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SCHLUMBERGER LIMITED 10-Q 2011

Documents found in this filing:

  1. 10-Q
  2. Ex-31.1
  3. Ex-31.2
  4. Ex-32.1
  5. Ex-32.2
  6. Ex-32.2
e10vq
Table of Contents

 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended:
September 30, 2011
Commission file No.:
1-4601
SCHLUMBERGER N.V.
(SCHLUMBERGER LIMITED)
(Exact name of registrant as specified in its charter)
     
CURAÇAO   52-0684746
(State or other jurisdiction of
incorporation or organization)
  (I.R.S. Employer
Identification No.)
     
42 RUE SAINT-DOMINIQUE
PARIS, FRANCE
  75007
     
5599 SAN FELIPE, 17th FLOOR
HOUSTON, TEXAS, U.S.A.
  77056
     
PARKSTRAAT 83
THE HAGUE,
THE NETHERLANDS
  2514 JG
     
(Addresses of principal executive offices)   (Zip Codes)
Registrant’s telephone number: (713) 375-3400
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 þ          NO o
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 þ           NO o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
             
Large accelerated filer þ   Accelerated filer o   Non-accelerated filer o   Smaller reporting company o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
YES o            NO þ
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
     
Class   Outstanding at September 30, 2011
     
COMMON STOCK, $0.01 PAR VALUE PER SHARE   1,342,125,999
 
 

 


 

SCHLUMBERGER LIMITED
Third Quarter 2011 Form 10-Q
Table of Contents
         
    Page  
       
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    31  
    31  
       
    32  
    32  
    32  
       
    32  
    32  
Certifications
       
 EX-31.1
 EX-31.2
 EX-32.1
 EX-32.2
 EX-101 INSTANCE DOCUMENT
 EX-101 SCHEMA DOCUMENT
 EX-101 CALCULATION LINKBASE DOCUMENT
 EX-101 LABELS LINKBASE DOCUMENT
 EX-101 PRESENTATION LINKBASE DOCUMENT
 EX-101 DEFINITION LINKBASE DOCUMENT

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Table of Contents

PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
SCHLUMBERGER LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
                                 
                    (Stated in millions,
except per share amounts)
 
    Third Quarter     Nine Months  
    2011     2010     2011     2010  
Revenue
                               
Oilfield Services
  $ 9,546     $ 6,646     $ 26,658     $ 18,180  
Distribution
    683       199       1,908       199  
 
                       
 
    10,229       6,845       28,566       18,379  
Interest & other income
    34       54       94       169  
Gain on investment in M-I SWACO
          1,270             1,270  
Expenses
                               
Cost of Revenue:
                               
Oilfield Services
    7,440       5,281       20,945       14,347  
Distribution
    652       190       1,831       190  
Research & engineering
    266       240       800       662  
General & administrative
    91       75       326       221  
Merger & integration
    27       97       93       131  
Restructuring & other
          299             299  
Interest
    70       47       212       146  
 
                       
Income from continuing operations before taxes
    1,717       1,940       4,453       3,822  
Taxes on income
    410       209       1,079       600  
 
                       
Income from continuing operations
    1,307       1,731       3,374       3,222  
Income from discontinued operations
                220        
 
                       
Net income
    1,307       1,731       3,594       3,222  
Net income (loss) attributable to noncontrolling interests
    6       (3 )     10       (2 )
 
                       
Net income attributable to Schlumberger
  $ 1,301     $ 1,734     $ 3,584     $ 3,224  
 
                       
 
                               
Schlumberger amounts attributable to:
                               
Income from continuing operations
  $ 1,301     $ 1,734     $ 3,364     $ 3,224  
Income from discontinued operations
                220        
 
                       
Net income
  $ 1,301     $ 1,734     $ 3,584     $ 3,224  
 
                       
 
                               
Basic earnings per share of Schlumberger:
                               
Income from continuing operations
  $ 0.97     $ 1.39     $ 2.49     $ 2.66  
Income from discontinued operations
                0.16        
 
                       
Net income
  $ 0.97     $ 1.39     $ 2.65     $ 2.66  
 
                       
 
                               
Diluted earnings per share of Schlumberger:
                               
Income from continuing operations
  $ 0.96     $ 1.38     $ 2.46     $ 2.63  
Income from discontinued operations
                0.16        
 
                       
Net income
  $ 0.96     $ 1.38     $ 2.62     $ 2.63  
 
                       
 
                               
Average shares outstanding:
                               
Basic
    1,345       1,249       1,352       1,212  
Assuming dilution
    1,357       1,258       1,365       1,227  
See Notes to Consolidated Financial Statements

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Table of Contents

SCHLUMBERGER LIMITED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Unaudited)
                 
            (Stated in millions)  
    Sept. 30, 2011     Dec. 31,  
          2010  
ASSETS
               
Current Assets
               
Cash
  $ 1,732     $ 1,764  
Short-term investments
    4,332       3,226  
Receivables less allowance for doubtful accounts (2011 - $182; 2010 - $185)
    9,493       8,278  
Inventories
    4,469       3,804  
Deferred taxes
    148       51  
Other current assets
    1,086       975  
 
           
 
    21,260       18,098  
Fixed Income Investments, held to maturity
    255       484  
Investments in Affiliated Companies
    1,222       1,071  
Fixed Assets less accumulated depreciation
    12,583       12,071  
Multiclient Seismic Data
    444       394  
Goodwill
    14,118       13,952  
Intangible Assets
    4,927       5,162  
Other Assets
    772       535  
 
           
 
  $ 55,581     $ 51,767  
 
           
 
               
LIABILITIES AND EQUITY
               
Current Liabilities
               
Accounts payable and accrued liabilities
  $ 7,023     $ 6,488  
Estimated liability for taxes on income
    1,207       1,493  
Long-term debt — current portion
    2,395       2,214  
Short-term borrowings
    348       381  
Dividends payable
    334       289  
 
           
 
    11,307       10,865  
Long-term Debt
    8,740       5,517  
Postretirement Benefits
    1,034       1,262  
Deferred Taxes
    1,662       1,636  
Other Liabilities
    1,215       1,043  
 
           
 
    23,958       20,323  
 
           
 
               
Equity
               
Common stock
    11,606       11,920  
Treasury stock
    (5,088 )     (3,136 )
Retained earnings
    27,780       25,210  
Accumulated other comprehensive loss
    (2,798 )     (2,768 )
 
           
Schlumberger stockholders’ equity
    31,500       31,226  
Noncontrolling interests
    123       218  
 
           
 
    31,623       31,444  
 
           
 
  $ 55,581     $ 51,767  
 
           
See Notes to Consolidated Financial Statements

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Table of Contents

SCHLUMBERGER LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
                 
        (Stated in millions)  
    Nine Months Ended Sept. 30,  
  2011     2010  
Cash flows from operating activities:
               
Net income
  $ 3,594     $ 3,222  
Less: Income from discontinued operations
    (220 )      
Adjustments to reconcile net income to cash provided by operating activities:
               
Depreciation and amortization (1)
    2,420       1,951  
Gain on investment in M-I SWACO
          (1,270 )
Non-cash charges
          144  
Earnings of companies carried at equity, less dividends received
    (59 )     (79 )
Deferred income taxes
    40       146  
Stock-based compensation expense
    203       145  
Pension and other postretirement benefits expense
    274       224  
Pension and other postretirement benefits funding
    (359 )     (615 )
Change in assets and liabilities: (2)
               
Increase in receivables
    (1,273 )     (539 )
Increase in inventories
    (743 )     (21 )
Increase in other current assets
    (103 )     (129 )
Increase (decrease) in accounts payable and accrued liabilities
    207       (128 )
(Decrease) increase in estimated liability for taxes on income
    (510 )     224  
Increase (decrease) in other liabilities
    129       (26 )
Other — net
    144       (153 )
 
           
NET CASH PROVIDED BY OPERATING ACTIVITIES
    3,744       3,096  
 
           
Cash flows from investing activities:
               
Capital expenditures
    (2,763 )     (1,907 )
Multiclient seismic data capitalized
    (206 )     (241 )
Business acquisitions, net of cash acquired
    (148 )     (154 )
Cash acquired in merger with Smith International, Inc.
          399  
Acquisition of Geoservices, net of cash acquired
          (889 )
(Purchase) sale of investments, net
    (866 )     2,620  
Other
    231       (84 )
 
           
NET CASH USED IN INVESTING ACTIVITIES
    (3,752 )     (256 )
 
           
Cash flows from financing activities:
               
Dividends paid
    (968 )     (756 )
Proceeds from employee stock purchase plan
    208       179  
Proceeds from exercise of stock options
    218       113  
Stock repurchase program
    (2,362 )     (1,268 )
Proceeds from issuance of long-term debt
    6,825       646  
Repayment of long-term debt
    (3,600 )     (1,267 )
Net decrease in short-term borrowings
    (112 )     (3 )
Other
    (616 )     14  
 
           
NET CASH USED IN FINANCING ACTIVITIES
    (407 )     (2,342 )
 
           
 
               
Cash flows from discontinued operations — investing activities
    385        
 
           
 
               
Net (decrease) increase in cash before translation effect
    (30 )     498  
Translation effect on cash
    (2 )     (1 )
Cash, beginning of period
    1,764       617  
 
           
Cash, end of period
  $ 1,732     $ 1,114  
 
           
 
(1)   Includes multiclient seismic data costs.
 
(2)   Net of the effect of business acquisitions and divestitures.
See Notes to Consolidated Financial Statements

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SCHLUMBERGER LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EQUITY
(Unaudited)
                                                 
                                  (Stated in millions)  
                            Accumulated        
                            Other        
    Common Stock     Retained     Comprehensive     Noncontrolling        
January 1, 2011 - September 30, 2011   Issued     In Treasury     Earnings     Loss     Interests     Total  
Balance, January 1, 2011
  $ 11,920     $ (3,136 )   $ 25,210     $ (2,768 )   $ 218     $ 31,444  
Comprehensive income
                                               
Net income
                    3,584               10          
Currency translation adjustments
                            (51 )                
Changes in fair value of derivatives
                            (119 )                
Deferred employee benefits liabilities
                            140                  
Total comprehensive income
                                            3,564  
Shares sold to optionees, less shares exchanged
    (22 )     240                               218  
Shares granted to Directors
    1       1                               2  
Vesting of restricted stock
    (14 )     14                                
Shares issued under employee stock purchase plan
    53       155                               208  
Stock repurchase program
            (2,362 )                             (2,362 )
Stock-based compensation cost
    203                                       203  
Acquisition of noncontrolling interest
    (547 )                             (81 )     (628 )
Dividends declared ( $0.75 per share)
                    (1,014 )                     (1,014 )
Tax benefits on stock options
    12                                       12  
Other
                                    (24 )     (24 )
 
                                   
Balance, September 30, 2011
  $ 11,606     $ (5,088 )   $ 27,780     $ (2,798 )   $ 123     $ 31,623  
 
                                   
                                                 
                                  (Stated in millions)  
                            Accumulated        
                            Other        
    Common Stock     Retained     Comprehensive     Noncontrolling        
January 1, 2010 - September 30, 2010   Issued     In Treasury     Earnings     Loss     Interests     Total  
Balance, January 1, 2010
  $ 4,777     $ (5,002 )   $ 22,019     $ (2,674 )   $ 109     $ 19,229  
Comprehensive income
                                               
Net income
                    3,224               (2 )        
Currency translation adjustments
                            (29 )                
Changes in fair value of derivatives
                            (44 )                
Deferred employee benefits liabilities
                            120                  
Total comprehensive income
                                            3,269  
Shares sold to optionees, less shares exchanged
    (3 )     116                               113  
Shares granted to Directors
    1       1                               2  
Vesting of restricted stock
    (9 )     9                                
Shares issued under employee stock purchase plan
    49       129                               178  
Stock repurchase program
            (1,268 )                             (1,268 )
Stock-based compensation cost
    145                                       145  
Shares issued on conversion of debentures
    17       303                               320  
Acquisition of Smith International, Inc.
    6,880       2,948                       114       9,942  
Acquisition of noncontrolling interests
    3                               (8 )     (5 )
Dividends declared ($0.63 per share)
                    (789 )                     (789 )
Tax benefits on stock options
    14                                       14  
Other
            (39 )                     5       (34 )
 
                                   
Balance, September 30, 2010
  $ 11,874     $ (2,803 )   $ 24,454     $ (2,627 )   $ 218     $ 31,116  
 
                                   
SHARES OF COMMON STOCK
(Unaudited)
                         
                    (Stated in millions)  
                    Shares  
    Issued     In Treasury     Outstanding  
Balance, January 1, 2011
    1,434       (73 )     1,361  
Shares sold to optionees, less shares exchanged
          6       6  
Shares issued under employee stock purchase plan
          3       3  
Stock repurchase program
          (28 )     (28 )
 
                 
Balance, September 30, 2011
    1,434       (92 )     1,342  
 
                 
See Notes to Consolidated Financial Statements

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SCHLUMBERGER LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
The accompanying unaudited consolidated financial statements of Schlumberger Limited and its subsidiaries (“Schlumberger”) have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of Schlumberger management, all adjustments considered necessary for a fair statement have been included in the accompanying unaudited financial statements. All intercompany transactions and balances have been eliminated in consolidation. Operating results for the nine-month period ended September 30, 2011 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2011. The December 31, 2010 balance sheet information has been derived from the Schlumberger 2010 financial statements. For further information, refer to the Consolidated Financial Statements and notes thereto, included in the Schlumberger Annual Report on Form 10-K for the year ended December 31, 2010, filed with the Securities and Exchange Commission on February 4, 2011.
Certain items from the prior year have been reclassified to conform to the current year presentation.
2. Charges and Credits
Schlumberger recorded the following charges and credits during the first nine months of 2011 and 2010:
2011
Third quarter of 2011:
    Schlumberger recorded $27 million of pretax merger and integration-related charges ($23 million after-tax) in connection with the acquisitions of Smith International, Inc. (“Smith”) and Geoservices. This amount is classified in Merger & integration in the Consolidated Statement of Income.
Second quarter of 2011:
    Schlumberger made a $50 million grant to the Schlumberger Foundation to support the Foundation’s Faculty for the Future program. This program supports talented women scientists from the developing world by helping them pursue advanced graduate studies in scientific disciplines at leading universities worldwide. This $50 million charge ($40 million after-tax) is classified in General & administrative in the Consolidated Statement of Income.
 
    Schlumberger recorded $32 million of pretax merger and integration-related charges ($24 million after-tax) in connection with the acquisitions of Smith and Geoservices. This amount is classified in Merger & integration in the Consolidated Statement of Income.
First quarter of 2011:
    Schlumberger recorded $34 million of pretax merger and integration-related charges ($28 million after-tax) in connection with the acquisitions of Smith and Geoservices. This amount is classified in Merger & integration in the Consolidated Statement of Income.

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The following is a summary of the charges recorded during the first nine months of 2011:
                             
            (Stated in millions)      
                  Consolidated Statement
    Pretax     Tax     Net     of Income Classification
Merger and integration-related costs
  $ 93     $ 17     $ 76     Merger & integration
Donation to the Schlumberger Foundation
    50       10       40     General & administrative
 
                   
 
  $ 143     $ 27     $ 116      
 
                   
2010
Third quarter of 2010:
    As a result of the decision to rationalize support costs across the organization as well as to restructure the North America land operations to provide greater operating efficiency, Schlumberger recorded a pretax charge of $90 million ($77 million after-tax).
 
    Following the successful introduction of UniQ, a new generation single-sensor land acquisition system, Schlumberger recorded a $78 million pretax charge ($71 million after-tax), related to the impairment of WesternGeco’s first generation Q-Land system assets.
 
    A pretax and after-tax charge of $63 million primarily relating to the early termination of a vessel lease associated with WesternGeco’s electromagnetic service offering as well as related assets, including a $30 million impairment related to an equity-method investment.
 
    In connection with Schlumberger’s merger with Smith (see Note 4 — Acquisitions), Schlumberger recorded the following pretax charges: $56 million ($55 million after-tax) of merger-related transaction costs including advisory and legal fees, $41 million ($35 million after-tax) relating to employee benefits for change in control payments and retention bonuses, and $38 million ($24 million after-tax) for the amortization of purchase accounting adjustments associated with the write-up of acquired inventory to its estimated fair value.
 
    $40 million pretax ($36 million after-tax) for the early termination of rig contracts and workforce reductions in Mexico due to the slowdown of project activity.
 
    Schlumberger repurchased $352 million of its $650 million 6.50% Notes due 2012 and, as a result, incurred a pretax charge of $28 million ($18 million after-tax).
 
    Schlumberger recorded a pretax gain of $1.27 billion ($1.24 billion after-tax) as a result of remeasuring its previously held 40% equity interest in the M-I SWACO joint venture.

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The following is a summary of the charges and credits recorded during the third quarter of 2010:
                             
            (Stated in millions)      
                            Consolidated Statement
    Pretax     Tax     Net     of Income Classification
Restructuring and Merger-related Charges:
                           
Severance and other
  $ 90     $ 13     $ 77     Restructuring & other
Impairment relating to WesternGeco’s first generation Q-Land acquisition system
    78       7       71     Restructuring & other
Other WesternGeco-related charges
    63             63     Restructuring & other
Professional fees and other
    56       1       55     Merger & integration
Merger-related employee benefits
    41       6       35     Merger & integration
Inventory fair value adjustments
    38       14       24     Cost of revenue
Mexico restructuring
    40       4       36     Restructuring & other
Repurchase of bonds
    28       10       18     Restructuring & other
 
                     
Total restructuring and merger-related charges
    434       55       379      
 
                     
Gain on investment in M-I SWACO
    (1,270 )     (32 )     (1,238 )   Gain on Investment in M-I SWACO
 
                     
 
  $ (836 )   $ 23     $ (859 )    
 
                     
First quarter of 2010:
    Schlumberger incurred $35 million of pretax and after-tax merger-related costs in connection with the Smith and Geoservices transactions. These costs primarily consisted of legal and other advisory fees.
 
    During March 2010, the Patient Protection and Affordable Care Act (“PPACA”) was signed into law in the United States. Among other things, the PPACA eliminated the tax deductibility of retiree prescription drug benefits to the extent of the Medicare Part D subsidy that companies, such as Schlumberger, receive. As a result of this change in law, Schlumberger recorded a $40 million charge to adjust its deferred tax assets to reflect the loss of this future tax deduction.
The following is a summary of the charges and credits recorded during the first nine months of 2010:
                             
            (Stated in millions)      
                            Consolidated Statement
    Pretax     Tax     Net     of Income Classification
Restructuring and Merger-related Charges:
                           
Severance and other
  $ 90     $ 13     $ 77     Restructuring & other
Impairment relating to WesternGeco’s first generation Q-Land acquisition system
    78       7       71     Restructuring & other
Other WesternGeco-related charges
    63             63     Restructuring & other
Professional fees and other
    91       1       90     Merger & integration
Merger-related employee benefits
    41       6       35     Merger & integration
Inventory fair value adjustments
    38       14       24     Cost of revenue
Mexico restructuring
    40       4       36     Restructuring & other
Repurchase of bonds
    28       10       18     Restructuring & other
 
                     
Total restructuring and merger-related charges
    469       55       414      
 
                     
Impact of elimination of tax deduction related to Medicare Part D subsidy
          (40 )     40     Taxes on income
 
                     
Gain on investment in M-I SWACO
    (1,270 )     (32 )     (1,238 )   Gain on Investment in M-I SWACO
 
                     
 
  $ (801 )   $ (17 )   $ (784 )    
 
                     
3. Earnings Per Share
The following is a reconciliation from basic earnings per share from continuing operations of Schlumberger to diluted earnings per share from continuing operations of Schlumberger:

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                            (Stated in millions, except per share amounts)  
    2011     2010  
    Schlumberger             Earnings per     Schlumberger             Earnings per  
    Income from     Average     Share from     Income from             Share from  
    Continuing     Shares     Continuing     Continuing     Average Shares     Continuing  
    Operations     Outstanding     Operations     Operations     Outstanding     Operations  
Third Quarter
                                               
Basic
  $ 1,301       1,345     $ 0.97     $ 1,734       1,249     $ 1.39  
 
                                   
Assumed exercise of stock options
          9                     7          
Unvested restricted stock
          3                     2          
 
                                   
Diluted
  $ 1,301       1,357     $ 0.96     $ 1,734       1,258     $ 1.38  
 
                                   
                                                 
    Schlumberger             Earnings per     Schlumberger             Earnings per  
    Income from     Average     Share from     Income from             Share from  
    Continuing     Shares     Continuing     Continuing     Average Shares     Continuing  
    Operations     Outstanding     Operations     Operations     Outstanding     Operations  
Nine Months
                                               
Basic
  $ 3,364       1,352     $ 2.49     $ 3,224       1,212     $ 2.66  
 
                                   
Assumed conversion of debentures
                        3       5          
Assumed exercise of stock options
          10                     8          
Unvested restricted stock
          3                     2          
 
                                   
Diluted
  $ 3,364       1,365     $ 2.46     $ 3,227       1,227     $ 2.63  
 
                                   
The number of outstanding options to purchase shares of Schlumberger common stock which were not included in the computation of diluted earnings per share, because to do so would have had an antidilutive effect, were as follows:
                 
    (Stated in millions)  
    2011     2010  
Third Quarter
    14       14  
Nine Months
    6       13  
4. Acquisitions
On August 27, 2010, Schlumberger acquired all of the outstanding shares of Smith, a leading supplier of premium products and services to the oil industry. Schlumberger issued approximately 176 million shares of its common stock which were valued at $9.8 billion at the time of closing, to effect this transaction. Smith reported revenue of approximately $6.8 billion during the first nine months of 2010.
On April 23, 2010, Schlumberger completed the acquisition of Geoservices, a privately owned oilfield services company specializing in mud logging, slickline and production surveillance operations, for $915 million in cash.
During the first nine months of 2011, Schlumberger made certain acquisitions and investments, none of which were significant on an individual basis, for cash payments, net of cash acquired, of $148 million.
5. Inventory
A summary of inventory follows:
                 
    (Stated in millions)  
    Sept. 30,     Dec. 31,  
    2011     2010  
Raw materials & field materials
  $ 1,971     $ 1,833  
Work in process
    355       249  
Finished goods
    2,143       1,722  
 
           
 
  $ 4,469     $ 3,804  
 
           

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6. Fixed Assets
A summary of fixed assets follows:
                 
    (Stated in millions)
    Sept. 30,     Dec. 31,  
    2011     2010  
Property, plant & equipment
  $ 28,960     $ 27,212  
Less: Accumulated depreciation
    16,377       15,141  
 
           
 
  $ 12,583     $ 12,071  
 
           
Depreciation expense relating to fixed assets was as follows:
                 
    (Stated in millions)  
    2011     2010  
Third Quarter
  $ 689     $ 603  
Nine Months
  $ 2,019     $ 1,708  
7. Multiclient Seismic Data
The change in the carrying amount of multiclient seismic data for the nine months ended September 30, 2011 was as follows:
         
    (Stated in millions)  
Balance at December 31, 2010
  $ 394  
Capitalized in period
    206  
Charged to expense
    (156 )
 
     
Balance at September 30, 2011
  $ 444  
 
     
8. Goodwill
In connection with the change in reportable segments as discussed in Note 14 Segment Information, Schlumberger reallocated the goodwill that existed as of December 31, 2010 to the new reporting units on a relative fair value basis.
The changes in the carrying amount of goodwill by reporting unit for the nine months ended September 30, 2011 were as follows:
                                         
                            (Stated in millions)  
    Reservoir     Reservoir                    
    Characterization     Production     Drilling     Distribution     Total  
Balance at January 1, 2011
  $ 3,381     $ 2,351     $ 8,150     $ 70     $ 13,952  
Adjustments relating to Smith acquisition
          13       175       6       194  
Other acquisitions
                47             47  
Divestiture of business
    (51 )                       (51 )
Impact of changes in exchange rates
    (10 )     (8 )     (6 )           (24 )
 
                             
Balance at September 30, 2011
  $ 3,320     $ 2,356     $ 8,366     $ 76     $ 14,118  
 
                             
9. Intangible Assets
Intangible assets principally comprise technology/technical know-how, tradenames and customer relationships. The gross book value, accumulated amortization and net book value of intangible assets were as follows:

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                                    (Stated in millions)  
    Sept. 30, 2011     Dec. 31, 2010  
    Gross     Accumulated     Net Book     Gross     Accumulated     Net Book  
    Book Value     Amortization     Value     Book Value     Amortization     Value  
         
Technology/Technical Know-How
  $ 1,835     $ 303     $ 1,532     $ 1,846     $ 215     $ 1,631  
Tradenames
    1,671       107       1,564       1,678       61       1,617  
Customer Relationships
    1,954       185       1,769       1,963       129       1,834  
Other
    361       299       62       378       298       80  
         
 
  $ 5,821     $ 894     $ 4,927     $ 5,865     $ 703     $ 5,162  
         
Amortization expense charged to income was as follows:
                 
    (Stated in millions)  
    2011     2010  
Third Quarter
  $ 81     $ 46  
Nine Months
  $ 245     $ 109  
The weighted average amortization period for all intangible assets is approximately 21 years.
Based on the net book value of intangible assets at September 30, 2011, amortization charged to income for the subsequent five years is estimated to be: remainder of 2011 — $81 million; 2012 — $303 million; 2013 — $295 million; 2014 — $286 million; 2015 — $265 million; and 2016 — $255 million.
10. Derivative Instruments and Hedging Activities
Schlumberger is exposed to market risks related to fluctuations in foreign currency exchange rates, commodity prices and interest rates. To mitigate these risks, Schlumberger utilizes derivative instruments. Schlumberger does not enter into derivative transactions for speculative purposes.
Foreign Currency Exchange Rate Risk
As a multinational company, Schlumberger conducts business in approximately 80 countries. Schlumberger’s functional currency is primarily the US dollar, which is consistent with the oil and gas industry. However, outside the United States, a significant portion of 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 local currency expenses exceed revenues denominated in local currency that are other than the functional currency. Schlumberger uses foreign currency forward contracts and foreign currency options to provide a hedge against a portion of these cash flow risks. These contracts are accounted for as cash flow hedges, with the effective portion of changes in the fair value of the hedge recorded on the Consolidated Balance Sheet and in Accumulated Other Comprehensive Loss. Amounts recorded in Accumulated Other Comprehensive Loss are reclassified into earnings in the same period or periods that the hedged item is recognized in earnings. The ineffective portion of changes in the fair value of hedging instruments, if any, is recorded directly to earnings.
At September 30, 2011, Schlumberger recognized a cumulative net $74 million loss in Equity relating to revaluation of foreign currency forward contracts and foreign currency options designated as cash flow hedges, the majority of which is expected to be reclassified into earnings within the next twelve months.
Schlumberger is also exposed to changes in the fair value of assets and liabilities, including certain of its long-term debt, which are denominated in currencies other than the functional currency. Schlumberger uses foreign currency forward contracts and foreign currency options to hedge this exposure as it relates to certain currencies. These contracts are accounted for as fair value hedges with the fair value of the contracts recorded on the Consolidated Balance Sheet and changes in the fair value recognized in the Consolidated Statement of Income along with the change in fair value of the hedged item.
At September 30, 2011, contracts were outstanding for the US dollar equivalent of $7.4 billion in various foreign currencies.

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Commodity Price Risk
Schlumberger is exposed to the impact of market fluctuations in the price of certain commodities, such as metals and fuel. Schlumberger utilizes forward contracts to manage a small percentage of the price risk associated with forecasted metal purchases. The objective of these contracts is to reduce the variability of cash flows associated with the forecasted purchase of those commodities. These contracts do not qualify for hedge accounting treatment and therefore, changes in the fair value of the forward contracts are recorded directly to earnings.
At September 30, 2011, $38 million of commodity forward contracts were outstanding.
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 the third quarter of 2009, Schlumberger entered into an interest rate swap for a notional amount of $450 million in order to hedge changes in the fair value of Schlumberger’s $450 million 3.00% Notes due 2013. Under the terms of this swap, Schlumberger receives interest at a fixed rate of 3.00% annually and pays interest quarterly at a floating rate of three-month LIBOR plus a spread of 0.765%. This interest rate swap is designated as a fair value hedge of the underlying debt. This derivative instrument is marked to market with gains and losses recognized currently in income to offset the respective gains and losses recognized on changes in the fair value of the hedged debt. This results in no net gain or loss being recognized in the Consolidated Statement of Income.
At September 30, 2011, Schlumberger had fixed rate debt aggregating $8.0 billion and variable rate debt aggregating $3.4 billion, after taking into account the effects of the interest rate swaps.
Short-term investments and Fixed income investments, held to maturity, totaled $4.6 billion at September 30, 2011, and were comprised primarily of money market funds, eurodollar time deposits, certificates of deposit, commercial paper, euro notes and Eurobonds, and were substantially all denominated in US dollars. The carrying value of these investments approximated fair value, which was estimated using quoted market prices for those or similar investments.
The fair values of outstanding derivative instruments are summarized as follows:

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The fair values of outstanding derivative instruments are summarized as follows:
                         
    (Stated in millions)        
    Fair Value of Derivatives        
    Sept. 30,     Dec. 31,        
  2011     2010     Consolidated Balance Sheet Classification
Derivative Assets
                       
Derivatives designated as hedges:
                       
Foreign exchange contracts
  $ 9     $ 4     Other current assets
Foreign exchange contracts
          37     Other Assets
Interest rate swaps
    12       14     Other Assets
 
                   
 
  $ 21     $ 55          
 
                   
 
                       
Derivatives not designated as hedges:
                       
Commodity contracts
  $     $ 3     Other current assets
Foreign exchange contracts
    25       9     Other current assets
Foreign exchange contracts
    23       9     Other Assets
 
                   
 
  $ 48     $ 21          
 
                   
 
  $ 69     $ 76          
 
                   
Derivative Liabilities
                       
Derivatives designated as hedges:
                       
Foreign exchange contracts
  $ 19     $ 9     Accounts payable and accrued liabilities
Foreign exchange contracts
    134       77     Other Liabilities
Interest rate swaps
          7     Accounts payable and accrued liabilities
 
                   
 
  $ 153     $ 93          
 
                   
 
                       
Derivatives not designated as hedges:
                       
Foreign exchange contracts
  $ 20     $ 14     Accounts payable and accrued liabilities
Commodity contacts
    6           Accounts payable and accrued liabilities
 
                   
 
  $ 26     $ 14          
 
                   
 
  $ 179     $ 107          
 
                   
The fair value of all outstanding derivatives was determined using a model with inputs that are observable in the market or can be derived from or corroborated by observable data.
The effect on the Consolidated Statement of Income of derivative instruments designated as fair value hedges and those not designated as hedges was as follows:
                                         
    (Stated in millions)  
    Gain (Loss) Recognized in Income        
    Third Quarter     Nine Months     Consolidated Statement
    2011     2010     2011     2010     of Income Classification
Derivatives designated as fair value hedges:
                                       
Foreign exchange contracts
  $ 1     $ 5     $ 8     $ (8 )   Cost of revenue — Oilfield Services
Interest rate swaps
    2       10       7       19     Interest expense
 
                               
 
  $ 3     $ 15     $ 15     $ 11          
 
                               
 
                                       
Derivatives not designated as hedges:
                                       
Foreign exchange contracts
  $ (12 )   $ 43     $ 3     $ (2 )   Cost of revenue — Oilfield Services
Commodity contracts
    (5 )     1       (7 )     (1 )   Cost of revenue — Oilfield Services
 
                               
 
  $ (17 )   $ 44     $ (4 )   $ (3 )        
 
                               
The effect of derivative instruments in cash flow hedging relationships on income and other comprehensive income (OCI) was as follows:

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    (Stated in millions)  
    Gain (Loss) Reclassified from Accumulated OCI into Income        
    Third Quarter     Nine Months     Consolidated Statement
    2011     2010     2011     2010     of Income Classification
Foreign exchange contracts
  $ (171 )   $ 186     $ 143     $ (149 )   Cost of revenue — Oilfield Services
Foreign exchange contracts
    6       (6 )     14       (12 )   Research & engineering
 
                               
 
  $ (165 )   $ 180     $ 157     $ (161 )        
 
                               
 
    (Stated in millions)  
    Gain (Loss) Recognized in OCI  
    Third Quarter     Nine Months  
    2011     2010     2011     2010  
Foreign exchange contracts
  $ (258 )   $ 217     $ 38     $ (205 )
 
                       
11. Long-term Debt
A summary of Long-term Debt follows:
                 
    (Stated in millions)  
    Sept. 30,     Dec. 31,  
    2011     2010  
3.30% Senior Notes due 2021
  $ 1,595     $  
4.50% Guaranteed Notes due 2014
    1,364       1,319  
2.75% Guaranteed Notes due 2015
    1,357       1,310  
1.95% Senior Notes due 2016
    1,099        
4.20% Guaranteed Notes due 2021
    1,099        
5.25% Guaranteed Notes due 2013
    682       659  
2.65% Guaranteed Notes due 2016
    498        
3.00% Guaranteed Notes due 2013
    450       450  
Floating Rate Senior Notes due 2014
    299        
9.75% Senior Notes due 2019
          776  
8.625% Senior Notes due 2014
          272  
6.00% Senior Notes due 2016
          218  
Commercial paper borrowings
          367  
Other variable rate debt
    287       133  
 
           
 
    8,730       5,504  
Fair value adjustment — hedging
    10       13  
 
           
 
  $ 8,740     $ 5,517  
 
           
The fair value adjustment presented above represents changes in the fair value of the portion of Schlumberger’s fixed rate debt that is hedged through the use of interest rate swaps.
During the third quarter of 2011 Schlumberger issued $1.1 billion of 1.95% Senior Notes due 2016, $1.6 billion of 3.30% Senior Notes due 2021 and $300 million of Floating Rate Senior Notes due 2014 that bear interest at a rate equal to three-month LIBOR plus 55 basis points per year.
During the first quarter of 2011, Schlumberger repurchased all of the outstanding 9.75% Senior Notes due 2019, the 8.625% Senior Notes due 2014 and the 6.00% Senior Notes due 2016 for approximately $1.26 billion. These transactions did not result in any significant gains or losses.
During the first quarter of 2011, Schlumberger issued $1.1 billion of 4.20% Guaranteed Notes due 2021.
During the first quarter of 2011, Schlumberger issued $500 million of 2.65% Guaranteed Notes due 2016. Schlumberger entered into agreements to swap these dollar notes for euros on the date of issue until maturity, effectively making this a euro denominated debt on which Schlumberger will pay interest in euros at a rate of 2.39%.

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At September 30, 2011, Schlumberger had separate committed debt facility agreements aggregating $5.6 billion with commercial banks, of which $3.4 billion was available and unused. This includes $5.0 billion of committed facilities which support commercial paper programs in the United States and Europe, of which $2.0 billion mature in December 2011 and $3.0 billion mature in July 2016. Interest rates and other terms of borrowing under these lines of credit vary from country to country. Borrowings under the commercial paper programs at September 30, 2011 were $2.0 billion ($1.9 billion at December 31, 2010). At September 30, 2011 all of the commercial paper borrowings were classified within Long-term debt — current portion in the Consolidated Balance Sheet.
The estimated fair value of Schlumberger’s Long-term Debt at September 30, 2011 and December 31, 2010, based on quoted market prices, was $9.0 billion and $5.6 billion, respectively.
12. Income Tax
Income from continuing operations before taxes which was subject to US and non-US income taxes was as follows:
                                 
    (Stated in millions)  
    Third Quarter     Nine Months  
    2011     2010     2011     2010  
United States
  $ 651     $ 168     $ 1,575     $ 312  
Outside United States
    1,066       1,772       2,878       3,510  
 
                       
 
  $ 1,717     $ 1,940     $ 4,453     $ 3,822  
 
                       
During the third quarter of 2011, Schlumberger recorded pretax charges of $27 million ($23 million in the US and $4 million outside of the US).
During the third quarter of 2010, Schlumberger recorded a net pretax credit of $836 million, consisting of net charges in the US of $63 million and a net pretax credit of $899 million outside of the US.
Schlumberger recorded pretax charges of $143 million during the nine months ended September 30, 2011 ($91 million in the US and $52 million outside of the US).
During the nine months ended September 30, 2010, Schlumberger recorded net pretax charges in the US of $63 million and a net pretax credit of $864 million outside of the US.
These charges are included in the table above and are more fully described in Note 2 — Charges.
The components of net deferred tax assets (liabilities) were as follows:
                 
    (Stated in millions)  
    Sept. 30,     Dec. 31,  
    2011     2010  
Postretirement benefits, net
  $ 273     $ 327  
Intangible assets
    (1,523 )     (1,674 )
Investments in non-US subsidiaries
    (325 )     (353 )
Other, net
    61       115  
 
           
 
  $ (1,514 )   $ (1,585 )
 
           
The above deferred tax balances at September 30, 2011 and December 31, 2010 were net of valuation allowances relating to net operating losses in certain countries of $274 million and $263 million, respectively.

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The components of consolidated Taxes on income were as follows:
                                 
    (Stated in millions)  
    Third Quarter     Nine Months  
    2011     2010     2011     2010  
Current:
                               
United States — Federal
  $ 102     $ (60 )   $ 553     $ (12 )
United States — State
    16       4       28       10  
Outside United States
    224       150       458       456  
 
                       
 
  $ 342     $ 94     $ 1,039     $ 454  
 
                       
Deferred:
                               
United States — Federal
  $ 86     $ 96     $ (39 )   $ 135  
United States — State
    4       3       (7 )     5  
Outside United States
    (20 )     16       93       16  
Valuation allowance
    (2 )           (7 )     (10 )
 
                       
 
  $ 68     $ 115     $ 40     $ 146  
 
                       
Consolidated taxes on income
  $ 410     $ 209     $ 1,079     $ 600  
 
                       
A reconciliation of the US statutory federal tax rate of 35% to the consolidated effective income tax rate follows:
                                 
    Third Quarter     Nine Months  
    2011     2010     2011     2010  
US federal statutory rate
    35 %     35 %     35 %     35 %
US state income taxes
    1                    
Non-US income taxed at different rates
    (10 )     (12 )     (10 )     (14 )
Charges (See Note 2)
          (10 )           (4 )
Other
    (2 )     (2 )     (1 )     (1 )
 
                       
Effective income tax rate
    24 %     11 %     24 %     16 %
 
                       
13. Contingencies
In 2007, Schlumberger received an inquiry from the United States Department of Justice (“DOJ”) related to the DOJ’s investigation of whether certain freight forwarding and customs clearance services of Panalpina, Inc., and other companies provided to oil and oilfield service companies, including Schlumberger, violated the Foreign Corrupt Practices Act. Schlumberger is cooperating with the governmental authorities and is currently unable to predict the outcome of this matter.
In 2009, Schlumberger learned that United States officials began a grand jury investigation and an associated regulatory inquiry, both related to certain Schlumberger operations in specified countries that are subject to United States trade and economic sanctions. Also in 2009, prior to being acquired by Schlumberger, Smith received an administrative subpoena with respect to its historical business practices in certain countries that are subject to United States trade and economic sanctions. Schlumberger is cooperating with the governmental authorities and is currently unable to predict the outcome of these matters.
On April 20, 2010, a fire and explosion occurred onboard the semisubmersible drilling rig Deepwater Horizon, owned by Transocean Ltd. and under contract to a subsidiary of BP plc. Pursuant to a contract between M-I SWACO and BP, M-I SWACO provided certain services under the direction of BP. A number of legal actions, certain of which name an M-I SWACO entity as a defendant, have been filed in connection with the Deepwater Horizon incident, and additional legal actions may be filed in the future. Based on information currently known, the amount of any potential loss attributable to M-I SWACO with respect to potential liabilities related to the incident would not be material to Schlumberger’s consolidated financial statements.
Schlumberger and its subsidiaries are party to various other legal proceedings from time to time. A liability is accrued when a loss is both probable and can be reasonably estimated. Management believes that the probability of a material loss is remote. However, litigation is inherently uncertain and it is not possible to predict the ultimate disposition of these proceedings.
14. Segment Information
Schlumberger previously reported its results on the basis of five business segments — Schlumberger Oilfield Services, WesternGeco, M-I SWACO, Smith Oilfield and Distribution and by geographical areas within Schlumberger Oilfield Services. As a result of the acquisitions of Smith and Geoservices, the range of Schlumberger’s activities comprising exploration and production services is so broad that it has changed the primary way in which it allocates resources and

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assesses performance. Consequently, effective with the first quarter of 2011, Schlumberger changed its primary reporting to product group segments (the “Groups”).
The Groups are as follows:
    Reservoir Characterization Group — Consists of the principal technologies involved in the finding and defining of hydrocarbon deposits. These include WesternGeco, Wireline, Testing Services, Schlumberger Information Services and Data & Consulting Services.
 
    Drilling Group — Consists of the principal technologies involved in the drilling and positioning of oil and gas wells and is comprised of Bits & Advanced Technologies, M-I SWACO, Geoservices, Drilling and Measurements, Pathfinder, Drilling Tools and Remedial Services, Dynamic Pressure Management and Integrated Project Management well construction projects.
 
    Reservoir Production Group — Consists of the principal technologies involved in the lifetime production of oil and gas reservoirs and includes Well Services, Completions and Artificial Lift, together with the Subsea and Water and Carbon Services activities and the Schlumberger Production Management field production projects.
The Groups are collectively referred to as “Oilfield Services”. Additionally, Schlumberger also reports the Distribution business, acquired in the Smith transaction, as a separate segment.
All prior period segment disclosures have been recast to reflect the new segments.
                                 
    (Stated in millions)  
    Third Quarter 2011     Third Quarter 2010  
            Income             Income  
            before             before  
    Revenue     taxes     Revenue     taxes  
Oilfield Services
                               
Reservoir Characterization
  $ 2,488     $ 610     $ 2,282     $ 525  
Drilling
    3,676       613       2,049       307  
Reservoir Production
    3,373       707       2,300       378  
Eliminations & other
    9       1       15       9  
 
                       
 
    9,546       1,931       6,646       1,219  
 
                       
 
                               
Distribution
    698       31       199       9  
Eliminations
    (15 )                  
 
                       
 
    683       31       199       9  
 
                       
 
                               
Corporate & other
          (158 )           (83 )
Interest income (1)
          9             10  
Interest expense (2)
          (69 )           (51 )
Charges and credits (see Note 2)
          (27 )           836  
 
                       
 
  $ 10,229     $ 1,717     $ 6,845     $ 1,940  
 
                       
 
(1)   Excludes interest income included in the segment results ($1 million in 2011; $2 million in 2010).
 
(2)    Excludes interest expense included in the segment results ($1 million in 2011; $- million in 2010).

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    (Stated in millions)  
    Nine Months 2011     Nine Months 2010  
            Income             Income  
            before             before  
    Revenue     taxes     Revenue     taxes  
Oilfield Services
                               
Reservoir Characterization
  $ 7,142     $ 1,672     $ 6,831     $ 1,647  
Drilling
    10,339       1,618       5,028       867  
Reservoir Production
    9,150       1,848       6,271       786  
Eliminations & other
    27       (2 )     50       73  
 
                       
 
    26,658       5,136       18,180       3,373  
 
                       
 
                               
Distribution
    1,935       77       199       9  
Eliminations
    (27 )                  
 
                       
 
    1,908       77       199       9  
 
                       
 
                               
Corporate & other
          (437 )           (251 )
Interest income (1)
          28             34  
Interest expense (2)
          (208 )           (144 )
Charges and credits (see Note 2)
          (143 )           801  
 
                       
 
  $ 28,566     $ 4,453     $ 18,379     $ 3,822  
 
                       
 
(1)   Excludes interest income included in the segment results ($1 million in 2011; $10 million in 2010).
 
(2)    Excludes interest expense included in the segment results ($4 million in 2011; $2 million in 2010).
15. Pension and Other Postretirement Benefits
Net pension cost for the Schlumberger pension plans included the following components:
                                                                 
    (Stated in millions)  
    Third Quarter     Nine Months  
    2011     2010     2011     2010  
    US     Int’l     US     Int’l     US     Int’l     US     Int’l  
Service cost — benefits earned during period
  $ 14     $ 15     $ 15     $ 15     $ 44     $ 49     $ 43     $ 39  
Interest cost on projected benefit obligation
    37       56       35       53       112       169       106       156  
Expected return on plan assets
    (42 )     (69 )     (48 )     (59 )     (127 )     (210 )     (143 )     (174 )
Amortization of prior service cost
    3       30       1       28       9       91       3       85  
Amortization of net loss
    23       7       14       5       67       23       45       15  
 
                                               
 
  $ 35     $ 39     $ 17     $ 42     $ 105     $ 122     $ 54     $ 121  
 
                                               
During the first nine months of 2011, Schlumberger made contributions to its US and international defined benefit pension plans of $204 million.
The net periodic benefit cost for the Schlumberger US postretirement medical plan included the following components:
                                 
    (Stated in millions)  
    Third Quarter     Nine Months  
    2011     2010     2011     2010  
Service cost — benefits earned during period
  $ 6     $ 6     $ 18     $ 17  
Interest cost on accumulated postretirement benefit obligation
    14       14       43       43  
Expected return on plan assets
    (5 )     (1 )     (15 )     (4 )
Amortization of prior service cost
    (3 )     (5 )     (9 )     (15 )
Amortization of net loss
    4       2       10       8  
 
                       
 
  $ 16     $ 16     $ 47     $ 49  
 
                       

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During the first nine months of 2011, Schlumberger made contributions to its US postretirement medical plan of $155 million.
16. Discontinued Operations
During the second quarter of 2011, Schlumberger completed the divestiture of its Global Connectivity Services business for approximately $385 million in cash. An after-tax gain of $220 million was recognized in connection with this transaction, and is classified in Income from Discontinued Operations in the Consolidated Statement of Income. The historical results of this business were not significant to Schlumberger’s consolidated financial statements and, as such, have not been reclassified to discontinued operations.

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Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Third Quarter 2011 Compared to Second Quarter 2011
Product Groups
                                 
    (Stated in millions)  
    Third Quarter 2011     Second Quarter 2011  
            Income             Income  
            Before             Before  
    Revenue     Taxes     Revenue     Taxes  
Oilfield Services
                               
Reservoir Characterization
  $ 2,488     $ 610     $ 2,461     $ 602  
Drilling
    3,676       613       3,458       538  
Reservoir Production
    3,373       707       3,060       613  
Eliminations & other
    9       1       11       (3 )
 
                       
 
    9,546       1,931       8,990       1,750  
 
                       
 
                               
Distribution
    698       31       637       24  
Eliminations
    (15 )           (6 )      
 
                       
 
    683       31       631       24  
 
                       
 
                               
Corporate & Other
          (158 )           (135 )
Interest Income
          9             10  
Interest Expense
          (69 )           (69 )
Charges
          (27 )           (82 )
 
                       
 
  $ 10,229     $ 1,717     $ 9,621     $ 1,498  
 
                       
Geographic Areas
                                 
    (Stated in millions)  
    Third Quarter 2011     Second Quarter 2011  
            Income             Income  
            Before             Before  
    Revenue     Taxes     Revenue     Taxes  
Oilfield Services
                               
North America
  $ 3,304     $ 836     $ 2,864     $ 673  
Latin America
    1,655       270       1,579       283  
Europe/CIS/Africa
    2,494       408       2,374       332  
Middle East & Asia
    2,003       444       2,078       518  
Eliminations & other
    90       (27 )     95       (56 )
 
                       
 
    9,546       1,931       8,990       1,750  
 
                       
 
                               
Distribution
    698       31       637       24  
Eliminations
    (15 )           (6 )      
 
                       
 
    683       31       631       24  
 
                       
 
                               
Corporate & Other
          (158 )           (135 )
Interest Income
          9             10  
Interest Expense
          (69 )           (69 )
Charges
          (27 )           (82 )
 
                       
 
  $ 10,229     $ 1,717     $ 9,621     $ 1,498  
 
                       
Pretax operating income represents the segments’ income before taxes and noncontrolling interests. The pretax operating income excludes such items as corporate expenses and interest income and interest expense not allocated to the segments as well as the charges described in detail in Note 2 to the Consolidated Financial Statements, interest on postretirement medical benefits, stock-based compensation costs and amortization expense associated with intangible assets recorded as a result of the merger with Smith International, Inc. (“Smith”).

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OILFIELD SERVICES
Third-quarter revenue of $9.55 billion increased 6% sequentially. Revenue increased in all Groups and across all geographical Areas with the exception of the Middle East & Asia Area.
On a geographical basis, North America Area revenue increased sequentially following the seasonal rig count recovery in Canada, higher activity on land in the US, and increased deepwater work in the US Gulf of Mexico. All Product Groups registered significant rebounds from the spring break-up in Canada. Reservoir Production, particularly Well Services, posted the highest increase as the rebound was augmented by higher rig count and land activity in the US. Reservoir Characterization and Drilling activities increased from a better mix of key services in the unconventional plays in US land and higher deepwater work in the US Gulf of Mexico. WesternGeco grew on higher Multiclient and Data Processing sales. In the Latin America Area, strong revenue growth was posted in the Mexico GeoMarket* due to higher Integrated Project Management (IPM) well construction project activities on land and on higher Drilling & Measurements work offshore. Argentina grew from strong unconventional gas activities that benefited Well Services. Meanwhile, Brazil experienced strong deepwater and exploration activity that led to expanded Wireline, Testing Services, Drilling & Measurements and M-I SWACO services in the GeoMarket although this was offset by the decline in WesternGeco proprietary marine surveys and multiclient sales. In the Europe/CIS/Africa Area, results were driven by higher revenue in the Continental Europe GeoMarket on a combination of strong drilling activity and fracturing work on unconventional plays in Poland. Russia/Central Asia saw strong land and offshore exploration activity benefiting Wireline, Testing Services, Drilling & Measurements and M-I SWACO Technologies—in addition to the full-quarter effect of the activity increase generated from the strategic alliance formed with the Eurasia Drilling Company Limited. The North Sea GeoMarket grew on higher exploration activity in the UK, Greenland and Denmark. In the Middle East & Asia Area, revenue declined sequentially due to decreased WesternGeco activity. The effect of this was partially mitigated by strong Wireline and Testing Services revenues in the East Asia and China GeoMarkets. Excluding WesternGeco, the Middle East & Asia Area increased sequentially driven by strong drilling and production activity in the Saudi Arabia, Bahrain; Iraq; and East Asia GeoMarkets.
Third-quarter pretax operating income of $1.93 billion increased 10% sequentially. Pretax operating margin increased 77 basis points (bps) sequentially to 20.2% primarily due to increasing higher-margin exploration activities that benefited Wireline, Testing Services, Drilling & Measurements and M-I SWACO. The rebound from the spring break-up in Canada also contributed significantly to margin improvements for Well Services and for all Drilling Group Technologies. These improvements, however, were partially offset by the lower WesternGeco activity during the quarter.
The current financial turmoil has already resulted in a lower outlook for oil demand growth in 2012, although demand is still expected to exceed that of 2011. Recent production data, as well as forward projections indicate that there is a tight cushion of excess oil supply that will continue to support activity. Therefore, while financial turmoil introduces some uncertainty over near-term activity, Schlumberger remains confident that any reductions will be short-lived, and that the outlook for the service industry remains very positive. Schlumberger further believes that its customers’ needs to renew reserves, as evidenced by the recent string of exploration successes particularly in deepwater offshore areas, favors Schlumberger’s broad international footprint. In addition, the balance between our reservoir characterization, drilling and production technologies — both in North America and overseas — will enable us to weather any activity fluctuations.
With respect to Libya, the carrying value of Schlumberger’s assets in the country was approximately $0.3 billion as of September 30, 2011. This consists primarily of accounts receivable, inventories and fixed assets. Schlumberger’s ability to recover these assets will ultimately depend on how the current situation evolves.
Reservoir Characterization
Third-quarter revenue of $2.49 billion was 1% higher compared to the second quarter of 2011. Pretax operating income of $610 million was 1% higher versus the second quarter of 2011.
Wireline and Testing Services posted significant sequential increases with revenue and margins up on stronger offshore exploration activities in Brazil, East Asia, Russia and the North Sea as well as from increased deepwater work in the US Gulf of Mexico. WesternGeco activity decreased, however, from lower marine vessel utilization due to higher transit and docking times while moving between contracts. WesternGeco also declined from reduced land seismic activity while mobilizing crews and equipment in preparation for a large contract survey in the Middle East.
Sequentially, pretax operating margins remained unchanged at 24.5% as significant margin improvements in Wireline and Testing Services from strong exploration activities were largely offset by the margin declines in WesternGeco.

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Drilling
Third-quarter revenue of $3.68 billion was 6% higher sequentially. Pretax operating income of $613 million increased 14% over the prior quarter.
Among Drilling Group Technologies, M-I SWACO recorded the largest sequential revenue increase through continued growth in unconventional shale plays on land in the US with higher asset utilization, as well as from the seasonal rig count recovery in Canada and Russia, and the increased deepwater activity in the US Gulf of Mexico and Brazil. Drilling & Measurements revenue increased sequentially on the strong summer drilling campaign in Russia and stronger deepwater activities in the US Gulf of Mexico and Brazil and increased shelf activity in Mexico. Pathfinder reported increased revenue from a more favorable technology mix on land in the US. In addition, Pathfinder, Geoservices and Bits & Advanced Technologies registered activity rebounds following the spring break-up in Canada.
Sequentially, pretax operating margins grew 111 bps to 16.7% driven by the rebound in activity in Canada, an improved technology mix, and further integration and expansion of Smith and Schlumberger drilling technologies. Bits & Advanced Technologies contributed to this improvement with increased sales and rentals of higher-margin drill bits while Pathfinder improved on higher-technology integration with Drilling & Measurements. M-I SWACO margins improved through increased exploration activities in the US Gulf of Mexico, Russia and Brazil, as well as through the seasonal rig count recovery in Canada. Better pricing on IPM land projects in Mexico and improved efficiencies on a well construction project in Algeria further contributed to this result.
Reservoir Production
Third-quarter revenue of $3.37 billion increased 10% sequentially. Pretax operating income of $707 million was 16% higher sequentially.
Among Reservoir Production Group Technologies, Well Services sequential revenue growth in North America was driven by the rebound from the spring break-up in Canada, stronger activity in liquids-rich unconventional plays, capacity additions and continuing improvements in asset utilization. Internationally, Well Services posted high double-digit growth in Latin America from higher stimulation and coiled-tubing activities in Argentina, Mexico, Venezuela and Brazil. Europe/CIS/Africa increased significantly from shale fracturing services in Poland, increased deepwater cementing work in the Black Sea, and strong land activities in Russia. In addition, strong stimulation vessel activity was seen in the Nigeria and the Gulf of Guinea Africa GeoMarket. Artificial Lift revenue grew sequentially across all Areas led by the North America and the Middle East & Asia Areas.
Sequentially, third-quarter pretax operating margins increased 96 bps to 21.0% as Well Services activity in Canada rebounded following the end of the spring break-up. In addition, Well Services achieved better cost efficiency and asset utilization on land in the US and in Russia and recorded increased higher-margin stimulation activities in the Europe/CIS/Africa Area.
DISTRIBUTION
Distribution revenue of $698 million increased 10% sequentially. Pretax segment income of $31 million improved 28% sequentially. These increases were primarily driven by strong activity in the shale plays in the US and the seasonal improvement in Canada.

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Third Quarter 2011 Compared to Third Quarter 2010
Product Groups
                                 
                    (Stated in millions)  
    Third Quarter 2011     Third Quarter 2010  
            Income             Income  
            Before             Before  
    Revenue     Taxes     Revenue     Taxes  
Oilfield Services
                               
Reservoir Characterization
  $ 2,488     $ 610     $ 2,282     $ 525  
Drilling
    3,676       613       2,049       307  
Reservoir Production
    3,373       707       2,300       378  
Eliminations & other
    9       1       15       9  
 
                       
 
    9,546       1,931       6,646       1,219  
 
                       
Distribution
    698       31       199       9  
Eliminations
    (15 )                  
 
                       
 
    683       31       199       9  
 
                       
Corporate & Other
          (158 )           (83 )
Interest Income
          9             10  
Interest Expense
          (69 )           (51 )
Charges and credits
          (27 )           836  
 
                       
 
  $ 10,229     $ 1,717     $ 6,845     $ 1,940  
 
                       
Geographic Areas
                                 
                    (Stated in millions)  
    Third Quarter 2011     Third Quarter 2010  
            Income             Income  
            Before             Before  
    Revenue     Taxes     Revenue     Taxes  
Oilfield Services
                               
North America
  $ 3,304     $ 836     $ 1,635     $ 274  
Latin America
    1,655       270       1,235       189  
Europe/CIS/Africa
    2,494       408       2,058       370  
Middle East & Asia
    2,003       444       1,634       433  
Eliminations & other
    90       (27 )     84       (47 )
 
                       
 
    9,546       1,931       6,646       1,219  
 
                       
Distribution
    698       31       199       9  
Eliminations
    (15 )                  
 
                       
 
    683       31       199       9  
 
                       
Corporate & Other
          (158 )           (83 )
Interest Income
          9             10  
Interest Expense
          (69 )           (51 )
Charges and credits
          (27 )           836  
 
                       
 
  $ 10,229     $ 1,717     $ 6,845     $ 1,940  
 
                       
OILFIELD SERVICES
Third-quarter 2011 revenue of $9.55 billion was 44% higher than the same period last year largely due to the acquisition of Smith on August 27, 2010, as well as to the significantly improved activity of Well Services technologies in North America and an increase in Wireline and Drilling & Measurements exploration activities in a number of GeoMarkets.
Third-quarter 2011 pretax operating margin increased 190 bps to 20.2% primarily due to strong contribution from Well Services Technologies, particularly in North America, as a result of increased capacity and improved efficiency, higher-margin exploration activities that benefited Wireline and to improvements at WesternGeco.

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Reservoir Characterization
Third-quarter 2011 revenue of $2.49 billion was 9% higher than the same period last year led by Wireline in North America, where offshore revenues improved considerably following the resumption of activity in the US Gulf of Mexico combined with a strong performance on land. Testing Services and Schlumberger Information Solutions also increased, mainly in the Latin America and Europe/CIS/Africa Areas, while WesternGeco was higher as improved multiclient sales more than offset the drop in land seismic revenues.
Pretax operating margin increased 151 bps to 24.5% largely due to the higher-margin exploration activities that benefited Wireline and improvements at WesternGeco.
Drilling
Third-quarter 2011 revenue of $3.68 billion was 79% higher than the previous year primarily due to the fact that the comparable period in the prior year only reflected one month of activity from the acquired Smith businesses following the closing of the transaction on August 27, 2010. Additionally, Drilling and Measurements revenue increased on higher activity across most Areas, most notably in North America as a result of the resumption of activity in the US Gulf of Mexico.
Year-on-year, pretax operating margin increased 167 bps to 16.7% largely due to improved pricing and operating efficiencies on IPM projects in Mexico and Algeria.
Reservoir Production
Third-quarter 2011 revenue of $3.37 billion increased 47% year-on-year, particularly in North America, due to a combination of capacity additions and continuing improvements in asset utilization of Well Services Technologies. Well Services also posted significant growth internationally. The addition of Production Wireline and Completion Systems, both acquired Smith businesses, also contributed to the Group’s growth as did Artificial Lift, which increased on strong growth in Latin America, on land in the US and in Russia.
Year-on-year, pretax operating margin improved 453 bps to 21.0% mainly due to the strong performance of Well Services technologies in North America.
DISTRIBUTION
Third-quarter 2011 revenue of $698 million increased $499 million, while pretax operating income of $31 million increased $22 million compared to the same period last year. These increases are attributable to the fact that the third quarter of 2010 included only one month of post-merger activity following the Smith acquisition on August 27, 2010.
Nine Months 2011 Compared to Nine Months 2010
Product Groups
                                 
                    (Stated in millions)  
    Nine Months 2011     Nine Months 2010  
            Income             Income  
            Before             Before  
  Revenue     Taxes     Revenue     Taxes  
Oilfield Services
                               
Reservoir Characterization
  $ 7,142     $ 1,672     $ 6,831     $ 1,647  
Drilling
    10,339       1,618       5,028       867  
Reservoir Production
    9,150       1,848       6,271       786  
Eliminations & other
    27       (2 )     50       73  
 
                       
 
    26,658       5,136       18,180       3,373  
 
                       
Distribution
    1,935       77       199       9  
Eliminations
    (27 )                  
 
                       
 
    1,908       77       199       9  
 
                       
Corporate & Other
          (437 )           (251 )
Interest Income
          28             34  
Interest Expense
          (208 )           (144 )
Charges
          (143 )           801  
 
                       
 
  $ 28,566     $ 4,453     $ 18,379     $ 3,822  
 
                       

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     Geographic Areas
                                 
                    (Stated in millions)  
    Nine Months 2011     Nine Months 2010  
            Income             Income  
            Before             Before  
    Revenue     Taxes     Revenue     Taxes  
Oilfield Services
                               
North America
  $ 8,757     $ 2,104     $ 4,132     $ 557  
Latin America
    4,619       770       3,597       601  
Europe/CIS/Africa
    7,058       1,013       5,571       1,006  
Middle East & Asia
    5,929       1,368       4,667       1,300  
Eliminations & other
    295       (119 )     213       (91 )
 
                       
 
    26,658       5,136       18,180       3,373  
 
                       
Distribution
    1,935       77       199       9  
Eliminations
    (27 )                  
 
                       
 
    1,908       77       199       9  
 
                       
Corporate & Other
          (437 )           (251 )
Interest Income
          28             34  
Interest Expense
          (208 )           (144 )
Charges and credits
          (143 )           801  
 
                       
 
  $ 28,566     $ 4,453     $ 18,379     $ 3,822  
 
                       
OILFIELD SERVICES
Nine-month revenue of $26.7 billion increased 47% versus the same period last year due to the acquisitions of Smith in August 2010 and Geoservices in April 2010, as well as to the significantly improved activity, pricing and asset efficiency for Well Services Technologies in North America—as the market transitions to liquid-rich plays demanding increasing service intensity in drilling and completing horizontal wells. Internationally, all Areas grew significantly as deepwater and exploration activity continued to strengthen with early signs of pricing traction for Wireline and Drilling & Measurements. The resumption of activity in the US Gulf of Mexico and higher WesternGeco marine and multiclient sales also contributed to the increase. However, these increases were tempered by activity disruptions from the first quarter’s geopolitical unrest in North Africa and the Middle East.
Year-to-date pretax operating margin increased 71 basis points to 19.3% primarily due to the resumption of higher-margin activity in the US Gulf of Mexico and to the improved pricing and asset efficiency for Well Services Technologies in North America. However the margin expansion was hampered by the effects of the geopolitical events.
Reservoir Characterization
Nine-month revenue of $7.14 billion was 5% higher than the same period last year on stronger Wireline activity, higher WesternGeco marine and multiclient sales and increased Schlumberger Information Solutions software sales.
Year-on-year, pretax operating margin decreased 71 bps to 23.4% led by margin declines in Wireline and Testing Services, largely due to the revenue mix and the impact of the geopolitical events that prevailed during the first quarter. The margin decline however was partially offset by a favorable WesternGeco multiclient sales mix and improved marine vessel utilization.
Drilling
Nine-month revenue of $10.34 billion was 106% higher than the same period last year primarily due to the Smith and Geoservices acquisitions.
Year-on-year, pretax operating margin decreased 160 bps to 15.7% largely due to the addition of Smith and Geoservices activities and the effects of the geopolitical events that prevailed during the first quarter.
Reservoir Production
Nine-month revenue of $9.15 billion was 46% higher than the same period last year while pretax operating margin increased 767 bps to 20.2%. Well Services revenue and margins expanded largely in North America on higher pricing, capacity additions and improved asset utilization and efficiency as the market transitions to liquid-rich plays.

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Internationally, Well Services posted growth also on the strength of higher activity despite the exceptional geopolitical events and weather issues that prevailed during the first quarter.
DISTRIBUTION
Nine-month revenue of $1.94 billion increased $1.74 billion, while pretax operating income of $77 million increased $68 million compared to the same period last year. These increases are attributable to the fact that the nine months ended September 30, of 2010 included only one month of post-merger activity following the Smith acquisition on August 27, 2010.
INTEREST & OTHER INCOME
Interest & other income consisted of the following for the third quarter and nine months ended September 30, 2011 and 2010:
                                 
                    (Stated in millions)  
    Third Quarter     Nine Months  
    2011     2010     2011     2010  
Equity in net earnings of affiliated companies
  $ 24     $ 46     $ 65     $ 129  
Interest income
    10       12       29       44  
Other
          (4 )           (4 )
 
                       
 
  $ 34     $ 54     $ 94     $ 169  
 
                       
The decrease in equity in net earnings of affiliated companies was primarily attributable to the loss of equity earnings from the M-I SWACO joint venture as Schlumberger now owns 100% of this venture following the acquisition of Smith on August 27, 2010.
OTHER
Research & engineering and General & administrative expenses, as a percentage of Revenue, for the third quarter and nine months ended September 30, 2011 and 2010 were as follows:
                                 
    Third Quarter     Nine Months  
    2011     2010     2011     2010  
Research & engineering
    2.6 %     3.5 %     2.8 %     3.6 %
General & administrative
    0.9 %     1.1 %     1.1 %     1.2 %
Although Research & engineering decreased as a percentage of revenue, in both the third quarter and nine months compared to the prior year, it increased in absolute dollars by $26 million and $138 million, respectively. These increases were driven in large part by the impact of the Smith acquisition.
Interest expense for the third quarter of 2011 was $70 million as compared to $47 million for the same period in 2010 and $212 million for the nine months ended September 30, 2011 as compared to $146 million for the same period of 2010. These increases were primarily attributable to the $4.6 billion of long-term debt that Schlumberger issued during the first nine months of 2011.
The effective tax rate for the third quarter of 2011 was 23.8% compared to 10.8% for the same period in 2010, which was significantly impacted by the charges and credits described in Note 2 to the Consolidated Financial Statements. Excluding the impact of these charges and credits, the effective tax rate for the third quarter of 2010 was 21.0%. The year-on-year increase in the effective tax rate, excluding the impact of the third quarter 2010 charges and credits, was primarily attributable to the fact that Schlumberger generated a larger proportion of its pretax earnings in North America in the third quarter of 2011.
The effective tax rate for the nine months ended September 30, 2011 was 24.2% compared to 15.7% for the same period of the prior year which was also significantly impacted by the charges and credits described in Note 2 to the Consolidated Financial Statements. Excluding the impact of these charges and credits, the effective tax rate for the nine months ended September 30, 2010 was 19.3%. The increase in the effective tax rate, excluding the impact of the 2010 charges and credits, was primarily attributable to the fact that Schlumberger generated a larger proportion of its pretax earnings in North America in 2011 as compared to 2010.

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CHARGES AND CREDITS
Schlumberger recorded charges and credits during the third quarters of 2011 and 2010 and the first nine months of 2011 and 2010. These charges, which are summarized below, are more fully described in Note 2 to the Consolidated Financial Statements.
The following is a summary of the third quarter of 2011 charges and credits:
                                 
    (Stated in millions)          
                            Consolidated Statement  
    Pretax     Tax     Net     of Income Classification  
Merger and integration-related costs
  $ 27     $ 4     $ 23     Merger & integration
 
                         
The following is a summary of the charges recorded during the first nine months of 2011:
                                 
    (Stated in millions)          
                            Consolidated Statement  
    Pretax     Tax     Net     of Income Classification  
Merger and integration-related costs
  $ 93     $ 17     $ 76     Merger & integration
Donation to the Schlumberger Foundation
    50       10       40     General & administrative
 
                         
 
  $ 143     $ 27     $ 116          
 
                         
The following is a summary of the third quarter of 2010 charges and credits:
                                 
    (Stated in millions)          
                            Consolidated Statement  
    Pretax     Tax     Net     of Income Classification  
Restructuring and Merger-related Charges:
                               
Severance and other
  $ 90     $ 13     $ 77     Restructuring & other
Impairment relating to WesternGeco’s first generation Q-Land acquisition system
    78       7       71     Restructuring & other
Other WesternGeco-related charges
    63             63     Restructuring & other
Professional fees and other
    56       1       55     Merger & integration
Merger-related employee benefits
    41       6       35     Merger & integration
Inventory fair value adjustments
    38       14       24     Cost of revenue
Mexico restructuring
    40       4       36     Restructuring & other
Repurchase of bonds
    28       10       18     Restructuring & other
 
                         
Total restructuring and merger-related charges
    434       55       379          
 
                         
 
                               
Gain on investment in M-I SWACO
    (1,270 )     (32 )     (1,238 )   Gain on Investment in M-I SWACO
 
                         
 
  $ (836 )   $ 23     $ (859 )        
 
                         

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The following is a summary of the charges and credits recorded during the first nine months of 2010:
                                 
    (Stated in millions)          
                            Consolidated Statement  
    Pretax     Tax     Net     of Income Classification  
Restructuring and Merger-related Charges:
                               
Severance and other
  $ 90     $ 13     $ 77     Restructuring & other
Impairment relating to WesternGeco’s first generation Q-Land acquisition system
    78       7       71     Restructuring & other
Other WesternGeco-related charges
    63             63     Restructuring & other
Professional fees and other
    91       1       90     Merger & integration
Merger-related employee benefits
    41       6       35     Merger & integration
Inventory fair value adjustments
    38       14       24     Cost of revenue
Mexico restructuring
    40       4       36     Restructuring & other
Repurchase of bonds
    28       10       18     Restructuring & other
 
                         
Total restructuring and merger-related charges
    469       55       414          
 
                         
 
                               
Impact of elimination of tax deduction related to Medicare Part D subsidy
          (40 )     40     Taxes on income
 
                         
 
                               
Gain on investment in M-I SWACO
    (1,270 )     (32 )     (1,238 )   Gain on Investment in M-I SWACO
 
                         
 
  $ (801 )   $ (17 )   $ (784 )        
 
                         
CASH FLOW
Net Debt represents gross debt less cash, short-term investments and fixed income investments, held to maturity. Management believes that Net Debt provides useful information regarding the level of Schlumberger indebtedness by reflecting cash and investments that could be used to repay debt.
Details of Net Debt follow:
                 
    (Stated in millions)  
    Sept. 30,     Sept. 30,  
    2011     2010  
Net Debt, beginning of year
  $ (2,638 )   $ (126 )
Income from continuing operations
    3,374       3,222  
Depreciation and amortization (1)
    2,420       1,951  
Gain on investment in M-I SWACO
          (1,270 )
Non-cash charges
          144  
Excess of equity income over dividends received
    (59 )     (79 )
Stock-based compensation expense
    203       145  
Pension and other postretirement benefits expense
    274       224  
Pension and other postretirement benefits funding
    (359 )     (615 )
Increase in working capital
    (2,438 )     (607 )
Capital expenditures
    (2,763 )     (1,907 )
Multiclient seismic data capitalized
    (206 )     (241 )
Dividends paid
    (968 )     (756 )
Stock repurchase program
    (2,362 )     (1,268 )
Proceeds from employee stock plans
    426       292  
Net debt assumed in merger with Smith
          (1,829 )
Geoservices acquisition, net of debt acquired
          (1,033 )
Business acquisitions and other transactions
    (571 )     (154 )
Conversion of debentures
          320  
Proceeds from divestiture of Global Connectivity Services business
    385        
Currency effect on Net Debt
    (128 )     9  
Other
    246       67  
 
           
Net Debt, end of period
  $ (5,164 )   $ (3,511 )
 
           
 
(1)   Includes multiclient seismic data costs.

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            (Stated in millions)  
    Sept. 30,     Sept. 30,     Dec. 31,  
Components of Net Debt   2011     2010     2010  
Cash
  $ 1,732     $ 1,114     $ 1,764  
Short-term investments
    4,332       1,511       3,226  
Fixed income investments, held to maturity
    255       600       484  
Short-term borrowings and current portion of long-term debt
    (2,743 )     (1,916 )     (2,595 )
Long-term debt
    (8,740 )     (4,820 )     (5,517 )
 
                 
 
  $ (5,164 )   $ (3,511 )   $ (2,638 )
 
                 
Key liquidity events during the first nine months of 2011 and 2010 included:
    During the third quarter of 2011 Schlumberger issued $1.1 billion of 1.95% Senior Notes due 2016, $1.6 billion of 3.30% Senior Notes due 2021 and $300 million of Floating Rate Senior Notes due 2014 that bear interest at a rate equal to three-month LIBOR plus 55 bps per year.
 
    During the second quarter of 2011, Schlumberger completed the divestiture of its Global Connectivity Services business for approximately $385 million in cash.
 
    During the first quarter of 2011, Schlumberger issued $1.1 billion of 4.20% Senior Notes due 2021 and $500 million of 2.65% Senior Notes due 2016.
 
    During the first quarter of 2011, Schlumberger repurchased all of its outstanding 9.75% Senior Notes due 2019, 8.625% Senior Notes due 2014 and 6.00% Senior Notes due 2016 for approximately $1.26 billion.
 
    On April 17, 2008, the Schlumberger Board of Directors approved an $8 billion share repurchase program for shares of Schlumberger common stock, to be acquired in the open market before December 31, 2011, of which $5.5 billion had been repurchased as of September 30, 2011. On July 21, 2011, the Schlumberger Board of Directors approved an extension of this repurchase program to December 31, 2013.
 
      The following table summarizes the activity, during the nine months ended September 30, under the April 17, 2008 share repurchase program:
                         
    (Stated in millions except per share amounts)  
    Total cost     Total number     Average price  
    of shares     of shares     paid per  
    purchased     purchased     share  
Nine months ended September 30, 2011
  $ 2,362       27.8     $ 85.01  
Nine months ended September 30, 2010
  $ 1,268       20.6     $ 61.63  
    During the first nine months of 2011 Schlumberger made contributions of $359 million to its defined benefit pension and other postretirement benefit plans as compared to $615 million during the same period last year.
 
    Cash flow provided by operations was $3.7 billion in the first nine months of 2011 compared to $3.1 billion in the first nine months of 2010 with the increase in earnings before depreciation and amortization expense offset in part by an increase in working capital requirements, primarily accounts receivable and inventories, as well as significant tax payments during the first nine months of 2011.
 
    Capital expenditures were $2.8 billion in the first nine months of 2011 compared to $1.9 billion during the first nine months of 2010. Capital expenditures for the full year of 2011 are expected to approach $4.2 billion as compared to $2.9 billion in 2010.
 
    During the first nine months of 2010, approximately $320 million of the 2.125% Series B Convertible Debentures due June 1, 2023 were converted by holders into 8.0 million shares of Schlumberger common stock.

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As of September 30, 2011 Schlumberger had $6.1 billion of cash and short-term investments on hand. Schlumberger had separate committed debt facility agreements aggregating $5.6 billion with commercial banks, of which $3.4 billion was available and unused as of September 30, 2011. This included $3.0 billion of unused committed facilities which support commercial paper programs in the United States and Europe. Schlumberger believes that these amounts are sufficient to meet future business requirements for at least the next twelve months.
Schlumberger had $2.0 billion of commercial paper outstanding as of September 30, 2011.
FORWARD-LOOKING STATEMENTS
This Form 10-Q 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; operating margins; improvements in operating procedures and technology; capital expenditures by Schlumberger and the oil and gas industry; the business strategies of Schlumberger’s customers; future global political and economic conditions; and future results of operations. These statements are subject to risks and uncertainties, including, but not limited to, current global economic conditions; changes in exploration and production spending by Schlumberger’s customers and changes in the level of oil and natural gas exploration and development; general economic, geopolitical and business conditions in key regions of the world; pricing erosion; weather and seasonal factors; the ability to respond to increased activity levels; 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; continuing operational delays or program reductions as of result of the lifted drilling moratorium in the Gulf of Mexico; inability of technology to meet new challenges in explorations; and other risks and uncertainties detailed in our most recent Form 10-K and other filings that we make with the Securities and Exchange Commission. If one or more of these risks or uncertainties materialize (or the consequences of such a development changes), or should underlying assumptions prove incorrect, actual outcomes may vary materially from those forecasted or expected. Schlumberger disclaims any intention or obligation to update publicly or revise such statements, whether as a result of new information, future events or otherwise.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
For quantitative and qualitative disclosures about market risk affecting Schlumberger, see Item 7A, “Quantitative and Qualitative Disclosures about Market Risk,” of the Schlumberger Annual Report on Form 10-K for the fiscal year ended December 31, 2010. Schlumberger’s exposure to market risk has not changed materially since December 31, 2010.
Item 4. Controls and Procedures.
Schlumberger has carried out an evaluation under the supervision and with the participation of Schlumberger’s management, including the Chief Executive Officer (“CEO”) and the Chief Financial Officer (“CFO”), of the effectiveness of Schlumberger’s “disclosure controls and procedures” (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)) as of the end of the period covered by this report. Based on this evaluation, the CEO and the CFO have concluded that, as of the end of the period covered by this report, Schlumberger’s disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in the reports that Schlumberger files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Schlumberger’s disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is accumulated and communicated to its management, including the CEO and the CFO, as appropriate, to allow timely decisions regarding required disclosure. There has been no change in Schlumberger’s internal control over financial reporting that occurred during the quarter to which this report relates that has materially affected, or is reasonably likely to materially affect, Schlumberger’s internal control over financial reporting.
 
*   Mark of Schlumberger

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PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
The information with respect to Item 1 is set forth under Note 13 — Contingencies, in the Consolidated Financial Statements.
Item 1A. Risk Factors.
As of the date of this filing, there have been no material changes from the risk factors previously disclosed in Part 1, Item 1A, of Schlumberger’s Annual Report on Form 10-K for the fiscal year ended December 31, 2010.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Unregistered Sales of Equity Securities
None.
Issuer Repurchases of Equity Securities
On April 17, 2008, the Schlumberger Board of Directors (the “Board”) approved an $8 billion share repurchase program for Schlumberger common stock, which may be acquired in the open market or in negotiated transactions. On July 21, 2011, the Board approved an extension of this repurchase program to December 31, 2013. As of September 30, 2011, $2.5 billion remained available for repurchase under the existing repurchase authorization.
Schlumberger’s common stock repurchase program activity for the three months ended September 30, 2011 was as follows:
                                    
    (Stated in millions, except per share amounts)  
                    Total number of     Maximum value of  
    Total number     Average price     shares purchased     shares that may yet  
    of shares     paid per     as part of publicly     be purchased  
    purchased     share     announced program     under the program  
July 1 through July 31, 2011
    4,629.6     $ 86.40       4,629.6     $ 2,898  
August 1 through August 31, 2011
    2,614.9     $ 85.21       2,614.9     $ 2,675  
September 1 through September 30, 2011
    2,666.9     $ 70.70       2,666.9     $ 2,487  
 
                         
 
    9,911.4     $ 81.86       9,911.4          
 
                         
All of the shares repurchased in July 2011 and 1,001,430 shares repurchased in August 2011 were acquired in a privately negotiated transaction.
In connection with the exercise of stock options under Schlumberger’s incentive compensation plans, Schlumberger routinely receives shares of its common stock from optionholders in consideration of the exercise price of the stock options. Schlumberger does not view these transactions as requiring disclosure under this Item as the number of shares of Schlumberger common stock received from optionholders is not material.
Item 3. Defaults Upon Senior Securities.
None.
Item 5. Other Information.
None.
Item 6. Exhibits.
      Exhibit 3.1 — Articles of Incorporation of Schlumberger Limited (Schlumberger N.V.) (incorporated by reference to Exhibit 3 to Schlumberger’s Current Report on Form 8-K filed on April 7, 2011).
 
      Exhibit 3.2 — Amended and Restated Bylaws of Schlumberger Limited (Schlumberger N.V.) (incorporated by reference to Exhibit 3.1 to Schlumberger’s Current Report on Form 8-K filed on April 22, 2005).
 
    * Exhibit 31.1 — Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 
    * Exhibit 31.2 — Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

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    ** Exhibit 32.1 — Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
    ** Exhibit 32.2 — Certification Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
    * Exhibit 101 — The following materials from Schlumberger Limited’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2011, formatted in XBRL (Extensible Business Reporting Language): (i) Consolidated Statement of Income; (ii) Consolidated Balance Sheet; (iii) Consolidated Statement of Cash Flows; (iv) Consolidated Statement of Equity, and (v) Notes to Consolidated Financial Statements.
 
    * Filed with this Form 10-Q.
 
    ** Furnished with this Form 10-Q.

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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized and in his capacity as Chief Accounting Officer.
         
  Schlumberger Limited
(Registrant)
 
 
Date: October 26, 2011  /s/ Howard Guild    
  Howard Guild   
  Chief Accounting Officer and
Duly Authorized Signatory
 
 
 

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