Item 8. Financial Statements and Supplementary Data.

SCHLUMBERGER LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF INCOME (LOSS)

	(Stated in millions, except per share amounts)
Year Ended December 31,	2019				2018				2017
Revenue
Services	$	24,358			$	24,296			$	21,927
Product sales		8,559				8,519				8,513
Total Revenue		32,917				32,815				30,440
Interest & other income		86				149				224
Gain on sale of business		-				215				-
Gain on formation of Sensia joint venture		247				-				-
Expenses
Cost of services		20,828				20,618				18,206
Cost of sales		7,892				7,860				8,337
Research & engineering		717				702				787
General & administrative		474				444				432
Impairments & other		13,148				356				3,211
Merger & integration		-				-				308
Interest		609				575				566
Income (loss) before taxes		(10,418	)			2,624				(1,183	)
Tax expense (benefit)		(311	)			447				330
Net income (loss)		(10,107	)			2,177				(1,513	)
Net income (loss) attributable to noncontrolling interests		30				39				(8	)
Net income (loss) attributable to Schlumberger	$	(10,137	)		$	2,138			$	(1,505	)
Basic earnings (loss) per share of Schlumberger	$	(7.32	)		$	1.54			$	(1.08	)
Diluted earnings (loss) per share of Schlumberger	$	(7.32	)		$	1.53			$	(1.08	)
Average shares outstanding:
Basic		1,385				1,385				1,388
Assuming dilution		1,385				1,393				1,388

See the Notes to Consolidated Financial Statements

SCHLUMBERGER LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS)

(Stated in millions)
Year Ended December 31,	2019				2018				2017
Net income (loss)	$	(10,107	)		$	2,177			$	(1,513	)
Currency translation adjustments
Net change arising during the period		67				(191	)			(3	)
Marketable securities
Unrealized loss arising during the period		-				(11	)			(8	)
Cash flow hedges
Net gain (loss) on cash flow hedges		(32	)			(16	)			22
Reclassification to net income (loss) of net realized loss		10				1				-
Pension and other postretirement benefit plans
Actuarial gain (loss) arising during the period		127				(186	)			134
Amortization to net income (loss) of net actuarial loss		94				187				159
Amortization to net income (loss) of net prior service (credit) cost		(11	)			(5	)			80
Income taxes on pension and other postretirement benefit plans		(71	)			(18	)			(15	)
Comprehensive income (loss)		(9,923	)			1,938				(1,144	)
Comprehensive income (loss) attributable to noncontrolling interests		30				39				(8	)
Comprehensive income (loss) attributable to Schlumberger	$	(9,953	)		$	1,899			$	(1,136	)

See the Notes to Consolidated Financial Statements

SCHLUMBERGER LIMITED AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

(Stated in millions)
December 31,	2019				2018
ASSETS
Current Assets
Cash	$	1,137			$	1,433
Short-term investments		1,030				1,344
Receivables less allowance for doubtful accounts (2019 - $255; 2018 - $249)		7,747				7,881
Inventories		4,130				4,010
Other current assets		1,486				1,063
		15,530				15,731
Investments in Affiliated Companies		1,565				1,538
Fixed Assets less accumulated depreciation		9,270				11,679
Multiclient Seismic Data		568				601
Goodwill		16,042				24,931
Intangible Assets		7,089				8,727
Other Assets		6,248				7,300
	$	56,312			$	70,507
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable and accrued liabilities		10,663				10,223
Estimated liability for taxes on income		1,209				1,155
Short-term borrowings and current portion of long-term debt		524				1,407
Dividends payable		702				701
		13,098				13,486
Long-term Debt		14,770				14,644
Postretirement Benefits		967				1,153
Deferred Taxes		491				1,441
Other Liabilities		2,810				3,197
		32,136				33,921
Equity
Common stock		13,078				13,132
Treasury stock		(3,631	)			(4,006	)
Retained earnings		18,751				31,658
Accumulated other comprehensive loss		(4,438	)			(4,622	)
Schlumberger stockholders' equity		23,760				36,162
Noncontrolling interests		416				424
		24,176				36,586
	$	56,312			$	70,507

See the Notes to Consolidated Financial Statements

SCHLUMBERGER LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS

(Stated in millions)
Year Ended December 31,	2019				2018				2017
Cash flows from operating activities:
Net income (loss)	$	(10,107	)		$	2,177			$	(1,513	)
Adjustments to reconcile net income (loss) to cash provided by operating activities:
Impairments and other charges		13,148				356				3,764
Gain on formation of Sensia joint venture		(247	)			-				-
Gain on sale of WesternGeco marine seismic acquisition business		-				(215	)			-
Depreciation and amortization (1)		3,589				3,556				3,837
Deferred taxes		(1,011	)			(245	)			(260	)
Stock-based compensation expense		405				345				343
Pension and other postretirement benefits funding		(25	)			(83	)			(133	)
Earnings of equity method investments, less dividends received		6				(48	)			(56	)
Change in assets and liabilities: (2)
Decrease (increase) in receivables		142				430				(124	)
(Increase) decrease in inventories		(314	)			(10	)			108
(Increase) decrease in other current assets		(68	)			121				(174	)
Decrease (increase) in other assets		22				(58	)			402
Decrease in accounts payable and accrued liabilities		(161	)			(824	)			(737	)
(Decrease) increase in estimated liability for taxes on income		6				(103	)			115
(Decrease) increase in other liabilities		(52	)			69				(28	)
Other		98				245				119
NET CASH PROVIDED BY OPERATING ACTIVITIES		5,431				5,713				5,663
Cash flows from investing activities:
Capital expenditures		(1,724	)			(2,160	)			(2,107	)
APS investments		(781	)			(981	)			(1,609	)
Multiclient seismic data capitalized		(231	)			(100	)			(276	)
Business acquisitions and investments, net of cash acquired		(23	)			(292	)			(847	)
Net proceeds from divestiture and formation of Sensia joint venture		586				-				-
Proceeds from sale of WesternGeco marine seismic business, net of cash divested		-				579				-
Sale of investments, net		317				1,943				3,277
Other		(155	)			(29	)			(217	)
NET CASH USED IN INVESTING ACTIVITIES		(2,011	)			(1,040	)			(1,779	)
Cash flows from financing activities:
Dividends paid		(2,769	)			(2,770	)			(2,778	)
Proceeds from employee stock purchase plan		196				227				212
Proceeds from exercise of stock options		23				34				85
Stock repurchase program		(278	)			(400	)			(969	)
Proceeds from issuance of long-term debt		4,004				898				2,371
Repayment of long-term debt		(4,799	)			(2,861	)			(2,961	)
Net decrease in short-term borrowings		(44	)			(85	)			(1,022	)
Other		(51	)			(63	)			29
NET CASH USED IN FINANCING ACTIVITIES		(3,718	)			(5,020	)			(5,033	)
Net decrease in cash before translation effect		(298	)			(347	)			(1,149	)
Translation effect on cash		2				(19	)			19
Cash, beginning of period		1,433				1,799				2,929
Cash, end of period	$	1,137			$	1,433			$	1,799

(1)	Includes depreciation of property, plant and equipment and amortization of intangible assets, multiclient seismic data costs and APS investments.

(2)	Net of the effect of business acquisitions and divestitures.

See the Notes to Consolidated Financial Statements

SCHLUMBERGER LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

	(Stated in millions)
													Accumulated
													Other
	Common Stock								Retained				Comprehensive				Noncontrolling
	Issued				In Treasury				Earnings				Loss				Interests				Total
Balance, January 1, 2017	$	12,801			$	(3,550	)		$	36,470			$	(4,643	)		$	451			$	41,529
Net loss										(1,505	)							(8	)			(1,513		)
Currency translation adjustments														(3	)							(3		)
Changes in unrealized gain on marketable securities														(8	)							(8		)
Changes in fair value of cash flow hedges														22								22
Pension and other postretirement benefit plans														358								358
Shares sold to optionees, less shares exchanged		(10	)			95																85
Vesting of restricted stock		(110	)			110																-
Shares issued under employee stock purchase plan		(52	)			264																212
Stock repurchase program						(969	)															(969		)
Stock-based compensation expense		343																				343
Dividends declared ($2.00 per share)										(2,775	)											(2,775		)
Other		3				1												(24	)			(20		)
Balance, December 31, 2017		12,975				(4,049	)			32,190				(4,274	)			419				37,261
Net income										2,138								39				2,177
Currency translation adjustments														(191	)			(5	)			(196		)
Changes in unrealized gain on marketable securities														(11	)							(11		)
Changes in fair value of cash flow hedges														(15	)							(15		)
Pension and other postretirement benefit plans														(22	)							(22		)
Shares sold to optionees, less shares exchanged		(41	)			75																34
Vesting of restricted stock		(72	)			72																-
Shares issued under employee stock purchase plan		(67	)			294																227
Stock repurchase program						(400	)															(400		)
Stock-based compensation expense		345																				345
Dividends declared ($2.00 per share)										(2,770	)											(2,770		)
Stranded tax related to US pension										109				(109	)							-
Other		(8	)			2				(9	)							(29	)			(44		)
Balance, December 31, 2018		13,132				(4,006	)			31,658				(4,622	)			424				36,586
Net loss										(10,137	)							30				(10,107		)
Currency translation adjustments														67				(1	)			66
Changes in fair value of cash flow hedges														(22	)							(22		)
Pension and other postretirement benefit plans														139								139
Shares sold to optionees, less shares exchanged		(26	)			49																23
Vesting of restricted stock		(155	)			155																-
Shares issued under employee stock purchase plan		(249	)			445																196
Stock repurchase program						(278	)															(278		)
Stock-based compensation expense		405																				405
Dividends declared ($2.00 per share)										(2,770	)											(2,770		)
Other		(29	)			4												(37	)			(62		)
Balance, December 31, 2019	$	13,078			$	(3,631	)		$	18,751			$	(4,438	)		$	416			$	24,176

See the Notes to Consolidated Financial Statements

SCHLUMBERGER LIMITED AND SUBSIDIARIES

SHARES OF COMMON STOCK

					(Stated in millions)
									Shares
	Issued				In Treasury				Outstanding
Balance, January 1, 2017		1,434				(43	)			1,391
Shares sold to optionees, less shares exchanged		-				1				1
Vesting of restricted stock		-				2				2
Shares issued under employee stock purchase plan		-				3				3
Stock repurchase program		-				(13	)			(13	)
Balance, December 31, 2017		1,434				(50	)			1,384
Shares sold to optionees, less shares exchanged		-				1				1
Vesting of restricted stock		-				1				1
Shares issued under employee stock purchase plan		-				3				3
Stock repurchase program		-				(6	)			(6	)
Balance, December 31, 2018		1,434				(51	)			1,383
Shares sold to optionees, less shares exchanged		-				1				1
Vesting of restricted stock		-				2				2
Shares issued under employee stock purchase plan		-				6				6
Stock repurchase program		-				(7	)			(7	)
Balance, December 31, 2019		1,434				(49	)			1,385

See the Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements

1. Business Description

Schlumberger Limited (Schlumberger N.V., incorporated in Curaçao) and its consolidated subsidiaries (collectively, “Schlumberger”) comprise the world’s leading supplier of technology for reservoir characterization, drilling, production and processing to the oil and gas industry.

2. Summary of Accounting Policies

The Consolidated Financial Statements of Schlumberger have been prepared in accordance with accounting principles generally accepted in the United States of America.

Use of Estimates

The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. On an ongoing basis, Schlumberger evaluates its estimates, including those related to collectibility of accounts receivable; revenue recognized for certain long-term construction-type contracts over time; recoverability of fixed assets, goodwill, intangible assets, Asset Performance Solutions investments and investments in affiliates; income taxes; multiclient seismic data; contingencies and actuarial assumptions for employee benefit plans. Schlumberger bases its estimates on historical experience and other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Revenue Recognition

Schlumberger adopted Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers on January 1, 2018. This ASU amended the existing accounting standards for revenue recognition and requires companies to recognize revenue when control of the promised goods or services is transferred to a customer at an amount that reflects the consideration a company expects to receive in exchange for those goods or services. Under the transition method selected by Schlumberger, this ASU was applied only to those contracts which were not completed as of January 1, 2018. Prior period amounts have not been adjusted and continue to be reflected in accordance with Schlumberger’s historical accounting. The adoption of this ASU did not have a material impact on Schlumberger’s Consolidated Financial Statements.

Schlumberger recognizes revenue upon the transfer of control of promised products or services to customers at an amount that reflects the consideration it expects to receive in exchange for these products or services. The vast majority of Schlumberger’s services and product offerings are short-term in nature. The time between invoicing and when payment is due under these arrangements is generally between 30 to 60 days.

Revenue is occasionally generated from contractual arrangements that include multiple performance obligations. Revenue from these arrangements is allocated to each performance obligation based on its relative standalone selling price. Standalone selling prices are generally determined based on the prices charged to customers or using expected costs plus margin.

Revenue is recognized for certain long-term construction-type contracts over time. These contracts involve significant design and engineering efforts in order to satisfy custom designs for customer-specific applications. Revenue is recognized as work progresses on each contract. Progress is measured by the ratio of actual costs incurred to date on the project in relation to total estimated project costs. The estimate of total project costs has a significant impact on both the amount of revenue recognized as well as the related profit on a project. Revenue and profits on contracts can also be significantly affected by change orders and claims. Due to the nature of these projects, adjustments to estimates of contract revenue and total contract costs may be required as work progresses. Progress billings are generally issued upon completion of certain phases of work as stipulated in the contract. Any expected losses on a project are recorded in full in the period in which they become probable.

Due to the nature of its businesses, Schlumberger does not have significant backlog. Total backlog was $3.0 billion at December 31, 2019, of which approximately 50% is expected to be recognized as revenue during 2020.

Short-term Investments

Short-term investments are comprised primarily of money market funds, time deposits, certificates of deposit, commercial paper, bonds and notes, substantially all of which are denominated in US dollars and are stated at cost plus accrued interest, which approximates fair value.

For purposes of the Consolidated Statement of Cash Flows, Schlumberger does not consider Short-term investments to be cash equivalents.

Investments in Affiliated Companies

Investments in companies in which Schlumberger does not have a controlling financial interest, but over which it has significant influence, are accounted for using the equity method. Schlumberger’s share of the after-tax earnings of equity method investees is included in Interest and other income. Investments in privately held companies in which Schlumberger does not have the ability to exercise significant influence are accounted for using the cost method.

Equity and cost method investments are classified as Investments in Affiliated Companies in the Consolidated Balance Sheet.

Multiclient Seismic Data

Schlumberger’s multiclient library consists of completed and in-process seismic surveys that are licensed on a nonexclusive basis. Schlumberger capitalizes costs directly incurred in acquiring and processing the multiclient seismic data. Such costs are charged to Cost of services based on the percentage of the total costs to the estimated total revenue that Schlumberger expects to receive from the sales of such data. However, under no circumstance will an individual survey carry a net book value greater than a 4-year, straight-line amortized value.

The carrying value of the multiclient library is reviewed for impairment annually as well as when an event or change in circumstance indicating impairment may have occurred. Adjustments to the carrying value are recorded when it is determined that estimated future cash flows, which involve significant judgment on the part of Schlumberger, would not be sufficient to recover the carrying value of the surveys. Significant adverse changes in Schlumberger’s estimated future cash flows could result in impairment charges in a future period.

Asset Performance Solutions

Asset Performance Solutions (“APS”), formerly Schlumberger Production Management, projects are focused on developing and managing production on behalf of Schlumberger’s clients under long-term agreements. Schlumberger will invest its own services and products, and historically, cash in certain cases, into the field development activities and operations. Although in certain arrangements Schlumberger is paid for a portion of the services or products it provides, generally Schlumberger will not be paid at the time of providing its services or upon delivery of its products. Instead, Schlumberger is compensated based upon cash flow generated or on a fee-per-barrel basis. This includes certain arrangements whereby Schlumberger is only compensated based upon incremental production it helps deliver above a mutually agreed baseline. Revenue from APS arrangements, which is recognized as the related production is achieved, represented less than 5% of Schlumberger’s consolidated revenue during each of 2019, 2018 and 2017.

Schlumberger capitalizes its cash investments in a project as well as the direct costs associated with providing services or products for which Schlumberger will be compensated when the related production is achieved. These capitalized investments are amortized to the Consolidated Statement of Income (Loss) as the related production is achieved based on the units of production method, whereby each unit produced is assigned a pro-rata portion of the unamortized costs based on estimated total production, resulting in a matching of revenue with the applicable costs. Amortization expense relating to these capitalized investments was $731 million, $568 million and $465 million in 2019, 2018 and 2017, respectively.

The unamortized portion of Schlumberger’s investments in APS projects was $3.724 billion and $4.201 billion at December 31, 2019 and 2018, respectively. These amounts are included within Other Assets in Schlumberger’s Consolidated Balance Sheet.

Concentration of Credit Risk

Schlumberger’s assets that are exposed to concentrations of credit risk consist primarily of cash, short-term investments, receivables from clients and derivative financial instruments. Schlumberger places its cash and short-term investments with financial institutions and corporations and limits the amount of credit exposure with any one of them. Schlumberger regularly evaluates the creditworthiness of the issuers in which it invests. By using derivative financial instruments to hedge certain exposures, Schlumberger exposes itself to some credit risk. Schlumberger minimizes this credit risk by entering into transactions with high-quality counterparties, limiting the exposure to each counterparty and monitoring the financial condition of its counterparties.

Schlumberger generates revenue in more than 120 countries and as such, its accounts receivable are spread over many countries and customers. Accounts receivable in the United States represented 18% of Schlumberger’s accounts receivable balance at December 31, 2019. No other country accounted for greater than 10% of Schlumberger’s accounts receivable balance.

Earnings per Share

The following is a reconciliation from basic to diluted earnings (loss) per share of Schlumberger for each of the last three years:

(Stated in millions, except per share amounts)
		Net Income (Loss) Attributable to Schlumberger				Average Shares Outstanding				Earnings (Loss) per Share
2019:
Basic		$	(10,137	)			1,385			$	(7.32	)
Assumed exercise of stock options			-				-
Unvested restricted stock			-				-
Diluted		$	(10,137	)			1,385			$	(7.32	)
2018:
Basic		$	2,138				1,385			$	1.54
Assumed exercise of stock options			-				-
Unvested restricted stock			-				8
Diluted		$	2,138				1,393			$	1.53
2017:
Basic		$	(1,505	)			1,388			$	(1.08	)
Assumed exercise of stock options			-				-
Unvested restricted stock			-				-
Diluted		$	(1,505	)			1,388			$	(1.08	)

The number of outstanding employee stock options to purchase shares of Schlumberger common stock and unvested restricted stock units that were not included in the computation of diluted earnings/loss per share, because to do so would have had an anti-dilutive effect, were as follows:

(Stated in millions)
	2019				2018				2017
Employee stock options		46				40				47
Unvested restricted stock		12				-				5

Reclassifications

Certain prior period amounts have been reclassified to conform to the current period presentation.

3. Charges and Credits

Schlumberger recorded the following charges and credits during 2019, 2018 and 2017:

2019

Schlumberger recorded the following charges and credits during 2019, all of which are classified as Impairments & other in the Consolidated Statement of Income (Loss), except for the gain on the formation of the Sensia joint venture:

	(Stated in millions)
	Pretax				Tax				Net
Fourth quarter:
North America restructuring	$	225			$	51			$	174
Other restructuring		104				(33	)			137
Workforce reductions		68				8				60
Pension settlement accounting		37				8				29
Repurchase of bonds		22				5				17
Gain on formation of Sensia joint venture		(247	)			(42	)			(205	)
Third quarter:
Goodwill impairment		8,828				43				8,785
Intangible assets impairment		1,085				248				837
North America pressure pumping		1,575				344				1,231
Other North America-related		310				53				257
Argentina		127				-				127
Equity-method investments		231				12				219
Asset Performance Solutions		294				-				294
Other		242				13				229
	$	12,901			$	710			$	12,191

Fourth quarter of 2019:

	•	Schlumberger recorded the following restructuring charges during the fourth quarter of 2019:

	-	$225 million associated with facility closures and costs to exit certain activities in North America. These charges included $123 million relating to fixed assets; $55 million of right-of-use assets under operating leases; and $47 million of other exit costs.

	-	$104 million primarily relating to restructuring certain activities outside of North America, which included $68 million associated with assets to be divested and $36 million of facility closure costs.

	-	$68 million of severance associated with streamlining its operations and exiting certain activities.

	•	Certain of Schlumberger’s defined benefit pension plans offered former Schlumberger employees, who had not yet commenced receiving their pension benefits, an opportunity to receive a lump sum payout of their vested pension benefit. Schlumberger’s pension plans paid $257 million from pension plan assets to those who accepted this offer, thereby reducing its pension benefit obligations. These transactions had no cash impact on Schlumberger, but did result in a non-cash pension settlement charge of $37 million in the fourth quarter of 2019. This settlement charge represented the immediate recognition of the related deferred actuarial losses in Accumulated Other Comprehensive Loss.

	•	During the fourth quarter of 2019, Schlumberger repurchased certain Senior Notes (see Note 9 – Long-term debt), which resulted in a $22 million charge.

	•	On October 1, 2019, Schlumberger and Rockwell completed the formation of Sensia, a joint venture that is the oil and gas industry’s first digitally enabled integrated automation solutions provider. Rockwell Automation owns 53% of the joint venture and Schlumberger owns 47%. In connection with this transaction, Schlumberger received a cash payment of $238 million. Schlumberger will account for its investment under the equity method of accounting. During the fourth quarter of 2019, Schlumberger recorded a $247 million gain as a result of the deconsolidation of certain of its businesses in connection with the formation of the joint venture. This gain, which is equal to the sum of the $238 million of cash proceeds received and the fair value of Schlumberger’s retained noncontrolling investment in the businesses it contributed less the carrying amount of the assets and liabilities of such businesses at the time of the closing, is classified as Gain on formation of Sensia in the Consolidated Statement of Income (Loss).

Third quarter of 2019:

	•	During August 2019, Schlumberger’s market capitalization deteriorated significantly compared to the end of the second quarter of 2019. Schlumberger’s stock price reached a low not seen since 2005. Additionally, the Philadelphia Oil Services Sector Index, which is comprised of companies in the oil services sector, reached an 18-year low.

As a result of these facts, Schlumberger determined that it was more likely than not that the fair value of certain of its reporting units were less than their carrying value. Therefore, Schlumberger performed an interim goodwill impairment test as of August 31, 2019.

As of August 31, 2019, Schlumberger had 17 reporting units with goodwill balances aggregating $25.0 billion. Schlumberger determined that the fair value of seven of its reporting units, representing approximately $13.8 billion of the goodwill, was substantially in excess of their carrying value. Schlumberger performed a detailed quantitative impairment assessment of the remaining 10 reporting units, which represented $11.2 billion of goodwill. As a result of this assessment, Schlumberger concluded that the goodwill associated with nine of the 10 reporting units was impaired, resulting in an $8.8 billion goodwill impairment charge. This charge primarily relates to Schlumberger’s Drilling and Cameron segments.

Following the $8.8 billion goodwill impairment charge relating to these nine reporting units, only three had a remaining goodwill balance. These three reporting units had goodwill balances which ranged between $0.4 billion and $0.6 billion and aggregated to $1.5 billion as of August 31, 2019. The tenth reporting unit, which was determined not to be impaired, had $0.9 billion of goodwill.

Schlumberger primarily used the income approach to estimate the fair value of its reporting units, but also considered the market approach to validate the results. The income approach estimates the fair value by discounting each reporting unit’s estimated future cash flows using Schlumberger’s estimate of the discount rate, or expected return, that a marketplace participant would have required as of the valuation date. The market approach includes the use of comparative multiples to corroborate the discounted cash flow results. The market approach involves significant judgement involved in the selection of the appropriate peer group companies and valuation multiples.

Some of the more significant assumptions inherent in the income approach include the estimated future net annual cash flows for each reporting unit and the discount rate. Schlumberger selected the assumptions used in the discounted cash flow projections using historical data supplemented by current and anticipated market conditions and estimated growth rates. Schlumberger’s estimates are based upon assumptions believed to be reasonable. However, given the inherent uncertainty in determining the assumptions underlying a discounted cash flow analysis, actual results may differ from those used in Schlumberger’s valuations which could result in additional impairment charges in the future.

The discount rates utilized to value Schlumberger’s reporting units were between 12.5% and 14.0%, depending on the risks and uncertainty inherent in the respective reporting unit. Assuming all other assumptions and inputs used in each of the respective discounted cash flow analysis were held constant, a 50 basis point increase in the discount rate assumption would have increased the goodwill impairment charge by approximately $0.3 billion. Conversely, assuming all other assumptions and inputs used in each of the respective discounted cash flow analysis were held constant, a 50 basis point decrease in the discount rate assumption would have decreased the goodwill impairment charge by approximately $0.4 billion.

	•	The negative market indicators described above combined with deteriorating market conditions in North America, as well as the results of the previously mentioned fair value determinations of certain of Schlumberger’s reporting units and the appointment of a new Chief Executive Officer (as described below), were all triggering events that indicated that certain of Schlumberger’s long-lived tangible and intangible assets may be impaired.

Recoverability testing, which was performed as of August 31, 2019, indicated that long-lived assets associated with certain asset groups were impaired. The estimated fair value of these asset groups was determined to be below their carrying value. As a result, Schlumberger recorded the following impairment and related charges:

	-	$1.085 billion of intangible assets, of which $842 million relates to Schlumberger’s 2010 acquisition of Smith International, Inc. The remaining $243 million primarily relates to other acquisitions in North America.

	-	$1.575 billion of charges relating to Schlumberger’s pressure pumping business in North America. This amount consists of $1.324 billion of pressure pumping equipment and related assets; $98 million of right-of-use assets under operating leases; $121 million relating to a supply contract; $19 million of inventory; and $13 million of severance.

	-	$310 million of charges primarily relating to other businesses in North America, consisting of $230 million of fixed asset impairments, $70 million of inventory write-downs and $10 million of severance.

	•	As a result of the ongoing economic challenges in Argentina, Schlumberger recorded $127 million of charges during the third quarter of 2019. This consists of $72 million of asset impairments, a $26 million devaluation charge and $29 million of severance.

	•	Schlumberger also recorded the following impairment and restructuring charges during the third quarter of 2019:

	-	$231 million relating to certain equity method investments that were determined to be other-than-temporarily impaired.

	-	$294 million impairment relating to the carrying value of certain smaller APS projects.

	-	$242 million of restructuring charges consisting of: $62 million of severance; $57 million relating to the acceleration of stock-based compensation expense associated with certain individuals; $49 million of business divestiture costs; $29 million relating to the repurchase of certain Senior Notes (see Note 9 - Long-term Debt); and $45 million of other provisions.

The fair value of certain of the assets impaired during 2019 was estimated based on the present value of projected future cash flows that the underlying assets are expected to generate. Such estimates included unobservable inputs that required significant judgment.

During the third quarter of 2019, Schlumberger’s Board of Directors announced the appointment of a new Chief Executive Officer. As the new Chief Executive Officer further develops and implements his strategy, it may result in additional restructuring charges in future periods. Furthermore, Schlumberger may be required to record additional impairment charges if industry conditions deteriorate.

2018

During 2018, Schlumberger recorded the following charges and credits:

	(Stated in millions)
	Pretax				Tax				Net
Gain on sale of marine seismic acquisition business	$	(215	)		$	(19	)		$	(196	)
Workforce reductions		184				20				164
Asset impairments		172				16				156
	$	141			$	17			$	124

	•	During the fourth quarter of 2018, Schlumberger completed the divestiture of its marine seismic acquisition business to Shearwater GeoServices (“Shearwater”) for $600 million of cash and a 15% equity interest in Shearwater. As a result of this transaction, Schlumberger recognized a $215 million gain. This gain is classified in Gain on sale of business in the Consolidated Statement of Income (Loss).

	•	During the fourth quarter of 2018, Schlumberger recorded $172 million of charges to fully impair certain long-lived assets. This amount is classified in Impairments & other in the Consolidated Statement of Income (Loss).

	•	During the second quarter of 2018, Schlumberger recorded a $184 million charge associated with workforce reductions, primarily to further streamline its support cost structure. This charge is classified in Impairment & other in the Consolidated Statement of Income (Loss).

2017

Schlumberger recorded the following charges and credits during 2017, of which $3.211 billion were classified as Impairments & other, $245 million were classified in Cost of sales and $308 million were classified as Merger & integration in the Consolidated Statement of Income (Loss):

	(Stated in millions)
									Noncontrolling
	Pretax				Tax				Interests				Net
Impairment & other
WesternGeco seismic restructuring charges	$	1,114			$	20			$	-			$	1,094
Venezuela investment write-down		938				-				-				938
Promissory note fair value adjustment and other		510				-				12				498
Workforce reductions		247				13				-				234
Multiclient seismic data impairment		246				81				-				165
Other restructuring charges		156				10				22				124
Cost of sales										-				-
Provision for loss on long-term construction project		245				22				-				223
Merger & integration										-				-
Merger and integration-related costs		308				70				-				238
US tax reform charge		-				(76	)			-				76
	$	3,764			$	140			$	34			$	3,590

	•	During the fourth quarter of 2017, Schlumberger decided to cease all future marine seismic acquisition activities, after satisfying its remaining contractual commitments. This decision resulted in a charge of $1.025 billion consisting of the following: $786 million write-down of the vessels to their estimated fair value; $78 million impairment of intangible assets; $59 million write-down of inventory, and $102 million of other related restructuring costs. The fair value of the vessels was determined based on unobservable inputs that required significant judgments. Schlumberger also recorded a $90 million impairment charge relating to its land seismic business.

	•	As a result of the unfavorable near-term outlook for exploration spending, Schlumberger determined in the fourth quarter of 2017 that the carrying value of certain multiclient seismic data, primarily related to the US Gulf of Mexico, was impaired, resulting in a $246 million charge that was estimated based on the projected present value of future cash flows these surveys are expected to generate.

	•	During the fourth quarter of 2017, Schlumberger determined that it was appropriate to write-down its investment in Venezuela, given the recent economic and political developments in the country which have created significant uncertainties regarding recoverability. As a result, Schlumberger recorded a charge of $938 million, reflecting $469 million of accounts receivable, a $105 million other-than-temporary impairment charge relating to certain promissory notes, $285 million of fixed assets and $79 million of other assets in the country.

	•	During the fourth quarter of 2017, Schlumberger recorded a $245 million charge related to an estimated loss on a long-term surface facility construction project.

	•	Schlumberger recorded $156 million of other restructuring charges during the fourth quarter of 2017, primarily relating to facility and other exit costs.

	•	During the fourth quarter of 2017, Schlumberger recorded a $247 million charge associated with workforce reductions primarily to further streamline its support cost structure.

	•	On December 22, 2017, the US enacted the Tax Cuts and Jobs Act (the “Act”). The Act, which is also commonly referred to as “US tax reform,” significantly changes US corporate income tax laws by, among other things, reducing the US corporate income tax rate to 21% starting in 2018 and creating a territorial tax system with a one-time mandatory tax on previously deferred foreign earnings of US subsidiaries. As a result, Schlumberger recorded a net charge of $76 million during the fourth quarter of 2017. This amount, which is included in Tax expense (benefit) in the Consolidated Statement of Income (Loss), consists of two components: (i) a $410 million charge relating to the one-time mandatory tax on previously deferred earnings of certain non-US subsidiaries that are owned either wholly or partially by a US subsidiary of Schlumberger, and (ii) a $334 million credit resulting from the remeasurement of Schlumberger’s net deferred tax liabilities in the US based on the new lower corporate income tax rate. Although the $76 million net charge represented what Schlumberger believed was a reasonable estimate of the impact of the income tax effects of the Act on Schlumberger’s Consolidated Financial Statements

		as of December 31, 2017, it was considered provisional. During 2018, Schlumberger finalized its accounting for this matter and concluded that no material adjustments were required. After considering the impact of foreign tax credits and tax losses, the resulting cash tax payable as a result of the one-time mandatory tax on previously deferred foreign earnings of Schlumberger’s US subsidiary was not significant.

	•	During the second quarter of 2017, Schlumberger entered into a financing agreement with its primary customer in Venezuela. This agreement resulted in the exchange of $700 million of outstanding accounts receivable for promissory notes with a three-year term that bear interest at the rate of 6.50% per annum. Schlumberger recorded these notes at their estimated fair value on the date of the exchange, which resulted in a charge of $460 million. Following the $105 million other-than-temporary impairment charge described above, the new cost basis of these promissory notes was $135 million, which approximated their fair value at December 31, 2017. Schlumberger sold these promissory notes during the fourth quarter of 2018, which resulted in an immaterial loss.

	•	During the second quarter of 2017, Schlumberger entered into discussions with a customer relating to certain of its outstanding accounts receivable. As a result of these discussions, Schlumberger recorded a charge of $50 million to adjust these receivables to their estimated net realizable value.

	•	Schlumberger recorded $308 million of charges during 2017 relating to employee benefits, facility closures and other merger and integration-related costs, primarily in connection with Schlumberger’s 2016 acquisition of Cameron International Corporation.

4. Inventories

Inventories, which are stated at the lower of average cost or net realizable value, consist of the following:

(Stated in millions)
	2019				2018
Raw materials & field materials	$	1,857			$	1,803
Work in progress		515				519
Finished goods		1,758				1,688
	$	4,130			$	4,010

5. Fixed Assets

Fixed assets consist of the following:

(Stated in millions)
	2019				2018
Land	$	483			$	462
Buildings & improvements		5,156				5,534
Machinery & equipment		29,370				32,668
		35,009				38,664
Less: Accumulated depreciation		25,739				26,985
	$	9,270			$	11,679

The estimated useful lives of Buildings & improvements are primarily 25 to 30 years. The estimated useful lives of Machinery & equipment are primarily 5 to 10 years.

Depreciation expense, which is recorded on a straight-line basis, was $2.0 billion, $2.1 billion and $2.3 billion in 2019, 2018 and 2017, respectively.

6. Multiclient Seismic Data

The change in the carrying amount of multiclient seismic data is as follows:

(Stated in millions)
	2019				2018
Balance at beginning of year	$	601			$	727
Capitalized in period		231				100
Charged to expense		(264	)			(226	)
	$	568			$	601

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, January 1, 2018	$	4,848			$	10,126			$	4,697			$	5,447			$	25,118
Acquisitions		39				-				-				-				39
Business divestiture		(175	)			-				-				-				(175	)
Impact of changes in exchange rates		(9	)			(15	)			(19	)			(8	)			(51	)
Balance, December 31, 2018		4,703				10,111				4,678				5,439				24,931
Impairment		(97	)			(3,025	)			(705	)			(5,001	)			(8,828	)
Impact of changes in exchange rates and other		(46	)			6				(24	)			3				(61	)
Balance, December 31, 2019	$	4,560			$	7,092			$	3,949			$	441			$	16,042

8. Intangible Assets

Intangible assets consist of the following:

	(Stated in millions)
	2019												2018
	Gross				Accumulated				Net Book				Gross				Accumulated				Net Book
	Book Value				Amortization				Value				Book Value				Amortization				Value
Customer Relationships	$	3,779			$	868			$	2,911			$	4,768			$	1,243			$	3,525
Technology/Technical Know-How		2,498				779				1,719				3,494				1,246				2,248
Tradenames		1,885				264				1,621				2,799				628				2,171
Other		1,514				676				838				1,404				621				783
	$	9,676			$	2,587			$	7,089			$	12,465			$	3,738			$	8,727

Customer relationships are generally amortized over periods ranging from 18 to 28 years, technology/technical know-how are generally amortized over periods ranging from 10 to 18 years, and tradenames are generally amortized over periods ranging from 15 to 30 years.

Amortization expense was $618 million in 2019, $673 million in 2018 and $663 million in 2017.

Based on the carrying value of intangible assets at December 31, 2019, amortization expense for the subsequent five years is estimated to be as follows: 2020: $530 million, 2021: $521 million, 2022: $497 million, 2023: $476 million and 2024: $472 million.

9. Long-term Debt and Debt Facility Agreements

Long-term Debt consists of the following:

(Stated in millions)
	2019				2018
3.30% Senior Notes due 2021	$	1,597			$	1,596
3.65% Senior Notes due 2023		1,495				1,493
3.90% Senior Notes due 2028		1,444				-
2.40% Senior Notes due 2022		998				997
4.00% Senior Notes due 2025		929				1,742
4.3% Senior Notes due 2029		845				-
3.75% Senior Notes due 2024		746				-
1.00% Guaranteed Notes due 2026		665				678
4.20% Senior Notes due 2021		600				1,100
2.65% Senior Notes due 2022		598				598
0.00% Notes due 2024		551				-
0.25% Notes due 2027		550				-
0.50% Notes due 2031		544				-
3.63% Senior Notes due 2022		294				847
7.00% Notes due 2038		208				210
5.95% Notes due 2041		114				115
5.13% Notes due 2043		99				99
4.00% Notes due 2023		81				82
3.70% Notes due 2024		55				55
3.00% Senior Notes due 2020		-				1,596
2.20% Senior Notes due 2020		-				499
4.50% Notes due 2021		-				132
3.60% Notes due 2022		-				109
Commercial paper borrowings		2,222				2,433
Other		135				263
	$	14,770			$	14,644

During the fourth quarter of 2019, Schlumberger repurchased the remaining $416 million of its 3.00% Senior Notes due 2020; $126 million of its 4.50% Senior Notes due 2021; $500 million of its 4.20% Senior Notes due 2021; and $106 million of its 3.60% Senior Notes due 2022. Schlumberger paid a premium of $28 million in connection with these repurchases. This premium, net of related credits, was classified as Impairments & other in the Consolidated Statement of Income (Loss). (See Note 3 - Charges and Credits.)

During the third quarter of 2019, Schlumberger issued €500 million of 0.00% Notes due 2024, €500 million of 0.25% Notes due 2027 and €500 million of 0.50% Notes due 2031.

During the third quarter of 2019, Schlumberger repurchased $783 million of its 3.00% Senior Notes due 2020 and $321 million of its 3.625% Senior Notes due 2022. Schlumberger paid a premium of $29 million in connection with these repurchases. This premium was classified as Impairments & other in the Consolidated Statement of Income (Loss). (See Note 3 - Charges and Credits.)

During the second quarter of 2019, Schlumberger completed a debt exchange offer, pursuant to which it issued $1.500 billion in principal of 3.90% Senior Notes due 2028 (the “New Notes”) in exchange for $401 million of 3.00% Senior Notes due 2020, $234 million of 3.63% Senior Notes due 2022 and $817 million of 4.00% Senior Notes due 2025. In connection with the exchange of principal, Schlumberger paid a premium of $48 million, substantially all of which was in the form of New Notes. This premium is being amortized as additional interest expense over the term of the New Notes.

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.

During the fourth quarter of 2018, Schlumberger issued €600 million of 1.00% Guaranteed Notes due 2026.

At December 31, 2019, Schlumberger had separate committed credit facility agreements aggregating $6.5 billion with commercial banks, of which $4.3 billion was available and unused. These committed facilities support commercial paper programs in the United States and Europe, and $1.0 billion matures in February 2020, $2.0 billion matures in February 2023, $2.0 billion matures in February 2024 and $1.5 billion matures in July 2024 . Interest rates and other terms of borrowing under these lines of credit vary from country to country.

Commercial paper borrowings are classified as long-term debt to the extent they are backed up by available and unused committed credit facilities maturing in more than one year and to the extent it is Schlumberger’s intent to maintain these obligations for longer than one year. Borrowings under the commercial paper programs at December 31, 2019 were $2.2 billion, all of which was classified in Long-term debt in the Consolidated Balance Sheet. At December 31, 2018, borrowings under the commercial paper programs were $2.4 billion, all of which was classified in Long-term debt in the Consolidated Balance Sheet.

The weighted average interest rate on variable rate debt as of December 31, 2019 was 2.3%.

Long-term Debt as of December 31, 2019 is due as follows: $2.3 billion in 2021, $1.9 billion in 2022, $1.9 billion in 2023, $3.2 billion in 2024, $0.9 billion in 2025, $0.7 billion in 2026 and $3.9 billion thereafter.

The fair value of Schlumberger’s Long-term Debt at December 31, 2019 and December 31, 2018 was $15.3 billion and $14.6 billion, respectively, and was estimated based on quoted market prices.

Schlumberger Limited fully and unconditionally guarantees the securities issued by certain of its subsidiaries, including securities issued by Schlumberger Investment SA, a wholly-owned finance subsidiary of Schlumberger.

10. Derivative Instruments and Hedging Activities

Schlumberger is exposed to market risks related to fluctuations in interest rates and foreign currency exchange rates. To mitigate these risks, Schlumberger utilizes derivative instruments. Schlumberger does not enter into derivative transactions for speculative purposes.

Interest Rate Risk

Schlumberger is subject to interest rate risk on its debt and its investment portfolio. Schlumberger maintains an interest rate risk management strategy that uses a mix of variable and fixed rate debt combined with its investment portfolio to mitigate the exposure to changes in interest rates.

At December 31, 2019, Schlumberger had fixed rate debt aggregating $12.9 billion and variable rate debt aggregating $2.4 billion.

Foreign Currency Exchange Rate Risk

As a multinational company, Schlumberger conducts its business in over 120 countries. Schlumberger’s functional currency is primarily the US dollar. Approximately 78% of Schlumberger’s revenues in 2019 were denominated in US dollars. However, outside the United States, a significant portion of Schlumberger’s expenses is incurred in foreign currencies. Therefore, when the US dollar weakens (strengthens) in relation to the foreign currencies of the countries in which Schlumberger conducts business, the US dollar–reported expenses will increase (decrease).

Schlumberger is exposed to risks on future cash flows to the extent that the local currency is not the functional currency and expenses denominated in local currency are not equal to revenues denominated in local currency. Schlumberger uses foreign currency forward contracts to provide a hedge against a portion of these cash flow risks. These contracts are accounted for as cash flow hedges, with the changes in the fair value of the hedge recorded on the Consolidated Balance Sheet and in Accumulated Other Comprehensive Loss. Amounts recorded in Accumulated Other Comprehensive Loss are reclassified into earnings in the same period or periods that the hedged item is recognized in earnings.

Schlumberger is also exposed to risks on future cash flows relating to certain of its fixed rate debt denominated in currencies other than the functional currency. Schlumberger uses cross-currency swaps to provide a hedge against these cash flow risks.

During 2017, a Canadian-dollar functional currency subsidiary of Schlumberger issued $1.1 billion of US-dollar denominated debt. Schlumberger entered into cross-currency swaps for an aggregate notional amount of $1.1 billion in order to hedge changes in the fair value of its $0.5 billion of 2.20% Senior Notes due 2020 and its $0.6 billion of 2.65% Senior Notes due 2022. These cross-currency swaps effectively convert the US-dollar denominated notes to Canadian-dollar denominated debt with fixed annual interest rates of 1.97% and 2.52%, respectively.

During the third quarter of 2019, a US-dollar functional currency subsidiary of Schlumberger issued €1.5 billion of Euro-denominated debt. Schlumberger entered into cross-currency swaps for an aggregate notional amount of €1.5 billion in order to hedge changes in the fair value of its €0.5 billion 0.00% Notes due 2024, €0.5 billion 0.25% Notes due 2027 and €0.5 billion Notes due 2031. These cross-currency swaps effectively converted the Euro-denominated notes to US-dollar denominated debt with fixed annual interest rates of 2.29%, 2.51% and 2.76%, respectively.

At December 31, 2019, Schlumberger recognized a cumulative net $34 million loss in Accumulated Other Comprehensive Loss relating to revaluation of foreign currency forward contracts designated as cash flow hedges, the majority of which is expected to be reclassified into earnings within the next 12 months.

Schlumberger is exposed to changes in the fair value of assets and liabilities denominated in currencies other than the functional currency. While Schlumberger uses foreign currency forward contracts to economically hedge this exposure as it relates to certain currencies, these contracts are not designated as hedges for accounting purposes. Instead, the fair value of the contracts is recorded on the Consolidated Balance Sheet and changes in the fair value are recognized in the Consolidated Statement of Income (Loss), as are changes in the fair value of the hedged item. Transaction gains of $2 million in 2019, transaction gains of $1 million in 2018 and transaction losses of $17 million in 2017 were recognized in the Consolidated Statement of Income (Loss) net of related hedging activities.

At December 31, 2019, contracts were outstanding for the US dollar equivalent of $7.7 billion in various foreign currencies, of which $3.0 billion relates to hedges of debt denominated in currencies other than the functional currency.

The fair value of outstanding derivatives was not material at December 31, 2019 and 2018.

The effect of derivative instruments designated as 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)												Consolidated Statement
	2019				2018				2017				of Income (Loss) Classification
Derivatives designated as fair value hedges:
Cross currency swap	$	-			$	(25	)		$	73			Interest expense
Derivatives designated as cash flow hedges:
Cross currency swap	$	(35	)		$	80			$	(8	)		Interest expense
Foreign exchange contracts		(10	)			(1	)			-			Cost of services/sales
	$	(45	)		$	79			$	(8	)
Derivatives not designated as hedges:
Foreign exchange contracts	$	(5	)		$	40			$	(26	)		Cost of services/sales

11. Stockholders’ Equity

Schlumberger is authorized to issue 4,500,000,000 shares of common stock, par value $0.01 per share, of which 1,384,515,345 and 1,382,964,324 shares were outstanding on December 31, 2019 and 2018, respectively. Holders of common stock are entitled to one vote for each share of stock held. Schlumberger is also authorized to issue 200,000,000 shares of preferred stock, par value $0.01 per share, which may be issued in series with terms and conditions determined by the Schlumberger Board of Directors. No shares of preferred stock have been issued.

Accumulated Other Comprehensive Loss consists of the following:

	(Stated in millions)
													Pension and
	Currency												Other
	Translation				Marketable				Cash Flow				Postretirement
	Adjustments				Securities				Hedges				Benefit Plans				Total
Balance, January 1, 2017	$	(2,136	)		$	21			$	(19	)		$	(2,509	)		$	(4,643	)
Other comprehensive income (loss) before reclassifications		(3	)			(8	)			22				134				145
Amounts reclassified from accumulated other comprehensive loss		-				-				-				239				239
Income taxes		-				-				-				(15	)			(15	)
Balance, December 31, 2017		(2,139	)			13				3				(2,151	)			(4,274	)
Reclassification to Retained Earnings of stranded tax effects resulting from US tax reform		-				-				-				(109	)			(109	)
Other comprehensive loss before reclassifications		(191	)			(11	)			(16	)			(186	)			(404	)
Amounts reclassified from accumulated other comprehensive loss		-				-				1				182				183
Income taxes		-				-				-				(18	)			(18	)
Balance, December 31, 2018		(2,330	)			2				(12	)			(2,282	)			(4,622	)
Other comprehensive loss before reclassifications		67				-				(32	)			127				162
Amounts reclassified from accumulated other comprehensive loss		-				-				10				83				93
Income taxes		-				-				-				(71	)			(71	)
Balance, December 31, 2019	$	(2,263	)		$	2			$	(34	)		$	(2,143	)		$	(4,438	)

Other comprehensive income was $184 million in 2019 and $369 million in 2017. Other comprehensive loss was $239 million in 2018.

12. Stock-based Compensation Plans

Schlumberger has three types of stock-based compensation programs: (i) stock options, (ii) a restricted stock, restricted stock unit and performance share unit program (collectively referred to as “restricted stock”), and (iii) a discounted stock purchase plan (“DSPP”).

Stock Options

Key employees are granted stock options under Schlumberger stock option plans. For all stock options granted, the exercise price equals the average of the high and low sales prices of Schlumberger stock on the date of grant; the maximum term is 10 years, and the options generally vest in increments over five years.

The fair value of each stock option grant was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions and resulting weighted-average fair value per share:

	2019				2018				2017
Dividend yield		4.8	%			2.6	%			2.3	%
Expected volatility		25	%			26	%			27	%
Risk-free interest rate		2.7	%			2.6	%			2.4	%
Expected option life in years		7.0				7.0				7.0
Weighted-average fair value per share	$	6.21			$	17.37			$	20.85

The following table summarizes information related to options outstanding and options exercisable as of December 31, 2019:

	(Shares stated in thousands)
	Options Outstanding												Options Exercisable
					Weighted-
					Average
					Remaining				Weighted-								Weighted-
	Options				Contractual Life				Average				Options				Average
Exercise prices range	Outstanding				(in years)				Exercise Price				Exercisable				Exercise Price
$41.47 - $69.98		11,307				5.6			$	53.99				5,343			$	65.01
$70.92 - $76.74		10,202				3.0			$	72.11				9,958			$	72.17
$77.10 - $83.15		7,714				6.4			$	79.32				4,257			$	79.62
$84.22 - $88.77		9,210				3.8			$	85.88				6,885			$	85.38
$91.28 - $114.83		7,836				4.4			$	95.86				7,160			$	96.25
		46,269				4.6			$	75.65				33,603			$	77.77

The weighted-average remaining contractual life of stock options exercisable as of December 31, 2019 was 3.47 years.

The following table summarizes stock option activity during the years ended December 31, 2019, 2018 and 2017:

	(Shares stated in thousands)
	2019								2018								2017
					Weighted-								Weighted-								Weighted-
					Average								Average								Average
					Exercise								Exercise								Exercise
	Shares				Price				Shares				Price				Shares				Price
Outstanding at beginning of year		43,529			$	79.36				47,210			$	79.13				46,502			$	78.31
Granted		5,604			$	41.50				2,121			$	76.95				5,024			$	86.55
Exercised		(1,045	)		$	38.50				(936	)		$	54.20				(1,156	)		$	57.87
Forfeited		(1,819	)		$	74.69				(4,866	)		$	84.19				(3,160	)		$	86.99
Outstanding at year-end		46,269			$	75.65				43,529			$	79.36				47,210			$	79.13

Stock options outstanding and stock options exercisable as of December 31, 2019 had no intrinsic value.

The total intrinsic value of options exercised during the years ended December 31, 2019, 2018 and 2017 was $4 million, $15 million and $26 million, respectively.

Restricted Stock

Schlumberger grants performance share units to -its executives officers. The number of shares earned is determined at the end of each performance period based on Schlumberger’s achievement of certain predefined targets as defined in the underlying performance share unit agreement. In the event Schlumberger exceeds the predefined target, shares for up to the maximum of 250% of the target award may be awarded. In the event Schlumberger falls below the predefined target, a reduced number of shares may be awarded. If Schlumberger falls below the threshold award performance level, no shares will be awarded. As of December 31, 2019, 3.6 million performance share units were outstanding assuming the achievement of 100% of target.

All other restricted stock awards generally vest at the end of three years.

Restricted stock awards generally do not pay dividends or have voting rights prior to vesting. Accordingly, the fair value of a restricted stock award is the quoted market price of Schlumberger’s stock on the date of grant less the present value of the expected dividends not received prior to vesting.

The following table summarizes information related to restricted stock transactions:

	(Shares stated in thousands)
	2019								2018								2017
					Weighted-								Weighted-								Weighted-
					Average								Average								Average
	Restricted				Grant Date				Restricted				Grant Date				Restricted				Grant Date
	Stock				Fair Value				Stock				Fair Value				Stock				Fair Value
Unvested at beginning of year		6,951			$	70.13				5,428			$	72.33				5,112			$	78.31
Granted		7,888			$	35.56				3,204			$	70.54				2,495			$	73.09
Vested		(2,722	)		$	72.09				(982	)		$	77.62				(1,645	)		$	83.03
Forfeited		(295	)		$	57.41				(699	)		$	70.67				(534	)		$	80.17
Unvested at year-end		11,822			$	49.86				6,951			$	70.13				5,428			$	72.33

Discounted Stock Purchase Plan

Under the terms of the DSPP, employees can choose to have a portion of their earnings withheld, subject to certain restrictions, to purchase Schlumberger common stock. The purchase price of the stock is 92.5% of the lower of the stock price at the beginning or end of the plan period at six-month intervals.

The fair value of the employees’ purchase rights under the DSPP was estimated using the Black-Scholes model with the following assumptions and resulting weighted-average fair value per share:

	2019				2018				2017
Dividend yield		5.3	%			2.9	%			2.7	%
Expected volatility		30	%			22	%			19	%
Risk-free interest rate		2.3	%			1.6	%			1.0	%
Weighted-average fair value per share	$	5.81			$	9.01			$	9.46

Total Stock-based Compensation Expense

The following summarizes stock-based compensation expense recognized in income:

(Stated in millions)
	2019				2018				2017
Stock options	$	99			$	134			$	161
Restricted stock		274				179				148
DSPP		32				32				34
	$	405			$	345			$	343

At December 31, 2019, there was $324 million of total unrecognized compensation cost related to nonvested stock-based compensation arrangements, of which $191 million is expected to be recognized in 2020, $100 million in 2021, $27 million in 2022, $6 million in 2023.

As of December 31, 2019, approximately 35 million shares of Schlumberger common stock were available for future grants under Schlumberger’s stock-based compensation programs.

13. Income Taxes

Schlumberger operates in more than 100 tax jurisdictions, where statutory tax rates generally vary from 0% to 35%.

Income (loss) before taxes subject to United States and non-United States income taxes was as follows:

(Stated in millions)
	2019				2018				2017
United States	$	(8,991	)		$	(55	)		$	(841	)
Outside United States		(1,427	)			2,679				(342	)
	$	(10,418	)		$	2,624			$	(1,183	)

Schlumberger recorded net pretax charges of $12.901 billion in 2019 ($8.769 billion in the US and $4.132 billion outside the US); $141 million in 2018 ($102 million in the US and $39 million outside the US); and $3.764 billion in 2017 ($533 million in the US and $3.231 billion outside the US). These charges and credits are included in the table above and are more fully described in Note 3 – Charges and Credits.

The components of net deferred tax assets (liabilities) were as follows:

(Stated in millions)
	2019				2018
Postretirement benefits	$	51			$	122
Intangible assets		(1,833	)			(2,110	)
Investments in non-US subsidiaries		(220	)			(223	)
Fixed assets, net		434				(140	)
Inventories		155				111
Foreign tax credits		312				343
Other, net		610				456
	$	(491	)		$	(1,441	)

The above deferred tax balances at December 31, 2019 and 2018 were net of valuation allowances relating to net operating losses in certain countries of $82 million and $87 million, respectively.

Schlumberger generally does not provide for taxes related to its undistributed earnings because such earnings either would not be taxable when remitted or they are considered to be indefinitely reinvested. Taxes that would be incurred if the undistributed earnings of other Schlumberger subsidiaries were distributed to their ultimate parent company would not be material.

The components of Tax expense (benefit) were as follows:

(Stated in millions)
	2019				2018				2017
Current:
United States-Federal	$	(81	)		$	124			$	(170	)
United States-State		11				(50	)			57
Outside United States		770				618				703
		700				692				590
Deferred:
United States-Federal	$	(660	)		$	(143	)		$	(225	)
United States-State		(93	)			(4	)			4
Outside United States		(257	)			(69	)			(47	)
Valuation allowance		(1	)			(29	)			8
		(1,011	)			(245	)			(260	)
	$	(311	)		$	447			$	330

A reconciliation of the United States statutory federal tax rate to the consolidated effective tax rate follows:

	2019				2018				2017
US federal statutory rate		21	%			21	%			35	%
State tax		-				(2	)			-
Non-US income taxed at different rates		-				(2	)			29
Charges and credits (See Note 3)		(19	)			-				(93	)
Enactment of US tax reform (See Note 3)		-				-				(6	)
Other		1				-				7
		3	%			17	%			(28	)%

A number of the jurisdictions in which Schlumberger operates have tax laws that are not fully defined and are evolving. Schlumberger’s tax filings are subject to regular audit by the tax authorities. These audits may result in assessments for additional taxes that are resolved with the tax authorities or, potentially, through the courts. Tax liabilities are recorded based on estimates of additional taxes that will be due upon the conclusion of these audits. Due to the uncertain and complex application of tax regulations, the ultimate resolution of audits may result in liabilities which could be materially different from these estimates.

A reconciliation of the beginning and ending amount of liabilities associated with uncertain tax positions for the years ended December 31, 2019, 2018 and 2017 is as follows:

(Stated in millions)
	2019				2018				2017
Balance at beginning of year	$	1,433			$	1,393			$	1,419
Additions based on tax positions related to the current year		86				88				132
Additions for tax positions of prior years		65				145				58
Impact of changes in exchange rates		2				(41	)			23
Settlements with tax authorities		(50	)			(22	)			(41	)
Reductions for tax positions of prior years		(176	)			(57	)			(157	)
Reductions due to the lapse of the applicable statute of limitations		(59	)			(73	)			(41	)
	$	1,301			$	1,433			$	1,393

The amounts above exclude accrued interest and penalties of $188 million, $205 million and $195 million at December 31, 2019, 2018 and 2017, respectively. Schlumberger classifies interest and penalties relating to uncertain tax positions within Tax expense (benefit) in the Consolidated Statement of Income (Loss).

The following table summarizes the tax years that are either currently under audit or remain open and subject to examination by the tax authorities in the most significant jurisdictions in which Schlumberger operates:

Canada	2012 - 2019
Ecuador	2016 - 2019
Mexico	2012 - 2019
Norway	2014 - 2019
Russia	2016 - 2019
Saudi Arabia	2015 - 2019
United Kingdom	2017 - 2019
United States	2017 - 2019

In certain of the jurisdictions noted above, Schlumberger operates through more than one legal entity, each of which may have different open years subject to examination. The table above presents the open years subject to examination for the most material of the legal entities in each jurisdiction. Additionally, it is important to note that tax years are technically not closed until the statute of limitations in each jurisdiction expires. In the jurisdictions noted above, the statute of limitations can extend beyond the open years subject to examination.

14. Leases and Lease Commitments

During the fourth quarter of 2018, Schlumberger adopted ASU No. 2016-02, Leases, effective January 1, 2018. This ASU requires lessees to recognize an operating lease asset and a lease liability on the balance sheet, with the exception of short-term leases.

Under the transition method selected by Schlumberger, leases existing at, or entered into after, January 1, 2018 were required to be recognized and measured. Prior period amounts have not been adjusted and continue to be reflected in accordance with Schlumberger’s historical accounting. The adoption of this standard resulted in the recording of operating lease assets and operating lease liabilities of approximately of $1.3 billion as of January 1, 2018, with no related impact on Schlumberger’s Consolidated Statement of Equity or Consolidated Statement of Income (Loss). Short-term leases have not been recorded on the balance sheet.

Schlumberger elected the package of practical expedients permitted under the transition guidance within the new standard which, among other things, allows companies to carry forward their historical lease classification.

Schlumberger’s leasing activities primarily consist of operating leases for administrative offices, manufacturing facilities, research centers, service centers, sales offices and certain equipment. Total operating lease expense, which approximates cash paid and includes short-term leases, was $1.7 billion in each of 2019 and 2018, and $1.4 billion in 2017.

Maturities of operating lease liabilities as of December 31, 2019 were as follows:

(Stated in millions)
2020	$	510
2021		276
2022		188
2023		152
2024		124
Thereafter		332
Total lease payments	$	1,582
Less: Interest		(171	)
	$	1,411
Amounts recognized in Balance Sheet
Accounts payable and accrued liabilities	$	494
Other Liabilities		917
	$	1,411

Operating lease assets of $1.3 billion and $1.8 billion as of December 31, 2019 and 2018, respectively, were included in Other Assets in the Consolidated Balance Sheet. Operating lease liabilities as of December 31, 2018 were $1.8 billion, of which $0.6 billion was classified in Accounts payable and accrued liabilities and $1.2 billion was classified in Other Liabilities in the Consolidated Balance Sheet.

The weighted-average remaining lease term as of December 31, 2019 was 7 years. The weighted-average discount rate used to determine the operating lease liability as of December 31, 2019 was 3.2%.

15. 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. Segment Information

Schlumberger’s segments are as follows:

	•	Reservoir Characterization – Consists of the principal Technologies involved in finding and defining hydrocarbon resources. These include WesternGeco, Wireline, Testing Services, Software Integrated Solutions, OneSurface and Integrated Services Management.

	•	Drilling – Consists of the principal Technologies involved in the drilling and positioning of oil and gas wells. These include Bits & Drilling Tools, M-I SWACO, Drilling & Measurements, Land Rigs and Integrated Drilling Services.

	•	Production – Consists of the principal Technologies involved in the lifetime production of oil and gas reservoirs. These include Well Services, OneStim, Completions, Artificial Lift and Asset Performance Solutions.

	•	Cameron – Consists of the principal Technologies involved in pressure and flow control for drilling and intervention rigs, oil and gas wells and production facilities. These include OneSubsea, Surface Systems, Drilling Systems and Valves & Process Systems.

Financial information for the years ended December 31, 2019, 2018 and 2017, by segment, is as follows:

					(Stated in millions)
	2019
													Depreciation
					Income								and				Capital
	Revenue				Before Taxes				Assets				Amortization				Expenditures
Reservoir Characterization	$	6,312			$	1,327			$	3,909			$	643			$	307
Drilling		9,721				1,216				5,724				540				616
Production		11,987				993				10,289				1,540				551
Cameron		5,336				613				4,102				233				166
Eliminations & other		(439	)			(171	)			1,414				216				84
						3,978
Goodwill and intangible assets										23,130
Cash and short term investments										2,167
All other assets										5,577
Corporate & other (1)						(957	)							417
Interest income (2)						33
Interest expense (3)						(571	)
Charges & credits (4)						(12,901	)
	$	32,917			$	(10,418	)		$	56,312			$	3,589			$	1,724

					(Stated in millions)
	2018
													Depreciation
					Income								and				Capital
	Revenue				Before Taxes				Assets				Amortization				Expenditures
Reservoir Characterization	$	6,173			$	1,347			$	4,306			$	667			$	296
Drilling		9,250				1,239				5,843				597				718
Production		12,394				1,052				12,625				1,417				886
Cameron		5,520				653				4,138				247				152
Eliminations & other		(522	)			(104	)			1,460				189				108
						4,187
Goodwill and intangible assets										33,658
Cash and short term investments										2,777
All other assets										5,700
Corporate & other (1)						(937	)							439
Interest income (2)						52
Interest expense (3)						(537	)
Charges & credits (4)						(141	)
	$	32,815			$	2,624			$	70,507			$	3,556			$	2,160

					(Stated in millions)
	2017
													Depreciation
					Income								and				Capital
	Revenue				Before Taxes				Assets				Amortization				Expenditures
Reservoir Characterization	$	6,476			$	1,184			$	4,714			$	981			$	304
Drilling		8,392				1,151				5,513				697				629
Production		10,630				936				12,450				1,240				889
Cameron		5,524				792				4,156				268				151
Eliminations & other		(582	)			(142	)			1,665				213				134
						3,921
Goodwill and intangible assets										34,472
Cash, short term investments and fixed income investments										5,089
All other assets										3,928
Corporate & other (1)						(934	)							438
Interest income (2)						107
Interest expense (3)						(513	)
Charges & credits (4)						(3,764	)
	$	30,440			$	(1,183	)		$	71,987			$	3,837			$	2,107

(1)	Comprised principally of certain corporate expenses not allocated to the segments, stock-based compensation costs, amortization expense associated with certain intangible assets (including intangible asset amortization expense resulting from the 2016 acquisition of Cameron), certain centrally managed initiatives and other nonoperating items.

(2)	Interest income excludes amounts which are included in the segments’ income (2019: $8 million; 2018: $8 million; 2017: $21 million).

(3)	Interest expense excludes amounts which are included in the segments’ income (2019: $38 million; 2018: $38 million; 2017: $53 million).

(4)	See Note 3 – Charges and Credits.

Segment assets consist of receivables, inventories, fixed assets, multiclient seismic data and APS investments.

Depreciation and amortization includes depreciation of property, plant and equipment and amortization of intangible assets, multiclient seismic data costs and APS investments.

Revenue by geographic area for the years ended December 31, 2019, 2018 and 2017 is as follows:

(Stated in millions)
	2019				2018				2017
North America	$	10,843			$	11,984			$	9,487
Latin America		4,149				3,745				3,976
Europe/CIS/Africa		7,683				7,158				7,072
Middle East & Asia		10,017				9,543				9,394
Eliminations & other		225				385				511
	$	32,917			$	32,815			$	30,440

Revenue is based on the location where services are provided and products are sold.

During each of the three years ended December 31, 2019, 2018 and 2017, no single customer exceeded 10% of consolidated revenue.

Schlumberger did not have revenue from third-party customers in its country of domicile during the last three years. Revenue in the United States in 2019, 2018 and 2017 was $9.3 billion, $10.1 billion and $8.1 billion, respectively.

North America and International revenue disaggregated by segment was as follows:

(Stated in millions)
	2019
	North America				International				Eliminations & other				Total
Reservoir Characterization	$	1,027			$	5,263			$	22			$	6,312
Drilling		2,220				7,294				207				9,721
Production		5,336				6,647				4				11,987
Cameron		2,318				2,975				43				5,336
Other		(58	)			(330	)			(51	)			(439	)
	$	10,843			$	21,849			$	225			$	32,917

(Stated in millions)
	2018
	North America				International				Eliminations & other				Total
Reservoir Characterization	$	992			$	5,031			$	150			$	6,173
Drilling		2,332				6,684				234				9,250
Production		6,312				6,077				5				12,394
Cameron		2,427				3,007				86				5,520
Other		(79	)			(353	)			(90	)			(522	)
	$	11,984			$	20,446			$	385			$	32,815

Fixed Assets less accumulated depreciation by geographic area are as follows:

(Stated in millions)
	2019				2018
North America	$	3,646			$	5,715
Latin America		824				898
Europe/CIS/Africa		2,258				2,364
Middle East & Asia		2,453				2,604
Unallocated		89				98
	$	9,270			$	11,679

17. Pension and Other Benefit Plans

Pension Plans

Schlumberger sponsors several defined benefit pension plans that cover substantially all US employees hired prior to October 1, 2004. The benefits are based on years of service and compensation, on a career-average pay basis.

In addition to the US defined benefit pension plans, Schlumberger sponsors several other international defined benefit pension plans. The most significant of these international plans are the International Staff Pension Plan and the UK pension plan (collectively, the “International plans”). The International Staff Pension Plan covers certain international employees hired prior to July 1, 2014 and is based on years of service and compensation on a career-average pay basis. The UK plan covers employees hired prior to April 1, 1999, and is based on years of service and compensation, on a final salary basis.

The weighted-average assumed discount rate, compensation increases and expected long-term rate of return on plan assets used to determine the net pension cost for the US and International plans were as follows:

	US												International
	2019				2018				2017				2019				2018				2017
Discount rate		4.30	%			3.70	%			4.20	%			4.00	%			3.55	%			4.13	%
Compensation increases		4.00	%			4.00	%			4.00	%			4.83	%			4.81	%			4.81	%
Return on plan assets		6.60	%			7.25	%			7.25	%			7.22	%			7.40	%			7.40	%

Net pension cost (credit) for 2019, 2018 and 2017 included the following components:

(Stated in millions)
	US												International
	2019				2018				2017				2019				2018				2017
Service cost - benefits earned during the period	$	49			$	59			$	57			$	112			$	138			$	95
Interest cost on projected benefit obligation		180				167				175				333				304				306
Expected return on plan assets		(232	)			(248	)			(242	)			(592	)			(584	)			(541	)
Amortization of prior service cost		10				13				12				7				10				97
Amortization of net loss		29				47				39				70				140				120
Settlement charge		37				-				-				-				-				-
	$	73			$	38			$	41			$	(70	)		$	8			$	77

See Note 3 - Charges and Credits for details regarding the 2019 settlement charge.

The weighted-average assumed discount rate and compensation increases used to determine the projected benefit obligations for the US and International plans were as follows:

	US								International
	2019				2018				2019				2018
Discount rate		3.30	%			4.30	%			3.27	%			4.00	%
Compensation increases		4.00	%			4.00	%			4.83	%			4.83	%

The changes in the projected benefit obligation, plan assets and funded status of the plans were as follows:

(Stated in millions)
	US								International
	2019				2018				2019				2018
Change in Projected Benefit Obligations
Projected benefit obligation at beginning of year	$	4,278			$	4,603			$	8,111			$	8,752
Service cost		49				59				112				138
Interest cost		180				167				333				304
Contribution by plan participants		-				-				63				79
Actuarial (gains) losses		535				(349	)			1,304				(758	)
Currency effect		-				-				50				(87	)
Settlement		(240	)			-				(17	)			-
Benefits paid		(209	)			(202	)			(309	)			(317	)
Projected benefit obligation at end of year	$	4,593			$	4,278			$	9,647			$	8,111
Change in Plan Assets
Plan assets at fair value at beginning of year	$	3,748			$	4,058			$	7,872			$	8,507
Actual return on plan assets		931				(112	)			1,676				(370	)
Currency effect		-				-				59				(105	)
Company contributions		6				4				19				78
Contributions by plan participants		-				-				63				79
Settlement		(240	)			-				(17	)			-
Benefits paid		(209	)			(202	)			(309	)			(317	)
Plan assets at fair value at end of year	$	4,236			$	3,748			$	9,363			$	7,872
Unfunded Liability	$	(357	)		$	(530	)		$	(284	)		$	(239	)
Amounts Recognized in Balance Sheet
Postretirement Benefits	$	(357	)		$	(530	)		$	(602	)		$	(514	)
Other Assets		-				-				318				275
	$	(357	)		$	(530	)		$	(284	)		$	(239	)
Amounts Recognized in Accumulated Other Comprehensive Loss
Actuarial losses	$	622			$	852			$	1,638			$	1,440
Prior service cost		9				18				-				9
	$	631			$	870			$	1,638			$	1,449
Accumulated benefit obligation	$	4,345			$	4,070			$	9,376			$	7,895

The unfunded liability represents the difference between the plan assets and the projected benefit obligation (“PBO”). The PBO represents the actuarial present value of benefits based on employee service and compensation and includes an assumption about future compensation levels. The accumulated benefit obligation (“ABO”) represents the actuarial present value of benefits based on employee service and compensation, but does not include an assumption about future compensation levels.

Actuarial losses arising during 2019 are primarily attributable to the decrease in the discount rate used to determine the PBO. As of December 31, 2019, the PBO and fair value of plan assets for plans with PBOs in excess of plan assets were $12.6 billion and $11.7 billion, respectively. The related ABO for these plans was $12.2 billion at December 31, 2019.

The weighted-average allocation of plan assets and the target allocations by asset category are as follows:

	US															International
	Target					2019					2018					Target					2019					2018
Equity securities	20 - 30			%			22		%			21		%		47 - 59			%			50		%			50
Debt securities	63 - 77						70					70				27 - 33						31					32
Cash and cash equivalents	0 - 3						2					2				0 - 5						4					2
Alternative investments	5 - 10						6					7				15 - 22						15					16
		100		%			100		%			100		%			100		%			100		%			100

Asset performance is monitored frequently with an overall expectation that plan assets will meet or exceed the weighted index of its target asset allocation and component benchmark over rolling five-year periods.

The expected rate of return on assets assumptions reflect the long-term average rate of earnings expected on funds invested or to be invested. The assumptions have been determined based on expectations regarding future rates of return for the portfolio considering the asset allocation and related historical rates of return. The appropriateness of the assumptions is reviewed annually.

The fair value of Schlumberger’s pension plan assets at December 31, 2019 and 2018, by asset category, is presented below and was determined based on valuation techniques categorized as follows:

	•	Level One: The use of quoted prices in active markets for identical instruments.

	•	Level Two: The use of quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active or other inputs that are observable in the market or can be corroborated by observable market data.

	•	Level Three: The use of significant unobservable inputs that typically require the use of management’s estimates of assumptions that market participants would use in pricing.

(Stated in millions)
	US Plan Assets
	2019																2018
					Level				Level				Level								Level				Level				Level
	Total				One				Two				Three				Total				One				Two				Three
Asset Category:
Cash and Cash Equivalents	$	73			$	59			$	14			$	-			$	80			$	44			$	36			$	-
Equity Securities:
US (a)		605				500				105				-				501				416				85				-
International (b)		320				315				5				-				267				263				4				-
Debt Securities
Corporate bonds (c)		1,687				-				1,687				-				1,517				-				1,517				-
Government and government-related debt securities (d)		1,256				74				1,182				-				1,072				66				1,006				-
Collateralized mortgage obligations and mortgage backed securities (e)		21				-				21				-				40				-				40				-
Alternative Investments:
Private equity (f)		181				-				-				181				185				-				-				185
Real estate (g)		93				-				-				93				86				-				-				86
Total	$	4,236			$	948			$	3,014			$	274			$	3,748			$	789			$	2,688			$	271

(Stated in millions)
	International Plan Assets
	2019																2018
					Level				Level				Level								Level				Level				Level
	Total				One				Two				Three				Total				One				Two				Three
Asset Category:
Cash and Cash Equivalents	$	351			$	166			$	185			$	-			$	157			$	75			$	82			$	-
Equity Securities:
US (a)		2,834				2,347				487				-				2,421				2,028				393				-
International (b)		1,871				1,723				148				-				1,526				1,406				120				-
Debt Securities
Corporate bonds (c)		1,105				-				1,105				-				923				-				923				-
Government and government-related debt securities (d)		1,602				5				1,597				-				1,377				5				1,372				-
Collateralized mortgage obligations and mortgage backed securities (e)		161				-				161				-				236				-				236				-
Alternative Investments:
Private equity (f)		623				-				-				623				565				-				-				565
Real estate (g)		183				-				-				183				150				-				-				150
Other		633				-				-				633				517				-				-				517
Total	$	9,363			$	4,241			$	3,683			$	1,439			$	7,872			$	3,514			$	3,126			$	1,232

(a)	US equities include companies that are well-diversified by industry sector and equity style (i.e., growth and value strategies). Active and passive management strategies are employed. Investments are primarily in large capitalization stocks and, to a lesser extent, mid- and small-cap stocks.

(b)	International equities are invested in companies that are traded on exchanges outside the US and are well-diversified by industry sector, country and equity style. Active and passive strategies are employed. The vast majority of the investments are made in companies in developed markets, with a small percentage in emerging markets.

(c)	Corporate bonds consist primarily of investment grade bonds from diversified industries.

(d)	Government and government-related debt securities are comprised primarily of inflation-protected US treasuries and, to a lesser extent, other government-related securities.

(e)	Collateralized mortgage obligations and mortgage backed-securities are debt obligations that represent claims to the cash flows from pools of mortgage loans, which are purchased from banks, mortgage companies, and other originators and then assembled into pools by governmental, quasi-governmental and private entities.

(f)	Private equity includes investments in several funds of funds.

(g)	Real estate primarily includes investments in real estate limited partnerships, concentrated in commercial real estate.

Schlumberger’s funding policy is to annually contribute amounts that are based upon a number of factors including the actuarial accrued liability, amounts that are deductible for income tax purposes, legal funding requirements and available cash flow. Schlumberger expects to contribute approximately $20 million to its postretirement benefit plans in 2020, subject to market and business conditions.

Postretirement Benefits Other Than Pensions

Schlumberger provides certain healthcare benefits to certain former US employees who have retired. Effective April 1, 2015, Schlumberger changed the way it provides healthcare coverage to certain retirees who are age 65 and over. Under the amended plan, these retirees transferred to individual coverage under the Medicare Exchange. Schlumberger subsidizes the cost of the program by providing these retirees with a Health Reimbursement Account. The annual subsidy may be increased based on medical cost inflation, but it will not be increased by more than 5% in any given year.

The actuarial assumptions used to determine the accumulated postretirement benefit obligation and net periodic benefit cost for the US postretirement medical plan were as follows:

	Benefit Obligations								Net Periodic Benefit
	At December 31,								Cost for the Year
	2019				2018				2019				2018				2017
Discount rate		3.30	%			4.30	%			4.30	%			3.70	%			4.20	%
Return on plan assets	-				-					7.00	%			7.00	%			7.00	%
Current medical cost trend rate		7.50	%			7.50	%			7.50	%			7.00	%			7.25	%
Ultimate medical cost trend rate		4.50	%			4.50	%			4.50	%			5.00	%			5.00	%
Year that the rate reaches the ultimate trend rate	2031				2031				2031				2026				2026

The net periodic benefit credit for the US postretirement medical plan included the following components:

(Stated in millions)
	2019				2018				2017
Service cost	$	29			$	32			$	29
Interest cost		45				43				46
Expected return on plan assets		(64	)			(63	)			(60	)
Amortization of prior service credit		(28	)			(28	)			(29	)
	$	(18	)		$	(16	)		$	(14	)

The changes in the accumulated postretirement benefit obligation, plan assets and funded status were as follows:

(Stated in millions)
	2019				2018
Change in Projected Benefit Obligations
Benefit obligation at beginning of year	$	1,106			$	1,213
Service cost		29				32
Interest cost		45				43
Contribution by plan participants		8				8
Actuarial (gains) losses		65				(128	)
Benefits paid		(60	)			(62	)
Benefit obligation at end of year	$	1,193			$	1,106
Change in Plan Assets
Plan assets at fair value at beginning of year	$	997			$	1,094
Actual return on plan assets		240				(44	)
Company contributions		-				1
Contributions by plan participants		8				8
Benefits paid		(60	)			(62	)
Plan assets at fair value at end of year	$	1,185			$	997
Unfunded Liability	$	(8	)		$	(109	)
Amounts Recognized in Accumulated Other Comprehensive Loss
Actuarial (gains) losses	$	(98	)		$	14
Prior service credit		(158	)			(186	)
	$	(256	)		$	(172	)

The unfunded liability is included in Postretirement Benefits in the Consolidated Balance Sheet.

The assets of the US postretirement medical plan are invested 60% in equity securities and 40% in debt securities at December 31, 2019. The fair value of these assets was primarily determined based on Level Two valuation techniques.

Other Information

The expected benefits to be paid under the US and International pension plans as well as the postretirement medical plan are as follows:

(Stated in millions)
	Pension Benefits								Postretirement
	US				International				Medical Plan
2020	$	218			$	333			$	52
2021	$	221			$	343			$	54
2022	$	225			$	353			$	55
2023	$	229			$	365			$	56
2024	$	233			$	366			$	57
2025-2029	$	1,213			$	2,057			$	317

In addition to providing defined pension benefits and a postretirement medical plan, Schlumberger has other deferred benefit programs, primarily profit sharing and defined contribution pension plans. Expenses for these programs were $410 million, $435 million and $413 million in 2019, 2018 and 2017, respectively.

18. Supplementary Information

Cash paid (refunded) for interest and income taxes was as follows:

(Stated in millions)
	2019				2018				2017
Interest	$	558			$	592			$	572
Income tax	$	739			$	628			$	(44	)

Interest and other income includes the following:

(Stated in millions)
	2019				2018				2017
Interest income	$	41			$	60			$	128
Earnings of equity method investments		45				89				96
	$	86			$	149			$	224

The change in Allowance for doubtful accounts is as follows:

(Stated in millions)
	2019				2018				2017
Balance at beginning of year	$	249			$	241			$	397
Additions		5				15				7
Amounts written off		1				(7	)			(163	)
Balance at end of year	$	255			$	249			$	241

Revenue in excess of billings related to contracts where revenue is recognized over time was $0.2 billion at both December 31, 2019 and 2018. Such amounts are included within Receivables less allowance for doubtful accounts in the Consolidated Balance Sheet.

Accounts payable and accrued liabilities consist of the following:

(Stated in millions)
	2019				2018
Trade	$	4,790			$	4,709
Payroll, vacation and employee benefits		1,293				1,244
Billings and cash collections in excess of revenue		910				877
Other		3,670				3,393
	$	10,663			$	10,223

Management’s Report on Internal Control Over Financial Reporting

Schlumberger management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a–15(f) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Schlumberger’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Schlumberger management assessed the effectiveness of its internal control over financial reporting as of December 31, 2019. In making this assessment, it used the criteria set forth in 2013 by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control—Integrated Framework. Based on this assessment Schlumberger’s management has concluded that, as of December 31, 2019, its internal control over financial reporting is effective based on those criteria.

The effectiveness of Schlumberger’s internal control over financial reporting as of December 31, 2019 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears herein.

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders

of Schlumberger Limited

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Schlumberger Limited and its subsidiaries (the “Company”) as of December 31, 2019 and 2018, and the related consolidated statements of income (loss), comprehensive income (loss), stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2019, including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018 and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2019 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Basis for Opinions

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control over Financial Reporting. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements, and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Goodwill Impairment

As described in Note 3 to the consolidated financial statements, the Company recorded charges to goodwill associated with certain reporting units during the third quarter of 2019. The goodwill relating to each of the Company’s reporting units is tested for impairment annually as well as when an event, or change in circumstances, indicates an impairment may have occurred. As a result of these facts, management 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, management performed an interim goodwill impairment test as of August 31, 2019. Management primarily used the income approach to estimate the fair value of its reporting units, but also considered the market approach to validate the results. The 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 estimate future net annual cash flows for each reporting unit and the discount rate.

The principal considerations for our determination that performing procedures related to goodwill impairment is a critical audit matter are there was significant judgment by management in determining the fair value of the reporting units, which in turn led to a high degree of auditor judgment, subjectivity, and effort in performing procedures relating to and evaluating significant assumptions related to cash flows to be derived from each reporting unit, the discount rate and valuation multiples.

Addressing the matter involved performing subjective procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management’s goodwill impairment test. These procedures also included, among others, testing management’s process for developing fair value estimates; evaluating the appropriateness of the discounted cash flow analyses and market approaches; testing the completeness, accuracy, and relevance of underlying data used in the approaches; and evaluating the significant assumptions used by management. Evaluating management’s assumptions related to the cash flows to be derived from each reporting unit involved evaluating the reasonableness of the assumptions used considering the Company’s past and anticipated performance, external market and industry data, and evidence obtained through other areas of the audit. Professionals with specialized skill and knowledge were used to assist in the evaluation of the appropriateness of the Company’s valuation approaches and reasonableness of the discount rate and valuation multiples assumptions.

Uncertain Tax Positions

As described in Note 13 to the consolidated financial statements, the Company’s tax filings are subject to regular audit by tax authorities, and those audits may result in assessments for additional taxes that are resolved with the authorities or, potentially, through the courts. Tax liabilities are recorded based on estimates of additional taxes that will be due upon the conclusion of these audits.

The principal considerations for our determination that performing procedures related to uncertain tax positions is a critical audit matter are there was a high degree of estimation uncertainty related to these liabilities due to the uncertain and complex application of tax regulations and management applied significant judgment in determining these liabilities, which in turn led to a high degree of auditor judgment, subjectivity, and effort in performing procedures to evaluate management’s estimates.

Addressing the matter involved performing subjective procedures and evaluating audit evidence, in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to uncertain tax positions. These procedures also included, among others, evaluating management’s process for developing the estimated liabilities for uncertain tax positions, testing the completeness and reasonableness of uncertain tax positions recorded in the consolidated financial statements, and evaluating material assessments received from the relevant tax authorities. Professionals with specialized skill and knowledge were used to assist in evaluating the reasonableness of assumptions used by management, including the reasonableness of management’s more-likely-than-not determination under relevant tax laws and regulations in applicable jurisdictions.

/s/ PricewaterhouseCoopers LLP
Houston, Texas
January 22, 2020

We have served as the Company’s auditor since 1952.

Quarterly Results

(Unaudited)

The following table summarizes Schlumberger’s results by quarter for the years ended December 31, 2019 and 2018.

(Stated in millions, except per share amounts)
									Net Income (Loss)				Earnings (Loss) per Share of
					Gross				Attributable to				Schlumberger (2)
	Revenue (2)				Margin (1), (2)				Schlumberger (2)				Basic				Diluted
Quarters 2019
First	$	7,879			$	925			$	421			$	0.30			$	0.30
Second		8,269				1,016				492				0.36				0.35
Third (3)		8,541				1,155				(11,383	)			(8.22	)			(8.22	)
Fourth (4)		8,228				1,101				333				0.24				0.24
	$	32,917			$	4,197			$	(10,137	)		$	(7.32	)		$	(7.32	)
Quarters 2018
First	$	7,829			$	1,027			$	525			$	0.38			$	0.38
Second (5)		8,303				1,124				430				0.31				0.31
Third		8,504				1,180				644				0.46				0.46
Fourth (6)		8,180				1,008				538				0.39				0.39
	$	32,815			$	4,337			$	2,138			$	1.54			$	1.53

(1)	Gross margin equals Total Revenue less Cost of Services and Cost of Sales.

(2)	Amounts may not add due to rounding.

(3)	Net income in the third quarter of 2019 includes after-tax and noncontrolling interest charges of $11.979 billion.

(4)	Net income in the fourth quarter of 2019 includes net after-tax and noncontrolling interest charges of $212 million.

(5)	Net income in the second quarter of 2018 includes after-tax and noncontrolling interest charges of $164 million.

(6)	Net income in the fourth quarter of 2018 includes after-tax and noncontrolling interest credits of $40 million.