Charges and Credits

12 Months Ended

Dec. 31, 2022

Restructuring And Related Activities [Abstract]

Charges and Credits

3.  Charges and Credits

2022

SLB recorded the following charges and credits during 2022, all of which are classified in Interest & other income, net in the Consolidated Statement of Income (Loss):

	(Stated in millions)
	Pretax			Tax Benefit
	Charge (Credit)			(Expense)			Net
First quarter:
Gain on sale of Liberty shares	$	(26	)	$	(4	)	$	(22	)
Second quarter:
Gain on sale of Liberty shares		(215	)		(14	)		(201	)
Gain on sale of real estate		(43	)		(2	)		(41	)
Fourth quarter:
Gain on sale of Liberty shares		(84	)		(19	)		(65	)
Loss on Blue Chip Swap transactions		139			-			139
Gain on ADC equity investment		(107	)		(3	)		(104	)
Gain on repurchase of bonds		(11	)		(2	)		(9	)
	$	(347	)	$	(44	)	$	(303	)

• On December 31, 2020, SLB contributed its onshore hydraulic fracturing business in the United States and Canada, including its pressure pumping, pumpdown perforating and Permian frac sand business to Liberty Energy Inc. (“Liberty”) in exchange for an equity interest in Liberty. During 2022, SLB sold 47.8 million of its shares of Liberty and received proceeds of $730 million. These transactions resulted in gains of $325 million. As of December 31, 2022, SLB had a 5% equity interest in Liberty. Based on the quoted market prices of Liberty’s shares, the fair value of SLB’s investment in Liberty was approximately $144 million as of December 31, 2022. SLB accounts for its investment in Liberty under the equity method of accounting and records its share of Liberty’s net income or loss on a one-quarter lag.

• The Central Bank of Argentina maintains certain currency controls that limit SLB’s ability to access US dollars in Argentina and remit cash from its Argentine operations.  A legal indirect foreign exchange mechanism exists, in the form of capital market transactions known as Blue Chip Swaps, which effectively results in a parallel US dollar exchange rate.  This parallel rate, which cannot be used as the basis to remeasure SLB’s Argentine peso-denominated net monetary assets in US dollars under US GAAP, was approximately 93% higher than Argentina’s official exchange rate at December 31, 2022.  During the fourth quarter of 2022, SLB entered into Blue Chip Swap transactions that resulted in a loss of $139 million.  

• During the fourth quarter of 2022, SLB repurchased $395 million of its 3.75% Senior Notes due 2024 and $409 million of its 4.00% Senior Notes due 2025 for $790 million, resulting in a gain of $11 million after considering the write-off of the related deferred financing fees and other costs.

• SLB has an investment in the Arabian Drilling Company (“ADC”), an onshore and offshore gas and oil rig drilling company in Saudi Arabia, that it accounts for under the equity method.  During the fourth quarter of 2022, ADC completed an initial public offering (“IPO”).  In connection with the IPO, SLB sold a portion of its interest in a secondary offering that resulted in SLB receiving net proceeds of $223 million.  As a result of these transactions, SLB’s ownership interest in ADC decreased from 49% to approximately 34%.  SLB recognized a gain of $107 million, representing the gain on the sale of a portion of its interest as well as the effect of the ownership dilution of its equity investment due to the IPO. As of December 31, 2022, the fair value of SLB’s investment in ADC, based on the quoted market price of ADC’s shares, was approximately $930 million and the carrying value of its investment was $556 million.  SLB accounts for its share of ADC’s net income on a one-quarter lag.

• During the second quarter of 2022, SLB sold certain real estate and received proceeds of $120 million. As a result of this transaction, SLB recognized a gain of $43 million.

2021

SLB recorded the following charges and credits during 2021:

	(Stated in millions)
	Pretax			Tax Benefit
	Charge (Credit)			(Expense)			Net
Third quarter:
Unrealized gain on marketable securities	$	(47	)	$	(11	)	$	(36	)
Fourth quarter:
Gain on sale of Liberty shares		(28	)		(4	)		(24	)
Early repayment of bonds		10			-			10
	$	(65	)	$	(15	)	$	(50	)

Third quarter 2021:

• During the third quarter of 2021, a start-up company that SLB previously invested in was acquired. As a result of this transaction, SLB’s ownership interest was converted into shares of a publicly traded company. SLB recognized an unrealized pretax gain of $47 million to increase the carrying value of this investment to its estimated fair value of approximately $55 million. This unrealized gain is reflected in Interest & other income, net in the Consolidated Statement of Income (Loss).

Fourth quarter 2021:

• SLB sold 9.5 million of its shares of Liberty and received proceeds of $109 million.  As a result of this transaction SLB recognized a gain of $28 million, which is classified in Interest & other income, net in the Consolidated Statement of Income (Loss).

• On November 30, 2021, SLB deposited sufficient funds with the trustee for its $1.0 billion of 2.40% Senior Notes due 2022 (including payment of the February 1, 2022 interest payment) to satisfy and discharge all of its obligations relating to such notes.  As a result of this transaction, SLB recorded a charge of $10 million.  This charge is reflected in Interest in the Consolidated Statement of Income (Loss).

2020

SLB recorded the following charges and credits during 2020, all of which, unless otherwise noted, are classified in Impairments & other in the Consolidated Statement of Income (Loss):

	(Stated in millions)
	Pretax			Tax Benefit
	Charge (Credit)			(Expense)			Net
First quarter:
Goodwill	$	3,070		$	-		$	3,070
Intangible assets impairments		3,321			815			2,506
Asset Performance Solutions investments		1,264			(4	)		1,268
North America pressure pumping impairment		587			133			454
Workforce reductions		202			7			195
Other		79			9			70
Valuation allowance		-			(164	)		164
Second quarter:
Workforce reductions		1,021			71			950
Asset Performance Solutions investments		730			15			715
Fixed asset impairments		666			52			614
Inventory write-downs		603			49			554
Right-of-use asset impairments		311			67			244
Costs associated with exiting certain activities		205			(25	)		230
Exploration data impairment		156			2			154
Repurchase of bonds		40			2			38
Postretirement benefits curtailment gain		(69	)		(16	)		(53	)
Other		60			4			56
Third quarter:
Facility exit charges		254			39			215
Workforce reductions		63			-			63
Other		33			1			32
Fourth quarter:
Gain on sale of OneStim		(104	)		(11	)		(93	)
Unrealized gain on marketable securities		(39	)		(9	)		(30	)
Other		62			4			58
	$	12,515		$	1,041		$	11,474

First quarter 2020:

• 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, SLB’s market capitalization deteriorated significantly compared to the end of 2019. SLB’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, SLB determined that it was more likely than not that the fair value of certain of its reporting units was less than their carrying value.

Therefore, SLB performed an interim goodwill impairment test, which resulted in a $3.1 billion goodwill impairment charge. SLB 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 SLB’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. SLB selected the assumptions used in the discounted cash flow projections using historical data supplemented by current and anticipated market conditions and estimated growth rates. SLB’s estimates were based upon assumptions believed to be reasonable.

The discount rates utilized to value SLB’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 SLB’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, SLB recorded the following impairment charges:

- $3.3 billion relating to intangible assets, of which $2.2 billion relates to SLB’s 2016 acquisition of Cameron International Corporation and $1.1 billion relates to SLB’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 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.

Second quarter 2020:

• As previously noted, late in the first quarter of 2020 geopolitical events that increased the supply of low-priced oil to the global market occurred at the same time as demand weakened due to the worldwide effects of the COVID-19 pandemic, which led to a collapse in oil prices. As a result, the second quarter of 2020 was the most challenging quarter in decades. SLB responded to these market conditions by taking actions to restructure its business and rationalize its asset base during the second quarter of 2020. These actions included reducing headcount, closing facilities, and exiting business lines in certain countries. Additionally, due to the resulting activity decline, SLB had assets that would no longer be utilized. As a consequence of these circumstances and decisions, SLB recorded the following restructuring and asset impairment charges:

- $1.021 billion of severance associated with reducing its workforce by more than 21,000 employees.

- $730 million relating to the carrying value of certain APS projects in Latin America.

- $666 million of fixed asset impairments primarily relating to equipment that would no longer be utilized and facilities it exited.

- $603 million write-down of the carrying value of inventory to its net realizable value.

- $311 million write-down of right-of-use assets under operating leases associated with leased facilities SLB exited and excess equipment.

- $205 million of costs associated with exiting certain activities.

- $156 million impairment of certain exploration data.

- $60 million of other costs, including a $42 million increase in the allowance for the doubtful accounts.

• SLB repurchased all $600 million of its 4.20% Senior Notes due 2021 and $935 million of its 3.30% Senior Notes due 2021. SLB paid a premium of $40 million in connection with these repurchases.

• As a consequence of the workforce reductions described above, SLB recorded a curtailment gain of $69 million relating to its US postretirement medical plan. See Note 16 – Pension and Other Postretirement Benefit Plans for further details.

Third quarter 2020:

• SLB recorded the following restructuring charges:

- $254 million of facility exit charges as SLB continued to rationalize its real estate footprint relating to both leased and owned facilities.

- $63 million of severance.

- $33 million of other charges.

Fourth quarter 2020:

• On December 31, 2020, SLB contributed its OneStim business to Liberty in exchange for a 37% equity interest in Liberty.  As a result of this transaction, SLB recognized a gain of $104 million.  This gain is classified in Interest & other income, net in the Consolidated Statement of Income (Loss).

• During the fourth quarter of 2020, a start-up company that SLB previously invested in completed an initial public offering.  As a result, SLB recognized an unrealized gain of $39 million to increase the carrying value of this investment to its fair value of approximately $43 million.  This unrealized gain is reflected in Interest & other income, net in the Consolidated Statement of Income (Loss).  SLB sold its interest in this company during 2021.

• During the fourth quarter of 2020, SLB entered into an agreement to purchase new software licenses.  This transaction rendered certain previously purchased licenses obsolete.  As a result, SLB wrote off the remaining $62 million of net book value associated with the obsolete software licenses.

The fair value of certain of the assets impaired during 2020 was estimated based on the present value of projected future cash flows that the underlying assets are expected to generate.  Such estimates included unobservable inputs that required significant judgment.