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,	2020				2019				2018
Revenue
Services	$	16,533			$	24,358			$	24,296
Product sales		7,068				8,559				8,519
Total Revenue		23,601				32,917				32,815
Interest & other income		163				86				149
Gains on sales of businesses		104				247				215
Expenses
Cost of services		14,675				20,828				20,618
Cost of sales		6,325				7,892				7,860
Research & engineering		580				717				702
General & administrative		365				474				444
Impairments & other		12,658				13,148				356
Interest		563				609				575
Income (loss) before taxes		(11,298	)			(10,418	)			2,624
Tax expense (benefit)		(812	)			(311	)			447
Net income (loss)		(10,486	)			(10,107	)			2,177
Net income attributable to noncontrolling interests		32				30				39
Net income (loss) attributable to Schlumberger	$	(10,518	)		$	(10,137	)		$	2,138
Basic earnings (loss) per share of Schlumberger	$	(7.57	)		$	(7.32	)		$	1.54
Diluted earnings (loss) per share of Schlumberger	$	(7.57	)		$	(7.32	)		$	1.53
Average shares outstanding:
Basic		1,390				1,385				1,385
Assuming dilution		1,390				1,385				1,393

See the Notes to Consolidated Financial Statements

SCHLUMBERGER LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS)

(Stated in millions)
Year Ended December 31,	2020				2019				2018
Net income (loss)	$	(10,486	)		$	(10,107	)		$	2,177
Currency translation adjustments
Net change arising during the period		(239	)			67				(191	)
Marketable securities
Unrealized loss arising during the period		-				-				(11	)
Cash flow hedges
Net loss on cash flow hedges		(90	)			(32	)			(16	)
Reclassification to net income (loss) of net realized loss		54				10				1
Pension and other postretirement benefit plans
Actuarial gain (loss) arising during the period		(247	)			127				(186	)
Amortization to net income (loss) of net actuarial loss		200				94				187
Amortization to net income (loss) of net prior service (credit) cost		(17	)			(11	)			(5	)
Impact of curtailment		(69	)			-				-
Income taxes on pension and other postretirement benefit plans		(38	)			(71	)			(18	)
Comprehensive income (loss)		(10,932	)			(9,923	)			1,938
Comprehensive income attributable to noncontrolling interests		32				30				39
Comprehensive income (loss) attributable to Schlumberger	$	(10,964	)		$	(9,953	)		$	1,899

See the Notes to Consolidated Financial Statements

SCHLUMBERGER LIMITED AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

(Stated in millions)
December 31,		2020				2019
ASSETS
Current Assets
Cash		$	844			$	1,137
Short-term investments			2,162				1,030
Receivables less allowance for doubtful accounts (2020 - $301; 2019 - $255)			5,247				7,747
Inventories			3,354				4,130
Other current assets			1,312				1,486
			12,919				15,530
Investments in Affiliated Companies			2,061				1,565
Fixed Assets less accumulated depreciation			6,826				9,270
Multiclient Seismic Data			317				568
Goodwill			12,980				16,042
Intangible Assets			3,455				7,089
Other Assets			3,876				6,248
		$	42,434			$	56,312
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable and accrued liabilities			8,442				10,663
Estimated liability for taxes on income			1,015				1,209
Short-term borrowings and current portion of long-term debt			850				524
Dividends payable			184				702
			10,491				13,098
Long-term Debt			16,036				14,770
Postretirement Benefits			1,049				967
Deferred Taxes			19				491
Other Liabilities			2,350				2,810
			29,945				32,136
Equity
Common stock			12,970				13,078
Treasury stock			(3,033	)			(3,631	)
Retained earnings			7,018				18,751
Accumulated other comprehensive loss			(4,884	)			(4,438	)
Schlumberger stockholders' equity			12,071				23,760
Noncontrolling interests			418				416
			12,489				24,176
		$	42,434			$	56,312

See the Notes to Consolidated Financial Statements

SCHLUMBERGER LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS

(Stated in millions)
Year Ended December 31,	2020				2019				2018
Cash flows from operating activities:
Net income (loss)	$	(10,486	)		$	(10,107	)		$	2,177
Adjustments to reconcile net income (loss) to cash provided by operating activities:
Impairments and other charges and credits		12,515				12,901				141
Depreciation and amortization (1)		2,566				3,589				3,556
Deferred taxes		(1,248	)			(1,011	)			(245	)
Stock-based compensation expense		397				405				345
Pension and other postretirement benefits funding		(16	)			(25	)			(83	)
Earnings of equity method investments, less dividends received		(28	)			6				(48	)
Change in assets and liabilities: (2)
Decrease in receivables		2,345				142				430
Decrease (increase) in inventories		86				(314	)			(10	)
Decrease (increase) in other current assets		267				(68	)			121
(Increase) decrease in other assets		(25	)			22				(58	)
Decrease in accounts payable and accrued liabilities		(3,330	)			(161	)			(824	)
(Decrease) increase in estimated liability for taxes on income		(201	)			6				(103	)
Increase (decrease) in other liabilities		19				(52	)			69
Other		83				98				245
NET CASH PROVIDED BY OPERATING ACTIVITIES		2,944				5,431				5,713
Cash flows from investing activities:
Capital expenditures		(1,116	)			(1,724	)			(2,160	)
APS investments		(303	)			(781	)			(981	)
Multiclient seismic data capitalized		(101	)			(231	)			(100	)
Net proceeds from divestitures		434				348				-
Proceeds from formation of Sensia joint venture		-				238				-
Proceeds from sale of WesternGeco marine seismic business, net of cash divested		-				-				579
Business acquisitions and investments, net of cash acquired		(33	)			(23	)			(292	)
(Purchase) sale of investments, net		(1,141	)			317				1,943
Other		(93	)			(155	)			(29	)
NET CASH USED IN INVESTING ACTIVITIES		(2,353	)			(2,011	)			(1,040	)
Cash flows from financing activities:
Dividends paid		(1,734	)			(2,769	)			(2,770	)
Proceeds from employee stock purchase plan		146				196				227
Proceeds from exercise of stock options		-				23				34
Stock repurchase program		(26	)			(278	)			(400	)
Proceeds from issuance of long-term debt		5,837				4,004				898
Repayment of long-term debt		(4,975	)			(4,799	)			(2,861	)
Net increase (decrease) in short-term borrowings		156				(44	)			(85	)
Repayment of finance lease-related obligations		(188	)			-				-
Other		(89	)			(51	)			(63	)
NET CASH USED IN FINANCING ACTIVITIES		(873	)			(3,718	)			(5,020	)
Net decrease in cash before translation effect		(282	)			(298	)			(347	)
Translation effect on cash		(11	)			2				(19	)
Cash, beginning of period		1,137				1,433				1,799
Cash, end of period	$	844			$	1,137			$	1,433

(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, 2018		$	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
Net loss											(10,518	)							32				(10,486	)
Currency translation adjustments															(239	)			7				(232	)
Changes in fair value of cash flow hedges															(36	)							(36	)
Pension and other postretirement benefit plans															(171	)							(171	)
Vesting of restricted stock			(173	)			173																-
Shares issued under employee stock purchase plan			(298	)			444																146
Stock repurchase program							(26	)															(26	)
Stock-based compensation expense			397																				397
Dividends declared ($0.875 per share)											(1,215	)											(1,215	)
Other			(34	)			7												(37	)			(64	)
Balance, December 31, 2020		$	12,970			$	(3,033	)		$	7,018			$	(4,884	)		$	418			$	12,489

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, 2018			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
Shares sold to optionees, less shares exchanged			-				6				6
Vesting of restricted stock			-				2				2
Stock repurchase program			-				(1	)			(1	)
Balance, December 31, 2020			1,434				(42	)			1,392

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”) form a technology company that partners with customers to access energy. Schlumberger provides leading digital solutions and deploys innovative technologies to enable performance and sustainability for the global energy industry. Schlumberger collaborates to create technology that unlocks access to energy for the benefit of all.

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 were not adjusted and were 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 $2.6 billion at December 31, 2020, of which approximately 60% is expected to be recognized as revenue during 2021.

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. Investments in publicly traded companies in which Schlumberger does not have the ability to exercise significant influence are reported at fair value, with unrealized gains and losses reported as a component of Interest and other income.

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, an individual survey generally will not 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”) projects are focused on developing and co-managing production of customers’ assets under long-term agreements. Schlumberger invests its own services and products, and in certain historical cases, cash into the field development activities and operations. Although in certain arrangements Schlumberger is paid for a portion of the services or products it provides, generally Schlumberger will not be paid at the time of providing its services or upon delivery of its products. Instead, Schlumberger is generally compensated based on cash flow generated or on a fee-per-barrel basis. This includes certain arrangements whereby Schlumberger is only compensated based on incremental production it helps deliver above a mutually agreed baseline.

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 $396 million, $731 million and $568 million in 2020, 2019 and 2018, respectively.

The unamortized portion of Schlumberger’s investments in APS projects was $1.713 billion and $3.724 billion at December 31, 2020 and 2019, 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. Mexico represented approximately 14% of Schlumberger’s net accounts receivable balance at December 31, 2020. No other country accounted for greater than 10% of Schlumberger’s accounts receivable balance. Schlumberger maintains an allowance for uncollectible accounts receivable based on expected collectability and performs ongoing credit evaluations of its customers’ financial condition. If the financial condition of Schlumberger’s customers were to deteriorate resulting in an impairment of their ability to make payments, adjustments to the allowance may be required.

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
2020:
Basic		$	(10,518	)			1,390			$	(7.57	)
Assumed exercise of stock options			-				-
Unvested restricted stock			-				-
Diluted		$	(10,518	)			1,390			$	(7.57	)
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

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)
	2020				2019				2018
Employee stock options		48				46				40
Unvested restricted stock		19				12				-

Reclassifications

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

3. Charges and Credits

2020

Schlumberger recorded the following charges and credits during 2020, all of which, unless otherwise noted, are classified in Impairments & other in the Consolidated Statement of Income (Loss):

	(Stated in millions)
	Pretax				Tax				Net
First quarter:
Goodwill	$	3,070			$	-			$	3,070
Intangible assets impairments		3,321				815				2,506
Asset Performance Solutions investments		1,264				(4	)			1,268
North America pressure pumping impairment		587				133				454
Workforce reductions		202				7				195
Other		79				9				70
Valuation allowance		-				(164	)			164
Second quarter:
Workforce reductions		1,021				71				950
Asset Performance Solutions investments		730				15				715
Fixed asset impairments		666				52				614
Inventory write-downs		603				49				554
Right-of-use asset impairments		311				67				244
Costs associated with exiting certain activities		205				(25	)			230
Multiclient seismic data impairment		156				2				154
Repurchase of bonds		40				2				38
Postretirement benefits curtailment gain		(69	)			(16	)			(53	)
Other		60				4				56
Third quarter:
Facility exit charges		254				39				215
Workforce reductions		63				-				63
Other		33				1				32
Fourth quarter:
Gain on sale of OneStim		(104	)			(11	)			(93	)
Unrealized gain on marketable securities		(39	)			(9	)			(30	)
Other		62				4				58
	$	12,515			$	1,041			$	11,474

First quarter 2020:

	•	Geopolitical events that increased the supply of low-priced oil to the global market occurred at the same time that demand weakened due to the worldwide effects of the COVID-19 pandemic, leading to a collapse in oil prices during March 2020. As a result, Schlumberger’s market capitalization deteriorated significantly compared to the end of 2019. Schlumberger’s stock price reached a low during the first quarter of 2020 not seen since 1995. Additionally, the Philadelphia Oil Services Sector index, which is comprised of companies involved in the oil services sector, reached an all-time low. As a result of these facts, Schlumberger determined that it was more likely than not that the fair value of certain of its reporting units was less than their carrying value. Therefore, Schlumberger performed an interim goodwill impairment test.

Schlumberger had 11 reporting units with goodwill balances aggregating $16.0 billion. Schlumberger determined that the fair value of four of its reporting units, representing $4.5 billion of goodwill, was substantially in excess of their carrying value. Schlumberger performed a detailed quantitative impairment assessment of the remaining seven reporting units, which represented $11.5 billion of goodwill. As a result of this assessment, Schlumberger concluded that the goodwill associated with each of these seven reporting units was impaired, resulting in a $3.1 billion goodwill impairment charge.

Following the $3.1 billion goodwill impairment charge relating to these seven reporting units, six of these reporting units had a remaining goodwill balance. These goodwill balances ranged between $0.2 billion and $5.0 billion and aggregated to $8.4 billion as of March 31, 2020.

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

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

The discount rates utilized to value Schlumberger’s reporting units were between 12.0% and 13.5%, depending on the risks and uncertainty inherent in the respective reporting unit as well as the size of the 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 or decrease in the discount rate assumptions would have changed the fair value of the seven reporting units, on average, by less than 5%.

	•	The negative market indicators described above were triggering events that indicated that certain of Schlumberger’s long-lived intangible and tangible assets may have been impaired. Recoverability testing indicated that certain long-lived assets were impaired. The estimated fair value of these assets was determined to be below their carrying value. As a result, Schlumberger recorded the following impairment charges:

	-	$3.3 billion relating to intangible assets, of which $2.2 billion relates to Schlumberger’s 2016 acquisition of Cameron International Corporation and $1.1 billion relates to Schlumberger’s 2010 acquisition of Smith International, Inc. Following this impairment charge, the carrying value of the impaired intangible assets was approximately $0.9 billion.

	-	$1.3 billion relating to the carrying value of certain APS projects in North America.

	-	$0.6 billion of fixed assets associated with the pressure pumping business in North America.

	•	$202 million of severance.

	•	$79 million of other restructuring charges, primarily consisting of the impairment of an equity method investment that was determined to be other-than-temporarily impaired.

	•	$164 million relating to a valuation allowance against certain deferred tax assets.

Second quarter 2020:

	•	As previously noted, late in the first quarter of 2020 geopolitical events that increased the supply of low-priced oil to the global market occurred at the same time as demand weakened due to the worldwide effects of the COVID-19 pandemic, which led to a collapse in oil prices. As a result, the second quarter of 2020 was the most challenging quarter in decades. Schlumberger responded to these market conditions by taking actions to restructure its business and rationalize its asset base during the second quarter of 2020. These actions included reducing headcount, closing facilities and exiting business lines in certain countries. Additionally, due to the resulting activity decline, Schlumberger had assets that would no longer be utilized. As a consequence of these circumstances and decisions, Schlumberger recorded the following restructuring and asset impairment charges:

	-	$1.021 billion of severance associated with reducing its workforce by more than 21,000 employees.

	-	$730 million relating to the carrying value of certain APS projects in Latin America.

	-	$666 million of fixed asset impairments primarily relating to equipment that would no longer be utilized and facilities it exited.

	-	$603 million write-down of the carrying value of inventory to its net realizable value.

	-	$311 million write-down of right-of-use assets under operating leases associated with leased facilities Schlumberger exited and excess equipment.

	-	$205 million of costs associated with exiting certain activities.

	-	$156 million impairment of certain multiclient seismic data.

	-	$60 million of other costs, including a $42 million increase in the allowance for the doubtful accounts.

	•	During the second quarter of 2020, Schlumberger repurchased certain Senior Notes (see Note 9 – Long-term Debt), which resulted in a $40 million charge.

	•	As a consequence of the workforce reductions described above, Schlumberger recorded a curtailment gain of $69 million relating to its US postretirement medical plan. See Note 17 – Pension and Other Postretirement Benefit Plans for further details.

The fair value of the impaired intangible assets, fixed assets, APS investments, right-of-use assets and multiclient seismic data was estimated based on the present value of projected future cash flows that the underlying assets are expected to generate. Such estimates included unobservable inputs that required significant judgement.

Third quarter 2020:

	•	During the third quarter of 2020, Schlumberger recorded the following restructuring charges:

	-	$254 million of facility exit charges as Schlumberger continued to rationalize its real estate footprint relating to both leased and owned facilities.

	-	$63 million of severance.

	-	$33 million of other charges.

Fourth quarter 2020:

	•	On December 31, 2020, Schlumberger contributed its onshore hydraulic fracturing business in the United States and Canada (“OneStim”), including its pressure pumping, pumpdown perforating and Permian frac sand business to Liberty Oilfield Services Inc. (“Liberty”) in exchange for a 37% equity interest in Liberty. As a result of this transaction, Schlumberger recognized a gain of $104 million during the fourth quarter of 2020. This gain is classified in Gains on sales of businesses in the Consolidated Statement of Income (Loss).

Schlumberger will account for its investment in Liberty under the equity method of accounting and will record its share of Liberty’s net income on a one-quarter lag. Based on the quoted market price of Liberty’s shares as of December 31, 2020, the value of Schlumberger’s investment is approximately $0.7 billion.

	•	During the fourth quarter of 2020, a start-up company that Schlumberger previously invested in completed an initial public offering. As a result, Schlumberger recognized an unrealized gain of $39 million to increase the carrying value of this investment to its fair value of approximately $43 million. This unrealized gain is reflected in Interest and other income in the Consolidated Statement of Income (Loss).

	•	During the fourth quarter of 2020, Schlumberger entered into an agreement to purchase new software licenses. This transaction rendered certain previously purchased licenses obsolete. As a result, Schlumberger wrote off the remaining $62 million of net book value associated with the obsolete software licenses.

As market conditions evolve and Schlumberger continues to develop its strategy to deal with such conditions, it may result in further restructuring and/or impairment charges in future periods.

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
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 investments		294				-				294
Other		242				13				229
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	)
	$	12,901			$	710			$	12,191

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 was 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.

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.

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, 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 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 the fourth quarter of 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.

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 which resulted in Schlumberger recording a pension settlement charge of $37 million in the fourth quarter of 2019. See Note 17 – Pension and Other Postretirement Benefit Plans for further details.

	•	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 Gains on sale of businesses in the Consolidated Statement of Income (Loss).

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).

4. Inventories

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

(Stated in millions)
	2020				2019
Raw materials & field materials	$	1,573			$	1,857
Work in progress		464				515
Finished goods		1,317				1,758
	$	3,354			$	4,130

5. Fixed Assets

Fixed assets consist of the following:

(Stated in millions)
	2020				2019
Land	$	362			$	483
Buildings & improvements		3,757				5,156
Machinery & equipment		25,625				29,370
		29,744				35,009
Less: Accumulated depreciation		22,918				25,739
	$	6,826			$	9,270

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 $1.6 billion, $2.0 billion and $2.1 billion in 2020, 2019 and 2018, respectively.

6. Multiclient Seismic Data

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

(Stated in millions)
	2020				2019
Balance at beginning of year	$	568			$	601
Capitalized in period		101				231
Charged to expense		(174	)			(264	)
Impairment charge (see Note 3)		(156	)			-
Other		(22	)			-
	$	317			$	568

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, 2019	$	4,703			$	10,111			$	4,678			$	5,439			$	24,931
Impairment (see Note 3)		(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
Impairment (see Note 3)		-				(1,659	)			(1,228	)			(183	)			(3,070	)
Impact of changes in exchange rates and other		-				10				(17	)			3				(4	)
Balance, September 30, 2020	$	4,560			$	5,443			$	2,704			$	261			$	12,968

In connection with the change in reportable segments discussed in Note 16 – Segment Information, Schlumberger reallocated goodwill that existed as of September 30, 2020 to the new reporting units on a relative fair value basis as follows:

	(Stated in millions)
	Digital &				Reservoir				Well				Production
	Integration				Performance				Construction				Systems				Total
Balance, October 1, 2020	$	2,041			$	3,806			$	6,267			$	854			$	12,968
Impact of changes in exchange rates and other		6				(4	)			11				(1	)			12
Balance, December 31, 2020	$	2,047			$	3,802			$	6,278			$	853			$	12,980

8. Intangible Assets

Intangible assets consist of the following:

	(Stated in millions)
	2020												2019
	Gross				Accumulated				Net Book				Gross				Accumulated				Net Book
	Book Value				Amortization				Value				Book Value				Amortization				Value
Customer Relationships	$	1,744			$	485			$	1,259			$	3,779			$	868			$	2,911
Technology/Technical Know-How		1,284				488				796				2,498				779				1,719
Tradenames		767				166				601				1,885				264				1,621
Other		1,488				689				799				1,514				676				838
	$	5,283			$	1,828			$	3,455			$	9,676			$	2,587			$	7,089

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 $371 million in 2020, $618 million in 2019 and $673 million in 2018.

Based on the carrying value of intangible assets at December 31, 2020, amortization expense for the subsequent five years is estimated to be as follows: 2021: $307 million, 2022: $304 million, 2023: $293 million, 2024: $269 million and 2025: $259 million.

9. Long-term Debt and Debt Facility Agreements

Long-term Debt consists of the following:

(Stated in millions)
	2020				2019
3.65% Senior Notes due 2023	$	1,496			$	1,495
3.90% Senior Notes due 2028		1,450				1,444
2.65% Senior Notes due 2030		1,250				-
1.375% Guaranteed Notes due 2026		1,221				-
2.00% Guaranteed Notes due 2032		1,214				-
0.25% Notes due 2027		1,100				550
0.50% Notes due 2031		1,099				544
2.40% Senior Notes due 2022		999				998
4.00% Senior Notes due 2025		930				929
4.30% Senior Notes due 2029		846				845
3.75% Senior Notes due 2024		746				746
1.00% Guaranteed Notes due 2026		736				665
0.00% Notes due 2024		611				551
2.65% Senior Notes due 2022		598				598
1.40% Senior Notes due 2025		498				-
3.63% Senior Notes due 2022		295				294
7.00% Notes due 2038		206				208
5.95% Notes due 2041		114				114
5.13% Notes due 2043		99				99
4.00% Notes due 2023		80				81
3.70% Notes due 2024		55				55
3.30% Senior Notes due 2021		-				1,597
4.20% Senior Notes due 2021		-				600
Commercial paper borrowings		393				2,222
Other		-				135
	$	16,036			$	14,770

During the third quarter of 2020, Schlumberger issued $500 million of 1.40% Senior Notes due 2025 and $350 million of 2.65% Senior Notes due 2030.

During the second quarter of 2020, Schlumberger issued €1.0 billion of 1.375% Guaranteed Notes due 2026, $900 million of 2.65% Senior Notes due 2030 and €1.0 billion of 2.00% Guaranteed Notes due 2032.

During the second quarter of 2020, Schlumberger repurchased all $600 million of its 4.20% Senior Notes due 2021 and $935 million of its 3.30% Senior Notes due 2021. Schlumberger paid a premium of approximately $40 million in connection with these repurchases. This premium was classified in Impairments & other in the Consolidated Statement of Income (Loss). (See Note 3 – Charges and Credits.)

During the second quarter of 2020, Schlumberger established a €5.0 billion Guaranteed Euro Medium Term Note program that provides for the issuance of various types of debt instruments such as fixed or floating rate notes in euro, US dollar or other currencies. At December 31, 2020, Schlumberger had not issued any debt under this program.

During the first quarter of 2020, Schlumberger issued €400 million of 0.25% Notes due 2027 and €400 million of 0.50% Notes due 2031.

During the 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.

At December 31, 2020, Schlumberger had committed credit facility agreements with commercial banks aggregating $6.25 billion, of which $5.86 billion was available and unused. These committed facilities support commercial paper programs in the United States and Europe, of which $2.75 billion matures in February 2023, $2.0 billion matures in February 2025 and $1.5 billion matures in July 2025. Schlumberger also has a €1.54 billion committed revolving credit facility that expires in the second quarter of 2021 but can be extended at Schlumberger’s option for up to an additional year. At December 31, 2020, no amounts had been drawn under this facility. Interest rates and other terms of borrowing under these lines of credit vary by facility.

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, 2020 were $0.4 billion, all of which was classified in Long-term debt in the Consolidated Balance Sheet. At December 31, 2019, borrowings under the commercial paper programs were $2.2 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, 2020 was 1.0%.

Long-term Debt as of December 31, 2020 is due as follows: $1.9 billion in 2022, $1.9 billion in 2023, $1.4 billion in 2024, $1.5 billion in 2025, $2.0 billion in 2026, $1.1 billion in 2027 and $6.3 billion thereafter.

The fair value of Schlumberger’s Long-term Debt at December 31, 2020 and December 31, 2019 was $17.3 billion and $15.3 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 and Schlumberger Finance Canada Ltd., both wholly-owned subsidiaries of Schlumberger Limited.

10. Derivative Instruments and Hedging Activities

As a multinational company, Schlumberger conducts its business in over 120 countries. Schlumberger’s functional currency is primarily the US dollar. Approximately 73% of Schlumberger’s revenues in 2020 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. Included in Other Assets was $427 million at December 31, 2020 ($41 million at December 31, 2019) and included in Other Liabilities was $13 million at December 31, 2020 ($38 million at December 31, 2019) relating to the fair value of outstanding cross-currency swap derivatives. The fair value was determined using a model with inputs that are observable in the market or can be derived or collaborated by observable data.

During 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 0.50% Notes due 2031. These cross-currency swaps effectively convert the Euro-denominated notes to US-dollar denominated debt with fixed annual interest rates of 2.29%, 2.51% and 2.76%, respectively.

During the first quarter of 2020, a US-dollar functional currency subsidiary of Schlumberger issued €0.8 billion of Euro-denominated debt. Schlumberger entered into cross-currency swaps for an aggregate notional amount of €0.8 billion in order to hedge changes in the fair value of its €0.4 billion of 0.25% Notes due 2027 and €0.4 billion of 0.50% Notes due 2031. These cross-currency swaps effectively convert the Euro-denominated notes to US-dollar denominated debt with fixed annual interest rates of 1.87% and 2.20%, respectively.

During the second quarter of 2020, a US-dollar functional currency subsidiary of Schlumberger issued €2.0 billion of Euro-denominated debt. Schlumberger entered into cross-currency swaps for an aggregate notional amount of €2.0 billion in order to hedge changes in the fair value of its €1.0 billion of 1.375% Guaranteed Notes due 2026 and €1.0 billion of 2.00% Guaranteed Notes due 2032. These cross-currency swaps effectively convert the swapped portion of the Euro-denominated notes to US-dollar denominated debt with fixed annual interest rates of 2.77% and 3.49%, respectively.

During the third quarter of 2020, a Canadian dollar functional currency subsidiary of Schlumberger issued $0.5 billion of US dollar denominated debt. Schlumberger entered into cross-currency swaps for an aggregate notional amount of $0.5 billion in order to hedge changes in the fair value of its $0.5 billion 1.40% Senior Notes due 2025. These cross-currency swaps effectively convert the US dollar notes to Canadian dollar denominated debt with a fixed annual interest rate of 1.73%.

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 losses of $21 million in 2020 and transaction gains of $2 million in 2019 and $1 million in 2018 were recognized in the Consolidated Statement of Income (Loss) net of related hedging activities.

At December 31, 2020, contracts were outstanding for the US dollar equivalent of $8.6 billion in various foreign currencies, of which $6.4 billion relates to hedges of debt denominated in currencies other than the functional currency.

Other than the previously mentioned cross-currency swaps, the fair value of the other outstanding derivatives was not material at December 31, 2020 and 2019.

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
	2020				2019				2018				of Income (Loss) Classification
Derivatives designated as cash flow hedges:
Cross currency swap	$	493			$	(35	)		$	55			Cost of services/sales
Foreign exchange contracts		(5	)			(10	)			(1	)		Cost of services/sales
	$	488			$	(45	)		$	54
Derivatives not designated as hedges:
Foreign exchange contracts	$	(29	)		$	(5	)		$	40			Cost of services/sales

Schlumberger does not enter into derivative transactions for speculative purposes.

11. Stockholders’ Equity

Schlumberger is authorized to issue 4,500,000,000 shares of common stock, par value $0.01 per share, of which 1,392,325,960 and 1,384,515,345 shares were outstanding on December 31, 2020 and 2019, 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, 2018	$	(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 loss before reclassifications		(239	)			-				(90	)			(247	)			(576	)
Amounts reclassified from accumulated other comprehensive loss		-				-				54				114				168
Income taxes		-				-				-				(38	)			(38	)
Balance, December 31, 2020	$	(2,502	)		$	2			$	(70	)		$	(2,314	)		$	(4,884	)

Other comprehensive loss was $447 million in 2020 and $239 million in 2018. Other comprehensive income was $184 million in 2019.

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 may be granted stock options under Schlumberger stock option plans. 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:

	2020				2019				2018
Dividend yield		5.2	%			4.8	%			2.6	%
Expected volatility		26	%			25	%			26	%
Risk-free interest rate		1.7	%			2.7	%			2.6	%
Expected option life in years		7.0				7.0				7.0
Weighted-average fair value per share	$	5.07			$	6.21			$	17.37

The following table summarizes information related to options outstanding and options exercisable as of December 31, 2020:

	(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
$38.75 - $69.98		15,562				7.7			$	44.48				3,846			$	56.69
$70.31 - $76.74		9,462				2.1			$	72.10				9,399			$	72.06
$77.10 - $83.15		7,303				5.4			$	79.29				5,425			$	79.52
$83.89 - $88.77		8,549				3.0			$	85.96				7,097			$	85.66
$90.00 - $114.83		7,396				3.4			$	95.79				7,396			$	95.79
		48,272				4.8			$	70.37				33,163			$	79.70

The weighted-average remaining contractual life of stock options exercisable as of December 31, 2020 was 3.3 years.

The following table summarizes stock option activity during the years ended December 31, 2020, 2019 and 2018:

	(Shares stated in thousands)
	2020								2019								2018
					Weighted-								Weighted-								Weighted-
					Average								Average								Average
					Exercise								Exercise								Exercise
	Shares				Price				Shares				Price				Shares				Price
Outstanding at beginning of year		46,269			$	75.65				43,529			$	79.36				47,210			$	79.13
Granted		7,468			$	38.75				5,604			$	41.50				2,121			$	76.95
Exercised		-			$	-				(1,045	)		$	38.50				(936	)		$	54.20
Forfeited		(5,465	)		$	71.86				(1,819	)		$	74.69				(4,866	)		$	84.19
Outstanding at year-end		48,272			$	70.37				46,269			$	75.65				43,529			$	79.36

Stock options outstanding and stock options exercisable as of December 31, 2020 had no intrinsic value.

The total intrinsic value of options exercised during the years ended December 31, 2019 and 2018 was $4 million and $15 million, respectively. There were no stock options exercised during the year ended December 31, 2020.

Restricted Stock

Schlumberger grants performance share units to its executive 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, 2020, 3.8 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 or vest ratably in equal tranches over a three-year period.

Restricted stock awards 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)
	2020								2019								2018
					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		11,822			$	49.86				6,951			$	70.13				5,428			$	72.33
Granted		10,637			$	26.53				7,888			$	35.56				3,204			$	70.54
Vested		(3,059	)		$	71.56				(2,722	)		$	72.09				(982	)		$	77.62
Forfeited		(637	)		$	45.95				(295	)		$	57.41				(699	)		$	70.67
Unvested at year-end		18,763			$	35.24				11,822			$	49.86				6,951			$	70.13

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:

	2020				2019				2018
Dividend yield		4.0	%			5.3	%			2.9	%
Expected volatility		43	%			30	%			22	%
Risk-free interest rate		0.88	%			2.3	%			1.6	%
Weighted-average fair value per share	$	5.38			$	5.81			$	9.01

Total Stock-based Compensation Expense

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

(Stated in millions)
	2020				2019				2018
Stock options	$	75			$	99			$	134
Restricted stock		293				274				179
DSPP		29				32				32
	$	397			$	405			$	345

At December 31, 2020, there was $335 million of total unrecognized compensation cost related to nonvested stock-based compensation arrangements, of which $198 million is expected to be recognized in 2021, $102 million in 2022, $26 million in 2023, and $9 million in 2024.

As of December 31, 2020, approximately 16 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)
	2020				2019				2018
United States	$	(4,394	)		$	(8,991	)		$	(55	)
Outside United States		(6,904	)			(1,427	)			2,679
	$	(11,298	)		$	(10,418	)		$	2,624

Schlumberger recorded net pretax charges of $12.515 billion in 2020 ($3.961 billion in the US and $8.554 billion outside the US); $12.901 billion in 2019 ($8.769 billion in the US and $4.132 billion outside the US); and $141 million in 2018 ($102 million in the US and $39 million 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)
	2020				2019
Intangible assets	$	(881	)		$	(1,790	)
Net operating losses		421				144
Fixed assets, net		151				434
Inventories		59				155
Investments in non-US subsidiaries		(171	)			(220	)
Foreign tax credits		-				312
Other, net		402				474
	$	(19	)		$	(491	)

The deferred tax balances at December 31, 2020 and 2019 were net of valuation allowances relating to net operating losses in certain countries of $127 million and $82 million, respectively. Additionally, the deferred tax balances at December 31, 2020 were net of valuation allowances relating to foreign tax credits and capital losses of $106 million and $54 million, respectively.

Approximately $353 million of the $421 million deferred tax asset relating to net operating losses at December 31, 2020 can be carried forward indefinitely. The vast majority of the remaining balance expires at various dates between 2030 and 2040.

Schlumberger generally does not provide for taxes related to the undistributed earnings of its subsidiaries because such earnings either would not be taxable when remitted or they are considered to be indefinitely reinvested.

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

(Stated in millions)
	2020				2019				2018
Current:
United States-Federal	$	21			$	(81	)		$	124
United States-State		5				11				(50	)
Outside United States		410				770				618
		436				700				692
Deferred:
United States-Federal	$	(824	)		$	(660	)		$	(143	)
United States-State		(67	)			(93	)			(4	)
Outside United States		(563	)			(257	)			(69	)
Valuation allowance		206				(1	)			(29	)
		(1,248	)			(1,011	)			(245	)
	$	(812	)		$	(311	)		$	447

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

	2020				2019				2018
US federal statutory rate		21	%			21	%			21	%
State tax		-				-				(2	)
Non-US income taxed at different rates		-				-				(2	)
Charges and credits (See Note 3)		(14	)			(19	)			-
Other		-				1				-
		7	%			3	%			17	%

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, 2020, 2019 and 2018 is as follows:

(Stated in millions)
	2020				2019				2018
Balance at beginning of year	$	1,301			$	1,433			$	1,393
Additions based on tax positions related to the current year		76				86				88
Additions for tax positions of prior years		78				65				145
Impact of changes in exchange rates		(3	)			2				(41	)
Settlements with tax authorities		(15	)			(50	)			(22	)
Reductions for tax positions of prior years		(87	)			(176	)			(57	)
Reductions due to the lapse of the applicable statute of limitations		(79	)			(59	)			(73	)
	$	1,271			$	1,301			$	1,433

The amounts above exclude accrued interest and penalties of $184 million, $188 million and $205 million at December 31, 2020, 2019 and 2018, 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	2013 - 2020
Ecuador	2016 - 2020
Mexico	2012 - 2020
Norway	2015 - 2020
Russia	2016 - 2020
Saudi Arabia	2015 - 2020
United Kingdom	2017 - 2020
United States	2017 - 2020

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

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 $1.4 billion in 2020 and $1.7 billion in each of 2019 and 2018.

Maturities of operating lease liabilities as of December 31, 2020 were as follows:

(Stated in millions)
2021	$	256
2022		200
2023		160
2024		128
2025		92
Thereafter		318
Total lease payments	$	1,154
Less: Interest		(143	)
	$	1,011
Amounts recognized in balance sheet
Accounts payable and accrued liabilities	$	248
Other Liabilities		763
	$	1,011

Operating lease assets of $0.8 billion and $1.3 billion as of December 31, 2020 and 2019, respectively, were included in Other Assets in the Consolidated Balance Sheet. Operating lease liabilities as of December 31, 2019 were $1.0 billion, of which $0.2 billion was classified in Accounts payable and accrued liabilities and $0.8 billion was classified in Other Liabilities in the Consolidated Balance Sheet.

The weighted-average remaining lease term as of December 31, 2020 was 8 years. The weighted-average discount rate used to determine the operating lease liability as of December 31, 2020 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

During 2020, Schlumberger restructured its organization in order to prepare for a changing industry future. This new structure is aligned with customer workflows and is directly linked to Schlumberger’s corporate strategy, a key element of which is customer collaboration.

The new organization consists of four Divisions that combine and integrate Schlumberger’s technologies, enhancing the portfolio of capabilities that support the emerging long-term growth opportunities in each of these market segments.

The four Divisions, representing Schlumberger’s segments, are:

	•	Digital & Integration – Combines Schlumberger’s software and seismic businesses with its integrated offering of Asset Performance Solutions.

	•	Reservoir Performance – Consists of reservoir-centric technologies and services that are critical to optimizing reservoir productivity and performance.

	•	Well Construction – Combines the full portfolio of products and services to optimize well placement and performance, maximize drilling efficiency, and improve wellbore assurance.

	•	Production Systems – Develops technologies and provides expertise that enhance production and recovery from subsurface reservoirs to the surface, into pipelines, and to refineries.

Financial information for the years ended December 31, 2020, 2019 and 2018, by segment, is as follows:

					(Stated in millions)
	2020
													Depreciation
					Income (Loss)								and				Capital
	Revenue				Before Taxes				Assets				Amortization				Investments
Digital & Integration	$	3,076			$	731			$	3,595			$	615			$	413
Reservoir Performance		5,602				353				3,489				549				384
Well Construction		8,605				866				4,768				580				420
Production Systems		6,650				623				4,665				338				240
Eliminations & other		(332	)			(172	)			940				276				63
						2,401
Goodwill and intangible assets										16,436
Cash and short-term investments										3,006
All other assets										5,535
Corporate & other (1)						(681	)							208
Interest income (2)						31
Interest expense (3)						(534	)
Charges & credits (4)						(12,515	)
	$	23,601			$	(11,298	)		$	42,434			$	2,566			$	1,520

					(Stated in millions)
	2019
													Depreciation
					Income (Loss)								and				Capital
	Revenue				Before Taxes				Assets				Amortization				Investments
Digital & Integration	$	4,145			$	882			$	6,388			$	1,069			$	1,020
Reservoir Performance		9,299				992				5,198				807				569
Well Construction		11,880				1,429				6,913				656				650
Production Systems		8,167				847				5,625				390				384
Eliminations & other		(574	)			(172	)			1,314				250				113
						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			$	2,736

					(Stated in millions)
	2018
													Depreciation
					Income								and				Capital
	Revenue				Before Taxes				Assets				Amortization				Investments
Digital & Integration	$	3,820			$	882			$	6,784			$	894			$	1,091
Reservoir Performance		10,050				1,169				7,396				850				899
Well Construction		11,310				1,465				7,112				713				769
Production Systems		8,168				843				5,632				423				343
Eliminations & other		(533	)			(172	)			1,448				237				139
						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			$	3,241

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

(2)	Interest income excludes amounts which are included in the segments’ income (2020: $2 million; 2019: $8 million; 2018: $8 million).

(3)	Interest expense excludes amounts which are included in the segments’ income (2020: $28 million; 2019: $38 million; 2018: $38 million).

(4)	See Note 3 – Charges and Credits.

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

Capital investments includes capital expenditures, APS investments and multiclient seismic data cost capitalized.

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, 2020, 2019 and 2018 is as follows:

(Stated in millions)
	2020				2019				2018
North America	$	5,478			$	10,446			$	11,730
Latin America		3,472				4,544				4,013
Europe/CIS/Africa		5,963				7,682				7,113
Middle East & Asia		8,567				10,016				9,582
Eliminations & other		121				229				377
	$	23,601			$	32,917			$	32,815

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

During each of the three years ended December 31, 2020, 2019 and 2018, 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 2020, 2019 and 2018 was $4.5 billion, $9.3 billion and $10.1 billion, respectively.

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

(Stated in millions)
	2020
	North America				International				Eliminations & other				Total
Digital & Integration	$	573			$	2,496			$	7			$	3,076
Reservoir Performance		1,547				4,043				12				5,602
Well Construction		1,453				6,956				196				8,605
Production Systems		1,921				4,702				27				6,650
Eliminations & other		(16	)			(195	)			(121	)			(332	)
	$	5,478			$	18,002			$	121			$	23,601

(Stated in millions)
	2019
	North America				International				Eliminations & other				Total
Digital & Integration	$	865			$	3,272			$	8			$	4,145
Reservoir Performance		3,779				5,509				11				9,299
Well Construction		2,814				8,809				257				11,880
Production Systems		3,053				5,059				55				8,167
Eliminations & other		(65	)			(407	)			(102	)			(574	)
	$	10,446			$	22,242			$	229			$	32,917

(Stated in millions)
	2018
	North America				International				Eliminations & other				Total
Digital & Integration	$	786			$	2,894			$	140			$	3,820
Reservoir Performance		4,975				5,066				9				10,050
Well Construction		2,911				8,083				316				11,310
Production Systems		3,139				4,966				63				8,168
Eliminations & other		(81	)			(301	)			(151	)			(533	)
	$	11,730			$	20,708			$	377			$	32,815

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

(Stated in millions)
	2020				2019
North America	$	1,588			$	3,326
Latin America		841				912
Europe/CIS/Africa		1,840				2,309
Middle East & Asia		2,353				2,502
Unallocated		204				221
	$	6,826			$	9,270

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
	2020				2019				2018				2020				2019				2018
Discount rate		3.30	%			4.30	%			3.70	%			3.27	%			4.00	%			3.55	%
Compensation increases		4.00	%			4.00	%			4.00	%			4.82	%			4.83	%			4.81	%
Return on plan assets		6.60	%			6.60	%			7.25	%			6.71	%			7.22	%			7.40	%

Net pension cost (credit) for 2020, 2019 and 2018 included the following components:

(Stated in millions)
	US												International
	2020				2019				2018				2020				2019				2018
Service cost - benefits earned during the period	$	55			$	49			$	59			$	140			$	112			$	138
Interest cost on projected benefit obligation		148				180				167				301				333				304
Expected return on plan assets		(233	)			(232	)			(248	)			(591	)			(592	)			(584	)
Amortization of prior service cost		8				10				13				-				7				10
Amortization of net loss		41				29				47				159				70				140
Settlement charge		-				37				-				-				-				-
	$	19			$	73			$	38			$	9			$	(70	)		$	8

Certain of Schlumberger’s deferred 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 resulted in a non-cash pension settlement charge of $37 million, representing the immediate recognition of the related deferred actuarial losses in Accumulated Other Comprehensive Loss, in the fourth quarter of 2019. See Note 3 – Charges and Credits.

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
	2020				2019				2020				2019
Discount rate		2.60	%			3.30	%			2.38	%			3.27	%
Compensation increases		4.00	%			4.00	%			4.82	%			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
	2020				2019				2020				2019
Change in Projected Benefit Obligations
Projected benefit obligation at beginning of year	$	4,593			$	4,278			$	9,647			$	8,111
Service cost		55				49				140				112
Interest cost		148				180				301				333
Contribution by plan participants		-				-				94				63
Actuarial losses		370				535				1,233				1,304
Currency effect		-				-				68				50
Settlement		-				(240	)			(5	)			(17	)
Benefits paid		(226	)			(209	)			(338	)			(309	)
Projected benefit obligation at end of year	$	4,940			$	4,593			$	11,140			$	9,647
Change in Plan Assets
Plan assets at fair value at beginning of year	$	4,236			$	3,748			$	9,363			$	7,872
Actual return on plan assets		760				931				1,282				1,676
Currency effect		-				-				72				59
Company contributions		6				6				20				19
Contributions by plan participants		-				-				94				63
Settlement		-				(240	)			-				(17	)
Benefits paid		(226	)			(209	)			(338	)			(309	)
Plan assets at fair value at end of year	$	4,776			$	4,236			$	10,493			$	9,363
Unfunded Liability	$	(164	)		$	(357	)		$	(647	)		$	(284	)
Amounts Recognized in Balance Sheet
Postretirement Benefits	$	(199	)		$	(357	)		$	(849	)		$	(602	)
Other Assets		35				-				202				318
	$	(164	)		$	(357	)		$	(647	)		$	(284	)
Amounts Recognized in Accumulated Other Comprehensive Loss
Actuarial losses	$	423			$	622			$	1,981			$	1,638
Prior service cost		1				9				-				-
	$	424			$	631			$	1,981			$	1,638
Accumulated benefit obligation	$	4,739			$	4,345			$	10,844			$	9,376

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 2020 and 2019 were primarily attributable to decreases in the discount rate used to determine the PBO. As of December 31, 2020, the PBO and fair value of plan assets for plans with PBOs in excess of plan assets were $9.4 billion and $8.3 billion, respectively. The related ABO for these plans was $9.1 billion at December 31, 2020.

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

	US															International
	Target					2020					2019					Target					2020					2019
Equity securities	11 - 20			%			15		%			22		%		40 - 54			%			43		%			50
Debt securities	70 - 83						76					70				28 - 43						36					31
Cash and cash equivalents	0 - 3						3					2				0 - 5						4					4
Alternative investments	5 - 10						6					6				15 - 22						17					15
		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, 2020 and 2019, 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
	2020																2019
					Level				Level				Level								Level				Level				Level
	Total				One				Two				Three				Total				One				Two				Three
Asset Category:
Cash and Cash Equivalents	$	140			$	127			$	13			$	-			$	73			$	59			$	14			$	-
Equity Securities:
US (a)		527				441				86				-				605				500				105				-
International (b)		186				182				4				-				320				315				5				-
Debt Securities
Corporate bonds (c)		1,945				-				1,945				-				1,687				-				1,687				-
Government and government-related debt securities (d)		1,658				180				1,478				-				1,256				74				1,182				-
Collateralized mortgage obligations and mortgage backed securities (e)		21				-				21				-				21				-				21				-
Alternative Investments:
Private equity (f)		204				-				-				204				181				-				-				181
Real estate (g)		95				-				-				95				93				-				-				93
Total	$	4,776			$	930			$	3,547			$	299			$	4,236			$	948			$	3,014			$	274

(Stated in millions)
	International Plan Assets
	2020																2019
					Level				Level				Level								Level				Level				Level
	Total				One				Two				Three				Total				One				Two				Three
Asset Category:
Cash and Cash Equivalents	$	457			$	215			$	242			$	-			$	351			$	166			$	185			$	-
Equity Securities:
US (a)		2,797				2,393				404				-				2,834				2,347				487				-
International (b)		1,711				1,615				96				-				1,871				1,723				148				-
Debt Securities
Corporate bonds (c)		1,260				-				1,260				-				1,105				-				1,105				-
Government and government-related debt securities (d)		2,405				213				2,192				-				1,602				5				1,597				-
Collateralized mortgage obligations and mortgage backed securities (e)		122				-				122				-				161				-				161				-
Alternative Investments:
Private equity (f)		851				-				-				851				623				-				-				623
Real estate (g)		200				-				-				200				183				-				-				183
Other		690				-				-				690				633				-				-				633
Total	$	10,493			$	4,436			$	4,316			$	1,741			$	9,363			$	4,241			$	3,683			$	1,439

(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 2021, 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
	2020				2019				2020				2019				2018
Discount rate		2.60	%			3.30	%			3.30	%			4.30	%			3.70	%
Return on plan assets	-				-					7.00	%			7.00	%			7.00	%
Current medical cost trend rate		7.25	%			7.50	%			7.25	%			7.50	%			7.00	%
Ultimate medical cost trend rate		4.50	%			4.50	%			4.50	%			4.50	%			5.00	%
Year that the rate reaches the ultimate trend rate	2031				2031				2031				2031				2026

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

(Stated in millions)
	2020				2019				2018
Service cost	$	31			$	29			$	32
Interest cost		36				45				43
Expected return on plan assets		(70	)			(64	)			(63	)
Amortization of prior service credit		(25	)			(28	)			(28	)
Curtailment gain		(69	)			-				-
	$	(97	)		$	(18	)		$	(16	)

Due to the actions taken by Schlumberger to reduce its global workforce during 2020, Schlumberger experienced a significant reduction in the expected aggregate years of future service of its employees in its US postretirement medical plan. Accordingly, Schlumberger recorded a curtailment gain of $69 million during the second quarter of 2020 relating to this plan. The curtailment gain includes recognition of the decrease in the benefit obligation as well as a portion of the previously unrecognized prior service credit, reflecting the reduction in expected years of future service. As a result of the curtailment, Schlumberger performed a remeasurement of the plan, which had an immaterial impact. This gain was classified in Impairments & other in the Consolidated Statement of Loss. See Note 3 – Charges and Credits.

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

(Stated in millions)
	2020				2019
Change in Projected Benefit Obligations
Benefit obligation at beginning of year	$	1,193			$	1,106
Service cost		31				29
Interest cost		36				45
Contribution by plan participants		8				8
Actuarial (gains) losses		64				65
Benefits paid		(58	)			(60	)
Curtailment		(40	)			-
Benefit obligation at end of year	$	1,234			$	1,193
Change in Plan Assets
Plan assets at fair value at beginning of year	$	1,185			$	997
Actual return on plan assets		221				240
Contributions by plan participants		8				8
Benefits paid		(58	)			(60	)
Plan assets at fair value at end of year	$	1,356			$	1,185
Asset (Unfunded Liability)	$	122			$	(8	)
Amounts Recognized in Accumulated Other Comprehensive Loss
Actuarial (gains) losses	$	(186	)		$	(98	)
Prior service credit		(104	)			(158	)
	$	(290	)		$	(256	)

The $122 million asset relating to this plan at December 31, 2020 was included in Other Assets while the $8 million unfunded liability at December 31, 2019 was included in Postretirement Benefits in the Consolidated Balance Sheet.

The assets of the US postretirement medical plan are invested 61% in equity securities and 39% in debt securities at December 31, 2020. 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
2021	$	235			$	349			$	56
2022	$	235			$	359			$	56
2023	$	236			$	370			$	56
2024	$	237			$	381			$	56
2025	$	237			$	385			$	57
2026-2030	$	1,193			$	2,146			$	297

18. Supplementary Information

Cash paid for interest and income taxes was as follows:

(Stated in millions)
	2020				2019				2018
Interest	$	598			$	558			$	592
Income tax	$	582			$	739			$	628

Interest and other income includes the following:

(Stated in millions)
	2020				2019				2018
Earnings of equity method investments	$	91			$	45			$	89
Interest income		33				41				60
Unrealized gain on marketable securities (see Note 3)		39				-				-
	$	163			$	86			$	149

The change in Allowance for doubtful accounts is as follows:

(Stated in millions)
	2020				2019				2018
Balance at beginning of year	$	255			$	249			$	241
Additions		58				5				15
Amounts written off		(12	)			1				(7	)
Balance at end of year	$	301			$	255			$	249

Revenue in excess of billings related to contracts where revenue is recognized over time was $0.2 billion at both December 31, 2020 and 2019. 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)
	2020				2019
Trade	$	2,937			$	4,790
Payroll, vacation and employee benefits		1,524				1,445
Billings and cash collections in excess of revenue		941				910
Other		3,040				3,518
	$	8,442			$	10,663

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, 2020. 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, 2020, 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, 2020 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 sheet of Schlumberger Limited and its subsidiaries (the “Company”) as of December 31, 2020 and 2019, 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, 2020, 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, 2020, 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, 2020 and 2019 and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020 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, 2020, 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 & Intangible Asset Impairment

As described in Note 3 to the consolidated financial statements, the Company recorded charges to goodwill associated with certain reporting units and certain intangible assets during the first quarter of 2020. As described by management, 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. Intangible assets are assessed for impairment whenever events or changes in circumstances indicate their carrying values may not be recoverable. Management determined that it was more likely than not that the fair value of certain of its reporting units and asset groups were less than their carrying value. Therefore, management performed interim impairment tests as of March 31, 2020. Management primarily used the income approach to estimate the fair value of its reporting units and asset groups, but also considered the market approach to validate the results. The market approach involves significant judgment 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 and the discount rate.

The principal considerations for our determination that performing procedures related to goodwill and intangible asset impairment is a critical audit matter are the significant judgment by management in determining the fair value of the reporting units and asset groups, which in turn led to a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating significant assumptions related to cash flows to be derived from each reporting unit and asset group, 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 and intangible asset impairment tests. These procedures also included, among others, testing management’s process for developing fair value estimates; which included (i) evaluating the appropriateness of the income and market approaches; (ii) testing the completeness, accuracy, and relevance of underlying data used in the approaches; and (iii) evaluating the significant assumptions used by management to develop the cash flows to be derived from each reporting unit and asset group. Evaluating management’s assumptions related to the cash flows to be derived from each reporting unit and asset group 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 the 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 the identification and recognition of uncertain tax positions. These procedures also included, among others, (i) evaluating management’s process for developing the estimated liabilities for uncertain tax positions, (ii) testing the completeness and reasonableness of uncertain tax positions recorded in the consolidated financial statements, and (iii) 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 27, 2021

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, 2020 and 2019.

(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 2020
First (3)	$	7,455			$	831			$	(7,376	)		$	(5.32	)		$	(5.32	)
Second (4)		5,356				431				(3,434	)			(2.47	)			(2.47	)
Third (5)		5,258				634				(82	)			(0.06	)			(0.06	)
Fourth (6)		5,532				704				374				0.27				0.27
	$	23,601			$	2,601			$	(10,518	)		$	(7.57	)		$	(7.57	)
Quarters 2019
First	$	7,879			$	925			$	421			$	0.30			$	0.30
Second		8,269				1,016				492				0.36				0.35
Third (7)		8,541				1,155				(11,383	)			(8.22	)			(8.22	)
Fourth (8)		8,228				1,101				333				0.24				0.24
	$	32,917			$	4,197			$	(10,137	)		$	(7.32	)		$	(7.32	)

(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 (loss) attributable to Schlumberger in the first quarter of 2020 includes after-tax charges of $7.727 billion.

(4)	Net income (loss) attributable to Schlumberger in the second quarter of 2020 includes after-tax charges of $3.502 billion.

(5)	Net income (loss) attributable to Schlumberger in the third quarter of 2020 includes after-tax charges of $310 million.

(6)	Net income (loss) attributable to Schlumberger in the fourth quarter of 2020 includes after-tax credits of $65 million.

(7)	Net income (loss) attributable to Schlumberger in the third quarter of 2019 includes after-tax charges of $11.979 billion.

(8)	Net income (loss) attributable to Schlumberger in the fourth quarter of 2019 includes net after-tax charges of $212 million.