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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended March 31, 2021

OR

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

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) |  | (IRS Employer Identification No.)
42 rue Saint-Dominique |  |
Paris, France |  | 75007
5599 San Felipe |  |
Houston, Texas, United States of America |  | 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 in the United States, including area code, is: (713) 513-2000

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

Title of each class | Trading Symbol(s) | Name of each exchange on which registered
common stock, par value $0.01 per share | SLB | New York Stock Exchange

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, smaller reporting company, or an 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.

Large accelerated filer |  | ☒ |  | Accelerated filer |  | ☐
Non-accelerated filer |  | ☐ |  | Smaller reporting company |  | ☐
Emerging growth company |  | ☐ |  |  |  |

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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

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 March 31, 2021
COMMON STOCK, $0.01 PAR VALUE PER SHARE | 1,398,332,463

SCHLUMBERGER LIMITED

First Quarter 2021 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 | 16
Item 3. |  | Quantitative and Qualitative Disclosures about Market Risk | 23
Item 4. |  | Controls and Procedures | 23
PART II |  | Other Information |
Item 1. |  | Legal Proceedings | 24
Item 1A. |  | Risk Factors | 24
Item 2. |  | Unregistered Sales of Equity Securities and Use of Proceeds | 24
Item 3. |  | Defaults Upon Senior Securities | 24
Item 4. |  | Mine Safety Disclosures | 24
Item 5. |  | Other Information | 24
Item 6. |  | Exhibits | 25

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

SCHLUMBERGER LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF INCOME (LOSS)

(Unaudited)

(Stated in millions, except per share amounts) |
| Three Months Ended March 31 |
| 2021 |  |  | 2020 |
Revenue |  |  |  |  |  |  |
Services | $ | 3,482 |  |  | $ | 5,426 |
Product sales |  | 1,741 |  |  |  | 2,029 |
Total Revenue |  | 5,223 |  |  |  | 7,455 |
Interest & other income |  | 19 |  |  |  | 39 |
Expenses |  |  |  |  |  |  |
Cost of services |  | 3,031 |  |  |  | 4,727 |
Cost of sales |  | 1,473 |  |  |  | 1,897 |
Research & engineering |  | 135 |  |  |  | 173 |
General & administrative |  | 81 |  |  |  | 127 |
Impairments & other |  | - |  |  |  | 8,523 |
Interest |  | 136 |  |  |  | 136 |
Income (loss) before taxes |  | 386 |  |  |  | (8,089 | )
Tax expense (benefit) |  | 74 |  |  |  | (721 | )
Net income (loss) |  | 312 |  |  |  | (7,368 | )
Net income attributable to noncontrolling interests |  | 13 |  |  |  | 8 |
Net income (loss) attributable to Schlumberger | $ | 299 |  |  | $ | (7,376 | )
Basic income (loss) per share of Schlumberger | $ | 0.21 |  |  | $ | (5.32 | )
Diluted income (loss) per share of Schlumberger | $ | 0.21 |  |  | $ | (5.32 | )
Average shares outstanding: |  |  |  |  |  |  |
Basic |  | 1,398 |  |  |  | 1,387 |
Assuming dilution |  | 1,419 |  |  |  | 1,387 |

See Notes to Consolidated Financial Statements

3

SCHLUMBERGER LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

(Stated in millions) |
| Three Months Ended March 31 |
| 2021 |  |  | 2020 |
Net income (loss) | $ | 312 |  |  | $ | (7,368 | )
Currency translation adjustments |  |  |  |  |  |  |
Unrealized net change arising during the period |  | 14 |  |  |  | (125 | )
Cash flow hedges |  |  |  |  |  |  |
Net gain (loss) on cash flow hedges |  | 150 |  |  |  | (203 | )
Reclassification to net income (loss) of net realized (gain) loss |  | (2 | ) |  |  | 1 |
Pension and other postretirement benefit plans |  |  |  |  |  |  |
Amortization to net income (loss) of net actuarial loss |  | 63 |  |  |  | 51 |
Amortization to net income (loss) of net prior service credit |  | (5 | ) |  |  | (5 | )
Income taxes on pension and other postretirement benefit plans |  | - |  |  |  | (4 | )
Comprehensive income (loss) |  | 532 |  |  |  | (7,653 | )
Comprehensive income attributable to noncontrolling interests |  | 13 |  |  |  | 8 |
Comprehensive income (loss) attributable to Schlumberger | $ | 519 |  |  | $ | (7,661 | )

See Notes to Consolidated Financial Statements

4

SCHLUMBERGER LIMITED AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

(Stated in millions) |
| Mar. 31, |  |  |  |  |
| 2021 |  |  | Dec. 31, |
| (Unaudited) |  |  | 2020 |
ASSETS |  |  |  |  |  |  |
Current Assets |  |  |  |  |  |  |
Cash | $ | 1,268 |  |  | $ | 844 |
Short-term investments |  | 1,642 |  |  |  | 2,162 |
Receivables less allowance for doubtful accounts (2021 - $319; 2020 - $301) |  | 5,269 |  |  |  | 5,247 |  |
Inventories |  | 3,303 |  |  |  | 3,354 |
Other current assets |  | 1,325 |  |  |  | 1,312 |
|  | 12,807 |  |  |  | 12,919 |
Investments in Affiliated Companies |  | 2,090 |  |  |  | 2,061 |
Fixed Assets less accumulated depreciation |  | 6,620 |  |  |  | 6,826 |
Multiclient Seismic Data |  | 298 |  |  |  | 317 |
Goodwill |  | 12,978 |  |  |  | 12,980 |
Intangible Assets |  | 3,397 |  |  |  | 3,455 |
Other Assets |  | 3,846 |  |  |  | 3,876 |
| $ | 42,036 |  |  | $ | 42,434 |
LIABILITIES AND EQUITY |  |  |  |  |  |  |
Current Liabilities |  |  |  |  |  |  |
Accounts payable and accrued liabilities | $ | 7,956 |  |  | $ | 8,442 |
Estimated liability for taxes on income |  | 983 |  |  |  | 1,015 |
Short-term borrowings and current portion of long-term debt |  | 749 |  |  |  | 850 |
Dividends payable |  | 185 |  |  |  | 184 |
|  | 9,873 |  |  |  | 10,491 |
Long-term Debt |  | 15,834 |  |  |  | 16,036 |
Postretirement Benefits |  | 1,003 |  |  |  | 1,049 |
Other Liabilities |  | 2,354 |  |  |  | 2,369 |
|  | 29,064 |  |  |  | 29,945 |
Equity |  |  |  |  |  |  |
Common stock |  | 12,663 |  |  |  | 12,970 |
Treasury stock |  | (2,598 | ) |  |  | (3,033 | )
Retained earnings |  | 7,142 |  |  |  | 7,018 |
Accumulated other comprehensive loss |  | (4,664 | ) |  |  | (4,884 | )
Schlumberger stockholders’ equity |  | 12,543 |  |  |  | 12,071 |
Noncontrolling interests |  | 429 |  |  |  | 418 |
|  | 12,972 |  |  |  | 12,489 |
| $ | 42,036 |  |  | $ | 42,434 |

See Notes to Consolidated Financial Statements

5

SCHLUMBERGER LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS

(Unaudited)

(Stated in millions) |
| Three Months Ended March 31, |
| 2021 |  |  | 2020 |
Cash flows from operating activities: |  |  |  |  |  |  |
Net income (loss) | $ | 312 |  |  | $ | (7,368 | )
Adjustments to reconcile net loss to cash provided by operating activities: |  |  |  |  |  |  |
Impairments and other charges |  | - |  |  |  | 8,523 |
Depreciation and amortization (1) |  | 532 |  |  |  | 792 |
Deferred taxes |  | (29 | ) |  |  | (781 | )
Stock-based compensation expense |  | 84 |  |  |  | 108 |
Earnings of equity method investments, less dividends received |  | (13 | ) |  |  | (10 | )
Change in assets and liabilities: (2) |  |  |  |  |  |  |
(Increase) decrease in receivables |  | (16 | ) |  |  | 233 |
Decrease (increase) in inventories |  | 49 |  |  |  | (42 | )
(Increase) decrease in other current assets |  | (17 | ) |  |  | 15 |
Decrease (increase) in other assets |  | 11 |  |  |  | (7 | )
Decrease in accounts payable and accrued liabilities |  | (438 | ) |  |  | (640 | )
Decrease in estimated liability for taxes on income |  | (33 | ) |  |  | (48 | )
Decrease in other liabilities |  | (18 | ) |  |  | (37 | )
Other |  | 5 |  |  |  | 46 |
NET CASH PROVIDED BY OPERATING ACTIVITIES |  | 429 |  |  |  | 784 |
Cash flows from investing activities: |  |  |  |  |  |  |
Capital expenditures |  | (178 | ) |  |  | (407 | )
APS investments |  | (85 | ) |  |  | (163 | )
Multiclient seismic data costs capitalized |  | (7 | ) |  |  | (35 | )
Business acquisitions and investments, net of cash acquired |  | (13 | ) |  |  | - |
Sale (purchase) of investments, net |  | 520 |  |  |  | (941 | )
Net proceeds from divestitures |  | - |  |  |  | 298 |
Other |  | (26 | ) |  |  | (64 | )
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES |  | 211 |  |  |  | (1,312 | )
Cash flows from financing activities: |  |  |  |  |  |  |
Dividends paid |  | (174 | ) |  |  | (692 | )
Proceeds from employee stock purchase plan |  | 62 |  |  |  | 85 |
Stock repurchase program |  | - |  |  |  | (26 | )
Proceeds from issuance of long-term debt |  | 134 |  |  |  | 1,475 |
Repayment of long-term debt |  | (98 | ) |  |  | (90 | )
Net (decrease) increase in short-term borrowings |  | (101 | ) |  |  | 34 |
Other |  | (35 | ) |  |  | (9 | )
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES |  | (212 | ) |  |  | 777 |
Net increase in cash before translation effect |  | 428 |  |  |  | 249 |
Translation effect on cash |  | (4 | ) |  |  | (11 | )
Cash, beginning of period |  | 844 |  |  |  | 1,137 |
Cash, end of period | $ | 1,268 |  |  | $ | 1,375 |

(1) | Includes depreciation of property, plant and equipment and amortization of intangible assets, multiclient seismic data costs, and APS investments.

(2) | Net of the effect of business acquisitions and divestitures.

See Notes to Consolidated Financial Statements

6

SCHLUMBERGER LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

(Unaudited)

|  | (Stated in millions, except per share amounts) |
|  |  |  |  |  |  |  |  |  |  |  |  |  | Accumulated |  |  |  |  |  |  |  |  |
|  |  |  |  |  |  |  |  |  |  |  |  |  | Other |  |  |  |  |  |  |  |  |
|  | Common Stock |  |  | Retained |  |  | Comprehensive |  |  | Noncontrolling |  |  |  |  |
January 1, 2021 – March 31, 2021 |  | Issued |  |  | In Treasury |  |  | Earnings |  |  | Loss |  |  | Interests |  |  | Total |
Balance, January 1, 2021 |  | $ | 12,970 |  |  | $ | (3,033 | ) |  | $ | 7,018 |  |  | $ | (4,884 | ) |  | $ | 418 |  |  | $ | 12,489 |
Net income |  |  |  |  |  |  |  |  |  |  | 299 |  |  |  |  |  |  |  | 13 |  |  |  | 312 |
Currency translation adjustments |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 14 |  |  |  | (2 | ) |  |  | 12 |
Changes in fair value of cash flow hedges |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 148 |  |  |  |  |  |  |  | 148 |
Pension and other postretirement benefit plans |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 58 |  |  |  |  |  |  |  | 58 |
Vesting of restricted stock |  |  | (171 | ) |  |  | 171 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | - |
Shares issued under employee stock purchase plan |  |  | (202 | ) |  |  | 264 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 62 |
Stock-based compensation expense |  |  | 84 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 84 |
Dividends declared ($0.125 per share) |  |  |  |  |  |  |  |  |  |  | (175 | ) |  |  |  |  |  |  |  |  |  |  | (175 | )
Other |  |  | (18 | ) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | (18 | )
Balance, March 31, 2021 |  | $ | 12,663 |  |  | $ | (2,598 | ) |  | $ | 7,142 |  |  | $ | (4,664 | ) |  | $ | 429 |  |  | $ | 12,972 |

|  | (Stated in millions, except per share amounts) |
|  |  |  |  |  |  |  |  |  |  |  |  |  | Accumulated |  |  |  |  |  |  |  |  |
|  |  |  |  |  |  |  |  |  |  |  |  |  | Other |  |  |  |  |  |  |  |  |
|  | Common Stock |  |  | Retained |  |  | Comprehensive |  |  | Noncontrolling |  |  |  |  |
January 1, 2020 – March 31, 2020 |  | Issued |  |  | In Treasury |  |  | Earnings |  |  | Loss |  |  | Interests |  |  | Total |
Balance, January 1, 2020 |  | $ | 13,078 |  |  | $ | (3,631 | ) |  | $ | 18,751 |  |  | $ | (4,438 | ) |  | $ | 416 |  |  | $ | 24,176 |
Net loss |  |  |  |  |  |  |  |  |  |  | (7,376 | ) |  |  |  |  |  |  | 8 |  |  |  | (7,368 | )
Currency translation adjustments |  |  |  |  |  |  |  |  |  |  |  |  |  |  | (125 | ) |  |  | (3 | ) |  |  | (128 | )
Changes in fair value of cash flow hedges |  |  |  |  |  |  |  |  |  |  |  |  |  |  | (202 | ) |  |  |  |  |  |  | (202 | )
Pension and other postretirement benefit plans |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 42 |  |  |  |  |  |  |  | 42 |
Shares sold to optionees, less shares exchanged |  |  | (117 | ) |  |  | 117 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | - |
Vesting of restricted stock |  |  | (95 | ) |  |  | 180 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 85 |
Stock repurchase program |  |  |  |  |  |  | (26 | ) |  |  |  |  |  |  |  |  |  |  |  |  |  |  | (26 | )
Stock-based compensation expense |  |  | 108 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 108 |
Dividends declared ($0.50 per share) |  |  |  |  |  |  |  |  |  |  | (694 | ) |  |  |  |  |  |  |  |  |  |  | (694 | )
Other |  |  | (11 | ) |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 1 |  |  |  | (10 | )
Balance, March 31, 2020 |  | $ | 12,963 |  |  | $ | (3,360 | ) |  | $ | 10,681 |  |  | $ | (4,723 | ) |  | $ | 422 |  |  | $ | 15,983 |

SHARES OF COMMON STOCK

(Unaudited)

|  |  |  |  | (Stated in millions) |
|  |  |  |  |  |  |  |  | Shares |
| Issued |  |  | In Treasury |  |  | Outstanding |
Balance, January 1, 2021 |  | 1,434 |  |  |  | (42 | ) |  |  | 1,392 |
Vesting of restricted stock |  | - |  |  |  | 2 |  |  |  | 2 |
Shares issued under employee stock purchase plan |  | - |  |  |  | 4 |  |  |  | 4 |
Balance, March 31, 2021 |  | 1,434 |  |  |  | (36 | ) |  |  | 1,398 |

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 three-month period ended March 31, 2021 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2021. The December 31, 2020 balance sheet information has been derived from the Schlumberger 2020 audited financial statements. For further information, refer to the Consolidated Financial Statements and notes thereto included in the Schlumberger Annual Report on Form 10-K for the year ended December 31, 2020, filed with the Securities and Exchange Commission on January 27, 2021.

2. Charges and Credits

Schlumberger did not record any charges or credits during the first quarter of 2021.

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

| (Stated in millions) |
| Pretax |  |  | Tax |  |  | Net |
Goodwill | $ | 3,070 |  |  | $ | - |  |  | $ | 3,070 |
Intangible assets |  | 3,321 |  |  |  | 815 |  |  |  | 2,506 |
APS investments |  | 1,264 |  |  |  | (4 | ) |  |  | 1,268 |
North American pressure pumping |  | 587 |  |  |  | 133 |  |  |  | 454 |
Severance |  | 202 |  |  |  | 7 |  |  |  | 195 |
Other |  | 79 |  |  |  | 9 |  |  |  | 70 |
Valuation allowance |  | - |  |  |  | (164 | ) |  |  | 164 |
| $ | 8,523 |  |  | $ | 796 |  |  | $ | 7,727 |

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

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

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

8

results may differ from those used in Schlumberger’s valuations which could result in additional impairment charges in the future.

The discount rates utilized to value Schlumberger’s reporting units were between 12.0% and 13.5%, depending on the risks and uncertainty inherent in the respective reporting unit as well as the size of the reporting unit. Assuming all other assumptions and inputs used in each of the respective discounted cash flow analysis were held constant, a 50-basis point increase or decrease in the discount rate assumptions would have changed the fair value of the seven reporting units, on average, by less than 5%.

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

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

| - | $1.3 billion relating to the carrying value of certain Asset Performance Solutions (“APS”) projects in North America.

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

| • | $202 million of severance.

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

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

3. Income (loss) Per Share

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

(Stated in millions, except per share amounts) |
| 2021 |  |  | 2020 |
| Schlumberger Net Income |  |  | Average Shares Outstanding |  |  | Income per Share |  |  | Schlumberger Net Loss |  |  | Average Shares Outstanding |  |  | Loss per Share |
First Quarter |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Basic | $ | 299 |  |  |  | 1,398 |  |  | $ | 0.21 |  |  | $ | (7,376 | ) |  |  | 1,387 |  |  | $ | (5.32 | )
Unvested restricted stock |  | - |  |  |  | 21 |  |  |  |  |  |  |  | - |  |  |  | - |  |  |  |  |
Diluted | $ | 299 |  |  |  | 1,419 |  |  | $ | 0.21 |  |  | $ | (7,376 | ) |  |  | 1,387 |  |  | $ | (5.32 | )

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

(Stated in millions) |
| Three Months Ended March 31, |
| 2021 |  |  | 2020 |
Employee stock options |  | 44 |  |  |  | 51 |
Unvested restricted stock |  | - |  |  |  | 16 |

9

4. Inventories

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

(Stated in millions) |
| Mar. 31, |  |  | Dec. 31, |
| 2021 |  |  | 2020 |
Raw materials & field materials | $ | 1,545 |  |  | $ | 1,573 |
Work in progress |  | 483 |  |  |  | 464 |
Finished goods |  | 1,275 |  |  |  | 1,317 |
| $ | 3,303 |  |  | $ | 3,354 |

5. Fixed Assets

A summary of fixed assets follows:

(Stated in millions) |
| Mar. 31, |  |  | Dec. 31, |
| 2021 |  |  | 2020 |
Property, plant & equipment | $ | 29,703 |  |  | $ | 29,744 |
Less: Accumulated depreciation |  | 23,083 |  |  |  | 22,918 |
| $ | 6,620 |  |  | $ | 6,826 |

Depreciation expense relating to fixed assets was $355 million and $449 million in the first quarter of 2021 and 2020, respectively.

6. Multiclient Seismic Data

The change in the carrying amount of multiclient seismic data for the three months ended March 31, 2021 was as follows:

(Stated in millions) |
Balance at December 31, 2020 | $ | 317 |
Capitalized in period |  | 7 |
Charged to expense |  | (26 | )
| $ | 298 |

7. Intangible Assets

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

| (Stated in millions) |
| Mar. 31, 2021 |  |  | Dec. 31, 2020 |
| Gross |  |  | Accumulated |  |  | Net Book |  |  | Gross |  |  | Accumulated |  |  | Net Book |
| Book Value |  |  | Amortization |  |  | Value |  |  | Book Value |  |  | Amortization |  |  | Value |
Customer relationships | $ | 1,743 |  |  | $ | 507 |  |  | $ | 1,236 |  |  | $ | 1,744 |  |  | $ | 485 |  |  | $ | 1,259 |
Technology/technical know-how |  | 1,284 |  |  |  | 514 |  |  |  | 770 |  |  |  | 1,284 |  |  |  | 488 |  |  |  | 796 |
Tradenames |  | 767 |  |  |  | 174 |  |  |  | 593 |  |  |  | 767 |  |  |  | 166 |  |  |  | 601 |
Other |  | 1,509 |  |  |  | 711 |  |  |  | 798 |  |  |  | 1,488 |  |  |  | 689 |  |  |  | 799 |
| $ | 5,303 |  |  | $ | 1,906 |  |  | $ | 3,397 |  |  | $ | 5,283 |  |  | $ | 1,828 |  |  | $ | 3,455 |

10

Amortization expense charged to income was $76 million during the first quarter of 2021 and $133 million during the first quarter of 2020.

Based on the net book value of intangible assets at March 31, 2021, amortization charged to income for the subsequent five years is estimated to be: remaining three quarters of 2021—$228 million; 2022—$295 million; 2023—$288 million; 2024—$267 million; 2025—$255 million; and 2026—$252 million.

8. Long-term Debt

A summary of Long-term Debt follows:

(Stated in millions) |
| Mar. 31, |  |  | Dec. 31, |
| 2021 |  |  | 2020 |
3.65% Senior Notes due 2023 | $ | 1,496 |  |  | $ | 1,496 |
3.90% Senior Notes due 2028 |  | 1,452 |  |  |  | 1,450 |
2.65% Senior Notes due 2030 |  | 1,250 |  |  |  | 1,250 |
1.375% Guaranteed Notes due 2026 |  | 1,173 |  |  |  | 1,221 |
2.00% Guaranteed Notes due 2032 |  | 1,167 |  |  |  | 1,214 |
0.25% Notes due 2027 |  | 1,057 |  |  |  | 1,100 |
0.50% Notes due 2031 |  | 1,056 |  |  |  | 1,099 |
2.40% Senior Notes due 2022 |  | 999 |  |  |  | 999 |
4.00% Senior Notes due 2025 |  | 930 |  |  |  | 930 |
4.30% Senior Notes due 2029 |  | 845 |  |  |  | 846 |
3.75% Senior Notes due 2024 |  | 747 |  |  |  | 746 |
1.00% Guaranteed Notes due 2026 |  | 703 |  |  |  | 736 |
0.00% Notes due 2024 |  | 588 |  |  |  | 611 |
2.65% Senior Notes due 2022 |  | 599 |  |  |  | 598 |
1.40% Senior Notes due 2025 |  | 498 |  |  |  | 498 |
3.63% Senior Notes due 2022 |  | 295 |  |  |  | 295 |
7.00% Notes due 2038 |  | 205 |  |  |  | 206 |
5.95% Notes due 2041 |  | 113 |  |  |  | 114 |
5.13% Notes due 2043 |  | 99 |  |  |  | 99 |
4.00% Notes due 2023 |  | 80 |  |  |  | 80 |
3.70% Notes due 2024 |  | 55 |  |  |  | 55 |
Commercial paper borrowings |  | 427 |  |  |  | 393 |
| $ | 15,834 |  |  | $ | 16,036 |

The estimated fair value of Schlumberger’s Long-term Debt, based on quoted market prices at March 31, 2021 and December 31, 2020, was $17.5 billion and $17.3 billion, respectively.

During the second quarter of 2020, Schlumberger entered into a €1.54 billion one-year committed revolving credit facility. In March 2021, Schlumberger exercised an option to extend this facility for six months. This facility can be extended for a further six months at Schlumberger’s election. In April 2021, Schlumberger reduced the size of the facility to €0.75 billion. At March 31, 2021 no amounts had been drawn under this facility.

In addition to the revolving credit facility described above, at March 31, 2021, Schlumberger had separate committed credit facility agreements aggregating $6.25 billion with commercial banks, of which $5.82 billion was available and unused. These committed facilities support commercial paper programs in the United States and Europe, of which $2.75 billion matures in February 2023, $2.0 billion matures in February 2025 and $1.5 billion matures in July 2025. Interest rates and other terms of borrowing under these lines of credit vary by facility.

Borrowings under the commercial paper programs at both March 31, 2021 and December 31, 2020 were $0.4 billion, all of which was classified in Long-term debt in the Consolidated Balance Sheet.

11

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

Schlumberger Limited fully and unconditionally guarantees the securities issued by certain of its subsidiaries, including securities issued by Schlumberger Investment SA and Schlumberger Finance Canada Ltd., both wholly-owned subsidiaries of Schlumberger.

9. Derivative Instruments and Hedging Activities

As a multinational company, Schlumberger conducts its business in over 120 countries. Schlumberger’s functional currency is primarily the US dollar.

Schlumberger is exposed to risks on future cash flows to the extent that the local currency is not the functional currency and expenses denominated in local currency are not equal to revenues denominated in local currency. Schlumberger uses foreign currency forward contracts to provide a hedge against a portion of these cash flow risks. These contracts are accounted for as cash flow hedges, with the changes in the fair value of the hedge recorded on the Consolidated Balance Sheet and in Accumulated Other Comprehensive Loss. Amounts recorded in Accumulated Other Comprehensive Loss are reclassified into earnings in the same period or periods that the hedged item is recognized in earnings.

Schlumberger is also exposed to risks on future cash flows relating to certain of its fixed rate debt denominated in currencies other than the functional currency. Schlumberger uses cross-currency swaps to provide a hedge against these cash flow risks. Included in Other Assets was $367 million at March 31, 2021 ($427 million at December 31, 2020) and included in Other Liabilities was $22 million at March 31, 2021 ($13 million at December 31, 2020) relating to the fair value of outstanding cross-currency swap derivatives. The fair value was determined using a model with inputs that are observable in the market or can be derived or collaborated by observable data.

During 2019, a US-dollar functional currency subsidiary of Schlumberger issued €1.5 billion of Euro-denominated debt. Schlumberger entered into cross-currency swaps for an aggregate notional amount of €1.5 billion in order to hedge changes in the fair value of its €0.5 billion 0.00% Notes due 2024, €0.5 billion 0.25% Notes due 2027 and €0.5 billion 0.50% Notes due 2031. These cross-currency swaps effectively convert the Euro-denominated notes to US-dollar denominated debt with fixed annual interest rates of 2.29%, 2.51% and 2.76%, respectively.

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

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

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

Schlumberger is exposed to changes in the fair value of assets and liabilities denominated in currencies other than the functional currency. While Schlumberger uses foreign currency forward contracts to economically hedge this exposure as it relates to certain currencies, these contracts are not designated as hedges for accounting purposes. Instead, the fair value of the contracts is recorded on the Consolidated Balance Sheet and changes in the fair value are recognized in the Consolidated Statement of Income (Loss), as are changes in the fair value of the hedged item.

At March 31, 2021, contracts were outstanding for the US dollar equivalent of $8.4 billion in various foreign currencies, of which $6.2 billion relates to hedges of debt denominated in currencies other than the functional currency.

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Other than the previously mentioned cross-currency swaps, the fair value of the other outstanding derivatives was no t material at March 31, 2021 and December 31, 2020.

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

| (Stated in millions) |  |  |
| Gain (Loss) Recognized in Income (loss) |  |  |
| Three Months |  |  |
| 2021 |  |  | 2020 |  |  | Consolidated Statement of Loss Classification
Derivatives designated as cash flow hedges: |  |  |  |  |  |  |  |  |
Cross currency swaps | $ | (216 | ) |  | $ | 58 |  |  | Cost of services/sales
Foreign exchange contracts |  | 2 |  |  |  | (1 | ) |  | Cost of services/sales
| $ | (214 | ) |  | $ | 57 |  |  |
Derivatives not designated as hedges: |  |  |  |  |  |  |  |  |
Foreign exchange contracts | $ | 6 |  |  | $ | (9 | ) |  | Cost of services/sales

10. Contingencies

Schlumberger is party to various legal proceedings from time to time. A liability is accrued when a loss is both probable and can be reasonably estimated. Management believes that the probability of a material loss with respect to any currently pending legal proceeding is remote. However, litigation is inherently uncertain and it is not possible to predict the ultimate disposition of any of these proceedings.

11. Segment Information

|  |  |  |  | (Stated in millions) |
| First Quarter 2021 |  |  | First Quarter 2020 |
|  |  |  |  | Income |  |  |  |  |  |  | Income (Loss) |
|  |  |  |  | Before |  |  |  |  |  |  | Before |
| Revenue |  |  | Taxes |  |  | Revenue |  |  | Taxes |
Digital & Integration | $ | 773 |  |  | $ | 247 |  |  | $ | 885 |  |  | $ | 151 |
Reservoir Performance |  | 1,002 |  |  |  | 102 |  |  |  | 1,969 |  |  |  | 134 |
Well Construction |  | 1,935 |  |  |  | 209 |  |  |  | 2,815 |  |  |  | 331 |
Production Systems |  | 1,590 |  |  |  | 138 |  |  |  | 1,912 |  |  |  | 191 |
Eliminations & other |  | (77 | ) |  |  | (32 | ) |  |  | (126 | ) |  |  | (31 | )
|  |  |  |  |  | 664 |  |  |  |  |  |  |  | 776 |
Corporate & other (1) |  |  |  |  |  | (150 | ) |  |  |  |  |  |  | (228 | )
Interest income (2) |  |  |  |  |  | 4 |  |  |  |  |  |  |  | 15 |
Interest expense (3) |  |  |  |  |  | (132 | ) |  |  |  |  |  |  | (129 | )
Charges and credits (4) |  |  |  |  |  | - |  |  |  |  |  |  |  | (8,523 | )
| $ | 5,223 |  |  | $ | 386 |  |  | $ | 7,455 |  |  | $ | (8,089 | )

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

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

(3) | Interest expense excludes amounts which are included in the segments’ income ($4 million in 2021; $7 million in 2020).

(4) | See Note 2 – Charges and Credits.

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Revenue by geographic area was as follows:

| (Stated in millions) |
| First Quarter |
| 2021 |  |  | 2020 |
North America | $ | 972 |  |  | $ | 2,180 |
Latin America |  | 1,038 |  |  |  | 1,046 |
Europe/CIS/Africa |  | 1,256 |  |  |  | 1,752 |
Middle East & Asia |  | 1,917 |  |  |  | 2,427 |
Eliminations & other |  | 40 |  |  |  | 50 |
| $ | 5,223 |  |  | $ | 7,455 |

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

|  |  |  |  |  |  |  |  | (Stated in millions) |
| First Quarter 2021 |
| North |  |  |  |  |  |  | Eliminations |  |  |  |  |
| America |  |  | International |  |  | & other |  |  | Total |
Digital & Integration | $ | 161 |  |  | $ | 610 |  |  | $ | 2 |  |  | $ | 773 |
Reservoir Performance |  | 78 |  |  |  | 922 |  |  |  | 2 |  |  |  | 1,002 |
Well Construction |  | 310 |  |  |  | 1,577 |  |  |  | 48 |  |  |  | 1,935 |
Production Systems |  | 420 |  |  |  | 1,161 |  |  |  | 9 |  |  |  | 1,590 |
Eliminations & other |  | 3 |  |  |  | (59 | ) |  |  | (21 | ) |  |  | (77 | )
| $ | 972 |  |  | $ | 4,211 |  |  | $ | 40 |  |  | $ | 5,223 |
| First Quarter 2020 |
| North |  |  |  |  |  |  | Eliminations |  |  |  |  |
| America |  |  | International |  |  | & other |  |  | Total |
Digital & Integration | $ | 152 |  |  | $ | 731 |  |  | $ | 2 |  |  | $ | 885 |
Reservoir Performance |  | 718 |  |  |  | 1,249 |  |  |  | 2 |  |  |  | 1,969 |
Well Construction |  | 635 |  |  |  | 2,124 |  |  |  | 56 |  |  |  | 2,815 |
Production Systems |  | 690 |  |  |  | 1,203 |  |  |  | 19 |  |  |  | 1,912 |
Eliminations & other |  | (15 | ) |  |  | (82 | ) |  |  | (29 | ) |  |  | (126 | )
| $ | 2,180 |  |  | $ | 5,225 |  |  | $ | 50 |  |  | $ | 7,455 |

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

Due to the nature of its business, Schlumberger does not have significant backlog. Total backlog was $2.7 billion at March 31, 2021, of which approximately 45% is expected to be recognized as revenue over the next 12 months.

Billings and cash collections in excess of revenue was $1.0 billion at March 31, 2021 and $0.9 billion at December 31, 2020. Such amounts are included within Accounts payable and accrued liabilities in the Consolidated Balance Sheet.

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12. Pension and Other Postretirement Benefit Plans

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

(Stated in millions) |
| First Quarter |
| 2021 |  |  | 2020 |
| US |  |  | Int’l |  |  | US |  |  | Int’l |
Service cost | $ | 11 |  |  | $ | 33 |  |  | $ | 15 |  |  | $ | 37 |
Interest cost |  | 32 |  |  |  | 69 |  |  |  | 37 |  |  |  | 75 |
Expected return on plan assets |  | (63 | ) |  |  | (158 | ) |  |  | (58 | ) |  |  | (147 | )
Amortization of prior service cost |  | - |  |  |  | - |  |  |  | 2 |  |  |  | - |
Amortization of net loss |  | 11 |  |  |  | 52 |  |  |  | 11 |  |  |  | 40 |
| $ | (9 | ) |  | $ | (4 | ) |  | $ | 7 |  |  | $ | 5 |

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

(Stated in millions) |
| First Quarter |
| 2021 |  |  | 2020 |
Service cost | $ | 7 |  |  | $ | 9 |
Interest cost |  | 8 |  |  |  | 10 |
Expected return on plan assets |  | (14 | ) |  |  | (17 | )
Amortization of prior service credit |  | (5 | ) |  |  | (7 | )
| $ | (4 | ) |  | $ | (5 | )

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

First Quarter 2021 Compared to Fourth Quarter 2020

|  |  |  |  | (Stated in millions) |
| First Quarter 2021 |  |  | Fourth Quarter 2020 |
|  |  |  |  | Income Before |  |  |  |  |  |  | Income Before |
| Revenue |  |  | Taxes |  |  | Revenue |  |  | Taxes |
Digital & Integration | $ | 773 |  |  | $ | 247 |  |  | $ | 833 |  |  | $ | 270 |
Reservoir Performance |  | 1,002 |  |  |  | 102 |  |  |  | 1,247 |  |  |  | 95 |
Well Construction |  | 1,935 |  |  |  | 209 |  |  |  | 1,866 |  |  |  | 183 |
Production Systems |  | 1,590 |  |  |  | 138 |  |  |  | 1,649 |  |  |  | 155 |
Eliminations & other |  | (77 | ) |  |  | (32 | ) |  |  | (63 | ) |  |  | (49 | )
|  |  |  |  |  | 664 |  |  |  |  |  |  |  | 654 |
Corporate & other (1) |  |  |  |  |  | (150 | ) |  |  |  |  |  |  | (132 | )
Interest income (2) |  |  |  |  |  | 4 |  |  |  |  |  |  |  | 5 |
Interest expense (3) |  |  |  |  |  | (132 | ) |  |  |  |  |  |  | (137 | )
Charges and credits (4) |  |  |  |  |  | - |  |  |  |  |  |  |  | 81 |
| $ | 5,223 |  |  | $ | 386 |  |  | $ | 5,532 |  |  | $ | 471 |

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

(2) | Interest income excludes amounts which are included in the segments’ income ($1 million in Q1 2021; $- million in Q4 2020).

(3) | Interest expense excludes amounts which are included in the segments’ income ($4 million in Q1 2021; $7 million in Q4 2020).

(4) | Charges and credits are described in detail in Note 2 to the Consolidated Financial Statements.

First-quarter revenue declined 6% sequentially, reflecting the expected reduction in North America following the divestitures of the OneStim® pressure pumping business and the low-flow artificial lift business during the fourth quarter of 2020. These divestitures were consistent with Schlumberger’s strategy to focus on high-grading and rationalizing its business portfolio to expand margins, minimize earnings volatility, and focus on more capital efficient businesses. Excluding the impact of these divestitures, which generated $285 million of revenue (all of which was in North America) during the fourth quarter of 2020, global revenue was essentially flat sequentially as the impact of seasonally lower activity in the Northern Hemisphere was fully offset by growth in multiple countries.

In North America, excluding the effects of divestitures, revenue grew 10% sequentially driven by land revenue which increased 24% due to higher drilling activity, despite the Texas freeze. Offshore revenue declined 10% sequentially following the seasonal year-end product sales in the fourth quarter.

International revenue in the quarter reflected the usual seasonal dip, though China and Russia experienced a particularly severe winter. However, the sequential revenue decline was less pronounced than in prior years due to strong growth in Latin America and in several key countries in the Middle East and Africa. The first-quarter revenue sequential decline was the shallowest since 2008, while international rig count experienced the strongest first-quarter sequential growth since 2011, affirming the international recovery.

First-quarter revenue was also characterized by growth in Well Construction and Reservoir Performance, excluding the effects of divestitures, and despite seasonality in the Northern Hemisphere. Well Construction revenue increased 4% sequentially due to higher drilling activity in North America and Latin America. Reservoir Performance decreased 20% due to the OneStim® divesture in North America—but excluding this, the Division grew by 3% driven by robust international land and offshore activity. Digital & Integration revenue decreased 7% sequentially due to seasonally lower sales of software and multiclient seismic data licenses. Production Systems revenue declined 4%, mostly due to lower product sales following the strong year-end sales of the previous quarter.

Sequentially, despite the revenue decline, first-quarter pretax segment operating income increased 1%. Pretax segment operating income margin expanded by 88 basis points (“bps’) sequentially to 13%, representing a 230 bps improvement compared to the first quarter of 2020 despite a 30% revenue decline year-on-year. This performance represents a promising start to the Company’s margin

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expansion ambition this year and highlights the impact of the capital stewardship program and cost reduction measures, which provides Schlumberger with significant operating leverage.

Looking ahead, Schlumberger continues to be encouraged by constructive macroeconomic drivers. While the world is still grappling with COVID-19 infection rates, vaccination programs and fiscal stimulus packages are expected to support a rebound of economic activity and oil demand recovery through the year. Industry analysis estimates 5-6 million barrels-per-day (“bb/d”) of oil demand will be added by the end of 2021 as demand recovery is projected to improve in the second quarter, exiting the year just 2 million bbl/d short of 2019 levels.

With the gradual return of oil demand, Schlumberger anticipates North America activity will level off at production maintenance levels, while international activity is poised to ramp up through the end of 2021 and beyond. Schlumberger expects to significantly benefit from this anticipated shift to increased international activity due to the strength and breadth of its international franchise. Consequently, Schlumberger is increasingly confident that its international revenue will see double-digit growth in the second half of 2021 as compared to the same period last year, which implies potential upside to the already robust growth that is anticipated in 2022 and beyond.

Digital & Integration

Digital & Integration revenue of $773 million decreased 7% sequentially due to seasonally lower sales of digital solutions, software, and multiclient seismic data licenses.

Digital & Integration pretax operating margin of 32% was essentially flat sequentially. Despite the revenue decline, operating margin was maintained as the effects of digital solutions and multiclient revenue declines were largely offset by improved profitability from Asset Performance Solutions (“APS”) projects.

Reservoir Performance

Reservoir Performance revenue of $1.0 billion declined 20% sequentially. The revenue decline reflected the OneStim divestiture, which generated $274 million of revenue during the fourth quarter of 2020. Excluding the impact of the OneStim divestiture, revenue grew 3% sequentially despite the impact of seasonally lower activity in Russia and China, due to higher activity in Latin America, North America, Sub-Sahara Africa, and the Middle East.

Reservoir Performance pretax operating margin of 10% expanded 261 bps sequentially as profitability was improved due to the divestiture of the OneStim business, which was previously dilutive to margins.

Well Construction

Well Construction revenue of $1.9 billion increased 4% sequentially primarily due to robust activity in North America land.

Sequentially, Well Construction pretax operating margin of 11% improved by 103 bps, mainly driven by higher drilling activity in North America.

Production Systems

Production Systems revenue of $1.6 billion decreased 4% sequentially. The revenue decrease was across North America offshore, Europe/CIS/Africa, and Asia.

Despite the revenue decline, pretax operating margin only decreased 71 bps to 9%, as a result of cost control measures as well as improved profitability in midstream production systems due to higher activity.

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First Quarter 2021 Compared to First Quarter 2020

|  |  |  |  | (Stated in millions) |
| First Quarter 2021 |  |  | First Quarter 2020 |
|  |  |  |  | Income |  |  |  |  |  |  | Income (Loss) |
|  |  |  |  | Before |  |  |  |  |  |  | Before |
| Revenue |  |  | Taxes |  |  | Revenue |  |  | Taxes |
Digital & Integration | $ | 773 |  |  | $ | 247 |  |  | $ | 885 |  |  | $ | 151 |
Reservoir Performance |  | 1,002 |  |  |  | 102 |  |  |  | 1,969 |  |  |  | 134 |
Well Construction |  | 1,935 |  |  |  | 209 |  |  |  | 2,815 |  |  |  | 331 |
Production Systems |  | 1,590 |  |  |  | 138 |  |  |  | 1,912 |  |  |  | 191 |
Eliminations & other |  | (77 | ) |  |  | (32 | ) |  |  | (126 | ) |  |  | (31 | )
|  |  |  |  |  | 664 |  |  |  |  |  |  |  | 776 |
Corporate & other (1) |  |  |  |  |  | (150 | ) |  |  |  |  |  |  | (228 | )
Interest income (2) |  |  |  |  |  | 4 |  |  |  |  |  |  |  | 15 |
Interest expense (3) |  |  |  |  |  | (132 | ) |  |  |  |  |  |  | (129 | )
Charges and credits (4) |  |  |  |  |  | - |  |  |  |  |  |  |  | (8,523 | )
| $ | 5,223 |  |  | $ | 386 |  |  | $ | 7,455 |  |  | $ | (8,089 | )

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

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

(3) | Interest expense excludes amounts which are included in the segments’ income ($4 million in 2021; $7 million in 2020).

(4) | Charges and credits are described in detail in Note 2 to the Consolidated Financial Statements.

First-quarter 2021 revenue of $5.2 billion decreased 30% year-on-year reflecting the significant fall in activity following the historic demand destruction driven by the COVID-19 pandemic that commenced in early 2020. More than a year after the unprecedented global health and economic crisis sparked by the pandemic began, customers have gradually increased their spending. Revenue also declined year-on-year, particularly in North America, following the previously mentioned divestitures during the fourth quarter of 2020. Excluding the impact of these divestitures, which generated $659 million of revenue (all of which was in North America) during the first quarter of 2020, first-quarter 2021 global revenue declined 23% year-on-year.

In North America revenue declined 55% year-on-year; however, excluding the impact of the previously described divestitures, first-quarter revenue only declined 36%. International revenue declined 19% year-on-year driven by significant activity decreases in Europe/CIS/Africa and the Middle East & Asia.

First-quarter 2021 pretax segment operating margin of 13% was 230 bps higher compared to the same period last year, despite the 30% decline in revenue, due to the divestitures 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.

Digital & Integration

First-quarter 2021 revenue of $773 million decreased 13% year-on-year following the significant cut in discretionary and exploration activity triggered by the pandemic.

Year-on-year, pretax operating margin increased from 17% to 32%. Despite the revenue decline, pretax operating margins increased primarily due to improved profitability from APS projects as a result of reduced amortization following the impairment charges that were recorded in 2020 relating to certain APS investments in North America and Latin America.

Reservoir Performance

First-quarter 2021 revenue of $1.0 billion decreased 49% year-on-year largely due to the effects of the pandemic. The revenue decline also reflected the effects of the OneStim divestiture, which generated $601 million of revenue during the first quarter of 2020. Excluding the impact of the OneStim divestiture, revenue declined 27% year-on-year.

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Year-on-year, pretax operating margin increased by 341 bps to 10% largely due to the divestiture of the OneStim business, which was previously dilutive to margins.

Well Construction

First-quarter 2021 revenue of $1.9 billion decreased 31% year-on-year due to the significant drop in rig count in North America and internationally due to the effects of the pandemic.

Year-on-year, pretax operating margin decreased 95 bps to 11% primarily due to the significant decrease in revenue.

Production Systems

First-quarter 2021 revenue of $1.6 billion decreased 17% year-on-year primarily driven by the North America short-cycle business due to the significant decline in completions activity due to the effects of the pandemic.

Year-on-year, pretax operating margin decreased 127 bps to 9% due to reduced profitability in surface, midstream, and subsea production systems.

Interest and Other Income

Interest & other income consisted of the following:

(Stated in millions) |
| First Quarter |
| 2021 |  |  | 2020 |
Equity in net earnings of affiliated companies | $ | 14 |  |  | $ | 24 |
Interest income |  | 5 |  |  |  | 15 |
| $ | 19 |  |  | $ | 39 |

Other

Research & engineering and General & administrative expenses, as a percentage of Revenue, for the first quarter ended March 31, 2021 and 2020 were as follows:

| First Quarter |
| 2021 |  |  | 2020 |
Research & engineering |  | 2.6 | % |  |  | 2.3 | %
General & administrative |  | 1.5 | % |  |  | 1.7 | %

The effective tax rate for the first quarter of 2021 was 19%, as compared to 9% for the same period of 2020. The higher effective tax rate was almost entirely due to the charges recorded during the first quarter of 2020 (see Note 2 to the Consolidated Financial Statements) which included a significant amount related to non-deductible goodwill.

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Charges and Credits

During the first quarter of 2020 Schlumberger recorded the following which are fully described in Note 2 to the Consolidated Financial Statements:

| (Stated in millions) |
| Pretax |  |  | Tax |  |  | Net |
Goodwill | $ | 3,070 |  |  | $ | - |  |  | $ | 3,070 |
Intangible assets |  | 3,321 |  |  |  | 815 |  |  |  | 2,506 |
APS investments |  | 1,264 |  |  |  | (4 | ) |  |  | 1,268 |
North American pressure pumping |  | 587 |  |  |  | 133 |  |  |  | 454 |
Severance |  | 202 |  |  |  | 7 |  |  |  | 195 |
Other |  | 79 |  |  |  | 9 |  |  |  | 70 |
Valuation allowance |  | - |  |  |  | (164 | ) |  |  | 164 |
| $ | 8,523 |  |  | $ | 796 |  |  | $ | 7,727 |

Liquidity and Capital Resources

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

| (Stated in millions) |
| Mar. 31, |  |  | Mar. 31, |  |  | Dec. 31, |
Components of Liquidity: | 2021 |  |  | 2020 |  |  | 2020 |
Cash | $ | 1,268 |  |  | $ | 1,375 |  |  | $ | 844 |
Short-term investments |  | 1,642 |  |  |  | 1,969 |  |  |  | 2,162 |
Short-term borrowings and current portion of long-term debt |  | (749 | ) |  |  | (1,233 | ) |  |  | (850 | )
Long-term debt |  | (15,834 | ) |  |  | (15,409 | ) |  |  | (16,036 | )
Net debt (1) | $ | (13,673 | ) |  | $ | (13,298 | ) |  | $ | (13,880 | )

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| Three Months Ended Mar. 31, |
Changes in Liquidity: | 2021 |  |  | 2020 |
Net income (loss) | $ | 312 |  |  | $ | (7,368 | )
Impairment and other charges |  | - |  |  |  | 8,523 |
Depreciation and amortization (2) |  | 532 |  |  |  | 792 |
Earnings of equity method investments, less dividends received |  | (13 | ) |  |  | (10 | )
Deferred taxes |  | (29 | ) |  |  | (781 | )
Stock-based compensation expense |  | 84 |  |  |  | 108 |
Increase in working capital (3) |  | (455 | ) |  |  | (482 | )
Other |  | (2 | ) |  |  | 2 |
Cash flow from operations |  | 429 |  |  |  | 784 |
Capital expenditures |  | (178 | ) |  |  | (407 | )
APS investments |  | (85 | ) |  |  | (163 | )
Multiclient seismic data costs capitalized |  | (7 | ) |  |  | (35 | )
Free cash flow (4) |  | 159 |  |  |  | 179 |
Dividends paid |  | (174 | ) |  |  | (692 | )
Proceeds from employee stock plans |  | 62 |  |  |  | 74 |
Stock repurchase program |  | - |  |  |  | (26 | )
Business acquisitions and investments, net of cash acquired plus debt assumed |  | (13 | ) |  |  | - |
Net proceeds from asset divestitures |  | - |  |  |  | 298 |
Other |  | (61 | ) |  |  | (63 | )
Change in net debt before impact of changes in foreign exchange rates on net debt |  | (27 | ) |  |  | (230 | )
Impact of changes in foreign exchange rates on net debt |  | 234 |  |  |  | 59 |
Decrease (increase) in net debt |  | 207 |  |  |  | (171 | )
Net debt, beginning of period |  | (13,880 | ) |  |  | (13,127 | )
Net debt, end of period | $ | (13,673 | ) |  | $ | (13,298 | )

(1) | “Net debt” represents gross debt less cash and short-term investments. Management believes that Net debt provides useful information regarding the level of Schlumberger’s indebtedness by reflecting cash and investments that could be used to repay debt. Net debt is a non-GAAP financial measure that should be considered in addition to, not as a substitute for or superior to, total debt.

(2) | Includes depreciation of property, plant and equipment and amortization of intangible assets, multiclient seismic data costs, and APS investments.

(3) | Includes severance payments of approximately $112 million and $56 million during the three months ended March 31, 2021 and 2020, respectively.

(4) | “Free cash flow” represents cash flow from operations less capital expenditures, APS investments and multiclient seismic data costs capitalized. Management believes that free cash flow is an important liquidity measure for the company and that it is useful to investors and management as a measure of our ability to generate cash. Once business needs and obligations are met, this cash can be used to reinvest in the company for future growth or to return to shareholders through dividend payments or share repurchases. Free cash flow does not represent the residual cash flow available for discretionary expenditures. Free cash flow is a non-GAAP financial measure that should be considered in addition to, not as substitute for or superior to, cash flow from operations.

In view of the uncertainty of the depth and extent of the contraction in oil demand due to the COVID-19 pandemic combined with the weaker commodity price environment at the time, in April 2020 Schlumberger announced a 75% reduction to its quarterly cash dividend. The revised dividend supports Schlumberger’s value proposition through a balanced approach of shareholder distributions and organic investment, while providing flexibility to address the uncertain environment. This decision reflected the Company’s focus on its capital stewardship program as well as its commitment to maintain both a strong liquidity position and a strong investment grade credit rating that provides privileged access to the financial markets.

Key liquidity events during the first three months of 2021 and 2020 included:

• | On January 21, 2016, the Board approved a $10 billion share repurchase program for Schlumberger common stock. Schlumberger had repurchased $1.0 billion of Schlumberger common stock under this program as of March 31, 2021. Schlumberger did not repurchase any of its common stock during the first quarter of 2021. Schlumberger repurchased $26 million of its common stock during the first quarter of 2020.

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| •Capital investments (consisting of capital expenditures, APS investments and multiclient seismic data capitalized) were $0.3 billion during the first quarter of 2021 compared to $0.6 billion during the first three months of 2020. Capital investments during the full year of 2021 are expected to be between $1.5 billion and $1.7 billion as compared to $1.5 billion for the full year 2020.

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

• | During the first quarter of 2020, Schlumberger completed the sale of its 49% interest in the Bandurria Sur Block in Argentina. The net cash proceeds from this transaction, combined with the proceeds received from the divestiture of a smaller APS project, amounted to $298 million.

As of March 31, 2021, Schlumberger had $2.91 billion of cash and short-term investments on hand. Schlumberger had committed debt facility agreements aggregating $8.06 billion, of which $7.64 billion was available and unused. Schlumberger believes these amounts are sufficient to meet future business requirements for at least the next 12 months.

Borrowings under the commercial paper programs at March 31, 2021 were $0.4 billion.

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.

Schlumberger generates revenue in more than 120 countries. As of March 31, 2021, only five of those countries individually accounted for greater than 5% of Schlumberger’s net receivable balance, of which only one (Mexico) accounted for greater than 10% of such receivables.

Schlumberger has recently experienced delays in payment from its primary customer in Mexico. Included in Receivables, less allowance for doubtful accounts in the Consolidated Balance Sheet as of March 31, 2021 is approximately $0.7 billion of receivables relating to Mexico. 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.

FORWARD-LOOKING STATEMENTS

This first-quarter 2021 Form 10-Q, 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 as our forecasts or expectations regarding business outlook; growth for Schlumberger as a whole and for each of its Divisions (and for specified business lines or geographic areas within each Division); oil and natural gas demand and production growth; oil and natural gas prices; pricing; Schlumberger’s response to, and preparedness for, the COVID-19 pandemic and other widespread health emergencies; 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 restructuring efforts and charges recorded as a result of such efforts; access to raw materials; Schlumberger’s effective tax rate; Schlumberger’s APS projects, joint ventures, and other alliances; 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, particularly during extended periods of low prices for crude oil and natural gas; Schlumberger’s inability to achieve its financial and performance targets and other forecasts and expectations; Schlumberger’s inability to sufficiently monetize assets; the extent of future charges; general economic, geopolitical and business conditions in key regions of the world; foreign currency risk; pricing pressure; 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 intended benefits from its business strategies and initiatives, such as digital or Schlumberger New Energy, as well as its restructuring and structural cost reduction plans; changes in government regulations and regulatory requirements, including those related to offshore oil and gas exploration, radioactive sources, explosives, chemicals, hydraulic fracturing services 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-Q and

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our most re c ent F orm 10-K and Forms 8-K filed with or furnished to 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 outcomes may vary materially from those reflected in our forward-looking statements. Statements in this first-quarter 2021 Form 10-Q are made as of April 28, 2021, 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.

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

For quantitative and qualitative disclosures about market risk affecting Schlumberger, see Item 7A, “Quantitative and Qualitative Disclosures about Market Risk,” of the Schlumberger Annual Report on Form 10-K for the fiscal year ended December 31, 2020. Schlumberger’s exposure to market risk has not changed materially since December 31, 2020.

Item 4. Controls and Procedures.

Schlumberger has carried out an evaluation under the supervision and with the participation of Schlumberger’s management, including the Chief Executive Officer (“CEO”) and the Chief Financial Officer (“CFO”), of the effectiveness of Schlumberger’s “disclosure controls and procedures” (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)) as of the end of the period covered by this report. Based on this evaluation, the CEO and the CFO have concluded that, as of the end of the period covered by this report, Schlumberger’s disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in the reports that Schlumberger files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Schlumberger’s disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is accumulated and communicated to its management, including the CEO and the CFO, as appropriate, to allow timely decisions regarding required disclosure. There was no change in Schlumberger’s internal control over financial reporting during the quarter to which this report relates that has materially affected, or is reasonably likely to materially affect, Schlumberger’s internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

The information with respect to this Item 1 is set forth under Note 10—Contingencies, in the accompanying Consolidated Financial Statements.

Item 1A. Risk Factors.

As of the date of this filing, there have been no material changes from the risk factors disclosed in Part 1, Item 1A, of Schlumberger’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Unregistered Sales of Equity Securities

None.

Issuer Repurchases of Equity Securities

As of March 31, 2021, Schlumberger had repurchased $1.0 billion of Schlumberger common stock under its $10 billion share repurchase program. Schlumberger did not repurchase any of its common stock during the first quarter of 2021.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Our mining operations are subject to regulation by the federal Mine Safety and Health Administration under the Federal Mine Safety and Health Act of 1977. 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 report.

Item 5. Other Information.

In 2013, Schlumberger completed the wind down of its service operations in Iran. Prior to this, certain non-US subsidiaries provided oilfield services to the National Iranian Oil Company and certain of its affiliates (“NIOC”).

Schlumberger’s residual transactions or dealings with the government of Iran during the first quarter of 2021 consisted of payments of taxes and other typical governmental charges. Certain non-US subsidiaries of Schlumberger maintain depository accounts at the Dubai branch of Bank Saderat Iran (“Saderat”), and at Bank Tejarat (“Tejarat”) in Tehran and in Kish for the deposit by NIOC of amounts owed to non-US subsidiaries of Schlumberger for prior services rendered in Iran and for the maintenance of such amounts previously received. One non-US subsidiary also maintained an account at Tejarat for payment of local expenses such as taxes. Schlumberger anticipates that it will discontinue dealings with Saderat and Tejarat following the receipt of all amounts owed to Schlumberger for prior services rendered in Iran.

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Item 6. Exhibits.

Exhibit 3.1—Articles of Incorporation of Schlumberger Limited (Schlumberger N.V.) (incorporated by reference to Exhibit 3.1 to Schlumberger’s Current Report on Form 8-K filed on April 6, 2016)
Exhibit 3.2—Amended and Restated By-laws of Schlumberger Limited (Schlumberger N.V.) (incorporated by reference to Exhibit 3 to Schlumberger’s Current Report on Form 8-K filed on July 22, 2019)
* Exhibit 10.1—Form of 2021 Performance Share Unit Award Agreement (Based on Return on Capital Employed Performance) under the Schlumberger 2017 Omnibus Stock Incentive Plan (+)
* Exhibit 10.2—Form of 2021 Performance Share Unit Award Agreement (Based on Free Cash Flow Margin Performance) under the Schlumberger 2017 Omnibus Stock Incentive Plan (+)
* Exhibit 10.3—Form of 2021 Performance Share Unit Award Agreement (Based on Relative TSR Performance) under the Schlumberger 2017 Omnibus Stock Incentive Plan (+)
* Exhibit 22—Issuers of Registered Guaranteed Debt Securities
* Exhibit 31.1—Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
* Exhibit 31.2—Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
** Exhibit 32.1—Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
** Exhibit 32.2—Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
* Exhibit 95—Mine Safety Disclosures
* Exhibit 101.INS—Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document
* Exhibit 101.SCH—Inline XBRL Taxonomy Extension Schema Document
* Exhibit 101.CAL—Inline XBRL Taxonomy Extension Calculation Linkbase Document
* Exhibit 101.DEF—Inline XBRL Taxonomy Extension Definition Linkbase Document
* Exhibit 101.LAB—Inline XBRL Taxonomy Extension Label Linkbase Document
* Exhibit 101.PRE—Inline XBRL Taxonomy Extension Presentation Linkbase Document
Exhibit 104—Cover Page Interactive Data File (embedded within the Inline XBRL document)

* | Filed with this Form 10-Q.

** | Furnished with this Form 10-Q.

+ | Compensatory plans or arrangements.

The Exhibits filed herewith do not include certain instruments with respect to long-term debt of Schlumberger Limited and its subsidiaries, inasmuch as the total amount of debt authorized under any such instrument does not exceed 10 percent of the total assets of Schlumberger Limited and its subsidiaries on a consolidated basis. Schlumberger agrees, pursuant to Item 601(b)(4)(iii) of Regulation S-K, that it will furnish a copy of any such instrument to the SEC upon request.

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized and in his capacity as Chief Accounting Officer.

|  |  | Schlumberger Limited (Registrant)
Date: | April 28, 2021 |  | /s/ Howard Guild
|  |  | Howard Guild
|  |  | Chief Accounting Officer and Duly Authorized Signatory

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