Item 1. Financial Statements.

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Item 1. Financial Statements.

SCHLUMBERGER LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF INCOME (LOSS)

(Unaudited)

(Stated in millions, except per share amounts)

	Third Quarter					Nine Months
	2021		2020			2021		2020
Revenue
Services	$	4,020	$	3,666		$	11,291	$	12,812
Product sales		1,827		1,592			5,413		5,257
Total Revenue		5,847		5,258			16,704		18,069
Interest & other income		56		22			91		94
Expenses
Cost of services		3,334		3,127			9,588		11,236
Cost of sales		1,528		1,497			4,547		4,936
Research & engineering		140		137			409		452
General & administrative		80		85			231		293
Impairments & other		-		350			-		12,596
Interest		130		138			402		419
Income (loss) before taxes		691		(54	)		1,618		(11,769	)
Tax expense (benefit)		129		19			301		(901	)
Net income (loss)		562		(73	)		1,317		(10,868	)
Net income attributable to noncontrolling interests		12		9			37		24
Net income (loss) attributable to Schlumberger	$	550	$	(82	)	$	1,280	$	(10,892	)

Basic income (loss) per share of Schlumberger	$	0.39	$	(0.06	)	$	0.92	$	(7.84	)

Diluted income (loss) per share of Schlumberger	$	0.39	$	(0.06	)	$	0.90	$	(7.84	)

Average shares outstanding:
Basic		1,402		1,391			1,399		1,389
Assuming dilution		1,424		1,391			1,422		1,389

See Notes to Consolidated Financial Statements

SCHLUMBERGER LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

(Stated in millions)

	Third Quarter						Nine Months
	2021			2020			2021			2020
Net income (loss)	$	562		$	(73	)	$	1,317		$	(10,868	)
Currency translation adjustments
Unrealized net change arising during the period		30			(94	)		6			(200	)
Cash flow hedges
Net gain (loss) on cash flow hedges		(9	)		36			13			(195	)
Reclassification to net income (loss) of net realized (gain) loss		(2	)		7			(7	)		12
Pension and other postretirement benefit plans
Amortization to net income (loss) of net actuarial loss		69			48			202			150
Amortization to net income (loss) of net prior service credit		(6	)		(2	)		(17	)		(13	)
Impact of curtailment		-			-			-			(69	)
Income taxes on pension and other postretirement benefit plans		(3	)		-			(6	)		10
Other		-			-			(4	)		-
Comprehensive income (loss)		641			(78	)		1,504			(11,173	)
Comprehensive income attributable to noncontrolling interests		12			9			37			24
Comprehensive income (loss) attributable to Schlumberger	$	629		$	(87	)	$	1,467		$	(11,197	)

See Notes to Consolidated Financial Statements

SCHLUMBERGER LIMITED AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

(Stated in millions)

	Sept. 30,
	2021			Dec. 31,
	(Unaudited)			2020
ASSETS
Current Assets
Cash	$	1,569		$	844
Short-term investments		1,373			2,162
Receivables less allowance for doubtful accounts (2021 - $320; 2020 - $301)		5,349			5,247
Inventories		3,296			3,354
Other current assets		800			1,312
		12,387			12,919
Investments in Affiliated Companies		2,110			2,061
Fixed Assets less accumulated depreciation		6,375			6,826
Goodwill		12,990			12,980
Intangible Assets		3,265			3,455
Other Assets		3,911			4,193
	$	41,038		$	42,434
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable and accrued liabilities	$	7,615		$	8,442
Estimated liability for taxes on income		907			1,015
Short-term borrowings and current portion of long-term debt		1,025			850
Dividends payable		188			184
		9,735			10,491
Long-term Debt		14,370			16,036
Postretirement Benefits		905			1,049
Other Liabilities		2,363			2,369
		27,373			29,945
Equity
Common stock		12,571			12,970
Treasury stock		(2,287	)		(3,033	)
Retained earnings		7,775			7,018
Accumulated other comprehensive loss		(4,697	)		(4,884	)
Schlumberger stockholders’ equity		13,362			12,071
Noncontrolling interests		303			418
		13,665			12,489
	$	41,038		$	42,434

See Notes to Consolidated Financial Statements

SCHLUMBERGER LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS

(Unaudited)

(Stated in millions)

	Nine Months Ended September 30,
	2021			2020
Cash flows from operating activities:
Net income (loss)	$	1,317		$	(10,868	)
Adjustments to reconcile net income (loss) to cash provided by operating activities:
Impairments and other charges & credits		(47	)		12,596
Depreciation and amortization (1)		1,588			1,983
Deferred taxes		(33	)		(1,147	)
Stock-based compensation expense		229			318
Earnings of equity method investments, less dividends received		6			(18	)
Change in assets and liabilities: (2)
(Increase) decrease in receivables		(97	)		2,159
Decrease (increase) in inventories		54			(24	)
Decrease in other current assets		506			202
(Increase) decrease in other assets		(9	)		25
Decrease in accounts payable and accrued liabilities		(660	)		(2,898	)
Decrease in estimated liability for taxes on income		(124	)		(261	)
Increase (decrease) in other liabilities		1			(14	)
Other		(12	)		13
NET CASH PROVIDED BY OPERATING ACTIVITIES		2,719			2,066
Cash flows from investing activities:
Capital expenditures		(694	)		(858	)
APS investments		(305	)		(252	)
Multiclient seismic data costs capitalized		(21	)		(86	)
Business acquisitions and investments, net of cash acquired		(134	)		(33	)
Proceeds from divestitures		-			325
Sale (purchase) of investments, net		790			(1,597	)
Other		(29	)		(98	)
NET CASH USED IN INVESTING ACTIVITIES		(393	)		(2,599	)
Cash flows from financing activities:
Dividends paid		(524	)		(1,560	)
Proceeds from employee stock purchase plan		137			146
Stock repurchase program		-			(26	)
Proceeds from issuance of long-term debt		34			5,837
Repayment of long-term debt		(1,076	)		(3,811	)
Net (decrease) increase in short-term borrowings		(94	)		96
Other		(81	)		(51	)
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES		(1,604	)		631
Net increase in cash before translation effect		722			98
Translation effect on cash		3			(16	)
Cash, beginning of period		844			1,137
Cash, end of period	$	1,569		$	1,219

(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 Notes to Consolidated Financial Statements

SCHLUMBERGER LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

(Unaudited)

	(Stated in millions, except per share amounts)

										Accumulated
										Other
	Common Stock						Retained			Comprehensive			Noncontrolling
January 1, 2021 – September 30, 2021	Issued			In Treasury			Earnings			Loss			Interests			Total
Balance, January 1, 2021	$	12,970		$	(3,033	)	$	7,018		$	(4,884	)	$	418		$	12,489
Net income								1,280						37			1,317
Currency translation adjustments											6			(2	)		4
Changes in fair value of cash flow hedges											6						6
Pension and other postretirement benefit plans											179						179
Vesting of restricted stock		(227	)		227												-
Shares issued under employee stock purchase plan		(377	)		514												137
Stock-based compensation expense		229															229
Dividends declared ($0.375 per share)								(523	)								(523	)
Deconsolidation of subsidiary														(123	)		(123	)
Other		(24	)		5						(4	)		(27	)		(50	)
Balance, September 30, 2021	$	12,571		$	(2,287	)	$	7,775		$	(4,697	)	$	303		$	13,665

	(Stated in millions, except per share amounts)

										Accumulated
										Other
	Common Stock						Retained			Comprehensive			Noncontrolling
January 1, 2020 – September 30, 2020	Issued			In Treasury			Earnings			Loss			Interests			Total
Balance, January 1, 2020	$	13,078		$	(3,631	)	$	18,751		$	(4,438	)	$	416		$	24,176
Net loss								(10,892	)					24			(10,868	)
Currency translation adjustments											(200	)		2			(198	)
Changes in fair value of cash flow hedges											(183	)					(183	)
Pension and other postretirement benefit plans											78						78
Vesting of restricted stock		(152	)		152												-
Shares issued under employee stock purchase plan		(298	)		444												146
Stock repurchase program					(26	)											(26	)
Stock-based compensation expense		318															318
Dividends declared ($0.75 per share)								(1,041	)								(1,041	)
Other		(25	)		6									(14	)		(33	)
Balance, September 30, 2020	$	12,921		$	(3,055	)	$	6,818		$	(4,743	)	$	428		$	12,369

	(Stated in millions, except per share amounts)

										Accumulated
										Other
	Common Stock						Retained			Comprehensive			Noncontrolling
July 1, 2021 – September 30, 2021	Issued			In Treasury			Earnings			Loss			Interests			Total
Balance, July 1, 2021	$	12,730		$	(2,591	)	$	7,399		$	(4,776	)	$	297		$	13,059
Net income								550						12			562
Currency translation adjustments											30						30
Changes in fair value of cash flow hedges											(11	)					(11	)
Pension and other postretirement benefit plans											60						60
Vesting of restricted stock		(53	)		53												-
Shares issued under employee stock purchase plan		(175	)		250												75
Stock-based compensation expense		73															73
Dividends declared ($0.125 per share)								(174	)								(174	)
Deconsolidation of subsidiary																	-
Other		(4	)		1									(6	)		(9	)
Balance, September 30, 2021	$	12,571		$	(2,287	)	$	7,775		$	(4,697	)	$	303		$	13,665

	(Stated in millions, except per share amounts)

										Accumulated
										Other
	Common Stock						Retained			Comprehensive			Noncontrolling
July 1, 2020 – September 30, 2020	Issued			In Treasury			Earnings			Loss			Interests			Total
Balance, July 1, 2020	$	13,044		$	(3,339	)	$	7,073		$	(4,738	)	$	416		$	12,456
Net loss								(82	)					9			(73	)
Currency translation adjustments											(94	)		4			(90	)
Changes in fair value of cash flow hedges											43						43
Pension and other postretirement benefit plans											46						46
Vesting of restricted stock		(21	)		21												-
Shares issued under employee stock purchase plan		(203	)		264												61
Stock-based compensation expense		105															105
Dividends declared ($0.125 per share)								(173	)								(173	)
Other		(4	)		(1	)								(1	)		(6	)
Balance, September 30, 2020	$	12,921		$	(3,055	)	$	6,818		$	(4,743	)	$	428		$	12,369

SHARES OF COMMON STOCK

(Unaudited)

			(Stated in millions)

						Shares
	Issued		In Treasury			Outstanding
Balance, January 1, 2021		1,434		(42	)		1,392
Vesting of restricted stock		-		3			3
Shares issued under employee stock purchase plan		-		8			8
Balance, September 30, 2021		1,434		(31	)		1,403

See Notes to Consolidated Financial Statements

SCHLUMBERGER LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Basis of Presentation

The accompanying unaudited consolidated financial statements of Schlumberger Limited and its subsidiaries (“Schlumberger”) have been prepared in accordance with generally accepted accounting principles in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of Schlumberger management, all adjustments considered necessary for a fair statement have been included in the accompanying unaudited financial statements. All intercompany transactions and balances have been eliminated in consolidation. Operating results for the nine-month period ended September 30, 2021 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2021. The December 31, 2020 balance sheet information has been derived from the Schlumberger 2020 audited financial statements. For further information, refer to the Consolidated Financial Statements and notes thereto included in the Schlumberger Annual Report on Form 10-K for the year ended December 31, 2020, filed with the Securities and Exchange Commission on January 27, 2021.

Charges and Credits

During the third quarter of 2021, a start-up company that Schlumberger previously invested in was acquired. As a result of this transaction, Schlumberger’s ownership interest was converted into shares of a publicly traded company. Schlumberger recognized an unrealized pretax gain of $47 million ($36 million after-tax) 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 in the Consolidated Statement of Income (Loss).

During the first nine months of 2020, Schlumberger recorded the following charges and credits, all of which are classified as Impairments & other in the Consolidated Statement of Income (Loss):

	(Stated in millions)

	Pretax			Tax			Net
First quarter:
Goodwill	$	3,070		$	-		$	3,070
Intangible assets		3,321			815			2,506
Asset Performance Solutions investments		1,264			(4	)		1,268
North American pressure pumping		587			133			454
Severance		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
	$	12,596		$	1,057		$	11,539

First quarter 2020:

	•	Geopolitical events that increased the supply of low-priced oil to the global market occurred at the same time that demand weakened due to the worldwide effects of the COVID-19 pandemic, leading to a collapse in oil prices during March 2020. As a result, Schlumberger’s market capitalization deteriorated significantly compared to the end of 2019. Schlumberger’s stock price reached a low during the first quarter of 2020 not seen since 1995. Additionally, the Philadelphia Oil Services Sector index, which is comprised of companies involved in the oil services sector, reached an all-time low. As a result of these facts, Schlumberger determined that it was more likely than not that the fair value of certain of its reporting units were less than their carrying value. Therefore, Schlumberger performed an interim goodwill impairment test that resulted in a $3.1 billion goodwill impairment charge.

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

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

The discount rates utilized to value Schlumberger’s reporting units were between 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 related to Schlumberger’s 2016 acquisition of Cameron International Corporation and $1.1 billion related 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 Asset Performance Solutions (“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 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 11 – 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 were 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.

Income (loss) Per Share

The following is a reconciliation from basic income (loss) per share of Schlumberger to diluted income (loss) per share of Schlumberger:

(Stated in millions, except per share amounts)

	2021						2020
	Schlumberger Net Income		Average Shares Outstanding		Income per Share		Schlumberger Net Loss			Average Shares Outstanding		Loss per Share
Third Quarter
Basic	$	550		1,402	$	0.39	$	(82	)		1,391	$	(0.06	)
Unvested restricted stock		-		22				-			-
Diluted	$	550		1,424	$	0.39	$	(82	)		1,391	$	(0.06	)


	2021						2020
	Schlumberger Net Income		Average Shares Outstanding		Income per Share		Schlumberger Net Loss			Average Shares Outstanding		Loss per Share
Nine Months
Basic	$	1,280	$	1,399	$	0.92	$	(10,892	)	$	1,389	$	(7.84	)
Unvested restricted stock		-		23				-			-
Diluted	$	1,280	$	1,422	$	0.90	$	(10,892	)	$	1,389	$	(7.84	)

The number of outstanding options to purchase shares of Schlumberger common stock that were not included in the computation of diluted income (loss) per share, because to do so would have had an antidilutive effect, was as follows:

(Stated in millions)

	Third Quarter				Nine Months
	2021		2020		2021		2020
Employee stock options		43		49		43		49
Unvested restricted stock		-		18		-		18

Inventories

A summary of inventories, which are stated at the lower of average cost or net realizable value, is as follows:

(Stated in millions)

	Sept. 30,		Dec. 31,
	2021		2020
Raw materials & field materials	$	1,548	$	1,573
Work in progress		491		464
Finished goods		1,257		1,317
	$	3,296	$	3,354

Fixed Assets

A summary of fixed assets follows:

(Stated in millions)

	Sept. 30,		Dec. 31,
	2021		2020
Property, plant & equipment	$	29,071	$	29,744
Less: Accumulated depreciation		22,696		22,918
	$	6,375	$	6,826

Depreciation expense relating to fixed assets was as follows:

(Stated in millions)

	2021		2020
Third Quarter	$	350	$	385
Nine Months	$	1,057	$	1,251

Intangible Assets

The gross book value, accumulated amortization and net book value of intangible assets were as follows:

	(Stated in millions)

	Sept. 30, 2021						Dec. 31, 2020
	Gross		Accumulated		Net Book		Gross		Accumulated		Net Book
	Book Value		Amortization		Value		Book Value		Amortization		Value
Customer relationships	$	1,690	$	530	$	1,160	$	1,744	$	485	$	1,259
Technology/technical know-how		1,273		545		728		1,284		488		796
Tradenames		767		190		577		767		166		601
Other		1,551		751		800		1,488		689		799
	$	5,281	$	2,016	$	3,265	$	5,283	$	1,828	$	3,455

Amortization expense charged to income was as follows:

(Stated in millions)

	2021		2020
Third Quarter	$	75	$	79
Nine Months	$	226	$	292

Based on the net book value of intangible assets at September 30, 2021, amortization expense for the subsequent five years is estimated to be: fourth quarter of 2021—$76 million; 2022—$292 million; 2023—$285 million; 2024—$264 million; 2025—$248 million; and 2026—$244 million.

Long-term Debt

A summary of Long-term Debt follows:

(Stated in millions)

	Sept. 30,		Dec. 31,
	2021		2020
3.65% Senior Notes due 2023	$	1,497	$	1,496
3.90% Senior Notes due 2028		1,456		1,450
2.65% Senior Notes due 2030		1,250		1,250
1.375% Guaranteed Notes due 2026		1,164		1,221
2.00% Guaranteed Notes due 2032		1,157		1,214
0.25% Notes due 2027		1,049		1,100
0.50% Notes due 2031		1,047		1,099
4.00% Senior Notes due 2025		930		930
4.30% Senior Notes due 2029		846		846
3.75% Senior Notes due 2024		748		746
1.00% Guaranteed Notes due 2026		701		736
0.00% Notes due 2024		583		611
2.65% Senior Notes due 2022		599		598
1.40% Senior Notes due 2025		498		498
3.63% Senior Notes due 2022		295		295
7.00% Notes due 2038		204		206
5.95% Notes due 2041		113		114
5.13% Notes due 2043		98		99
4.00% Notes due 2023		80		80
3.70% Notes due 2024		55		55
2.40% Senior Notes due 2022		-		999
Commercial paper borrowings		-		393
	$	14,370	$	16,036

The estimated fair value of Schlumberger’s Long-term Debt, based on quoted market prices at September 30, 2021 and December 31, 2020, was $15.3 billion and $17.3 billion, respectively.

During the second quarter of 2021, Schlumberger replaced its €1.54 billion one-year committed facility with a €750 million three-year committed revolving credit facility maturing in June 2024. At September 30, 2021 no amounts had been drawn under this facility.

In addition to the revolving credit facility described above, at September 30, 2021, Schlumberger had separate committed credit facility agreements aggregating $5.75 billion with commercial banks, all of which 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 $1.0 billion matures in July 2026. Interest rates and other terms of borrowing under these lines of credit vary by facility.

There were no borrowings under the commercial paper programs at September 30, 2021. 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.

During the second quarter of 2021, Schlumberger repurchased all $665 million of its 3.30% Senior Notes due 2021.

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 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 2 – Charges and Credits.

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.

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.

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.

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 $193 million at September 30, 2021 ($427 million at December 31, 2020) and included in Other Liabilities was $37 million at September 30, 2021 ($13 million at December 31, 2020) 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 corroborated 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.

At September 30, 2021, contracts were outstanding for the US dollar equivalent of $8.3 billion in various foreign currencies, of which $6.1 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 September 30, 2021 and December 31, 2020.

The effect of derivative instruments designated as cash flow hedges, and those not designated as hedges, on the Consolidated Statement of Income (Loss) was as follows:

							(Stated in millions)

	Gain (Loss) Recognized in Income (Loss)
	Third Quarter						Nine Months
	2021			2020			2021			2020			Consolidated Statement of Income (Loss) Classification
Derivatives designated as cash flow hedges:
Cross currency swaps	$	(89	)	$	197		$	(267	)	$	347		Cost of services/sales
Foreign exchange contracts		2			(7	)		7			(12	)	Cost of services/sales
	$	(87	)	$	190		$	(260	)	$	335
Derivatives not designated as hedges:
Foreign exchange contracts	$	(45	)	$	(14	)	$	(19	)	$	(12	)	Cost of services/sales

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.

Segment Information

				(Stated in millions)

	Third Quarter 2021						Third Quarter 2020
				Income						Income (Loss)
				Before						Before
	Revenue			Taxes			Revenue			Taxes
Digital & Integration	$	812		$	284		$	738		$	201
Reservoir Performance		1,192			190			1,215			103
Well Construction		2,273			345			1,837			173
Production Systems		1,674			166			1,532			132
Eliminations & other		(104	)		(77	)		(64	)		(34	)
					908						575
Corporate & other (1)					(145	)					(151	)
Interest income					8						3
Interest expense (2)					(127	)					(131	)
Charges and credits (3)					47						(350	)
	$	5,847		$	691		$	5,258		$	(54	)

(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 expense excludes amounts which are included in the segments’ income ($3 million in 2021; $7 million in 2020).

(3)	See Note 2 – Charges and Credits.

				(Stated in millions)

	Nine Months 2021						Nine Months 2020
				Income						Income (Loss)
				Before						Before
	Revenue			Taxes			Revenue			Taxes
Digital & Integration	$	2,401		$	805		$	2,235		$	458
Reservoir Performance		3,312			448			4,354			259
Well Construction		6,319			827			6,747			687
Production Systems		4,946			475			5,001			467
Eliminations & other		(274	)		(176	)		(268	)		(124	)
					2,379						1,747
Corporate & other (1)					(434	)					(548	)
Interest income (2)					17						25
Interest expense (3)					(391	)					(397	)
Charges and credits (4)					47						(12,596	)
	$	16,704		$	1,618		$	18,069		$	(11,769	)

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

(2)	Interest income excludes amounts which are included in the segments’ income ($1 million in 2021; $1 million in 2020).

(3)	Interest expense excludes amounts which are included in the segments’ income ($11 million in 2021; $22 million in 2020).

(4)	See Note 2 – Charges and Credits.

Revenue by geographic area was as follows:

					(Stated in millions)

	Third Quarter				Nine Months
	2021		2020		2021		2020
North America	$	1,129	$	1,034	$	3,185	$	4,311
Latin America		1,160		828		3,255		2,503
Europe/CIS/Africa		1,481		1,397		4,190		4,597
Middle East & Asia		2,034		1,986		5,952		6,559
Eliminations & other		43		13		122		99
	$	5,847	$	5,258	$	16,704	$	18,069

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

						(Stated in millions)

	Third Quarter 2021
	North					Eliminations
	America		International			& other			Total
Digital & Integration	$	196	$	615		$	1		$	812
Reservoir Performance		79		1,112			1			1,192
Well Construction		382		1,839			52			2,273
Production Systems		469		1,205			-			1,674
Eliminations & other		3		(96	)		(11	)		(104	)
	$	1,129	$	4,675		$	43		$	5,847


	Third Quarter 2020
	North					Eliminations
	America		International			& other			Total
Digital & Integration	$	134	$	603		$	1		$	738
Reservoir Performance		275		937			3			1,215
Well Construction		235		1,562			40			1,837
Production Systems		389		1,138			5			1,532
Eliminations & other		1		(29	)		(36	)		(64	)
	$	1,034	$	4,211		$	13		$	5,258

				(Stated in millions)

	Nine Months 2021
	North						Eliminations
	America			International			& other			Total
Digital & Integration	$	549		$	1,850		$	2		$	2,401
Reservoir Performance		237			3,072			3			3,312
Well Construction		1,045			5,124			150			6,319
Production Systems		1,347			3,587			12			4,946
Eliminations & other		7			(236	)		(45	)		(274	)
	$	3,185		$	13,397		$	122		$	16,704


	Nine Months 2020
	North						Eliminations
	America			International			& other			Total
Digital & Integration	$	431		$	1,799		$	5		$	2,235
Reservoir Performance		1,208			3,137			9			4,354
Well Construction		1,201			5,395			151			6,747
Production Systems		1,488			3,487			26			5,001
Eliminations & other		(17	)		(159	)		(92	)		(268	)
	$	4,311		$	13,659		$	99		$	18,069

Revenue in excess of billings related to contracts where revenue is recognized over time was $0.2 billion at both September 30, 2021 and December 31, 2020. Such amounts are included within Receivables less allowance for doubtful accounts in the Consolidated Balance Sheet.

Due to the nature of its business, Schlumberger does not have significant backlog. Total backlog was $3.0 billion at September 30, 2021, of which approximately 51% is expected to be recognized as revenue over the next 12 months.

Billings and cash collections in excess of revenue was $0.9 billion at both September 30, 2021 and December 31, 2020. Such amounts are included within Accounts payable and accrued liabilities in the Consolidated Balance Sheet.

Pension and Other Postretirement Benefit Plans

Net pension (credit) cost for the Schlumberger pension plans included the following components:

(Stated in millions)

	Third Quarter												Nine Months
	2021						2020						2021						2020
	US			Int’l			US			Int’l			US			Int’l			US			Int’l
Service cost	$	10		$	24		$	10		$	31		$	33		$	91		$	41		$	105
Interest cost		32			67			36			76			95			199			111			226
Expected return on plan assets		(63	)		(159	)		(58	)		(148	)		(190	)		(478	)		(175	)		(443	)
Amortization of prior service cost		-			-			2			-			-			-			6			-
Amortization of net loss		11			58			9			39			33			169			31			119
	$	(10	)	$	(10	)	$	(1	)	$	(2	)	$	(29	)	$	(19	)	$	14		$	7

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

(Stated in millions)

	Third Quarter						Nine Months
	2021			2020			2021			2020
Service cost	$	7		$	5		$	20		$	23
Interest cost		8			7			24			27
Expected return on plan assets		(23	)		(19	)		(49	)		(52	)
Amortization of prior service credit		(6	)		(4	)		(17	)		(19	)
Curtailment gain		-			-			-			(69	)
	$	(14	)	$	(11	)	$	(22	)	$	(90	)

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 Income (Loss). See Note 2 – Charges and Credits.

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