Attached files

file filename
EX-95 - EX-95 - SCHLUMBERGER LIMITED/NVslb-ex95_201409307.htm
EX-31.2 - EX-31.2 - SCHLUMBERGER LIMITED/NVslb-ex312_2014093013.htm
EX-32.1 - EX-32.1 - SCHLUMBERGER LIMITED/NVslb-ex321_2014093010.htm
EX-32.2 - EX-32.2 - SCHLUMBERGER LIMITED/NVslb-ex322_201409309.htm
EX-31.1 - EX-31.1 - SCHLUMBERGER LIMITED/NVslb-ex311_2014093011.htm
EXCEL - IDEA: XBRL DOCUMENT - SCHLUMBERGER LIMITED/NVFinancial_Report.xls

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended: September 30, 2014

Commission file No.: 1-4601

 

SCHLUMBERGER N.V.

(SCHLUMBERGER LIMITED)

(Exact name of registrant as specified in its charter)

 

 

CURAÇAO

 

52-0684746

(State or other jurisdiction of
incorporation or organization)

 

(I.R.S. Employer
Identification No.)

 

 

 

42 RUE SAINT-DOMINIQUE

 

 

PARIS, FRANCE

 

75007

 

 

 

5599 SAN FELIPE, 17th FLOOR

 

 

HOUSTON, TEXAS, U.S.A.

 

77056

 

 

 

62 BUCKINGHAM GATE

 

 

LONDON, UNITED KINGDOM

 

SW1E 6AJ

 

 

 

PARKSTRAAT 83 THE HAGUE,

 

 

THE NETHERLANDS

 

2514 JG

(Addresses of principal executive offices)

 

(Zip Codes)

Registrant’s telephone number: (713) 513-2000

 

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  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).    Yes  x    No  ¨

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

 

Large accelerated filer

x

Accelerated filer

¨

 

 

 

 

Non-accelerated filer

¨  (Do not check if a smaller reporting company)

Smaller reporting company

¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

 

Class

Outstanding at September 30, 2014

COMMON STOCK, $0.01 PAR VALUE PER SHARE

1,286,793,905

 

 

 


SCHLUMBERGER LIMITED

Third Quarter 2014 Form 10-Q

Table of Contents

 

 

 

 

Page

 PART I

 

Financial Information

 

 

 

 

 

Item 1.

 

Financial Statements

3

 

 

 

 

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

18

 

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosures about Market Risk

27

 

 

 

 

Item 4.

 

Controls and Procedures

27

 

 

 

 

 PART II

 

Other Information

 

 

 

 

 

Item 1.

 

Legal Proceedings

28

 

 

 

 

Item 1A.

 

Risk Factors

28

 

 

 

 

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

28

 

 

 

 

Item 3.

 

Defaults Upon Senior Securities

28

 

 

 

 

Item 4.

 

Mine Safety Disclosures

28

 

 

 

 

Item 5.

 

Other Information

28

 

 

 

 

Item 6.

 

Exhibits

29

 

 

 

 

 

 

Certifications

 

 

 

 

2


PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

SCHLUMBERGER LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF INCOME

(Unaudited)

 

(Stated in millions, except per share amounts)

 

 

Third Quarter

 

 

Nine Months

 

 

2014

 

 

2013

 

 

2014

 

 

2013

 

Revenue

$

12,646

 

 

$

11,608

 

 

$

35,939

 

 

$

33,360

 

Interest & other income

 

79

 

 

 

43

 

 

 

220

 

 

 

105

 

Gain on formation of OneSubsea

 

 

 

 

 

 

 

 

 

 

1,028

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenue

 

9,689

 

 

 

8,926

 

 

 

27,708

 

 

 

26,047

 

Research & engineering

 

301

 

 

 

286

 

 

 

893

 

 

 

870

 

General & administrative

 

125

 

 

 

110

 

 

 

353

 

 

 

305

 

Impairment & other

 

 

 

 

 

 

 

 

 

 

456

 

Interest

 

90

 

 

 

98

 

 

 

282

 

 

 

294

 

Income from continuing operations before taxes

 

2,520

 

 

 

2,231

 

 

 

6,923

 

 

 

6,521

 

Taxes on income

 

556

 

 

 

506

 

 

 

1,530

 

 

 

1,361

 

Income from continuing operations

 

1,964

 

 

 

1,725

 

 

 

5,393

 

 

 

5,160

 

Loss from discontinued operations

 

 

 

 

 

 

 

(205

)

 

 

(69

)

Net income

 

1,964

 

 

 

1,725

 

 

 

5,188

 

 

 

5,091

 

Net income attributable to noncontrolling interests

 

15

 

 

 

10

 

 

 

52

 

 

 

23

 

Net income attributable to Schlumberger

$

1,949

 

 

$

1,715

 

 

$

5,136

 

 

$

5,068

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Schlumberger amounts attributable to:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from continuing operations

$

1,949

 

 

$

1,715

 

 

$

5,341

 

 

$

5,137

 

Loss from discontinued operations

 

 

 

 

 

 

 

(205

)

 

 

(69

)

Net income

$

1,949

 

 

$

1,715

 

 

$

5,136

 

 

$

5,068

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per share of Schlumberger:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from continuing operations

$

1.51

 

 

$

1.30

 

 

$

4.11

 

 

$

3.87

 

Loss from discontinued operations

 

 

 

 

 

 

 

(0.16

)

 

 

(0.05

)

Net income

$

1.51

 

 

$

1.30

 

 

$

3.95

 

 

$

3.82

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted earnings per share of Schlumberger:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from continuing operations

$

1.49

 

 

$

1.29

 

 

$

4.07

 

 

$

3.84

 

Loss from discontinued operations

 

 

 

 

 

 

 

(0.16

)

 

 

(0.05

)

Net income

$

1.49

 

 

$

1.29

 

 

$

3.91

 

 

$

3.79

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

1,294

 

 

 

1,322

 

 

 

1,300

 

 

 

1,326

 

Assuming dilution

 

1,310

 

 

 

1,333

 

 

 

1,315

 

 

 

1,336

 

    

See Notes to Consolidated Financial Statements

 

 

 

3


SCHLUMBERGER LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(Unaudited)

 

 

(Stated in millions)

 

 

Third Quarter

 

 

Nine Months

 

 

2014

 

 

2013

 

 

2014

 

 

2013

 

Net income

$

1,964

 

 

$

1,725

 

 

$

5,188

 

 

$

5,091

 

Currency translation adjustments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized net change arising during the period

 

(146

)

 

 

95

 

 

 

(176

)

 

 

(139

)

Marketable securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized (loss) gain arising during the period

 

(162

)

 

 

(25

)

 

 

(132

)

 

 

58

 

Derivatives

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net derivatives (loss) gain on hedge transactions (see Note 11)

 

(151

)

 

 

76

 

 

 

(138

)

 

 

(27

)

Reclassification to net income of net realized loss (gain) (see Note 11)

 

53

 

 

 

(30

)

 

 

59

 

 

 

15

 

Pension and other postretirement benefit plans

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Actuarial loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Actuarial loss arising during the period

 

 

 

 

(18

)

 

 

 

 

 

(23

)

Amortization to net income of net actuarial loss (see Note 15)

 

32

 

 

 

73

 

 

 

132

 

 

 

224

 

Prior service cost

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization to net income of net prior service cost (see Note 15)

 

40

 

 

 

31

 

 

 

96

 

 

 

94

 

Income taxes on pension and other postretirement benefit plans

 

(8

)

 

 

(9

)

 

 

(28

)

 

 

(40

)

Comprehensive income

 

1,622

 

 

 

1,918

 

 

 

5,001

 

 

 

5,253

 

Comprehensive income attributable to noncontrolling interests

 

15

 

 

 

10

 

 

 

52

 

 

 

23

 

Comprehensive income attributable to Schlumberger

$

1,607

 

 

$

1,908

 

 

$

4,949

 

 

$

5,230

 

 

See Notes to Consolidated Financial Statements

 

 

 

4


SCHLUMBERGER LIMITED AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

 

 

(Stated in millions)

 

 

Sept. 30, 2014

 

 

Dec. 31,

 

 

(Unaudited)

 

 

2013

 

ASSETS

 

 

 

 

 

 

 

Current Assets

 

 

 

 

 

 

 

Cash

$

3,118

 

 

$

3,472

 

Short-term investments

 

3,641

 

 

 

4,898

 

Receivables less allowance for doubtful accounts (2014 - $282; 2013 - $384)

 

12,352

 

 

 

11,497

 

Inventories

 

4,702

 

 

 

4,603

 

Deferred taxes

 

287

 

 

 

288

 

Other current assets

 

1,373

 

 

 

1,467

 

 

 

25,473

 

 

 

26,225

 

Fixed Income Investments, held to maturity

 

473

 

 

 

363

 

Investments in Affiliated Companies

 

3,223

 

 

 

3,317

 

Fixed Assets less accumulated depreciation

 

15,809

 

 

 

15,096

 

Multiclient Seismic Data

 

751

 

 

 

667

 

Goodwill

 

15,243

 

 

 

14,706

 

Intangible Assets

 

4,690

 

 

 

4,709

 

Other Assets

 

2,658

 

 

 

2,017

 

 

$

68,320

 

 

$

67,100

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

 

 

Accounts payable and accrued liabilities

$

8,916

 

 

$

8,837

 

Estimated liability for taxes on income

 

1,499

 

 

 

1,490

 

Long-term debt - current portion

 

27

 

 

 

1,819

 

Short-term borrowings

 

1,424

 

 

 

964

 

Dividends payable

 

522

 

 

 

415

 

 

 

12,388

 

 

 

13,525

 

Long-term Debt

 

11,626

 

 

 

10,393

 

Postretirement Benefits

 

606

 

 

 

670

 

Deferred Taxes

 

1,733

 

 

 

1,708

 

Other Liabilities

 

1,280

 

 

 

1,169

 

 

 

27,633

 

 

 

27,465

 

Equity

 

 

 

 

 

 

 

Common stock

 

12,428

 

 

 

12,192

 

Treasury stock

 

(10,725

)

 

 

(8,135

)

Retained earnings

 

41,543

 

 

 

37,966

 

Accumulated other comprehensive loss

 

(2,741

)

 

 

(2,554

)

Schlumberger stockholders' equity

 

40,505

 

 

 

39,469

 

Noncontrolling interests

 

182

 

 

 

166

 

 

 

40,687

 

 

 

39,635

 

 

$

68,320

 

 

$

67,100

 

See Notes to Consolidated Financial Statements

 

 

 

5


SCHLUMBERGER LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS

(Unaudited)

 

 

(Stated in millions)

 

 

Nine Months Ended Sept. 30,

 

 

2014

 

 

2013

 

Cash flows from operating activities:

 

 

 

 

 

 

 

Net income

$

5,188

 

 

$

5,091

 

Add: Loss from discontinued operations

 

205

 

 

 

69

 

Adjustments to reconcile net income to cash provided by operating activities:

 

 

 

 

 

 

 

Gain on formation of OneSubsea

 

 

 

 

(1,028

)

Impairment of equity method investments and currency devaluation loss in Venezuela

 

 

 

 

456

 

Depreciation and amortization (1)

 

3,029

 

 

 

2,891

 

Pension and other postretirement benefits expense

 

266

 

 

 

388

 

Stock-based compensation expense

 

246

 

 

 

255

 

Pension and other postretirement benefits funding

 

(318

)

 

 

(468

)

Earnings of equity method investments, less dividends received

 

(68

)

 

 

(46

)

Change in assets and liabilities: (2)

 

 

 

 

 

 

 

Increase in receivables

 

(779

)

 

 

(1,215

)

Increase in inventories

 

(61

)

 

 

(96

)

Decrease in other current assets

 

112

 

 

 

28

 

Increase in other assets

 

(89

)

 

 

(135

)

(Decrease) increase in accounts payable and accrued liabilities

 

(256

)

 

 

189

 

(Decrease) increase in liability for taxes on income

 

(7

)

 

 

15

 

(Decrease) increase in other liabilities

 

(78

)

 

 

2

 

Other

 

(108

)

 

 

175

 

NET CASH PROVIDED BY OPERATING ACTIVITIES

 

7,282

 

 

 

6,571

 

Cash flows from investing activities:

 

 

 

 

 

 

 

Capital expenditures

 

(2,766

)

 

 

(2,753

)

SPM investments

 

(569

)

 

 

(633

)

Multiclient seismic data capitalized

 

(212

)

 

 

(300

)

Business acquisitions and investments, net of cash acquired

 

(556

)

 

 

(1,144

)

Sale of investments, net

 

1,147

 

 

 

963

 

Other

 

3

 

 

 

131

 

NET CASH USED IN INVESTING ACTIVITIES

 

(2,953

)

 

 

(3,736

)

Cash flows from financing activities:

 

 

 

 

 

 

 

Dividends paid

 

(1,451

)

 

 

(1,196

)

Proceeds from employee stock purchase plan

 

295

 

 

 

270

 

Proceeds from exercise of stock options

 

500

 

 

 

145

 

Stock repurchase program

 

(3,582

)

 

 

(1,526

)

Proceeds from issuance of long-term debt

 

2,005

 

 

 

2,267

 

Repayment of long-term debt

 

(2,857

)

 

 

(1,211

)

Net increase (decrease) in short-term borrowings

 

455

 

 

 

(306

)

Other

 

(38

)

 

 

3

 

NET CASH USED IN FINANCING ACTIVITIES

 

(4,673

)

 

 

(1,554

)

Cash flows provided by (used in) discontinued operations - operating activities

 

24

 

 

 

(2

)

Cash flows provided by (used in) discontinued operations - investing activities

 

 

 

 

(28

)

Cash flows provided by (used in) discontinued operations

 

24

 

 

 

(30

)

Net (decrease) increase in cash before translation effect

 

(320

)

 

 

1,251

 

Translation effect on cash

 

(34

)

 

 

(7

)

Cash, beginning of period

 

3,472

 

 

 

1,905

 

Cash, end of period

$

3,118

 

 

$

3,149

 

 

(1)

Includes depreciation of property, plant and equipment and amortization of intangible assets, multiclient seismic data costs and SPM investments.  

(2)

Net of the effect of business acquisitions and divestitures.

See Notes to Consolidated Financial Statements

 

6


SCHLUMBERGER LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF EQUITY

(Unaudited)

 

 

 

(Stated in millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Retained

 

 

Comprehensive

 

 

Noncontrolling

 

 

 

 

 

January 1, 2014 - September 30, 2014

 

Issued

 

 

In Treasury

 

 

Earnings

 

 

Loss

 

 

Interests

 

 

Total

 

Balance, January 1, 2014

 

$

12,192

 

 

$

(8,135

)

 

$

37,966

 

 

$

(2,554

)

 

$

166

 

 

$

39,635

 

Net income

 

 

 

 

 

 

 

 

 

 

5,136

 

 

 

 

 

 

 

52

 

 

 

5,188

 

Currency translation adjustments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(176

)

 

 

 

 

 

 

(176

)

Changes in unrealized gain on marketable securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(132

)

 

 

 

 

 

 

(132

)

Changes in fair value of derivatives

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(79

)

 

 

 

 

 

 

(79

)

Pension and other postretirement benefit plans

 

 

 

 

 

 

 

 

 

 

 

 

 

 

200

 

 

 

 

 

 

 

200

 

Shares sold to optionees, less shares exchanged

 

 

(18

)

 

 

518

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

500

 

Vesting of restricted stock

 

 

(68

)

 

 

68

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares issued under employee stock purchase plan

 

 

33

 

 

 

262

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

295

 

Stock repurchase program

 

 

 

 

 

 

(3,582

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,582

)

Stock-based compensation expense

 

 

246

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

246

 

Dividends declared ($1.20 per share)

 

 

 

 

 

 

 

 

 

 

(1,559

)

 

 

 

 

 

 

 

 

 

 

(1,559

)

Shares issued for acquisition

 

 

72

 

 

 

141

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

213

 

Other

 

 

(29

)

 

 

3

 

 

 

 

 

 

 

 

 

 

 

(36

)

 

 

(62

)

Balance, September 30, 2014

 

$

12,428

 

 

$

(10,725

)

 

$

41,543

 

 

$

(2,741

)

 

$

182

 

 

$

40,687

 

 

 

 

(Stated in millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Retained

 

 

Comprehensive

 

 

Noncontrolling

 

 

 

 

 

January 1, 2013 - September 30, 2013

 

Issued

 

 

In Treasury

 

 

Earnings

 

 

Loss

 

 

Interests

 

 

Total

 

Balance, January 1, 2013

 

$

11,912

 

 

$

(6,160

)

 

$

32,887

 

 

$

(3,888

)

 

$

107

 

 

$

34,858

 

Net income

 

 

 

 

 

 

 

 

 

 

5,068

 

 

 

 

 

 

 

23

 

 

 

5,091

 

Currency translation adjustments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(139

)

 

 

 

 

 

 

(139

)

Changes in unrealized gain on marketable securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

58

 

 

 

 

 

 

 

58

 

Changes in fair value of derivatives.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(12

)

 

 

 

 

 

 

(12

)

Pension and other postretirement benefit plans

 

 

 

 

 

 

 

 

 

 

 

 

 

 

255

 

 

 

 

 

 

 

255

 

Shares sold to optionees, less shares exchanged

 

 

(31

)

 

 

176

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

145

 

Vesting of restricted stock

 

 

(48

)

 

 

48

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares issued under employee stock purchase plan

 

 

18

 

 

 

252

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

270

 

Stock repurchase program

 

 

 

 

 

 

(1,526

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,526

)

Stock-based compensation expense

 

 

255

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

255

 

Dividends declared ($0.9375 per share)

 

 

 

 

 

 

 

 

 

 

(1,244

)

 

 

 

 

 

 

 

 

 

 

(1,244

)

Other

 

 

2

 

 

 

2

 

 

 

 

 

 

 

 

 

 

 

16

 

 

 

20

 

Balance, September 30, 2013

 

$

12,108

 

 

$

(7,208

)

 

$

36,711

 

 

$

(3,726

)

 

$

146

 

 

$

38,031

 

SHARES OF COMMON STOCK

(Unaudited)

  

 

 

 

 

(Stated in millions)

 

 

 

 

 

 

 

 

 

 

Shares

 

 

Issued

 

 

In Treasury

 

 

Outstanding

 

Balance, January 1, 2014

 

1,434

 

 

 

(127

)

 

 

1,307

 

Shares sold to optionees, less shares exchanged

 

 

 

 

8

 

 

 

8

 

Vesting of restricted stock

 

 

 

 

1

 

 

 

1

 

Shares issued under employee stock purchase plan

 

 

 

 

4

 

 

 

4

 

Shares issued for acquisition

 

 

 

 

2

 

 

 

2

 

Stock repurchase program

 

 

 

 

(35

)

 

 

(35

)

Balance, September 30, 2014

 

1,434

 

 

 

(147

)

 

 

1,287

 

 

See Notes to Consolidated Financial Statements

7


 

SCHLUMBERGER LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

1. 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, 2014 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2014. The December 31, 2013 balance sheet information has been derived from the Schlumberger 2013 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, 2013, filed with the Securities and Exchange Commission on January 31, 2014.

Certain prior year items have been reclassified to conform to the current year presentation.  Beginning in the second quarter of 2014, Schlumberger revised its Consolidated Statement of Cash Flows to present certain cash outflows relating to Schlumberger Production Management (“SPM”) activities as a separate line item within investing activities, referred to as “SPM investments.”  Schlumberger historically presented such cash outflows as an operating activity.  This change is not considered material to prior periods.

New Accounting Pronouncement

In May 2014, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers.  This ASU amends the existing accounting standards for revenue recognition and is based on the principle that revenue should be recognized to depict the transfer of goods or services to a customer at an amount that reflects the consideration a company expects to receive in exchange for those goods or services.  Schlumberger is required to adopt this ASU on January 1, 2017.  Schlumberger does not expect this ASU to have a material impact on its consolidated financial statements.

 

 

2. Charges and Credits

Schlumberger recorded the following charges and credits in continuing operations during the first nine months of 2013:

Second quarter 2013:

·

Schlumberger recorded a pretax and after-tax gain of $1.028 billion as a result of the deconsolidation of its subsea business in connection with the formation of the OneSubsea joint venture with Cameron International Corporation (“Cameron”). Refer to Note 4 – Acquisitions for further details.

·

Schlumberger recorded a $222 million pretax ($203 million after-tax) impairment charge relating to an investment in a company involved in developing drilling-related technology and a $142 million pretax and after-tax impairment charge relating to an investment in a contract drilling business.

First quarter 2013:

·

Although the functional currency of Schlumberger’s operations in Venezuela is the US dollar, a portion of the transactions are denominated in local currency. In February 2013, Venezuela’s currency was devalued from the prior exchange rate of 4.3 bolivar fuertes per US dollar to 6.3 bolivar fuertes per US dollar. As a result of this devaluation, Schlumberger recorded a pretax and after-tax foreign currency loss of $92 million during the first quarter of 2013.  

The following is a summary of the charges recorded during the first nine months of 2013:

 

 

(Stated in millions)

 

 

 

 

 

 

Pretax

 

 

Tax

 

 

Net

 

 

Classification

 

 

Gain on formation of OneSubsea joint venture

$

(1,028

)

 

$

 

 

$

(1,028

)

 

Gain on formation of OneSubsea

 

 

Impairment of equity-method investments

 

364

 

 

 

19

 

 

 

345

 

 

Impairment & other

 

 

Currency devaluation loss in Venezuela

 

92

 

 

$

 

 

 

92

 

 

Impairment & other

 

 

 

$

(572

)

 

$

19

 

 

$

(591

)

 

 

 

 

8


 

 There were no charges or credits recorded in continuing operations during the first nine months of 2014.

 

3. Earnings Per Share

The following is a reconciliation from basic earnings per share from continuing operations of Schlumberger to diluted earnings per share from continuing operations of Schlumberger:

 

 

(Stated in millions, except per share amounts)

 

 

2014

 

 

2013

 

 

Schlumberger Income from Continuing Operations

 

 

Average Shares Outstanding

 

 

Earnings per Share from Continuing Operations

 

 

Schlumberger Income from Continuing Operations

 

 

Average

Shares Outstanding

 

 

Earnings per Share from Continuing Operations

 

Third Quarter

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

$

1,949

 

 

 

1,294

 

 

$

1.51

 

 

$

1,715

 

 

 

1,322

 

 

$

1.30

 

Assumed exercise of stock options

 

 

 

 

12

 

 

 

 

 

 

 

 

 

 

7

 

 

 

 

 

Unvested restricted stock

 

 

 

 

4

 

 

 

 

 

 

 

 

 

 

4

 

 

 

 

 

Diluted

$

1,949

 

 

 

1,310

 

 

$

1.49

 

 

$

1,715

 

 

 

1,333

 

 

$

1.29

 

 

 

Schlumberger Income from Continuing Operations