2. Charges and Credits

Schlumberger recorded the following charges and credits during the first six months of 2017:

Second quarter 2017:

•

During the second quarter of 2017, Schlumberger entered into a financing agreement with its primary customer in Venezuela. This agreement resulted in the exchange of $700 million of outstanding accounts receivable for a promissory note with a three-year term that bears interest at the rate of 6.50% per annum. Schlumberger recorded this note at its estimated fair value on the date of the exchange, which resulted in a pretax and after-tax charge of $460 million. Schlumberger is accounting for the promissory note as an available-for-sale security reported at fair value in Other Assets, with unrealized gains and losses included as a component of Accumulated other comprehensive loss. The fair value of the promissory notes is based on management’s estimate of pricing assumptions that market participants would use.

During the second quarter of 2017, Schlumberger also entered into discussions with another customer relating to certain of its outstanding accounts receivable. As a result of these ongoing discussions, Schlumberger recorded a pretax charge of $50 million ($38 million after taxes and noncontrolling interests) to adjust these receivables to their estimated net realizable value.

These charges are classified in Impairments & other in the Consolidated Statement of Income (Loss).

•

In connection with Schlumberger’s acquisition of Cameron (See Note 4 – Acquisition of Cameron), Schlumberger recorded $81 million of pretax charges ($64 million after-tax) consisting of employee benefits, facility consolidation and other merger and integration-related costs. These charges are classified in Merger & integration in the Consolidated Statement of Income (Loss).

First quarter of 2017:

•

In connection with Schlumberger’s acquisition of Cameron (See Note 4 – Acquisition of Cameron), Schlumberger recorded $82 million of pretax charges ($68 million after-tax) consisting of employee benefits, facility consolidation and other merger and integration-related costs. These charges are classified in Merger & integration in the Consolidated Statement of Income (Loss).

The following is a summary of the charges and credits recorded during the first six months of 2017:

	(Stated in millions)

					Noncontrolling
	Pretax		Tax		Interests		Net
Promissory note fair value adjustment and other	$	510	$	-	$	12	$	498
Merger & integration		164		31		-		133
	$	674	$	31	$	12	$	631

Schlumberger recorded the following charges and credits during the second quarter of 2016:

•

As a result of the persistent unfavorable oil and gas industry market conditions that continued to deteriorate in the first half of 2016, and the related impact on first-half operating results and expected customer activity levels, Schlumberger determined that the carrying values of certain assets were no longer recoverable and took certain decisions that resulted in the following impairments and other charges:

$646 million of severance costs associated with further headcount reductions.

$209 million impairment of pressure pumping equipment in North America.

$165 million impairment of facilities in North America.

$684 million of other fixed asset impairments primarily relating to other underutilized equipment.

$616 million write-down of the carrying value of certain inventory to its net realizable value.

$198 million impairment of certain multiclient seismic data, largely related to the US Gulf of Mexico.

$55 million of other costs, primarily relating to facility closure costs.

The fair value of the impaired fixed assets and multiclient seismic data was estimated based on the projected present value of future cash flows that these assets are expected to generate. Such estimates included unobservable inputs that required significant judgments. Additional charges may be required in future periods should industry conditions worsen. The above items are classified in Impairments & other in the Consolidated Statement of Income (Loss).

•

In connection with Schlumberger’s acquisition of Cameron (see Note 4 – Acquisition of Cameron), Schlumberger recorded $185 million of charges, classified in Merger & integration in the Consolidated Statement of Income (Loss), consisting of the following: $47 million relating to employee benefits for change-in-control arrangements and retention bonuses; $45 million of transaction costs, including advisory and legal fees; $40 million of facility closure costs, and $53 million of other merger and integration-related costs. Additionally, Schlumberger recorded $150 million of charges related to the amortization of purchase accounting adjustments associated with the write-up of acquired inventory to its estimated fair value, which is classified in Cost of sales in the Consolidated Statement of Income (Loss), This amortization was historically presented as a component of Merger & integration; however, Schlumberger reclassified this prior period amount to Cost of sales during the current quarter.

The following is a summary of the charges and credits recorded during the second quarter of 2016:

	(Stated in millions)

	Pretax		Tax		Net
Impairments & other
Workforce reduction	$	646	$	63	$	583
North America pressure pumping asset impairments		209		67		142
Facilities impairments		165		58		107
Other fixed asset impairments		684		52		632
Inventory write-downs		616		49		567
Multiclient seismic data impairment		198		62		136
Other restructuring charges		55		-		55
Merger & integration
Merger-related employee benefits		47		7		40
Professional fees		45		10		35
Facility closure costs		40		10		30
Other merger and integration-related		53		9		44
Amortization of inventory fair value adjustment		150		45		105
	$	2,908	$	432	$	2,476

There were no charges or credits recorded during the first quarter of 2016.