SCHLUMBERGER LIMITED/NV - Annual Report: 2021 (Form 10-K)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

(Mark One)

For the fiscal year ended December 31, 2021

OR

For the transition period from __________ to __________

Commission File Number 1-4601

Schlumberger N.V.

(Schlumberger Limited)

(Exact name of registrant as specified in its charter)

Registrant’s telephone number in the United States, including area code, is: (713) 513-2000

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☑ No ☐

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☑

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files.) Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.  ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). YES ☐ NO ☑

As of June 30, 2021, the aggregate market value of the common stock of the registrant held by non-affiliates of the registrant was approximately $44.72 billion.

As of December 31, 2021, the number of shares of common stock outstanding was 1,403,381,685.

DOCUMENTS INCORPORATED BY REFERENCE

Certain information required to be furnished pursuant to Part III of this Form 10-K is set forth in, and is incorporated by reference from, Schlumberger’s definitive proxy statement for its 2022 Annual General Meeting of Stockholders, to be filed by Schlumberger with the Securities and Exchange Commission (“SEC”) pursuant to Regulation 14A within 120 days after December 31, 2021 (the “2022 Proxy Statement”).

SCHLUMBERGER LIMITED

Table of Contents

Form 10-K

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PART I

Item 1. Business.

All references in this report to “Registrant,” “Company,” “Schlumberger,” “we” or “our” are to Schlumberger Limited (Schlumberger N.V.) and its consolidated subsidiaries.

Schlumberger is a technology company that partners with customers to access energy by providing leading digital solutions and deploying innovative technologies to enable performance and sustainability for the global energy industry.  Schlumberger collaborates to create technology that unlocks access to energy for the benefit of all.

Schlumberger is organized under four Divisions operating in five distinct Basins that are aligned with critical hubs of activity.   These Divisions combine and integrate Schlumberger’s technologies, enhancing our ability to support the emerging long-term growth opportunities in each of these market segments.

The four Divisions are:

Digital & Integration – Combines Schlumberger’s digital workflow solutions and seismic data interpretation and management businesses with its integrated offering of Asset Performance Solutions (“APS”).  Through digital solutions and technologies, supported by the future of software, digital, infrastructure, connected assets, and data, this Division enhances efficiency to improve asset and enterprise-wide performance for customers.  APS helps develop or redevelop fields while increasing production, improving cash flow, and extending recovery for customers by providing fit-for-purpose solutions.  

The primary offerings comprising this Division are:

APS creates alignment between Schlumberger and the asset holder and/or the operator utilizing a commercial model whereby Schlumberger receives remuneration in line with the value it creates.  These projects are generally focused on developing and co-managing production of customer assets under long-term agreements.  Schlumberger invests its 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 Schlumberger is only compensated based on incremental production that it helps deliver above a mutually agreed baseline.  As of December 31, 2021, Schlumberger’s APS portfolio primarily consisted of three field production projects in Ecuador and one in Canada.  

Reservoir Performance – Consists of reservoir-centric technologies and services that are critical to optimizing reservoir productivity and performance. Reservoir Performance develops and deploys innovative technologies and services to evaluate, intervene, and stimulate reservoirs that help customers understand subsurface assets and maximize their value.

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The primary offerings comprising this Division are:

On December 31, 2020, Schlumberger contributed its onshore hydraulic fracturing business in the United States and Canada (“OneStim^®”), including its pressure pumping, pumpdown perforating, and Permian frac sand businesses, to Liberty Oilfield Services Inc. (“Liberty”), in exchange for a 37% equity interest in Liberty.  OneStim’s historical results were reported as part of the Reservoir Performance Division through the closing of the transaction.  As of December 31, 2021, Schlumberger had a 31% equity interest in Liberty.

Well Construction – Combines the full portfolio of products and services to optimize well placement and performance, maximize drilling efficiency, and improve wellbore assurance.  Well Construction provides operators and drilling rig manufacturers with services and products related to designing and constructing a well.

The primary offerings comprising this Division are:

Production Systems – Develops technologies and provides expertise that enhance production and recovery from subsurface reservoirs to the surface, into pipelines, and to refineries.  Production Systems provides a comprehensive portfolio of equipment and services including subsurface production systems, subsea and surface equipment and services, and midstream production systems.

The primary offerings comprising this Division are:

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Supporting the Divisions is a global network of research and engineering centers.  Through these centers Schlumberger advances its technology programs to safely and sustainably enhance industry efficiency, lower finding and producing costs, improve productivity, maximize reserve recovery and increase asset value.

The Divisions are deployed around a geographical structure within five Basins:  Americas Land, Offshore Atlantic, Middle East & North Africa, Asia, and Russia & Central Asia.  The Basins are configured around common regional characteristics to deploy fit-for-purpose technologies, operating models and skills and are focused on agility, responsiveness and competitiveness.  The Basins are comprised of GeoUnits, which can be a single country or made up of several countries.  With a strong focus on the customers, Basins identify opportunities for local growth.

Corporate Strategy

Schlumberger’s strategy is designed to adapt the Company to an evolving industry landscape shaped by emerging drivers, including capital discipline, regionalization of supply and demand, an efficiency imperative, and resilience—defined by sustainability and lower carbon footprint.  This strategy is designed to magnify Schlumberger’s ability to improve customer performance, which is the differentiating factor that will help our industry meet higher stakeholder expectations.

Oil and gas will remain critical to economic activity and prosperity.  According to the most recent International Energy Agency Sustainable Development Scenario, oil and gas are expected to represent approximately 45% of the global energy mix through 2040.  Schlumberger’s role is twofold: to enable customers to produce these resources efficiently, cost effectively and with the lowest carbon footprint and to support the world’s transition to a more diversified energy mix.

Schlumberger’s strategy is structured around three major themes, all of which are focused on customer performance: (i) strengthen the core; (ii) go-to-market; and (iii) horizons of growth.

Strengthen the Core

The core of Schlumberger is how we work with customers and execute our business.  The elements in this theme—which include customer collaboration, the integrity and efficiency of our operations, and capital stewardship—are enabled by our people and technology.  

As a service company, Schlumberger has always worked closely with customers.  We are exploring new ways to collaborate and help them overcome their challenges and improve performance.

Operations integrity and efficiency—core to Schlumberger’s culture—are enhanced by the digitization of our operations.  Just as Schlumberger is delivering digital solutions to our customers, we are advancing them in our own operations to capture value from our equipment and services businesses by integrating them into our digital structure.

Capital stewardship is a crucial factor for our industry.  Schlumberger has implemented a capital allocation framework that governs all investments, whether related to capital expenditures, mergers and acquisitions, or research and engineering.  The underlying principle behind this framework is that investment opportunities are prioritized based on returns and cash flow.  Our focus on capital stewardship also includes evolving certain businesses into innovative, less capital-intensive commercial models.

Go-to-Market

Industry markets have evolved into multiple, diverse regional markets that are increasingly competing with each other to meet global, regional, and domestic oil and gas demand.  Each of these regions has a set of resource plays—or basins—with localized economics and operational drivers.  As a result, the industry is witnessing a decoupling of the activity characteristics of each major region, resulting in a unique set of dynamics for each oil and gas basin across the world.  This presents Schlumberger with opportunities that can be optimally addressed with a basin-specific approach.

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A key differentiator for Schlumberger is its “fit-for-basin” approach and ability.  Fit-for-basin describes the mindset Schlumberger has adopted toward technology development, in-country value, and market access. Schlumberger is developing and deploying basin-specific technology that helps its customers overcome the challenges of their respective regions.  At the same time, in-country value enables regional efficiency and performance, while creating opportunity and aligning with the strategic priorities of our clients.  

In addition, technology access and performance models are highly strategic elements of our go-to-market strategy.  Technology access is fundamentally about making the right decisions with respect to our technology portfolio and how we go to market.  Performance models are focused on commercial and contractual innovations.  

The elements of our go-to-market strategy enable Schlumberger to develop deeper partnerships with customers, expanding on their needs and challenges from a basin-specific perspective to provide technology and business models tailored to regional or individual customer requirements. These elements allow us to share in the performance improvement we deliver for customers and partners.

Horizons of Growth

The third strategic element positions Schlumberger to increase its share in existing markets and expand into new long-term markets in digital, production and recovery, and energy transition, including Schlumberger New Energy and Transition Technologies.

Digital capabilities are crucial to long-term performance and resilience.  Through its industry-leading digital platform, Schlumberger will enable digital transformation at scale, unlocking significant value, and leading innovation across the digital domain in the industry.

Schlumberger seeks to define the future of digital technology in the energy industry and has designed and built a secure and flexible digital industry platform centered around differentiated digital technologies.  Enabled by key partnerships with companies such as Google, IBM, Microsoft, Amazon Web Services, AVEVA and NOV, Schlumberger provides an open digital platform that takes advantage of on-demand, high-performance computing and makes digital capabilities such as embedded artificial intelligence or machine learning readily accessible to customers.

The application of digital technology across the entire E&P value chain—from subsurface to drilling to production—has the potential to deliver a step-change in operational workflows that will significantly elevate our customers’ performance sustainably. Digital technology can move technical workflows from the desktop to the cloud, creating data structures that enable artificial intelligence and machine learning to provide insights at scale across our customers’ operations.

Production and recovery is about positioning Schlumberger to take advantage of two key trends shaping the market.  The first trend relates to accelerating gas discovery, development and production, as Schlumberger expects to see significant growth in gas demand over the next two decades as the world seeks to decarbonize its energy mix.  The second trend relates to operators’ increased focus on improving recovery from their existing wells, fields and infrastructure—ultimately achieving the most capital efficient production.  As a result and based on our deep domain knowledge from the subsurface to midstream production facilities, we are positioning our technology portfolio to participate and lead in these growing markets.

Finally, Schlumberger recognizes that its future will expand beyond oil and gas with energy transition, and the Company is positioning itself for long-term growth opportunities.  In this regard, in 2020 the Company created Schlumberger New Energy to develop businesses in low-carbon or carbon-neutral energy technologies, and in 2021 it announced its commitment to reach net-zero emissions by 2050 and launched its Transition Technologies portfolio to reduce emissions from oil and gas operations.  

Schlumberger New Energy is using partnership models and Schlumberger’s experience in technology industrialization to expand into energy verticals beyond oil and gas.  Schlumberger’s approach is to apply its domain expertise in areas adjacent to its existing activities where it can use its global footprint and execution platform to deliver at scale.

The Schlumberger New Energy portfolio consists of ventures in the domains of hydrogen, lithium, energy storage, carbon capture and sequestration (“CCS”), geothermal power and geoenergy for heating and cooling buildings.   While many of these investments are in new energy emerging sectors, Schlumberger New Energy has leveraged Schlumberger’s extensive experience in both the CCS and geothermal sectors.  For more than two decades, Schlumberger has participated in CCS projects providing consulting, technology services and project management.  In geothermal, Schlumberger provides the full spectrum of geothermal resource development services through GeothermEx, a consulting and services company we acquired in 2010.  Schlumberger New Energy has extended Schlumberger’s geothermal reach by exploring opportunities in the development of geothermal power projects.

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Schlumberger New Energy activities currently include the following ventures and strategic partnerships:

In June 2021, Schlumberger announced its commitment to achieve net-zero greenhouse gas (“GHG”) emissions by 2050.  Guided by climate science and GHG Protocol, Schlumberger spent 18 months conducting extensive analysis and working with experts to produce its decarbonization plan, which is aligned with the Paris Agreement ambition of limiting global warming to 1.5 degrees Celsius.  Schlumberger was the first energy services company to set a net-zero target inclusive of all three emission scopes. By setting targets with respect to the Company’s total 2019 baseline GHG footprint of approximately 54 million metric tons of CO₂ equivalent (which consisted of 52 million metric tons of Scope 3 emissions and two million metric tons of Scope 1 and Scope 2 emissions), and not just its Scope 1 and 2 footprint, Schlumberger’s comprehensive emissions reduction roadmap addresses the entire oil and gas value chain.

Schlumberger’s 2050 net zero target is supported by the following interim milestones, using 2019 as the baseline year:

There are three key components to Schlumberger achieving its net-zero target: reducing operational emissions, reducing customer emissions that occur while using Schlumberger technology, and taking carbon-negative actions of sufficient scale to offset any residual operational and technology emissions that the Company may have in 2050.

Schlumberger’s Scope 1 and 2 emissions primarily come from its fuel use and electricity consumption, whereas its Scope 3 emissions are indirect, such as customer emissions related to the use of Schlumberger technology and operational emissions related to purchased goods and services. In 2021, Schlumberger launched its Transition Technologies portfolio.  This portfolio is focused on addressing fugitive emissions, flaring reduction, electrification, well construction emissions, and full field development solutions.  Comprised of proprietary technologies and solutions, the Transition Technologies portfolio will help reduce direct and indirect emissions along with other environmental attributes, while simultaneously driving efficiency, reliability and performance for our customers.

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Human Capital

At December 31, 2021, Schlumberger’s workforce consisted of approximately 92,000 people representing more than 160 nationalities.

Schlumberger believes that the diversity of its workforce is one of its greatest strengths and its ambition is to maintain a workforce nationality mix that is aligned to its geographical revenue mix.  

Schlumberger recognizes that its ability to attract, develop, motivate and retain a highly competent and diverse workforce has been key to its success for many decades.  As a global company focused on creating and optimizing value for its customers, Schlumberger believes it is critical for its people to communicate with customers in their native languages and to share the values of the people in the countries where it works.  Furthermore, Schlumberger’s diverse workforce positions the Company to effectively deliver services and products that meet the unique expectations and requirements of, its stakeholders, including customers, suppliers and shareholders.  Schlumberger’s long-standing commitment to national and cultural diversity fosters a culture that is global in outlook, yet local in practice, which permeates every layer of the Company.

In addition to national and cultural diversity, gender balance is another important pillar of our diversity and inclusion strategy.  Schlumberger is committed to lead our industry in gender diversity.    Schlumberger has made significant progress towards achieving its gender balance goal of having women comprise 25% of the Company’s salaried workforce by 2025.  In this regard, in 2021, Schlumberger set its next goal which is for women to comprise 30% of the Company’s salaried workforce by 2030.  As of December 31, 2021, women made up approximately 23% of the Company’s salaried workforce.  Additionally, approximately 22% of management roles were held by women in 2021 and women represented approximately 48% of our 2021 new hires of salaried employees with science, technology, engineering and mathematics backgrounds.

Schlumberger is proud to provide a career platform that enables a culture of lifelong learning for all employees. Schlumberger is committed to offering borderless careers and making career decisions based on merit.  Schlumberger’s borderless careers philosophy is powered by its internal mobility practices, which offer employees multiple, flexible, career paths to help them acquire the required skills to reach their ambition. We seek to provide continuous growth opportunities through a combination of training and experience. Schlumberger strives to identify talent early and to provide opportunities for those employees who demonstrate exceptional performance and potential to progress to higher levels within the organization. These opportunities accelerate career development while fostering an agile workforce and the next generation of business leaders.

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Competition

The principal methods of competition within the energy services industry are technological innovation, quality of service and price differentiation.  These factors vary geographically and are dependent upon the different services and products that Schlumberger offers.  Schlumberger has numerous competitors, both large and small.

Intellectual Property

Schlumberger owns and controls a variety of intellectual property, including but not limited to patents, proprietary information, trade secrets and software tools and applications that, in the aggregate, are material to Schlumberger’s business.  While Schlumberger seeks and holds numerous patents covering various products and processes, no particular patent or group of patents is material to Schlumberger’s business.

Seasonality

Seasonal changes in weather and significant weather events can temporarily affect the delivery of Schlumberger’s products and services.  For example, the spring thaw in Canada and consequent road restrictions can affect activity levels, while the winter months in the North Sea, Russia and China can produce severe weather conditions that can temporarily reduce levels of activity.  In addition, hurricanes and typhoons can disrupt coastal and offshore operations.  Furthermore, customer spending patterns for multiclient data, software and other products may result in higher activity in the fourth quarter of the year as clients seek to fully utilize their annual budgets.  Conversely, customer budget constraints in North America may lead to lower demand for our services and products in the fourth quarter of the year.

Customers

Schlumberger’s primary customers are national oil companies, large integrated oil companies and independent operators. No single customer exceeded 10% of Schlumberger’s consolidated revenue during each of 2021, 2020 and 2019.

Governmental Regulations

Schlumberger is subject to numerous environmental and other governmental and regulatory requirements related to its operations worldwide. For additional details, see “Item 1(a). Risk Factors – Legal and Regulatory Risks”, which is incorporated by reference in this Item 1.

Corporate Information

Schlumberger was founded in 1926.  The Company is incorporated under the laws of Curaçao and has executive offices in Paris, Houston, London and The Hague.

Available Information

The Schlumberger website is www.slb.com.  Schlumberger uses its Investor Relations website, www.slb.com/ir, as a routine channel for distribution of important information, including news releases, analyst presentations, and financial information.  Schlumberger makes available free of charge through its Investor Relations website at www.slb.com/ir, access to its Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, proxy statements and Forms 3, 4 and 5 filed on behalf of directors and executive officers, and amendments to each of those reports, as soon as reasonably practicable after such material is filed with or furnished to the SEC.  Alternatively, you may access these reports at the SEC’s website at www.sec.gov.  Copies are also available, without charge, from Schlumberger Investor Relations, 5599 San Felipe, 17^th Floor, Houston, Texas 77056.  Unless expressly noted, the information on its website or any other website is not incorporated by reference in this Form 10-K and should not be considered part of this Form 10-K or any other filing Schlumberger makes with the SEC.

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Information About Our Executive Officers

The following table sets forth, as of January 26, 2022, the names and ages of the executive officers of Schlumberger, including all offices and positions held by each for the past five years.

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Item 1A. Risk Factors.

The following discussion of risk factors known to us contains important information for the understanding of our “forward-looking statements,” which are discussed immediately following Item 7A. of this Form 10-K and elsewhere.  These risk factors should also be read in conjunction with Item 7.  Management’s Discussion and Analysis of Financial Condition and Results of Operations, and the Consolidated Financial Statements and related notes included in this Form 10-K.

We urge you to consider carefully the risks described below, which discuss the material factors that make an investment in our securities speculative or risky, as well as in other reports and materials that we file with the SEC and the other information included or incorporated by reference in this Form 10-K.  Additional risks and uncertainties not currently known to us or that we currently deem immaterial may also materially adversely affect our business, reputation, financial condition, results of operations, cash flows and prospects.

Business and Operational Risks

Demand for our products and services is substantially dependent on the levels of expenditures by our customers.  Recent oil and gas industry downturns have resulted in reduced demand for oilfield products and services and lower expenditures by our customers, which has in the past had, and may in the future have, a material adverse effect on our financial condition, results of operations and cash flows.

Demand for our products and services depends substantially on expenditures by our customers for the exploration, development and production of oil and gas reserves.  These expenditures are generally dependent on our customers’ views of future demand for oil and gas and future oil and gas prices, as well as our customers’ ability to access capital.  In addition, the transition of the global energy sector from primarily a fossil fuel-based system to renewable energy sources could affect our customers’ levels of expenditures.

Actual and anticipated declines in oil and gas prices have in the past resulted in, and may in the future result in, lower capital expenditures, project modifications, delays or cancellations, general business disruptions, and delays in payment of, or nonpayment of, amounts that are owed to us.  These effects have had, and may in the future have, a material adverse effect on our financial condition, results of operations and cash flows.

Historically, oil and gas prices have experienced significant volatility and can be affected by a variety of factors, including:

The oil and gas industry has historically experienced periodic downturns, which have been characterized by diminished demand for our products and services and downward pressure on the prices that we are able to charge.  Sustained market uncertainty can also result in lower demand and pricing for our products and services.  A significant industry downturn, sustained market uncertainty, or increased availability of economical alternative energy sources could result in a reduction in demand for our products and services, which could adversely affect our business, financial condition, results of operations, cash flows and prospects.

Disruptions in the political, regulatory, economic, and social environments of the countries in which we operate could adversely affect our financial condition, results of operations and cash flows.

We generate revenue in more than 120 countries across the world.  Our non-US operations accounted for approximately 85% of our consolidated revenue in 2021, 81% in 2020 and 72% in 2019.  Instability and unforeseen changes in any of the markets in which we operate could result in business disruptions that may have an adverse effect on the demand for our products and services or our financial condition, results of operations or cash flows. These factors include, but are not limited to, the following:

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Failure to effectively and timely address the energy transition could adversely affect our business, results of operations and cash flows.

Our long-term success depends on our ability to effectively address the energy transition, which will require adapting our technology portfolio to potentially changing government requirements and customer preferences, as well as engaging with our customers to develop solutions to decarbonize oil and gas operations. If the energy transition landscape changes faster than anticipated or in a manner that we do not anticipate, demand for our products and services could be adversely affected. Furthermore, if we fail or are perceived to not effectively implement an energy transition strategy, or if investors or financial institutions shift funding away from companies in fossil fuel-related industries, our access to capital or the market for our securities could be negatively impacted.

We operate in a highly competitive environment.  If we are unable to maintain technology leadership, this could adversely affect any competitive advantage we hold.

The energy industry is highly competitive.  Our business may be adversely affected if we fail to continue developing and producing innovative technologies in response to changes in the market, including customer and government requirements, or if we fail to deliver such technologies to our customers in a timely and cost-competitive manner.  If we are unable to maintain technology leadership in our industry, our ability to maintain market share, defend, maintain or increase prices for our products and services, and negotiate acceptable contract terms with our customers could be adversely affected.  Furthermore, if competing technology accelerates the obsolescence of any of our products or services, the value of our intellectual property may be reduced, which could adversely affect our financial condition, results of operations and cash flows.

Limitations on our ability to obtain, maintain, protect or enforce our intellectual property rights, including our trade secrets, could cause a loss in revenue and any competitive advantage we hold.

There can be no assurance that the steps we take to obtain, maintain, protect and enforce our intellectual property rights will be adequate.  Some of our products or services, and the processes we use to produce or provide them, have been granted patent protection, have patent applications pending, or are trade secrets.  Our business may be adversely affected when our patents are unenforceable, the claims allowed under our patents are not sufficient to protect our technology, our patent applications are denied, or our trade secrets are not adequately protected.  Patent protection on some types of technology, such as software or machine learning processes, may not be available in certain countries in which we operate.  Our competitors may also be able to develop technology independently that is similar to ours without infringing on our patents or gaining access to our trade secrets, which could adversely affect our financial condition, results of operations and cash flows.

Third parties may claim that we have infringed upon or otherwise violated their intellectual property rights.

The tools, techniques, methodologies, programs and components we use to provide our services and products may infringe upon or otherwise violate the intellectual property rights of others or be challenged on that basis.  Regardless of the merits, any such claims generally result in significant legal and other costs, including reputational harm, and may distract management from running our business.  Resolving such claims could increase our costs, including through royalty payments to acquire licenses, if available, from third parties and through the development of replacement technologies.  If a license to resolve a claim were not available, we might not be able to continue providing a particular service or product, which could adversely affect our financial condition, results of operations and cash flows.

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Legal and Regulatory Risks

Our operations require us to comply with numerous laws and regulations, violations of which could have a material adverse effect on our financial condition, results of operations or cash flows.

Our operations are subject to international, regional, national, and local laws and regulations in every place where we operate, relating to matters such as environmental protection, health and safety, labor and employment, import/export controls, currency exchange, bribery and corruption, data privacy and cybersecurity, intellectual property, immigration, and taxation.  These laws and regulations are complex, frequently change, and have tended to become more stringent over time.  In the event the scope of these laws and regulations expands in the future, the incremental cost of compliance could adversely affect our financial condition, results of operations, or cash flows.

Our operations are subject to anti-corruption and anti-bribery laws and regulations, such as the Foreign Corrupt Practices Act, the U.K. Bribery Act and other similar laws.  We are also subject to trade control regulations and trade sanctions laws that restrict the movement of certain goods to, and certain operations in, various countries or with certain persons.  Our ability to transfer people, products and data among certain countries is subject to maintaining required licenses and complying with these laws and regulations.

The internal controls, policies and procedures, and employee training and compliance programs we have implemented to deter prohibited practices may not be effective in preventing employees, contractors or agents from violating or circumventing such internal policies or from material violations of applicable laws and regulations.  Any determination that we have violated or are responsible for violations of anti-bribery, trade control, trade sanctions or anti-corruption laws could have a material adverse effect on our financial condition.  Violations of international and US laws and regulations or the loss of any required licenses may result in fines and penalties, criminal sanctions, administrative remedies or restrictions on business conduct, and could have a material adverse effect on our business, operations and financial condition.  In addition, any major violations could have a significant effect on our reputation and consequently on our ability to win future business and maintain existing customer and supplier relationships.

Existing or future laws, regulations, court orders or other initiatives to limit greenhouse gas emissions or relating to climate change may reduce demand for our products and services.

Continuing political and social attention to the issue of climate change has resulted in both existing and proposed international agreements and national, regional and local legislation and regulatory measures to limit GHG emissions. The implementation of these agreements, including the Paris Agreement, the Europe Climate Law, and other existing or future regulatory mandates, may adversely affect the demand for our products and services, impose taxes on us or our customers, require us or our customers to reduce GHG emissions from our technologies or operations, or accelerate the obsolescence of our products or services.

In addition, increasing attention to the risks of climate change has resulted in an increased possibility of litigation or investigations brought by public and private entities against oil and gas companies in connection with their GHG emissions.  As a result, we or our customers may become subject to court orders compelling a reduction of GHG emissions or requiring mitigation of the effects of climate change.  

There is also increased focus by governments and our customers, investors and other stakeholders on climate change, sustainability and energy transition matters. Negative attitudes toward or perceptions of our industry or fossil fuel products and their relationship to the environment have led governments, non-governmental organizations, and companies to implement initiatives to conserve energy and promote the use of alternative energy sources, which may reduce the demand for and production of oil and gas in areas of the world where our customers operate, and thus reduce future demand for our products and services.  In addition, initiatives by investors and financial institutions to limit funding to companies in fossil fuel-related industries may adversely affect our liquidity or access to capital. Any of these initiatives may, in turn, adversely affect our financial condition, results of operations and cash flows.

Environmental compliance costs and liabilities arising as a result of environmental laws and regulations could have a material adverse effect on our business, financial condition and results of operations.

We are subject to numerous laws and regulations relating to environmental protection, including those governing air and GHG emissions, water discharges and waste management, as well as the importation and use of hazardous materials, radioactive materials, chemicals and explosives.  The technical requirements of these laws and regulations are becoming increasingly complex, stringent and expensive to implement.  These laws sometimes provide for “strict liability” for remediation costs, damages to natural resources or threats to public health and safety.  Strict liability can render us liable for damages without regard to our degree of care or fault.  Some environmental laws provide for joint and several strict liability for remediation of spills and releases of hazardous substances, and, as a result, we could be liable for the actions of others.

We use and generate hazardous substances and wastes in our operations.  In addition, many of our current and former properties are, or have been, used for industrial purposes.  Accordingly, we could become subject to material liabilities relating to the investigation

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and cleanup of potentially contaminated properties, and to claims alleging personal injury or property damage as a result of exposures to, or releases of, hazardous substances.  In addition, stricter enforcement or changing interpretations of existing laws and regulations, the enactment of new laws and regulations, the discovery of previously unknown contamination or the imposition of new or increased requirements could require us to incur costs or become the basis for new or increased liabilities that could have a material adverse effect on our business, operations and financial condition.

We could be subject to substantial liability claims, including as a result of well incidents, which could adversely affect our reputation, financial condition, results of operations and cash flows.

The technical complexities of our operations expose us to a wide range of significant health, safety and environmental risks.  Our operations involve production-related activities, radioactive materials, chemicals, explosives and other equipment and services that are deployed in challenging exploration, development and production environments.  Accidents or acts of malfeasance involving these services or equipment, or a failure of a product (including as a result of a cyberattack), could cause personal injury, loss of life, damage to or destruction of property, equipment or the environment, or suspension of operations, which could materially adversely affect us.  Any well incidents, including blowouts at a well site or any loss of containment or well control, may expose us to additional liabilities, which could be material.  Generally, we rely on contractual indemnities, releases, and limitations on liability with our customers and insurance to protect us from potential liability related to such events.  However, our insurance may not protect us against liability for certain kinds of events, including events involving pollution, or against losses resulting from business interruption.  Moreover, we may not be able to maintain insurance at levels of risk coverage or policy limits that we deem adequate.  Any damages caused by our services or products that are not covered by insurance or are in excess of policy limits or subject to substantial deductibles, could adversely affect our financial condition, results of operations and cash flows.

General Risk Factors

The COVID-19 pandemic and resulting adverse economic conditions have had, and may to continue to have, a material adverse effect on our financial condition, results of operations and cash flows.

The COVID-19 pandemic caused a significant and swift reduction in global economic activity during 2020, which significantly weakened demand for oil and gas, and in turn, for our products and services.  Other effects of the pandemic included, and may continue to include, significant volatility and disruption of the global financial markets; adverse revenue and net income effects; disruptions to our operations, including suspension or deferral of drilling activities; customer shutdowns of oil and gas exploration and production; downward revisions to customer budgets; limitations on access to sources of liquidity; supply chain disruptions; limitations on access to raw materials; employee impacts from illness, school closures and other community response measures; and temporary closures of our facilities or the facilities of our customers and suppliers.  The pandemic is continuously evolving, and the extent to which our operating and financial results will continue to be affected will depend on various factors beyond our control, such as the ultimate duration, severity and sustained geographic resurgence of the virus; the emergence of new variants and strains of the virus; and the success of actions to contain the virus and its variants, or treat its impact, such as the availability and acceptance of vaccines.  COVID-19, and the volatile regional and global economic conditions stemming from the pandemic, could also aggravate our other risk factors described in this Form 10-K.

Our operations are subject to cyber incidents that could have a material adverse effect on our business, financial condition and results of operations.

We are highly dependent on digital technologies and services to conduct our business.  We use these technologies for internal purposes, including data storage, processing and transmission, as well as in our interactions with our business associates, such as customers and suppliers.  In addition, we develop software and other digital products and services that store, retrieve, manipulate and manage our customers’ information and data, external data, personal data, and our own data.  Our digital technologies and services, and those of our business associates, are subject to the risk of cyberattacks and, given the nature of such attacks, some incidents can remain undetected for a period of time despite efforts to detect and respond to them in a timely manner.  There can be no assurance that the systems we have designed to prevent or limit the effects of cyber incidents or attacks will be sufficient to prevent or detect material consequences arising from such incidents or attacks, or to avoid a material adverse impact on our systems after such incidents or attacks do occur.  We have experienced and will continue to experience varying degrees of cyber incidents in the normal conduct of our business, including attacks resulting from phishing emails and ransomware infections.  Even if we successfully defend our own digital technologies and services, we also rely on third-party business associates, with whom we may share data and services, to defend their digital technologies and services against attack.  

We could suffer significant damage to our reputation if a cyber incident or attack were to allow unauthorized access to or modification of our customers’ data, other external data, personal data, or our own data, or if the services we provide to our customers were disrupted, or if our digital products or services were reported to have or were perceived as having security vulnerabilities.  This could lead to fewer customers using our digital products and services, which could have a material adverse impact on our financial condition and results of operations.  In addition, if our systems, or our third-party business associates’ systems, for protecting against cybersecurity risks prove to be insufficient, we could be adversely affected by, among other things, loss of or damage to intellectual property, proprietary or confidential information, or customer, supplier, or employee data; breach of personal data; interruption of our business operations; increased legal and regulatory exposure, including fines and remediation costs; and increased costs required to

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prevent, respond to, or mitigate cybersecurity attacks.  These risks could harm our reputation and our relationships with our employees, business associates and other third parties, and may result in claims against us.  The occurrence of any of these risks could have a material adverse effect on our business, financial condition and results of operations.

Our aspirations, goals, and initiatives related to sustainability and emissions reduction, and our public statements and disclosures regarding them, expose us to numerous risks.

We have developed, and will continue to develop and set, goals, targets, and other objectives related to sustainability matters, including our net-zero target and our energy transition strategy.  Statements related to these goals, targets and objectives reflect our current plans and do not constitute a guarantee that they will be achieved.  Our efforts to research, establish, accomplish, and accurately report on these goals, targets, and objectives expose us to numerous operational, reputational, financial, legal, and other risks.  Our ability to achieve any stated goal, target, or objective, including with respect to emissions reduction, is subject to numerous factors and conditions, some of which are outside of our control.  

Our business may face increased scrutiny from investors and other stakeholders related to our sustainability activities, including the goals, targets, and objectives that we announce, and our methodologies and timelines for pursuing them.  If our sustainability practices do not meet investor or other stakeholder expectations and standards, which continue to evolve, our reputation, our ability to attract or retain employees, and our attractiveness as an investment or business partner could be negatively affected.  Similarly, our failure or perceived failure to pursue or fulfill our sustainability-focused goals, targets, and objectives, to comply with ethical, environmental, or other standards, regulations, or expectations, or to satisfy various reporting standards with respect to these matters, within the timelines we announce, or at all, could adversely affect our business or reputation, as well as expose us to government enforcement actions and private litigation.  

Failure to attract and retain qualified personnel could impede our operations.

Our future success depends on our ability to recruit, train, and retain qualified personnel.  We require highly skilled personnel to operate and provide technical services and support for our business.  Competition for the personnel necessary for our businesses intensifies as activity increases and technology evolves.  In periods of high utilization, it is often more difficult to find and retain qualified individuals.  This could increase our costs or have other material adverse effects on our operations.

Severe weather, including extreme weather conditions associated with climate change, has in the past and may in the future adversely affect our operations and financial results.

Our business has been, and in the future will be, affected by severe weather in areas where we operate, which could materially affect our operations and financial results.  Extreme weather conditions such as hurricanes, flooding and landslides have in the past resulted in, and may in the future result in, the evacuation of personnel, stoppage of services and activity disruptions at our facilities, in our supply chain, or at well-sites, or result in disruptions of our customers’ operations.  Particularly severe weather events affecting platforms or structures may result in a suspension of activities.  In addition, acute or chronic physical impacts of climate change, such as sea level rise, coastal storm surge, inland flooding from intense rainfall and hurricane-strength winds may damage our facilities.  Any such extreme weather events may result in increased operating costs or decreases in revenue, which could adversely affect our financial condition, results of operations and cash flows.

Item 1B.  Unresolved Staff Comments.

None.

Item 2.  Properties.

Schlumberger owns or leases numerous manufacturing facilities, administrative offices, service centers, research centers, data processing centers, mines, and other facilities throughout the world, none of which are individually material.  

Item 3.  Legal Proceedings.

The information with respect to this Item 3. Legal Proceedings is set forth in Note 14 – Contingencies, in the accompanying Consolidated Financial Statements.

Item 4.  Mine Safety Disclosures.

Information concerning mine safety violations or other regulatory matters required by section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K is included in Exhibit 95 to this Form 10-K.

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PART II

Item 5.  Market for Schlumberger’s Common Stock, Related Stockholder Matters and Issuer Purchases of Equity Securities.

As of December 31, 2021, there were 23,753 stockholders of record. The principal US market for Schlumberger’s common stock is the New York Stock Exchange (“NYSE”), where it is traded under the symbol “SLB.”

The following graph compares the cumulative total stockholder return on Schlumberger common stock with the cumulative total return on the Standard & Poor’s 500 Index (“S&P 500 Index”) and the cumulative total return on the Philadelphia Oil Service Index. It assumes $100 was invested on December 31, 2016 in Schlumberger common stock, in the S&P 500 Index and in the Philadelphia Oil Service Index, as well as the reinvestment of dividends on the last day of the month of payment. The stockholder return set forth below is not necessarily indicative of future performance.  The following graph and related information shall not be deemed “soliciting material” or to be “filed” with the SEC, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent that Schlumberger specifically incorporates it by reference into such filing.

Comparison of Five-Year Cumulative Total Return Among

Schlumberger Common Stock, the S&P 500 Index and the

Philadelphia Oil Service Index

Share Repurchases

On January 21, 2016, the Schlumberger Board of Directors approved a $10 billion share repurchase program for Schlumberger common stock.  Schlumberger had repurchased $1.0 billion of its common stock under this program as of December 31, 2021. Schlumberger did not repurchase any of its common stock during 2021.

Unregistered Sales of Equity Securities

None.

Item 6. [Reserved].

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Item 7.  Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis contains forward-looking statements, including, without limitation, statements relating to our plans, strategies, objectives, expectations, intentions and resources. Such forward-looking statements should be read in conjunction with our disclosures under “Item 1A. Risk Factors” of this Form 10-K.

This section of the Form 10-K generally discusses 2021 and 2020 items and year-to-year comparisons between 2021 and 2020.   Discussions of 2019 items and year-to-year comparison between 2020 and 2019 that are not included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of Schlumberger’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

2021 Executive Overview

Continuing a broad recovery that began in 2020, oil markets were generally positive throughout the year, with Brent oil price starting 2021 at the year’s low of $51 per barrel, reaching a high of $85 in November.  Sentiment in oil markets was largely positive as global demand recovered and supply was managed by a combination of the reassurance of continued intervention from OPEC+, and ongoing capital discipline by publicly traded operators in North America.

Within the context of strengthening fundamentals across the year, there were several instances where the potential impact of COVID-19 variants raised concerns regarding demand growth. However, these periods were shorter lived than the prolonged decline in 2020, which was characterized by economic lockdowns, and oil prices soon rebounded. Pricing was initially supported by OPEC+ production agreements that had come into effect in 2020 and remained resilient as those production targets were gradually increased in the second half of 2021, as crude and product stocks continued a multiyear downward trend.

International activity grew broadly across geographies in the second half of the year, including offshore and deepwater, with operators investing in projects to meet long-term objectives and regional demand growth.

Activity in North America land also rebounded, albeit from a very low base in 2020, but did not return to prepandemic levels, as investment and production were subdued as a result of continued capital discipline on the part of larger producers.

International natural gas pricing, while following the traditional seasonal pattern, was volatile, swinging from pandemic-driven lows in 2020 to record highs around the world. Domestically, US Henry Hub natural gas prices rose dramatically, averaging $3.91 per million British thermal units on a monthly basis—as compared to $2.04 in 2020—and reaching a peak of $5.87 in October before ending the year at $3.73.

Against this backdrop, Schlumberger’s full-year 2021 revenue of $22.9 billion decreased 3% year-on-year as a result of the divestitures of the OneStim pressure pumping business and the North America low-flow artificial lift business during the fourth quarter of 2020.  These divestitures were consistent with Schlumberger’s strategy to focus on expanding margins, minimizing earnings volatility and focusing on less capital-intensive businesses by high-grading and rationalizing its business portfolio.  The divested businesses accounted for approximately 25% of Schlumberger’s North America revenue in 2020. Excluding the impact of these divestitures, which generated $1.3 billion of revenue during 2020 (all of which was in North America), full-year 2021 global revenue grew 3% year-on-year, driven by an 8% increase in North America and a 2% increase in international revenue.

Financial performance in 2021 was driven by global oil and gas activity growth in the second half of the year as investment spending experienced double-digit growth year-on-year. Consequently, Schlumberger’s revenue in the second half of 2021 grew 12% compared to the same period of 2020, and increased 18% when adjusted for the effects of the divestitures.  International revenue increased 12% year-on-year during the second half of 2021, and North America revenue increased 10%, or 44% when adjusted for the effects of the divestitures (which generated $0.5 billion of revenue during the second half of 2020).

Looking ahead into 2022, we believe the industry macro fundamentals are very favorable, due to the combination of projected steady demand recovery, an increasingly tight supply market, and supportive oil prices. Schlumberger expects this to result in a material step up in industry capital spending with double-digit growth in both the international and North American markets.  Absent any further significant COVID-related disruption, oil demand is expected to exceed prepandemic levels before the end of the year and further strengthen in 2023. We believe these favorable market conditions are similar to those experienced during the last industry supercycle, suggesting that resurgent global demand-led capital spending will result in an exceptional multiyear growth cycle.

Throughout 2021, Schlumberger continued to strengthen its core portfolio, enhanced its sustainability leadership, successfully advanced its digital journey, and expanded its new energy portfolio.  Schlumberger is well prepared to fully seize this growth ahead. Schlumberger is entering this cycle in a position of strength, having reset its operating leverage, expanded peer-leading margins across multiple quarters, and aligned its technology and business portfolio with the new industry imperatives.

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Fourth Quarter 2021 Results

Fourth-quarter revenue of $6.22 billion increased 6% sequentially as a result of broad-based growth across all geographies and Divisions.

International revenue of $4.90 billion grew 5% sequentially, driven primarily by strengthening activity, increased digital sales, and early benefits of pricing improvements. The sequential revenue increase was led by growth in Europe/CIS/Africa largely due to strong offshore activity in Africa. This growth was complemented by project startups and activity gains in the Middle East & Asia and sustained activity growth in Latin America.

In North America, revenue of $1.28 billion grew 13% sequentially, outperforming the rig count growth. The sequential growth was driven by strong offshore and land drilling activity and increased exploration data licensing.

Fourth-quarter pretax segment operating margin of 16% increased 31 basis points (bps) sequentially, reaching its highest quarterly level since 2015, largely as a result of the accretive effect of accelerating digital sales.

Digital & Integration

Fourth-quarter revenue of $889 million increased 10% sequentially, propelled by accelerated digital sales internationally, particularly in Europe/CIS/Africa and Middle East & Asia, and increased exploration data licensing sales in North America offshore and the Permian. These increases, however, were partially offset by the effects of a temporary production interruption in the APS projects in Ecuador due to pipeline disruption.

Digital & Integration pretax operating margin of 38% expanded 268 bps sequentially, primarily due to higher digital and exploration data licensing sales.

Reservoir Performance

Fourth-quarter revenue of $1.3 billion increased 8% sequentially, primarily due to higher intervention activity across the international offshore markets and activity gains in the Middle East & Asia.

Reservoir Performance pretax operating margin of 16% was essentially flat sequentially.

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Well Construction

Fourth-quarter revenue of $2.4 billion increased 5% sequentially, driven by higher measurements and drilling fluids activity and increased drilling equipment sales. North America revenue increased 15% due to higher rig count on land and increased well construction activity in the US Gulf of Mexico. International revenue growth of 3% was driven by growth in Latin America.

Well Construction pretax operating margin of 15% was essentially flat sequentially.

Production Systems

Fourth-quarter revenue of $1.8 billion increased 5% sequentially driven by a 6% increase in international revenue.  This growth was mainly in Europe/CIS/Africa as a result of strong project progress.

Production Systems pretax operating margin of 9% declined 85 bps sequentially due to an unfavorable mix and the impact of delayed deliveries due to global supply and logistics constraints.

Full-Year 2021 Results

Full-year 2021 revenue of $22.9 billion decreased 3% year-on-year primarily as a result of the divestitures of the OneStim pressure pumping business and the low-flow artificial lift business during the fourth quarter of 2020. Excluding the impact of these divestitures, which generated $1.3 billion of revenue (all of which was in North America) during 2020, global revenue increased 3% year-on-year.  

In North America revenue declined 18% year-on-year; however, excluding the impact of the previously described divestitures, full-year revenue increased 8%.  International revenue also increased 2%.

The growth in 2021 was driven by strong global oil and gas activity in the second half of the year.  Schlumberger’s revenue in the second half of 2021 grew 12% compared to the same period of 2020 and increased 18% when adjusted for the effects of the divestitures.  This growth was pervasive across all geographies and Divisions.

Full-year 2021 pretax operating margin of 15% was 450 bps higher compared to 2020, primarily due to the divestiture of certain businesses in North America, which were previously dilutive to margins, combined with reduced depreciation and amortization expense following the asset impairment charges recorded during 2020 and the effects of cost reduction measures.

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Digital & Integration

Full-year 2021 revenue of $3.3 billion increased 7% year-on-year, primarily driven by robust APS project revenue from higher production and improved oil prices.

Year-on-year, pretax operating margin increased 11 percentage points to 35%.  Operating margin increased due to improved profitability from APS projects as a result of higher oil prices and reduced amortization expense following the asset impairment charges that were recorded during 2020 relating to certain APS investments.

Reservoir Performance

Full-year 2021 revenue of $4.6 billion decreased 18% year-on-year, largely reflecting the effects of the OneStim divestiture, which generated $1.2 billion of revenue during 2020.  Excluding the impact of the OneStim divestiture, revenue increased 5% year-on-year primarily driven by strong activity in Latin America.

Year-on-year, pretax operating margin increased by 779 bps to 14% despite the significant drop in revenue, primarily due to the divestiture of the OneStim business, which was previously dilutive to margins.

Well Construction

Full-year 2021 revenue of $8.7 billion increased 1% year-on-year.

Year-on-year, pretax operating margin increased 363 bps to 14% despite the relatively flat revenue, largely as a result of the implementation of cost control measures.

Production Systems

Full-year 2021 revenue of $6.7 billion increased 1% year-on-year, primarily driven by improved international activity that was largely offset by a decline in completions activity in North America as a result of the pandemic.

Year-on-year, pretax operating margin was essentially flat at 9%.

Interest and Other Income

Interest & other income consisted of the following:

The decrease in earnings of equity method investments in 2021 as compared to 2020 is primarily attributable to Schlumberger’s share of net losses associated with Schlumberger’s investment in Liberty.  Schlumberger records its share of Liberty’s net income or loss on a one-quarter lag.

During the fourth quarter of 2021 Schlumberger sold 9.5 million of its shares of Liberty and recognized a gain of $28 million.  See Note 3 to the Consolidated Financial Statements.

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 to increase the carrying value of this investment to its estimated fair value of approximately $55 million.  See Note 3 to the Consolidated Financial Statements.  

During the fourth quarter of 2020, a start-up company that Schlumberger previously invested in completed an initial public offering.  As a result, Schlumberger recognized an unrealized gain of $39 million to increase the carrying value of this investment to its fair

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value of $43 million as of December 31, 2020.  See Note 3 to the Consolidated Financial Statements.  Schlumberger sold this investment during 2021, which did not result in a material gain or loss.

Interest Expense

Interest expense of $539 million in 2021 decreased $24 million compared to 2020 primarily as a result of the $2.7 billion year-on-year reduction in total debt outstanding.

Other

Research & engineering and General & administrative expenses, as a percentage of Revenue, were as follows:

Income Taxes

The Schlumberger effective tax rate is sensitive to the geographic mix of earnings.  When the percentage of pretax earnings generated outside of North America increases, the Schlumberger effective tax rate generally decreases.  Conversely, when the percentage of pretax earnings generated outside of North America decreases, the Schlumberger effective tax rate generally increases.

The Schlumberger effective tax rate was 19% in 2021 as compared to 7% in 2020.  The increase in the effective tax rate was primarily due to the charges and credits described in Note 3 to the Consolidated Financial Statements. These charges and credits reduced the effective tax rate in 2020 by 12 percentage points as a significant portion of these charges were not tax-effective.

Charges and Credits

Schlumberger recorded charges and credits during 2021 and 2020. These charges and credits, which are summarized below, are more fully described in Note 3 to the Consolidated Financial Statements.

The following is a summary of the 2021 charges and credits.

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The following is a summary of the 2020 charges and credits.

As a result of the first quarter 2020 impairment charges, commencing with the second quarter of 2020, depreciation and amortization expense was reduced by approximately $95 million on a quarterly basis.  Approximately $33 million of this quarterly reduction is reflected in the Digital & Integration Division and $12 million is reflected in the Reservoir Performance Division.  The remaining $50 million is reflected in the “Corporate & other” line item.

As a result of the second quarter 2020 restructuring and impairment charges, commencing with the third quarter of 2020, depreciation and amortization expense was reduced by approximately $80 million and lease expense was reduced by $25 million on a quarterly basis.  Approximately $51 million of this quarterly reduction is reflected in the Digital & Integration Division and $31 million is reflected in the Reservoir Performance Division, with the remaining $23 million reflected among the Well Construction Division and Production Systems Division.

As a result of the third quarter 2020 restructuring charges, commencing with the fourth quarter of 2020, depreciation and lease expense was reduced by $15 million on a quarterly basis.  This quarterly reduction is reflected among all of the Divisions.

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Liquidity and Capital Resources

Details of the components of liquidity as well as changes in liquidity follow:

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Key liquidity events during 2021 and 2020 included:

As of December 31, 2021, Schlumberger had $3.14 billion of cash and short-term investments and committed credit facility agreements with commercial banks aggregating $6.60 billion, all of which was available and unused.  Schlumberger believes these amounts, along with cash generated by ongoing operations, will be sufficient to meet future business requirements for the next 12 months and beyond.

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The following table reflects the carrying amounts of Schlumberger’s debt at December 31, 2021 by year of maturity:

Interest payments on fixed rate debt obligations by year are as follows:

See Note 13, Leases of the Consolidated Financial Statements for details regarding Schlumberger’s lease obligations.

Schlumberger has outstanding letters of credit/guarantees that relate to business performance bonds, custom/excise tax commitments, facility lease/rental obligations, etc. These were entered into in the ordinary course of business and are customary practices in the various countries where Schlumberger operates.

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Critical Accounting Policies and Estimates

The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States requires Schlumberger to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent liabilities and the reported amounts of revenue and expenses. The following accounting policies involve “critical accounting estimates” because they are particularly dependent on estimates and assumptions made by Schlumberger about matters that are inherently uncertain.

Schlumberger bases its estimates on historical experience and on various 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.

Allowance for Doubtful Accounts

Schlumberger maintains an allowance for doubtful accounts in order to record accounts receivable at their net realizable value.  Judgment is involved in recording and making adjustments to this reserve.  Allowances have been recorded for receivables believed to be uncollectible, including amounts for the resolution of potential credit and other collection issues such as disputed invoices.  Adjustments to the allowance may be required in future periods depending on how such potential issues are resolved, or if the financial condition of Schlumberger’s customers were to deteriorate resulting in an impairment of their ability to make payments.

As a large multinational company with a long history of operating in a cyclical industry, Schlumberger has extensive experience in working with its customers during difficult times to manage its accounts receivable.  During weak economic environments or when there is an extended period of weakness in oil and gas prices, Schlumberger typically experiences delays in the payment of its receivables.  However, except for a $469 million accounts receivable write-off during 2017 as a result of the political and economic condition in Venezuela, Schlumberger has not historically had material write-offs due to uncollectible accounts receivable.  Schlumberger generates revenue in more than 120 countries.  As of December 31, 2021, five of those countries individually accounted for greater than 5% of Schlumberger’s net accounts receivable balance, of which only one (the United States) accounted for greater than 10% of such receivables.

At times in recent periods, Schlumberger has experienced delays in payments from its primary customer in Mexico.  Included in Receivables, less allowance for doubtful accounts in the Consolidated Balance Sheet as of December 30, 2021 is approximately $0.5 billion of receivables relating to Mexico at December 31, 2021 ($0.7 billion at December 31, 2020).  Schlumberger’s receivables from its primary customer in Mexico are not in dispute and Schlumberger has not historically had any material write-offs due to uncollectible accounts receivable relating to this customer.

Goodwill, Intangible Assets and Long-Lived Assets

Schlumberger records the excess of purchase price over the fair value of the tangible and identifiable intangible assets acquired and liabilities assumed as goodwill. The goodwill relating to each of Schlumberger’s reporting units is tested for impairment annually as well as when an event, or change in circumstances, indicates an impairment may have occurred.

Under generally accepted accounting principles, Schlumberger has the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of one or more of its reporting units is greater than its carrying amount. If, after assessing the totality of events or circumstances, Schlumberger determines it is more likely than not that the fair value of a reporting unit is greater than its carrying amount, there is no need to perform any further testing. However, if Schlumberger concludes otherwise, then it is required to perform a quantitative impairment test by calculating the fair value of the reporting unit and comparing the fair value with the carrying amount of the reporting unit. If the fair value of the reporting unit is less than its carrying value, an impairment loss is recorded based on that difference.

Schlumberger has the option to bypass the qualitative assessment for any reporting unit in any period and proceed directly to performing the quantitative goodwill impairment test.

Schlumberger elected to perform the qualitative assessment described above for purposes of its annual goodwill impairment test in 2021.  Based on this assessment, Schlumberger concluded it was more likely than not that the fair value of each of its reporting units was significantly greater than its carrying amount.  Accordingly, no further testing was required.

During 2020 and 2019, Schlumberger recorded goodwill impairment charges of $3.1 billion and $8.8 billion and intangible asset impairment charges of $3.3 billion and $1.1 billion, respectively.  Refer to Note 3 to the Consolidated Financial Statements for details regarding the facts and circumstances that led to this impairment and how the fair value of each reporting unit was estimated, including the significant assumptions used and other details.

Long-lived assets, including fixed assets, intangible assets and investments in APS projects, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. In reviewing for impairment, the carrying value of such assets is compared to the estimated undiscounted future cash flows expected from the use of the assets and their eventual

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disposition. If such cash flows are not sufficient to support the asset’s recorded value, an impairment charge is recognized to reduce the carrying value of the long-lived asset to its estimated fair value. The determination of future cash flows as well as the estimated fair value of long-lived assets involves significant estimates on the part of management. If there is a material change in economic conditions or other circumstances influencing the estimate of future cash flows or fair value, Schlumberger could be required to recognize impairment charges in the future.

Income Taxes

Schlumberger conducts business in more than 100 tax jurisdictions, a number of which have tax laws that are not fully defined and are evolving. Schlumberger’s tax filings are subject to regular audits by the tax authorities. These audits may result in assessments for additional taxes that are resolved with the authorities or, potentially, through the courts. Schlumberger recognizes the impact of a tax position in its financial statements if that position is more likely than not of being sustained on audit, based on the technical merits of the position.  Tax liabilities are recorded based on estimates of additional taxes that will be due upon the conclusion of these audits. Estimates of these tax liabilities are judgmental and are made based upon prior experience, and are updated in light of changes in facts and circumstances. However, due to the uncertain and complex application of tax regulations, the ultimate resolution of audits may result in liabilities that could be materially different from these estimates. In such an event, Schlumberger will record additional tax expense or tax benefit in the period in which such resolution occurs.

Revenue Recognition for Certain Long-term Construction-type Contracts

Schlumberger recognizes revenue 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.  Under this method, 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.  Approximately 6% of Schlumberger’s revenue in 2021, and 5% in each of 2020 and 2019, respectively, was recognized under this method.

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.  Profits are recognized based on the estimated project profit multiplied by the percentage complete.  Due to the nature of these projects, adjustments to estimates of contract revenue and total contract costs are often required as work progresses.  Any expected losses on a project are recorded in full in the period in which they become probable.

Pension and Postretirement Benefits

Schlumberger’s pension and postretirement benefit obligations are described in detail in Note 16 to the Consolidated Financial Statements. The obligations and related costs are calculated using actuarial concepts, which include critical assumptions related to the discount rate, expected rate of return on plan assets and medical cost trend rates. These assumptions are important elements of expense and/or liability measurement and are updated on an annual basis, or upon the occurrence of significant events.

The discount rate that Schlumberger uses reflects the prevailing market rate of a portfolio of high-quality debt instruments with maturities matching the expected timing of payment of the related benefit obligations. The following summarizes the discount rates utilized by Schlumberger for its various pension and postretirement benefit plans:

The expected rate of return for Schlumberger’s retirement benefit plans represents the average rate of return expected to be earned on plan assets over the period that benefits included in the benefit obligation are expected to be paid, with consideration given to the distribution of investments by asset class and historical rates of return for each individual asset class. The average expected rate of return on plan assets for the United States pension plans was 6.60% in both 2021 and 2020. The weighted average expected rate of return on plan assets for the international pension plans was 6.73% in 2021 and 6.71% in 2020. A lower expected rate of return would increase pension expense.

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The following illustrates the sensitivity to changes in certain assumptions, holding all other assumptions constant, for Schlumberger’s United States and international pension plans:

The following illustrates the sensitivity to changes in certain assumptions, holding all other assumptions constant, for Schlumberger’s United States postretirement medical plans:

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Item 7A.  Quantitative and Qualitative Disclosures About Market Risk.

Schlumberger is subject to market risks primarily associated with changes in foreign currency exchange rates.

As a multinational company, Schlumberger generates revenue in more than 120 countries. Schlumberger’s functional currency is primarily the US dollar. Approximately 70% of Schlumberger’s revenue in 2021 was denominated in US dollars. However, outside the United States, a significant portion of Schlumberger’s expenses is incurred in foreign currencies. Therefore, when the US dollar weakens in relation to the foreign currencies of the countries in which Schlumberger conducts business, the US dollar-reported expenses will increase.

Schlumberger maintains a foreign-currency risk management strategy that uses derivative instruments to manage the impact of changes in foreign exchange rates on its earnings.  Schlumberger enters into foreign currency forward contracts to provide a hedge against currency fluctuations on certain monetary assets and liabilities, and certain expenses denominated in currencies other than the functional currency.

A 10% appreciation in the US dollar from the December 31, 2021 market rates would increase the unrealized value of Schlumberger’s forward contracts by $5 million.  Conversely, a 10% depreciation in the US dollar from the December 31, 2021 market rates would decrease the unrealized value of Schlumberger’s forward contracts by $8 million.  In either scenario, the gain or loss on the forward contract would be offset by the gain or loss on the underlying transaction, and therefore, would have no impact on future earnings.

At December 31, 2021, contracts were outstanding for the US dollar equivalent of $7.7 billion in various foreign currencies, of which $6.0 billion related to hedges of debt balances denominated in currencies other than the functional currency.

Forward-Looking Statements

This Form 10-K, as well as other statements we make, contains “forward-looking statements” within the meaning of the federal securities laws, which include any statements that are not historical facts. Such statements often contain words such as “expect,” “may,” “can,” “believe,” “predict,” “plan,” “potential,” “projected,” “projections,” “forecast,” “estimate,” “intend,” “anticipate,” “ambition,” “goal,” “target,” “think,” “should,” “could,” “would,” “will,” “see,” “likely,” and other similar words. Forward-looking statements address matters that are, to varying degrees, uncertain, such as statements about Schlumberger’s financial and performance targets and other forecasts or expectations regarding, or dependent on, its business outlook; growth for Schlumberger as a whole and for each of its Divisions (and for specified business lines, geographic areas or technologies within each Division); oil and natural gas demand and production growth; oil and natural gas prices; forecasts or expectations regarding energy transition and global climate change; improvements in operating procedures and technology; capital expenditures by Schlumberger and the oil and gas industry; the business strategies of Schlumberger, including digital and “fit for basin,” as well as the strategies of Schlumberger’s customers; Schlumberger’s effective tax rate; Schlumberger’s APS projects, joint ventures, and other alliances; Schlumberger’s response to the COVID-19 pandemic and its preparedness for other widespread health emergencies; access to raw materials; future global economic and geopolitical conditions; future liquidity; and future results of operations, such as margin levels.  These statements are subject to risks and uncertainties, including, but not limited to, changing global economic conditions; changes in exploration and production spending by Schlumberger’s customers and changes in the level of oil and natural gas exploration and development; the results of operations and financial condition of Schlumberger’s customers and suppliers; Schlumberger’s inability to achieve its financial and performance targets and other forecasts and expectations; Schlumberger’s inability to achieve net-zero carbon emissions goals or interim emissions reduction goals; general economic, geopolitical and business conditions in key regions of the world; foreign currency risk; pricing pressure; inflation; weather and seasonal factors; unfavorable effects of health pandemics; availability and cost of raw materials; operational modifications, delays or cancellations; challenges in Schlumberger’s supply chain; production declines; Schlumberger’s inability to recognize efficiencies and other intended benefits from its business strategies and initiatives, such as digital or Schlumberger New Energy, as well as its cost reduction strategies; changes in government regulations and regulatory requirements, including those related to offshore oil and gas exploration, radioactive sources, explosives, chemicals and climate-related initiatives; the inability of technology to meet new challenges in exploration; the competitiveness of alternative energy sources or product substitutes; and other risks and uncertainties detailed in this Form 10-K and other filings that we make with the SEC.  If one or more of these or other risks or uncertainties materialize (or the consequences of any such development changes), or should our underlying assumptions prove incorrect, actual results or outcomes may vary materially from those reflected in our forward-looking statements.  Forward-looking and other statements in this Form 10-K regarding our environmental, social and other sustainability plans and goals are not an indication that these statements are necessarily material to investors or required to be disclosed in our filings with the SEC. In addition, historical, current, and forward-looking environmental, social and sustainability-related statements may be based on standards for measuring progress that are still developing, internal controls and processes that continue to evolve, and assumptions that are subject to change in the future. Statements in this Form 10-K are made as of January 26, 2022, and Schlumberger disclaims any intention or obligation to update publicly or revise such statements, whether as a result of new information, future events or otherwise.

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Item 8. Financial Statements and Supplementary Data.

SCHLUMBERGER LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF INCOME (LOSS)