Derivative Instruments and Hedging Activities

12 Months Ended

Dec. 31, 2023

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments and Hedging Activities

10. Derivative Instruments and Hedging Activities

SLB’s functional currency is primarily the US dollar. Approximately 72% of SLB’s revenues in 2023 were denominated in US dollars. 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).

Changes in foreign currency exchange rates expose SLB 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 December 31, 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 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 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 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 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 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 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 fair 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 follows:

	(Stated in millions)
	Dec. 31, 2023		Dec. 31, 2022
Other Assets	$	36	$	1
Other Liabilities	$	67	$	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 had derivative contracts in place that hedged the price of oil related to approximately 75% of the projected oil production for each of 2023 and 2022 for one of its APS projects. During 2023, SLB entered into derivative contracts that hedge the price of oil relating to approximately 75% of the projected oil production for the first six months of 2024; approximately 65% for the third quarter of 2024; and approximately 30% of the projected oil production for the fourth quarter 2024 for the same project. 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. Transaction losses of $154 million in 2023 (including $90 million related to the Argentina devaluation in 2023; see Note 3 – Charges and credits for further details), $96 million in 2022, and $23 million in 2021 were recognized in the Consolidated Statement of Income net of related hedging activities.

Foreign currency forward contracts were outstanding for the US dollar equivalent of $5.4 billion and $2.1 billion in various foreign currencies as of December 31, 2023 and 2022, respectively.

Other than the previously mentioned cross-currency interest rate swaps, the fair value of the other outstanding derivatives was not material as of December 31, 2023 and 2022.

The effect of derivative instruments designated as hedges and those not designated as hedges on the Consolidated Statement of Income was as follows:

				(Stated in millions)
	Gain (Loss) Recognized in Income									Consolidated Statement
	2023			2022			2021			of Income Classification
Derivatives designated as cash flow hedges:
Cross-currency interest rate swaps	$	173		$	(254	)	$	(422	)	Cost of services/sales
Cross-currency interest rate swaps		(88	)		(88	)		(83	)	Interest expense
Commodity contracts		3			(87	)		-		Revenue
Foreign exchange contracts		15			(30	)		5		Cost of services/sales
	$	103		$	(459	)	$	(500	)
Derivatives not designated as hedges:
Foreign exchange contracts	$	(9	)	$	42		$	(11	)	Cost of services/sales

During the fourth quarter of 2023, SLB issued a credit default swap (“CDS”) for a notional amount of $275 million to a third-party financial institution. The CDS relates to a secured borrowing provided by the financial institution to SLB’s primary customer in Mexico. The secured borrowing was utilized by this customer to pay certain of SLB’s outstanding receivables. The notional amount of the CDS, which was increased to $560 million in January 2024, will reduce on a monthly basis over its 26-month term. The fair value of this derivative liability was not material at December 31, 2023.