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Derivative Instruments and Hedging Activities | 9 Months Ended
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Sep. 30, 2023
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Derivative Instruments and Hedging Activities | 8. Derivative Instruments and Hedging Activities SLB’s functional currency is primarily the US dollar. However, outside the United States, a significant portion of SLB’s expenses is incurred in foreign currencies. Therefore, when the US dollar weakens (strengthens) in relation to the foreign currencies of the countries in which SLB conducts business, the US dollar-reported expenses will increase (decrease). SLB is exposed to risks on future cash flows relating to its fixed rate debt denominated in currencies other than the functional currency. SLB uses cross-currency interest rate swaps to provide a hedge against these risks. These contracts are accounted for as cash flow hedges, with the fair value of the derivative recorded on the Consolidated Balance Sheet and in Accumulated other comprehensive loss. Amounts recorded in Accumulated other comprehensive loss are reclassified into earnings in the same period or periods that the hedged item is recognized in earnings. Details regarding SLB’s outstanding cross-currency interest rate swaps as of September 30, 2023, were as follows: • During 2019, a US-dollar functional currency subsidiary of SLB issued €1.5 billion of Euro-denominated debt. SLB entered into cross-currency interest rate swaps in order to hedge changes in the US dollar value of its €0.5 billion 0.00% Notes due 2024, €0.5 billion 0.25% Notes due 2027 and €0.5 billion 0.50% Notes due 2031. These cross-currency interest rate swaps effectively convert the Euro-denominated notes to US-dollar denominated debt with fixed annual interest rates of 2.29%, 2.51% and 2.76%, respectively. • During 2020, a US-dollar functional currency subsidiary of SLB issued €0.8 billion of Euro-denominated debt. SLB entered into cross-currency interest rate swaps to hedge changes in the US dollar value of its €0.4 billion of 0.25% Notes due 2027 and €0.4 billion of 0.50% Notes due 2031. These cross-currency interest rate swaps effectively convert the Euro-denominated notes to US-dollar denominated debt with fixed annual interest rates of 1.87% and 2.20%, respectively. • During 2020, a US-dollar functional currency subsidiary of SLB issued €2.0 billion of Euro-denominated debt. SLB entered into cross-currency interest rate swaps to hedge changes in the US dollar value of its €1.0 billion of 1.375% Guaranteed Notes due 2026 and €1.0 billion of 2.00% Guaranteed Notes due 2032. These cross-currency interest rate swaps effectively convert the Euro-denominated notes to US-dollar denominated debt with fixed annual interest rates of 2.77% and 3.49%, respectively. • During 2020, a Canadian dollar functional currency subsidiary of SLB issued $0.5 billion of US dollar denominated debt. SLB entered into cross-currency interest rate swaps to hedge changes in the US dollar value of its $0.5 billion 1.40% Senior Notes due 2025. These cross-currency interest rate swaps effectively convert the US dollar notes to Canadian dollar denominated debt with a fixed annual interest rate of 1.73%. A summary of the amounts included in the Consolidated Balance Sheet relating to cross currency interest rate swaps was as follows:
| (Stated in millions) |
| Sept. 30, 2023 |  |  | Dec. 31, 2022 |
Other Assets | $ | 12 |  |  | $ | 1 |
Other Liabilities | $ | 241 |  |  | $ | 326 |
The fair values were determined using a model with inputs that are observable in the market or can be derived or corroborated by observable data. SLB has entered into derivative contracts that hedge the price of oil related to approximately 75% of the projected oil production for the fourth quarter of 2023 and the first half of 2024; approximately 50% for the third quarter of 2024; and 25% for the fourth quarter of 2024 for one of its Asset Performance Solutions ("APS") projects. These contracts are accounted for as cash flow hedges, with changes in the fair value of the hedge recorded in Accumulated other comprehensive loss. Amounts recorded in Accumulated other comprehensive loss are reclassified to earnings in the same period or periods that the hedged item is recognized in earnings. SLB is exposed to risks on future cash flows to the extent that the local currency is not the functional currency and expenses denominated in local currency are not equal to revenues denominated in local currency. SLB uses foreign currency forward contracts to provide a hedge against a portion of these cash flow risks. These contracts are accounted for as cash flow hedges. SLB is also exposed to changes in the fair value of assets and liabilities denominated in currencies other than the functional currency. While SLB uses foreign currency forward contracts to economically hedge this exposure as it relates to certain currencies, these contracts are not designated as hedges for accounting purposes. Instead, the fair value of the derivative is recorded on the Consolidated Balance Sheet and changes in the fair value are recognized in the Consolidated Statement of Income, as are changes in the fair value of the hedged item. Foreign currency forward contracts were outstanding for the US dollar equivalent of $2.3 billion and $2.1 billion in various foreign currencies as of September 30, 2023 and December 31, 2022, respectively. Other than the previously mentioned cross-currency interest rate swaps, the fair value of the other outstanding derivatives was no t material as of September 30, 2023 and December 31, 2022. The effect of derivative instruments designated as cash flow hedges, and those not designated as hedges, on the Consolidated Statement of Income was as follows:
|  |  |  |  |  |  | (Stated in millions) |  |  |
| Gain (Loss) Recognized in Income |  |  |
| Third Quarter |  |  | Nine Months |  |  |
| 2023 |  |  | 2022 |  |  | 2023 |  |  | 2022 |  |  | Consolidated Statement of Income Classification
Derivatives designated as cash flow hedges: |  |  |  |  |  |  |  |  |  |  |  |  |
Cross-currency interest rate swaps | $ | (159 | ) |  | $ | (362 | ) |  | $ | (27 | ) |  | $ | (653 | ) |  | Cost of services/sales
Cross-currency interest rate swaps |  | (22 | ) |  |  | - |  |  |  | (66 | ) |  |  | - |  |  | Interest expense
Commodity contracts |  | (5 | ) |  |  | (20 | ) |  |  | 2 |  |  |  | (85 | ) |  | Revenue
Foreign exchange contracts |  | 7 |  |  |  | (10 | ) |  |  | 14 |  |  |  | (17 | ) |  | Cost of services/sales
| $ | (179 | ) |  | $ | (392 | ) |  | $ | (77 | ) |  | $ | (755 | ) |  |
Derivatives not designated as hedges: |  |  |  |  |  |  |  |  |  |  |  |  |
Foreign exchange contracts | $ | 5 |  |  | $ | 8 |  |  | $ | (21 | ) |  | $ | (30 | ) |  | Cost of services/sales

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- Definition The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 815 -SubTopic 40 -Name Accounting Standards Codification -Section 50 -Paragraph 5 -Subparagraph (f) -Publisher FASB -URI https://asc.fasb.org//1943274/2147480237/815-40-50-5 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 815 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 5C -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org//1943274/2147480434/815-10-50-5C Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 815 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//815/tableOfContent + Details
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