UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended:
Commission file No.:
SCHLUMBERGER N.V.
(SCHLUMBERGER LIMITED)
(Exact name of registrant as specified in its charter)
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Curaçao |
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(State or other jurisdiction of |
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(I.R.S. Employer |
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42 RUE SAINT-DOMINIQUE |
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PARIS, FRANCE |
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75007 |
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62 BUCKINGHAM GATE |
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LONDON, UNITED KINGDOM |
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SW1E 6AJ |
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PARKSTRAAT 83 THE HAGUE, |
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THE NETHERLANDS |
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2514 JG |
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(Addresses of principal executive offices) |
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(Zip Codes) |
Registrant’s telephone number in the United States, including area code, is: (
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer |
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Accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
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Class |
Outstanding at June 30, 2020 |
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COMMON STOCK, $0.01 PAR VALUE PER SHARE |
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SCHLUMBERGER LIMITED
Second Quarter 2020 Form 10-Q
Table of Contents
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Page |
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PART I |
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Financial Information |
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Item 1. |
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3 |
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Item 2. |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
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29 |
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Item 4. |
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29 |
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PART II |
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Other Information |
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Item 1. |
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30 |
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Item 1A. |
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30 |
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Item 2. |
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30 |
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Item 3. |
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30 |
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Item 4. |
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30 |
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Item 5. |
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30 |
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Item 6. |
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31 |
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
SCHLUMBERGER LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME (LOSS)
(Unaudited)
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(Stated in millions, except per share amounts) |
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Second Quarter |
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Six Months |
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2020 |
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2019 |
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2020 |
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2019 |
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Revenue |
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Services |
$ |
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$ |
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$ |
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$ |
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Product sales |
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Total Revenue |
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Interest & other income |
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Expenses |
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Cost of services |
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Cost of sales |
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Research & engineering |
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General & administrative |
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Impairments & other |
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- |
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- |
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Interest |
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Income (loss) before taxes |
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( |
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( |
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Tax expense (benefit) |
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( |
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( |
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Net income (loss) |
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( |
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( |
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Net income attributable to noncontrolling interests |
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Net income (loss) attributable to Schlumberger |
$ |
( |
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$ |
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$ |
( |
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$ |
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Basic earnings (loss) per share of Schlumberger |
$ |
( |
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$ |
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$ |
( |
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$ |
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Diluted earnings (loss) per share of Schlumberger |
$ |
( |
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$ |
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$ |
( |
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$ |
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Average shares outstanding: |
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Basic |
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Assuming dilution |
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See Notes to Consolidated Financial Statements
3
SCHLUMBERGER LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
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(Stated in millions) |
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Second Quarter |
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Six Months |
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2020 |
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2019 |
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2020 |
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2019 |
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Net income (loss) |
$ |
( |
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$ |
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$ |
( |
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$ |
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Currency translation adjustments |
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Unrealized net change arising during the period |
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( |
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( |
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Cash flow hedges |
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Net (loss) gain on cash flow hedges |
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( |
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( |
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( |
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Reclassification to net income (loss) of net realized loss |
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Pension and other postretirement benefit plans |
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Amortization to net income (loss) of net actuarial loss |
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Amortization to net income (loss) of net prior service credit |
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( |
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( |
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Impact of curtailment |
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( |
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- |
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( |
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- |
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Income taxes on pension and other postretirement benefit plans |
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( |
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( |
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Comprehensive income (loss) |
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( |
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( |
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Comprehensive income attributable to noncontrolling interests |
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Comprehensive income (loss) attributable to Schlumberger |
$ |
( |
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$ |
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$ |
( |
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$ |
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See Notes to Consolidated Financial Statements
4
SCHLUMBERGER LIMITED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
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(Stated in millions) |
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Jun. 30, |
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2020 |
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Dec. 31, |
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(Unaudited) |
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2019 |
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ASSETS |
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Current Assets |
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Cash |
$ |
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$ |
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Short-term investments |
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Receivables less allowance for doubtful accounts (2020 - $ |
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Inventories |
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Other current assets |
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Investments in Affiliated Companies |
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Fixed Assets less accumulated depreciation |
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Multiclient Seismic Data |
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Goodwill |
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Intangible Assets |
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Other Assets |
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$ |
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$ |
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LIABILITIES AND EQUITY |
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Current Liabilities |
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Accounts payable and accrued liabilities |
$ |
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$ |
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Estimated liability for taxes on income |
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Short-term borrowings and current portion of long-term debt |
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Dividends payable |
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Long-term Debt |
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Postretirement Benefits |
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Deferred Taxes |
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Other Liabilities |
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Equity |
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Common stock |
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Treasury stock |
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( |
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( |
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Retained earnings |
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Accumulated other comprehensive loss |
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( |
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( |
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Schlumberger stockholders' equity |
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Noncontrolling interests |
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$ |
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$ |
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See Notes to Consolidated Financial Statements
5
SCHLUMBERGER LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
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(Stated in millions) |
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Six Months Ended June 30, |
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2020 |
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2019 |
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Cash flows from operating activities: |
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Net income (loss) |
$ |
( |
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$ |
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Adjustments to reconcile net income (loss) to cash provided by operating activities: |
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Impairments and other charges |
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- |
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Depreciation and amortization (1) |
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Deferred taxes |
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( |
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( |
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Stock-based compensation expense |
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Earnings of equity method investments, less dividends received |
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( |
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- |
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Change in assets and liabilities: (2) |
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Decrease (increase) in receivables |
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( |
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Increase in inventories |
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( |
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( |
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Decrease (increase) in other current assets |
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( |
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Decrease (increase) in other assets |
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( |
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Decrease in accounts payable and accrued liabilities |
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( |
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( |
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Decrease in estimated liability for taxes on income |
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( |
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( |
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Decrease in other liabilities |
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( |
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( |
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Other |
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NET CASH PROVIDED BY OPERATING ACTIVITIES |
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Cash flows from investing activities: |
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Capital expenditures |
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( |
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( |
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APS investments |
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( |
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( |
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Multiclient seismic data costs capitalized |
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( |
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( |
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Business acquisitions and investments, net of cash acquired |
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( |
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( |
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(Purchase) sale of investments, net |
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( |
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Net proceeds from asset divestitures |
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- |
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Other |
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( |
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( |
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NET CASH USED IN INVESTING ACTIVITIES |
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( |
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( |
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Cash flows from financing activities: |
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Dividends paid |
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( |
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Proceeds from employee stock purchase plan |
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Proceeds from exercise of stock options |
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- |
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Stock repurchase program |
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( |
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( |
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Proceeds from issuance of long-term debt |
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Repayment of long-term debt |
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( |
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( |
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Net increase (decrease) in short-term borrowings |
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( |
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Other |
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( |
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NET CASH PROVIDED BY (USED) IN FINANCING ACTIVITIES |
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( |
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Net increase in cash before translation effect |
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Translation effect on cash |
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( |
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Cash, beginning of period |
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Cash, end of period |
$ |
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$ |
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(1) |
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(2) |
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See Notes to Consolidated Financial Statements
6
SCHLUMBERGER LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
(Unaudited)
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(Stated in millions, except per share amounts) |
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Accumulated |
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Other |
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Common Stock |
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Retained |
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Comprehensive |
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Noncontrolling |
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January 1, 2020 – June 30, 2020 |
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Issued |
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In Treasury |
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Earnings |
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Loss |
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Interests |
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Total |
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Balance, January 1, 2020 |
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$ |
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$ |
( |
) |
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$ |
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$ |
( |
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$ |
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$ |
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Net loss |
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( |
) |
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( |
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Currency translation adjustments |
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( |
) |
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( |
) |
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( |
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Changes in fair value of cash flow hedges |
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( |
) |
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( |
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Pension and other postretirement benefit plans |
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|
|
|
Vesting of restricted stock |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
Shares issued under employee stock purchase plan |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock repurchase program |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
Stock-based compensation expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends declared ($ |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
Other |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Balance, June 30, 2020 |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
|
|
|
(Stated in millions, except per share amounts) |
|
|||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock |
|
|
Retained |
|
|
Comprehensive |
|
|
Noncontrolling |
|
|
|
|
|
||||||||
|
January 1, 2019 – June 30, 2019 |
|
Issued |
|
|
In Treasury |
|
|
Earnings |
|
|
Loss |
|
|
Interests |
|
|
Total |
|
||||||
|
Balance, January 1, 2019 |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Currency translation adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension and other postretirement benefit plans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares sold to optionees, less shares exchanged |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vesting of restricted stock |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
Shares issued under employee stock purchase plan |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock repurchase program |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
Stock-based compensation expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends declared ($ |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
Other |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Balance, June 30, 2019 |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
7
|
|
|
(Stated in millions, except per share amounts) |
|
|||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock |
|
|
Retained |
|
|
Comprehensive |
|
|
Noncontrolling |
|
|
|
|
|
||||||||
|
April 1, 2020 – June 30, 2020 |
|
Issued |
|
|
In Treasury |
|
|
Earnings |
|
|
Loss |
|
|
Interests |
|
|
Total |
|
||||||
|
Balance, April 1, 2020 |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
|
Net loss |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
Currency translation adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in fair value of cash flow hedges |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
Pension and other postretirement benefit plans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
Vesting of restricted stock |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
Stock-based compensation expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends declared ($ |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
Other |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Balance, June 30, 2020 |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
|
|
(Stated in millions, except per share amounts) |
|
|||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock |
|
|
Retained |
|
|
Comprehensive |
|
|
Noncontrolling |
|
|
|
|
|
||||||||
|
April 1, 2019 – June 30, 2019 |
Issued |
|
|
In Treasury |
|
|
Earnings |
|
|
Loss |
|
|
Interests |
|
|
Total |
|
||||||
|
Balance, April 1, 2019 |
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Currency translation adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
Changes in fair value of cash flow hedges |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension and other postretirement benefit plans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares sold to optionees, less shares exchanged |
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
Vesting of restricted stock |
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
Stock repurchase program |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
Stock-based compensation expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends declared ($ |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
Other |
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Balance, June 30, 2019 |
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
SHARES OF COMMON STOCK
(Unaudited)
|
|
|
|
|
|
(Stated in millions) |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares |
|
|
|
|
Issued |
|
|
In Treasury |
|
|
Outstanding |
|
|||
|
Balance, January 1, 2020 |
|
|
|
|
|
( |
) |
|
|
|
|
|
Vesting of restricted stock |
|
- |
|
|
|
|
|
|
|
|
|
|
Shares issued under employee stock purchase plan |
|
- |
|
|
|
|
|
|
|
|
|
|
Stock repurchase program |
|
- |
|
|
|
( |
) |
|
|
( |
) |
|
Balance, June 30, 2020 |
|
|
|
|
|
( |
) |
|
|
|
|
See Notes to Consolidated Financial Statements
8
SCHLUMBERGER LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
The accompanying unaudited consolidated financial statements of Schlumberger Limited and its subsidiaries (“Schlumberger”) have been prepared in accordance with generally accepted accounting principles in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of Schlumberger management, all adjustments considered necessary for a fair statement have been included in the accompanying unaudited financial statements. All intercompany transactions and balances have been eliminated in consolidation. Operating results for the six-month period ended June 30, 2020 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2020. The December 31, 2019 balance sheet information has been derived from the Schlumberger 2019 audited financial statements. For further information, refer to the Consolidated Financial Statements and notes thereto included in the Schlumberger Annual Report on Form 10-K for the year ended December 31, 2019, filed with the Securities and Exchange Commission on January 22, 2020.
2. Charges and Credits
Schlumberger recorded the following charges and credits during 2020, all of which are classified in Impairments & other in the Consolidated Statement of Income (Loss):
|
|
(Stated in millions) |
|
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pretax |
|
|
Tax |
|
|
Net |
|
|||
|
First quarter: |
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill |
$ |
|
|
|
$ |
- |
|
|
$ |
|
|
|
Intangible asset impairments |
|
|
|
|
|
( |
) |
|
|
|
|
|
Asset Performance Solutions investments |
|
|
|
|
|
|
|
|
|
|
|
|
North America pressure pumping impairment |
|
|
|
|
|
( |
) |
|
|
|
|
|
Workforce reductions |
|
|
|
|
|
( |
) |
|
|
|
|
|
Other |
|
|
|
|
|
( |
) |
|
|
|
|
|
Valuation allowance |
|
- |
|
|
|
|
|
|
|
|
|
|
Second quarter: |
|
|
|
|
|
|
|
|
|
|
|
|
Workforce reductions |
|
|
|
|
|
( |
) |
|
|
|
|
|
Asset Performance Solutions investments |
|
|
|
|
|
( |
) |
|
|
|
|
|
Fixed asset impairments |
|
|
|
|
|
( |
) |
|
|
|
|
|
Inventory write-downs |
|
|
|
|
|
( |
) |
|
|
|
|
|
Right-of-use asset impairments |
|
|
|
|
|
( |
) |
|
|
|
|
|
Costs associated with exiting certain activities |
|
|
|
|
|
|
|
|
|
|
|
|
Multiclient seismic data impairment |
|
|
|
|
|
( |
) |
|
|
|
|
|
Repurchase of bonds |
|
|
|
|
|
( |
) |
|
|
|
|
|
Postretirement benefits curtailment gain |
|
( |
) |
|
|
|
|
|
|
( |
) |
|
Other |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
First quarter 2020:
|
|
• |
Geopolitical events that increased the supply of low-priced oil to the global market occurred at the same time that demand weakened due to the worldwide effects of the COVID-19 pandemic, leading to a collapse in oil prices during March 2020. As a result, Schlumberger’s market capitalization deteriorated significantly compared to the end of 2019. Schlumberger’s stock price reached a low during the first quarter of 2020 not seen since 1995. Additionally, the Philadelphia Oil Services Sector index, which is comprised of companies involved in the oil services sector, reached an all-time low. As a result of these facts, Schlumberger determined that it was more likely than not that the fair value of certain of its reporting units were less than their carrying value. Therefore, Schlumberger performed an interim goodwill impairment test. |
9
Schlumberger had
Following the $3.1 billion goodwill impairment charge relating to these seven reporting units,
Schlumberger used the income approach to estimate the fair value of its reporting units, but also considered the market approach to validate the results. The income approach estimates the fair value by discounting each reporting unit’s estimated future cash flows using Schlumberger’s estimate of the discount rate, or expected return, that a marketplace participant would have required as of the valuation date. The market approach includes the use of comparative multiples to corroborate the discounted cash flow results. The market approach involves significant judgement involved in the selection of the appropriate peer group companies and valuation multiples.
Some of the more significant assumptions inherent in the income approach include the estimated future net annual cash flows for each reporting unit and the discount rate. Schlumberger selected the assumptions used in the discounted cash flow projections using historical data supplemented by current and anticipated market conditions and estimated growth rates. Schlumberger’s estimates are based upon assumptions believed to be reasonable. However, given the inherent uncertainty in determining the assumptions underlying a discounted cash flow analysis, particularly in the current volatile market, actual results may differ from those used in Schlumberger’s valuations which could result in additional impairment charges in the future.
The discount rates utilized to value Schlumberger’s reporting units were between
|
|
• |
The negative market indicators described above were triggering events that indicated that certain of Schlumberger’s long-lived intangible and tangible assets may be impaired. Recoverability testing indicated that certain long-lived assets were impaired. The estimated fair value of these assets was determined to be below their carrying value. As a result, Schlumberger recorded the following impairment charges: |
|
|
- |
$ |
|
|
- |
$ |
|
|
- |
$ |
|
|
• |
$ |
|
|
• |
$ |
|
|
• |
$ |
Second quarter 2020:
|
|
• |
As previously noted, late in the first quarter of 2020 geopolitical events that increased the supply of low-priced oil to the global market occurred at the same time as demand weakened due to the worldwide effects of the COVID-19 pandemic, which led to a collapse in oil prices. As a result, the second quarter of 2020 was the most challenging quarter in past decades. Schlumberger responded to these market conditions by taking actions to restructure its business and rationalize its asset base during the second quarter of 2020. These actions included reducing headcount, closing facilities and exiting business lines in certain countries. Additionally, due to the resulting activity decline, Schlumberger had assets that will no longer be utilized. As a consequence of these circumstances and decisions, Schlumberger recorded the following restructuring and asset impairment charges: |
10
|
|
- |
$ |
|
|
- |
$ |
|
|
- |
$ |
|
|
- |
$ |
|
|
- |
$ |
|
|
- |
$ |
|
|
- |
$ |
|
|
- |
$ |
|
|
• |
During the second quarter of 2020, Schlumberger repurchased certain Senior Notes (see Note 9 – Long-term debt), which resulted in a $ |
|
|
• |
As a consequence of the workforce reductions described above, Schlumberger recorded a curtailment gain of $ |
The fair value of the impaired intangible assets, fixed assets, APS investments, right-of-use assets and multiclient seismic data was estimated based on the present value of projected future cash flows that the underlying assets are expected to generate. Such estimates included unobservable inputs that required significant judgement.
As market conditions evolve and Schlumberger continues to develop its strategy to deal with such conditions, it may result in further restructuring and/or impairment charges in future periods relating to, among other things, fixed assets, facilities, workforce reductions and other assets.
There were
3. Earnings (Loss) Per Share
The following is a reconciliation from basic earnings (loss) per share of Schlumberger to diluted earnings (loss) per share of Schlumberger:
|
(Stated in millions, except per share amounts) |
|
||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020 |
|
|
2019 |
|
||||||||||||||||||
|
|
Schlumberger Net Loss |
|
|
Average Shares Outstanding |
|
|
Loss per Share |
|
|
Schlumberger Net Income |
|
|
Average Shares Outstanding |
|
|
Earnings per Share |
|
||||||
|
Second Quarter |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
$ |
( |
) |
|
|
|
|
|
$ |
( |
) |
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
Unvested restricted stock |
|
- |
|
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
Diluted |
$ |
( |
) |
|
|
|
|
|
$ |
( |
) |
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020 |
|
|
2019 |
|
||||||||||||||||||
|
|
Schlumberger Net Loss |
|
|
Average Shares Outstanding |
|
|
Loss per Share |
|
|
Schlumberger Net Income |
|
|
Average Shares Outstanding |
|
|
Earnings per Share |
|
||||||
|
Six Months |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Unvested restricted stock |
|
- |
|
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
Diluted |
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
11
The number of outstanding options to purchase shares of Schlumberger common stock that were not included in the computation of diluted earnings per share, because to do so would have had an antidilutive effect, was as follows:
|
(Stated in millions) |
|
||||||||||
|
|
|
|
|
|
|||||||
|
|
Second Quarter |
|
|
Six Months |
|
||||||
|
|
2020 |
|
2019 |
|
|
2020 |
|
2019 |
|
||
|
Employee stock options |
|
|
|
|
|
|
|
|
|
|
|
|
Unvested restricted stock |
|
|
|
- |
|
|
|
|
|
- |
|
4. Inventories
A summary of inventories, which are stated at the lower of average cost or net realizable value, is as follows:
|
(Stated in millions) |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
Jun. 30, |
|
|
Dec. 31, |
|
||
|
|
2020 |
|
|
2019 |
|
||
|
Raw materials & field materials |
$ |
|
|
|
$ |
|
|
|
Work in progress |
|
|
|
|
|
|
|
|
Finished goods |
|
|
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
5. Fixed Assets
A summary of fixed assets follows:
|
(Stated in millions) |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
Jun. 30, |
|
|
Dec. 31, |
|
||
|
|
2020 |
|
|
2019 |
|
||
|
Property, plant & equipment |
$ |
|
|
|
$ |
|
|
|
Less: Accumulated depreciation |
|
|
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
Depreciation expense relating to fixed assets was as follows:
|
(Stated in millions) |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
2020 |
|
|
2019 |
|
||
|
Second Quarter |
$ |
|
|
|
$ |
|
|
|
Six Months |
$ |
|
|
|
$ |
|
|
12
6. Multiclient Seismic Data
The change in the carrying amount of multiclient seismic data for the six months ended June 30, 2020 was as follows:
|
(Stated in millions) |
|
||
|
|
|
|
|
|
Balance at December 31, 2019 |
$ |
|
|
|
Capitalized in period |
|
|
|
|
Charged to expense |
|
( |
) |
|
Impairments (See Note 2) |
|
( |
) |
|
Other |
|
( |
) |
|
Balance at June 30, 2020 |
$ |
|
|
7. Goodwill
The changes in the carrying amount of goodwill by segment were as follows:
|
|
(Stated in millions) |
|
|||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reservoir |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Characterization |
|
|
Drilling |
|
|
Production |
|
|
Cameron |
|
|
Total |
|
|||||
|
Balance at December 31, 2019 |
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Impairment (See Note 2) |
|
- |
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Impact of changes in exchange rates and other |
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
- |
|
|
|
( |
) |
|
Balance at June 30, 2020 |
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
8. Intangible Assets
The gross book value, accumulated amortization and net book value of intangible assets were as follows:
|
|
(Stated in millions) |
|
|||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||
|
|
Jun. 30, 2020 |
|
|
Dec. 31, 2019 |
|
||||||||||||||||||
|
|
Gross |
|
|
Accumulated |
|
|
Net Book |
|
|
Gross |
|
|
Accumulated |
|
|
Net Book |
|
||||||
|
|
Book Value |
|
|
Amortization |
|
|
Value |
|
|
Book Value |
|
|
Amortization |
|
|
Value |
|
||||||
|
Customer relationships |
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Technology/technical know-how |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tradenames |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Amortization expense charged to income was as follows:
|
(Stated in millions) |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
2020 |
|
|
2019 |
|
||
|
Second Quarter |
$ |
|
|
|
$ |
|
|
|
Six Months |
$ |
|
|
|
$ |
|
|
Based on the net book value of intangible assets at June 30, 2020, amortization charged to income for the subsequent five years is estimated to be: remaining two quarters of 2020—$
13
9. Long-term Debt
A summary of Long-term Debt follows:
|
(Stated in millions) |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
Jun. 30, |
|
|
Dec. 31, |
|
||
|
|
2020 |
|
|
2019 |
|
||
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
Commercial paper borrowings |
|
|
|
|
|
|
|
|
Other |
|
- |
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
The estimated fair value of Schlumberger’s Long-term Debt, based on quoted market prices at June 30, 2020 and December 31, 2019, was $
During the second quarter of 2020, Schlumberger entered into a €
At June 30, 2020, Schlumberger had separate committed credit facility agreements aggregating $
Borrowings under the commercial paper programs at June 30, 2020 were $
During the first quarter of 2020, Schlumberger issued €
During the second quarter of 2020, Schlumberger issued €
14
During the second quarter of 2020, Schlumberger repurchased all $
During the second quarter of 2020, Schlumberger established a €
Schlumberger Limited fully and unconditionally guarantees the securities issued by certain of its subsidiaries, including securities issued by Schlumberger Investment SA, a wholly-owned subsidiary of Schlumberger.
10. Derivative Instruments and Hedging Activities
Schlumberger is exposed to market risks related to fluctuations in foreign currency exchange rates and interest rates. To mitigate these risks, Schlumberger utilizes derivative instruments. Schlumberger does not enter into derivative transactions for speculative purposes.
Interest Rate Risk
Schlumberger is subject to interest rate risk on its debt and its investment portfolio. Schlumberger maintains an interest rate risk management strategy that uses a mix of variable and fixed rate debt combined with its investment portfolio, to mitigate the exposure to changes in interest rates.
At June 30, 2020, Schlumberger had fixed rate debt aggregating $
Foreign Currency Exchange Rate Risk
As a multinational company, Schlumberger generates revenue in more than
Schlumberger is exposed to risks on future cash flows to the extent that the local currency is not the functional currency and expenses denominated in local currency are not equal to revenues denominated in local currency. Schlumberger uses foreign currency forward contracts to provide a hedge against a portion of these cash flow risks. These contracts are accounted for as cash flow hedges, with the changes in the fair value of the hedge recorded on the Consolidated Balance Sheet and in Accumulated Other Comprehensive Loss. Amounts recorded in Accumulated Other Comprehensive Loss are reclassified into earnings in the same period or periods that the hedged item is recognized in earnings.
Schlumberger is also exposed to risks on future cash flows relating to certain of its fixed rate debt denominated in currencies other than the functional currency. Schlumberger uses cross-currency swaps to provide a hedge against these cash flow risks.
During 2017, a Canadian-dollar functional currency subsidiary of Schlumberger issued $
During 2019, a US-dollar functional currency subsidiary of Schlumberger issued €
During the first quarter of 2020, a US-dollar functional currency subsidiary of Schlumberger issued €
15
During the second quarter of 2020, a US-dollar functional currency subsidiary of Schlumberger issued €
Schlumberger is exposed to changes in the fair value of assets and liabilities that are denominated in currencies other than the functional currency. While Schlumberger uses foreign currency forward contracts and foreign currency options to economically hedge this exposure as it relates to certain currencies, these contracts are not designated as hedges for accounting purposes. Instead, the fair value of the contracts is recorded on the Consolidated Balance Sheet, and changes in the fair value are recognized in the Consolidated Statement of Income (Loss) as are changes in fair value of the hedged item.
At June 30, 2020, contracts were outstanding for the US dollar equivalent of $
At June 30, 2020, Schlumberger recognized a cumulative $
The effect of derivative instruments designated as fair value and cash flow hedges, and those not designated as hedges, on the Consolidated Statement of Income (Loss) was as follows:
|
|
|
|
|
|
|
|
|
|
(Stated in millions) |
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain (Loss) Recognized in Income (Loss) |
|
|
|
|||||||||||||
|
|
Second Quarter |
|
|
Six Months |
|
|
|
||||||||||
|
|
2020 |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
|
Consolidated Statement of Income (Loss) Classification |
||||
|
Derivatives designated as cash flow hedges: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts |
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
Cost of services/sales |
|
Cross currency swaps |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
Interest expense |
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
|
|
|
Derivatives not designated as hedges: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts |
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
|
Cost of services/sales |
11. Contingencies
Schlumberger is party to various legal proceedings from time to time. A liability is accrued when a loss is both probable and can be reasonably estimated. Management believes that the probability of a material loss with respect to any currently pending legal proceeding is remote. However, litigation is inherently uncertain and it is not possible to predict the ultimate disposition of any of these proceedings.
16
12. Segment Information
|
|
|
|
|
|
(Stated in millions) |
|
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second Quarter 2020 |
|
|
Second Quarter 2019 |
|
||||||||||
|
|
|
|
|
|
Income (Loss) |
|
|
|
|
|
|
Income (Loss) |
|
||
|
|
|
|
|
|
Before |
|
|
|
|
|
|
Before |
|
||
|
|
Revenue |
|
|
Taxes |
|
|
Revenue |
|
|
Taxes |
|
||||
|
Reservoir Characterization |
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Drilling |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Production |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cameron |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eliminations & other |
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate & other (1) |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
Interest income (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense (3) |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
Charges and credits (4) |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
- |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
Certain prior period amounts have been reclassified to conform to the current period presentation.
|
(1) |
|
|
(2) |
|
|
(3) |
|
|
(4) |
|
|
|
|
|
|
|
(Stated in millions) |
|
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months 2020 |
|
|
Six Months 2019 |
|
||||||||||
|
|
|
|
|
|
Income (Loss) |
|
|
|
|
|
|
Income (Loss) |
|
||
|
|
|
|
|
|
Before |
|
|
|
|
|
|
Before |
|
||
|
|
Revenue |
|
|
Taxes |
|
|
Revenue |
|
|
Taxes |
|
||||
|
Reservoir Characterization |
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Drilling |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Production |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cameron |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eliminations & other |
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate & other (1) |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
Interest income (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense (3) |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
Charges and credits (4) |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
- |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
Certain prior period amounts have been reclassified to conform to the current period presentation.
|
(1) |
Comprised principally of certain corporate expenses not allocated to the segments, stock-based compensation costs, amortization expense associated with certain intangible assets, certain centrally managed initiatives and other nonoperating items. |
|
(2) |
Interest income excludes amounts which are included in the segments’ income ($ |
|
(3) |
Interest expense excludes amounts which are included in the segments’ income ($ |
|
(4) |
See Note 2 – Charges and Credits. |
17
Revenue by geographic area was as follows:
|
|
|
|
|
|
|
|
|
|
(Stated in millions) |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second Quarter |
|
|
Six Months |
|
||||||||||
|
|
2020 |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
||||
|
North America |
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Latin America |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Europe/CIS/Africa |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Middle East & Asia |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eliminations & other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
North America and International revenue disaggregated by segment was as follows:
|
|
|
|
|
|
|
|
|
|
(Stated in millions) |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second Quarter 2020 |
|
|||||||||||||
|
|
North |
|
|
|
|
|
|
Eliminations |
|
|
|
|
|
||
|
|
America |
|
|
International |
|
|
& other |
|
|
Total |
|
||||
|
Reservoir Characterization |
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Drilling |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Production |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cameron |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Other |
|
- |
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second Quarter 2019 |
|
|||||||||||||
|
|
North |
|
|
|
|
|
|
Eliminations |
|
|
|
|
|
||
|
|
America |
|
|
International |
|
|
& other |
|
|
Total |
|
||||
|
Reservoir Characterization |
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Drilling |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Production |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cameron |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Other |
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
18
|
|
|
|
|
|
(Stated in millions) |
|
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months 2020 |
|
|||||||||||||
|
|
North |
|
|
|
|
|
|
Eliminations |
|
|
|
|
|
||
|
|
America |
|
|
International |
|
|
& other |
|
|
Total |
|
||||
|
Reservoir Characterization |
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Drilling |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Production |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cameron |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months 2019 |
|
|||||||||||||
|
|
North |
|
|
|
|
|
|
Eliminations |
|
|
|
|
|
||
|
|
America |
|
|
International |
|
|
& other |
|
|
Total |
|
||||
|
Reservoir Characterization |
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Drilling |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Production |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cameron |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Revenue in excess of billings related to contracts where revenue is recognized over time was $
Due to the nature of its business, Schlumberger does not have significant backlog. Total backlog was $
Billings and cash collections in excess of revenue was $
13. Pension and Other Postretirement Benefit Plans
Net pension cost (credit) for the Schlumberger pension plans included the following components:
|
(Stated in millions) |
|
||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second Quarter |
|
|
Six Months |
|
||||||||||||||||||||||||||
|
|
2020 |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
||||||||||||||||||||
|
|
US |
|
|
Int'l |
|
|
US |
|
|
Int'l |
|
|
US |
|
|
Int'l |
|
|
US |
|
|
Int'l |
|
||||||||
|
Service cost |
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Interest cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected return on plan assets |
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Amortization of prior service cost |
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
Amortization of net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
19
The net periodic benefit credit for the Schlumberger US postretirement medical plan included the following components:
|
(Stated in millions) |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second Quarter |
|
|
Six Months |
|
||||||||||
|
|
2020 |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
||||
|
Service cost |
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Interest cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected return on plan assets |
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Amortization of prior service credit |
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Curtailment gain |
|
( |
) |
|
|
- |
|
|
|
( |
) |
|
|
- |
|
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Due to the actions taken by Schlumberger to reduce its global workforce during 2020, Schlumberger experienced a significant reduction in the expected aggregate years of future service of its employees in its US postretirement medical plan. Accordingly, Schlumberger recorded a curtailment gain of $
20
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Second Quarter 2020 Compared to First Quarter 2020
|
|
|
|
|
|
(Stated in millions) |
|
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second Quarter 2020 |
|
|
First Quarter 2020 |
|
||||||||||
|
|
|
|
|
|
Income (Loss) |
|
|
|
|
|
|
Income (Loss) |
|
||
|
|
|
|
|
|
Before |
|
|
|
|
|
|
Before |
|
||
|
|
Revenue |
|
|
Taxes |
|
|
Revenue |
|
|
Taxes |
|
||||
|
Reservoir Characterization |
$ |
1,052 |
|
|
$ |
185 |
|
|
$ |
1,311 |
|
|
$ |
184 |
|
|
Drilling |
|
1,731 |
|
|
|
165 |
|
|
|
2,289 |
|
|
|
285 |
|
|
Production |
|
1,615 |
|
|
|
25 |
|
|
|
2,703 |
|
|
|
212 |
|
|
Cameron |
|
1,015 |
|
|
|
80 |
|
|
|
1,254 |
|
|
|
121 |
|
|
Eliminations & other |
|
(57 |
) |
|
|
(59 |
) |
|
|
(102 |
) |
|
|
(26 |
) |
|
|
|
|
|
|
|
396 |
|
|
|
|
|
|
|
776 |
|
|
Corporate & other (1) |
|
|
|
|
|
(169 |
) |
|
|
|
|
|
|
(228 |
) |
|
Interest income (2) |
|
|
|
|
|
7 |
|
|
|
|
|
|
|
15 |
|
|
Interest expense (3) |
|
|
|
|
|
(137 |
) |
|
|
|
|
|
|
(129 |
) |
|
Charges and credits (4) |
|
|
|
|
|
(3,724 |
) |
|
|
|
|
|
|
(8,523 |
) |
|
|
$ |
5,356 |
|
|
$ |
(3,627 |
) |
|
$ |
7,455 |
|
|
$ |
(8,089 |
) |
|
(1) |
Comprised principally of certain corporate expenses not allocated to the segments, stock-based compensation costs, amortization expense associated with certain intangible assets, certain centrally managed initiatives and other nonoperating items. |
|
(2) |
Interest income excludes amounts which are included in the segments’ income ($- million in Q2 2020; $- million in Q1 2020). |
|
(3) |
Interest expense excludes amounts which are included in the segments’ income ($7 million in Q2 2020; $7 million in Q1 2020). |
|
(4) |
Charges and credits are described in detail in Note 2 to the Consolidated Financial Statements. |
The second quarter of 2020 was probably the most challenging quarter in past decades. Second-quarter revenue of $5.4 billion declined 28% sequentially, caused by the significant decrease in North America activity, and international activity drop due to downward revisions to customer budgets accentuated by COVID-19 disruptions. The entire oil and gas industry was confronted with historic oil demand and supply imbalances caused by demand destruction from the global COVID-19 containment effort.
North America revenue declined 48% sequentially with land revenue falling 60% as customers dramatically cut back spending. International revenue declined 19% sequentially with Latin America and Africa experiencing the largest revenue declines due to COVID-19-related restrictions and the drop in deepwater activity. In addition, there was a production interruption in the Asset Performance Solutions (“APS”) projects in Ecuador caused by a major landslide that led to the rupture of the main pipeline.
Schlumberger has worked to protect its liquidity and cash positions and sustained resilient international margins while navigating the trough of this downcycle.
Despite the severe drop in international revenue and the effect of the APS production interruption in Ecuador, international margin was essentially flat compared to the previous quarter, due to Schlumberger’s swift and decisive actions to reduce operating costs, restructure, and rationalize its asset base. Schlumberger is working to permanently remove $1.5 billion of structural costs annually by reorganizing into a leaner and more responsive company that is better aligned with its customers’ workflows.
Looking at the macro view in the near-term, during the beginning of the third quarter of 2020 oil demand slowly started to normalize and is expected to continue to improve as government measures support consumption. However, subsequent waves of potential COVID-19 resurgence pose a negative risk to this outlook.
The conditions are set in the third quarter for a modest frac completion activity increase in North America, though from a very low base. Internationally, markets may continue to be disrupted by the pandemic and will continue to adjust to budget levels set during the second quarter, but this is expected to be mostly offset if there is a seasonal return of activity in the Northern Hemisphere and a rebound of Latin America from its second-quarter weakness. However, any further material COVID-19 disruption or significant setback in oil demand arising from a slower economic recovery could present downside risks to this outlook. Absent these risks, Schlumberger anticipates flat sequential revenue in the third quarter. Schlumberger expects its third quarter pretax segment operating income and margin to expand as a result of its restructuring efforts, improved activity mix, and sustained benefits from technology adoption, including digital.
21
Reservoir Characterization
Reservoir Characterization revenue of $1.1 billion decreased 20% sequentially. This was mainly due to lower Wireline activity in North America land and the Eastern Middle East and Sub-Sahara Africa GeoMarkets. Testing Services revenue was also lower mainly in the Sub-Sahara Africa GeoMarket as a result of projects that were completed in the prior quarter, as well as delayed and cancelled activities due to COVID-19.
Reservoir Characterization pretax operating margin of 18% rebounded 357 bps sequentially despite the significant revenue decline. This margin expansion was driven by prompt cost reduction measures through headcount rationalization and furloughs.
Drilling
Drilling revenue of $1.7 billion decreased 24% sequentially. This was primarily due to the activity decline in US land as rig count dropped more than 50%, while COVID-19 disruptions caused drilling activities to be cancelled or suspended in several international GeoMarkets.
Drilling pretax operating margin of 10% contracted by 289 bps sequentially. Drilling & Measurements and M-I SWACO accounted for most of the margin decline and experienced the largest drop in activity due to their sizeable footprint in North America land.
Production
Production revenue of $1.6 billion decreased 40% sequentially. This was driven by the sharp drop in OneStim® pressure-pumping activity in North America land, lower APS revenue due primarily to the significant production interruption in Ecuador and COVID-19 disruptions.
Production pretax operating margin of 2% contracted by 630 bps sequentially. The margin decline was due to reduced profitability in North America land from the dramatic fall in activity, which mostly impacted the OneStim margin, as well as the drop in APS revenue in Ecuador.
Cameron
Cameron revenue of $1.0 billion decreased 19% sequentially. The decline was driven by lower Surface Systems and Valves & Process Systems revenues in North America and lower Drilling Systems sales.
Cameron pretax operating margin of 8% declined by 180 bps sequentially primarily due to the significant revenue decline.
22
Second Quarter 2020 Compared to Second Quarter 2019
|
|
|
|
|
|
(Stated in millions) |
|
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second Quarter 2020 |
|
|
Second Quarter 2019 |
|
||||||||||
|
|
|
|
|
|
Income (Loss) |
|
|
|
|
|
|
Income (Loss) |
|
||
|
|
|
|
|
|
Before |
|
|
|
|
|
|
Before |
|
||
|
|
Revenue |
|
|
Taxes |
|
|
Revenue |
|
|
Taxes |
|
||||
|
Reservoir Characterization |
$ |
1,052 |
|
|
$ |
185 |
|
|
$ |
1,558 |
|
|
$ |
317 |
|
|
Drilling |
|
1,731 |
|
|
|
165 |
|
|
|
2,420 |
|
|
|
301 |
|
|
Production |
|
1,615 |
|
|
|
25 |
|
|
|
3,077 |
|
|
|
235 |
|
|
Cameron |
|
1,015 |
|
|
|
80 |
|
|
|
1,328 |
|
|
|
165 |
|
|
Eliminations & other |
|
(57 |
) |
|
|
(59 |
) |
|
|
(114 |
) |
|
|
(50 |
) |
|
|
|
|
|
|
|
396 |
|
|
|
|
|
|
|
968 |
|
|
Corporate & other (1) |
|
|
|
|
|
(169 |
) |
|
|
|
|
|
|
(238 |
) |
|
Interest income (2) |
|
|
|
|
|
7 |
|
|
|
|
|
|
|
9 |
|
|
Interest expense (3) |
|
|
|
|
|
(137 |
) |
|
|
|
|
|
|
(146 |
) |
|
Charges and credits (4) |
|
|
|
|
|
(3,724 |
) |
|
|
|
|
|
|
- |
|
|
|
$ |
5,356 |
|
|
$ |
(3,627 |
) |
|
$ |
8,269 |
|
|
$ |
593 |
|
|
(1) |
Comprised principally of certain corporate expenses not allocated to the segments, stock-based compensation costs, amortization expense associated with certain intangible assets, certain centrally managed initiatives and other nonoperating items. |
|
(2) |
Interest income excludes amounts which are included in the segments’ income ($- million in 2020; $2 million in 2019). |
|
(3) |
Interest expense excludes amounts which are included in the segments’ income ($7 million in 2020; $10 million in 2019). |
|
(4) |
Charges and credits are described in detail in Note 2 to the Consolidated Financial Statements. |
Second-quarter 2020 revenue of $5.4 billion was 35% lower compared to the same period last year due to the significant fall in North America activity, well as the international activity drop due to downward revisions to customer budgets accentuated by COVID-19 disruptions. With market uncertainty weighing on demand outlook, North America revenue declined 58% reflecting the continued capital discipline of North America operators, who reduced drilling and frac activity. International revenue decreased 24%. This decline was most prominent in Latin America and Africa due to COVID-19-related restrictions and the drop in deepwater activity, as well as the effect of the APS production interruption in Ecuador.
Reservoir Characterization
Second-quarter 2020 revenue of $1.1 billion decreased 32% year-on-year. This was mainly due to lower Wireline and WesternGeco revenue as customers pulled back activity due to COVID-19 and cut discretionary spending and exploration in several international GeoMarkets.
Year-on-year, pretax operating margin decreased 273 bps to 18% due to reduced profitability, largely in Wireline and WesternGeco.
Drilling
Second-quarter 2020 revenue of $1.7 billion decreased 28% year-on-year. This was primarily due to the activity decline in US land as rig count significantly decreased, while COVID-19 disruptions caused drilling activities to be cancelled or suspended in several international GeoMarkets. Revenue was also lower due to the divestiture of the Drilling Tools businesses at the end of the fourth quarter of 2019.
Year-on-year, pretax operating margin decreased 288 bps to 10% due to the significant reduction in activity in North America.
Production
Second-quarter 2020 revenue of $1.6 billion decreased 48% year-on-year. This revenue decrease was driven by the sharp drop in OneStim pressure pumping activity in North America land, lower APS revenue due primarily to the significant production interruption in Ecuador and COVID-19 disruptions.
23
Year-on-year, pretax operating margin decreased 612 bps to 2% due primarily to reduced profitability in OneStim in North America land.
Cameron
Second-quarter 2020 revenue of $1.0 billion decreased 24% year-on-year. The decline was driven primarily by lower Valves & Process Systems and Surface Systems revenue in North America.
Year-on-year, pretax operating margin decreased 453 bps to 8% due to the significant revenue decline.
Six Months 2020 Compared to Six Months 2019
|
|
|
|
|
|
(Stated in millions) |
|
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months 2020 |
|
|
Six Months 2019 |
|
||||||||||
|
|
|
|
|
|
Income (Loss) |
|
|
|
|
|
|
Income (Loss) |
|
||
|
|
|
|
|
|
Before |
|
|
|
|
|
|
Before |
|
||
|
|
Revenue |
|
|
Taxes |
|
|
Revenue |
|
|
Taxes |
|
||||
|
Reservoir Characterization |
$ |
2,363 |
|
|
$ |
369 |
|
|
$ |
3,017 |
|
|
$ |
598 |
|
|
Drilling |
|
4,020 |
|
|
|
450 |
|
|
|
4,806 |
|
|
|
608 |
|
|
Production |
|
4,318 |
|
|
|
237 |
|
|
|
5,967 |
|
|
|
453 |
|
|
Cameron |
|
2,270 |
|
|
|
201 |
|
|
|
2,586 |
|
|
|
313 |
|
|
Eliminations & other |
|
(160 |
) |
|
|
(85 |
) |
|
|
(227 |
) |
|
|
(96 |
) |
|
|
|
|
|
|
|
1,172 |
|
|
|
|
|
|
|
1,876 |
|
|
Corporate & other (1) |
|
|
|
|
|
(397 |
) |
|
|
|
|
|
|
(511 |
) |
|
Interest income (2) |
|
|
|
|
|
22 |
|
|
|
|
|
|
|
18 |
|
|
Interest expense (3) |
|
|
|
|
|
(266 |
) |
|
|
|
|
|
|
(282 |
) |
|
Charges and credits (4) |
|
|
|
|
|
(12,247 |
) |
|
|
|
|
|
|
- |
|
|
|
$ |
12,811 |
|
|
$ |
(11,716 |
) |
|
$ |
16,149 |
|
|
$ |
1,101 |
|
|
(1) |
Comprised principally of certain corporate expenses not allocated to the segments, stock-based compensation costs, amortization expense associated with certain intangible assets, certain centrally managed initiatives and other nonoperating items. |
|
(2) |
Interest income excludes amounts which are included in the segments’ income ($1 million in 2020; $5 million in 2019). |
|
(3) |
Interest expense excludes amounts which are included in the segments’ income ($15 million in 2020; $20 million in 2019). |
(4) Charges and credits are described in detail in Note 2 to the Consolidated Financial Statements.
Six-month 2020 revenue of $12.8 billion was 21% lower compared to the same period last year due to the significant fall in North America activity, as well as the international activity drop due to downward revisions to customer budgets accentuated by COVID-19 disruptions. With market uncertainty weighing on demand outlook, North America revenue declined 37% reflecting the continued capital discipline of North America operators, who reduced drilling and frac activity. International revenue decreased 12%. The decline was most prominent in Latin America and Africa due to COVID-19 related restrictions and the drop in deepwater activity, as well as the effect of the APS production interruption in Ecuador.
Reservoir Characterization
Six-month 2020 revenue of $2.4 billion decreased 22% year-on-year. This was mainly due to lower Wireline and WesternGeco revenue as customers pulled back activity due to COVID-19 and cut discretionary spending and exploration in several international GeoMarkets. Testing Services and Software Integrated Solutions revenue declined slightly.
Year-on-year, pretax operating margin decreased 421 bps to 16% due to reduced profitability largely in Wireline and WesternGeco.
Drilling
Six-month 2020 revenue of $4.0 billion decreased 16% year-on-year. This was primarily due to the activity decline in US land as rig count significantly decreased while COVID-19 disruptions caused drilling activities to be cancelled or suspended in several
24
international GeoMarkets. Revenue was also lower due to the divestiture of the Drilling Tools businesses at the end of the fourth quarter of 2019.
Year-on-year, pretax operating margin decreased 145 bps to 11%. Margins were lower due to the decrease in revenue and COVID-19-related disruptions.
Production
Six-month 2020 revenue of $4.3 billion decreased 28% year-on-year. This revenue decrease was driven primarily by the sharp drop in OneStim pressure pumping activity in North America land, lower APS revenue due primarily to the significant production interruption in Ecuador and COVID-19 disruptions.
Year-on-year, pretax operating margin decreased 211 bps to 5% due primarily to reduced profitability in OneStim in North America land.
Cameron
Six-month 2020 revenue of $2.3 billion decreased 12% year-on-year. The decline was driven primarily by lower Valves & Process Systems and Surface Systems revenue in North America.
Year-on-year, pretax operating margin decreased 322 bps to 9% due to the significant revenue decline.
Interest and Other Income
Interest & other income consisted of the following:
|
(Stated in millions) |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second Quarter |
|
|
Six Months |
|
||||||||||
|
|
2020 |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
||||
|
Equity in net earnings of affiliated companies |
$ |
26 |
|
|
$ |
14 |
|
|
$ |
49 |
|
|
$ |
16 |
|
|
Interest income |
|
7 |
|
|
|
11 |
|
|
|
23 |
|
|
|
23 |
|
|
|
$ |
33 |
|
|
$ |
25 |
|
|
$ |
72 |
|
|
$ |
39 |
|
The increases in earnings from equity method investments primarily relates to higher income associated with Schlumberger's equity investments in rig- and seismic-related businesses.
Other
Research & engineering and General & administrative expenses, as a percentage of Revenue, for the second quarter and six months ended June 30, 2020 and 2019 were as follows:
|
|
Second Quarter |
|
|
Six Months |
|
||||||||||
|
|
2020 |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
||||
|
Research & engineering |
|
2.6 |
% |
|
|
2.2 |
% |
|
|
2.5 |
% |
|
|
2.2 |
% |
|
General & administrative |
|
1.5 |
% |
|
|
1.4 |
% |
|
|
1.6 |
% |
|
|
1.4 |
% |
The effective tax rate for the second quarter of 2020 was 6%, as compared to 17% for the same period of 2019. The charges described in Note 2 to the Consolidated Financial Statements reduced the effective tax rate for the second quarter of 2020 by 17 percentage points as a significant portion of these charges were not tax-effective. Changes in the geographic mix of pretax earnings increased the effective tax rate for the second quarter of 2020 by six percentage points as compared to the same period of 2019.
The effective tax rate for first six months of 2020 was 8% as compared to 16% for the same period of 2019. The charges described in Note 2 to the Consolidated Financial Statements reduced the effective tax rate for the first six months of 2020 by 10 percentage points as a significant portion of these charges were not tax-effective.
25
Charges and Credits
Schlumberger recorded the following charges and credits during 2020, which are fully described in Note 2 to the Consolidated Financial Statements:
|
|
(Stated in millions) |
|
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pretax |
|
|
Tax |
|
|
Net |
|
|||
|
First quarter: |
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill |
$ |
3,070 |
|
|
$ |
- |
|
|
$ |
3,070 |
|
|
Intangible asset impairments |
|
3,321 |
|
|
|
(815 |
) |
|
|
2,506 |
|
|
Asset Performance Solutions investments |
|
1,264 |
|
|
|
4 |
|
|
|
1,268 |
|
|
North America pressure pumping impairment |
|
587 |
|
|
|
(133 |
) |
|
|
454 |
|
|
Workforce reductions |
|
202 |
|
|
|
(7 |
) |
|
|
195 |
|
|
Other |
|
79 |
|
|
|
(9 |
) |
|
|
70 |
|
|
Valuation allowance |
|
- |
|
|
|
164 |
|
|
|
164 |
|
|
Second quarter: |
|
|
|
|
|
|
|
|
|
|
|
|
Workforce reductions |
|
1,021 |
|
|
|
(71 |
) |
|
|
950 |
|
|
Asset Performance Solutions investments |
|
730 |
|
|
|
(15 |
) |
|
|
715 |
|
|
Fixed asset impairments |
|
666 |
|
|
|
(52 |
) |
|
|
614 |
|
|
Inventory write-downs |
|
603 |
|
|
|
(49 |
) |
|
|
554 |
|
|
Right-of-use asset impairments |
|
311 |
|
|
|
(67 |
) |
|
|
244 |
|
|
Costs associated with exiting certain activities |
|
205 |
|
|
|
25 |
|
|
|
230 |
|
|
Multiclient seismic data impairment |
|
156 |
|
|
|
(2 |
) |
|
|
154 |
|
|
Repurchase of bonds |
|
40 |
|
|
|
(2 |
) |
|
|
38 |
|
|
Postretirement benefits curtailment gain |
|
(69 |
) |
|
|
16 |
|
|
|
(53 |
) |
|
Other |
|
61 |
|
|
|
(4 |
) |
|
|
57 |
|
|
|
$ |
12,247 |
|
|
$ |
(1,017 |
) |
|
$ |
11,230 |
|
The first quarter 2020 results did not include any benefit from reduced depreciation and amortization expense as a result of the first quarter impairment charges. However, commencing with the second quarter of 2020, depreciation and amortization expense was reduced by approximately $95 million on a quarterly basis as a result of the first quarter impairment charges. Approximately $45 million of this quarterly reduction is reflected in the Production segment, with the remaining $50 million reflected in the “Corporate & other” line item.
The second quarter 2020 results did not include any benefit from reduced expenses associated with the second quarter restructuring and impairment charges. However, going forward depreciation and amortization expense will be reduced by approximately $80 million and lease expense will be reduced by $25 million, on a quarterly basis. Approximately $70 million of this quarterly reduction will be reflected in the Production Segment, with the remaining $35 million reflected amongst the Reservoir Characterization, Drilling and Cameron segments.
There were no charges or credits recorded during the first six months of 2019.
Liquidity and Capital Resources
The effects of the COVID-19 pandemic have resulted in a significant and swift reduction in international and U.S. economic activity. These effects have adversely affected the demand for oil and natural gas, as well as for Schlumberger’s products and services, and caused significant volatility and disruption of the financial markets. This period of extreme economic disruption, low oil prices and reduced demand for Schlumberger’s products and services has had, and is likely to continue to have, a material adverse impact on Schlumberger’s business, results of operations, financial condition and, at times, access to sources of liquidity.
In view of the uncertainty of the depth and extent of the contraction in oil demand due to the COVID-19 pandemic combined with the weaker commodity price environment, Schlumberger has turned its strategic focus to cash conservation and protecting its balance sheet. As a result, in April 2020 Schlumberger announced a 75% reduction to its quarterly dividend. The revised dividend supports Schlumberger’s value proposition through a balanced approach of shareholder distributions and organic investment, while providing the flexibility to weather the uncertain environment. This decision reflects the Company’s focus on its capital stewardship program as well as its commitment to maintain both a strong liquidity position and a strong investment grade credit rating that provides privileged access to the financial markets.
26
Details of the components of liquidity as well as changes in liquidity follow:
|
|
(Stated in millions) |
|
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jun. 30, |
|
|
Jun. 30, |
|
|
Dec. 31, |
|
|||
|
Components of Liquidity: |
2020 |
|
|
2019 |
|
|
2019 |
|
|||
|
Cash |
$ |
1,462 |
|
|
$ |
1,466 |
|
|
$ |
1,137 |
|
|
Short-term investments |
|
2,127 |
|
|
|
882 |
|
|
|
1,030 |
|
|
Short-term borrowings and current portion of long-term debt |
|
(603 |
) |
|
|
(98 |
) |
|
|
(524 |
) |
|
Long-term debt |
|
(16,763 |
) |
|
|
(16,978 |
) |
|
|
(14,770 |
) |
|
Net debt (1) |
$ |
(13,777 |
) |
|
$ |
(14,728 |
) |
|
$ |
(13,127 |
) |
|
Changes in Liquidity: |
Six Months Ended Jun. 30, |
|
|||||
|
|
2020 |
|
|
2019 |
|
||
|
Net income (loss) |
$ |
(10,796 |
) |
|
$ |
923 |
|
|
Impairment and other charges |
|
12,247 |
|
|
|
- |
|
|
Depreciation and amortization (2) |
|
1,396 |
|
|
|
1,841 |
|
|
Earnings of equity method investments, less dividends received |
|
(26 |
) |
|
|
- |
|
|
Deferred taxes |
|
(1,050 |
) |
|
|
(101 |
) |
|
Stock-based compensation expense |
|
213 |
|
|
|
194 |
|
|
Increase in working capital (3) |
|
(423 |
) |
|
|
(1,460 |
) |
|
Other |
|
26 |
|
|
|
37 |
|
|
Cash flow from operations |
|
1,587 |
|
|
|
1,434 |
|
|
Capital expenditures |
|
(658 |
) |
|
|
(817 |
) |
|
APS investments |
|
(224 |
) |
|
|
(332 |
) |
|
Multiclient seismic data costs capitalized |
|
(61 |
) |
|
|
(109 |
) |
|
Free cash flow (4) |
|
644 |
|
|
|
176 |
|
|
Dividends paid |
|
(1,386 |
) |
|
|
(1,385 |
) |
|
Proceeds from employee stock plans |
|
69 |
|
|
|
106 |
|
|
Stock repurchase program |
|
(26 |
) |
|
|
(199 |
) |
|
Net proceeds from asset divestitures |
|
298 |
|
|
|
- |
|
|
Business acquisitions and investments, net of cash acquired plus debt assumed |
|
(20 |
) |
|
|
(17 |
) |
|
Other |
|
(229 |
) |
|
|
(135 |
) |
|
Increase in net debt |
|
(650 |
) |
|
|
(1,454 |
) |
|
Net debt, beginning of period |
|
(13,127 |
) |
|
|
(13,274 |
) |
|
Net debt, end of period |
$ |
(13,777 |
) |
|
$ |
(14,728 |
) |
|
(1) |
“Net debt” represents gross debt less cash and short-term investments. Management believes that Net debt provides useful information regarding the level of Schlumberger’s indebtedness by reflecting cash and investments that could be used to repay debt. Net debt is a non-GAAP financial measure that should be considered in addition to, not as a substitute for or superior to, total debt. |
|
(2) |
Includes depreciation of property, plant and equipment and amortization of intangible assets, multiclient seismic data costs, and APS investments. |
|
(3) |
Includes severance payments of approximately $426 million and $71 million during the six months ended June 30, 2020 and 2019, respectively. |
|
(4) |
“Free cash flow” represents cash flow from operations less capital expenditures, APS investments and multiclient seismic data costs capitalized. Management believes that free cash flow is an important liquidity measure for the company and that it is useful to investors and management as a measure of our ability to generate cash. Once business needs and obligations are met, this cash can be used to reinvest in the company for future growth or to return to shareholders through dividend payments or share repurchases. Free cash flow does not represent the residual cash flow available for discretionary expenditures. Free cash flow is a non-GAAP financial measure that should be considered in addition to, not as substitute for or superior to, cash flow from operations. |
Key liquidity events during the first six months of 2020 and 2019 included:
|
|
• |
On January 21, 2016, the Board approved a $10 billion share repurchase program for Schlumberger common stock. Schlumberger had repurchased $1.0 billion of Schlumberger common stock under this program as of June 30, 2020. The Company did not repurchase any Schlumberger common stock during the second quarter of 2020. |
27
The following table summarizes the activity under the 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 |
|
|||
|
Six months ended June 30, 2020 |
$ |
26 |
|
|
|
0.8 |
|
|
$ |
33.81 |
|
|
Six months ended June 30, 2019 |
$ |
199 |
|
|
|
4.8 |
|
|
$ |
41.40 |
|
|
|
• |
Capital expenditures were $0.7 billion during the first six months of 2020 compared to $0.8 billion during the first six months of 2019, respectively. Capital expenditures for full-year 2020 are expected to be approximately $1.1 billion, representing a 35% decrease as compared to 2019. |
|
|
• |
During the second quarter of 2020, Schlumberger issued €1.0 billion of 1.375% Guaranteed Notes due 2026, $900 million of 2.650% Senior Notes due 2030 and €1.0 billion of 2.00% Guaranteed Notes due 2032. |
|
|
• |
During the second quarter of 2020, Schlumberger repurchased all $600 million of its 4.20% Senior Notes due 2021 and $935 million of its 3.30% Senior Notes due 2021. Schlumberger paid a premium of approximately $40 million in connection with these repurchases. This premium was classified in Impairments & other in the Consolidated Statement of Income (Loss). See Note 2 – Charge and Credits. |
|
|
• |
During the second quarter of 2020, Schlumberger established a €5.0 billion Guaranteed Euro Medium Term Note program that provides for the issuance of various types of debt instruments such as fixed or floating rate notes in euro, US dollar or other currencies. Schlumberger has not issued any debt under this program. |
|
|
• |
During the first quarter of 2020, Schlumberger issued €400 million of 0.25% Notes due 2027 and €400 million of 0.50% Notes due 2031. |
|
|
• |
During the first quarter of 2020, Schlumberger completed the sale of its 49% interest in the Bandurria Sur Block in Argentina. The net cash proceeds from this transaction, combined with the proceeds received from the divestiture of a smaller APS project, amounted to $298 million. |
|
|
• |
During the first quarter of 2019, Schlumberger issued $750 million of 3.75% Senior Notes due 2024 and $850 million of 4.30% Senior Notes due 2029. |
Schlumberger recorded a $1.0 billion charge relating to severance during the second quarter of 2020. The vast majority of this charge is expected to be paid during the second half of 2020.
Schlumberger generates revenue in more than 120 countries. As of June 30, 2020, six of those countries individually accounted for greater than 5% of Schlumberger’s net receivables balance, of which only the United States accounted for greater than 10% of such receivables.
As of June 30, 2020, Schlumberger had $3.6 billion of cash and short-term investments on hand. Schlumberger had separate committed debt facility agreements aggregating $8.0 billion that support commercial paper programs, of which $6.2 billion was available and unused. Schlumberger believes these amounts are sufficient to meet future business requirements for at least the next 12 months.
Borrowings under the commercial paper programs at June 30, 2020 were $1.8 billion.
FORWARD-LOOKING STATEMENTS
This second-quarter 2020 Form 10-Q, as well as 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; pricing; Schlumberger’s response to, and preparedness for, the COVID-19 pandemic; access to raw materials; improvements in operating procedures and technology; capital expenditures by Schlumberger and the oil and gas industry; the business strategies of Schlumberger and Schlumberger’s customers; Schlumberger’s digital strategy; Schlumberger’s restructuring efforts and charges recorded as a result of such efforts; our
28
effective tax rate; Schlumberger’s APS projects, joint ventures, and alliances; future global economic and geopolitical conditions; and future results of operations. These statements are subject to risks and uncertainties, including, but not limited to, changing 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; the results of operations and financial condition of Schlumberger’s customers and suppliers, particularly during extended periods of low prices for crude oil and natural gas; Schlumberger’s inability to sufficiently monetize assets; the extent of future charges; general economic, geopolitical, and business conditions in key regions of the world; foreign currency risk; pricing pressure; weather and seasonal factors; unfavorable effects of health pandemics; availability and cost of raw materials; operational modifications, delays or cancellations; challenges in Schlumberger’s supply chain; production declines; Schlumberger’s inability to recognize intended benefits from its business strategies and initiatives, such as digital or new energy, as well as our restructuring and structural cost reduction plans; changes in government regulations and regulatory requirements, including those related to offshore oil and gas exploration, radioactive sources, explosives, chemicals, hydraulic fracturing services and climate-related initiatives; the inability of technology to meet new challenges in exploration; the competitiveness of alternative energy sources or product substitutes; and other risks and uncertainties detailed in this Form 10-Q and our most recent Form 10-K and Forms 8-K filed with or furnished to the SEC. If one or more of these or other risks or uncertainties materialize (or the consequences of any such development changes), or should our underlying assumptions prove incorrect, actual outcomes may vary materially from those reflected in our forward-looking statements. Statements in this second-quarter 2020 Form 10-Q are made as of July 29, 2020, and Schlumberger disclaims any intention or obligation to update publicly or revise such statements, whether as a result of new information, future events or otherwise.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
For quantitative and qualitative disclosures about market risk affecting Schlumberger, see Item 7A, “Quantitative and Qualitative Disclosures about Market Risk,” of the Schlumberger Annual Report on Form 10-K for the fiscal year ended December 31, 2019. Schlumberger’s exposure to market risk has not changed materially since December 31, 2019.
Item 4. Controls and Procedures.
Schlumberger has carried out an evaluation under the supervision and with the participation of Schlumberger’s management, including the Chief Executive Officer (“CEO”) and the Chief Financial Officer (“CFO”), of the effectiveness of Schlumberger’s “disclosure controls and procedures” (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)) as of the end of the period covered by this report. Based on this evaluation, the CEO and the CFO have concluded that, as of the end of the period covered by this report, Schlumberger’s disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in the reports that Schlumberger files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Schlumberger’s disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is accumulated and communicated to its management, including the CEO and the CFO, as appropriate, to allow timely decisions regarding required disclosure. There was no change in Schlumberger’s internal control over financial reporting during the quarter to which this report relates that has materially affected, or is reasonably likely to materially affect, Schlumberger’s internal control over financial reporting.
29
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
The information with respect to this Item 1 is set forth under Note 11—Contingencies, in the accompanying Consolidated Financial Statements.
Item 1A. Risk Factors.
As of the date of this filing, there have been no material changes from the risk factors disclosed in Part 1, Item 1A, of Schlumberger’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019, other than the risk factor disclosed in Item 8.01 of Schlumberger’s Current Report on Form 8-K filed on April 17, 2020, which is hereby incorporated by reference into this Quarterly Report on Form 10-Q.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Unregistered Sales of Equity Securities
None.
Issuer Repurchases of Equity Securities
As of June 30, 2020, Schlumberger had repurchased $1.0 billion of Schlumberger common stock under its $10 billion share repurchase program. Schlumberger did not repurchase any of its common stock during the second quarter of 2020.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Our mining operations are subject to regulation by the federal Mine Safety and Health Administration under the Federal Mine Safety and Health Act of 1977. Information concerning mine safety violations or other regulatory matters required by section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K is included in Exhibit 95 to this report.
Item 5. Other Information.
In 2013, Schlumberger completed the wind down of its service operations in Iran. Prior to this, certain non-US subsidiaries provided oilfield services to the National Iranian Oil Company and certain of its affiliates (“NIOC”).
Schlumberger’s residual transactions or dealings with the government of Iran during the second quarter of 2020 consisted of payments of taxes and other typical governmental charges. Certain non-US subsidiaries of Schlumberger maintain depository accounts at the Dubai branch of Bank Saderat Iran (“Saderat”), and at Bank Tejarat (“Tejarat”) in Tehran and in Kish for the deposit by NIOC of amounts owed to non-US subsidiaries of Schlumberger for prior services rendered in Iran and for the maintenance of such amounts previously received. One non-US subsidiary also maintained an account at Tejarat for payment of local expenses such as taxes. Schlumberger anticipates that it will discontinue dealings with Saderat and Tejarat following the receipt of all amounts owed to Schlumberger for prior services rendered in Iran.
30
Item 6. Exhibits.
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* Exhibit 22—Issuer of Registered Guaranteed Debt Securities
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* Exhibit 95—Mine Safety Disclosures |
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* Exhibit 101.INS—Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document |
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* Exhibit 101.SCH—Inline XBRL Taxonomy Extension Schema Document |
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* Exhibit 101.CAL—Inline XBRL Taxonomy Extension Calculation Linkbase Document |
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* Exhibit 101.DEF—Inline XBRL Taxonomy Extension Definition Linkbase Document |
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* Exhibit 101.LAB—Inline XBRL Taxonomy Extension Label Linkbase Document |
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* Exhibit 101.PRE—Inline XBRL Taxonomy Extension Presentation Linkbase Document |
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Exhibit 104—Cover Page Interactive Data File (embedded within the Inline XBRL document) |
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* Filed with this Form 10-Q. |
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** Furnished with this Form 10-Q. |
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The Exhibits filed herewith do not include certain instruments with respect to long-term debt of Schlumberger Limited and its subsidiaries, inasmuch as the total amount of debt authorized under any such instrument does not exceed 10 percent of the total assets of Schlumberger Limited and its subsidiaries on a consolidated basis. Schlumberger agrees, pursuant to Item 601(b)(4)(iii) of Regulation S-K, that it will furnish a copy of any such instrument to the SEC upon request.
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31
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized and in his capacity as Chief Accounting Officer.
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Schlumberger Limited (Registrant) |
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Date: |
July 29, 2020 |
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/s/ Howard Guild |
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Howard Guild |
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Chief Accounting Officer and Duly Authorized Signatory |
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Exhibit 22
Issuer of Registered Guaranteed Debt Securities
Schlumberger Investment SA, a société anonyme incorporated under the laws of the Grand Duchy of Luxembourg (“SISA”), is an indirect wholly-owned subsidiary of Schlumberger Limited (the “Guarantor”).
As of June 30, 2020, SISA was the issuer of its 3.650% Senior Notes due 2023 and 2.650% Senior Notes due 2030 (together, the “Notes”). The Guarantor fully and unconditionally guarantees the Notes on a senior unsecured basis.
Exhibit 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
I, Olivier Le Peuch, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Schlumberger N.V. (Schlumberger Limited);
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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c) |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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d) |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
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a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
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b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
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Date: July 29, 2020 |
/s/ Olivier Le Peuch |
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Olivier Le Peuch |
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Chief Executive Officer |
Exhibit 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
I, Stephane Biguet, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Schlumberger N.V. (Schlumberger Limited);
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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c) |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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d) |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
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a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
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b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
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Date: July 29, 2020 |
/s/ Stephane Biguet |
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Stephane Biguet |
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Executive Vice President and Chief Financial Officer |
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
In connection with the Quarterly Report on Form 10-Q of Schlumberger N.V. (Schlumberger Limited) (the “Company”) for the quarterly period ended June 30, 2020 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Olivier Le Peuch, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
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(1) |
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and |
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(2) |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
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Date: July 29, 2020 |
/s/ Olivier Le Peuch |
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Olivier Le Peuch |
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Chief Executive Officer |
A signed original of this written statement required by Section 906 has been provided to Schlumberger Limited and will be retained by Schlumberger Limited and furnished to the Securities and Exchange Commission or its staff upon request.
This certification accompanies the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed by the Company for purposes of Section 18 of the Exchange Act.
Exhibit 32.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of Schlumberger N.V. (Schlumberger Limited) (the “Company”) for the quarterly period ended June 30, 2020 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Stephane Biguet, Executive Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
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(1) |
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and |
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(2) |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
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Date: July 29, 2020 |
/s/ Stephane Biguet |
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Stephane Biguet |
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Executive Vice President and Chief Financial Officer |
A signed original of this written statement required by Section 906 has been provided to Schlumberger Limited and will be retained by Schlumberger Limited and furnished to the Securities and Exchange Commission or its staff upon request.
This certification accompanies the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed by the Company for purposes of Section 18 of the Exchange Act.
Exhibit 95
Mine Safety Disclosure
The following disclosure is provided pursuant to Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which requires certain disclosures by companies required to file periodic reports under the Securities Exchange Act of 1934, as amended, that operate mines regulated under the Federal Mine Safety and Health Act of 1977.
The table that follows reflects citations, orders, violations and proposed assessments issued by the Mine Safety and Health Administration (the “MSHA”) to indirect subsidiaries of Schlumberger. The disclosure is with respect to the three months ended June 30, 2020. Due to timing and other factors, the data may not agree with the mine data retrieval system maintained by the MSHA at www.MSHA.gov.
Three Months Ended June 30, 2020
[unaudited]
(whole dollars)
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Mine or Operating Name/MSHA Identification Number |
Section 104 S&S Citations |
Section 104(b) Orders |
Section 104(d) Citations and Orders |
Section 110(b)(2) Violations |
Section 107(a) Orders |
Total Dollar Value of MSHA Assessments Proposed (1) |
Total Number of Mining Related Fatalities |
Received Notice of Pattern of Violations Under Section 104(e) (yes/no) |
Received Notice of Potential to Have Pattern Under Section 104(e) (yes/no) |
Legal Actions Pending as of Last Day of Period |
Legal Actions Initiated During Period |
Legal Actions Resolved During Period |
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Amelia Barite Plant/1600825 |
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─ |
─ |
─ |
─ |
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N |
N |
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─ |
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Battle Mountain Grinding Plant/2600828 |
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─ |
─ |
─ |
─ |
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N |
N |
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─ |
─ |
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Galveston GBT Barite Grinding Plant/4104675 |
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─ |
─ |
─ |
─ |
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N |
N |
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─ |
─ |
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Greybull Milling Operation/4800602 |
3 |
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$1,936 |
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N |
N |
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─ |
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3 |
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$2,091 |
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N |
N |
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─ |
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Greystone Mine/2600411 |
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─ |
─ |
─ |
─ |
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N |
N |
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─ |
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Mountain Springs Beneficiation Plant/2601390 |
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─ |
─ |
─ |
─ |
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N |
N |
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─ |
─ |
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Wisconsin Proppants Hixton Mine/4703742 |
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─ |
─ |
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$123 |
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N |
N |
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─ |
─ |
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Wisconsin Proppants Alma Mine/4703823 |
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─ |
─ |
─ |
─ |
─ |
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N |
N |
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─ |
─ |
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Wisconsin Proppants Monahans Mine/4105336 |
─ |
─ |
─ |
─ |
─ |
─ |
─ |
N |
N |
─ |
─ |
─ |
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2 |
─ |
─ |
─ |
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$0 (2) |
─ |
N |
N |
─ |
─ |
─ |
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(1) |
Amounts included are the total dollar value of proposed assessments received from MSHA during the quarter on or before June 30, 2020, regardless of whether the assessment has been challenged or appealed. Citations and orders can be contested and appealed, and as part of that process, are sometimes reduced in severity and amount, and sometimes dismissed. The number of citations, orders, and proposed assessments vary by inspector and vary depending on the size and type of the operation. |
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(2) |
As of June 30, 2020, MSHA had not yet proposed an assessment for two S&S citations and two non-S&S citations at Wisconsin Proppants High Roller Sand Mine/4105321. |