon Rawlins, Jimmy Varughese, Danil Zazulya, Catherine MacGregor, and Richard Brown. This set a new benchmark for extended-reach drilling that exceeds the previous record by 4,921 ft. Historically, new drilling records have been characterized by incremental gains in measured depth, and this new benchmark was achieved in a technically challenging subarctic, frontier environment. The Sakhalin Extended-Reach Drilling Center of Excellence integrated the domain expertise and technology from 10 Schlumberger product lines and worked closely with the Sakhalin-1 Consortium during the two years it took to plan and drill this well in the Chayvo field—with drilling completed in 103 days. This successful collaboration achieved a 37% increase in the rate of penetration compared with the previous extended-reach drilling record from 2015. 5 14781schD2R4.nar.indd 5 2/14/18 4:26 PM Digital Technology Integration Digital enablement is revolutionizing many industries, yet its adoption by the E&P industry has been limited to date. Today, digital enablement permeates everything Schlumberger does—from research and engineering, manufacturing, operations, and maintenance to resource planning. Building on our domain expertise and our leadership in hardware and software, Schlumberger is also developing new software and a digital foundation that removes barriers between disciplines to create seamless digital workflows for all E&P domains. This new software moves beyond incremental change—it represents a new way of working that provides new opportunities, unmatched performance, and a step change in efficiency. Schlumberger is already capitalizing internally on the value unlocked by digital enablement. In addition, value from new digital workflows will be increasingly shared between Schlumberger and its customers as we commercialize new technologies and further enable existing products and services. Advanced computational capabilities in the DELFI cognitive E&P environment are used to predict well production profiles in the Petrel* E&P software platform. 14781schD2R3.nar.indd 6 2/13/18 11:18 PM 14781schD2R3.nar.indd 7 2/13/18 11:18 PM Establish a New Way of Working In a medium-for-longer oil price environment, increased demand for oil requires investment in technology and business models that will improve efficiency and enable unprecedented levels of integration and collaboration. The development of digital technology is disrupting the traditional way of working in the oil and gas industry and creating a step change in operational and business performance for both Schlumberger and its customers. Although digital technology has been integrated into nearly every facet of our personal lives, its adoption in the E&P industry has been limited. The industry’s traditional way of working presents barriers to the sharing of data and technical knowledge among the domain experts who make important decisions directing the discovery and development of oil and gas resources. Integrating digital technology into E&P workflows requires extensive domain expertise about the entire system— from hardware and software technologies to the complexity of the data and numerous systems involved. To tackle this challenge, Schlumberger has the domain expertise and global experience in every step of the E&P process, a knowledge that stems from our focus on the science of subsurface measurement since the company’s foundation. In addition, the current medium-for-longer oil price environment demands a new approach for the E&P industry. This new approach requires a system-level view to fully optimize the finding, development, and production of new oil and gas resources as well as the operation of existing oil and gas fields. Innovation around a single element of the E&P development chain cannot maximize efficiency if done in isolation. The new approach requires a complete understanding of what each element contributes to the entire chain. Schlumberger believes that achieving this will require a profound change in the way the industry operates and interacts—changing the way we work and yet also changing the very nature of that work. Achieving change entails a new collaborative mindset, end- to-end systems knowledge, and redesigned business models that firmly establish and support new ways of working based on innovative technology and domain expertise. “ Over the last three years, Schlumberger has created technology centers that innovate within the rapidly evolving world of digital technology and automation.” 8 Over the last three years, Schlumberger has created technology centers that innovate within the rapidly evolving world of digital technology and automation. In line with our long history of working with research and engineering partners, these centers have formed strong relationships with an extensive network of leading digital technology companies, creating building blocks of expertise in areas such as cloud technology, data analytics, machine learning, artificial intelligence, robotics, and automation. Through this ecosystem of extended knowledge, Schlumberger now has deeper access to the best and most advanced digital technologies and capabilities available today. Together with our partners, we are developing the solutions we believe will meet the industry’s needs. System-Level Optimization Although data is at the center of E&P development, some exploration wells fall short of their objectives as a result of unexpected geology or unanticipated hazards. Increasing the volume and quality of accessible data equips the E&P industry to make better-informed decisions that reduce subsurface risk, optimize production, and maximize recovery—but only if that data is efficiently managed. Petrotechnical experts working on exploration projects spend more than half of their time finding and preparing the data they need to make their decisions. The subsequent data interpretation is also very time consuming, and these interpretations drive important decisions for the reservoir’s development plan. Changing the way the industry works begins with a critical assessment of how the data is used across reservoir characterization, well construction, and field production. During the development process as it is practiced today, different types of data exist in silos, making holistic analysis impossible. Without a system approach, precious information and time are lost because the lack of interface among different systems makes it difficult to share localized knowledge. The DELFI cognitive E&P environment was developed to enable a new way of working. As the first of its kind in the oil and gas industry, this secure, cloud-based environment harnesses data, scientific knowledge, and domain expertise to fundamentally change the industry’s way of working. The new DELFI environment makes applications and workflows accessible to every user. Gone are the impenetrable silos, because in the DELFI environment, every stakeholder can build common workspaces for data, models, and interpretations while respecting proprietary information boundaries. 14781schD2R3.nar.indd 8 2/13/18 11:18 PM A geophysicist working in the DELFI environment selects data from different sources in the E&P Data Lake by searching its global multiclient library. By visualizing integrated data models, the geophysicist can enhance his understanding of the subsurface in a specific area of interest. The DELFI environment provides the best possible representation of the surface and subsurface, including existing wells and facilities, plus those that are planned. The outcome is shared insight among all users and among all stakeholders to eliminate the silos of today. Performance is boosted as time cycles are compressed across the business, uncertainty in planning is reduced through greater understanding, and new opportunities are created to extend domain science into drilling and production operations. Everything working together enhances business value for both Schlumberger and its customers. When Schlumberger launched the DELFI environment, the company deployed an E&P Data Lake on the Google Cloud Platform, which includes more than 1,000 3D seismic surveys, 5 million wells, 1 million well logs, and 400 million production records from around the world. This Data Lake makes data from different sources available through a common interface, making it easier for users to discover what the data is, have access to it, and use it to maximum advantage. As they work with this vast amount of information in the cloud, the result is a step change in scalability and performance. The DELFI environment leverages data analytics, machine learning, high performance computing (HPC), and the Internet of things (IoT), all of which work together to maximize operational efficiency and deliver optimized production at the lowest cost per barrel. This environment facilitates a new level of integration among the geophysics, geology, reservoir engineering, drilling, and production domains. There are many workflows throughout exploration and production, and a digital approach accelerates access to all the available data. For that reason, the DELFI environment is also an open and extensible system in which Schlumberger customers and software partners can add their own intellectual property and workflows. Schlumberger is an early adopter of HPC, and the teams at its technology centers—Menlo Park, California; Houston, Texas; Gatwick, UK; and Mumbai, India—have been leading the application of HPC for seismic processing. Today, Schlumberger has a state-of-the-art HPC infrastructure on the cloud that runs thousands of central processing unit (CPU) and graphics processing unit (GPU) nodes, and it is the largest cloud computer cluster of its kind in the oil and gas industry. Cloud- based HPC creates new opportunities for advanced visualization and machine learning to enhance the value of oil and gas data assets. But how exactly does the DELFI environment change not just the way of working but also the nature of work? The answer is by enabling working in a common environment as well as creating accessibility and augmented intelligence for information sharing. Data is delivered to the right people at the right time so all recipients can maximize use of the latest information based 9 14781schD2R3.nar.indd 9 2/13/18 11:18 PM on their role and expertise. Barriers to effective communication are eliminated, improving efficiency during the process so domain experts can spend more time on high-level solutions to the unique challenges every reservoir presents. Decisions that used to take days can now be completed in minutes. The advancement of digital technology enablement within the oil and gas industry sets new demands in terms of cybersecurity. Schlumberger has been providing secure commercial software, information management, and IT infrastructure across the entire E&P life cycle for 35 years. In 2015, Schlumberger obtained Service Organization Controls 2 (SOC 2®) Type 1 and 2 accreditations for cybersecurity through an external audit. The SOC 2 accreditation provides detailed information about the controls Schlumberger has implemented in regard to security, availability, and integrity of the systems the company uses to process customer data as well as the confidentiality and privacy of the information that these systems process. By working in the DELFI environment, oil and gas experts will be able to connect in a different way to complete shared work “ Schlumberger has been providing secure commercial software, information management, and IT infrastructure across the entire E&P life cycle for 35 years.” goals and expand their sphere of contact to other intellectually challenging domains. They will have access to tools and technologies that relieve them of routine, repetitive tasks, effectively freeing up their valuable time to focus on innovative solutions. This new way of working is possible only by combining the latest offerings in digital technology with the domain know-how and hardware and software technology leadership that can optimize workflows, increase the efficiency of operations, and ultimately decrease the cost per barrel. Schlumberger Software Technology Innovation Center Schlumberger Software Technology Innovation Center (STIC) was established in 2014 with a goal of leading the oilfield digital transformation by taking advantage of technology trends driven by Silicon Valley companies. The center team consists of a highly technical workforce, including Schlumberger experts and recent university graduates. The technical staff includes cloud and big data engineers, user experience (UX) designers, front-end web developers, data scientists, and machine learning experts. The primary focus of STIC is to deliver technology proof points—working code that leverages new technology applied to oilfield challenges. The center regularly aligns its priorities with stakeholders from the Schlumberger product lines. STIC is closely connected with the Schlumberger software community, hosting hackathons and design sprints to bring engineers, stakeholders, and end users together to accelerate the software-development process. The center maintains affiliations with earth science, computer science, and computational mathematics departments of Bay Area universities, most notably Stanford. It also partners with companies in Silicon Valley to gain knowledge about how digital technology and infrastructure are applied in other industries. STIC has become a focal point for Schlumberger to communicate its digital vision with customers, with the center frequently hosting meetings and workshops that provide in- depth technical engagement. 10 Subsurface expert Sergey Doronichev (left) and Data Scientist Vishakh Hegde explore the capabilities of virtual reality for the visualization of 3D seismic surveys at the Schlumberger Software Technology Innovation Center in Menlo Park, California. Over the past three years, STIC has worked with and evaluated more than 400 companies and pursued projects with over 70 of them. By working together with partners, we continuously learn about new capabilities and opportunities while integrating with the Silicon Valley ecosystem. Through close collaboration with these digital technology partners, Schlumberger is able to develop digital technology solutions in less time, thus reducing the development lead time. This is our new way of working for technology development. 14781schD2R3.nar.indd 10 2/13/18 11:19 PM Reduce Uncertainty, Accelerate Decision Making The first step in the E&P development process is to create a digital representation of what is hidden below the Earth’s surface. To accomplish that, measurements and data from multiple sources are combined to create a model of the subsurface. Experts from multiple technical domains—geology, geophysics, and petrophysics as well as reservoir, drilling, and production engineering—use their knowledge to further refine the model. This initial combination of measurements and data, along with expert interpretation, are fundamental to some of the most critical decisions about the reservoir—decisions that will affect its entire life cycle. The Petrel E&P software platform, which has become an industry standard and was introduced in 2003, is also now available in the DELFI environment. The Petrel platform uses a shared-earth approach that enables standardized workflows from exploration to production. Every decision is an informed one that is made with a clear understanding of both opportunities and risks. Repeatable and automated workflows enable users to capture best practices and share them throughout the organization. Petrotechnical experts and asset teams can analyze, interpret, and model the subsurface in real time in a highly collaborative manner. All of this works together to decrease uncertainty and accelerate the decision-making process, thereby accelerating the time to first oil. Numerous applications are also available in the DELFI environment for access as required. The Techlog* wellbore software platform for the analysis and validation of wellbore data, the ECLIPSE* industry-reference reservoir simulator, and INTERSECT* high-resolution reservoir simulator for accurate, efficient simulation of reservoir behavior over time are just a few examples. Having global access to applications, instead of the conventional siloed approach, further helps to optimize field development plans and facilities design. Working in the cloud within the DELFI environment also enables users to take advantage of high performance computing to process large volumes of data during the construction and maintenance of evergreen reservoir models. This includes higher-resolution seismic data, wireline logging of wells, and the testing and characterization of reservoir fluids. Key benefits to working in the cloud environment are fast access to data visualization, interpretation, and application to refine the model during different phases of the E&P life cycle. Geoscientists review petrophysical measurements and 3D seismic data in the Petrel E&P platform to improve modeling of a complex formation. Increase Efficiency, Minimize Risks The software and systems used to drill and complete a well are some of the most complex technologies in the world, crucial to making both the few major development decisions and the millions of small but critical ones that are made daily. Every well drilled comes with a unique set of conditions that also vary during the construction process. The DrillPlan digital well construction planning solution is the first cloud-native application to be launched in the DELFI cognitive E&P environment, providing a radically new way of working to deliver higher-quality drilling programs faster. This is achieved through the automation of repetitive tasks and validation of end-to-end workflows to ensure that the entire plan is coherent. The DrillPlan solution employs an iterative workflow. As new data is added, the plans improve and future programs can learn from prior experience. This iterative process also improves planning efficiency because any changes to the plan, such as recalculating 11 14781schD2R3.nar.indd 11 2/13/18 11:19 PM the path that the well should follow, can be completed in minutes rather than days. The DrillPlan solution in the DELFI environment enables seamless collaboration between experts, from the geologist to the drilling engineer and production engineer. The resulting digital drilling plan integrates activities, processes, and people, placing the right information in the right hands at the right time. The DrillPlan solution also monitors deviations from the original plan for continuous improvement via machine learning. When domain experts make dynamic changes to the plan, the software immediately updates the shared-earth model, which also augments learning for the next well plan. By automating repetitive tasks, domain experts have more time to use their advanced skills to create new insights. The result is a drilling program that maximizes accuracy, efficiency, and value at the same time as minimizing risks. The DrillPlan solution leverages the digital technologies of the Microsoft Azure and the Azure Stack hybrid cloud solution. Interoperability with Microsoft Office 365 and Microsoft Teams empowers new levels of collaboration among teams and stakeholders, significantly improving productivity. After more than a year of testing by oil and gas companies in the United States and Canada, the DrillPlan solution has proved to be comprehensive and powerful, delivering well planning programs in days rather than weeks. The DrillPlan solution has been available in North America land operations since the fourth quarter of 2017, and Schlumberger continues to develop its functionalities to meet the needs of the global exploration and development market in 2018 and beyond. In a future that requires increasing production to meet global demand for oil and gas resources, the Schlumberger goal is to reduce the planning process from weeks to days. The digital way of working, such as the DrillPlan solution in the DELFI environment, facilitates that goal by enabling iterative collaboration among team members working on the latest model. This is one example of how Schlumberger is using digital technology to improve collaboration within the industry. “ The DrillPlan solution has proved to be comprehensive and powerful, delivering well planning programs in days rather than weeks. ” Schlumberger Limited Industrial Internet Center Located in Sugar Land, Texas, the Schlumberger Limited Industrial Internet Center focuses on architecture and infrastructure development for the cloud, data, industrial Internet of things (IoT), automation, and cybersecurity across multiple platforms. Established in 2016, the center comprises experienced IoT professionals with knowledge of other industries, recent graduates, and personnel from other Schlumberger hardware and software technology centers. Today, consumer technologies that tap into the IoT include products such as wearable health monitors and smart home appliances. This gives us the ability to connect different types of devices, gather relevant data, and apply analytical techniques to gain valuable insights. Adopting the IoT in the E&P industry, however, presents several unique challenges. First, there is the nature of oil and gas equipment as well as the broad global footprint of where these operations occur. Then there is the need for data integrity and the highest level of cybersecurity. Internet of Things Production Systems Engineer Miguel Lopez and Automation Engineer Mona El Hares inspect a scanner device used in an application at the Schlumberger Limited Industrial Internet Center in Sugar Land, Texas. Based on a thorough understanding of equipment design, performance factors, and domain use, the center’s team of experts collaborates with other Schlumberger software teams around the globe to establish the infrastructure for a scalable, accessible, and flexible data store—where all the data is shared in a common ecosystem—to enable improved business intelligence. 12 14781schD2R3.nar.indd 12 2/13/18 11:19 PM Decrease Cost per Barrel Schlumberger is committed to technology and processes that enhance efficiency and decrease the cost per barrel. An ongoing consideration is that about 85% of the total cost of ownership (TCO) of tools and equipment accumulates from the moment they are deployed until the day they are retired. Therefore, improving the management of assets throughout their life cycle is a primary concern for Schlumberger and its customers. The extent of the Schlumberger global footprint provides the scale to take on any size project and the reach to quickly respond to customer needs in any corner of the world. To properly maintain the global fleet of assets that is the basis of these capabilities, Schlumberger relies on its Technology Lifecycle Management (TLM) organization. The organization acts as a bridge between Engineering and Manufacturing and field operations. The TLM organization uses industry-leading maintenance processes and ensures that sustaining activities are aligned with the specific demands that vary among GeoMarket regions. A maintenance supervisor at the Denton Center of Reliability and Efficiency in Texas oversees remote hydraulic fracturing operations. The goal of the TLM organization is to reduce the TCO of every asset while providing the most reliable tools and equipment to field operations in a timely manner. Monitoring and surveillance use software engines and data science to improve operations reliability and efficiency, which together improve our customers’ performance. One example of how Schlumberger is using TLM to improve asset utilization and reduce TCO is in the deployment of OneStimSM products and services on land in North America for unconventional reservoir completions. Fracturing fleets are akin to a high-volume factory where each fleet consists of more than 40 pieces of equipment and 4,000 replaceable components to be maintained on location by a team of 11 crew members. Each well requires four to seven million pounds of sand, which is transported as 140 truckloads or in 35 railroad cars. The equipment and personnel at a fracturing operation are part of a changing worksite environment that needs to move and scale in size for a new location every few weeks. A semiautonomous drone hovering over a hydraulic fracturing fleet scans objects to detect fluid levels on equipment that is difficult to access. 13 14781schD2R3.nar.indd 13 2/13/18 11:19 PM Active Drone FeedPattern IdentifiedHeightRPMsAmbnient Temp291802085°OKPattern IdentifiedPattern IdentifiedPattern IdentifiedPattern IdentifiedCurrent MissionIdentifying RegionsXSchlumberger manages all of this through distribution control towers and global equipment traceability that tap into streamlined digital supply chain capabilities. Vertical integration of the supply chain adds another dimension through the ability to balance, for instance, our internal supply of sand against external suppliers. further This type of predictive health monitoring applied to automatic improves equipment reliability. surveillance Rather than waiting to resolve an offline pump, Schlumberger can now shorten the time it is offline by performing what is needed to keep it running efficiently. Since 2014, these processes have generated approximately 10% of year-on-year savings in both capital expenditures and maintenance costs. This represents only one example of how digitizing planning and logistics across all functions and product lines can improve efficiency and lower the cost per barrel. During hydraulic fracturing operations, different types of sensors placed on the high-pressure pumps enable Schlumberger to use data analytics to predict the onset of major component failures before they occur. The data is collected by a remote monitoring center where experts alert field personnel to remove a pump from operations and perform the necessary maintenance before it fails, which significantly reduces maintenance costs as well as the need for backup equipment on location. Another aspect of TLM is a suite of maintenance applications that are part of the Schlumberger Maintenance Tool Ecosystem. For example, at a fracturing wellsite in North America land, two shifts of crew members perform thousands of checks per day. Historically, all the data was recorded by hand. Today, using a highly visual mobile app, maintenance crew members can perform these checks with significant improvement in their productivity. Data from the mobile app is shared in the cloud along with information from equipment sensors, remote monitoring sites, and maintenance centers. Inventory tracking and reliability data also feed into the cloud to facilitate predictive health maintenance. This ecosystem was deployed globally in 2017 for Well Services but is also being used in other product lines. Schlumberger-Doll Research Center Schlumberger has always held the conviction that research is an investment in its future and an essential part of the company’s culture. The first Schlumberger research laboratory, founded in 1948 in Ridgefield, Connecticut, focused on a scientific research program assembled by scientist Henri-Georges Doll. The objective of the program was to invent new subsurface measurements that would expand the growing Schlumberger wireline business. In 1967, the laboratory was renamed the Schlumberger-Doll Research Center in honor of Henri-Georges, who was then the retiring chairman and had been the foremost technical contributor at Schlumberger. In 2007, the center moved to a new facility in Cambridge, Massachusetts, to be closer to a major research hub, including world-renowned universities such as the Massachusetts Institute of Technology (MIT) and Harvard University. In January 2017, the Schlumberger-Doll Research Center leverages digital added a robotics department that technologies to address the challenges of oilfield operations— from subsea and surface to flexible manufacturing. The rise of robotics and artificial intelligence has sparked a remarkable industrial transformation, and adopting the use of robotics in the oil and gas industry provides another opportunity to reduce operational costs while further improving service quality and safety. 14 Roboticist Anastasia Mavrommati, Research Scientist Gavin Strunk, and Intelligent Manipulation Program Manager Chris Bogath implement path planning and grasping software changes in a flexible manufacturing demonstrator at the Schlumberger-Doll Research Center in Cambridge, Massachusetts. The Schlumberger robotics department works closely with academic institutions in Boston and industrial partners around the globe to adapt emerging robotics technology, such as perception, reasoning, communication, and manipulation, to enable system automation for oilfield applications. 14781schD2R3.nar.indd 14 2/13/18 11:19 PM OneSubsea Pore to Process Optimization One of the greatest challenges in deepwater oil and gas developments is controlling cost. Digital technology holds the promise of enabling domain experts to detect different ways to reduce cost when designing a subsea system from pore to process. One example could be a reduction in capital expenditure by redesigning the subsea architecture or the topside production system. OneSubsea Capital-Efficient Solutions extend market-leading subsea boosting technology and are now an integral part of all customer projects. Capital-Efficient Solutions have reduced the average lead times of subsea products by more than 50%, saving up to 60% in project costs. As a portfolio of standardized designs that leverages streamlined engineering and manufacturing processes, OneSubsea delivers integrated subsea production systems that reduce project cycle time and overall cost. At OneSubsea, early engagement with customers is essential to determine the best way to develop a field. Historically, this early engagement process can last from four to six months. During this time, OneSubsea and customer expert teams study the reservoir, looking closely at its expected flow dynamics, to answer specific questions. The new planning software that Schlumberger is currently developing and testing with customers will shorten the time it takes to obtain viable answers to all the questions that must be answered in the design of subsea development projects. Our integrated teams of experts employ digital technology to explore multiple scenarios. To reduce the risks associated with complicated subsea developments, the teams need to explore as many scenarios as possible. However, the traditional approach to development entails collecting data from the customer that is used to iterate different concepts on paper for the field’s design. When this work takes place in a digital environment, multiple scenarios can be assessed in less time, which ultimately helps to accelerate the time to first oil. Having all the pertinent data from different domains in one integrated model also facilitates better collaboration between experts. As the integrated team of experts from the customer and OneSubsea moves forward with planning, it will also benefit from the cognitive abilities of this new subsea planning software. Components of a multiphase compressor for subsea processing applications are loaded onto a vessel in Horsøy, Norway, for delivery to an oil and gas field in the North Sea. OneSubsea Capital-Efficient Solutions deliver integrated subsea production systems that reduce project cycle time and overall cost. Over time, monitoring services for subsea equipment have expanded to include production monitoring, such as real- time flow assurance consulting to optimize field production. Using software such as the PIPESIM* steady-state multiphase flow simulator and OLGA* dynamic multiphase flow simulator—both of which are available in the cloud- based DELFI cognitive E&P environment—in combination with production chemistry testing and customized advisory services, Schlumberger can provide a complete flow assurance solution for any type of oil and gas operational challenge. Furthermore, subsea monitoring uses all the data intelligence available from an operation to enable future intelligent design and manufacturing for new developments. 15 14781schD2R3.nar.indd 15 2/13/18 11:19 PM Digitally Enable End-to-End Solutions It is time for the E&P industry to do something it has never done before to achieve a genuine step change in performance. It needs to rise above historical attempts to make incremental improvements and instead completely redesign the workflows and redefine the work itself with a clear focus on efficiency and consistency. This requires deep domain knowledge and operational experience that Schlumberger possesses in understanding how workflows can be improved to create a more efficient pathway to lowering the cost per barrel. Technology is the fulcrum on which the oilfield services industry turns. The Schlumberger focus on technology integration drives a leading portfolio of pore to pipeline products and services. We speak our customers’ language, and we are committed to developing the technology and aligning the business models they need to overcome the challenges they face. Schlumberger leadership in hardware, software, and domain expertise has enabled our customers to gain access to new reserves, increase reservoir recovery and production, and maximize their returns. Digital technology enablement represents a new dimension that unlocks further value for Schlumberger and its stakeholders. The adoption of digital technology improves the speed at which field personnel have access to critical information during operations. For example, OneSurface engineers using handheld devices will be informed of live flow events from inside hydrocarbon processing plants, enabling them to take immediate action to maintain system health status. 16 14781schD2R4.nar.indd 16 2/14/18 3:06 PM 2017 Form 10-K Schlumberger Limited 14781schD2R3.nar.indd 17 2/13/18 11:19 PM 18 14781schD2R3.nar.indd 18 2/13/18 11:19 PM UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-K (Mark One) Í ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2017 OR ‘ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number 1-4601 Schlumberger N.V. (Schlumberger Limited) (Exact name of registrant as specified in its charter) Curaçao (State or other jurisdiction of incorporation or organization) 42, rue Saint-Dominique Paris, France 5599 San Felipe, 17th Floor Houston, Texas, United States of America 62 Buckingham Gate, London, United Kingdom Parkstraat 83, The Hague, The Netherlands (Addresses of principal executive offices) 52-0684746 (IRS Employer Identification No.) 75007 77056 SW1E 6AJ 2514 JG (Zip Codes) Registrant’s telephone number in the United States, including area code, is: (713) 513-2000 Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered Common Stock, par value $0.01 per share New York Stock Exchange Euronext Paris The London Stock Exchange SIX Swiss Exchange Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES Í NO ‘ Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. YES ‘ NO Í Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES Í NO ‘ Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files.) YES Í NO ‘ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ‘ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. Large accelerated filer Í Accelerated filer ‘ Non-accelerated filer ‘ Smaller reporting company ‘ Emerging growth company ‘ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ‘ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). YES ‘ NO Í As of June 30, 2017, the aggregate market value of the common stock of the registrant held by non-affiliates of the registrant was approximately $91.07 billion. As of December 31, 2017, the number of shares of common stock outstanding was 1,383,932,776. DOCUMENTS INCORPORATED BY REFERENCE Certain information required to be furnished pursuant to Part III of this Form 10-K is set forth in, and is hereby incorporated by reference herein from, Schlumberger’s definitive proxy statement for its 2018 Annual General Meeting of Stockholders, to be filed by Schlumberger with the Securities and Exchange Commission pursuant to Regulation 14A within 120 days after December 31, 2017 (the “2018 Proxy Statement”). SCHLUMBERGER LIMITED Table of Contents Form 10-K PART I Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Item 1A. Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 3 9 Item 1B. Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Item 2. Item 3. Item 4. PART II Item 5. Item 6. Item 7. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Market for Schlumberger’s Common Stock, Related Stockholder Matters and Issuer Purchases of Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Management’s Discussion and Analysis of Financial Condition and Results of Operations . . . . . 18 Item 7A. Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 Item 8. Item 9. Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . . . . 83 Item 9A. Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83 Item 9B. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84 PART III Item 10. Directors, Executive Officers and Corporate Governance of Schlumberger . . . . . . . . . . . . . . . . . 85 Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85 Item 13. Certain Relationships and Related Transactions, and Director Independence . . . . . . . . . . . . . . . . 85 Item 14. Principal Accounting Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85 PART IV Item 15. Exhibits and Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86 Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91 Certifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 PART I Item 1. Business. All references in this report to “Registrant,” “Company,” “Schlumberger,” “we” or “our” are to Schlumberger Limited (Schlumberger N.V., incorporated in Curaçao) and its consolidated subsidiaries. Founded in 1926, Schlumberger is the world’s leading provider of technology for reservoir characterization, drilling, production and processing to the oil and gas industry. Having invented wireline logging as a technique today Schlumberger supplies the industry’s most for obtaining downhole data in oil and gas wells, from exploration through production, and integrated comprehensive range of products and services, pore-to-pipeline solutions that optimize hydrocarbon recovery to deliver reservoir performance. As of December 31, 2017, the Company employed approximately 100,000 people of over 140 nationalities operating in more than 85 countries. Schlumberger has executive offices in Paris, Houston, London and The Hague. Schlumberger operates in each of the major oilfield service markets, managing its business through four Groups: Reservoir Characterization, Drilling, Production and Cameron. Each Group consists of a number of technology- based service and product lines, or Technologies. These Technologies cover the entire life cycle of the reservoir and correspond to a number of markets in which Schlumberger holds leading positions. The role of the Groups and Technologies is to support Schlumberger in providing the best possible service to customers and to ensure that Schlumberger remains at the forefront of technology development and services integration. The Groups and Technologies are collectively responsible for driving excellence in execution throughout their businesses; overseeing operational processes, resource allocation and personnel; and delivering superior financial results. The Groups are as follows: Reservoir Characterization Group – Consists of the principal Technologies involved in finding and defining hydrocarbon resources. These include WesternGeco®, Wireline, Testing Services, OneSurfaceSM, Software Integrated Solutions (SIS) and Integrated Services Management (ISM). (cid:129) WesternGeco is a leading geophysical services supplier, providing comprehensive worldwide reservoir interpretation and data processing services. It provides a highly efficient and scientifically advanced imaging platform to its customers. Through access to the industry’s global marine fleet, it provides accurate measurements and images of subsurface geology and rock properties for multiclient surveys. WesternGeco offers the industry’s most extensive multiclient library. (cid:129) Wireline provides the information necessary to evaluate subsurface formation rocks and fluids to plan and monitor well construction, and to monitor and evaluate well production. Wireline offers both openhole and cased-hole services including wireline perforating. Slickline services provide downhole mechanical well intervention. (cid:129) (cid:129) (cid:129) (cid:129) Testing Services provides exploration and production pressure and flow-rate measurement services both at the surface and downhole. Testing has a network of laboratories that conduct rock and fluid characterization. Testing also provides tubing-conveyed perforating services. OneSurface provides a unique, reservoir-driven, fit-for-purpose integrated production system for accelerating first oil and gas and maximizing project economics. Software Integrated Solutions sells proprietary software and provides consulting, information management and IT infrastructure services to customers in the oil and gas industry. SIS also offers expert consulting services for reservoir characterization, field development planning and production enhancement, as well as industry-leading petrotechnical data services and training solutions. Integrated Services Management provides coordination and management of Schlumberger services, products, and third parties in projects around the world. ISM offers a certified integrated services project manager as a focal point of contact between the project owner and the various Schlumberger services, ensuring alignment of project objectives. 3 Drilling Group – Consists of the principal Technologies involved in the drilling and positioning of oil and gas wells and comprises Bits & Drilling Tools, M-I SWACO®, Drilling & Measurements, Land Rigs and Integrated Drilling Services (“IDS”). (cid:129) Bits & Drilling Tools designs, manufactures and markets roller cone and fixed cutter drill bits for all environments. The drill bits include designs for premium market segments where faster penetration rates and increased footage provide significant economic benefits in lowering overall well costs. Drilling Tools includes a wide variety of bottom-hole-assembly, borehole-enlargement technologies and impact tools, as well as a comprehensive collection of tubulars and tubular services for oil and gas drilling operations. (cid:129) M-I SWACO is a supplier of drilling fluid systems engineered to improve drilling performance by anticipating fluids-related problems; fluid systems and specialty equipment designed to optimize wellbore productivity; and production technology solutions formulated to maximize production rates. M-I SWACO also provides engineered managed pressure drilling and underbalanced drilling solutions, as well as environmental services and products to safely manage waste volumes generated in both drilling and production operations. (cid:129) (cid:129) (cid:129) Drilling & Measurements provides mud logging services for geological and drilling surveillance, directional drilling, measurement-while-drilling and logging-while-drilling services for all well profiles as well as engineering support. Land Rigs provides land drilling rigs and related support services. The land drilling system of the future, currently under development, represents an integrated drilling platform bringing together digitally enabled surface and downhole hardware combined with a common optimization software to create a step-change in operational efficiency. Integrated Drilling Services supplies all of the services necessary to construct or change the architecture (re-entry) of wells. IDS covers all aspects of well planning, well drilling, engineering, supervision, logistics, procurement and contracting of third parties, and drilling rig management. Production Group – Consists of the principal Technologies involved in the lifetime production of oil and gas reservoirs and includes Well Services, OneStimSM, Completions, Artificial Lift, Integrated Production Services (“IPS”) and Schlumberger Production Management (“SPM”). (cid:129) Well Services provides services used during oil and gas well drilling and completion as well as those used to maintain optimal production throughout the life of a well. Such services include pressure pumping, well cementing and stimulation, and coiled tubing equipment for downhole mechanical well intervention, reservoir monitoring and downhole data acquisition. (cid:129) (cid:129) (cid:129) (cid:129) OneStim provides a low cost-to-serve and highly competitive service delivery platform in North America’s unconventional plays. The services include hydraulic fracturing, multistage completions, perforating, coiled tubing equipment and services for downhole mechanical well intervention, and a vertically integrated product and logistics organization. Completions supplies well completion services and equipment that include packers, safety valves, sand control technology as well as a range of intelligent well completions technology and equipment. Artificial Lift provides production equipment and optimization services using electrical submersible pumps, gas lift equipment, rod lift systems, progressing cavity pumps and surface horizontal pumping systems. Integrated Production Services offers the project scope necessary to abandon, maintain, or increase the production of single or multiple wells. All aspects of project planning are addressed and include well engineering, wellsite supervision, civil engineering, logistics, procurement, contracting of third parties, and workovers. 4 (cid:129) Schlumberger Production Management is a business model for field production projects. This model combines the required services and products of the Technologies with drilling rig management, specialized engineering and project management expertise to provide a complete solution to well construction and production improvement. invest SPM creates alignment between Schlumberger and the asset holder and/or the operator whereby Schlumberger receives remuneration in line with its value creation. These projects are generally focused on developing and co-managing production of customer assets under long-term agreements. Schlumberger will its own services and products, and in some cases cash, into the field development activities and operations. Although in certain arrangements Schlumberger is paid for a portion of the services or products it provides, generally Schlumberger will not be paid at the time of providing its services or upon delivery of its products. Instead, Schlumberger is generally compensated based upon cash flow generated or on a fee-per-barrel basis. This includes certain arrangements whereby Schlumberger is only compensated based upon incremental production that it helps deliver above a mutually agreed baseline. SPM represented less than 5% of Schlumberger’s consolidated revenue for the year ended December 31, 2017. Cameron Group – Consists of the principal Technologies involved in pressure and flow control for drilling and intervention rigs, oil and gas wells and production facilities, and includes OneSubsea®, Surface Systems, Drilling Systems, and Valves & Measurement. (cid:129) (cid:129) (cid:129) (cid:129) OneSubsea provides integrated solutions, products, systems and services for the subsea oil and gas market, including integrated subsea production systems involving wellheads, subsea trees, manifolds and flowline connectors, control systems, connectors and services designed to maximize reservoir recovery and extend the life of each field. OneSubsea offers integration and optimization of the entire production system over the life of the field by leveraging flow control expertise and process technologies with petrotechnical expertise and reservoir and production technologies. Surface Systems designs and manufactures onshore and offshore platform wellhead systems and processing solutions, including valves, chokes, actuators and Christmas trees, and provides services to oil and gas operators. Drilling Systems provides drilling equipment and services to shipyards, drilling contractors, E&P companies and rental tool companies. The products fall into two broad categories: pressure control equipment and rotary drilling equipment. These products are designed for either onshore or offshore applications and include drilling equipment packages, blowout preventers (BOPs), BOP control systems, connectors, riser systems, valves and choke manifold systems, top drives, mud pumps, pipe handling equipment, rig designs and rig kits. Valves & Measurement serves portions of the upstream, midstream and downstream markets and provides valve products and measurement systems that are primarily used to control, direct and measure the flow of oil and gas as they are moved from wellheads through flow lines, gathering lines and transmission systems to refineries, petrochemical plants and industrial centers for processing. Supporting the Groups is a global network of research and engineering centers. Through this organization, Schlumberger is committed to advanced technology programs that enhance oilfield efficiency, lower finding and producing costs, improve productivity, maximize reserve recovery and increase asset value while accomplishing these goals in a safe and environmentally sound manner. Schlumberger’s business is also reported through four geographic areas: North America, Latin America, Europe/ CIS/Africa and Middle East & Asia. Within these geographic areas, a network of GeoMarket* regions provides logistical, technical and commercial coordination. 5 The GeoMarket structure offers customers a single point of contact at the local level for field operations and local needs and deliver customized solutions. The brings together geographically focused teams to meet GeoMarkets are responsible for providing the most efficient and cost-effective support possible to the operations. Schlumberger primarily uses its own personnel to market its offerings. The customer base, business risks and opportunities for growth are essentially uniform across all services and products. Manufacturing and engineering facilities as well as research centers are shared, and the labor force is interchangeable. Technological innovation, quality of service and price differentiation are the principal methods of competition, which vary geographically with respect to the different services and products offered. While Schlumberger has numerous competitors, both large and small, Schlumberger believes that it is an industry leader in providing geophysical equipment and services, wireline logging, well production testing, exploration and production software, rig equipment, surface equipment, subsea equipment, artificial lift, hydraulic fracturing, cementing, coiled-tubing services, drilling and completion fluids, solids control and waste management, drilling pressure control, drill bits, measurement-while- drilling, logging-while-drilling, directional-drilling services, and surface data (mud) logging. GENERAL Intellectual Property Schlumberger owns and controls a variety of intellectual property, limited to patents, proprietary information and software tools and applications that, in the aggregate, are material to Schlumberger’s business. While Schlumberger seeks and holds numerous patents covering various products and processes, no particular patent or group of patents is material to Schlumberger’s business. including but not Seasonality Seasonal changes in weather and significant weather events can temporarily affect the delivery of oilfield services. For example, the spring thaw in Canada and consequent road restrictions can affect activity levels, while the winter months in the North Sea, Russia and China can produce severe weather conditions that can temporarily reduce levels of activity. In addition, hurricanes and typhoons can disrupt coastal and offshore operations. Furthermore, customer spending patterns for multiclient data, software and other oilfield services and products generally result in higher activity in the fourth quarter of each year as clients seek to utilize their annual budgets. Customers and Backlog of Orders For the year ended December 31, 2017, no single customer exceeded 10% of consolidated revenue. Other than WesternGeco, OneSubsea and Drilling Systems businesses, Schlumberger has no significant backlog due to the nature of its businesses. The WesternGeco backlog was $0.4 billion at December 31, 2017 (all of which is expected to be recognized as revenue in 2018) and $0.8 billion at December 31, 2016. The combined backlog of the OneSubsea and Drilling Systems businesses was $2.5 billion at December 31, 2017 (of which approximately 50% is expected to be recognized as revenue during 2018) and $3.1 billion at December 31, 2016. Financial Information Financial information by business segment and geographic area for the years ended December 31, 2017, 2016 and 2015 is provided in Note 17 of the Consolidated Financial Statements. 6 Executive Officers of Schlumberger The following table sets forth, as of January 24, 2018, the names and ages of the executive officers of Schlumberger, including all offices and positions held by each for the past five years. Name Age Current Position and Five-Year Business Experience Paal Kibsgaard 50 Chairman of the Board of Directors, since April 2015; Chief Executive Officer, since August 2011; and Director since April 2011. Simon Ayat 63 Executive Vice President and Chief Financial Officer, since March 2007. Alexander C. Juden 57 Secretary and General Counsel, since April 2009. Ashok Belani 59 Executive Vice President Technology, since January 2011. Jean-Francois Poupeau 56 Executive Vice President Corporate Engagement, since May 2017; and Executive Vice President Corporate Development and Communications, June 2012 to April 2017. Patrick Schorn 49 Executive Vice President, New Ventures, since May 2017; President, Operations, August 2015 to May 2017; President, Operations & Integration, July 2013 to August 2015; and President, Production Group, January 2011 to June 2013. Khaled Al Mogharbel 47 President, Eastern Hemisphere, since May 2017; President, Drilling Group, July 2013 to April 2017; and President, Middle East, August 2011 to June 2013. Aaron Gatt Floridia 49 President, Western Hemisphere, since May 2017; Chief Commercial Officer, May 2016 to May 2017; and President, Reservoir Characterization Group, August 2011 to May 2016. Stephane Biguet 49 Vice President Finance, since December 2017; Vice President and Treasurer, December 2016 to November 2017; Vice President Controller, Operations, August 2015 to December 2016; Vice President Controller, Operations & Integration, November 2013 to August 2015; and Vice President, Global Shared Services Organization, August 2011 to October 2013. Pierre Chereque 63 Vice President and Director of Taxes, since June 2017; Director of Taxes, Operations July 2004 to May 2017. Stephanie Cox Simon Farrant Kevin Fyfe 49 Vice President Human Resources, since June 2017; President, North America June 2017 to May 2017; President, Asia June 2014 to May 2016; and Vice President, Human Resources May 2009 to May 2014. 53 Vice President Investor Relations, since February 2014; Special Projects Manager, December 2013 to January 2014; and Vice President and General Manager, North Sea GeoMarket, April 2012 to November 2013. 44 Vice President and Controller, since October 2017; Controller, Cameron Group, January 2016 to September 2017; Vice President Finance, OneSubsea July 2013 to December 2015; and Finance Integration Manager, December 2012 to June 2013. 7 Name Age Current Position and Five-Year Business Experience Hinda Gharbi 47 President, Reservoir Characterization Group, since June 2017; President, Wireline June 2013 to May 2017; and President, Asia June 2010 to June 2013. Howard Guild 46 Chief Accounting Officer, since July 2005. Claudia Jaramillo 45 Vice President and Treasurer, since December 2017; ERM and Treasury Manager, July 2017 to November 2017; Controller North America, July 2014 to May 2017; and Controller, Drilling and Measurements, July 2011 to June 2014. Vijay Kasibhatla 54 Director of Mergers and Acquisitions, since January 2013. Imran Kizilbash 51 Vice President Schlumberger Venture Fund, since December 2016; Vice President and Treasurer, November 2013 to December 2016; Controller, Operations & Integration, July 2013 to October 2013; and Controller, Operations, January 2011 to June 2013. Saul R. Laureles 52 Director, Corporate Legal, since July 2014; Assistant Secretary, since April 2007; and Deputy General Counsel, Governance and Securities, October 2012 to June 2014. Olivier Le Peuch 54 President, Cameron Group, since February 2017; President, Completions October 2014 to January 2017; and Vice President EMS August 2010 to September 2014. Catherine MacGregor 45 President, Drilling Group, since May 2017; President, Reservoir Characterization Group, August 2016 to April 2017; President, Europe and Africa, July 2013 to July 2016; and Wireline President, May 2009 to June 2013. Abdellah Merad 44 President, Production Group, since May 2017; Vice President Controller, Operations, December 2016 to April 2017; Vice President, Global Shared Services Organization, November 2013 to December 2016; GeoMarket Cost Management Project Manager, August 2013 to November 2013; and North Africa GeoMarket Manager, June 2010 to July 2013. Available Information The Schlumberger Internet website is www.slb.com. Schlumberger uses its Investor Relations website, www.slb.com/ir, as a routine channel for distribution of important information, including news releases, analyst presentations, and financial information. Schlumberger makes available free of charge through its Investor Relations website at www.slb.com/ir access to its Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, its proxy statements and Forms 3, 4 and 5 filed on behalf of directors and executive officers, and amendments to each of those reports, as soon as reasonably practicable after such material is filed with or furnished to the Securities and Exchange Commission (“SEC”). Alternatively, you may access these reports at the SEC’s Internet website at www.sec.gov. Copies are also available, without charge, from Schlumberger Investor Relations, 5599 San Felipe, 17th Floor, Houston, Texas 77056. Unless expressly noted, the information on our website or any other website is not incorporated by reference in this Form 10-K and should not be considered part of this Form 10-K or any other filing Schlumberger makes with the SEC. 8 Item 1A. Risk Factors. The following discussion of risk factors known to us contains important information for the understanding of our “forward-looking statements,” which are discussed immediately following Item 7A. of this Form 10-K and elsewhere. These risk factors should also be read in conjunction with Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, and the Consolidated Financial Statements and related notes included in this Form 10-K. We urge you to consider carefully the risks described below, as well as in other reports and materials that we file with the SEC and the other information included or incorporated by reference in this Form 10-K. If any of the risks described below or elsewhere in this Form 10-K were to materialize, our business, financial condition, results of operations, cash flows or prospects could be materially adversely affected. In such case, the trading price of our common stock could decline and you could lose part or all of your investment. Additional risks and uncertainties not currently known to us or that we currently deem immaterial may also materially adversely affect our financial condition, results of operations and cash flows. Demand for the majority of our products and services is substantially dependent on the levels of expenditures by our customers. The oil and gas industry downturn has resulted in reduced demand for oilfield services, which has had, and may continue to have, a material adverse impact on our financial condition, results of operations and cash flows. Demand for the majority of our products and services depends substantially on expenditures by our customers for the exploration, development and production of oil and natural gas reserves. These expenditures are generally dependent on our customers’ views of future oil and natural gas prices and are sensitive to our customers’ views of future economic growth and the resulting impact on demand for oil and natural gas. Oil and gas prices have declined significantly from their highs in 2014, resulting in lower expenditures by our customers. During the downturn, many of our customers reduced or delayed their oil and gas exploration and production spending, reducing the demand for our products and services and exerting downward pressure on the prices that we have been able to charge. These conditions have had, and may continue to have, an adverse impact on our financial condition, results of operations and cash flows. Lower oil and gas prices have resulted in a reduction in cash flows for our customers. This has resulted in, and may continue to result in, project modifications, delays and cancellations, general business disruptions, and delays in payment of, or nonpayment of, amounts that are owed to us. These effects could have a material adverse effect on our financial condition, results of operations and cash flows. The prices for oil and natural gas have historically been volatile and can be affected by a variety of factors, including: (cid:129) (cid:129) (cid:129) (cid:129) (cid:129) (cid:129) (cid:129) (cid:129) (cid:129) demand for hydrocarbons, which is affected by general economic and business conditions; the ability or willingness of the Organization of Petroleum Exporting Countries (“OPEC”) to set and maintain production levels for oil; oil and gas production levels by non-OPEC countries; the level of excess production capacity; political and economic uncertainty and geopolitical unrest; the level of worldwide oil and gas exploration and production activity; access to potential resources; governmental policies and subsidies; the costs of exploring for, producing and delivering oil and gas; 9 (cid:129) (cid:129) technological advances affecting energy consumption; and weather conditions. There can be no assurance that the demand or pricing for oil and natural gas will follow historic patterns or recover meaningfully in the near term. Continued or worsening conditions in the oil and gas industry could have a further material adverse effect on our financial condition, results of operations and cash flows. A significant portion of our revenue is derived from our non-United States operations, which exposes us to risks inherent in doing business in each of the over 85 countries in which we operate. Our non-United States operations accounted for approximately 74% of our consolidated revenue in 2017, 80% in 2016 and 76% in 2015. Operations in countries other than the United States are subject to various risks, including: (cid:129) (cid:129) (cid:129) (cid:129) (cid:129) (cid:129) (cid:129) (cid:129) (cid:129) (cid:129) (cid:129) volatility in political, social and economic conditions; exposure to expropriation of our assets or other governmental actions; social unrest, acts of terrorism, war or other armed conflict; confiscatory taxation or other adverse tax policies; deprivation of contract rights; trade and economic sanctions or other restrictions imposed by the United States, the European Union or other countries; restrictions under the United States Foreign Corrupt Practices Act (“FCPA”) or similar legislation; restrictions on the repatriation of income or capital; currency exchange controls; inflation; and currency exchange rate fluctuations and devaluations. Our failure to comply with complex US and foreign laws and regulations could have a material adverse effect on our operations. We are subject to complex US and foreign laws and regulations, such as the FCPA, the U.K. Bribery Act and various other anti-bribery and anti-corruption laws. We are also subject to trade control regulations and trade sanctions laws that restrict the movement of certain goods to, and certain operations in, various countries or with certain persons. Our ability to transfer people and products among certain countries is subject to maintaining required licenses and complying with these laws and regulations. The internal controls, policies and procedures, and employee training and compliance programs we have implemented to deter prohibited practices may not be effective in preventing employees, contractors or agents from violating or circumventing such internal policies or violating applicable laws and regulations. Any determination that we have violated or are responsible for violations of anti-bribery, trade control, trade sanctions or anti-corruption laws could have a material adverse effect on our financial condition. Violations of international and US laws and regulations or the loss of any required licenses may result in fines and penalties, criminal sanctions, administrative remedies or restrictions on business conduct, and could have a material adverse effect on our reputation and our business, operating results and financial condition. Demand for our products and services could be reduced by existing and future legislation or regulations. Environmental advocacy groups and regulatory agencies in the United States and other countries have been focusing considerable attention on the emissions of carbon dioxide, methane and other greenhouse gasses and 10 their potential role in climate change. Existing or future legislation and regulations related to greenhouse gas emissions and climate change, as well as government initiatives to conserve energy or promote the use of alternative energy sources, may significantly curtail demand for and production of fossil fuels such as oil and gas in areas of the world where our customers operate, and thus adversely affect future demand for our products and services. This may, in turn, adversely affect our financial condition, results of operations and cash flows. Some international, national, state and local governments and agencies have also adopted laws and regulations or are evaluating proposed legislation and regulations that are focused on the extraction of shale gas or oil using hydraulic fracturing. Hydraulic fracturing is a stimulation treatment routinely performed on oil and gas wells in low-permeability reservoirs. Specially engineered fluids are pumped at high pressure and rate into the reservoir interval to be treated, causing cracks in the target formation. Proppant, such as sand of a particular size, is mixed with the treatment fluid to keep the cracks open when the treatment is complete. Future hydraulic fracturing- related legislation or regulations could limit or ban hydraulic fracturing, or lead to operational delays and increased costs, and therefore reduce demand for our pressure pumping services. If such additional international, national, state or local legislation or regulations are enacted, it could adversely affect our financial condition, results of operations and cash flows. Environmental compliance costs and liabilities could reduce our earnings and cash available for operations. We are subject to increasingly stringent laws and regulations relating to importation and use of hazardous materials, radioactive materials, chemicals and explosives and to environmental protection, including laws and regulations governing air emissions, hydraulic fracturing, water discharges and waste management. We incur, and expect to continue to incur, capital and operating costs to comply with environmental laws and regulations. The technical requirements of these laws and regulations are becoming increasingly complex, stringent and expensive to implement. These laws may provide for “strict liability” for remediation costs, damages to natural resources or threats to public health and safety. Strict liability can render a party liable for damages without regard to negligence or fault on the part of the party. Some environmental laws provide for joint and several strict liability for remediation of spills and releases of hazardous substances. We use and generate hazardous substances and wastes in our operations. In addition, many of our current and former properties are, or have been, used for industrial purposes. Accordingly, we could become subject to material liabilities relating to the investigation and cleanup of potentially contaminated properties, and to claims alleging personal injury or property damage as the result of exposures to, or releases of, hazardous substances. In addition, stricter enforcement of existing laws and regulations, new laws and regulations, the discovery of previously unknown contamination or the imposition of new or increased requirements could require us to incur costs or become the basis for new or increased liabilities that could reduce our earnings and our cash available for operations. We could be subject to substantial liability claims, which could adversely affect our financial condition, results of operations and cash flows. The technical complexities of our operations expose us to a wide range of significant health, safety and environmental risks. Our offerings involve production-related activities, radioactive materials, chemicals, explosives and other equipment and services that are deployed in challenging exploration, development and production environments. An accident involving these services or equipment, or a failure of a product, could cause personal injury, loss of life, damage to or destruction of property, equipment or the environment, or suspension of operations. Our insurance may not protect us against liability for certain kinds of events, including events involving pollution, or against losses resulting from business interruption. Moreover, we may not be able to maintain insurance at levels of risk coverage or policy limits that we deem adequate. Any damages caused by our services or products that are not covered by insurance, or are in excess of policy limits or subject to substantial deductibles, could adversely affect our financial condition, results of operations and cash flows. 11 If we are unable to maintain technology leadership, this could adversely affect any competitive advantage we hold. The oilfield service industry is highly competitive. Our ability to continually provide competitive technology and services can impact our ability to defend, maintain or increase prices for our products and services, maintain market share, and negotiate acceptable contract terms with our customers. If we are unable to continue to develop and produce competitive technology or deliver it to our clients in a timely and cost-competitive manner in the various markets we serve, it could adversely affect our financial condition, results of operations and cash flows. Limitations on our ability to protect our intellectual property rights, including our trade secrets, could cause a loss in revenue and any competitive advantage we hold. Some of our products or services, and the processes we use to produce or provide them, have been granted patent protection, have patent applications pending, or are trade secrets. Our business may be adversely affected if our patents are unenforceable, the claims allowed under our patents are not sufficient to protect our technology, our patent applications are denied or our trade secrets are not adequately protected. Our competitors may be able to develop technology independently that is similar to ours without infringing on our patents or gaining access to our trade secrets, which could adversely affect our financial condition, results of operations and cash flows. We may be subject to litigation if another party claims that we have infringed upon its intellectual property rights. The tools, techniques, methodologies, programs and components we use to provide our services may infringe upon the intellectual property rights of others. Infringement claims generally result in significant legal and other costs, and may distract management from running our business. Royalty payments under licenses from third parties, if available, would increase our costs. Additionally, developing non-infringing technologies would increase our costs. If a license were not available, we might not be able to continue providing a particular service or product, which could adversely affect our financial condition, results of operations and cash flows. Failure to obtain and retain skilled technical personnel could impede our operations. We require highly skilled personnel to operate and provide technical services and support for our business. Competition for the personnel required for our businesses intensifies as activity increases. In periods of high utilization it may become more difficult to find and retain qualified individuals. This could increase our costs or have other adverse effects on our operations. Severe weather conditions may adversely affect our operations. Our business may be materially affected by severe weather conditions in areas where we operate. This may entail the evacuation of personnel and stoppage of services. In addition, if particularly severe weather affects platforms or structures, this may result in a suspension of activities. Any of these events could adversely affect our financial condition, results of operations and cash flows. Cyberattacks could have a material adverse impact on our business and results of operation. We rely heavily on information systems to conduct our business. Although we devote significant resources to protect our systems and data, we have experienced and will continue to experience varying degrees of cyber incidents in the normal conduct of our business. There can be no assurance that the systems we have designed to prevent or limit the effects of cyber incidents or attacks will be sufficient to prevent or detect such incidents or attacks, or to avoid a material adverse impact on our systems when such incidents or attacks do occur. If our systems for protecting against cybersecurity risks are circumvented or breached, this could result in disruptions to our business operations, access to our financial reporting systems, the loss of access to critical data or systems through ransomware or other attacks, or other loss, misuse or corruption of critical data and proprietary information, including our intellectual property and customer data. 12 Item 1B. Unresolved Staff Comments. None. Item 2. Properties. Schlumberger owns or leases numerous manufacturing facilities, administrative offices, service centers, research centers, data processing centers, mines, ore, drilling fluid and production chemical processing centers, sales offices and warehouses throughout the world. Schlumberger views its principal manufacturing, mining and processing facilities, research centers and data processing centers as its “principal owned or leased facilities.” The following sets forth Schlumberger’s principal owned or leased facilities: Beijing, China; Beziers and Clamart, France; Fuchinobe, Japan; Kleppestø and Stavanger, Norway; Singapore; Abingdon and Cambridge, United Kingdom; Moscow, Russia; Johor, Malaysia; and within the United States: Boston, Massachusetts; Houston, Katy, Rosharon and Sugar Land, Texas; Berwick, Louisiana; Battle Mountain, Nevada and Greybull, Wyoming. Item 3. Legal Proceedings. The information with respect to this Item 3. Legal Proceedings is set forth in Note 16 of the Consolidated Financial Statements. Item 4. Mine Safety Disclosures. 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 Form 10-K. 13 PART II Item 5. Market for Schlumberger’s Common Stock, Related Stockholder Matters and Issuer Purchases of Equity Securities. As of December 31, 2017, there were 26,572 stockholders of record. The principal United States market for Schlumberger’s common stock is the New York Stock Exchange (“NYSE”), where it is traded under the symbol “SLB.” Common Stock, Market Prices and Dividends Declared per Share Quarterly high and low prices for Schlumberger’s common stock as reported by the NYSE (composite transactions), together with dividends declared per share in each quarter of 2017 and 2016, were as follows: 2017 QUARTERS First Second . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Third . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fourth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2016 QUARTERS First . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Second . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Third . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fourth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Price Range High Low Dividends Declared $ $ 87.84 80.89 70.01 69.57 76.16 81.96 83.97 87.00 $ $ 76.14 65.10 62.56 61.02 59.60 71.69 74.33 77.48 0.50 0.50 0.50 0.50 0.50 0.50 0.50 0.50 There are no legal restrictions on the payment of dividends or ownership or voting of such shares, except as to shares held as treasury stock. Under current legislation, stockholders are not subject to any Curaçao withholding or other Curaçao taxes attributable to the ownership of such shares. 14 The following graph compares the cumulative total stockholder return on Schlumberger common stock with the cumulative total return on the Standard & Poor’s 500 Index (“S&P 500 Index”) and the cumulative total return on the Philadelphia Oil Service Index. It assumes $100 was invested on December 31, 2012 in Schlumberger common stock, in the S&P 500 Index and in the Philadelphia Oil Service Index, as well as the reinvestment of dividends on the last day of the month of payment. The stockholder return set forth below is not necessarily indicative of future performance. The following graph and related information shall not be deemed “soliciting material” or to be “filed” with the SEC, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent that Schlumberger specifically incorporates it by reference into such filing. Comparison of Five-Year Cumulative Total Return Among Schlumberger Common Stock, the S&P 500 Index and the Philadelphia Oil Service Index $250 $200 $150 $100 $50 $0 Dec12 Dec13 Dec14 Dec15 Dec16 Dec17 Schlumberger Ltd S&P 500 Index Philadelphia Oil Service Index (OSX) Share Repurchases On July 18, 2013, the Schlumberger Board of Directors (the “Board”) approved a $10 billion share repurchase program for Schlumberger common stock, to be completed at the latest by June 30, 2018. This program was completed during May 2017. On January 21, 2016, the Board approved a new $10 billion share repurchase program for Schlumberger common stock. This new program took effect once the July 18, 2013 program was exhausted. 15 Schlumberger’s common stock repurchase program activity for the three months ended December 31, 2017 was as follows: (Stated in thousands, except per share amounts) Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Program Maximum Value of Shares that may yet be Purchased Under the Program October 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . November 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . December 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 529.7 528.6 496.4 1,554.7 $ $ $ $ 66.44 63.61 64.37 64.82 529.7 528.6 496.4 $ $ $ 9,741,944 9,708,321 9,676,364 1,554.7 Unregistered Sales of Equity Securities None. 16 Item 6. Selected Financial Data. The following selected consolidated financial data should be read in conjunction with both “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Item 8. Financial Statements and Supplementary Data” of this Form 10-K in order to understand factors, such as business combinations and charges and credits, which may affect the comparability of the Selected Financial Data. (Stated in millions, except per share amounts) Year Ended December 31, 2017 2016 2015 2014 2013 Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 30,440 $ 27,810 $ 35,475 Income (loss) from continuing operations . . . . . $ (1,505) $ (1,687) $ 2,072 Diluted earnings (loss) per share from continuing operations . . . . . . . . . . . . . . . . . . . . $ (1.08) $ (1.24) $ Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Short-term investments . . . . . . . . . . . . . . . . . . . . $ Working capital . . . . . . . . . . . . . . . . . . . . . . . . . . $ Fixed income investments, held to maturity . . . . $ 1,799 3,290 3,215 - Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 71,987 Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . $ 14,875 Total debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 18,199 Schlumberger stockholders’ equity . . . . . . . . . . . $ 36,842 Cash dividends declared per share . . . . . . . . . . . $ 2.00 $ $ $ $ $ $ $ $ $ 2,929 6,328 8,868 238 77,956 16,463 19,616 41,078 2.00 $ $ $ $ $ $ $ $ $ 1.63 2,793 10,241 12,791 418 68,005 14,442 18,999 35,633 2.00 $ $ $ $ $ $ $ $ $ $ $ $ 48,580 5,643 4.31 3,130 4,371 10,518 442 66,904 10,565 13,330 37,850 1.60 $ $ $ $ $ $ $ $ $ $ $ $ 45,266 6,801 5.10 3,472 4,898 12,700 363 67,100 10,393 13,176 39,469 1.25 17 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. The following discussion and analysis contains forward-looking statements, limitation, statements relating to our plans, strategies, objectives, expectations, intentions and resources. Such forward- looking statements should be read in conjunction with our disclosures under “Item 1A. Risk Factors” of this Form 10-K. including, without 2017 Executive Overview Schlumberger full-year 2017 revenue of $30.4 billion increased 9% year-on-year. This reflects a full year of activity from the acquired Cameron businesses as compared to only three quarters of activity in 2016. In addition to the impact of Cameron, revenue growth was driven by unconventional land resource developments in North America due to the recovery in activity combined with market share gains and improved pricing, as the oil and gas industry began to emerge from the longest and deepest downturn in 30 years. Following two successive years of E&P investment cuts, operators increased their upstream spend in North America by more than 30% in 2017. The increase in oil price afforded by the OPEC agreement gave US producers a means to increase their investment in tight oil. However, apprehension related to growing US supply, and uncertainty surrounding the duration of OPEC and Russia led production cuts held international spending to a level 3% below 2016. During 2017, the outlook improved for international markets, evidenced by a significant increase in the sanctioning of new projects. The number of final investment decisions tripled in 2017 as compared to 2016, with 75% of the new projects planned for shallow and deepwater offshore environments. After starting the year at $55 per barrel, Brent prices fell to $44 in June and then recovered to $67 by the end of the year. The price increase resulted from 2017 demand growth of 1.5 million barrels per day, and strong adherence to a production agreement between OPEC and Russia, which served to reduce oil production by an average of 1.6 million barrels per day compared to the fourth quarter of 2016. Strong demand and restricted supply accelerated the depletion of stocks as the year progressed. By September, OECD crude and product stocks had returned to 2015 levels. As the oil market began to rebalance in 2017, replacement of conventional oil reserves remains a challenge. In 2017, discoveries were at an all-time low due to lower exploration activity, and more than 60% of discovered resources were gas. Oil discoveries accounted for only 3.4 billion barrels, while about 30 billion barrels of conventional oil is produced each year, representing a reserves replacement ratio of only 11%. In the natural gas markets, low Henry Hub prices and flat domestic consumption allowed the US to transition from importer to exporter of natural gas for the first time since 1957, and Liquified Natural Gas was the enabler. Global LNG trading increased 11% year-on-year driven by demand in Asia. LNG supply growth was also strong, with the addition of six new liquefaction trains in 2017. In today’s well-supplied market, both producers and consumers are reluctant to invest in new projects. While the short-term market outlook remains challenged, strong longer-term demand growth signals a future need for new LNG supply capacity. Schlumberger’s financial performance in 2017 was driven by land activity in North America, where revenue increased over 80% in line with the average rig count increase. Continued expansion of Schlumberger’s hydraulic fracturing presence in North America resulted in additional fleet redeployments, which benefited the Production Group. Drilling Group revenue in North America land increased due to the continuing high demand for longer horizontal lateral sections in shale oil wells. Increased Cameron Surface and Drilling Systems product sales and services also contributed to the strong financial performance in North America. North America revenue, including offshore, grew 42% year-on-year. International revenue decreased 2% as compared to 2016. This decline was driven by soft demand for exploration and development-related products and services as E&P budgets remained tight. Activity in Latin American 18 decreased due to Schlumberger’s decision to align operations with cash collections in Venezuela. Robust activity in the Middle East and Russia, driven by integrated drilling and production projects, as well as an additional quarter of activity from the acquired Cameron businesses partially offset these decreases. three years of unprecedented market downturn, Schlumberger has proactively sought During the past to strengthen its technology offering and presence in key markets around the world. The most recent example is the expansion of its hydraulic fracturing presence in North America land through the purchase of the US fracturing and pump-down perforating businesses from Weatherford. In line with the challenging business environment, over the same period Schlumberger has restructured all relevant parts of the company, in terms of both size and organizational structure, to maximize its market competitiveness and operational agility. With the significant changes seen in customer priorities and buying habits in recent years, Schlumberger has continued to evaluate the present and future return prospects for all of its product lines, as it seeks to maximize its long-term financial performance. Based on this in-depth analysis, Schlumberger identified the seismic acquisition business as the only product line that does not meet Schlumberger’s return expectations going forward, even after factoring in an eventual market recovery. Schlumberger has, therefore, taken the difficult decision to exit the marine and land seismic acquisition market and instead operate the WesternGeco product line as an asset-light business, built on its leading position within multiclient, data processing and geophysical interpretation. Looking at the oil market, the strong growth in demand is projected to continue in 2018, on the back of a robust global economy. On the supply side, the extension of the OPEC- and Russia-led production cuts is already translating into higher-than-expected inventory draws. In North America, 2018 shale oil production is set for another year of strong growth, as the positive oil market sentiments will likely increase both investment appetite and availability of financing. At the same time, the production base in the rest of the world is showing fatigue after three years of unprecedented under-investment. The underlying signs of weakness will likely become more evident in the coming year, as the production additions from investments made in the previous upcycle start to noticeably fall off. Taken together, this means the oil market is now in balance and the previous over-supply discount is gradually being replaced by a market tightness premium, which makes Schlumberger increasingly positive on the global outlook for its business. These positive oil market sentiments are reflected in third-party E&P spend surveys that predict 15-20% growth in North American investments in 2018, while the international market is expected to grow for the first time in four years, with a projected 5% increase in spend. As a result, as Schlumberger enters the first year of expected growth in all parts of its global operations since 2014, there is a renewed excitement and enthusiasm throughout the organization, and Schlumberger remains committed to delivering market-leading products and services to its customers and superior returns to its shareholders. 19 Full-Year 2017 Results (Stated in millions) 2017 2016 Income Before Taxes Income Before Taxes Revenue Revenue Reservoir Characterization . . . . . . . . . . . . . . . . . . . . . Drilling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Production . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cameron . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Eliminations & other . . . . . . . . . . . . . . . . . . . . . . . . . . $ $ 6,786 8,392 10,639 5,205 (582) Pretax operating income . . . . . . . . . . . . . . . . . . . . Corporate & other (1) . . . . . . . . . . . . . . . . . . . . . . . . . . Interest income (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest expense (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Charges & credits (4) $ 1,251 1,151 928 733 (142) 3,921 (934) 107 (513) (3,764) $ 6,648 8,561 8,804 4,211 (414) 1,249 994 507 653 (130) 3,273 (925) 84 (517) (3,820) $ 30,440 $ (1,183) $ 27,810 $ (1,905) (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. Full-year 2017 and 2016 include $252 million and $189 million, respectively, of amortization expense associated with intangible assets recorded as a result of the acquisition of Cameron, which was completed on April 1, 2016. (2) (3) Excludes interest income included in the segments’ income (2017: $21 million; 2016: $26 million). Excludes interest expense included in the segments’ income (2017: $52 million; 2016: $53 million). (4) Charges and credits are described in detail in Note 3 to the Consolidated Financial Statements. Full-year 2017 revenue of $30.4 billion increased 9% year-on-year. This included a full year of activity from the acquired Cameron businesses versus nine months of activity for the same period in 2016. Excluding the impact of the Cameron Group, revenue increased 7% year-on-year. The growth was primarily driven by North America, where the land rig count increased more than 80% versus the same period last year. Full-year revenue for the Drilling Group declined 2% primarily driven by the 8% decline in offshore rig count combined with Schlumberger’s decision in April 2016 to reduce its activities in Venezuela to align operations with cash collections. Production Group revenue increased 21% due to the accelerated land pressure pumping activity growth in North America, while the Reservoir Characterization Group revenue improved 2%. Full-year 2017 pretax operating margin was expanded 111 basis points (“bps”) to 13%, as improved profitability in North America due to the land activity growth that benefited the Production and Drilling Groups was offset by margin declines in the Reservoir Characterization and Cameron Groups. Reservoir Characterization Group Full-year 2017 revenue of $6.8 billion increased 2% year-on-year primarily due to higher WesternGeco and Wireline revenue on projects in the Middle East & Asia Area, North America land, Russia and Mexico. Year-on-year, pretax operating margin was essentially flat at 18%. 20 Drilling Group Full-year 2017 revenue of $8.4 billion decreased 2% year-on-year primarily due to the rig count declines internationally and in offshore North America combined with pricing pressure. Revenue also declined as a result of Schlumberger’s decision in April 2016 to reduce its activities in Venezuela to align operations with cash collections. Year-on-year, pretax operating margin increased 210 bps to 14% primarily due to improved profitability in North America due to accelerated land activity and improved pricing. This improvement was partially offset by the negative impact of reduced activity in Venezuela. Production Group Full-year 2017 revenue of $10.6 billion increased 21% year-on-year with most of the revenue increase attributable to the accelerated land activity growth in North America that benefited the pressure pumping business which grew 44%. Lower Schlumberger Production Management (SPM) production levels in Ecuador partially offset the revenue increase. Year-on-year, pretax operating margin increased 297 bps to 9% as a result of improved profitability in North America due to the accelerated land activity and improved pricing. This was partially offset by reduced margins in SPM due to lower production in Ecuador. Cameron Group The Cameron Group contributed full-year revenue of $5.2 billion. Cameron Group revenue for 2016 included only nine months of revenue following the closing of the acquisition in April 2016. Revenue in 2017 was impacted by a declining project backlog, particularly for the long-cycle businesses of Drilling Systems and OneSubsea. Year-on-year, pretax operating margin of 14% decreased 142 bps as a result of lower Drilling Systems project volumes. Full-Year 2016 Results (Stated in millions) 2016 2015 Income Before Taxes Revenue Reservoir Characterization . . . . . . . . . . . . . . . . . . . Drilling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Production . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cameron . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Eliminations & other . . . . . . . . . . . . . . . . . . . . . . . . $ $ 6,648 8,561 8,804 4,211 (414) Pretax operating income . . . . . . . . . . . . . . . . . . Corporate & other (1) . . . . . . . . . . . . . . . . . . . . . . . . Interest income (2) . . . . . . . . . . . . . . . . . . . . . . . . . . Interest expense (3) . . . . . . . . . . . . . . . . . . . . . . . . . . Charges & credits (4) . . . . . . . . . . . . . . . . . . . . . . . . $ 1,249 994 507 653 (130) 3,273 (925) 84 (517) (3,820) Revenue $ 9,501 13,563 12,548 - (137) Income Before Taxes 2,450 2,538 1,585 - (63) 6,510 (768) 30 (316) (2,575) $ 27,810 $ (1,905) $ 35,475 $ 2,881 21 (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. Full-year 2016 includes $189 million of amortization expense associated with intangible assets recorded as a result of the acquisition of Cameron, which was completed on April 1, 2016. (2) (3) Excludes interest income included in the segments’ income (2016: $26 million; 2015: $22 million). Excludes interest expense included in the segments’ income (2016: $53 million; 2015: $30 million). (4) Charges and credits are described in detail in Note 3 to the Consolidated Financial Statements. Full-year 2016 revenue of $27.8 billion decreased 22% year-on-year. This included nine months of activity from the Cameron Group, which contributed $4.2 billion of revenue. Full-year 2016 revenue from both the Reservoir Characterization and Production Groups declined by 30%, as a result of lower demand for exploration- and development-related products and services as E&P budgets were further reduced. Drilling Group revenue fell 37% due to the rig count decline in both North America and internationally. Full-year 2016 pretax operating income margin decreased 658 bps to 12% as a result of the overall decline in activity and pervasive pricing concessions. The margin decrease was highest in the Reservoir Characterization Group, which contracted by 699 bps to 19%. Drilling Group pretax operating margin fell 710 bps to 12%, while the Production Group decreased 687 bps to 6%. The Cameron Group posted a pretax margin of 16%. Reservoir Characterization Group Full-year 2016 revenue of $6.7 billion decreased 30% year-on-year primarily due to sustained cuts in exploration and discretionary spending. Year-on-year, pretax operating margin decreased 699 bps to 19% due to reduced high-margin Wireline and Testing Services activities. Drilling Group Full-year 2016 revenue of $8.6 billion decreased 37% year-on-year primarily due to the severe drop in rig count in both North America and internationally combined with pricing pressure that mainly affected Drilling & Measurements and M-I SWACO activity. Year-on-year, pretax operating margin decreased 710 bps to 12% primarily due to the significant decline in higher-margin activities of Drilling & Measurements combined with pricing weakness. Production Group Full-year 2016 revenue of $8.7 billion decreased 30% year-on-year with most of the decrease attributable to a decline in North America, particularly on Well Services pressure pumping technologies driven by activity declines and pricing pressure as the land rig count declined dramatically. Year-on-year, pretax operating margin decreased 687 bps to 6% as a result of lower activity and increasing pricing pressure, which continued to impact North America land. Cameron Group Cameron Group contributed nine-month revenue of $4.2 billion and pretax operating margin of 16%. Revenue was impacted by a declining project backlog as well as a further slowdown in North America land activity, which also affected the short-cycle businesses of the Valves & Measurement and Surface product lines. 22 Pretax operating margin of 16% was driven by strong project execution and manufacturing efficiency in OneSubsea and overall cost control across the Group. Interest and Other Income Interest & other income consisted of the following: (Stated in millions) 2017 2016 2015 Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Earnings of equity method investments . . . . . . . . . . . . . . . . . . . . . . . $ 128 96 $ 110 90 $ 224 $ 200 $ 52 184 236 The increase in interest income in 2016 as compared to 2015 is primarily attributable to the higher cash and short-term investment balances as a result of the issuance of $6.0 billion of Senior Notes during the fourth quarter of 2015. The decrease in earnings of equity method investments in 2016 as compared to 2015 primarily reflects the effects of the downturn in the oil and gas industry, which has negatively impacted the majority of Schlumberger’s that investments in affiliates, particularly those in North America. This decrease also reflects the fact Schlumberger ceased recording equity income from the OneSubsea joint venture in April 2016 as a result of Schlumberger’s acquisition of Cameron. Interest Expense Interest expense of $566 million in 2017 was essentially flat as compared to 2016. Interest expense of $570 million in 2016 increased by $224 million compared to 2015 primarily due to the issuance of $6.0 billion of Senior Notes during the fourth quarter of 2015 and the impact of the $3.0 billion of debt assumed in the acquisition of Cameron. Other Research & engineering and General & administrative expenses, as a percentage of Revenue, were as follows: Research & engineering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . General & administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.6% 1.4% 3.6% 1.4% 3.1% 1.4% 2017 2016 2015 Research & engineering costs have decreased in terms of both absolute dollars and as a percentage of Revenue in 2017 as compared to 2016 as a result of cost control measures. Although Research & engineering costs increased as a percentage of Revenue in 2016 as compared to 2015, they decreased in absolute dollar terms as a result of cost control measures that were implemented, offset in part by the impact of the Cameron acquisition. Income Taxes The Schlumberger effective tax rate was (27.9)% in 2017, 14.6% in 2016, and 25.9% in 2015. 23 The Schlumberger effective tax rate has historically been sensitive to the geographic mix of earnings. When the percentage of pretax earnings generated outside of North America increased, the Schlumberger effective tax rate generally decreased. Conversely, when the percentage of pretax earnings generated outside of North America decreased, the Schlumberger effective tax rate generally increased. The effective tax rate for each of 2017, 2016 and 2015 was significantly impacted by the charges and credits described in Note 3 to the Consolidated Financial Statements because they were only partially tax-effective. Excluding the impact of these charges and credits, the effective tax rate was 18.2% in 2017, 15.9% in 2016 and 20.2% in 2015. The increase in the effective tax rate in 2017 as compared to 2016, excluding the impact of charges and credits, was primarily attributable to a change in the geographic mix of earnings as the percentage of pretax earnings generated in North America increased. The decrease in the effective tax rate, excluding the impact of charges and credits, in 2016 as compared to 2015 was primarily attributed to the geographic mix of earnings and the favorable resolution of the tax examinations in certain jurisdictions. As discussed in further detail in Note 3 to the Consolidated Financial Statements, on December 22, 2017 the US enacted the Tax Cuts and Jobs Act (the “Act”). The Act, which is also commonly referred to as “US tax reform”, significantly changes US corporate income tax laws by, among other things, reducing the US corporate income tax rate to 21% starting in 2018 and creating a territorial tax system with a one-time mandatory tax on previously deferred foreign earnings of US subsidiaries. Excluding the impact of any discrete items, the provisions of the Act are expected to reduce Schlumberger’s effective tax rate in 2018 by approximately 2 to 3 percentage points compared to what the rate would have otherwise been in the absence of US tax reform. The ultimate impact on Schlumberger’s effective tax rate will largely depend on the percentage of pretax earnings that Schlumberger generates in the US as compared to the rest of the world. Charges and Credits Schlumberger recorded significant charges and credits during 2017, 2016 and 2015. These charges and credits, which are summarized below, are more fully described in Note 3 to the Consolidated Financial Statements. 24 The following is a summary of the 2017 charges and credits, of which $3.211 billion were classified as Impairments & other, $245 million were classified as Cost of sales and $308 million were classified as Merger & integration in the Consolidated Statement of Income (Loss): Pretax Tax Noncontrolling Interests Net (Stated in millions) Impairment & other WesternGeco seismic restructuring charges . . . . . . . . . . . . . . . . . . . . . . . . Venezuela investment write-down . . . . . Promissory note fair value adjustment and other . . . . . . . . . . . . . . . . . . . . . . . Workforce reductions . . . . . . . . . . . . . . . Multiclient seismic data impairment . . . Other restructuring charges . . . . . . . . . . Cost of sales Provision for loss on long-term construction project . . . . . . . . . . . . . . . Merger & integration Merger and integration-related costs . . . US tax reform charge . . . . . . . . . . . . . . . . . . $ $ 1,114 938 510 247 246 156 245 308 - 20 - - 13 81 10 22 70 (76) $ $ - - 1,094 938 12 - - 22 - - - - - 498 234 165 124 - 223 - 238 76 $ 3,764 $ 140 $ 34 $ 3,590 25 The following is a summary of the 2016 charges and credits, of which $3.172 billion were classified as Impairments & other, $349 million were classified as Merger & integration and $299 million were classified in Cost of sales in the Consolidated Statement of Income (Loss): (Stated in millions) Pretax Tax Net Impairment & other $ Workforce reductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other fixed asset impairments . . . . . . . . . . . . . . . . . . . . . . Inventory write-downs . . . . . . . . . . . . . . . . . . . . . . . . . . . . North America pressure pumping asset impairments . . . . . Multiclient seismic data impairment . . . . . . . . . . . . . . . . . . Facility impairments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Facility closure costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Costs associated with exiting certain activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . Currency devaluation loss in Egypt Contract termination costs . . . . . . . . . . . . . . . . . . . . . . . . . Other restructuring charges . . . . . . . . . . . . . . . . . . . . . . . . . Merger & integration Other merger and integration-related . . . . . . . . . . . . . . . . . Merger-related employee benefits . . . . . . . . . . . . . . . . . . . Facility closure costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Professional fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Amortization of inventory fair value adjustment $ 880 684 616 209 198 165 165 98 63 39 55 160 83 61 45 299 $ 69 52 49 67 62 58 40 23 - 9 - 28 13 13 10 90 $ 3,820 $ 583 $ 811 632 567 142 136 107 125 75 63 30 55 132 70 48 35 209 3,237 The following is a summary of the 2015 charges and credits, all of which were classified as Impairments & other in the Consolidated Statement of Income (Loss): (Stated in millions) Pretax Tax Net $ Workforce reductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fixed asset impairments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inventory write-downs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Impairment of SPM project . . . . . . . . . . . . . . . . . . . . . . . . . . . . Facility closures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Geopolitical events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Currency devaluation loss in Venezuela . . . . . . . . . . . . . . . . . . Contract termination costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 920 776 269 182 177 77 49 41 84 $ 107 141 27 36 37 - - 2 7 813 635 242 146 140 77 49 39 77 $ 2,575 $ 357 $ 2,218 26 Liquidity and Capital Resources Schlumberger had total Cash, Short-term investments and Fixed income investments, held to maturity of $5.1 billion, $9.5 billion and $13.5 billion at December 31, 2017, 2016 and 2015, respectively. Total debt was $18.2 billion, $19.6 billion and $19.0 billion at December 31, 2017, 2016 and 2015, respectively. Details of the components of liquidity as well as changes in liquidity follows: Components of Liquidity: (Stated in millions) Dec. 31, 2017 Dec. 31, 2016 Dec. 31, 2015 Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Short-term investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fixed income investments, held to maturity . . . . . . . . . . . . Short-term borrowings and current portion of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ $ 1,799 3,290 - $ 2,929 6,328 238 (3,324) (14,875) (3,153) (16,463) 2,793 10,241 418 (4,557) (14,442) Net debt (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (13,110) $ (10,121) $ (5,547) 27 Changes in Liquidity: 2017 2016 2015 Income (loss) from continuing operations before noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Impairments and other charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . Depreciation and amortization (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . Earnings of equity method investments, less dividends received . . Pension and other postretirement benefits expense . . . . . . . . . . . . . Stock-based compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . Pension and other postretirement benefits funding . . . . . . . . . . . . . Decrease (increase) in working capital (3) . . . . . . . . . . . . . . . . . . . . . US Federal tax refund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash flow from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . SPM investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Multiclient seismic data capitalized . . . . . . . . . . . . . . . . . . . . . . . . . Free cash flow (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Proceeds from employee stock plans . . . . . . . . . . . . . . . . . . . . . . . . Stock repurchase program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Business acquisitions and investments, net of cash acquired plus debt assumed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Discontinued operations – settlement with U.S. Department of Justice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,513) $ 3,764 3,837 (56) 104 343 (133) (823) 685 (545) 5,663 (2,107) (1,609) (276) 1,671 (2,778) 297 (969) (1,779) (847) - (363) Increase in Net Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net Debt, Beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,989) (10,121) (1,627) $ 3,820 4,094 (60) 187 267 (174) 416 - (662) 6,261 (2,055) (1,031) (630) 2,545 (2,647) 415 (778) (465) (4,022) - (87) (4,574) (5,547) 2,135 2,575 4,078 (125) 438 326 (346) (478) - 202 8,805 (2,410) (953) (486) 4,956 (2,419) 448 (2,182) 803 (478) (233) (252) (160) (5,387) Net Debt, End of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (13,110) $ (10,121) $ (5,547) (1) (2) (3) (4) “Net Debt” represents gross debt less cash, short-term investments and fixed income investments, held to maturity. Management believes that Net Debt provides useful information regarding the level of Schlumberger’s indebtedness by reflecting cash and investments that could be used to repay debt. Net Debt is a non-GAAP financial measure that should be considered in addition to, not as a substitute for, or superior to, total debt. Includes depreciation of property, plant and equipment and amortization of intangible assets, multiclient seismic data costs and SPM investments. Includes severance payments of approximately $455 during 2017, $850 million during 2016 and $810 million during 2015. “Free cash flow” represents cash flow from operations less capital expenditures, SPM investments and multiclient seismic data costs capitalized. Management believes that free cash flow is an important liquidity measure for the company and that it is useful to investors and management as a measure of the ability of our business to generate cash. Once business needs and obligations are met, this cash can be used to reinvest in the company for future growth or to return to shareholders through dividend payments or share repurchases. Free cash flow does not represent the residual cash flow available for discretionary expenditures. Free cash flow is a non-GAAP financial measure that should be considered in addition to, not as substitute for, or superior to, cash flow from operations. 28 Key liquidity events during 2017, 2016 and 2015 included: (cid:129) (cid:129) (cid:129) (cid:129) (cid:129) (cid:129) (cid:129) (cid:129) (cid:129) Cash flow from operations was $5.7 billion in 2017, $6.3 billion in 2016 and $8.8 billion in 2015. The decrease in operating cash flows for each of the last two years is largely attributable to lower earnings before non-cash charges and credits and depreciation and amortization expense. Schlumberger paid $2.8 billion of cash in connection with its acquisition of Cameron. Additionally, as a result of the acquisition of Cameron, Schlumberger assumed $3.0 billion of debt (including a $244 million adjustment to increase Cameron’s long-term fixed rate debt to its estimated fair value) and acquired $2.2 billion of cash and short-term investments. During the second quarter of 2016, Schlumberger repurchased approximately $1.4 billion of Cameron’s long-term fixed-rate debt. In connection with Schlumberger’s acquisition of Cameron, Cameron merged with Schlumberger Holdings Corporation (“SHC”), an indirect wholly-owned United States subsidiary of Schlumberger. Under the terms of the agreement, Cameron shareholders received 0.716 shares of Schlumberger Limited common stock and a cash payment of $14.44 in exchange for each Cameron share of common stock outstanding. In connection with this transaction, SHC acquired approximately 138 million shares of common stock from Schlumberger Limited and transferred those shares to Cameron’s shareholders. In order to partially fund the purchase of the 138 million shares of common stock from Schlumberger Limited that were transferred to Cameron stockholders, SHC issued $6 billion of notes during the fourth quarter of 2015 consisting of the following: – – – – – $500 million of 1.90% Senior Notes due 2017; $1.3 billion of 2.35% Senior Notes due 2018; $1.6 billion of 3.00% Senior Notes due 2020; $850 million of 3.63% Senior Notes due 2022; and $1.75 billion of 4.00% Senior Notes due 2025. On July 18, 2013, the Board approved a new $10 billion share repurchase program to be completed at the latest by June 30, 2018. This program was completed during May 2017. On January 21, 2016, the Board approved a new $10 billion share repurchase program for Schlumberger common stock. Schlumberger had repurchased $324 million under the new program as of December 31, 2017. The following table summarizes the activity under this share repurchase program during 2017, 2016 and 2015: (Stated in thousands, except per share amounts) Total Cost of Shares Purchased Total Number of Shares Purchased Average Price Paid per Share 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ $ $ 968,676 778,018 2,182,180 13,249.7 10,988.5 26,751.0 $ $ $ 73.11 70.80 81.57 Dividends paid during 2017, 2016 and 2015 were $2.8 billion, $2.6 billion and $2.4 billion, respectively. Capital expenditures were $2.1 billion in 2017, $2.1 billion in 2016 and $2.4 billion in 2015. Capital expenditures are expected to be approximately $2.1 billion in 2018. During the fourth quarter of 2017, Schlumberger issued $0.5 billion of 2.20% Guaranteed Notes due 2020 and $0.6 billion of 2.65% Guaranteed Notes due 2022. During 2017, 2016 and 2015 Schlumberger made contributions of $133 million, $174 million and $346 million, respectively, to its postretirement benefit plans. The US pension plans were 88% funded at December 31, 2017 and 85% funded at December 31, 2016 based on the projected benefit obligation. 29 Schlumberger’s international defined benefit pension plans were a combined 97% funded at December 31, 2017 based on the projected benefit obligation. This compares to 92% funded at December 31, 2016. Schlumberger expects to contribute approximately $125 million to its postretirement benefit plans in 2018, subject to market and business conditions. (cid:129) The increase in SPM investments in 2017 as compared to 2016 is primarily attributable to the purchase of a majority non-operating interest in the Palliser Block, located in Alberta, Canada, from Cenovous Energy, an integrated Canadian oil company. Schlumberger maintains a €5.0 billion Guaranteed Euro Medium Term Note program. This program provides for the issuance of various types of debt instruments such as fixed or floating rate notes in Euro, US dollar or other currencies. Schlumberger has issued €0.5 billion 1.50% Guaranteed Notes due 2019 under this program. As of December 31, 2017, Schlumberger had $5.1 billion of cash and short-term investments on hand. Schlumberger also has separate committed credit facility agreements aggregating $6.6 billion with commercial banks, of which $3.6 billion was available and unused as of December 31, 2017. The $6.6 billion of committed credit facility agreements included $6.3 billion of committed facilities which support commercial paper programs. Schlumberger believes that these amounts are sufficient to meet future business requirements for at least the next 12 months. The total outstanding commercial paper borrowings were $3.0 billion as of December 31, 2017 and $2.6 billion as of December 31, 2016. Summary of Contractual Obligations (Stated in millions) Payment Period Total 2018 2019-2020 2021-2022 After 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Debt (1) Interest on fixed rate debt obligations (2) . . . . . Operating leases . . . . . . . . . . . . . . . . . . . . . . . . Purchase obligations (3) . . . . . . . . . . . . . . . . . . . $ 18,199 2,354 1,432 3,560 $ 3,324 446 284 3,344 $ 4,264 776 447 196 $ 6,814 474 291 5 3,797 658 410 15 $ 25,545 $ 7,398 $ 5,683 $ 7,584 $ 4,880 (1) (2) Excludes future payments for interest. Excludes interest on $4.0 billion of variable rate debt, which had a weighted average interest rate of 2.3% as of December 31, 2017. (3) Represents an estimate of contractual obligations in the ordinary course of business. Although these contractual obligations are considered enforceable and legally binding, the terms generally allow Schlumberger the option to reschedule and adjust its requirements based on business needs prior to the delivery of goods. Refer to Note 18, Pension and Other Benefit Plans, of the Consolidated Financial Statements for details regarding Schlumberger’s pension and other postretirement benefit obligations. As discussed in Note 14, Income Taxes, of the Consolidated Financial Statements, included in the Schlumberger Consolidated Balance Sheet at December 31, 2017 is approximately $1.4 billion of liabilities associated with uncertain tax positions in the over 100 jurisdictions in which Schlumberger conducts business. Due to the 30 uncertain and complex application of tax regulations, combined with the difficulty in predicting when tax audits throughout the world may be concluded, Schlumberger cannot make reliable estimates of the timing of cash outflows relating to these liabilities. Schlumberger has outstanding letters of credit/guarantees that relate to business performance bonds, custom/ excise tax commitments, facility lease/rental obligations, etc. These were entered into in the ordinary course of business and are customary practices in the various countries where Schlumberger operates. Critical Accounting Policies and Estimates The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States requires Schlumberger to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenue and expenses. The following accounting policies involve “critical accounting estimates” because they are particularly dependent on estimates and assumptions made by Schlumberger about matters that are inherently uncertain. Schlumberger bases its estimates on historical experience and on various assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Multiclient Seismic Data Schlumberger capitalizes the costs associated with obtaining multiclient seismic data. The carrying value of the multiclient seismic data library at December 31, 2017 and 2016 was $727 million and $1.07 billion, respectively. Such costs are charged to Cost of services based on the percentage of the total costs to the estimated total revenue that Schlumberger expects to receive from the sales of such data. However, under no circumstances will an individual survey carry a net book value greater than a 4-year, straight-line amortized value. The carrying value of surveys is reviewed for impairment annually as well as when an event or change in circumstance indicates an impairment may have occurred. Adjustments to the carrying value are recorded when it is determined that estimated future revenues, which involve significant judgment on the part of Schlumberger, would not be sufficient to recover the carrying value of the surveys. Significant adverse changes in Schlumberger’s estimated future cash flows could result in impairment charges in a future period. For purposes of performing the annual library, surveys are primarily analyzed for impairment impairment on a survey-by-survey basis. test of the multiclient Allowance for Doubtful Accounts 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. During weak economic environments or when there is an extended period of weakness in oil and gas prices, Schlumberger typically experiences delays in the payment of its receivables. However, except as described below, Schlumberger has not had material write-offs due to uncollectible accounts receivable over the recent 31 industry downturn. Schlumberger operates in more than 85 countries. As of December 31, 2017, only five of those countries individually accounted for greater than 5% of Schlumberger’s net receivables balance, of which only one (the United States) accounted for greater than 10% of such receivables. During the second quarter of 2017, Schlumberger entered into a financing agreement with its primary customer in Venezuela. This agreement resulted in the exchange of $700 million of outstanding accounts receivable for promissory notes with a three-year term that bear interest at the rate of 6.50% per annum. Schlumberger recorded these notes at their estimated fair value on the date of the exchange, which resulted in a pretax and after-tax charge of $460 million. As a result, the cost basis of the promissory note was $240 million as of June 30, 2017. In April 2016, Schlumberger announced that it was reducing its activity in Venezuela to align operations with cash collections as a result of insufficient payments on outstanding receivables. Schlumberger also previously disclosed that its judgment regarding the collectibility of its receivables and promissory notes in Venezuela is sensitive to the political and economic conditions in the country and that, if conditions in Venezuela worsen, Schlumberger may be required to record adjustments to the carrying value of these assets. During the fourth quarter of 2017, conditions in Venezuela further deteriorated such that Schlumberger determined it was appropriate to write-off the remaining outstanding receivable balance of approximately $469 million and record an impairment charge of $105 million related to the aforementioned promissory notes, in order to write-down the cost basis of such notes to their estimated fair value as of December 31, 2017. Goodwill, Intangible Assets and Long-Lived Assets Schlumberger records the excess of purchase price over the fair value of the tangible and identifiable intangible assets acquired and liabilities assumed as goodwill. The goodwill relating to each of Schlumberger’s reporting units is tested for impairment annually as well as when an event, or change in circumstances, indicates an impairment may have occurred. Under generally accepted accounting principles, Schlumberger has the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of one of its reporting units is greater than its carrying amount. If, after assessing the totality of events or circumstances, Schlumberger determines it is more likely than not that the fair value of a reporting unit is greater than its carrying amount, there is no need to perform any further testing. However, if Schlumberger concludes otherwise, then it is required to perform a quantitative impairment test by calculating the fair value of the reporting unit and comparing the fair value with the carrying amount of the reporting unit. If the fair value of the reporting unit is less than its carrying value, an impairment loss is recorded based on that difference. Schlumberger has the option to bypass the qualitative assessment for any reporting unit in any period and proceed directly to performing the quantitative goodwill impairment test. For purposes of performing the impairment test for goodwill, Schlumberger’s reporting units are its four Groups: Reservoir Characterization, Drilling, Production and Cameron. Schlumberger elected to perform the qualitative assessment described above for purposes of its annual goodwill impairment test in 2017. Based on this assessment, Schlumberger concluded that it was more likely than not that the fair value of each of its reporting units was greater than its carrying amount. Accordingly, no further testing was required. Long-lived assets, including fixed assets, intangible assets and investments in SPM projects, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. In reviewing for impairment, the carrying value of such assets is compared to the estimated undiscounted future cash flows expected from the use of the assets and their eventual disposition. If such cash flows are not sufficient to support the asset’s recorded value, an impairment charge is recognized to reduce the carrying value of the long-lived asset to its estimated fair value. The determination of future cash flows as well as the estimated fair value of long-lived assets involves significant estimates on the part of management. If there is a 32 material change in economic conditions or other circumstances influencing the estimate of future cash flows or fair value, Schlumberger could be required to recognize impairment charges in the future. Income Taxes Schlumberger conducts business in more than 100 tax jurisdictions, a number of which have tax laws that are not fully defined and are evolving. Schlumberger’s tax filings are subject to regular audits by the tax authorities. These audits may result in assessments for additional taxes that are resolved with the authorities or, potentially, through the courts. Schlumberger recognizes the impact of a tax position in its financial statements if that position is more likely than not of being sustained on audit, based on the technical merits of the position. Tax liabilities are recorded based on estimates of additional taxes which will be due upon the conclusion of these audits. Estimates of these tax liabilities are made based upon prior experience and are updated in light of changes in facts and circumstances. However, due to the uncertain and complex application of tax regulations, the ultimate resolution of audits may result in liabilities that could be materially different from these estimates. In such an event, Schlumberger will record additional tax expense or tax benefit in the period in which such resolution occurs. Percentage-of-Completion Revenue Recognition Schlumberger uses the percentage-of-completion method to account for certain long-term construction-type contracts. These contracts involve significant design and engineering efforts in order to satisfy custom designs for customer-specific applications. Under the percentage-of-completion method, revenue is recognized as work progresses on each contract. Progress is measured by the ratio of actual costs incurred to date on the project in relation to total estimated project costs. The estimate of total project costs has a significant impact on both the amount of revenue recognized as well as the related profit on a project. Revenue and profits on contracts can also be significantly affected by change orders and claims. Profits are recognized based on the estimated project profit multiplied by the percentage complete. Due to the nature of these projects, adjustments to estimates of contract revenue and total contract costs are often required as work progresses. Any expected losses on a project are recorded in full in the period in which they become probable. Approximately 7% of Schlumberger’s revenue in 2017 was recognized under the percentage-of-completion method. Pension and Postretirement Benefits Schlumberger’s pension and postretirement benefit obligations are described in detail in Note 18 to the Consolidated Financial Statements. The obligations and related costs are calculated using actuarial concepts, which include critical assumptions related to the discount rate, expected rate of return on plan assets and medical cost trend rates. These assumptions are important elements of expense and/or liability measurement and are updated on an annual basis, or upon the occurrence of significant events. The discount rate that Schlumberger uses reflects the prevailing market rate of a portfolio of high-quality debt instruments with maturities matching the expected timing of payment of the related benefit obligations. The following summarizes the discount rates utilized by Schlumberger for its various pension and postretirement benefit plans: (cid:129) (cid:129) The discount rate utilized to determine the liability for Schlumberger’s United States pension plans and postretirement medical plan was 3.70% at December 31, 2017 and 4.20% at December 31, 2016. The weighted-average discount international pension plans was 3.55% at December 31, 2017 and 4.13% at December 31, 2016. rate utilized to determine the liability for Schlumberger’s 33 (cid:129) (cid:129) The weighted-average discount rate utilized to determine expense for Schlumberger’s United States pension plans and postretirement medical plan decreased from 4.50% in 2016 to 4.20% in 2017. The weighted-average discount rate utilized to determine expense for Schlumberger’s international pension plans decreased from 4.36% in 2016 to 4.13% in 2017. The expected rate of return for Schlumberger’s retirement benefit plans represents the average rate of return expected to be earned on plan assets over the period that benefits included in the benefit obligation are expected to be paid. The expected rate of return for Schlumberger’s United States pension plans has been determined based upon expected rates of return for the investment portfolio, with consideration given to the distribution of investments by asset class and historical rates of return for each individual asset class. The weighted average expected rate of return on plan assets for the United States pension plans was 7.25% in both 2017 and 2016. The weighted average expected rate of return on plan assets for the international pension plans was 7.40% in both 2017 and 2016. A lower expected rate of return would increase pension expense. Schlumberger’s medical cost trend rate assumptions are developed based on historical cost data, the near-term outlook and an assessment of likely long-term trends. The overall medical cost trend rate assumption utilized to determine the 2017 postretirement medical expense was 7.25% graded to 5.0% over the next nine years. The overall medical trend rate assumption utilized to determine the postretirement medical liability at December 31, 2017 was 7.25% graded to 5.0% over the next nine years. The following illustrates the sensitivity to changes in certain assumptions, holding all other assumptions constant, for Schlumberger’s United States and international pension plan: Change in Assumption (Stated in millions) Effect on 2017 Pretax Pension Expense Effect on Dec. 31, 2017 Liability 25 basis point decrease in discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . 25 basis point increase in discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . 25 basis point decrease in expected return on plan assets . . . . . . . . . . . . 25 basis point increase in expected return on plan assets . . . . . . . . . . . . +$40 -$37 +$27 -$26 +$550 -$518 - - The following illustrates the sensitivity to changes in certain assumptions, holding all other assumptions constant, for Schlumberger’s United States postretirement medical plans: Change in Assumption (Stated in millions) Effect on 2017 Pretax Pension Expense Effect on Dec. 31, 2017 Liability 25 basis point decrease in discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 basis point increase in discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 basis point decrease per annum in medical cost trend rate . . . . . . . . . . 100 basis point increase per annum in medical cost trend rate . . . . . . . . . . - - -$3 +$3 +$45 -$42 -$35 +$34 34 Item 7A. Quantitative and Qualitative Disclosures About Market Risk. Schlumberger is subject to market risks primarily associated with changes in foreign currency exchange rates and interest rates. As a multinational company, Schlumberger operates in more than 85 countries. Schlumberger’s functional currency is primarily the US dollar. Approximately 78% of Schlumberger’s revenue in 2017 was denominated in US dollars. However, outside the United States, a significant portion of Schlumberger’s expenses is incurred in foreign currencies. Therefore, when the US dollar weakens in relation to the foreign currencies of the countries in which Schlumberger conducts business, the US dollar-reported expenses will increase. Schlumberger maintains a foreign-currency risk management strategy that uses derivative instruments to manage the impact of changes in foreign exchange rates on its earnings. Schlumberger enters into foreign currency forward contracts to provide a hedge against currency fluctuations on certain monetary assets and liabilities, and certain expenses denominated in currencies other than the functional currency. A 10% appreciation in the US dollar from the December 31, 2017 market rates would increase the unrealized value of Schlumberger’s forward contracts by $123 million. Conversely, a 10% depreciation in the US dollar from the December 31, 2017 market rates would decrease the unrealized value of Schlumberger’s forward contracts by $74 million. In either scenario, the gain or loss on the forward contract would be offset by the gain or loss on the underlying transaction, and therefore, would have no impact on future earnings. At December 31, 2017, contracts were outstanding for the US dollar equivalent of $5.0 billion in various foreign currencies of which $1.8 billion related to hedges of debt balances denominated in currencies other than the functional currency. Schlumberger is subject to interest rate risk on its debt and its investment portfolio. Schlumberger maintains an interest rate risk management strategy that uses a mix of variable and fixed rate debt combined with its investment portfolio and occasionally interest rate swaps to mitigate the exposure to changes in interest rates. At December 31, 2017, Schlumberger had fixed rate debt aggregating approximately $14.2 billion and variable rate debt aggregating approximately $4.0 billion, before considering the effects of cross currency swaps. Schlumberger’s exposure to interest rate risk associated with its debt is also partially mitigated by its investment portfolio. Short-term investments, which totaled approximately $3.3 billion at December 31, 2017, is comprised primarily of money market funds, time deposits, certificates of deposit, commercial paper, bonds and notes, substantially all of which are denominated in US dollars. The average return on investments was 1.3% in 2017. 35 The following table reflects the carrying amounts of Schlumberger’s debt at December 31, 2017 by year of maturity: 2018 2019 2020 2021 2022 2023 2024 2025 Thereafter Total (Stated in millions) $ 712 603 $1,593 498 $1,595 1,100 135 Fixed rate debt 2.35% Senior Notes . . . . . . . . $1,298 6.38% Notes . . . . . . . . . . . . . . 284 0.63% Guaranteed Notes . . . . 1.50% Guaranteed Notes . . . . 3.00% Senior Notes . . . . . . . . 2.20% Senior Notes . . . . . . . . 3.30% Senior Notes . . . . . . . . 4.20% Senior Notes . . . . . . . . 4.50% Notes . . . . . . . . . . . . . . 2.40% Senior Notes . . . . . . . . 3.63% Senior Notes . . . . . . . . 2.65% Senior Notes . . . . . . . . 3.60% Notes . . . . . . . . . . . . . . 3.65% Senior Notes . . . . . . . . 4.00% Notes . . . . . . . . . . . . . . 3.70% Notes . . . . . . . . . . . . . . 4.00% Senior Notes . . . . . . . . 7.00% Notes . . . . . . . . . . . . . . 5.95% Notes . . . . . . . . . . . . . . 5.13% Notes . . . . . . . . . . . . . . $ 1,298 284 712 603 1,593 498 1,595 1,100 135 996 846 598 110 1,492 82 56 1,741 212 115 99 $ 996 846 598 110 $1,492 82 $56 $1,741 $212 115 99 Total fixed rate debt . . . . . . . . $1,582 $1,315 $2,091 $2,830 $2,550 $1,574 - Variable rate debt . . . . . . . . 1,742 711 1,434 147 - $56 $1,741 - - $426 $14,165 4,034 - Total . . . . . . . . . . . . . . . . . . . . $3,324 $1,462 $2,802 $4,264 $2,550 $1,574 $56 $1,741 $426 $18,199 The fair market value of the outstanding fixed rate debt was approximately $14.5 billion as of December 31, 2017. The weighted average interest rate on the variable rate debt as of December 31, 2017 was 2.3%. Schlumberger does not enter into derivatives for speculative purposes. Forward-looking Statements This Form 10-K and other statements we make, contain “forward-looking statements” within the meaning of the federal securities laws, which include any statements that are not historical facts, such as our forecasts or expectations regarding business outlook; growth for Schlumberger as a whole and for each of its segments (and for specified products or geographic areas within each segment); oil and natural gas demand and production growth; oil and natural gas prices; including our transformation program; capital expenditures by Schlumberger and the oil and gas industry; the business strategies of Schlumberger’s customers; the effects of U.S. tax reform; our effective tax rate; the success of Schlumberger’s SPM projects, joint ventures and alliances; future global economic conditions; and future results of operations. These statements are subject to risks and uncertainties, including, but not limited to, global economic conditions; changes in exploration and production spending by Schlumberger’s customers and changes improvements in operating procedures and technology, 36 in the level of oil and natural gas exploration and development; general economic, political and business conditions in key regions of the world; foreign currency risk; pricing pressure; weather and seasonal factors; operational modifications, delays or cancellations; production declines; changes in government regulations and regulatory requirements, including those related to offshore oil and gas exploration, radioactive sources, explosives, chemicals, hydraulic fracturing services and climate-related initiatives; the inability of technology to meet new challenges in exploration; the inability to retain key employees; and other risks and uncertainties detailed in the Risk Factors section of this Form 10-K and other filings that we make with the Securities and Exchange Commission. If one or more of these or other risks or uncertainties materialize (or the consequences of such a development changes), or should our underlying assumptions prove incorrect, actual outcomes may vary materially from those reflected in our forward-looking statements. Schlumberger disclaims any intention or obligation to update publicly or revise such statements, whether as a result of new information, future events or otherwise. 37 Item 8. Financial Statements and Supplementary Data. SCHLUMBERGER LIMITED AND SUBSIDIARIES CONSOLIDATED STATEMENT OF INCOME (LOSS) (Stated in millions, except per share amounts) 2017 2016 2015 31,652 3,823 35,475 236 25,175 3,146 1,094 494 2,575 - 346 2,881 746 2,135 63 2,072 1.63 1.63 1,267 1,275 Year Ended December 31, Revenue Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Product sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Total Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest & other income Expenses Cost of services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Research & engineering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . General & administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Impairments & other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Merger & integration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income (loss) before taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tax expense (benefit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net income (loss) Net income attributable to noncontrolling interests . . . . . . . . . . . . . . . . . . . Net income (loss) attributable to Schlumberger . . . . . . . . . . . . . . . . . . . . . . . . Basic earnings per share of Schlumberger . . . . . . . . . . . . . . . . . . . . . . . . . . Diluted earnings per share of Schlumberger . . . . . . . . . . . . . . . . . . . . . . . . . $ 21,927 8,513 30,440 224 18,206 8,337 787 432 3,211 308 566 (1,183) 330 (1,513) (8) $ 20,259 7,551 27,810 200 17,352 7,057 1,012 403 3,172 349 570 (1,905) (278) (1,627) 60 $ $ $ (1,505) $ (1,687) $ (1.08) $ (1.24) $ (1.08) $ (1.24) $ Average shares outstanding: Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Assuming dilution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,388 1,388 1,357 1,357 See the Notes to Consolidated Financial Statements 38 SCHLUMBERGER LIMITED AND SUBSIDIARIES CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS) Year Ended December 31, Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Currency translation adjustments Unrealized net change arising during the period . . . . . . . . . . . Marketable securities Unrealized gain (loss) arising during the period . . . . . . . . . . . Reclassification to net income - impairment charge . . . . . . . . Cash flow hedges Net gain (loss) on cash flow hedges . . . . . . . . . . . . . . . . . . . . Reclassification to net income (loss) of net realized loss . . . . Pension and other postretirement benefit plans Actuarial gain (loss) Actuarial gain (loss) arising during the period . . . . . . . . . Amortization to net income (loss) of net actuarial loss . . . Prior service cost Amortization to net income (loss) of net prior service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income taxes on pension and other postretirement benefit plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (Stated in millions) 2017 2016 2015 $ (1,513) $ (1,627) $ 2,135 (83) (522) (3) (8) - 22 - 134 159 80 (15) 21 - (101) 121 (289) 157 102 (13) (50) 40 (178) 235 (210) 306 101 (74) 1,783 Comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . Comprehensive income (loss) attributable to noncontrolling (1,144) (1,712) interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (8) 60 63 Comprehensive income (loss) attributable to Schlumberger . . . . $ (1,136) $ (1,772) $ 1,720 See the Notes to Consolidated Financial Statements 39 SCHLUMBERGER LIMITED AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET December 31, ASSETS Current Assets Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Short-term investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Receivables less allowance for doubtful accounts (2017–$241; 2016–$397) . . . . Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Fixed Income Investments, held to maturity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Investments in Affiliated Companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fixed Assets less accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Multiclient Seismic Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Intangible Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . LIABILITIES AND EQUITY Current Liabilities Accounts payable and accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Estimated liability for taxes on income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Short-term borrowings and current portion of long-term debt . . . . . . . . . . . . . . . Dividends payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Long-term Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Postretirement Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Equity Common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Treasury stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Schlumberger stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . See the Notes to Consolidated Financial Statements 40 (Stated in millions) 2017 2016 $ 1,799 3,290 8,084 4,046 1,278 18,497 - 1,519 11,576 727 25,118 9,354 5,196 $ 71,987 $ 10,036 1,223 3,324 699 15,282 14,875 1,082 1,650 1,837 34,726 12,975 (4,049) 32,190 (4,274) 36,842 419 37,261 $ 71,987 $ 2,929 6,328 9,387 4,225 1,058 23,927 238 1,243 12,821 1,073 24,990 9,855 3,809 77,956 10,016 1,188 3,153 702 15,059 16,463 1,495 1,880 1,530 36,427 12,801 (3,550) 36,470 (4,643) 41,078 451 41,529 77,956 SCHLUMBERGER LIMITED AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS Year Ended December 31, Cash flows from operating activities: Net income (loss) Adjustments to reconcile net income (loss) to cash provided by operating . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ activities: (Stated in millions) 2017 2016 2015 (1,513) $ (1,627) $ 2,135 Impairments and other charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Depreciation and amortization (1) Pension and other postretirement benefits expense . . . . . . . . . . . . . . . . . Stock-based compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . Pension and other postretirement benefits funding . . . . . . . . . . . . . . . . . Earnings of equity method investments, less dividends received . . . . . . Change in assets and liabilities: (2) (Increase) decrease in receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Decrease in inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (Increase) decrease in other current assets . . . . . . . . . . . . . . . . . . . . . . . Decrease (increase) in other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Decrease in accounts payable and accrued liabilities . . . . . . . . . . . . . . . Increase (decrease) in estimated liability for taxes on income . . . . . . . . (Decrease) increase in other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,764 3,837 104 343 (133) (56) (124) 108 (174) 402 (737) 104 (28) (234) NET CASH PROVIDED BY OPERATING ACTIVITIES . . . . . . . . . . . . . . . . . . 5,663 Cash flows from investing activities: Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . SPM investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Multiclient seismic data capitalized . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Business acquisitions and investments, net of cash acquired . . . . . . . . . . . . . Sale (purchase) of investments, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . NET CASH USED IN INVESTING ACTIVITIES . . . . . . . . . . . . . . . . . . . . . . . . Cash flows from financing activities: Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Proceeds from employee stock purchase plan . . . . . . . . . . . . . . . . . . . . . . . . Proceeds from exercise of stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . . Stock repurchase program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Proceeds from issuance of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . Repayment of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net decrease in short-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES . . . . . . . . . Cash flow used in discontinued operations - operating activities . . . . . . . . . . . . . . Net (decrease) increase in cash before translation effect . . . . . . . . . . . . . . . . . . . . . Translation effect on cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash, beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,107) (1,609) (276) (847) 3,277 (217) (1,779) (2,778) 212 85 (969) 2,371 (2,961) (1,022) 29 (5,033) - (1,149) 19 2,929 3,820 4,094 187 267 (174) (60) 1,098 800 308 (488) (1,680) (110) 77 (251) 6,261 (2,055) (1,031) (630) (2,398) 5,544 (54) 2,575 4,078 438 326 (346) (125) 2,176 625 76 16 (2,656) (699) 24 162 8,805 (2,410) (953) (486) (443) (5,848) (112) (624) (10,252) (2,647) 231 184 (778) 3,640 (5,630) (387) (41) (5,428) - 209 (73) 2,793 (2,419) 296 152 (2,182) 9,565 (3,771) (3) (264) 1,374 (233) (306) (31) 3,130 2,793 Cash, end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,799 $ 2,929 $ (1) (2) Includes depreciation of property, plant and equipment and amortization of intangible assets, multiclient seismic data costs and SPM investments. Net of the effect of business acquisitions and divestitures. See the Notes to Consolidated Financial Statements 41 SCHLUMBERGER LIMITED AND SUBSIDIARIES CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY Common Stock Issued In Treasury Retained Earnings Accumulated Other Comprehensive Loss Noncontrolling Interests Total (Stated in millions) Balance, January 1, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Currency translation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . Changes in unrealized gain on marketable securities . . . . . . . . . . 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 repurchase program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Stock-based compensation expense . . . . . . . . . . . . . . . . . . . . . . . . Dividends declared ($2.00 per share) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other Balance, December 31, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Currency translation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . Changes in unrealized gain on marketable securities . . . . . . . . . . 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 repurchase program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Stock-based compensation expense . . . . . . . . . . . . . . . . . . . . . . . . Dividends declared ($2.00 per share) . . . . . . . . . . . . . . . . . . . . . . Acquisition of Cameron International Corporation . . . . . . . . . . . . Acquisition of noncontrolling interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other Balance, December 31, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Currency translation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . Changes in unrealized gain on marketable securities . . . . . . . . . . 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 repurchase program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Stock-based compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Dividends declared ($2.00 per share) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other 12,495 $ (11,772) $ 41,333 $ 2,072 (4,206) $ 199 $ 63 (38) (112) 17 326 5 190 112 279 (2,182) 1 12,693 (13,372) (82) (122) (55) 267 103 266 122 286 (778) 9,924 (3) 2 12,801 (3,550) (10) (110) (52) 343 3 95 110 264 (969) 1 (2,535) 40,870 (1,687) (2,713) 36,470 (1,505) (2,775) (522) (10) 57 123 (4,558) (83) 21 20 (43) (4,643) (3) (8) 22 358 10 272 60 106 13 451 (8) (24) 38,049 2,135 (522) (10) 57 123 152 - 296 (2,182) 326 (2,535) 16 35,905 (1,627) (83) 21 20 (43) 184 - 231 (778) 267 (2,713) 10,027 106 12 41,529 (1,513) (3) (8) 22 358 85 - 212 (969) 343 (2,775) (20) Balance, December 31, 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 12,975 $ (4,049) $ 32,190 $ (4,274) $ 419 $ 37,261 See the Notes to Consolidated Financial Statements 42 SCHLUMBERGER LIMITED AND SUBSIDIARIES SHARES OF COMMON STOCK Issued In Treasury (Stated in millions) Shares Outstanding Balance, January 1, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Shares sold to optionees, less shares exchanged . . . . . . . . . . . . . Vesting of restricted stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Shares issued under employee stock purchase plan . . . . . . . . . . Stock repurchase program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Balance, December 31, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Acquisition of Cameron International Corporation . . . . . . . . . . . Shares sold to optionees, less shares exchanged . . . . . . . . . . . . . Vesting of restricted stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Shares issued under employee stock purchase plan . . . . . . . . . . Stock repurchase program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Balance, December 31, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Shares sold to optionees, less shares exchanged . . . . . . . . . . . . . Vesting of restricted stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Shares issued under employee stock purchase plan . . . . . . . . . . Stock repurchase program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Balance, December 31, 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . See the Notes to Consolidated Financial Statements 1,434 - - - - 1,434 - - - - - 1,434 - - - - 1,434 (159) 3 1 4 (27) (178) 138 3 1 4 (11) (43) 1 2 3 (13) (50) 1,275 3 1 4 (27) 1,256 138 3 1 4 (11) 1,391 1 2 3 (13) 1,384 43 Notes to Consolidated Financial Statements 1. Business Description Schlumberger Limited (Schlumberger N.V., comprise “Schlumberger”) (collectively, characterization, drilling, production and processing to the oil and gas industry. incorporated in Curaçao) and its consolidated subsidiaries reservoir leading supplier of technology for the world’s 2. Summary of Accounting Policies The Consolidated Financial Statements of Schlumberger have been prepared in accordance with accounting principles generally accepted in the United States of America. Use of Estimates The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. On an ongoing basis, Schlumberger evaluates its estimates, including those related to collectibility of accounts receivable; revenue recognized under the percentage-of-completion method; recoverability of fixed assets, goodwill, intangible assets, Schlumberger Production Management income taxes; multiclient seismic data; contingencies and actuarial assumptions for employee benefit plans. Schlumberger bases its estimates on historical experience and other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. investments and investments in affiliates; Revenue Recognition Schlumberger recognizes revenue based upon purchase orders, contracts or other persuasive evidence of an arrangement with the customer that include fixed or determinable prices provided that collectibility is reasonably assured. Revenue is recognized for services when they are rendered. Revenue is recognized for products upon delivery and when the customer assumes the risks and rewards of ownership. Revenue is recognized for certain long-term construction-type contracts based on the percentage-of-completion method. These contracts involve significant design and engineering efforts in order to satisfy custom designs for customer-specific applications. Under the percentage-of-completion method, revenue is recognized as work progresses on each such contract. Progress is measured by the ratio of actual costs incurred to date on the project in relation to total estimated project costs. Any expected losses on a project are recorded in full in the period in which they become probable. Progress billings are generally issued upon completion of certain phases of work as stipulated in the contract. Revenue in excess of billings is included within Receivables less allowance for doubtful accounts in the Consolidated Balance Sheet. Billings and cash collections in excess of revenue recognized on contracts are included within Accounts payable and accrued liabilities in the Consolidated Balance Sheet. Revenue from seismic contract services performed on a dayrate basis is recognized as the service is performed. Revenue from other services, including pre-funded multiclient surveys, is recognized as the seismic data is acquired and/or processed on a proportionate basis as work is performed. This method requires revenue to be recognized based upon quantifiable measures of progress, such as square kilometers acquired. Multiclient data surveys are licensed or sold to customers on a non-transferable basis. Revenue from sales of completed multiclient data surveys is recognized upon obtaining a signed licensing agreement and providing customers with access to such data. 44 Revenue is occasionally generated from contractual arrangements that include multiple deliverables. Revenue from these arrangements is recognized as each item is delivered based on its relative fair value, provided that the delivered items have stand-alone value to the customer. Revenue derived from the sale of licenses of Schlumberger software may include installation, maintenance, consulting and training services. If services are not essential to the functionality of the software, the revenue for each element of the contract is recognized separately based on its respective vendor specific objective evidence of fair value when all of the following conditions are met: a signed contract is obtained, delivery has occurred, the fee is fixed or determinable and collectibility is probable. Short-term Investments The Consolidated Balance Sheet reflects the Schlumberger investment portfolio separated between current and long term, based on maturity. Short-term investments are comprised primarily of money market funds, time deposits, certificates of deposit, commercial paper, bonds and notes, substantially all of which are denominated in US dollars and are stated at cost plus accrued interest, which approximates market. For purposes of the Consolidated Statement of Cash Flows, Schlumberger does not consider Short-term investments to be cash equivalents. Investments in Affiliated Companies Investments in companies in which Schlumberger does not have a controlling financial interest, but over which it has significant influence, are accounted for using the equity method. Schlumberger’s share of the after-tax earnings of equity method investees is included in Interest and other income. Investments in privately held companies in which Schlumberger does not have the ability to exercise significant influence are accounted for using the cost method. Investments in publicly traded companies in which Schlumberger does not have significant influence are accounted for as available-for-sale marketable securities, reported at fair value with unrealized gains and losses reported as a component of Accumulated other comprehensive loss. Equity and cost method investments as well as investments in available-for-sale marketable securities are classified as Investments in Affiliated Companies in the Consolidated Balance Sheet. Multiclient Seismic Data Schlumberger’s multiclient library consists of completed and in-process seismic surveys that are licensed on a nonexclusive basis. Schlumberger capitalizes costs directly incurred in acquiring and processing the multiclient seismic data. Such costs are charged to Cost of services based on the percentage of the total costs to the estimated total revenue that Schlumberger expects to receive from the sales of such data. However, under no circumstance will an individual survey carry a net book value greater than a 4-year, straight-line amortized value. The carrying value of the multiclient library is reviewed for impairment annually as well as when an event or change in circumstance indicating impairment may have occurred. Adjustments to the carrying value are recorded when it is determined that estimated future cash flows, which involve significant judgment on the part of Schlumberger, would not be sufficient to recover the carrying value of the surveys. Significant adverse changes in Schlumberger’s estimated future cash flows could result in impairment charges in a future period. Schlumberger Production Management Schlumberger Production Management (“SPM”) projects are focused on developing and managing production on behalf of Schlumberger’s clients under long-term agreements. Schlumberger will invest its own services and products, and in some cases cash, into the field development activities and operations. Although in certain 45 arrangements Schlumberger is paid for a portion of the services or products it provides, generally Schlumberger will not be paid at the time of providing its services or upon delivery of its products. Instead, Schlumberger is compensated based upon cash flow generated or on a fee-per-barrel basis. This includes certain arrangements whereby Schlumberger is only compensated based upon incremental production it helps deliver above a mutually agreed baseline. Revenue from SPM arrangements, which is recognized as the related production is achieved, represented less than 5% of Schlumberger’s consolidated revenue during each of 2017, 2016 and 2015. Schlumberger capitalizes its cash investments in a project as well as the direct costs associated with providing services or products for which Schlumberger will be compensated when the related production is achieved. These capitalized investments are amortized to the Consolidated Statement of Income (Loss) as the related production is achieved based on the units of production method, whereby each unit produced is assigned a pro-rata portion of the unamortized costs based on estimated total production, resulting in a matching of revenue with the applicable costs. Amortization expense relating to these capitalized investments was $465 million, $449 million and $317 million in 2017, 2016 and 2015, respectively. During 2017, Schlumberger purchased a majority non-operating interest in the Palliser Block, located in Alberta, Canada. In connection with the initial accounting for this transaction, Schlumberger recorded a $268 million asset retirement obligation, which was included in both Other Assets and Other Liabilities in the Consolidated Balance Sheet. The unamortized portion of Schlumberger’s investments in SPM projects was $4.065 billion and $2.458 billion at December 31, 2017 and 2016, respectively. These amounts are included within Other Assets in Schlumberger’s Consolidated Balance Sheet. Concentration of Credit Risk Schlumberger’s assets that are exposed to concentrations of credit risk consist primarily of cash, short-term investments, fixed income investments held to maturity, receivables from clients and derivative financial instruments. Schlumberger places its cash, short-term investments and fixed income investments held to maturity with financial institutions and corporations and limits the amount of credit exposure with any one of them. Schlumberger regularly evaluates the creditworthiness of the issuers in which it invests. By using derivative financial instruments to hedge certain exposures, Schlumberger exposes itself to some credit risk. Schlumberger minimizes this credit risk by entering into transactions with high-quality counterparties, limiting the exposure to each counterparty and monitoring the financial condition of its counterparties. Schlumberger operates in more than 85 countries and as such, its accounts receivable are spread over many countries and customers. Accounts receivable in the United States represented approximately 23% of Schlumberger’s accounts receivable balance at December 31, 2017. No other country accounted for greater than 10% of Schlumberger’s accounts receivable balance. 46 Earnings per Share The following is a reconciliation from basic to diluted earnings (loss) per share of Schlumberger for each of the last three years: (Stated in millions, except per share amounts) Net Income (Loss) Attributable to Schlumberger Average Shares Outstanding Earnings (Loss) per Share 2017: Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (1,505) 1,388 $ (1.08) Assumed exercise of stock options . . . . . . . . . . . . . . . . . . Unvested restricted stock . . . . . . . . . . . . . . . . . . . . . . . . . - - - - Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (1,505) 1,388 $ (1.08) 2016: Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (1,687) 1,357 $ (1.24) Assumed exercise of stock options . . . . . . . . . . . . . . . . . . . Unvested restricted stock . . . . . . . . . . . . . . . . . . . . . . . . . . - - - - Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (1,687) 1,357 $ (1.24) 2015: Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,072 1,267 $ 1.63 Assumed exercise of stock options . . . . . . . . . . . . . . . . . . . Unvested restricted stock . . . . . . . . . . . . . . . . . . . . . . . . . . - - 4 4 Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,072 1,275 $ 1.63 The number of outstanding employee stock options to purchase shares of Schlumberger common stock and unvested restricted stock units that were not included in the computation of diluted earnings/loss per share, because to do so would have had an anti-dilutive effect, were as follows: (Stated in millions) 2017 2016 2015 Employee stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Unvested restricted stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 5 47 5 20 - Recently Issued Accounting Pronouncements In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers. This ASU amends the existing accounting standards for revenue recognition and is based on the principle that revenue should be recognized to depict the transfer of goods or services to a customer at an amount that reflects the consideration a company expects to receive in exchange for those goods or services. Schlumberger adopted this ASU on January 1, 2018. Schlumberger has concluded that the adoption of this ASU will not have a material impact on its consolidated financial statements. In February 2016, the FASB issued ASU No. 2016-02, Leases. This ASU requires lessees to recognize a right of use asset and lease liability on the balance sheet for all leases, with the exception of short-term leases. 47 Schlumberger will adopt this ASU on January 1, 2019. Based on its current lease portfolio, Schlumberger estimates that the adoption of this ASU will result in approximately $1.2 billion of additional assets and liabilities being reflected on its Consolidated Balance Sheet. Reclassifications Certain prior period amounts have been reclassified to conform to the current period presentation. 3. Charges and Credits Schlumberger recorded the following charges and credits during 2017, 2016 and 2015: 2017 (cid:129) (cid:129) (cid:129) (cid:129) (cid:129) (cid:129) (cid:129) During the fourth quarter of 2017, Schlumberger decided to cease all future marine seismic acquisition activities, after satisfying its remaining contractual commitments. As a result, Schlumberger will seek to monetize its existing fleet of marine seismic vessels. This decision resulted in a charge of $1.025 billion consisting of the following: $786 million write-down of the vessels to their estimated fair value; $78 million impairment of intangible assets; $59 million write-down of inventory, and $102 million of other related restructuring costs. The fair value of the vessels was determined based on unobservable inputs that required significant judgments. Schlumberger also recorded a $90 million impairment charge relating to its land seismic business. As a result of the unfavorable near-term outlook for exploration spending, Schlumberger determined in the fourth quarter of 2017 that the carrying value of certain multiclient seismic data, primarily related to the US Gulf of Mexico, was impaired, resulting in a $246 million charge that was estimated based on the projected present value of future cash flows that these surveys are expected to generate. During the fourth quarter of 2017, Schlumberger determined that it was appropriate to write-down its investment in Venezuela, given the recent economic and political developments in the country which have created significant uncertainties regarding recoverability. As a result, Schlumberger recorded a charge of $938 million, reflecting $469 million of accounts receivable, a $105 million other-than- temporary impairment charge relating to the promissory notes described below, $285 million of fixed assets and $79 million of other assets in the country. During the fourth quarter of 2017, Schlumberger recorded a $245 million charge related to an estimated the loss on a long-term surface facility construction project percentage-of-completion method. is accounted for under that Schlumberger recorded $156 million of other restructuring charges during the fourth quarter of 2017, primarily relating to facility and other exit costs. During the fourth quarter of 2017, Schlumberger recorded a $247 million charge associated with headcount reductions primarily to further streamline its support cost structure. On December 22, 2017, the US enacted the Tax Cuts and Jobs Act (the “Act”). The Act, which is also commonly referred to as “US tax reform”, significantly changes US corporate income tax laws by, among other things, reducing the US corporate income tax rate to 21% starting in 2018 and creating a territorial tax system with a one-time mandatory tax on previously deferred foreign earnings of US subsidiaries. As a result, Schlumberger recorded a net charge of $76 million during the fourth quarter of 2017. This amount, which is included in Tax expense (benefit) in the Consolidated Statement of Income (Loss), consists of two components: (i) a $410 million charge relating to the one-time mandatory tax on previously deferred earnings of certain non-US subsidiaries that are owned either wholly or partially by a US subsidiary of Schlumberger, and (ii) a $334 million credit resulting from the remeasurement of Schlumberger’s net deferred tax liabilities in the US based on the new lower corporate income tax rate. 48 Although the $76 million net charge represents what Schlumberger believes is a reasonable estimate of the impact of the income tax effects of the Act on Schlumberger’s Consolidated Financial Statements as of December 31, 2017, it should be considered provisional. Once Schlumberger finalizes certain tax positions when it files its 2017 US tax return, it will be able to conclude whether any further adjustments are required to its net deferred tax liability balance in the US of $1.7 billion as of December 31, 2017, as well as to the liability associated with the one-time mandatory tax. Any adjustments to these provisional amounts will be reported as a component of Tax expense (benefit) in the reporting period in which any such adjustments are determined, which will be no later than the fourth quarter of 2018. During the second quarter of 2017, Schlumberger entered into a financing agreement with its primary customer in Venezuela. This agreement resulted in the exchange of $700 million of outstanding accounts receivable for promissory notes with a three-year term that bear interest at the rate of 6.50% per annum. Schlumberger recorded these notes at their estimated fair value on the date of the exchange, which resulted in a charge of $460 million. Schlumberger is accounting for the promissory notes as available-for-sale securities reported at fair value in Other Assets, with unrealized gains and losses included as a component of Accumulated other comprehensive loss. Following the $105 million other- than-temporary impairment charge described above, the new cost basis of these promissory notes is $135 million, which approximates their fair value at December 31, 2017. During the second quarter of 2017, Schlumberger entered into discussions with a customer relating to certain of its outstanding accounts receivable. As a result of these discussions, Schlumberger recorded a charge of $50 million to adjust these receivables to their estimated net realizable value. Schlumberger recorded $308 million of charges during 2017 relating to employee benefits, facility closures and other merger and integration-related costs, primarily in connection with Schlumberger’s 2016 acquisition of Cameron International Corporation (“Cameron”) (See Note 4 – Acquisitions). (cid:129) (cid:129) (cid:129) The following is a summary of these charges and credits, of which $3.211 billion were classified as Impairments & other, $245 million were classified in Cost of sales and $308 million were classified as Merger & integration in the Consolidated Statement of Income (Loss). (Stated in millions) Pretax Tax Noncontrolling Interests Net Impairment & other WesternGeco seismic restructuring charges . . . . . . . $ Venezuela investment write-down . . . . . . . . . . . . . . Promissory note fair value adjustment and other . . . Workforce reductions . . . . . . . . . . . . . . . . . . . . . . . . Multiclient seismic data impairment . . . . . . . . . . . . Other restructuring charges . . . . . . . . . . . . . . . . . . . Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Provision for loss on long-term construction project . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Merger & integration . . . . . . . . . . . . . . . . . . . . . . . . . Merger and integration-related costs . . . . . . . . . . . . US tax reform charge . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,114 938 510 247 246 156 245 308 - $ 20 - - 13 81 10 22 70 (76) $ - - 12 - - 22 - - - - - 1,094 938 498 234 165 124 - 223 - 238 76 $ 3,764 $ 140 $ 34 $ 3,590 49 2016 (cid:129) (cid:129) (cid:129) (cid:129) (cid:129) Schlumberger reduced its headcount during the second quarter of 2016 as a result of persistent unfavorable oil and gas industry market conditions and the expected impact on customer activity levels. Schlumberger recorded a $646 million charge during the second quarter of 2016 associated with this headcount reduction. During the fourth quarter of 2016, Schlumberger further reduced its headcount in order to streamline its support cost structure. Schlumberger recorded an additional $234 million charge during the fourth quarter associated with these actions. During the fourth quarter of 2016, Schlumberger recorded $302 million of restructuring charges consisting of the following: $165 million of facility closure costs due to the expected sale of certain owned properties and the termination of certain facility leases; $98 million of asset write-offs associated with exiting certain activities; and $39 million of contract termination costs. During the fourth quarter of 2016, the Central Bank of Egypt took the decision to float its currency and the Egyptian pound devalued relative to the US dollar. As a result, Schlumberger recorded a $63 million devaluation charge during the fourth quarter of 2016. As a result of the unfavorable oil and gas industry market conditions that continued to deteriorate in the first half of 2016, and the related impact on 2016 first half operating results and expected customer activity levels, Schlumberger determined that the carrying values of certain assets were no longer recoverable and also took certain decisions that resulted in the following impairment and other charges during the second quarter of 2016: - - - - - - $209 million impairment of pressure pumping equipment in North America. $165 million impairment of facilities in North America. $684 million of other fixed asset impairments primarily relating to underutilized equipment. $616 million write-down of the carrying value of certain inventory to its net realizable value. $198 million impairment of certain multiclient seismic data, largely related to the US Gulf of Mexico. $55 million of other restructuring costs. The fair value of the impaired fixed assets and multiclient seismic data was estimated based on the projected present value of future cash flows that these assets are expected to generate. Such estimates included unobservable inputs that required significant judgments. In connection with Schlumberger’s acquisition of Cameron, Schlumberger recorded $349 million of charges, classified as Merger & integration in the Consolidated Statement of Income (Loss), consisting of the following: $83 million relating to employee benefits for change-in-control arrangements and retention bonuses; $45 million of transaction costs, including advisory and legal fees; $61 million of facility closure costs, and $160 million of other merger and integration-related costs. Additionally, Schlumberger recorded $299 million of charges relating to the amortization of purchase accounting adjustments associated with the write-up of acquired inventory to its estimated fair value, which is classified in Cost of sales in the Consolidated Statement of Income (Loss). This amortization was presented as a component of Merger & integration in the prior year; however, Schlumberger reclassified this prior period item to Cost of sales in the current year. 50 The following is a summary of these charges and credits, of which $3.172 billion were classified as Impairments & other, $349 million were classified as Merger & integration and $299 million were classified in Cost of sales in the Consolidated Statement of Income (Loss): Impairment & other $ Workforce reductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other fixed asset impairments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inventory write-downs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . North America pressure pumping asset impairments . . . . . . . . . . . . . Multiclient seismic data impairment . . . . . . . . . . . . . . . . . . . . . . . . . . Facility impairments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Facility closure costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Costs associated with exiting certain activities . . . . . . . . . . . . . . . . . . Currency devaluation loss in Egypt . . . . . . . . . . . . . . . . . . . . . . . . . . Contract termination costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other restructuring charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Merger & integration Other merger and integration-related . . . . . . . . . . . . . . . . . . . . . . . . . Merger-related employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . Facility closure costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Professional fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cost of sales Amortization of inventory fair value adjustment . . . . . . . . . . . . . . . . (Stated in millions) Pretax Tax Net $ 880 684 616 209 198 165 165 98 63 39 55 160 83 61 45 299 $ 69 52 49 67 62 58 40 23 - 9 - 28 13 13 10 90 811 632 567 142 136 107 125 75 63 30 55 132 70 48 35 209 $ 3,820 $ 583 $ 3,237 2015 (cid:129) (cid:129) Schlumberger reduced its headcount during the first quarter of 2015 as a result of the severe fall in activity in North America, combined with the impact of lower international activity due to customer budget cuts driven by lower oil prices. Schlumberger recorded a $390 million charge during the first quarter associated with this headcount reduction as well as an incentivized leave of absence program. Based on the activity outlook for 2016, as well as to further streamline its support structure, Schlumberger decided to further reduce its headcount and expand its incentivized leave of absence program during the fourth quarter of 2015. Schlumberger recorded an additional $530 million charge during the fourth quarter associated with these actions. As a result of unfavorable oil and gas industry market conditions that continued to deteriorate and their impact on the activity outlook, Schlumberger determined that the carrying values of certain assets were no longer recoverable and also took certain decisions that resulted in the following impairment and restructuring charges during the fourth quarter of 2015: - - - $776 million of fixed asset impairments primarily related to underutilized pressure pumping and other equipment in North America, as well as certain lower-tier drilling rigs. $269 million to write-down the carrying value of certain inventory, primarily in North America. $182 million to reduce the carrying value of an investment in an SPM project to its estimated fair value, as a result of the decline in commodity prices and considering this project was approaching the end of its contractual term. 51 - - - - $177 million associated with certain of Schlumberger’s owned and leased facilities, including the expected sale of certain properties and the termination of certain leases. $77 million relating to assets that were no longer recoverable as a result of geopolitical issues in certain countries in the Middle East. $41 million relating to contract termination costs. $84 million of other charges associated with then current market conditions, including $40 million relating to an other-than-temporary impairment of marketable securities and $15 million relating to the impairment of an equity-method investment. Certain of these impairment charges were estimated based on the projected present value of future cash flows, which included unobservable inputs that required significant judgments. (cid:129) In February 2015, the Venezuelan government replaced the SICAD II exchange rate (described in further detail below) with a new foreign exchange market system known as SIMADI. The SIMADI exchange rate was approximately 192 Venezuelan Bolivares fuertes to the US dollar as of March 31, 2015. As a result, Schlumberger recorded a $49 million devaluation charge during the first quarter of 2015, reflecting the adoption of the SIMADI exchange rate. The following is a summary of these charges and credits, all of which were classified as Impairments & other in the Consolidated Statement of Income (Loss): (Stated in millions) Pretax Tax Net Workforce reductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Fixed asset impairments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inventory write-downs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Impairment of SPM project . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Facility closures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Geopolitical events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Currency devaluation loss in Venezuela . . . . . . . . . . . . . . . . . . . . . . . . . Contract termination costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 920 776 269 182 177 77 49 41 84 $ 107 141 27 36 37 - - 2 7 813 635 242 146 140 77 49 39 77 $ 2,575 $ 357 $ 2,218 4. Acquisitions Cameron On April 1, 2016, Schlumberger acquired all of the outstanding shares of Cameron, a leading provider of flow equipment products, systems and services to the oil and gas industry worldwide. The acquisition is expected to create technology-driven growth by integrating Schlumberger reservoir and well technologies with Cameron wellhead and surface equipment, flow control and processing technology. The combination of the two complementary technology portfolios provides the industry’s most comprehensive range of products and services, from exploration to production and integrated pore-to-pipeline solutions that optimize hydrocarbon recovery to deliver reservoir performance. Under the terms of the merger agreement, Cameron became a wholly-owned subsidiary of Schlumberger. Each share of Cameron common stock issued and outstanding immediately prior to the effective time of the merger was converted into the right to receive 0.716 shares of Schlumberger stock and $14.44 in cash. 52 Calculation of Consideration Transferred The fair value of the consideration transferred to effect the acquisition of Cameron was as follows: (stated in millions, except exchange ratio and per share amounts) Equity consideration: Number of shares of Cameron stock outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . Exchange ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Schlumberger shares of common stock issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Schlumberger closing stock share price on April 1, 2016 . . . . . . . . . . . . . . . . . . . . . Equity consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash consideration: Number of shares of Cameron stock outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash consideration per Cameron share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other: Fair value of replacement equity awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 192 0.716 138 72.12 192 14.44 $ $ $ 9,924 2,776 103 Total fair value of the consideration transferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 12,803 Certain amounts reflect rounding adjustments 53 Allocation of Consideration Transferred to Net Assets Acquired The following amounts represent the fair value of assets acquired and liabilities assumed in the merger. Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Short-term investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inventories (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fixed assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Intangible assets: Customer relationships (weighted-average life of 25 years) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Technology/Technical know-how (weighted-average life of 16 years) Tradenames (weighted-average life of 25 years) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accounts payable and accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Long-term debt (2) Deferred taxes (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sub-total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Less: Investment in OneSubsea (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total identifiable net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Goodwill (5) $ (Stated in millions) 785 $ 1,448 1,669 2,350 1,320 2,371 1,736 1,225 511 (2,604) (3,018) (1,343) (538) 5,912 (2,065) (57) 3,790 9,013 Total consideration transferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 12,803 (1) (2) (3) (4) (5) Schlumberger recorded an adjustment of $299 million to write-up the acquired inventory to its estimated fair value. Schlumberger’s 2016 Cost of sales reflected this increased valuation. In connection with the merger, Schlumberger assumed all of the debt obligations of Cameron, including its $2.75 billion of fixed rate notes. Schlumberger recorded a $244 million adjustment to increase the carrying amount of these notes to their estimated fair value. This adjustment is being amortized as a reduction of interest expense over the remaining term of the respective obligations. In connection with the acquisition accounting, Schlumberger provided deferred taxes related to, among other items, the estimated fair value adjustments for acquired inventory, intangible assets and assumed debt obligations. Prior to the completion of the merger, Cameron and Schlumberger operated OneSubsea, a joint venture that manufactured and developed products, systems and services for the subsea oil and gas market, which was 40% owned by Schlumberger and 60% owned by Cameron. OneSubsea is now owned 100% by Schlumberger. As a result of obtaining control of this joint venture, Schlumberger was required to remeasure its previously held equity interest in the joint venture to its acquisition-date fair value. Schlumberger determined that the estimated fair value of its previously held equity interest approximated its carrying value. Accordingly, Schlumberger did not recognize any gain or loss on this transaction. The goodwill recognized is primarily attributable to expected synergies that will result from combining the operations of Schlumberger and Cameron, as well as intangible assets which do not qualify for separate recognition. The amount of goodwill that is deductible for income tax purposes is not significant. 54 Supplemental Pro Forma Financial Information Cameron’s results of operations have been included in Schlumberger’s financial statements for periods subsequent to the closing of the acquisition on April 1, 2016. Businesses acquired from Cameron contributed revenues of approximately $4 billion and pretax operating income of approximately $0.7 billion for the period from April 1, 2016 through December 31, 2016. The following supplemental pro forma results of operations assume that Cameron had been acquired on January 1, 2015. The supplemental pro forma financial information was prepared based on the historical financial information of Schlumberger and Cameron and has been adjusted to give effect to pro forma adjustments that are both directly attributable to the transaction and factually supportable. The pro forma amounts reflect certain adjustments to amortization expense, interest expense and income taxes resulting from purchase accounting. The pro forma results for the year ended December 31, 2016 reflect adjustments to exclude after-tax merger and integration costs of $285 million and after-tax charges relating to the amortization of the inventory fair value adjustment of $209 million. As required by generally accepted accounting principles, the pro forma results for the year ended December 31, 2015 have been adjusted to include after-tax adjustments for merger and integration costs of $285 million and the after-tax charges relating to the amortization of the inventory fair value adjustment of $209 million. The supplemental pro forma financial information presented below is unaudited and does not include any anticipated cost savings or the expected realization of other synergies associated with this transaction. Accordingly, this supplemental pro forma financial information is presented for informational purposes only and is not necessarily indicative of what the actual results of operations of the combined company would have been had the acquisition occurred on January 1, 2015, nor is it indicative of future results of operations. (Stated in millions, except per share amounts) 2016 2015 Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ . . . . . . . . . . . . . . . . . . . . . . $ Net income (loss) attributable to Schlumberger Diluted earnings (loss) per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 29,438 $ (1,419) $ (1.02) $ 44,306 2,000 1.42 Other Schlumberger made other acquisitions and investments for cash payments, net of cash acquired, of $847 million during 2017, $407 million during 2016 and $443 million during 2015. None of these transactions were significant to Schlumberger’s consolidated financial statements, either individually or in the aggregate. 5. Inventories A summary of inventories, which are stated at the lower of average cost or market, follows: Raw materials & field materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Work in progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Finished goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,846 503 1,697 $ 4,046 $ 1,720 610 1,895 4,225 (Stated in millions) 2017 2016 55 6. Fixed Assets A summary of fixed assets follows: (Stated in millions) 2017 2016 Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Buildings & improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Machinery & equipment Seismic vessels . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Less: Accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 428 5,122 32,160 103 37,813 26,237 $ 11,576 $ 479 4,849 33,834 846 40,008 27,187 12,821 The estimated useful lives of Buildings & improvements are primarily 25 to 30 years. The estimated useful lives of Machinery & equipment are primarily 5 to 10 years. Seismic vessels are depreciated over periods ranging from 20 to 30 years. Depreciation expense, which is recorded on a straight-line basis, was $2.3 billion, $2.7 billion and $3.2 billion in 2017, 2016 and 2015, respectively. 7. Multiclient Seismic Data The change in the carrying amount of multiclient seismic data is as follows: Balance at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Capitalized in period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Charged to expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Impairment charge (see Note 3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (Stated in millions) 2017 2016 $ $ $ 1,073 276 (377) (245) 727 $ 1,026 630 (385) (198) 1,073 56 8. Goodwill The changes in the carrying amount of goodwill by reporting unit were as follows: (Stated in millions) Reservoir Characterization Drilling Production Cameron Total Balance, January 1, 2016 . . . . . . . . $ Acquisition of Cameron . . . . . . . . . Other acquisitions . . . . . . . . . . . . . Reallocation . . . . . . . . . . . . . . . . . . Impact of changes in exchange rates . . . . . . . . . . . . . . . . . . . . . . . Balance, December 31, 2016 . . . . . Acquisitions . . . . . . . . . . . . . . . . . . Impact of changes in exchange rates . . . . . . . . . . . . . . . . . . . . . . . 3,798 $ 790 79 146 8,584 $ 1,490 24 - 3,223 $ 1,170 242 - 7 4,820 21 7 16 10,114 3 9 4 4,639 46 12 $ - 5,563 - (146) - 5,417 24 15,605 9,013 345 - 27 24,990 94 6 34 Balance, December 31, 2017 . . . . . $ 4,848 $ 10,126 $ 4,697 $ 5,447 $ 25,118 9. Intangible Assets A summary of intangible assets follows: 2017 2016 Gross Book Value Accumulated Amortization Net Book Value Gross Book Value Accumulated Amortization Net Book Value (Stated in millions) 4,832 $ 1,020 $ 3,812 $ 4,938 $ 865 $ 4,073 Customer Relationships . . $ Technology/Technical Know-How . . . . . . . . . . . Tradenames . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . 3,634 2,806 1,295 1,078 533 582 2,556 2,273 713 3,655 2,847 1,122 835 458 549 $ 12,567 $ 3,213 $ 9,354 $ 12,562 $ 2,707 $ 2,820 2,389 573 9,855 Customer relationships are generally amortized over periods ranging from 18 to 28 years, technology/technical know-how are generally amortized over periods ranging from 10 to 18 years, and tradenames are generally amortized over periods ranging from 15 to 30 years. Amortization expense was $663 million in 2017, $567 million in 2016 and $354 million in 2015. Based on the carrying value of intangible assets at December 31, 2017, amortization expense for the subsequent five years is estimated to be as follows: 2018: $677 million, 2019: $673 million, 2020: $638 million, 2021: $616 million and 2022: $608 million. 57 10. Long-term Debt and Debt Facility Agreements Long-term Debt consists of the following: 4.00% Senior Notes due 2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3.30% Senior Notes due 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.00% Senior Notes due 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.65% Senior Notes due 2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.20% Senior Notes due 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.40% Senior Notes due 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.63% Senior Notes due 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.63% Guaranteed Notes due 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.50% Guaranteed Notes due 2019 (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.65% Senior Notes due 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.20% Senior Notes due 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.00% Notes due 2038 (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.50% Notes due 2021 (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.95% Notes due 2041 (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.60% Notes due 2022 (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.13% Notes due 2043 (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.00% Notes due 2023 (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.70% Notes due 2024 (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.35% Senior Notes due 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.38% Notes due 2018 (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Commercial paper borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other (Stated in millions) 2017 2016 $ 1,741 1,595 1,593 1,492 1,100 996 846 712 603 598 498 212 135 115 110 99 82 56 - - 1,694 598 1,740 1,594 1,591 1,491 1,100 996 845 622 536 - - 214 137 116 110 99 83 56 1,297 297 2,421 1,118 $ 14,875 $ 16,463 (1) Schlumberger maintains a €5.0 billion Guaranteed Euro Medium Term Note program that provides for the issuance of various types of debt instruments such as fixed or floating rate notes in euro, US dollar or other currencies. Schlumberger issued €0.5 billion 1.50% Guaranteed Notes due 2019 under this program in 2013. (2) Represents long-term fixed rate debt obligations assumed in connection with the acquisition of Cameron, net of amounts repurchased subsequent to the closing of the transaction. Schlumberger Limited fully and unconditionally guarantees the securities issued by certain of its subsidiaries, including securities issued by Schlumberger Investment SA, a wholly-owned finance subsidiary of Schlumberger. At December 31, 2017, Schlumberger had separate committed credit facility agreements aggregating $6.6 billion with commercial banks, of which $3.6 billion was available and unused. This included $6.3 billion of committed facilities which support commercial paper programs in the United States and Europe, of which $1.0 billion matures in February 2018, $1.8 billion matures in July 2018, $1.5 billion matures in November 2020, and $2.0 billion matures in February 2021. Interest rates and other terms of borrowing under these lines of credit vary from country to country. Commercial paper borrowings are classified as long-term debt to the extent they are backed up by available and unused committed credit facilities maturing in more than one year and to the extent it is Schlumberger’s intent to maintain 58 these obligations for longer than one year. Borrowings under the commercial paper program at December 31, 2017 were $3.0 billion, of which $1.7 billion was classified within Long-term debt and $1.3 billion was classified in Short-term borrowings and current portion of in the Consolidated Balance Sheet. At December 31, 2016, borrowings under the commercial paper program were $2.6 billion, of which $2.4 billion was classified within Long-term debt and $0.2 billion was classified in Short-term borrowings and current portion of long-term debt in the Consolidated Balance Sheet. long-term debt The weighted average interest rate on variable rate debt as of December 31, 2017 was 2.3%. Long-term Debt as of December 31, 2017 is due as follows: $1.5 billion in 2019, $2.8 billion in 2020, $4.3 billion in 2021, $2.6 billion in 2022, $1.6 billion in 2023, $1.7 billion in 2025 and $0.4 billion thereafter. The fair value of Schlumberger’s Long-term Debt at December 31, 2017 and December 31, 2016 was $15.2 billion and $16.8 billion, respectively, and was estimated based on quoted market prices. 11. Derivative Instruments and Hedging Activities Schlumberger is exposed to market risks related to fluctuations in interest rates and foreign currency exchange rates. To mitigate these risks, Schlumberger utilizes derivative instruments. Schlumberger does not enter into derivative transactions for speculative purposes. Interest Rate Risk Schlumberger is subject to interest rate risk on its debt and its investment portfolio. Schlumberger maintains an interest rate risk management strategy that uses a mix of variable and fixed rate debt combined with its investment portfolio, and occasionally interest rate swaps, to mitigate the exposure to changes in interest rates. During 2013, Schlumberger entered into a cross-currency swap for a notional amount of €0.5 billion in order to hedge changes in the fair value of Schlumberger’s €0.5 billion 1.50% Guaranteed Notes due 2019. Under the terms of this swap, Schlumberger will receive interest at a fixed rate of 1.50% on the euro notional amount and pay interest at a floating rate of three-month LIBOR plus approximately 64 basis points on the US dollar notional amount. During 2017, a Canadian dollar functional currency subsidiary of Schlumberger issued $1.1 billion of US dollar denominated debt. Schlumberger entered into cross-currency swaps for an aggregate notional amount of $1.1 billion in order to hedge changes in the fair value of its $0.5 billion 2.20% Senior Notes due 2020 and its $0.6 billion 2.65% Senior Notes due 2022. These cross-currency swaps effectively convert the US dollar notes to Canadian dollar denominated debt with fixed annual interest rates of 1.97% and 2.52%, respectively. These cross-currency swaps are designated as a fair value hedges of the underlying debt. These derivative instruments are marked to market with gains and losses recognized currently in income to largely offset the respective gains and losses recognized on changes in the fair value of the hedged debt. At December 31, 2017, Schlumberger had fixed rate debt aggregating $13.6 billion and variable rate debt aggregating $4.6 billion, after taking into account the effect of interest rate swaps. Short-term investments were $3.3 billion at December 31, 2017. The carrying value of these investments approximated fair value. Foreign Currency Exchange Rate Risk As a multinational company, Schlumberger conducts its business in over 85 countries. Schlumberger’s functional currency is primarily the US dollar. Approximately 78% of Schlumberger’s revenues in 2017 was denominated 59 in US dollars. However, outside the United States, a significant portion of Schlumberger’s expenses is incurred in foreign currencies. Therefore, when the US dollar weakens (strengthens) in relation to the foreign currencies of the countries in which Schlumberger conducts business, the US dollar–reported expenses will increase (decrease). Schlumberger is exposed to risks on future cash flows to the extent that the local currency is not the functional currency and expenses denominated in local currency are not equal to revenues denominated in local currency. Schlumberger is also exposed to risks on future cash flows relating to certain of its fixed rate debt denominated in currencies other than the functional currency. Schlumberger uses foreign currency forward contracts to provide a hedge against a portion of these cash flow risks. These contracts are accounted for as cash flow hedges, with the effective portion of changes in the fair value of the hedge recorded on the Consolidated Balance Sheet and in Accumulated Other Comprehensive Loss. Amounts recorded in Accumulated Other Comprehensive Loss are reclassified into earnings in the same period or periods that the hedged item is recognized in earnings. The ineffective portion of changes in the fair value of hedging instruments, if any, is recorded directly to earnings. At December 31, 2017, Schlumberger recognized a cumulative net $3 million gain in Accumulated other comprehensive loss relating to revaluation of foreign currency forward contracts designated as cash flow hedges, the majority of which is expected to be reclassified into earnings within the next 12 months. Schlumberger is exposed to changes in the fair value of assets and liabilities 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. Transaction losses of $57 million, $93 million and $76 million, net of related hedging activities, were recognized in the Consolidated Statement of Income (Loss) in 2017, 2016 and 2015, respectively. Included in these amounts are $63 million of losses relating to Egypt in 2016 and $49 million of losses relating to Venezuela in 2015. See Note 3–Charges and Credits for further details. At December 31, 2017, contracts were outstanding for the US dollar equivalent of $5.0 billion in various foreign currencies, of which $1.8 billion relates to hedges of debt denominated in currencies other than the functional currency. The fair value of outstanding derivatives was not material at December 31, 2017 and 2016. The effect of derivative instruments designated as fair value hedges and those not designated as hedges on the Consolidated Statement of Income (Loss) was as follows: (Stated in millions) Gain (Loss) Recognized in Income 2017 2016 2015 Consolidated Statement of Income (Loss) Classification Derivatives designated as fair value hedges: Cross currency swaps . . . . . . . . . . . . . . $ 73 $ (31) $ (64) Interest Derivatives not designated as hedges: Cross currency swaps . . . . . . . . . . . . . . Foreign exchange contracts . . . . . . . . . . $ $ $ (8) (26) $ - (246) - Interest (154) Cost of services/sales (34) $ (246) $ (154) 60 12. Stockholders’ Equity Schlumberger is authorized to issue 4,500,000,000 shares of common stock, par value $0.01 per share, of which 1,383,932,776 and 1,391,475,510 shares were outstanding on December 31, 2017 and 2016, respectively. Holders of common stock are entitled to one vote for each share of stock held. Schlumberger is also authorized to issue 200,000,000 shares of preferred stock, par value $0.01 per share, which may be issued in series with terms and conditions determined by the Schlumberger Board of Directors. No shares of preferred stock have been issued. Accumulated Other Comprehensive Loss consists of the following: Currency Translation Adjustments Marketable Securities Cash Flow Hedges Pension and Other Postretirement Benefit Plans Total (Stated in millions) Balance, January 1, 2015 . . . . . . . . . . $ (1,531) $ 10 $ (96) $ (2,589) $ (4,206) Other comprehensive income (loss) before reclassifications . . . . Amounts reclassified from accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . Income taxes . . . . . . . . . . . . . . . . . Balance, December 31, 2015 . . . . . . . Other comprehensive income (loss) before reclassifications . . . . Amounts reclassified from accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . Income taxes . . . . . . . . . . . . . . . . . Balance, December 31, 2016 . . . . . . . Other comprehensive income (loss) before reclassifications . . . . Amounts reclassified from accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . Income taxes . . . . . . . . . . . . . . . . . (522) (50) (178) (210) (960) - - (2,053) (83) - - (2,136) (3) - - 40 - - 21 - - 21 (8) - - 235 - (39) 407 (74) 682 (74) (2,466) (4,558) (101) (289) (452) 121 - (19) 22 - - 259 (13) 380 (13) (2,509) (4,643) 134 145 239 (15) 239 (15) Balance, December 31, 2017 . . . . . . . $ (2,139) $ 13 $ 3 $ (2,151) $ (4,274) Other comprehensive income was $369 million in 2017. Other comprehensive loss was $85 million in 2016 and $352 billion in 2015. 13. Stock-based Compensation Plans Schlumberger has three types of stock-based compensation programs: (i) stock options, (ii) a restricted stock, restricted stock unit and performance share unit program (collectively referred to as “restricted stock”) and (iii) a discounted stock purchase plan (DSPP). 61 Stock Options Key employees are granted stock options under Schlumberger stock option plans. For all stock options granted, the exercise price equals the average of the high and low sales prices of Schlumberger stock on the date of grant; the maximum term is ten years, and the options generally vest in increments over five years. The fair value of each stock option grant was estimated on the date of grant using the Black-Scholes option- pricing model with the following weighted-average assumptions and resulting weighted-average fair value per share: Dividend yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Expected volatility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Risk-free interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Expected option life in years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Weighted-average fair value per share . . . . . . . . . . . . . . . . . . . . . . . $ 2.3% 27% 2.4% 7.0 20.85 $ 2.7% 30% 1.7% 7.0 17.45 $ 2.3% 36% 1.7% 7.0 25.96 2017 2016 2015 The following table summarizes information related to options outstanding and options exercisable as of December 31, 2017: (Shares stated in thousands) Options Outstanding Options Exercisable Weighted- Average Remaining Contractual Life (in years) Weighted- Average Exercise Price Options Exercisable Weighted- Average Exercise Price 4.8 4.0 5.5 6.1 6.2 5.6 $ $ $ $ $ $ 56.17 69.93 73.97 84.01 95.07 79.13 4,132 6,008 7,033 7,186 5,960 30,319 $ $ $ $ $ $ 53.91 69.82 73.08 83.68 95.32 76.71 Exercise prices range $37.85 - $67.87 . . . . . . . . . . . . . . $68.51 - $71.06 . . . . . . . . . . . . . . $72.11 - $79.85 . . . . . . . . . . . . . . $80.53 - $87.38 . . . . . . . . . . . . . . $88.61 - $114.83 . . . . . . . . . . . . . Options Outstanding 5,696 6,665 9,107 15,511 10,231 47,210 The weighted-average remaining contractual life of stock options exercisable as of December 31, 2017 was 4.3 years. 62 The following table summarizes stock option activity during the years ended December 31, 2017, 2016 and 2015: 2017 2016 2015 (Shares stated in thousands) Weighted- Average Weighted- Average Shares Exercise Price Shares Exercise Price Shares Weighted- Average Exercise Price Outstanding at beginning of year . . . . . . . . . . . . . . . . . . . Granted . . . . . . . . . . . . . . . . . . Assumed in Cameron transaction . . . . . . . . . . . . . . Exercised . . . . . . . . . . . . . . . . Forfeited . . . . . . . . . . . . . . . . . 46,502 5,024 $ $ $ - (1,156) $ (3,160) $ 78.31 86.55 41,087 7,672 $ $ 78.73 76.14 38,583 7,118 $ $ - 57.87 86.99 $ 3,088 (3,357) $ (1,988) $ 63.24 60.70 84.60 $ - (2,561) $ (2,053) $ Outstanding at year-end . . . . . 47,210 $ 79.13 46,502 $ 78.31 41,087 $ 76.10 86.86 - 60.10 80.34 78.73 The aggregate intrinsic value of stock options outstanding and stock options exercisable as of December 31, 2017 was $64 million and $56 million, respectively. The total intrinsic value of options exercised during the years ended December 31, 2017, 2016 and 2015 was $26 million, $45 million and $62 million, respectively. Restricted Stock Schlumberger grants performance share units to certain executives. The number of shares earned is determined at the end of each performance period, which is generally three years, based on Schlumberger’s achievement of certain predefined targets as defined in the underlying performance share unit agreement. In the event Schlumberger exceeds the predefined target, shares for up to the maximum of 250% of the target award may be awarded. In the event Schlumberger falls below the predefined target, a reduced number of shares may be granted. If Schlumberger falls below the threshold award performance level, no shares will be awarded. As of December 31, 2017, 1.1 million performance share units were outstanding based assuming the achievement of 100% of target. All other restricted stock awards generally vest at the end of three years. Restricted stock awards generally do not pay dividends or have voting rights prior to vesting. Accordingly, the fair value of a restricted stock award is the quoted market price of Schlumberger’s stock on the date of grant less the present value of the expected dividends not received prior to vesting. 63 The following table summarizes information related to restricted stock transactions: (Shares stated in thousands) 2017 2016 2015 Weighted- Average Grant Date Fair Value Restricted Stock Weighted- Average Grant Date Fair Value Restricted Stock Weighted- Average Grant Date Fair Value Restricted Stock Unvested at beginning of year . . . . . . . . . . . . . . . . . . . . . Granted . . . . . . . . . . . . . . . . . . . Assumed in Cameron transaction . . . . . . . . . . . . . . . Vested . . . . . . . . . . . . . . . . . . . . Forfeited . . . . . . . . . . . . . . . . . . 5,112 2,495 $ $ $ - (1,645) $ (534) $ 78.31 73.09 - 83.03 80.17 3,571 1,678 $ $ $ 1,824 (1,720) $ (241) $ 85.04 68.66 72.12 72.64 80.87 4,138 1,254 $ $ $ - (1,495) $ (326) $ 80.80 82.37 - 71.30 83.86 Unvested at year-end . . . . . . . . . 5,428 $ 72.33 5,112 $ 78.31 3,571 $ 85.04 Discounted Stock Purchase Plan Under the terms of the DSPP, employees can choose to have a portion of their earnings withheld, subject to certain restrictions, to purchase Schlumberger common stock. The purchase price of the stock is 92.5% of the lower of the stock price at the beginning or end of the plan period at six-month intervals. The fair value of the employees’ purchase rights under the DSPP was estimated using the Black-Scholes model with the following assumptions and resulting weighted-average fair value per share: Dividend yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Expected volatility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Risk-free interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Weighted-average fair value per share . . . . . . . . . . . . . . . . . . . . . . . . $ 2.7% 19% 1.0% 9.46 2.7% 25% 0.5% 2.3% 27% 0.2% $ 10.37 $ 12.45 2017 2016 2015 Total Stock-based Compensation Expense The following summarizes stock-based compensation expense recognized in income: Stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Restricted stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . DSPP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (Stated in millions) 2017 2016 2015 $ $ $ 161 148 34 $ 175 47 45 343 $ 267 $ 176 107 43 326 At December 31, 2017, there was $485 million of total unrecognized compensation cost related to nonvested stock-based compensation arrangements, of which $246 million is expected to be recognized in 2018, $158 million in 2019, $58 million in 2020, $22 million in 2021 and $1 million in 2022. 64 As of December 31, 2017, approximately 45 million shares of Schlumberger common stock were available for future grants under Schlumberger’s stock-based compensation programs. 14. Income Taxes Schlumberger operates in more than 100 tax jurisdictions, where statutory tax rates generally vary from 0% to 40%. Income (loss) before taxes subject to United States and non-United States income taxes was as follows: (Stated in millions) 2017 2016 2015 United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Outside United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (841) $ (342) (3,103) $ 1,198 $ (1,183) $ (1,905) $ (691) 3,572 2,881 Schlumberger recorded pretax charges of $3.764 billion in 2017 ($533 million in the US and $3.231 billion outside the US); $3.820 billion in 2016 ($1.848 billion in the US and $1.972 billion outside the US); and $2.575 billion in 2015 ($883 million in the US and $1.692 billion outside the US). These charges and credits are included in the table above and are more fully described in Note 3–Charges and Credits. The components of net deferred tax assets (liabilities) were as follows: (Stated in millions) 2017 2016 Postretirement benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Investments in non-US subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fixed assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other, net $ 135 (2,186) (224) (55) 126 554 253 (2,869) (271) (79) 248 838 $ (1,650) $ (1,880) The above deferred tax balances at December 31, 2017 and 2016 were net of valuation allowances relating to net operating losses in certain countries of $119 million and $97 million, respectively. As a direct result of Schlumberger’s 2016 acquisition of Cameron, certain non-US subsidiaries of Cameron are either wholly or partially owned by a US subsidiary of Schlumberger. As described in Note 3, Schlumberger recorded a $410 million charge relating to the one-time mandatory tax on previously deferred foreign earnings of Schlumberger’s US subsidiary. After considering the impact of foreign tax credits and tax losses, the resulting cash tax payable as a result of the one-time mandatory tax on previously deferred foreign earnings of Schlumberger’s US subsidiary will not be significant. Other than as described above, Schlumberger generally does not provide for taxes related to its undistributed earnings because such earnings either would not be taxable when remitted or they are considered to be indefinitely reinvested. Taxes that would be incurred if the undistributed earnings of other Schlumberger subsidiaries were distributed to their ultimate parent company would not be material. 65 The components of Tax expense (benefit) were as follows: (Stated in millions) 2017 2016 2015 Current: United States-Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ United States-State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Outside United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred: United States-Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ United States-State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Outside United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (170) $ 57 703 590 (225) $ 4 (47) 8 (260) (511) $ (36) 648 101 (352) $ (13) (51) 37 (379) $ 330 $ (278) $ 90 12 1,085 1,187 (356) (19) (52) (14) (441) 746 A reconciliation of the United States statutory federal tax rate (35%) to the consolidated effective tax rate follows: US federal statutory rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . State tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Non-US income taxed at different rates . . . . . . . . . . . . . . . . . . . . . . . . Charges and credits (See Note 3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Enactment of US tax reform . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2017 2016 2015 35% - (24) (40) (6) 7 (28)% 35% 2 (21) (1) - - 15% 35% - (13) 6 - (2) 26% A number of the jurisdictions in which Schlumberger operates have tax laws that are not fully defined and are evolving. Schlumberger’s tax filings are subject to regular audit by the tax authorities. These audits may result in assessments for additional taxes that are resolved with the tax authorities, or potentially through the courts. Tax liabilities are recorded based on estimates of additional taxes that will be due upon the conclusion of these audits. Due to the uncertain and complex application of tax regulations, the ultimate resolution of audits may result in liabilities which could be materially different from these estimates. 66 A reconciliation of the beginning and ending amount of liabilities associated with uncertain tax positions for the years ended December 31, 2017, 2016 and 2015 is as follows: (Stated in millions) 2017 2016 2015 Balance at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Additions based on tax positions related to the current year . . . . . . . . . . . . Additions for tax positions of prior years . . . . . . . . . . . . . . . . . . . . . . . . . . Additions related to acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Impact of changes in exchange rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Settlements with tax authorities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Reductions for tax positions of prior years . . . . . . . . . . . . . . . . . . . . . . . . . Reductions due to the lapse of the applicable statute of limitations . . . . . . $ $ 1,419 132 58 - 23 (41) (157) (41) $ 1,285 70 119 127 (25) (45) (85) (27) Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,393 $ 1,419 $ 1,402 140 136 5 (78) (99) (203) (18) 1,285 The amounts above exclude accrued interest and penalties of $195 million, $178 million and $176 million at December 31, 2017, 2016 and 2015, respectively. Schlumberger classifies interest and penalties relating to uncertain tax positions within Tax expense (benefit) in the Consolidated Statement of Income (Loss). The following table summarizes the tax years that are either currently under audit or remain open and subject to examination by the tax authorities in the most significant jurisdictions in which Schlumberger operates: Brazil . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2012 - 2017 Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2010 - 2017 Ecuador . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2014 - 2017 Mexico . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2011 - 2017 Norway . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2013 - 2017 Russia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2014 - 2017 Saudi Arabia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2004 - 2017 United Kingdom . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2015 - 2017 United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2014 - 2017 In certain of the jurisdictions noted above, Schlumberger operates through more than one legal entity, each of which may have different open years subject to examination. The table above presents the open years subject to examination for the most material of the legal entities in each jurisdiction. Additionally, it is important to note that tax years are technically not closed until the statute of limitations in each jurisdiction expires. In the jurisdictions noted above, the statute of limitations can extend beyond the open years subject to examination. 67 15. Leases and Lease Commitments Total rental expense was $1.1 billion in 2017, $1.2 billion in 2016, and $1.6 billion in 2015. Future minimum rental commitments under noncancelable operating leases for each of the next five years are as follows: 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (Stated in millions) 284 $ 244 203 164 127 410 $ 1,432 16. Contingencies Schlumberger and its subsidiaries are party to various legal proceedings from time to time. A liability is accrued when a loss is both probable and can be reasonably estimated. Management believes that the probability of a material loss with respect to any currently pending legal proceeding is remote. However, litigation is inherently uncertain and it is not possible to predict the ultimate disposition of any of these proceedings. 17. Segment Information Schlumberger’s segments are as follows: (cid:129) (cid:129) (cid:129) (cid:129) Reservoir Characterization Group – Consists of the principal Technologies involved in finding and defining hydrocarbon resources. These include WesternGeco, Wireline, Testing Services, OneSurface, Software Integrated Solutions and Integrated Services Management. Drilling Group – Consists of the principal Technologies involved in the drilling and positioning of oil and gas wells. These include Bits & Drilling Tools, M-I SWACO, Drilling & Measurements, Land Rigs and Integrated Drilling Services. Production Group – Consists of the principal Technologies involved in the lifetime production of oil and gas reservoirs. These include Well Services, OneStim, Completions, Artificial Lift, Integrated Production Services and Schlumberger Production Management. Cameron Group – Consists of the principal Technologies involved in pressure and flow control for drilling and intervention rigs, oil and gas wells and production facilities. These include OneSubsea, Surface Systems, Drilling Systems and Valves & Measurements. 68 Financial information for the years ended December 31, 2017, 2016 and 2015, by segment, is as follows: 2017 Income Before Taxes Assets Revenue $ Reservoir Characterization . . . . . . Drilling . . . . . . . . . . . . . . . . . . . . . Production . . . . . . . . . . . . . . . . . . Cameron . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Eliminations & other $ 6,786 8,392 10,639 5,205 (582) Pretax operating income . . . . . Goodwill and intangible assets . . . Cash and short term investments . . . . . . . . . . . . . . . . All other assets . . . . . . . . . . . . . . . Corporate & other (1) . . . . . . . . . . . Interest income (2) . . . . . . . . . . . . . . . . . . . . . . . . . Interest expense (3) Charges & credits (4) . . . . . . . . . . . 4,892 5,421 12,326 3,978 1,881 34,472 5,089 3,928 $ 1,251 1,151 928 733 (142) 3,921 (934) 107 (513) (3,764) (Stated in millions) Depreciation and Amortization 988 $ 685 1,249 264 213 $ Capital Expenditures 305 629 889 150 134 438 $ 30,440 $ (1,183) $ 71,987 $ 3,837 $ 2,107 Reservoir Characterization . . . . . . . . . . . . . . . . Drilling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Production . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cameron . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Eliminations & other . . . . . . . . . . . . . . . . . . . . . Pretax operating income . . . . . . . . . . . . . . . Goodwill and intangible assets . . . . . . . . . . . . . Cash, short term investments and fixed income investments . . . . . . . . . . . . . . . . . . . . . . . . . . All other assets . . . . . . . . . . . . . . . . . . . . . . . . . Corporate & other (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest income (2) Interest expense (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Charges & credits (4) (Stated in millions) 2016 Income Before Taxes Assets $ 1,249 $ 6,890 6,747 10,476 4,246 1,605 994 507 653 (130) Depreciation and Amortization 1,104 $ 904 1,234 211 257 Revenue $ 6,648 8,561 8,804 4,211 (414) Capital Expenditures 532 $ 425 655 176 267 34,845 9,495 3,652 3,273 (925) 84 (517) (3,820) 384 $ 27,810 $(1,905) $77,956 $ 4,094 $ 2,055 69 (Stated in millions) 2015 Revenue Income Before Taxes Assets Depreciation and Amortization Capital Expenditures Reservoir Characterization . . . . . . Drilling . . . . . . . . . . . . . . . . . . . . . Production . . . . . . . . . . . . . . . . . . . Eliminations & other . . . . . . . . . . . $ $ 9,501 13,563 12,548 (137) Pretax operating income . . . . . Goodwill and intangible assets . . . Cash, short term investments and fixed income investments . . . . . All other assets . . . . . . . . . . . . . . . Corporate & other (1) . . . . . . . . . . . Interest income (2) . . . . . . . . . . . . . Interest expense (3) . . . . . . . . . . . . . . . . . . . . . . . . Charges & credits (4) $ 8,266 8,562 9,938 2,039 $ 1,279 1,177 1,216 213 648 673 824 265 20,174 13,452 5,574 193 $ 2,450 2,538 1,585 (63) 6,510 (768) 30 (316) (2,575) $ 35,475 $ 2,881 $ 68,005 $ 4,078 $ 2,410 (1) Comprised principally of certain corporate expenses not allocated to the segments, stock-based compensation costs, amortization expense associated with certain intangible assets (including intangible asset amortization expense resulting from the 2016 acquisition of Cameron), certain centrally managed initiatives and other nonoperating items. (2) (3) Interest income excludes amounts which are included in the segments’ income (2017: $21 million; 2016: $26 million; 2015: $22 million). Interest expense excludes amounts which are included in the segments’ income (2017: $53 million; 2016: $53 million; 2015: $30 million). (4) See Note 3–Charges and Credits. Segment assets consist of receivables, inventories, fixed assets, multiclient seismic data and SPM investments. Depreciation and amortization includes depreciation of property, plant and equipment and amortization of intangible assets, multiclient seismic data costs and SPM investments. Revenue by geographic area for the years ended December 31, 2017, 2016 and 2015 is as follows: (Stated in millions) 2017 2016 2015 North America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Latin America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Europe/CIS/Africa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Middle East & Asia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Eliminations & other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ $ 9,487 3,976 7,047 9,419 511 $ 6,665 4,230 7,351 9,286 278 9,811 6,014 9,284 9,898 468 $ 30,440 $ 27,810 $ 35,475 70 Revenue is based on the location where services are provided and products are sold. During each of the three years ended December 31, 2017, 2016 and 2015, no single customer exceeded 10% of consolidated revenue. Schlumberger did not have revenue from third-party customers in its country of domicile during the last three years. Revenue in the United States in 2017, 2016 and 2015 was $8.1 billion, $5.4 billion and $8.5 billion, respectively. Fixed Assets less accumulated depreciation by geographic area are as follows: (Stated in millions) 2017 2016 2015 North America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Latin America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Europe/CIS/Africa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Middle East & Asia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Unallocated (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ $ 5,120 1,042 2,540 2,771 103 $ 4,428 1,460 2,706 3,149 1,078 4,392 1,728 2,978 3,078 1,239 $ 11,576 $ 12,821 $ 13,415 (1) Represents seismic vessels, including the related on-board equipment, which frequently transition between geographic areas. 18. Pension and Other Benefit Plans Pension Plans Schlumberger sponsors several defined benefit pension plans that cover substantially all US employees hired prior to October 1, 2004. The benefits are based on years of service and compensation, on a career-average pay basis. In addition to the US defined benefit pension plans, Schlumberger sponsors several other international defined benefit pension plans. The most significant of these international plans are the International Staff Pension Plan and the UK pension plan (collectively, the “International plans”). The International Staff Pension Plan covers certain international employees hired prior to July 1, 2014 and is based on years of service and compensation on a career-average pay basis. The UK plan covers employees hired prior to April 1, 1999, and is based on years of service and compensation, on a final salary basis. The weighted-average assumed discount rate, compensation increases and expected long-term rate of return on plan assets used to determine the net pension cost for the US and International plans were as follows: 2017 US 2016 International 2015 2017 2016 2015 Discount rate . . . . . . . . . . . . . . . . . . Compensation increases . . . . . . . . . Return on plan assets . . . . . . . . . . . . 4.20% 4.00% 7.25% 4.50% 4.00% 7.25% 4.15% 4.00% 7.25% 4.13% 4.81% 7.40% 4.36% 4.81% 7.40% 4.07% 4.79% 7.40% 71 Net pension cost for 2017, 2016 and 2015 included the following components: US 2016 2017 2015 2017 International 2016 2015 (Stated in millions) Service cost-benefits earned during the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Interest cost on projected benefit obligation . . . Expected return on plan assets . . . . . . . . . . . . . . Amortization of prior service cost . . . . . . . . . . . Amortization of net loss . . . . . . . . . . . . . . . . . . . 57 $ 175 (242) 12 39 62 $ 177 (235) 12 79 86 $ 170 (229) 12 123 95 $ 306 (541) 97 120 110 $ 311 (517) 122 78 $ 41 $ 95 $ 162 $ 77 $ 104 $ 167 297 (498) 121 170 257 The weighted-average assumed discount rate and compensation increases used to determine the projected benefit obligations for the US and International plans were as follows: Discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Compensation increases . . . . . . . . . . . . . . . . . . . . . . . 3.70% 4.00% 4.20% 4.00% 3.55% 4.81% 4.13% 4.81% US International 2017 2016 2017 2016 72 The changes in the projected benefit obligation, plan assets and funded status of the plans were as follows: (Stated in millions) US International 2017 2016 2017 2016 Change in Projected Benefit Obligations Projected benefit obligation at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Service cost Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Contribution by plan participants . . . . . . . . . . . . . . . . . . . . . . Actuarial (gains) losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Currency effect Benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other $ $ 4,240 57 175 - 325 - (194) - $ 4,025 62 177 - 137 - (183) 22 $ 7,793 95 306 88 616 147 (293) - 7,340 110 311 117 477 (290) (272) - Projected benefit obligation at end of year . . . . . . . . . . . . . . . $ 4,603 $ 4,240 $ 8,752 $ 7,793 Change in Plan Assets Plan assets at fair value at beginning of year . . . . . . . . . . . . . . Actual return on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . Currency effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Company contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Contributions by plan participants . . . . . . . . . . . . . . . . . . . . . . Benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other Plan assets at fair value at end of year . . . . . . . . . . . . . . . . . . . Unfunded Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Amounts Recognized in Balance Sheet Postretirement Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Amounts Recognized in Accumulated Other Comprehensive Loss Actuarial losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Prior service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accumulated benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . $ $ $ $ $ $ $ $ $ 3,625 622 - 5 - (194) - $ 3,467 320 - 4 - (183) 17 $ 7,194 1,216 161 88 88 (293) 53 4,058 $ 3,625 $ 8,507 $ 6,832 715 (318) 130 117 (272) (10) 7,194 (545) $ (615) $ (245) $ (599) (545) $ - (615) $ - (418) $ 173 (545) $ (615) $ (245) $ (724) 125 (599) 887 30 917 4,347 $ $ $ 982 42 1,024 3,999 $ $ $ 1,419 17 1,436 8,400 $ $ $ 1,644 114 1,758 7,454 The unfunded liability represents the difference between the plan assets and the projected benefit obligation (PBO). The PBO represents the actuarial present value of benefits based on employee service and compensation and includes an assumption about future compensation levels. The accumulated benefit obligation represents the actuarial present value of benefits based on employee service and compensation, but does not include an assumption about future compensation levels. 73 The weighted-average allocation of plan assets and the target allocations by asset category are as follows: Equity securities . . . . . . . . . . . . . . . . . . . . Debt securities . . . . . . . . . . . . . . . . . . . . . . Cash and cash equivalents . . . . . . . . . . . . . Alternative investments . . . . . . . . . . . . . . . Target 37 - 56% 35 - 62 0 - 3 0 - 10 US 2017 International 2016 Target 2017 2016 51% 38 3 8 52% 45 - 71% 37 2 9 20 - 35 0 - 5 0 - 25 64% 23 4 9 64% 25 2 9 100% 100% 100% 100% 100% 100% Asset performance is monitored frequently with an overall expectation that plan assets will meet or exceed the weighted index of its target asset allocation and component benchmark over rolling five-year periods. The expected rate of return on assets assumptions reflect the long-term average rate of earnings expected on funds invested or to be invested. The assumptions have been determined based on expectations regarding future rates of return for the portfolio considering the asset allocation and related historical rates of return. The appropriateness of the assumptions is reviewed annually. The fair value of Schlumberger’s pension plan assets at December 31, 2017 and 2016, by asset category, is presented below and was determined based on valuation techniques categorized as follows: (cid:129) (cid:129) (cid:129) Level One: The use of quoted prices in active markets for identical instruments. Level Two: The use of quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active or other inputs that are observable in the market or can be corroborated by observable market data. Level Three: The use of significant unobservable inputs that management’s estimates of assumptions that market participants would use in pricing. typically require the use of 74 US Plan Assets 2017 2016 (Stated in millions) Total Level One Level Two Level Three Total Level One Level Two Level Three Asset Category: Cash and Cash Equivalents . . . $ Equity Securities: 112 $ 92 $ 20 $ - $ 60 $ 15 $ 45 $ - US (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . International (b) 1,324 757 1,148 747 176 10 771 1,210 662 1,049 649 625 161 13 625 771 Debt Securities . . . . . . . . Corporate bonds (c) Government and government-related debt securities (d) . . . . . . . . . . . . . . Collateralized mortgage obligations and mortgage backed securities (e) . . . . . . . . Alternative Investments: Private equity (f) Real estate (g) . . . . . . . . . . . . . . . . . . . . . . 656 163 493 643 164 479 108 183 147 108 92 191 142 183 147 92 191 142 Total . . . . . . . . . . . . . . . . . . . . . . $ 4,058 $ 2,150 $ 1,578 $ 330 $ 3,625 $1,877 $1,415 $ 333 International Plan Assets 2017 2016 (Stated in millions) Total Level One Level Two Level Three Total Level One Level Two Level Three Asset Category: Cash and Cash Equivalents . . . $ Equity Securities: 307 $ 69 $ 238 $ - $ 184 $ 135 $ 49 $ - US (a) . . . . . . . . . . . . . . . . . . . International (b) . . . . . . . . . . . . 3,286 2,160 2,642 1,871 Debt Securities Corporate bonds (c) . . . . . . . . . Government and government- related debt securities (d) . . . . . Collateralized mortgage obligations and mortgage backed securities (e) Alternative Investments: . . . . . . . . Private equity (f) . . . . . . . . . . . Real estate (g) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other 841 985 150 477 168 133 11 644 289 841 974 150 2,854 1,726 2,324 1,475 685 1,001 10 130 385 106 123 477 168 133 530 251 685 991 130 385 106 123 Total . . . . . . . . . . . . . . . . . . . . . . . $ 8,507 $ 4,593 $ 3,136 $ 778 $ 7,194 $ 3,944 $ 2,636 $ 614 75 (a) (b) (c) (d) (e) (f) (g) US equities include companies that are well-diversified by industry sector and equity style (i.e., growth and value strategies). Active and passive management strategies are employed. Investments are primarily in large capitalization stocks and, to a lesser extent, mid- and small-cap stocks. International equities are invested in companies that are traded on exchanges outside the US and are well-diversified by industry sector, country and equity style. Active and passive strategies are employed. The vast majority of the investments are made in companies in developed markets, with a small percentage in emerging markets. Corporate bonds consist primarily of investment grade bonds from diversified industries. Government and government-related debt securities are comprised primarily of inflation-protected US treasuries and, to a lesser extent, other government-related securities. Collateralized mortgage obligations and mortgage backed-securities are debt obligations that represent claims to the cash flows from pools of mortgage loans, which are purchased from banks, mortgage companies, and other originators and then assembled into pools by governmental, quasi-governmental and private entities. Private equity includes investments in several funds of funds. Real estate primarily includes investments in real estate limited partnerships, concentrated in commercial real estate. Schlumberger’s funding policy is to annually contribute amounts that are based upon a number of factors including the actuarial accrued liability, amounts that are deductible for income tax purposes, legal funding requirements and available cash flow. Schlumberger expects to contribute approximately $125 million to its postretirement benefit plans in 2018, subject to market and business conditions. Postretirement Benefits Other Than Pensions Schlumberger provides certain healthcare benefits to certain former US employees who have retired. Effective April 1, 2015, Schlumberger changed the way it provides healthcare coverage to certain retirees who are age 65 and over. Under the amended plan, these retirees transferred to individual coverage under the Medicare Exchange. Schlumberger subsidizes the cost of the program by providing these retirees with a Health Reimbursement Account. The annual subsidy may be increased based on medical cost inflation, but it will not be increased by more than 5% in any given year. The actuarial assumptions used to determine the accumulated postretirement benefit obligation and net periodic benefit cost for the US postretirement medical plan were as follows: Discount rate . . . . . . . . . . . . . . . . . . . . . . . . . Return on plan assets . . . . . . . . . . . . . . . . . . . Current medical cost trend rate . . . . . . . . . . . Ultimate medical cost trend rate . . . . . . . . . . Year that the rate reaches the ultimate trend Benefit Obligations At December 31, Net Periodic Benefit Cost for the Year 2017 2016 2017 2016 2015 3.70% - 7.25% 5.00% 4.20% - 7.25% 5.00% 4.20% 7.00% 7.25% 5.00% 4.50% 7.00% 7.50% 5.00% 4.15% 7.00% 7.00% 5.00% rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2026 2026 2026 2026 2023 76 The net periodic benefit cost (credit) for the US postretirement medical plan included the following components: (Stated in millions) 2017 2016 2015 Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Expected return on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Amortization of prior service credit Amortization of net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 29 46 (60) (29) - $ 30 47 (57) (32) - $ (14) $ (12) $ 42 48 (52) (32) 13 19 The changes in the accumulated postretirement benefit obligation, plan assets and funded status were as follows: Change in Projected Benefit Obligations Benefit obligation at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Service cost Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Contribution by plan participants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Actuarial gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (Stated in millions) 2017 2016 $ 1,108 29 46 8 71 (49) 1,103 30 47 8 (32) (48) Benefit obligation at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,213 $ 1,108 Change in Plan Assets Plan assets at fair value at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Actual return on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Company contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Contributions by plan participants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Plan assets at fair value at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Unfunded Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Amounts Recognized in Accumulated Other Comprehensive Loss Actuarial losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Prior service credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ $ $ $ $ $ 952 143 40 8 (49) 1,094 $ 884 68 40 8 (48) 952 (119) $ (156) $ 36 (215) (179) $ 62 (243) (181) The unfunded liability is included in Postretirement Benefits in the Consolidated Balance Sheet. The assets of the US postretirement medical plan are invested 59% in equity securities and 41% in debt securities at December 31, 2017. The fair value of these assets was primarily determined based on Level Two valuation techniques. 77 A one percentage point change in assumed health care cost trend rates would have the following effects on the amounts reported for the US postretirement medical plan: (Stated in millions) One Percentage Point Increase One Percentage Point Decrease Effect on total service and interest cost components . . . . . . . . . . . . . . . . Effect on accumulated postretirement benefit obligation . . . . . . . . . . . . . $ $ 3 35 $ $ (3) (30) Other Information The expected benefits to be paid under the US and International pension plans as well as the postretirement medical plan are as follows: (Stated in millions) Pension Benefits US International Postretirement Medical Plan 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2023-2027 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 201 207 212 218 224 1,215 $ $ $ $ $ $ 281 294 307 320 333 1,895 $ $ $ $ $ $ 53 55 58 60 61 333 Included in Accumulated other comprehensive loss at December 31, 2017 are non-cash pretax charges which have not yet been recognized in net periodic benefit cost. The estimated portion of each component of Accumulated other comprehensive loss which is expected to be recognized as a component of net periodic benefit cost during the year ending December 31, 2018 is as follows: (Stated in millions) Postretirement Medical Plan Pension Plans Net actuarial losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Prior service cost (credit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 209 23 $ $ - (28) In addition to providing defined pension benefits and a postretirement medical plan, Schlumberger and its subsidiaries have other deferred benefit programs, primarily profit sharing and defined contribution pension plans. Expenses for these programs were $413 million, $445 million and $565 million in 2017, 2016 and 2015, respectively. 19. Supplementary Information During 2015, Schlumberger entered into an agreement with one of its customers to receive certain fixed assets in lieu of payment of approximately $200 million of accounts receivable. 78 Cash paid (refunded) for interest and income taxes was as follows: Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ $ $ 572 (44) $ 599 750 $ $ 346 1,567 Interest and other income includes the following: (Stated in millions) 2017 2016 2015 Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Earnings of equity method investments . . . . . . . . . . . . . . . . . . . . . . . The change in Allowance for doubtful accounts is as follows: Balance at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Amounts written off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ $ $ (Stated in millions) 2017 2016 2015 $ 128 96 $ 110 90 224 $ 200 $ 52 184 236 (Stated in millions) 2017 2016 2015 $ 397 7 (163) $ 333 123 (59) 275 75 (17) 333 Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 241 $ 397 $ Revenue in excess of billings related to contracts accounted for under the percentage-of-completion method was $0.3 billion and $0.5 billion at December 31, 2017 and 2016, respectively. Accounts payable and accrued liabilities are summarized as follows: (Stated in millions) 2017 2016 Payroll, vacation and employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$ Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other $ 1,296 4,614 752 3,374 1,349 4,004 1,088 3,575 $ 10,036 $ 10,016 79 Management’s Report on Internal Control Over Financial Reporting Schlumberger management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a–15(f) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Schlumberger’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Because of its inherent internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. limitations, Schlumberger management assessed the effectiveness of its internal control over financial reporting as of December 31, 2017. In making this assessment, it used the criteria set forth in 2013 by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control–Integrated Framework. Based on this assessment Schlumberger’s management has concluded that, as of December 31, 2017, its internal control over financial reporting is effective based on those criteria. The effectiveness of Schlumberger’s internal control over financial reporting as of December 31, 2017 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears herein. 80 Report of Independent Registered Public Accounting Firm To the Board of Directors and Stockholders of Schlumberger Limited Opinions on the Financial Statements and Internal Control over Financial Reporting We have audited the accompanying consolidated balance sheets of Schlumberger Limited and its subsidiaries (the “Company”) as of December 31, 2017 and 2016, and the related consolidated statements of income (loss), comprehensive income (loss), stockholders’ equity and cash flows for each of the three years in the period ended including the related notes (collectively referred to as the “consolidated financial December 31, 2017, statements”). We also have audited the Company’s internal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control–Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2016 and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2017 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control–Integrated Framework (2013) issued by the COSO. Basis for Opinions The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in 81 accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. internal control over financial reporting may not prevent or detect Because of its inherent misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. limitations, /s/ PricewaterhouseCoopers LLP PricewaterhouseCoopers LLP Houston, Texas January 24, 2018 We have served as the Company’s auditor since 1952. 82 Quarterly Results (Unaudited) The following table summarizes Schlumberger’s results by quarter for the years ended December 31, 2017 and 2016. (Stated in millions, except per share amounts) Net Income (Loss) Attributable to Schlumberger Earnings per Share of Schlumberger (2) Basic Diluted Revenue (2) Gross Margin (1), (2) Quarters 2017 First (3) Second (4) Third (5) Fourth (6) . . . . . . . . . . . . . . . . . . . . . . . . . $ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,894 7,464 7,905 8,179 $ 818 994 1,108 978 $ 279 (74) 545 (2,255) $ 0.20 (0.05) 0.39 (1.63) 0.20 (0.05) 0.39 (1.63) $ 30,440 $ 3,897 $ (1,505) $ (1.08) $ (1.08) Quarters 2016 First . . . . . . . . . . . . . . . . . . . . . . . . . . . $ . . . . . . . . . . . . . . . . . . . . . . . Second (7) Third (8) . . . . . . . . . . . . . . . . . . . . . . . . . Fourth (9) . . . . . . . . . . . . . . . . . . . . . . . . $ 6,520 7,164 7,019 7,107 $ 1,059 699 728 914 $ 500 (2,159) 176 (204) $ 0.40 (1.56) 0.13 (0.15) 0.40 (1.56) 0.13 (0.15) $ 27,810 $ 3,401 $ (1,687) $ (1.24) $ (1.24) (1) Gross margin equals Total Revenue less Cost of Services and Cost of Sales. (2) Amounts may not add due to rounding. (3) Net income in the first quarter of 2017 includes after-tax and noncontrolling interest charges of $68 million. (4) Net income in the second quarter of 2017 includes after-tax and noncontrolling interest charges of $631 million. (5) Net income in the third quarter of 2017 includes after-tax charges of $36 million. (6) Net income in the fourth quarter of 2017 includes after-tax charges of $2.923 billion. (7) Net income in the second quarter of 2016 includes after-tax charges of $2.476 billion. Net income in the third quarter of 2016 includes after-tax charges of $176 million. (8 (9) Net income in the fourth quarter of 2016 includes after-tax charges of $583 million. * Mark of Schlumberger Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None. Item 9A. 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 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 83 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 so that information required to be disclosed in reports filed or submitted under the Exchange Act is accumulated and communicated to its management, including the CEO and the CFO, as appropriate, to allow timely decisions regarding required disclosure. There has been no change in Schlumberger’s internal control over financial reporting that occurred during the fourth quarter of 2017 that has materially affected, or is reasonably likely to materially affect, Schlumberger’s internal control over financial reporting. Item 9B. 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 2017 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. During the fourth quarter of 2016, a non-US subsidiary entered into a memorandum of understanding (“MOU”) with NIOC relating to the non-disclosure of data required for the technical evaluation of an oilfield project. In the first quarter of 2017, the Schlumberger subsidiary provided NIOC with written notice that it was terminating the MOU, effective March 11, 2017. The MOU did not involve the provision of services. During the second quarter of 2017, and in furtherance of the termination of the MOU, the Schlumberger subsidiary had residual dealings with the NIOC consisting solely of the return of client data. 84 PART III Item 10. Directors, Executive Officers and Corporate Governance of Schlumberger. See “Item 1. Business–Executive Officers of Schlumberger” of this Report for Item 10 information regarding executive officers of Schlumberger. The information under the captions “Election of Directors,” “Section 16(a) Beneficial Ownership Reporting Compliance,” “Corporate Governance–Director Nominations” and “Corporate Governance–Board Committees–Audit Committee” in Schlumberger’s 2018 Proxy Statement is incorporated herein by reference. Schlumberger has a Code of Conduct that applies to all of its directors, officers and employees, including its principal executive, financial and accounting officers, or persons performing similar functions. Schlumberger’s Code of Conduct is posted on its website at www.slb.com/about/codeofconduct.aspx. Schlumberger intends to disclose future amendments to the Code of Conduct and any grant of a waiver from a provision of the Code of Conduct requiring disclosure under applicable SEC rules at www.slb.com/about/codeofconduct.aspx. Item 11. Executive Compensation. the captions “Compensation Discussion and Analysis,” “Executive The information set Compensation Tables and Accompanying Narrative,” “Compensation Committee Report” and “Director Compensation in Fiscal Year 2017” in Schlumberger’s 2018 Proxy Statement is incorporated herein by reference. forth under Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. The information under the captions “Stock Ownership Information–Security Ownership by Certain Beneficial Owners,” “Stock Ownership Information–Security Ownership by Management” and “Equity Compensation Plan Information” in Schlumberger’s 2018 Proxy Statement is incorporated herein by reference. Item 13. Certain Relationships and Related Transactions, and Director Independence. The information under the captions “Corporate Governance–Board Independence” and “Corporate Governance– Policies and Procedures for Approval of Related Person Transactions” in Schlumberger’s 2018 Proxy Statement is incorporated herein by reference. Item 14. Principal Accounting Fees and Services. The information under the caption “Appointment of Independent Registered Public Accounting Firm” in Schlumberger’s 2018 Proxy Statement is incorporated herein by reference. 85 PART IV Item 15. Exhibits and Financial Statement Schedules. (a) The following documents are filed as part of this Report: (1) Financial Statements Consolidated Statement of Income (Loss) for the three years ended December 31, 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Consolidated Statement of Comprehensive Income for the three years ended December 31, 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Consolidated Balance Sheet at December 31, 2017 and 2016 . . . . . . . . . . . . . . Consolidated Statement of Cash Flows for the three years ended December 31, 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Consolidated Statement of Stockholders’ Equity for the three years ended Page(s) 38 39 40 41 December 31, 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 and 43 Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 to 80 Report of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . Quarterly Results (Unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81 83 Financial statements of companies accounted for under the equity method and unconsolidated subsidiaries have been omitted because they do not meet the materiality tests for assets or income. (2) Financial Statement Schedules not required (3) Exhibits: See exhibits listed under Part (b) below. (b) Exhibits 86 INDEX TO EXHIBITS Articles of Incorporation of Schlumberger Limited (Schlumberger N.V.), as amended on April 6, 2016 (incorporated by reference to Exhibit 3.1 to Schlumberger’s Current Report on Form 8-K filed on April 6, 2016) Exhibit 3.1 Amended and Restated By-Laws of Schlumberger Limited (Schlumberger N.V.), as amended on January 19, 2017 (incorporated by reference to Exhibit 3.1 to Schlumberger’s Current Report on Form 8-K filed on January 19, 2017) Indenture dated as of December 3, 2013, by and among Schlumberger Investment SA, as issuer, Schlumberger Limited, as guarantor, and The Bank of New York Mellon Trust Company, N.A., as trustee (incorporated by reference to Exhibit 4.1 to Schlumberger’s Current Report on Form 8-K filed on December 3, 2013) First Supplemental Indenture dated as of December 3, 2013, by and among Schlumberger Investment SA, as issuer, Schlumberger Limited, as guarantor, and The Bank of New York Mellon Trust Company, N.A., as trustee (including form of global notes representing 3.650% Senior Notes due 2023) (incorporated by reference to Exhibit 4.2 to Schlumberger’s Current Report on Form 8-K filed on December 3, 2013) Schlumberger Limited Supplementary Benefit Plan, as conformed to include amendments through January 1, 2009 (incorporated by reference to Exhibit 10.2 to Schlumberger’s Annual Report on Form 10-K for the year ended December 31, 2008) (+) Schlumberger Limited Restoration Savings Plan, as conformed to include amendments through January 1, 2009 (incorporated by reference to Exhibit 10.3 to Schlumberger’s Annual Report on Form 10-K for the year ended December 31, 2008) (+) First Amendment to Schlumberger Limited Restoration Savings Plan (incorporated by reference to Exhibit 10.3 to Schlumberger’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2013) (+) Schlumberger 1998 Stock Option Plan, as conformed to include amendments through January 1, 2009 (incorporated by reference to Exhibit 10.4 to Schlumberger’s Annual Report on Form 10-K for the year ended December 31, 2008) (+) Third Amendment to Schlumberger 1998 Stock Option Plan (incorporated by reference to Exhibit 10.4 to Schlumberger’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2013) (+) Schlumberger 2001 Stock Option Plan, as conformed to include amendments through January 1, 2009 (incorporated by reference to Exhibit 10.5 to Schlumberger’s Annual Report on Form 10-K for the year ended December 31, 2008) (+) Second Amendment to Schlumberger 2001 Stock Option Plan (incorporated by reference to Exhibit 10.5 to Schlumberger’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2013) (+) Schlumberger Limited 2004 Stock and Deferral Plan for Non-Employee Directors, amended and restated effective January 19, 2012 (incorporated by reference to Exhibit 10 to Schlumberger’s Current Report on Form 8-K filed on April 11, 2012) (+) 87 3.2 4.1 4.2 10.1 10.2 10.3 10.4 10.5 10.6 10.7 10.8 Schlumberger 2005 Stock Incentive Plan, as conformed to include amendments through January 1, 2009 (incorporated by reference to Exhibit 10.6 to Schlumberger’s Annual Report on Form 10-K for the year ended December 31, 2008) (+) Third Amendment to Schlumberger 2005 Stock Incentive Plan (incorporated by reference to Exhibit 10.6 to Schlumberger’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2013) (+) Schlumberger 2008 Stock Incentive Plan, as conformed to include amendments through January 1, 2009 (incorporated by reference to Exhibit 10.8 to Schlumberger’s Annual Report on Form 10-K for the year ended December 31, 2008) (+) Second Amendment to Schlumberger 2008 Stock Incentive Plan (incorporated by reference to Exhibit 10.7 to Schlumberger’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2013) (+) Schlumberger 2010 Omnibus Stock Incentive Plan (incorporated by reference to Exhibit 10.1 to Schlumberger’s Current Report on Form 8-K filed on April 9, 2010) (+) First Amendment to Schlumberger 2010 Omnibus Stock Incentive Plan (incorporated by reference to Exhibit 10.8 to Schlumberger’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2013) (+) Rules of the Schlumberger 2010 Omnibus Stock Incentive Plan, French Sub-Plan for Restricted Share Units (+) (*) Cameron International Corporation Equity Incentive Plan, as amended and restated January 1, 2013 (incorporated by reference to Exhibit 10.16 to Schlumberger’s Annual Report on Form 10-K for the year ended December 31, 2016) (+) Form of 2014 Three-Year Performance Share Unit Award Agreement under Schlumberger 2013 Omnibus Stock Incentive Plan (incorporated by reference to Exhibit 10.1 to Schlumberger’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2014) (+) French Sub-Plan of Schlumberger 2010 Omnibus Stock Incentive Plan for Employees in France (incorporated by reference to Exhibit 10.7 to Schlumberger’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2013) (+) Form of Option Agreement (Employees in France), Incentive Stock Option, under Schlumberger 2010 Omnibus Stock Incentive Plan (incorporated by reference to Exhibit 10.10 to Schlumberger’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2013) (+) in France), Non-Qualified Stock Option, under Form of Option Agreement Schlumberger 2010 Omnibus Stock Incentive Plan (incorporated by reference to Exhibit 10.11 to Schlumberger’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2013) (+) (Employees Form of Schlumberger Stock Incentive Plan Restricted Stock Unit Award Agreement for France (incorporated by reference to Exhibit 10.3 to Schlumberger’s Quarterly report on Form 10-Q for the quarter ended March 31, 2017) (+) Schlumberger 2013 Omnibus Stock Incentive Plan (incorporated by reference to Appendix A to Schlumberger’s Definitive Proxy Statement on Schedule 14A filed on March 1, 2013) (+) 88 Exhibit 10.9 10.10 10.11 10.12 10.13 10.14 10.15 10.16 10.17 10.18 10.19 10.20 10.21 10.22 First Amendment to Schlumberger 2013 Omnibus Stock Incentive Plan (incorporated by reference to Exhibit 10.9 to Schlumberger’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2013) (+) Exhibit 10.23 Form of Option Agreement, Incentive Stock Option, under Schlumberger 2013 Omnibus Stock Incentive Plan (incorporated by reference to Exhibit 10.1 to the Schlumberger’s Quarterly Report on Form 10-Q for the quarter ended in June 30, 2015) (+) Form of Option Agreement, Non-Qualified Stock Option, under Schlumberger 2013 Omnibus Stock Incentive Plan (incorporated by reference to Exhibit 10.2 to Schlumberger’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015) (+) Form of Restricted Stock Unit Award Agreement under Schlumberger 2013 Omnibus Stock Incentive Plan (incorporated by reference to Exhibit 10.3 to Schlumberger’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015) (+) Schlumberger Discounted Stock Purchase Plan, as amended and restated effective as of January 19, 2017 (incorporated by reference to Appendix C to Schlumberger’s Definitive Proxy Statement on Schedule 14A filed on February 21, 2017) (+) Schlumberger 2017 Omnibus Stock Incentive Plan (incorporated by reference to Appendix B of Schlumberger’s Definitive Proxy Statement filed on February 21, 2017) (+) Form of Incentive Stock Option Agreement under 2017 Schlumberger Omnibus Stock Incentive Plan (incorporated by reference to Exhibit 10.6 to Schlumberger’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2017) (+) Form of Restricted Stock Unit Award Agreement under Schlumberger 2017 Omnibus Stock Incentive Plan (incorporated by reference to Exhibit 10.4 to Schlumberger’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2017) (+) Form of Non-Qualified Stock Option Agreement under Schlumberger 2017 Omnibus Stock Incentive Plan (incorporated by reference to Exhibit 10.5 to Schlumberger’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2017) (+) Form of 2016 Three-Year Performance Share Unit Award Agreement under Schlumberger 2013 Omnibus Stock Incentive Plan (incorporated by reference to Exhibit 10.1 to Schlumberger’s Quarterly Report on Form 10-Q for the quarter ended April 27, 2016) (+) Form of 2017 Two-Year Performance Share Unit Award Agreement under Schlumberger 2013 Omnibus Stock Incentive Plan (incorporated by reference to Exhibit 10.1 to Schlumberger’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2017) (+) Form of 2017 Three-Year Performance Share Unit Award Agreement under Schlumberger 2013 Omnibus Stock Incentive Plan (incorporated by reference to Exhibit 10.2 to Schlumberger’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2017) (+) Form of 2015 Cameron International Corporation Stock Option Agreement applicable to Chief Executive Officer (incorporated by reference to Exhibit 10.38 to Schlumberger’s Annual Report on Form 10-K for the year ended December 31, 2016) (+) 89 10.24 10.25 10.26 10.27 10.28 10.29 10.30 10.31 10.32 10.33 10.34 10.35 Form of 2011 Cameron International Corporation Non-Qualified Stock Option Agreement (incorporated by reference to Exhibit 10.39 to Schlumberger’s Annual Report on Form 10-K for the year ended December 31, 2016) (+) Form of 2013 Cameron International Corporation Non-Qualified Stock Option Agreement (incorporated by reference to Exhibit 10.40 to Schlumberger’s Annual Report on Form 10-K for the year ended December 31, 2016) (+) Form of 2014 Cameron International Corporation Non-Qualified Stock Option Agreement (incorporated by reference to Exhibit 10.41 to Schlumberger’s Annual Report on Form 10-K for the year ended December 31, 2016) (+) Form of 2011 Cameron International Corporation Incentive Stock Option Agreement (incorporated by reference to Exhibit 10.43 to Schlumberger’s Annual Report on Form 10-K for the year ended December 31, 2016) (+) Form of 2013 Cameron International Corporation Incentive Stock Option Agreement (incorporated by reference to Exhibit 10.44 to Schlumberger’s Annual Report on Form 10-K for the year ended December 31, 2016) (+) Form of 2014 Cameron International Corporation Incentive Stock Option Agreement (incorporated by reference to Exhibit 10.45 to Schlumberger’s Annual Report on Form 10-K for the year ended December 31, 2016) (+) Form of Indemnification Agreement (incorporated by reference to Exhibit 10 to Schlumberger’s Current Report on Form 8-K filed on October 21, 2013) Subsidiaries (*) Consent of Independent Registered Public Accounting Firm (*) Exhibit 10.36 10.37 10.38 10.39 10.40 10.41 10.42 21 23 24 Powers of Attorney (*) Certification of Chief Executive Officer pursuant Section 302 of the Sarbanes-Oxley Act of 2002 (*) Certification of Chief Financial Officer pursuant Section 302 of the Sarbanes-Oxley Act of 2002 (*) to Rule 13a-14(a) as Adopted Pursuant to 31.1 to Rule 13a-14(a) as Adopted Pursuant to 31.2 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (*) Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (*) Mine Safety Disclosure (*) The following materials from Schlumberger Limited’s Annual Report on Form 10-K for the year ended December 31, 2017, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Statement of Income, (ii) Consolidated Statement of Comprehensive Income, (iii) Consolidated Balance Sheet, (iv) Consolidated Statement of Cash Flows, (v) Consolidated Statement of Equity and (vi) Notes to Consolidated Financial Statements. (*) (*) Exhibits electronically filed with this Form 10-K. All other exhibits incorporated by reference. (+) Management contracts or compensatory plans or arrangements. 32.1 32.2 95 101 90 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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. Date: January 24, 2018 SCHLUMBERGER LIMITED By: /S/ HOWARD GUILD Howard Guild Chief Accounting Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. Name * Paal Kibsgaard /S/ SIMON AYAT Simon Ayat /S/ HOWARD GUILD Howard Guild * Peter L.S. Currie * Miguel Galuccio * V. Maureen Kempston Darkes * Nikolay Kudryavtsev * Helge Lund * Michael E. Marks * Indra K. Nooyi * Lubna S. Olayan * Leo Rafael Reif * Tore Sandvold * Henri Seydoux Title Chairman and Chief Executive Officer (Principal Executive Officer) Executive Vice President and Chief Financial Officer (Principal Financial Officer) Chief Accounting Officer (Principal Accounting Officer) Director Director Director Director Director Director Director Director Director Director Director /S/ ALEXANDER C. JUDEN *By Alexander C. Juden Attorney-in-Fact January 24, 2018 91 Significant Subsidiaries Listed below are the significant subsidiaries of the Registrant as of December 31, 2017, and the states or jurisdictions in which they are incorporated or organized. The indentation reflects the principal parenting of each subsidiary. The names of other subsidiaries have been omitted from the list below, since they would not constitute, in the aggregate, a significant subsidiary as of December 31, 2017. Exhibit 21 Schlumberger B.V., Netherlands Cameron Lux I SARL, Luxembourg OneSubsea BV, Netherlands Schlumberger Canada Limited, Canada Schlumberger SA, France Services Petroliers Schlumberger, France Schlumberger Norge AS, Norway Schlumberger Holdings Corporation, Delaware Cameron International Corporation, Delaware Schlumberger Technology Corporation, Texas Smith International Inc., Delaware Schlumberger UK Limited, UK Schlumberger Plc, UK Schlumberger Oilfield UK Plc, UK Schlumberger Oilfield Holdings Limited, BVI Schlumberger Holdings II Limited, BVI Dowell Schlumberger Corporation, BVI Schlumberger Logelco, Inc., Panama Schlumberger Middle East SA., Panama Schlumberger Offshore Services Limited, BVI Schlumberger Overseas, SA, Panama Schlumberger Seaco, Inc., Panama Schlumberger Oilfield Eastern Ltd., BVI Exhibit 23 Consent of Independent Registered Public Accounting Firm We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 333-36366; 333-104225; 333-115277; 333-124534; 333-151920; 333-173055, as amended by post-effective amendment on Form S-8; 333-188589; 333-188590; 333-218181; and 333-218182); on Form S-3 (No.333-221161); on Form S-4 (No. 333-97899); and on Form S-4 as amended by post-effective amendment on Form S-8 (Nos. 333-207260 and 333-166326) of Schlumberger Limited of our report dated January 24, 2018 relating to the consolidated financial statements and the effectiveness of internal control over financial reporting, which appears in this Form 10-K. /s/ PricewaterhouseCoopers LLP PricewaterhouseCoopers LLP Houston, Texas January 24, 2018 Powers of Attorney Exhibit 24 Each of the undersigned, in the capacity or capacities set forth below his or her signature as a member of the Board of Directors and/or an officer of Schlumberger Limited, a Curaçao corporation, hereby appoints Simon Ayat, Howard Guild and Alexander C. Juden, or any of them, the attorney or attorneys of the undersigned, with full power of substitution and revocation, for and in the name, place and stead of the undersigned to execute and file with the Securities and Exchange Commission the Annual Report on Form 10-K under the Securities Exchange Act of 1934 (the “Exchange Act”) for the fiscal year ending December 31, 2017, and any amendment or amendments to any such Annual Report on Form 10-K, and any agreements, consents or waivers relative thereto, and to take any and all such other action for and in the name and place and stead of the undersigned as may be necessary or desirable in order to comply with the Exchange Act or the rules and regulations thereunder. /s/ Peter L.S. Currie Peter L.S. Currie Director /s/ V. Maureen Kempston Darkes V. Maureen Kempston Darkes Director /s/ Paal Kibsgaard Paal Kibsgaard Chairman of the Board and Chief Executive Officer /s/ Nikolay Kudryavtsev Nikolay Kudryavtsev Director /s/ Michael E. Marks Michael E. Marks Director /s/ Helge Lund Helge Lund Director Date: January 17, 2018 /s/ Indra K. Nooyi Indra K. Nooyi Director /s/ Lubna S. Olayan Lubna S. Olayan Director /s/ Leo Rafael Reif Leo Rafael Reif Director /s/ Tore Sandvold Tore Sandvold Director /s/ Henri Seydoux Henri Seydoux Director /s/ Miguel Galuccio Miguel Galuccio Director Exhibit 31.1 CERTIFICATION OF CHIEF EXECUTIVE OFFICER I, Paal Kibsgaard, certify that: 1. I have reviewed this Annual Report on Form 10-K of Schlumberger Limited; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: a) b) c) d) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and 5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): a) b) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. Date: January 24, 2018 /s/ Paal Kibsgaard Paal Kibsgaard Chief Executive Officer Exhibit 31.2 I, Simon Ayat, certify that: CERTIFICATION OF CHIEF FINANCIAL OFFICER 1. I have reviewed this Annual Report on Form 10-K of Schlumberger Limited; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: a) b) c) d) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and 5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): a) b) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. Date: January 24, 2018 /s/ Simon Ayat Simon Ayat Executive Vice President and Chief Financial Officer CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 Exhibit 32.1 In connection with the Annual Report on Form 10-K of Schlumberger N.V. (Schlumberger Limited) (the “Company”) for the year ended December 31, 2017 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Paal Kibsgaard, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that: (1) (2) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: January 24, 2018 /s/ Paal Kibsgaard Paal Kibsgaard Chief Executive Officer A signed original of this written statement required by Section 906 has been provided to Schlumberger Limited and will be retained by Schlumberger Limited and furnished to the Securities and Exchange Commission or its staff upon request. This certification accompanies the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed by the Company for purposes of Section 18 of the Exchange Act. CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 Exhibit 32.2 In connection with the Annual Report on Form 10-K of Schlumberger N.V. (Schlumberger Limited) (the “Company”) for the year ended December 31, 2017 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Simon Ayat, Executive Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that: (1) (2) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: January 24, 2018 /s/ Simon Ayat Simon Ayat Executive Vice President and Chief Financial Officer A signed original of this written statement required by Section 906 has been provided to Schlumberger Limited and will be retained by Schlumberger Limited and furnished to the Securities and Exchange Commission or its staff upon request. This certification accompanies the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed by the Company for purposes of Section 18 of the Exchange Act. Mine Safety Disclosure Exhibit 95 The following disclosure is provided pursuant to Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which requires certain disclosures by companies required to file periodic reports under the Securities Exchange Act of 1934, as amended, that operate mines regulated under the Federal Mine Safety and Health Act of 1977. The table that follows reflects citations, orders, violations and proposed assessments issued by the Mine Safety and Health Administration (the “MSHA”) to M-I LLC, an indirect wholly-owned subsidiary of Schlumberger. The disclosure is with respect to the full year ended December 31, 2017. Due to timing and other factors, the data may not agree with the mine data retrieval system maintained by the MSHA at www.MSHA.gov. Full Year 2017 (whole dollars) Mine or Operating Name/MSHA Identification Number Section 104 S&S Citations Section 104(b) Orders Section 104(d) Citations and Orders Section 110(b)(2) Violations Section 107(a) Orders Proposed MSHA Assessments(1) Mining Related Fatalities Received Notice of Potential to Have Pattern Under Section 104(e) (yes/no) Received Notice of Pattern of Violations Under Section 104(e) (yes/no) Legal Actions Pending as of Last Day of Period Legal Actions Initiated During Period Legal Actions Resolved During Period Amelia Barite Plant/1600825 Battle Mountain Grinding Plant/2600828 Galveston GBT Barite Grinding Plant/4104675 Greybull Milling Operation/ 4800602 Greybull Mining Operation/ 4800603 Greystone Mine/2600411 Mountain Springs Beneficiation Plant/2601390 Wisconsin Proppants/ 4703742 0 0 1 1 0 0 1 2 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 $116 $348 $232* $375 $0 $0 $276 $1552* 0 0 0 0 0 0 0 0 N N N N N N N N N N N N N N N N 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 (1) * * Amounts included are the total dollar value of proposed assessments received from MSHA on or before December 31, 2017, regardless of whether the assessment has been challenged or appealed, for citations and orders occurring during the full year 2017. Citations and orders can be contested and appealed, and as part of that process, are sometimes reduced in severity and amount, and sometimes dismissed. The number of citations, orders, and proposed assessments vary by inspector and also vary depending on the size and type of the operation. As of January 3, 2018, MSHA had not yet proposed an assessment for one S&S citation, at Galveston GBT Barite Grinding Plant/4104675. As of January 3, 2018, MSHA had not yet proposed an assessment for (5) Non-S&S citations and (1) S&S CITATION for WP Operations LLC, (1) non-S&S citation for TPS Construction (1) non-S&S citation for B&B electric, (1) non-S&S citation for Advantage Industrial Systems and (1) non-S&S citation for Chippewa Valley Vulcanizing at Wisconsin Proppants/4703742 Board of Directors Corporate Officers Paal Kibsgaard Chairman and Chief Executive Officer Simon Ayat Executive Vice President and Chief Financial Officer Alexander C. Juden Secretary and General Counsel Ashok Belani Executive Vice President Technology Jean-François Poupeau Executive Vice President Corporate Engagement Patrick Schorn Executive Vice President New Ventures Aaron Gatt Floridia President Western Hemisphere Khaled Al Mogharbel President Eastern Hemisphere Stephane Biguet Vice President Finance Pierre Cheréque Vice President and Director of Taxes Stephanie Cox Vice President Human Resources Catherine MacGregor President Drilling Group Hinda Gharbi President Reservoir Characterization Group Olivier Le Peuch President Cameron Group Abdellah Merad President Production Group Imran Kizilbash Vice President Schlumberger Venture Fund Simon Farrant Vice President Investor Relations Howard Guild Chief Accounting Officer Kevin Fyfe Vice President Controller Operations Claudia Jaramillo Vice President and Treasurer Vijay Kasibhatla Director Mergers and Acquisitions Guy Arrington Vice President Operations Planning and Resource Management Saul Laureles Director Corporate Legal and Assistant Secretary Eileen Hardell Assistant Secretary Corporate Information Stockholder Information Schlumberger’s common stock is listed on the New York Stock Exchange, trading symbol “SLB,” and on the Euronext Paris, London, and SIX Swiss Stock Exchanges. For quarterly earnings dividend announcements and other informa- tion, please call (800) 997-5299 from the United States and Canada, or +1 (813) 774-5043 outside North America. You may also visit www.slb.com/ir. Stock Transfer Agent and Registrar Computershare Trust Company, N.A. P.O. Box 30170 College Station, Texas 77842 +1 (877) 745-9341 +1 (781) 575-2707 For Overnight Delivery: Computershare Trust Company, N.A. 211 Quality Circle, Suite 210 College Station, Texas 77845 +1 (877) 745-9341 +1 (781) 575-2707 General stockholder information is available on the Computershare website at www.computershare.com. E-mail Alerts To receive Schlumberger press releases and daily news, sign up at www.slb.com/ir. Form 10-K The Schlumberger 2017 annual report on Form 10-K filed with the Securities and Exchange Commission is available without charge. To obtain a copy, call (800) 997-5299 within North America and +1 (813) 774-5043 outside North America. Alternatively, you can view and print all of our SEC filings online at www.slb.com/ir or write to: Vice President Investor Relations Schlumberger Limited 5599 San Felipe, 17th Floor Houston, Texas, 77056. Duplicate Mailings When a stockholder owns shares in more than one account, or when stockholders live at the same address, duplicate mailings may result. If you receive duplicate reports, you can help eliminate the added expense by requesting that only one copy be sent. To elimi- nate duplicate mailings, contact Computershare Trust Company, N.A., Stock Transfer Agent and Registrar. Nonprofit Community Development Programs Schlumberger supports and encourages a range of community development programs—both local and global—many of which are supported by employee volunteers. We have chosen to focus on science, technology, engineering, and mathematics (STEM) education and community health and safety. To learn more about these programs, please see the latest edition of the Schlumberger Global Stewardship Report at www.slb.com. World Wide Web For information on Schlumberger technology, services and solutions, visit www.slb.com. For information on career and job opportunities at Schlumberger, visit www.careers.slb.com. * Mark of Schlumberger Other company, product, and service names are the properties of their respective owners. Photography by John Hafemeister and Gary Ranos (cover, 3c, 13a); Stuart Conway (inside front cover); Robert Seale (3a); Ken Childress (3d, 9); John Hafemeister (12); Ragnar Vikoeren (16). Peter L.S. Currie 2, 4 President, Currie Capital LLC Palo Alto, California V. Maureen Kempston Darkes 1, 3 Former Group Vice President General Motors Corporation Detroit, Michigan Paal Kibsgaard Chairman and Chief Executive Officer Schlumberger Nikolay Kudryavtsev 1, 3, 5 Rector Moscow Institute of Physics and Technology Moscow, Russia Helge Lund 1, 3 Former Chief Executive Officer BG Group plc Michael E. Marks 1 Managing Partner Riverwood Capital, LLC Palo Alto, California Indra K. Nooyi 1, 2 Chairman and Chief Executive Officer PepsiCo Purchase, New York Lubna S. Olayan 3, 4 Chief Executive Officer Olayan Financing Company Riyadh, Saudi Arabia Leo Rafael Reif 2, 4, 5 President Massachusetts Institute of Technology Cambridge, Massachusetts Tore I. Sandvold 3, 4 Executive Chairman Sandvold Energy AS Oslo, Norway Henri Seydoux 3, 4, 5 Chairman and Chief Executive Officer Parrot S.A. Paris, France Miguel Galuccio 3, 5 Chairman and Chief Executive Officer Vista Oil and Gas Mexico City, Mexico 1 Member, Audit Committee 2 Member, Compensation Committee 3 Member, Finance Committee 4 Member, Nominating and Governance Committee 5 Member, Science and Technology Committee Financial Performance (Stated in millions, except per-share amounts) Year ended December 31 Revenue Net income (loss) attributable to Schlumberger Diluted earnings (loss) per share Cash dividends per share Cash flow from operations Safety Performance Year ended December 31 Combined Lost Time Injury Frequency (CLTIF)—Industry Recognized Auto Accident Rate mile (AARm)—Industry Recognized 2017 $ 30,440 $ (1,505) $ (1.08) $ 2.00 $ 5,663 2017 0.90 0.34 2016 $ 27,810 $ (1,687) $ (1.24) 2.00 $ 6,261 $ 2016 0.90 0.25 2015 $ 35,475 $ 2,072 $ 1.63 2.00 $ 8,805 $ 2015 0.95 0.21 14781schD1R2.indd 2 2/14/18 5:18 PM Schlumberger Limited 42 rue Saint-Dominique 75007 Paris France 5599 San Felipe Houston, Texas 77056 United States 62 Buckingham Gate London SW1E 6AJ United Kingdom Parkstraat 83 2514 JG The Hague The Netherlands www.slb.com 2017 Annual Report Schlumberger Limited 14781schD1R2.indd 1 2/15/18 9:13 AM 

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