Charges and Credits

9 Months Ended

Sep. 30, 2011

Charges and Credits [Abstract]

Charges and Credits

2. Charges and Credits

Schlumberger recorded the following charges and credits during the first nine months of 2011 and 2010:

2011

Third quarter of 2011:

• Schlumberger recorded $27 million of pretax merger and integration-related charges ($23 million after-tax) in connection with the acquisitions of Smith International, Inc. (“Smith”) and Geoservices. This amount is classified in Merger & integration in the Consolidated Statement of Income.

Second quarter of 2011:

• Schlumberger made a $50 million grant to the Schlumberger Foundation to support the Foundation’s Faculty for the Future program. This program supports talented women scientists from the developing world by helping them pursue advanced graduate studies in scientific disciplines at leading universities worldwide. This $50 million charge ($40 million after-tax) is classified in General & administrative in the Consolidated Statement of Income.

• Schlumberger recorded $32 million of pretax merger and integration-related charges ($24 million after-tax) in connection with the acquisitions of Smith and Geoservices. This amount is classified in Merger & integration in the Consolidated Statement of Income.

First quarter of 2011:

• Schlumberger recorded $34 million of pretax merger and integration-related charges ($28 million after-tax) in connection with the acquisitions of Smith and Geoservices. This amount is classified in Merger & integration in the Consolidated Statement of Income.

The following is a summary of the charges recorded during the first nine months of 2011:

			(Stated in millions)
							Consolidated Statement
	Pretax		Tax		Net		of Income Classification
Merger and integration-related costs	$	93	$	17	$	76	Merger & integration
Donation to the Schlumberger Foundation		50		10		40	General & administrative
	$	143	$	27	$	116

2010

Third quarter of 2010:

• As a result of the decision to rationalize support costs across the organization as well as to restructure the North America land operations to provide greater operating efficiency, Schlumberger recorded a pretax charge of $90 million ($77 million after-tax).

• Following the successful introduction of UniQ, a new generation single-sensor land acquisition system, Schlumberger recorded a $78 million pretax charge ($71 million after-tax), related to the impairment of WesternGeco’s first generation Q-Land system assets.

• A pretax and after-tax charge of $63 million primarily relating to the early termination of a vessel lease associated with WesternGeco’s electromagnetic service offering as well as related assets, including a $30 million impairment related to an equity-method investment.

• In connection with Schlumberger’s merger with Smith (see Note 4 — Acquisitions), Schlumberger recorded the following pretax charges: $56 million ($55 million after-tax) of merger-related transaction costs including advisory and legal fees, $41 million ($35 million after-tax) relating to employee benefits for change in control payments and retention bonuses, and $38 million ($24 million after-tax) for the amortization of purchase accounting adjustments associated with the write-up of acquired inventory to its estimated fair value.

• $40 million pretax ($36 million after-tax) for the early termination of rig contracts and workforce reductions in Mexico due to the slowdown of project activity.

• Schlumberger repurchased $352 million of its $650 million 6.50% Notes due 2012 and, as a result, incurred a pretax charge of $28 million ($18 million after-tax).

• Schlumberger recorded a pretax gain of $1.27 billion ($1.24 billion after-tax) as a result of remeasuring its previously held 40% equity interest in the M-I SWACO joint venture.

The following is a summary of the charges and credits recorded during the third quarter of 2010:

				(Stated in millions)
										Consolidated Statement
	Pretax			Tax			Net			of Income Classification
Restructuring and Merger-related Charges:
Severance and other	$	90		$	13		$	77		Restructuring & other
Impairment relating to WesternGeco’s first generation Q-Land acquisition system		78			7			71		Restructuring & other
Other WesternGeco-related charges		63			—			63		Restructuring & other
Professional fees and other		56			1			55		Merger & integration
Merger-related employee benefits		41			6			35		Merger & integration
Inventory fair value adjustments		38			14			24		Cost of revenue
Mexico restructuring		40			4			36		Restructuring & other
Repurchase of bonds		28			10			18		Restructuring & other
Total restructuring and merger-related charges		434			55			379
Gain on investment in M-I SWACO		(1,270	)		(32	)		(1,238	)	Gain on Investment in M-I SWACO
	$	(836	)	$	23		$	(859	)

First quarter of 2010:

• Schlumberger incurred $35 million of pretax and after-tax merger-related costs in connection with the Smith and Geoservices transactions. These costs primarily consisted of legal and other advisory fees.

• During March 2010, the Patient Protection and Affordable Care Act (“PPACA”) was signed into law in the United States. Among other things, the PPACA eliminated the tax deductibility of retiree prescription drug benefits to the extent of the Medicare Part D subsidy that companies, such as Schlumberger, receive. As a result of this change in law, Schlumberger recorded a $40 million charge to adjust its deferred tax assets to reflect the loss of this future tax deduction.

The following is a summary of the charges and credits recorded during the first nine months of 2010:

				(Stated in millions)
										Consolidated Statement
	Pretax			Tax			Net			of Income Classification
Restructuring and Merger-related Charges:
Severance and other	$	90		$	13		$	77		Restructuring & other
Impairment relating to WesternGeco’s first generation Q-Land acquisition system		78			7			71		Restructuring & other
Other WesternGeco-related charges		63			—			63		Restructuring & other
Professional fees and other		91			1			90		Merger & integration
Merger-related employee benefits		41			6			35		Merger & integration
Inventory fair value adjustments		38			14			24		Cost of revenue
Mexico restructuring		40			4			36		Restructuring & other
Repurchase of bonds		28			10			18		Restructuring & other
Total restructuring and merger-related charges		469			55			414
Impact of elimination of tax deduction related to Medicare Part D subsidy		—			(40	)		40		Taxes on income
Gain on investment in M-I SWACO		(1,270	)		(32	)		(1,238	)	Gain on Investment in M-I SWACO
	$	(801	)	$	(17	)	$	(784	)