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,	2022				2021				2020
Revenue
Services	$	19,552			$	15,602			$	16,533
Product sales		8,539				7,327				7,068
Total Revenue		28,091				22,929				23,601
Interest & other income, net		610				148				267
Expenses
Cost of services		15,233				13,129				14,675
Cost of sales		7,697				6,142				6,325
Research & engineering		634				554				580
General & administrative		376				339				365
Impairments & other		-				-				12,658
Interest		490				539				563
Income (loss) before taxes		4,271				2,374				(11,298	)
Tax expense (benefit)		779				446				(812	)
Net income (loss)		3,492				1,928				(10,486	)
Net income attributable to noncontrolling interests		51				47				32
Net income (loss) attributable to SLB	$	3,441			$	1,881			$	(10,518	)
Basic earnings (loss) per share of SLB	$	2.43			$	1.34			$	(7.57	)
Diluted earnings (loss) per share of SLB	$	2.39			$	1.32			$	(7.57	)
Average shares outstanding:
Basic		1,416				1,400				1,390
Assuming dilution		1,437				1,427				1,390

See the Notes to Consolidated Financial Statements

SCHLUMBERGER LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS)

(Stated in millions)
Year Ended December 31,	2022				2021				2020
Net income (loss)	$	3,492			$	1,928			$	(10,486	)
Currency translation adjustments
Net change arising during the period		(26	)			83				(239	)
Cash flow hedges
Net loss on cash flow hedges		(148	)			(12	)			(90	)
Reclassification to net income (loss) of net realized (income) loss		117				(3	)			54
Pension and other postretirement benefit plans
Actuarial gain (loss) arising during the period		(305	)			1,075				(247	)
Amortization to net income (loss) of net actuarial loss		75				271				200
Amortization to net income (loss) of net prior service credit		(23	)			(23	)			(17	)
Impact of curtailment		-				-				(69	)
Income taxes on pension and other postretirement benefit plans		24				(74	)			(38	)
Other		1				(3	)			-
Comprehensive income (loss)		3,207				3,242				(10,932	)
Comprehensive income attributable to noncontrolling interests		51				47				32
Comprehensive income (loss) attributable to SLB	$	3,156			$	3,195			$	(10,964	)

See the Notes to Consolidated Financial Statements

SCHLUMBERGER LIMITED AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

(Stated in millions)
December 31,		2022				2021
ASSETS
Current Assets
Cash		$	1,655			$	1,757
Short-term investments			1,239				1,382
Receivables less allowance for doubtful accounts (2022 - $340; 2021 - $319)			7,032				5,315
Inventories			3,999				3,272
Other current assets			1,078				928
			15,003				12,654
Investments in Affiliated Companies			1,581				2,044
Fixed Assets less accumulated depreciation			6,607				6,429
Goodwill			12,982				12,990
Intangible Assets			2,992				3,211
Other Assets			3,970				4,183
		$	43,135			$	41,511
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable and accrued liabilities			9,121				8,382
Estimated liability for taxes on income			1,002				879
Short-term borrowings and current portion of long-term debt			1,632				909
Dividends payable			263				189
			12,018				10,359
Long-term Debt			10,594				13,286
Postretirement Benefits			165				231
Deferred Taxes			61				94
Other Liabilities			2,308				2,255
			25,146				26,225
Equity
Common stock			11,837				12,608
Treasury stock			(1,016	)			(2,233	)
Retained earnings			10,719				8,199
Accumulated other comprehensive loss			(3,855	)			(3,570	)
SLB stockholders' equity			17,685				15,004
Noncontrolling interests			304				282
			17,989				15,286
		$	43,135			$	41,511

See the Notes to Consolidated Financial Statements

SCHLUMBERGER LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS

(Stated in millions)
Year Ended December 31,	2022				2021				2020
Cash flows from operating activities:
Net income (loss)	$	3,492			$	1,928			$	(10,486	)
Adjustments to reconcile net income (loss) to cash provided by operating activities:
Impairments and other charges and credits		(347	)			(65	)			12,515
Depreciation and amortization (1)		2,147				2,120				2,566
Deferred taxes		(39	)			(31	)			(1,248	)
Stock-based compensation expense		313				324				397
Earnings of equity method investments, less dividends received		(96	)			10				(28	)
Change in assets and liabilities: (2)
(Increase) decrease in receivables		(1,728	)			(36	)			2,345
(Increase) decrease in inventories		(737	)			75				86
(Increase) decrease in other current assets		(44	)			387				267
Increase in other assets		(45	)			(2	)			(25	)
Increase (decrease) in accounts payable and accrued liabilities		704				160				(3,330	)
Increase (decrease) in estimated liability for taxes on income		96				(154	)			(201	)
Increase (decrease) in other liabilities		23				(26	)			19
Other		(19	)			(39	)			67
NET CASH PROVIDED BY OPERATING ACTIVITIES		3,720				4,651				2,944
Cash flows from investing activities:
Capital expenditures		(1,618	)			(1,141	)			(1,116	)
APS investments		(587	)			(474	)			(303	)
Exploration data capitalized		(97	)			(39	)			(101	)
Net proceeds from divestitures		-				-				434
Proceeds from sale of Liberty shares		732				109				-
Proceeds from sale of ADC shares		223				-				-
Proceeds from sale of real estate		120				-				-
Business acquisitions and investments, net of cash acquired		(58	)			(103	)			(33	)
Sale (purchase) of short-term investments, net		138				787				(1,141	)
Purchases of Blue Chip Swap securities		(259	)			-				-
Proceeds from sales of Blue Chip Swap securities		111				-				-
Other		(93	)			(58	)			(93	)
NET CASH USED IN INVESTING ACTIVITIES		(1,388	)			(919	)			(2,353	)
Cash flows from financing activities:
Dividends paid		(848	)			(699	)			(1,734	)
Proceeds from employee stock purchase plan		142				137				146
Proceeds from exercise of stock options		81				-				-
Taxes paid on net-settled stock-based compensation awards		(93	)			(24	)			(28	)
Stock repurchase program		-				-				(26	)
Proceeds from issuance of long-term debt		-				34				5,837
Repayment of long-term debt		(1,650	)			(2,076	)			(4,975	)
Net increase (decrease) in short-term borrowings		37				(105	)			156
Repayment of finance lease-related obligations		-				-				(188	)
Other		(51	)			(91	)			(61	)
NET CASH USED IN FINANCING ACTIVITIES		(2,382	)			(2,824	)			(873	)
Net increase (decrease) in cash before translation effect		(50	)			908				(282	)
Translation effect on cash		(52	)			5				(11	)
Cash, beginning of period		1,757				844				1,137
Cash, end of period	$	1,655			$	1,757			$	844

(1)	Includes depreciation of property, plant and equipment and amortization of intangible assets, exploration 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, 2020		$	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, net of taxes withheld			(201	)			173																(28	)
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			(6	)			7												(37	)			(36	)
Balance, December 31, 2020			12,970				(3,033	)			7,018				(4,884	)			418				12,489
Net income											1,881								47				1,928
Currency translation adjustments															83				(2	)			81
Changes in fair value of cash flow hedges															(15	)							(15	)
Pension and other postretirement benefit plans															1,249								1,249
Vesting of restricted stock, net of taxes withheld			(305	)			281																(24	)
Employee stock purchase plan			(377	)			514																137
Stock-based compensation expense			324																				324
Dividends declared ($0.50 per share)											(700	)											(700	)
Deconsolidation of subsidiary																			(123	)			(123	)
Other			(4	)			5								(3	)			(58	)			(60	)
Balance, December 31, 2021			12,608				(2,233	)			8,199				(3,570	)			282				15,286
Net income											3,441								51				3,492
Currency translation adjustments															(26	)							(26	)
Changes in fair value of cash flow hedges															(31	)							(31	)
Pension and other postretirement benefit plans															(229	)							(229	)
Vesting of restricted stock, net of taxes withheld			(795	)			702																(93	)
Employee stock purchase plan			(222	)			364																142
Stock-based compensation expense			313																				313
Shares sold to optionees, less shares exchanged			(67	)			148																81
Dividends declared ($0.65 per share)											(921	)											(921	)
Other							3								1				(29	)			(25	)
Balance, December 31, 2022		$	11,837			$	(1,016	)		$	10,719			$	(3,855	)		$	304			$	17,989

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, 2020		1,434				(49	)			1,385
Employee stock purchase plan		-				6				6
Vesting of restricted stock		-				2				2
Stock repurchase program		-				(1	)			(1	)
Balance, December 31, 2020		1,434				(42	)			1,392
Employee stock purchase plan		-				7				7
Vesting of restricted stock		-				4				4
Balance, December 31, 2021		1,434				(31	)			1,403
Employee stock purchase plan		-				5				5
Vesting of restricted stock		-				10				10
Shares sold to optionees, less shares exchanged		-				2				2
Balance, December 31, 2022		1,434				(14	)			1,420

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, “SLB”) form a global technology company that drives energy innovation for a balanced planet. With a global footprint in more than 100 countries and employees representing almost twice as many nationalities, SLB works each day on innovating oil and gas, delivering digital at scale, decarbonizing industries, and developing and scaling new energy systems that accelerate the energy transition.

2. Summary of Accounting Policies

The Consolidated Financial Statements of SLB 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, SLB 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; exploration data; contingencies and actuarial assumptions for employee benefit plans. SLB 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

SLB 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 SLB’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 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, SLB does not have significant backlog. Total backlog was $3.0 billion at December 31, 2022, of which approximately 60% is expected to be recognized as revenue during 2023.

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, SLB does not consider Short-term investments to be cash equivalents.

Investments in Affiliated Companies

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

Exploration Data

SLB’s exploration data library consists of completed and in-process seismic surveys that are licensed on a nonexclusive basis. SLB capitalizes costs directly incurred in acquiring and processing the exploration data. Such costs are charged to Cost of services based on the percentage of the total costs to the estimated total revenue that SLB 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 exploration data 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 SLB, would not be sufficient to recover the carrying value of the surveys. Significant adverse changes in SLB’s estimated future cash flows could result in impairment charges in a future period.

Asset Performance Solutions

Asset Performance Solutions (“APS”) projects are generally focused on developing and co-managing production of customers’ assets under long-term agreements. SLB invests its own services and products into the field development activities and operations and is compensated on a fee-per-barrel basis or based on cash flow generated. This includes certain arrangements whereby SLB is only compensated based on incremental production that it helps deliver above a mutually agreed baseline.

SLB capitalizes its investments in a project including the direct costs associated with providing its services or products. 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.

Concentration of Credit Risk

SLB’s assets that are exposed to concentrations of credit risk consist primarily of cash, short-term investments, receivables from clients and derivative financial instruments. SLB places its cash and short-term investments with financial institutions and corporations and limits the amount of credit exposure with any one of them. SLB regularly evaluates the creditworthiness of the issuers in which it invests. By using derivative financial instruments to hedge certain exposures, SLB exposes itself to some credit risk. SLB 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.

As a large multinational company, SLB’s accounts receivable are spread over many countries and customers. The United States and Mexico represented 13% and 14%, respectively, of SLB’s net accounts receivable balance at December 31, 2022. No other countries accounted for greater than 10% of SLB’s accounts receivable balance. SLB 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 SLB’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 SLB:

(Stated in millions, except per share amounts)
		Net Income (Loss) Attributable to SLB				Average Shares Outstanding				Earnings (Loss) per Share
2022:
Basic		$	3,441				1,416			$	2.43
Dilutive impact of stock options and restricted stock			-				21
Diluted		$	3,441				1,437			$	2.39
2021:
Basic		$	1,881				1,400			$	1.34
Dilutive impact of stock options and restricted stock			-				27
Diluted		$	1,881				1,427			$	1.32
2020:
Basic		$	(10,518	)			1,390			$	(7.57	)
Dilutive impact of stock options and restricted stock			-				-
Diluted		$	(10,518	)			1,390			$	(7.57	)

The number of outstanding employee stock options to purchase shares of SLB 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)
	2022				2021				2020
Employee stock options		25				42				48
Unvested restricted stock		-				-				19

3. Charges and Credits

2022

SLB recorded the following charges and credits during 2022, all of which are classified in Interest & other income, net in the Consolidated Statement of Income (Loss):

	(Stated in millions)
	Pretax				Tax Benefit
	Charge (Credit)				(Expense)				Net
First quarter:
Gain on sale of Liberty shares	$	(26	)		$	(4	)		$	(22	)
Second quarter:
Gain on sale of Liberty shares		(215	)			(14	)			(201	)
Gain on sale of real estate		(43	)			(2	)			(41	)
Fourth quarter:
Gain on sale of Liberty shares		(84	)			(19	)			(65	)
Loss on Blue Chip Swap transactions		139				-				139
Gain on ADC equity investment		(107	)			(3	)			(104	)
Gain on repurchase of bonds		(11	)			(2	)			(9	)
	$	(347	)		$	(44	)		$	(303	)

	•	On December 31, 2020, SLB contributed its onshore hydraulic fracturing business in the United States and Canada, including its pressure pumping, pumpdown perforating and Permian frac sand business to Liberty Energy Inc. (“Liberty”) in exchange for an equity interest in Liberty. During 2022, SLB sold 47.8 million of its shares of Liberty and received proceeds of $730 million. These transactions resulted in gains of $325 million. As of December 31, 2022, SLB had a 5% equity interest in Liberty. Based on the quoted market prices of Liberty’s shares, the fair value of SLB’s investment in Liberty was approximately $144 million as of December 31, 2022. SLB accounts for its investment in Liberty under the equity method of accounting and records its share of Liberty’s net income or loss on a one-quarter lag.

	•	The Central Bank of Argentina maintains certain currency controls that limit SLB’s ability to access US dollars in Argentina and remit cash from its Argentine operations. A legal indirect foreign exchange mechanism exists, in the form of capital market transactions known as Blue Chip Swaps, which effectively results in a parallel US dollar exchange rate. This parallel rate, which cannot be used as the basis to remeasure SLB’s Argentine peso-denominated net monetary assets in US dollars under US GAAP, was approximately 93% higher than Argentina’s official exchange rate at December 31, 2022. During the fourth quarter of 2022, SLB entered into Blue Chip Swap transactions that resulted in a loss of $139 million.

	•	During the fourth quarter of 2022, SLB repurchased $395 million of its 3.75% Senior Notes due 2024 and $409 million of its 4.00% Senior Notes due 2025 for $790 million, resulting in a gain of $11 million after considering the write-off of the related deferred financing fees and other costs.

	•	SLB has an investment in the Arabian Drilling Company (“ADC”), an onshore and offshore gas and oil rig drilling company in Saudi Arabia, that it accounts for under the equity method. During the fourth quarter of 2022, ADC completed an initial public offering (“IPO”). In connection with the IPO, SLB sold a portion of its interest in a secondary offering that resulted in SLB receiving net proceeds of $223 million. As a result of these transactions, SLB’s ownership interest in ADC decreased from 49% to approximately 34%. SLB recognized a gain of $107 million, representing the gain on the sale of a portion of its interest as well as the effect of the ownership dilution of its equity investment due to the IPO. As of December 31, 2022, the fair value of SLB’s investment in ADC, based on the quoted market price of ADC’s shares, was approximately $930 million and the carrying value of its investment was $556 million. SLB accounts for its share of ADC’s net income on a one-quarter lag.

	•	During the second quarter of 2022, SLB sold certain real estate and received proceeds of $120 million. As a result of this transaction, SLB recognized a gain of $43 million.

2021

SLB recorded the following charges and credits during 2021:

	(Stated in millions)
	Pretax				Tax Benefit
	Charge (Credit)				(Expense)				Net
Third quarter:
Unrealized gain on marketable securities	$	(47	)		$	(11	)		$	(36	)
Fourth quarter:
Gain on sale of Liberty shares		(28	)			(4	)			(24	)
Early repayment of bonds		10				-				10
	$	(65	)		$	(15	)		$	(50	)

Third quarter 2021:

	•	During the third quarter of 2021, a start-up company that SLB previously invested in was acquired. As a result of this transaction, SLB’s ownership interest was converted into shares of a publicly traded company. SLB recognized an unrealized pretax gain of $47 million to increase the carrying value of this investment to its estimated fair value of approximately $55 million. This unrealized gain is reflected in Interest & other income, net in the Consolidated Statement of Income (Loss).

Fourth quarter 2021:

	•	SLB sold 9.5 million of its shares of Liberty and received proceeds of $109 million. As a result of this transaction SLB recognized a gain of $28 million, which is classified in Interest & other income, net in the Consolidated Statement of Income (Loss).

	•	On November 30, 2021, SLB deposited sufficient funds with the trustee for its $1.0 billion of 2.40% Senior Notes due 2022 (including payment of the February 1, 2022 interest payment) to satisfy and discharge all of its obligations relating to such notes. As a result of this transaction, SLB recorded a charge of $10 million. This charge is reflected in Interest in the Consolidated Statement of Income (Loss).

2020

SLB 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 Benefit
	Charge (Credit)				(Expense)				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
Exploration 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, SLB’s market capitalization deteriorated significantly compared to the end of 2019. SLB’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, SLB 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, SLB performed an interim goodwill impairment test, which resulted in a $3.1 billion goodwill impairment charge. SLB 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 SLB’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. SLB selected the assumptions used in the discounted cash flow projections using historical data supplemented by current and anticipated market conditions and estimated growth rates. SLB’s estimates were based upon assumptions believed to be reasonable.

The discount rates utilized to value SLB’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 SLB’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, SLB recorded the following impairment charges:

	-	$3.3 billion relating to intangible assets, of which $2.2 billion relates to SLB’s 2016 acquisition of Cameron International Corporation and $1.1 billion relates to SLB’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. SLB 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, SLB had assets that would no longer be utilized. As a consequence of these circumstances and decisions, SLB 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 SLB exited and excess equipment.

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

	-	$156 million impairment of certain exploration data.

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

	•	SLB repurchased all $600 million of its 4.20% Senior Notes due 2021 and $935 million of its 3.30% Senior Notes due 2021. SLB paid a premium of $40 million in connection with these repurchases.

	•	As a consequence of the workforce reductions described above, SLB recorded a curtailment gain of $69 million relating to its US postretirement medical plan. See Note 16 – Pension and Other Postretirement Benefit Plans for further details.

Third quarter 2020:

	•	SLB recorded the following restructuring charges:

	-	$254 million of facility exit charges as SLB 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, SLB contributed its OneStim business to Liberty in exchange for a 37% equity interest in Liberty. As a result of this transaction, SLB recognized a gain of $104 million. This gain is classified in Interest & other income, net in the Consolidated Statement of Income (Loss).

	•	During the fourth quarter of 2020, a start-up company that SLB previously invested in completed an initial public offering. As a result, SLB 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 & other income, net in the Consolidated Statement of Income (Loss). SLB sold its interest in this company during 2021.

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

The fair value of certain of the assets impaired during 2020 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.

4. Inventories

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

(Stated in millions)
	2022				2021
Raw materials & field materials	$	2,085			$	1,594
Work in progress		547				425
Finished goods		1,367				1,253
	$	3,999			$	3,272

5. Fixed Assets

Fixed assets consist of the following:

(Stated in millions)
	2022				2021
Land	$	326			$	372
Buildings & improvements		4,328				4,371
Machinery & equipment		23,732				24,334
		28,386				29,077
Less: Accumulated depreciation		21,779				22,648
	$	6,607			$	6,429

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 $1.4 billion in each of 2022 and 2021, and $1.6 billion in 2020.

6. Goodwill

The changes in the carrying amount of goodwill by segment were as follows:

	(Stated in millions)
	Digital &				Reservoir				Well				Production
	Integration				Performance				Construction				Systems				Total
Balance, December 31, 2020	$	2,047			$	3,802			$	6,278			$	853			$	12,980
Acquisitions		18				-				-				-				18
Translation and other		(13	)			2				3				-				(8	)
Balance, December 31, 2021		2,052				3,804				6,281				853				12,990
Translation and other		(8	)			-				-				-				(8	)
Balance, December 31, 2022	$	2,044			$	3,804			$	6,281			$	853			$	12,982

7. Intangible Assets

Intangible assets consist of the following:

	(Stated in millions)
	2022												2021
	Gross				Accumulated				Net Book				Gross				Accumulated				Net Book
	Book Value				Amortization				Value				Book Value				Amortization				Value
Customer Relationships	$	1,680			$	631			$	1,049			$	1,681			$	551			$	1,130
Technology/Technical Know-How		1,280				676				604				1,264				562				702
Tradenames		767				222				545				766				191				575
Other		1,657				863				794				1,578				774				804
	$	5,384			$	2,392			$	2,992			$	5,289			$	2,078			$	3,211

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 $301 million in 2022, $302 million in 2021, and $371 million in 2020.

Based on the carrying value of intangible assets at December 31, 2022, amortization expense for the subsequent five years is estimated to be as follows: 2023: $289 million, 2024: $281 million, 2025: $265 million, 2026: $260 million and 2027: $253 million.

8. Long-term Debt and Debt Facility Agreements

Long-term Debt consists of the following:

(Stated in millions)
	2022				2021
3.90% Senior Notes due 2028	$	1,464			$	1,457
2.65% Senior Notes due 2030		1,250				1,250
1.375% Guaranteed Notes due 2026		1,061				1,125
2.00% Guaranteed Notes due 2032		1,055				1,118
0.25% Notes due 2027		955				1,013
0.50% Notes due 2031		954				1,012
4.30% Senior Notes due 2029		847				846
1.00% Guaranteed Notes due 2026		635				679
0.00% Notes due 2024		531				563
4.00% Senior Notes due 2025		522				930
1.40% Senior Notes due 2025		499				498
3.75% Senior Notes due 2024		355				748
7.00% Notes due 2038		202				204
5.95% Notes due 2041		112				113
5.13% Notes due 2043		98				98
3.70% Notes due 2024		54				55
3.65% Senior Notes due 2023		-				1,497
4.00% Notes due 2023		-				80
	$	10,594			$	13,286

At December 31, 2022, SLB had committed credit facility agreements with commercial banks aggregating $5.75 billion, all of which was available and unused. These committed facilities support commercial paper programs in the United States and Europe, of which $750 million matures in February 2024, $2.0 billion matures in February 2025, $1.0 billion matures in July 2026, and $2.0 billion in February 2027. SLB also has a €750 million three-year committed revolving credit facility that matures in June 2024. At December 31, 2022, 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 SLB’s intent to maintain these obligations for longer than one year. There were no borrowings under the commercial paper programs at December 31, 2022 and December 31, 2021, respectively.

Long-term Debt as of December 31, 2022 is due as follows: $0.9 billion in 2024, $1.0 billion in 2025, $1.7 billion in 2026, $1.0 billion in 2027, $1.5 billion in 2028, $0.8 billion in 2029 and $3.7 billion thereafter.

The fair value of SLB’s Long-term Debt at December 31, 2022 and December 31, 2021 was $9.4 billion and $13.9 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 indirect wholly-owned subsidiaries of Schlumberger Limited.

9. Derivative Instruments and Hedging Activities

SLB’s functional currency is primarily the US dollar. Approximately 72% of SLB’s revenues in 2022 were denominated in US dollars. However, outside the United States, a significant portion of SLB’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 SLB conducts business, the US dollar-reported expenses will increase (decrease).

SLB is exposed to risks on future cash flows relating to its fixed rate debt denominated in currencies other than the functional currency. SLB uses cross-currency interest rate swaps to provide a hedge against these cash flow risks. These contracts are accounted for as cash flow hedges, with the fair value of the derivative 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.

Details regarding SLB’s outstanding cross-currency interest rate swaps as of December 31, 2022, were as follows:

	•	During 2019, a US-dollar functional currency subsidiary of SLB issued €1.5 billion of Euro-denominated debt. SLB entered into cross-currency interest rate swaps 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 interest rate 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 2020, a US-dollar functional currency subsidiary of SLB issued €0.8 billion of Euro-denominated debt. SLB entered into cross-currency interest rate swaps 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 interest rate 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 2020, a US-dollar functional currency subsidiary of SLB issued €2.0 billion of Euro-denominated debt. SLB entered into cross-currency interest rate swaps 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 interest rate swaps effectively convert the Euro-denominated notes to US-dollar denominated debt with fixed annual interest rates of 2.77% and 3.49%, respectively.

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

A summary of the amounts included in the Consolidated Balance Sheet relating to cross currency interest rate swaps follows:

	(Stated in millions)
	Dec. 31, 2022				Dec. 31, 2021
Other Assets	$	1			$	66
Other Liabilities	$	326			$	78

The fair values were determined using a model with inputs that are observable in the market or can be derived or corroborated by observable data.

SLB had derivative contracts in place that hedged the price of oil related to approximately 75% of the projected oil production for 2022 for one of its APS projects. During 2022, SLB entered into derivative contracts that hedge the price of oil relating to approximately 70% of the projected oil production for the first six months of 2023 and approximately 30% of the projected oil production for the last six months of 2023 for the same project. These contracts are accounted for as cash flow hedges.

SLB 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. SLB 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.

SLB is also exposed to changes in the fair value of assets and liabilities denominated in currencies other than the functional currency. While SLB 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 derivative 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 $96 million in 2022, $23 million in 2021, and $21 million in 2020 were recognized in the Consolidated Statement of Income (Loss) net of related hedging activities.

Foreign currency forward contracts were outstanding for the US dollar equivalent of $2.1 billion and $1.7 billion in various foreign currencies as of December 31, 2022 and 2021, respectively.

Other than the previously mentioned cross-currency interest rate swaps, the fair value of the other outstanding derivatives was not material as of December 31, 2022 and 2021.

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
	2022				2021				2020				of Income (Loss) Classification
Derivatives designated as cash flow hedges:
Cross-currency interest rate swaps	$	(254	)		$	(422	)		$	493			Cost of services/sales
Cross-currency interest rate swaps		(88	)			(83	)			(63	)		Interest expense
Commodity contracts		(87	)			-				-			Revenue
Foreign exchange contracts		(30	)			5				(5	)		Cost of services/sales
	$	(459	)		$	(500	)		$	425
Derivatives not designated as hedges:
Foreign exchange contracts	$	42			$	(11	)		$	(29	)		Cost of services/sales

SLB does not enter into derivative transactions for speculative purposes.

10. Stockholders’ Equity

SLB is authorized to issue 4,500,000,000 shares of common stock, par value $0.01 per share, of which 1,420,188,492 and 1,403,381,685 shares were outstanding on December 31, 2022 and 2021, respectively. Holders of common stock are entitled to one vote for each share of stock held. SLB 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 SLB Board of Directors. No shares of preferred stock have been issued.

Accumulated Other Comprehensive Loss consists of the following:

									(Stated in millions)
	2022				2021				2020
Currency translation adjustments	$	(2,444	)		$	(2,419	)		$	(2,502	)
Pension and other postretirement benefit plans		(1,295	)			(1,066	)			(2,314	)
Cash flow hedges		(116	)			(85	)			(70	)
Other		-				-				2
	$	(3,855	)		$	(3,570	)		$	(4,884	)

11. Stock-based Compensation Plans

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

Restricted Stock

SLB grants performance share units to certain key employees. The number of shares earned is determined at the end of each performance period based on SLB’s achievement of certain predefined targets as described in the underlying performance share unit agreement. In the event SLB exceeds the predefined target, shares for up to a maximum of 250% of the target award may be awarded. In the event SLB falls below the predefined target, a reduced number of shares may be awarded. If SLB falls below the threshold award performance level, no shares will be awarded. As of December 31, 2022, 3.9 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 generally the quoted market price of SLB’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 activity:

	(Shares stated in millions)
	2022								2021								2020
					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		22			$	29.03				19			$	35.24				12			$	49.86
Granted		7			$	36.16				8			$	25.16				11			$	26.53
Adjustments for performance achieved		2			$	35.55				-			$	-				-			$	-
Vested		(13	)		$	32.42				(5	)		$	48.44				(3	)		$	71.56
Forfeited		-			$	-				-			$	-				(1	)		$	45.95
Unvested at year-end		18			$	30.24				22			$	29.03				19			$	35.24

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 SLB common stock. Until July 1, 2022, the purchase price of the stock was 92.5% of the lower of the stock price at the beginning or end of the plan period at six-month intervals. Effective July 1, 2022, the purchase price of the stock was changed to 85% 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:

	2022				2021				2020
Dividend yield		1.8	%			2.0	%			4.0	%
Expected volatility		47	%			67	%			43	%
Risk-free interest rate		1.32	%			0.07	%			0.88	%
Weighted-average fair value per share	$	8.05			$	6.72			$	5.38

Stock Options

Key employees may be granted stock options under SLB stock option plans. The exercise price equals the average of the high and low sales prices of SLB stock on the date of grant. The maximum term is 10 years, and the options generally vest in increments over five years.

The following table summarizes stock option activity:

	(Shares stated in millions)
	2022								2021								2020
					Weighted-								Weighted-								Weighted-
					Average								Average								Average
					Exercise								Exercise								Exercise
	Shares				Price				Shares				Price				Shares				Price
Outstanding at beginning of year		42			$	68.95				48			$	70.37				46			$	75.65
Granted		-			$	-				-			$	-				7			$	38.75
Exercised		(2	)		$	40.04				-			$	-				-			$	-
Forfeited / Expired		(5	)		$	71.45				(6	)		$	80.46				(5	)		$	71.86
Outstanding at year-end		35			$	70.31				42			$	68.95				48			$	70.37

The following table summarizes information related to options outstanding and options exercisable as of December 31, 2022:

	(Shares stated in millions)
	Options Outstanding												Options Exercisable
					Weighted-
					Average				Weighted-								Weighted-
	Options				Remaining Life				Average				Options				Average
Exercise prices range	Outstanding				(in years)				Exercise Price				Exercisable				Exercise Price
$38.75 - $41.47		10				6.6			$	39.82				5			$	40.19
$47.55 - $69.98		2				2.8			$	62.30				2			$	62.36
$70.31 - $79.85		9				2.0			$	74.27				8			$	74.15
$80.53 - $88.77		8				3.3			$	84.44				8			$	84.45
$91.28 - $114.83		6				1.7			$	96.22				6			$	96.21
		35				3.6			$	70.31				29			$	76.70

The weighted-average remaining contractual life of stock options exercisable as of December 31, 2022 was 2.9 years.

The aggregate intrinsic value of stock options outstanding and stock options exercisable as of December 31, 2022 was $133 million and $49 million, respectively.

Total Stock-based Compensation Expense

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

(Stated in millions)
	2022				2021				2020
Restricted stock	$	255			$	254			$	293
DSPP		41				34				29
Stock options		17				36				75
	$	313			$	324			$	397

At December 31, 2022, there was $275 million of total unrecognized compensation cost related to nonvested stock-based compensation arrangements, of which $172 million is expected to be recognized in 2023, $87 million in 2024, $12 million in 2025, and $4 million in 2026.

As of December 31, 2022, approximately 36 million shares of SLB common stock were available for future grants under SLB’s stock-based compensation programs.

12. Income Taxes

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

(Stated in millions)
	2022				2021				2020
United States	$	600			$	30			$	(4,394	)
Outside United States		3,671				2,344				(6,904	)
	$	4,271			$	2,374			$	(11,298	)

SLB recorded net pretax credits of $347 million in 2022 ($379 million of credits in the US and $32 million of net charges outside the US); and $65 million in 2021 ($75 million of credits in the US and $10 million of charges outside the US). SLB recorded net pretax charges of $12.515 billion in 2020 ($3.961 billion in the US and $8.554 billion outside the US). These charges and credits are included in the table above and are more fully described in Note 3 – Charges and Credits.

The components of net deferred tax liabilities were as follows:

(Stated in millions)
	2022				2021
Intangible assets	$	(780	)		$	(855	)
Net operating losses		326				427
Research and development credits		129				118
Fixed assets, net		101				151
Inventories		45				58
Investments in non-US subsidiaries		(125	)			(161	)
Pension and other postretirement benefits		(114	)			(136	)
Other, net		357				304
	$	(61	)		$	(94	)

Approximately $300 million of the $326 million deferred tax asset relating to net operating losses at December 31, 2022 can be carried forward indefinitely. The vast majority of the remaining balance expires at various dates between 2030 and 2041.

The deferred tax balances at December 31, 2022 and 2021 were net of valuation allowances relating to net operating losses in certain countries of $111 million and $133 million, respectively. Additionally, the deferred tax balances were net of valuation allowances relating to the following:

(Stated in millions)
	2022				2021
Foreign tax credits	$	181			$	210
Capital losses	$	-			$	49

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

(Stated in millions)
	2022				2021				2020
Current:
United States-Federal	$	2			$	(32	)		$	21
United States-State		3				-				5
Outside United States		813				509				410
		818				477				436
Deferred:
United States-Federal	$	98			$	(132	)		$	(824	)
United States-State		13				12				(67	)
Outside United States		(70	)			(15	)			(563	)
Valuation allowance		(80	)			104				206
		(39	)			(31	)			(1,248	)
	$	779			$	446			$	(812	)

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

	2022				2021				2020
US federal statutory rate		21	%			21	%			21	%
Charges and credits (See Note 3)		(1	)			-				(14	)
Other		(2	)			(2	)			-
		18	%			19	%			7	%

A number of the jurisdictions in which SLB operates have tax laws that are not fully defined and are evolving. SLB’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 is as follows:

(Stated in millions)
	2022				2021				2020
Balance at beginning of year	$	1,001			$	1,271			$	1,301
Additions based on tax positions related to the current year		41				38				76
Additions for tax positions of prior years		64				19				78
Impact of changes in exchange rates		(38	)			(24	)			(3	)
Settlements with tax authorities		(37	)			(49	)			(15	)
Reductions for tax positions of prior years		(94	)			(228	)			(87	)
Reductions due to the lapse of statute of limitations		(44	)			(26	)			(79	)
	$	893			$	1,001			$	1,271

The amounts above exclude accrued interest and penalties of $155 million, $164 million and $184 million at December 31, 2022, 2021 and 2020, respectively. SLB 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 SLB operates:

Canada	2014 - 2022
Ecuador	2018 - 2022
Mexico	2013 - 2022
Norway	2017 - 2022
Russia	2019 - 2022
Saudi Arabia	2016 - 2022
United Kingdom	2017 - 2022
United States	2017 - 2022

13. Leases

SLB’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 $1.2 billion in both 2022 and 2021 and $1.4 billion in 2020.

Maturities of operating lease liabilities as of December 31, 2022 were as follows:

(Stated in millions)
2023	$	165
2024		134
2025		105
2026		79
2027		67
Thereafter		262
Total lease payments	$	812
Less: Interest		(113	)
	$	699
Amounts recognized in balance sheet:
Accounts payable and accrued liabilities	$	160
Other Liabilities		539
	$	699

The weighted-average remaining lease term as of December 31, 2022 was 10 years. The weighted-average discount rate used to determine the operating lease liability as of December 31, 2022 was 3.3%.

14. Contingencies

SLB 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.

15. Segment Information

SLB is organized under four Divisions that combine and integrate SLB’s technologies, enhancing the Company’s ability to support the emerging long-term growth opportunities in each of these market segments.

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

	•	Digital & Integration – Combines SLB’s industry-leading digital solutions and data products 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 by segment is as follows:

					(Stated in millions)
	2022
													Depreciation
					Pretax								and				Capital
	Revenue				Income				Assets				Amortization				Investments
Digital & Integration	$	3,725			$	1,357			$	3,132			$	504			$	689
Reservoir Performance		5,553				881				3,159				386				478
Well Construction		11,397				2,202				6,481				524				687
Production Systems		7,862				748				5,603				311				346
Eliminations & other		(446	)			(177	)			1,426				271				102
Pretax segment operating income						5,011
Goodwill and intangible assets										15,974
Cash and short-term investments										2,897
All other assets										4,463
Corporate & other (1)						(637	)							151
Interest income (2)						27
Interest expense (3)						(477	)
Charges & credits (4)						347
	$	28,091			$	4,271			$	43,135			$	2,147			$	2,302

					(Stated in millions)
	2021
													Depreciation
					Pretax								and				Capital
	Revenue				Income				Assets				Amortization				Investments
Digital & Integration	$	3,290			$	1,141			$	3,134			$	446			$	516
Reservoir Performance		4,599				648				2,923				415				348
Well Construction		8,706				1,195				4,714				537				424
Production Systems		6,710				634				4,684				302				267
Eliminations & other		(376	)			(253	)			1,501				269				99
Pretax segment operating income						3,365
Goodwill and intangible assets										16,201
Cash and short-term investments										3,139
All other assets										5,215
Corporate & other (1)						(573	)							151
Interest income (2)						31
Interest expense (3)						(514	)
Charges & credits (4)						65
	$	22,929			$	2,374			$	41,511			$	2,120			$	1,654

					(Stated in millions)
	2020
													Depreciation
					Pretax								and				Capital
	Revenue				Income (Loss)				Assets				Amortization				Investments
Digital & Integration	$	3,067			$	727			$	3,595			$	615			$	413
Reservoir Performance		5,602				353				3,489				549				384
Well Construction		8,614				870				4,768				580				420
Production Systems		6,650				623				4,665				338				240
Eliminations & other		(332	)			(172	)			940				276				63
Pretax segment operating income						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

(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 (2022: $72 million; 2021: $2 million; 2020: $2 million).

(3)	Interest expense excludes amounts which are included in the segments’ income (2022: $13 million; 2021: $15 million; 2020: $28 million) and $10 million interest expense included in Charges & credits in 2021.

(4)	See Note 3 – Charges and Credits.

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

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

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

Revenue by geographic area for the years ended December 31, 2022, 2021 and 2020 was as follows:

(Stated in millions)
	2022				2021				2020
North America	$	5,995			$	4,466			$	5,478
Latin America		5,661				4,459				3,472
Europe/CIS/Africa		7,201				5,778				5,963
Middle East & Asia		9,033				8,059				8,567
Eliminations & other		201				167				121
	$	28,091			$	22,929			$	23,601

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

During each of the three years ended December 31, 2022, 2021 and 2020, no single customer exceeded 10% of consolidated revenue.

SLB did not have revenue from third-party customers in its country of domicile during the last three years. Revenue in the United States in 2022, 2021 and 2020 was $4.6 billion, $3.4 billion and $4.5 billion, respectively.

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

(Stated in millions)
	2022
	North America				International				Other				Total
Digital & Integration	$	1,069			$	2,651			$	5			$	3,725
Reservoir Performance		455				5,091				7				5,553
Well Construction		2,311				8,875				211				11,397
Production Systems		2,176				5,675				11				7,862
Eliminations & other		(16	)			(397	)			(33	)			(446	)
	$	5,995			$	21,895			$	201			$	28,091

(Stated in millions)
	2021
	North America				International				Other				Total
Digital & Integration	$	812			$	2,474			$	4			$	3,290
Reservoir Performance		329				4,266				4				4,599
Well Construction		1,485				7,025				196				8,706
Production Systems		1,832				4,865				13				6,710
Eliminations & other		8				(334	)			(50	)			(376	)
	$	4,466			$	18,296			$	167			$	22,929

(Stated in millions)
	2020
	North America				International				Other				Total
Digital & Integration	$	573			$	2,487			$	7			$	3,067
Reservoir Performance		1,547				4,043				12				5,602
Well Construction		1,453				6,965				196				8,614
Production Systems		1,921				4,702				27				6,650
Eliminations & other		(16	)			(195	)			(121	)			(332	)
	$	5,478			$	18,002			$	121			$	23,601

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

(Stated in millions)
	2022				2021
North America	$	1,459			$	1,368
Latin America		913				868
Europe/CIS/Africa		1,668				1,690
Middle East & Asia		2,099				2,049
Unallocated		468				454
	$	6,607			$	6,429

16. Pension and Other Postretirement Benefit Plans

Pension Plans

SLB 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, SLB 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
	2022				2021				2020				2022				2021				2020
Discount rate		3.00	%			2.60	%			3.30	%			2.83	%			2.38	%			3.27	%
Compensation increases		4.00	%			4.00	%			4.00	%			4.83	%			4.82	%			4.83	%
Return on plan assets		4.40	%			6.60	%			6.60	%			5.05	%			6.73	%			6.71	%

Net pension cost (credit) included the following components:

(Stated in millions)
	US												International
	2022				2021				2020				2022				2021				2020
Service cost	$	37			$	44			$	55			$	101			$	117			$	140
Interest cost		137				127				148				298				267				301
Expected return on plan assets		(202	)			(254	)			(233	)			(530	)			(640	)			(591	)
Amortization of prior service cost		-				-				8				-				-				-
Amortization of net loss		5				44				41				80				227				159
	$	(23	)		$	(39	)		$	19			$	(51	)		$	(29	)		$	9

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
	2022				2021				2022				2021
Discount rate		5.50	%			3.00	%			5.41	%			2.83	%
Compensation increases		4.00	%			4.00	%			4.84	%			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
	2022				2021				2022				2021
Change in Projected Benefit Obligations:
Projected benefit obligation at beginning of year	$	4,668			$	4,940			$	10,618			$	11,140
Service cost		37				44				101				117
Interest cost		137				127				298				267
Contribution by plan participants		-				-				47				53
Actuarial gains		(1,152	)			(211	)			(3,140	)			(586	)
Currency effect		-				-				(148	)			(18	)
Benefits paid		(375	)			(232	)			(363	)			(355	)
Other		-				-				185				-
Projected benefit obligation at end of year	$	3,315			$	4,668			$	7,598			$	10,618
Change in Plan Assets:
Plan assets at fair value at beginning of year	$	4,696			$	4,776			$	11,221			$	10,493
Actual return on plan assets		(933	)			145				(2,834	)			1,040
Currency effect		-				-				(188	)			(28	)
Company contributions		8				7				18				18
Contributions by plan participants		-				-				47				53
Benefits paid		(375	)			(232	)			(363	)			(355	)
Other		-				-				225				-
Plan assets at fair value at end of year	$	3,396			$	4,696			$	8,126			$	11,221
Asset	$	81			$	28			$	528			$	603
Amounts Recognized in Balance Sheet:
Postretirement Benefits	$	(151	)		$	(212	)		$	(14	)		$	(19	)
Other Assets		232				240				542				622
	$	81			$	28			$	528			$	603
Amounts Recognized in Accumulated Other Comprehensive Loss:
Actuarial losses	$	255			$	276			$	1,366			$	1,174
Accumulated benefit obligation	$	3,221			$	4,484			$	7,454			$	10,370

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

Actuarial gains arising during each of 2022 and 2021 were primarily attributable to increases in the discount rate used to determine the PBO.

The weighted-average allocation of plan assets as of December 31, 2022 and 2021 and the target allocations by asset category as of December 31, 2022 were as follows:

	US															International
	Target					2022					2021					Target					2022					2021
Cash and cash equivalents	0 - 3			%			2		%			2		%		0 - 5			%			2		%			3		%
Equity securities	0 - 5						-					5				10 - 20						10					23
Debt securities	80 - 90						83					84				50 - 60						56					53
Private equity and real estate	5 - 12						11					8				15 - 22						19					13
Private debt	2 - 8						4					1				9 - 15						13					8
		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 return expected to be earned on plan assets. 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 SLB’s pension plan assets at December 31, 2022 and 2021, 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
	2022																2021
					Level				Level				Level								Level				Level				Level
	Total				One				Two				Three				Total				One				Two				Three
Asset Category:
Cash and Cash Equivalents	$	81			$	77			$	4			$	-			$	68			$	61			$	7			$	-
Equity Securities:
US		3				-				3				-				212				196				16				-
International		-				-				-				-				49				48				1				-
Debt Securities:
Corporate bonds		1,775				-				1,775				-				2,583				-				2,583				-
Government and related debt securities		1,014				157				857				-				1,353				199				1,154				-
Mortgage and asset-based securities		29				-				29				-				-				-				-				-
Alternative Investments:
Private equity		291				-				-				291				293				-				-				293
Private debt		124				-				-				124				39				-				-				39
Real estate		79				-				-				79				99				-				-				99
Total	$	3,396			$	234			$	2,668			$	494			$	4,696			$	504			$	3,761			$	431

(Stated in millions)
	International Plan Assets
	2022																2021
					Level				Level				Level								Level				Level				Level
	Total				One				Two				Three				Total				One				Two				Three
Asset Category:
Cash and Cash Equivalents	$	170			$	163			$	7			$	-			$	362			$	353			$	9			$	-
Equity Securities:
US		580				497				83				-				1,909				1,600				309				-
International		273				273				-				-				717				717				-				-
Debt Securities:
Corporate bonds		2,224				-				2,224				-				2,859				-				2,859				-
Government and related debt securities		2,283				336				1,947				-				2,390				221				2,169				-
Mortgage and asset-based securities		13				-				13				-				644				-				644				-
Alternative Investments:
Private equity		1,362				-				-				1,362				1,284				-				-				1,284
Private debt		1,041				-				-				1,041				869				-				-				869
Real estate		180				-				-				180				187				-				-				187
Total	$	8,126			$	1,269			$	4,274			$	2,583			$	11,221			$	2,891			$	5,990			$	2,340

SLB’s funding policy is to annually contribute amounts that are based upon a number of factors including the funded status of the plans, amounts that are deductible for income tax purposes, legal funding requirements and available cash flow. SLB does not expect to make any material contributions to its postretirement benefit plans in 2023.

Postretirement Benefits Other Than Pensions

SLB provides healthcare benefits to certain former US employees who have retired.

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
	2022				2021				2022				2021				2020
Discount rate		5.50	%			3.00	%			3.00	%			2.60	%			3.30	%
Return on plan assets	-				-					2.94	%			6.21	%			6.21	%
Current medical cost trend rate		7.50	%			6.75	%			6.75	%			7.00	%			7.25	%
Ultimate medical cost trend rate		4.50	%			4.50	%			4.50	%			4.50	%			4.50	%
Year that the rate reaches the ultimate trend rate	2035				2031				2031				2031				2031

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

(Stated in millions)
	2022				2021				2020
Service cost	$	23			$	28			$	31
Interest cost		33				32				36
Expected return on plan assets		(38	)			(73	)			(70	)
Amortization of prior service credit		(23	)			(23	)			(25	)
Amortization of net loss		(10	)			-				-
Curtailment gain		-				-				(69	)
	$	(15	)		$	(36	)		$	(97	)

Due to the actions taken by SLB to reduce its global workforce during 2020, SLB experienced a significant reduction in the expected aggregate years of future service of its employees in its US postretirement medical plan. Accordingly, SLB 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, SLB performed a remeasurement of the plan, which had an immaterial impact. This gain was classified in Impairments & other in the Consolidated Statement of Income (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)
	2022				2021
Change in Accumulated Postretirement Benefit Obligation:
Benefit obligation at beginning of year	$	1,146			$	1,234
Service cost		23				28
Interest cost		33				32
Contribution by plan participants		9				10
Actuarial gains		(338	)			(95	)
Benefits paid		(65	)			(63	)
Benefit obligation at end of year	$	808			$	1,146
Change in Plan Assets:
Plan assets at fair value at beginning of year	$	1,318			$	1,356
Actual return on plan assets		(323	)			15
Contributions by plan participants		8				10
Benefits paid		(65	)			(63	)
Plan assets at fair value at end of year	$	938			$	1,318
Asset	$	130			$	172
Amounts Recognized in Accumulated Other Comprehensive Loss:
Actuarial gains	$	199			$	225
Prior service credit		59				81
	$	258			$	306

The asset balance relating to this plan was included in Other Assets in the Consolidated Balance Sheet.

The assets of the US postretirement medical plan are invested 87% in debt securities and 13% in equity securities at December 31, 2022. 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 Plans								Postretirement
	US				International				Medical Plan
2023	$	226			$	390			$	51
2024	$	227			$	399			$	51
2025	$	228			$	412			$	52
2026	$	230			$	425			$	52
2027	$	231			$	432			$	54
2028-2032	$	1,168			$	2,376			$	296

17. Supplementary Information

Cash paid for interest and income taxes was as follows:

(Stated in millions)
	2022				2021				2020
Interest	$	562			$	560			$	598
Income tax	$	716			$	591			$	582

Interest and other income, net includes the following:

(Stated in millions)
	2022				2021				2020
Gain on sale of Liberty shares *	$	325			$	28			$	-
Loss on Blue Chip Swap transactions *		(139	)			-				-
Gain on ADC equity investment *		107				-				-
Earnings of equity method investments		164				40				91
Interest income		99				33				33
Gain on sale of real estate *		43				-				-
Gain on repurchase of bonds *		11				-				-
Unrealized gain on marketable securities *		-				47				39
Gain on sale of OneStim *		-				-				104
	$	610			$	148			$	267

• See Note 3 – Charges and Credits

The components of depreciation and amortization expense were as follows:

(Stated in millions)
	2022				2021				2020
Depreciation of fixed assets	$	1,368			$	1,402			$	1,625
Amortization of APS investments		368				305				396
Amortization of intangible assets		301				302				371
Amortization of exploration data costs		110				111				174
	$	2,147			$	2,120			$	2,566

The change in Allowance for doubtful accounts was as follows:

(Stated in millions)
	2022				2021				2020
Balance at beginning of year	$	319			$	301			$	255
Additions		54				47				58
Amounts written off		(33	)			(29	)			(12	)
Balance at end of year	$	340			$	319			$	301

Revenue in excess of billings related to contracts where revenue is recognized over time was $0.3 billion at December 31, 2022 and $0.2 billion at December 31, 2021. Such amounts are included within Receivables less allowance for doubtful accounts in the Consolidated Balance Sheet.

Other Assets consist of the following:

(Stated in millions)
	2022				2021
Investments in APS projects	$	2,023			$	1,786
Pension and other postretirement plan assets		904				1,034
Operating lease assets		538				553
Exploration data costs capitalized		141				154
Fair value of hedge contracts		1				66
Other		363				590
	$	3,970			$	4,183

Accounts payable and accrued liabilities consist of the following:

(Stated in millions)
	2022				2021
Trade	$	3,921			$	3,205
Payroll, vacation and employee benefits		1,493				1,377
Billings and cash collections in excess of revenue		1,157				1,088
Other		2,550				2,712
	$	9,121			$	8,382

Management’s Report on Internal Control Over Financial Reporting

SLB 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”). SLB’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.

SLB management assessed the effectiveness of its internal control over financial reporting as of December 31, 2022. 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 SLB’s management has concluded that, as of December 31, 2022, its internal control over financial reporting is effective based on those criteria.

The effectiveness of SLB’s internal control over financial reporting as of December 31, 2022 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, 2022 and 2021, 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, 2022, 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, 2022, 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, 2022 and 2021 and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022 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, 2022, 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 matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates 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 matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Uncertain Tax Positions

As described in Note 12 to the consolidated financial statements, the Company’s tax filings are subject to regular audit by the tax authorities, and those 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.

The principal considerations for our determination that performing procedures relating to uncertain tax positions is a critical audit matter are the significant judgment applied by management in determining these liabilities including a high degree of estimation uncertainty due to the uncertain and complex application of tax regulations, 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 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 determining 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 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 management’s assessment of whether tax positions are more-likely-than-not of being sustained.

/s/ PricewaterhouseCoopers LLP
Houston, Texas
January 25, 2023

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