# SLB LIMITED/NV (SLB) FY 2022 MD&A

Verbatim Item 7 Management's Discussion and Analysis from SLB LIMITED/NV's 10-K for fiscal year 2022.

SEC filing source: https://www.sec.gov/Archives/edgar/data/87347/000156459023000762/slb-10k_20221231.htm
Accession: 0001564590-23-000762
Filing date: 2023-01-25
Report date: 2022-12-31
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary.
Confidence: high

Company profile: /company/SLB/
All MD&A years: /company/SLB/mda/
Previous year: /company/SLB/mda/fy2021/ (FY 2021)
Next year: /company/SLB/mda/fy2023/ (FY 2023)

Item 7.  Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis contains forward-looking statements, including, without limitation, statements relating to our plans, strategies, objectives, expectations, intentions and resources. Such forward-looking statements should be read in conjunction with our disclosures under “Item 1A. Risk Factors” of this Form 10-K.

This section of the Form 10-K generally discusses 2022 and 2021 items and year-to-year comparisons between 2022 and 2021.   Discussions of 2020 items and year-to-year comparison between 2021 and 2020 that are not included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of SLB’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

2022 Executive Overview

We delivered strong fourth quarter results and concluded a remarkable year for SLB with great success. Full-year 2022 revenue of $28.1 billion increased 23% year on year. All Divisions and geographical areas experienced double digit revenue growth.

2022 was transformative for SLB as we set new safety, operational, and performance benchmarks for our customers and strengthened our market position both internationally and in North America. We launched our bold new brand identity, reinforcing our leadership position in energy technology, digital, and sustainability, and demonstrated our ability to deliver superior earnings in this early phase of a structural upcycle in energy.

In North America, we seized the growth cycle throughout the year, increased our pretax operating margins close to 600 basis points (“bps”), and almost doubled our pretax operating income. We effectively harnessed our refocused portfolio, fit-for-basin technology, and performance differentiation to gain greater market access and improved pricing, particularly in the drilling markets where we significantly outperformed rig count growth. Today, we have built one of the highest-quality oilfield services and equipment businesses in North America through the implementation of our returns-focused strategy.

In the international markets, after a first half of the year that was impacted by geopolitical conflict and supply chain bottlenecks, activity began to visibly expand in the second half of the year, resulting in full year revenue growth of 20% and margin expansion of more than 150 bps. We laid the foundation for further growth and margin expansion through pricing improvements and a solid pipeline of incremental contract awards. In the Middle East, SLB is well positioned to be a key beneficiary of this visible market expansion, and we expect record levels of upstream investment by national oil companies to continue in the next few years. During the year, we secured a sizeable share of tender awards in the region, driven by our differentiated performance, fit-for-purpose technology, and best-in-class local content. Similarly, across offshore basins, we continue to consolidate our advantaged position with new contract awards, particularly in Latin America and Africa.

Beyond our financial results, we made significant progress in our sustainability initiatives during the year, including launching several new Transition Technologies to support the decarbonization of oil and gas. Our Transition Technologies portfolio revenue grew more than 30% year-on-year, and we project it will cross the $1 billion revenue mark in 2023.

Finally, we initiated increased returns to shareholders, demonstrating confidence in our strategy, our financial outperformance, and our commitment to superior returns. We increased our dividend by 40% in April 2022, followed by a further 43% increase in January 2023, and we resumed our share buyback program in the first quarter of 2023.

The fourth quarter affirmed a distinctive new phase in the upcycle with the much-anticipated acceleration of activity in the Middle East, as revenue in the region increased by double digits. Offshore activity continued to strengthen, partially offset by seasonality in the Northern Hemisphere. In North America, the US land rig count remains at robust levels, although the pace of growth is moderating. Additionally, pricing continues to trend favorably, extending beyond North America and into the international regions, supported by new technology and very tight equipment and service capacity in certain markets.

These activity dynamics, improved pricing, and our commercial success—particularly in the Middle East, offshore, and North American markets—combine to set a very strong foundation for outperformance in 2023.

We strengthened our balance by reducing our net debt by $1.7 billion to $9.3 billion, its lowest level since the second quarter of 2016, and repaid approximately $1.7 billion of gross debt during the year.

Looking ahead, we believe the macro backdrop and market fundamentals that underpin a strong multi-year upcycle for energy remain very compelling in both oil and gas and in low-carbon energy resources. First, oil and gas demand is forecasted by the International Energy Agency (“IEA”) to grow by 1.7 million barrels per day in 2023 despite concerns for a potential economic slowdown in certain regions. In parallel, markets remain very tightly supplied. Second, energy security is prompting a sense of urgency to make further investments to ensure capacity expansion and diversity of supply. And third, the secular trends of digital and decarbonization are set to accelerate with significant digital technology advancements, favorable government policy support, and increased spending on low-carbon initiatives and resources.

Based on these factors, global upstream spending projections continue to trend positively. Activity growth is expected to be broad-based, marked by an acceleration in international basins. These positive activity dynamics will be amplified by higher service pricing

17

and tighter service sector capacity. The impact of loosening COVID-19 restrictions and an earlier than expected reopening of China could support further upside potential over 2023.

Overall, the combination of these effects will result in a very favorable mix for SLB with significant growth opportunities in our Core, Digital, and New Energy and we expect another year of very strong growth and margin expansion.

Fourth Quarter 2022 Results

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[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["(1)","Comprised principally of certain corporate expenses not allocated to the segments, stock-based compensation costs, amortization expense associated with certain intangible assets, certain centrally managed initiatives and other nonoperating items."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["(2)","Excludes interest income included in the segments\u2019 income (fourth quarter 2022: $19 million; third quarter 2022: $25 million)."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["(3)","Excludes interest expense included in the segments\u2019 income (fourth quarter 2022: $3 million; third quarter 2022: $3 million)."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["(4)","Charges & credits are described in detail in Note 3 to the Consolidated Financial Statements."]]
[[/GREPCENT_TABLE]]

Fourth-quarter revenue of $7.9 billion increased 5% sequentially. Revenue grew across all Divisions and geographical areas, with robust year-end sales in digital and particularly strong service activity offshore and in the Middle East where a significant inflection was witnessed as capacity expansion projects mobilized.

International revenue of $6.2 billion grew 5% sequentially, driven by continued strengthening activity. This revenue increase was led by the Middle East & Asia and Latin America, both of which grew 7%. In North America, revenue of $1.6 billion increased 6% sequentially driven by strong year-end exploration data licensing sales in the US Gulf of Mexico boosting North America offshore revenue.  US land revenue increased 4% sequentially due to drilling revenue growth, which outperformed the rig count growth.

Fourth-quarter pretax segment operating margin of 19.8% was the highest since 2015.

Digital & Integration

Digital & Integration fourth-quarter revenue of $1.0 billion increased 12% sequentially, propelled by the year-end exploration data licensing sales in the US Gulf of Mexico and Africa; increased Asset Performance Solutions (“APS”) project activity in Ecuador and higher digital sales internationally.

Digital & Integration pretax operating margin of 38% expanded 386 bps sequentially, due to improved profitability in exploration data licensing and digital solutions.

Reservoir Performance

Reservoir Performance revenue of $1.6 billion increased 7% sequentially from new projects and activity gains internationally, particularly in the Middle East and Africa.

Reservoir Performance pretax operating margin of 18% expanded 146 bps sequentially. Profitability was boosted by higher offshore and exploration activity, mainly in Africa, and strong development activity, particularly in US land and Middle East & Asia.

Well Construction

Well Construction revenue of $3.2 billion increased 5% sequentially, outperforming global rig count growth due to strong activity from new projects and solid pricing improvements internationally, particularly in the Middle East & Asia and Latin America.

18

Well Construction pretax operating margin of 21% contracted 50 bps sequentially, as improved profitability from increasing activity in the Middle East & Asia, North America, and Latin America was more than offset by the onset of seasonal effects in the Northern Hemisphere.

Production Systems

Production Systems revenue of $2.2 billion increased 3% sequentially primarily due to higher international sales of artificial lift, completions, and midstream productions systems.

Production Systems pretax operating margin of 11% expanded 32 bps sequentially primarily due to an improved revenue mix.

Full-Year 2022 Results

[[GREPCENT_TABLE]]
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[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["(1)","Comprised principally of certain corporate expenses not allocated to the segments, stock-based compensation costs, amortization expense associated with certain intangible assets, certain centrally managed initiatives and other nonoperating items."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["(2)","Excludes interest income included in the segments\u2019 income (2022: $72 million; 2021: $2 million)."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["(3)","Excludes interest expense included in the segments\u2019 income (2022: $13 million; 2021: $15 million) and $10 million interest expense included in Charges & credits in 2021."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["(4)","Charges and credits are described in detail in Note 3 to the Consolidated Financial Statements."]]
[[/GREPCENT_TABLE]]

Full-year 2022 revenue of $28.1 billion increased 23% year-on-year driven by activity increases internationally, in North America and across all Divisions.

International revenue increased 20% to $21.9 billion led by Latin America and Europe/CIS/Africa with revenue growth of 27% and 25%, respectively, while revenue in the Middle East & Asia increased 12%. In North America, revenue increased 34% to $6.0 billion primarily driven by robust onshore drilling activity; higher sales of production systems; a strong contribution from the APS project in Canada; and increased exploration data licensing in the US Gulf of Mexico.

Full-year pretax operating margin of 18% increased 316 bps due to improved operating leverage from higher activity, a favorable activity mix, and an improving pricing environment.

Digital & Integration

Digital & Integration full-year revenue of $3.7 billion increased 13% year on year, primarily driven by increased APS project activity in Ecuador and Canada and higher exploration data licensing sales in the US Gulf of Mexico.

Digital & Integration pretax operating margin of 36% expanded 177 bps year on year largely due to improved profitability in exploration data licensing.

Reservoir Performance

Reservoir Performance full-year revenue of $5.6 billion increased 21% year on year as a result of strong international activity led by the Middle East & Asia and Latin America on higher activity and improved pricing.

19

Reservoir Performance pretax operating margin of 16% increased 177 bps year on year primarily due to improved profitability in intervention activity.

Well Construction

Well Construction full-year revenue of $11.4 billion grew 31% year on year with strong growth across all geographical areas led by North America and Latin America, which grew 56% and 53%, respectively. This growth was driven by higher land and offshore activity along with improved pricing.

Well Construction pretax operating margin of 19% expanded 560 bps year on year driven by the higher activity and improved pricing.

Production Systems

Production Systems full-year revenue of $7.9 billion increased 17% year on year driven by new projects and increased sales activity primarily in Europe, Africa, and North America. Double digit growth was posted in midstream, artificial lift, surface production systems and subsea production systems.

Production Systems pretax operating margin of 10% was essentially flat primarily as a result of higher logistics costs and a less favorable revenue mix.

Interest & Other Income, Net

Interest & other income, net consisted of the following:

[[GREPCENT_TABLE]]
[["","","","","","(Stated in millions)"],["","2022","","","2021"],["Gain on sale of Liberty shares","$","325","","","$","28"],["Loss on Blue Chip Swap transactions","","(139",")","","","-"],["Gain on ADC equity investment","","107","","","","-"],["Earnings of equity method investments","","164","","","","40"],["Interest income","","99","","","","33"],["Gain on sale of real estate","","43","","","","-"],["Gain on repurchase of bonds","","11","","","","-"],["Unrealized gain on marketable securities","","-","","","","47"],["","$","610","","","$","148"]]
[[/GREPCENT_TABLE]]

During 2022, SLB sold 47.8 million of its shares of Liberty and recognized a gain of $325 million. During 2021, SLB sold 9.5 million of its shares of Liberty and recognized a gain of $28 million.

SLB’s functional currency in Argentina is the US dollar and it uses Argentina’s official exchange rate to remeasure its Argentine peso-denominated net assets into US dollars. 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 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. 

SLB’s peso-denominated net assets in Argentina were approximately $40 million at December 31, 2022 (as compared to approximately $270 million at September 30, 2022), primarily consisting of cash. If Argentina’s official exchange rate converges with the parallel rate, SLB would incur a loss on its peso-denominated net assets in Argentina.  Additionally, SLB may enter into further Blue Chip Swap transactions in the future. Argentina represented less than 5% of SLB’s consolidated revenue in 2022.

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. 

The increase in earnings of equity method investments in 2022 as compared to 2021 is primarily due to SLB’s investment in Liberty, as Liberty experienced net losses in 2021 as compared to net income in 2022, as well as higher earnings from SLB’s investment in ADC.

The increase in interest income was primarily driven by the effect of higher cash and short-term investment balances and interest rates in Argentina.  This increase was more than offset by approximately $100 million of foreign exchange losses recorded during 2022 ($13

20

million during 2021) relating to the remeasurement of Argentine peso-denominated net monetary assets as the official Argentine peso exchange rate devalued compared to the US dollar throughout 2022. 

During 2022, SLB sold certain real estate and recognized a gain of $43 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.

During 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.

Interest Expense

Interest expense of $490 million in 2022 decreased $49 million compared to 2021 primarily as a result of the repayment of $1.7 billion and $2.1 billion of debt during 2022 and 2021, respectively.

Other

Research & engineering and General & administrative expenses, as a percentage of Revenue, were as follows:

[[GREPCENT_TABLE]]
[["","2022","","","2021"],["Research & engineering","","2.3","%","","","2.4","%"],["General & administrative","","1.3","%","","","1.5","%"]]
[[/GREPCENT_TABLE]]

Income Taxes

The SLB effective tax rate is sensitive to the geographic mix of earnings. When the percentage of pretax earnings generated outside of North America increases, the SLB effective tax rate generally decreases. Conversely, when the percentage of pretax earnings generated outside of North America decreases, the SLB effective tax rate generally increases.

The effective tax rate was 18% in 2022 as compared to 19% in 2021.  The decrease in the effective tax rate was primarily due to the charges and credits described in Note 3 to the Consolidated Financial Statements. These charges and credits reduced the effective tax rate in 2022 by approximately one percentage point.

Charges and Credits

SLB recorded charges and credits during 2022 and 2021. These charges and credits, which are summarized below, are more fully described in Note 3 to the Consolidated Financial Statements.

The following is a summary of the 2022 charges and credits:

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[[/GREPCENT_TABLE]]

21

The following is a summary of the 2021 charges and credits:

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[[/GREPCENT_TABLE]]

Liquidity and Capital Resources

Details of the components of liquidity as well as changes in liquidity follow:

[[GREPCENT_TABLE]]
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[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["Changes in Liquidity:","2022","","","2021"],["Net income","$","3,492","","","$","1,928"],["Charges and credits","","(347",")","","","(65",")"],["Depreciation and amortization (2)","","2,147","","","","2,120"],["Stock-based compensation expense","","313","","","","324"],["Deferred taxes","","(39",")","","","(31",")"],["Earnings of equity method investments, less dividends received","","(96",")","","","10"],["Increase in working capital","","(1,709",")","","","(45",")"],["US Federal tax refund","","-","","","","477"],["Other","","(41",")","","","(67",")"],["Cash flow from operations","","3,720","","","","4,651"],["Capital expenditures","","(1,618",")","","","(1,141",")"],["APS investments","","(587",")","","","(474",")"],["Exploration data capitalized","","(97",")","","","(39",")"],["Free cash flow (3)","","1,418","","","","2,997"],["Dividends paid","","(848",")","","","(699",")"],["Proceeds from employee stock purchase plan","","141","","","","137"],["Proceeds from exercise of stock options","","81","","","","-"],["Taxes paid on net-settled stock-based compensation awards","","(93",")","","","(24",")"],["Business acquisitions and investments, net of cash acquired plus debt assumed","","(58",")","","","(103",")"],["Proceeds from sale of Liberty shares","","732","","","","109"],["Proceeds from sale of ADC shares","","223","","","","-"],["Proceeds from sale of real estate","","120","","","","-"],["Purchases of Blue Chip Swap securities","","(259",")","","","-"],["Proceeds from sales of Blue Chip Swap securities","","111","","","","-"],["Other","","(105",")","","","(81",")"],["Change in net debt before impact of changes in foreign exchange rates on net debt","","1,463","","","","2,336"],["Impact of changes in foreign exchange rates on net debt","","261","","","","488"],["Decrease in Net Debt","","1,724","","","","2,824"],["Net Debt, Beginning of period","","(11,056",")","","","(13,880",")"],["Net Debt, End of period","$","(9,332",")","","$","(11,056",")"]]
[[/GREPCENT_TABLE]]

22

[[GREPCENT_TABLE]]
[["(1)","\u201cNet debt\u201d represents gross debt less cash and short-term investments. Management believes that Net debt provides useful information regarding the level of SLB\u2019s indebtedness by reflecting cash and investments that could be used to repay debt. Net debt is a non-GAAP financial measure that should be considered in addition to, not as a substitute for or superior to, total debt."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["(2)","Includes depreciation of property, plant and equipment and amortization of intangible assets, exploration data costs and APS investments."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["(3)","\u201cFree cash flow\u201d represents cash flow from operations less capital expenditures, APS investments and exploration data costs capitalized. Management believes that free cash flow is an important liquidity measure for the company and that it is useful to investors and management as a measure of our ability to generate cash. Once business needs and obligations are met, this cash can be used to reinvest in the company for future growth or to return to shareholders through dividend payments or share repurchases. Free cash flow does not represent the residual cash flow available for discretionary expenditures. Free cash flow is a non-GAAP financial measure that should be considered in addition to, not as a substitute for or superior to, cash flow from operations."]]
[[/GREPCENT_TABLE]]

Key liquidity events during 2022 and 2021 included:

[[GREPCENT_TABLE]]
[["","\u2022","Cash flow from operations of $3.7 billion in 2022 decreased approximately $1.0 billion as compared to 2021. This decrease was primarily due to working capital consuming $1.7 billion of liquidity in 2022 compared to $45 million in 2021. The increase in working capital was largely the result of receivables increasing $1.7 billion (32%) and inventories increasing $0.7 billion (22%), respectively, from 2021 to 2022, while these balances were relatively flat at the end of 2021 as compared to 2020. The increase in receivables was driven primarily by the fact that SLB\u2019s fourth quarter 2022 revenue increased 27% as compared to the same period last year. The increase in inventories was a result of the significant activity growth that SLB experienced in 2022 that is expected to continue in 2023. These increases in working capital were partially offset by increases in accounts payable and accrued liabilities that were a source of cash of $0.7 billion in 2022 compared to $0.2 billion in 2021."]]
[[/GREPCENT_TABLE]]

The increase in working capital in 2022 was partially offset by the effects of a $1.3 billion increase in net income, excluding the effects of the previously mentioned charges and credits (which had no impact on cash flow from operations), in 2022 as compared to 2021. In addition, cash flow from operations in 2021 benefited from a federal tax refund of $477 million relating to the carryback of US net operating losses pursuant to the Coronavirus Aid, Relief and Economic Security Act.

[[GREPCENT_TABLE]]
[["","\u2022","In April 2022, SLB announced a 40% increase to its quarterly cash dividend from $0.125 per share of outstanding common stock to $0.175 per share, beginning with the dividend payable in July 2022. Dividends paid during 2022 and 2021 were $0.8 billion and $0.7 billion, respectively. In January 2023, SLB announced a further 43% increase to its quarterly cash dividend from $0.175 per share of outstanding common stock to $0.25 per share, beginning with the dividend payable in April 2023."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u2022","On January 21, 2016, the SLB Board of Directors approved a $10 billion share repurchase program for SLB common stock. SLB had repurchased $1.0 billion of SLB common stock under this program as of December 31, 2022. SLB did not repurchase any of its common stock during 2022 and 2021. SLB resumed repurchases under this program in the first quarter of 2023."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u2022","Capital investments (consisting of capital expenditures, APS investments and exploration data capitalized) were $2.3 billion in 2022 and $1.7 billion in 2021. Capital investments during 2023 are expected to be approximately $2.5 to $2.6 billion as SLB continues to support the strong revenue growth that is expected to continue in 2023."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u2022","During 2022, SLB sold 47.8 million of its shares of Liberty and received proceeds of $732 million. During 2021, SLB sold 9.5 million of its shares of Liberty and received proceeds of $109 million."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u2022","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."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u2022","During the fourth quarter of 2022, SLB sold a portion of its equity interest in ADC in a secondary offering that resulted in SLB receiving net proceeds of $223 million."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u2022","During the second quarter of 2022, SLB sold certain real estate and received proceeds of $120 million."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u2022","During the fourth quarter of 2021, SLB deposited sufficient funds with the trustee for its $1.0 billion of 2.40% Senior Notes due 2022 to satisfy and discharge all of its obligations relating to such notes."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u2022","During the second quarter of 2021, SLB repurchased all $665 million of its 3.30% Senior Notes due 2021."]]
[[/GREPCENT_TABLE]]

As of December 31, 2022, SLB had $2.89 billion of cash and short-term investments and committed credit facility agreements with commercial banks aggregating $6.55 billion, all of which was available and unused. SLB believes these amounts, along with cash generated by ongoing operations, will be sufficient to meet future business requirements for the next 12 months and beyond.

23

The following table reflects the carrying amounts of SLB’s debt at December 31, 2022 by year of maturity:

[[GREPCENT_TABLE]]
[["","","","","","","","","","","","","","","","","","","","","","","","","","","","","","","","","","(Stated in millions)"],["","","","","","","","","","","","","","","","","","","","","","","","","","","","","","","","","","After"],["","2023","","","2024","","","2025","","","2026","","","2027","","","2028","","","2029","","","2030","","","2031","","","Total"],["Fixed rate debt"],["3.65% Senior Notes","$","1,499","","","","","","","","","","","","","","","","","","","","","","","","","","","","","","","","","","","","1,499"],["4.00% Notes","","79","","","","","","","","","","","","","","","","","","","","","","","","","","","","","","","","","","","","79"],["0.00% Notes","","","","","$","531","","","","","","","","","","","","","","","","","","","","","","","","","","","","","","","","531"],["3.75% Senior Notes","","","","","","355","","","","","","","","","","","","","","","","","","","","","","","","","","","","","","","","355"],["3.70% Notes","","","","","","54","","","","","","","","","","","","","","","","","","","","","","","","","","","","","","","","54"],["4.00% Senior Notes","","","","","","","","","$","522","","","","","","","","","","","","","","","","","","","","","","","","","","","","522"],["1.40% Senior Notes","","","","","","","","","","499","","","","","","","","","","","","","","","","","","","","","","","","","","","","499"],["1.375% Guaranteed Notes","","","","","","","","","","","","","$","1,060","","","","","","","","","","","","","","","","","","","","","","","","1,060"],["1.00% Guaranteed Notes","","","","","","","","","","","","","","636","","","","","","","","","","","","","","","","","","","","","","","","636"],["0.25% Notes","","","","","","","","","","","","","","","","","$","955","","","","","","","","","","","","","","","","","","","","955"],["3.90% Senior Notes","","","","","","","","","","","","","","","","","","","","","$","1,464","","","","","","","","","","","","","","","","1,464"],["4.30% Senior Notes","","","","","","","","","","","","","","","","","","","","","","","","","$","847","","","","","","","","","","","","847"],["2.65% Senior Notes","","","","","","","","","","","","","","","","","","","","","","","","","","","","","$","1,250","","","","","","","","1,250"],["2.00% Guaranteed Notes","","","","","","","","","","","","","","","","","","","","","","","","","","","","","","","","","$","1,055","","","","1,055"],["0.50% Notes","","","","","","","","","","","","","","","","","","","","","","","","","","","","","","","","","","954","","","","954"],["7.00% Notes","","","","","","","","","","","","","","","","","","","","","","","","","","","","","","","","","","202","","","","202"],["5.95% Notes","","","","","","","","","","","","","","","","","","","","","","","","","","","","","","","","","","112","","","","112"],["5.13% Notes","","","","","","","","","","","","","","","","","","","","","","","","","","","","","","","","","","98","","","","98"],["Total fixed rate debt","$","1,578","","","$","940","","","$","1,021","","","$","1,696","","","$","955","","","$","1,464","","","$","847","","","$","1,250","","","$","2,421","","","$","12,172"],["Variable rate debt","","54","","","","-","","","","-","","","","-","","","","-","","","","-","","","","-","","","","-","","","","-","","","","54"],["Total","$","1,632","","","$","940","","","$","1,021","","","$","1,696","","","$","955","","","$","1,464","","","$","847","","","$","1,250","","","$","2,421","","","$","12,226"]]
[[/GREPCENT_TABLE]]

Interest payments on fixed rate debt obligations by year are as follows:

[[GREPCENT_TABLE]]
[["(Stated in millions)"],["2023","$","386"],["2024","","320"],["2025","","301"],["2026","","265"],["2027","","235"],["Thereafter","","706"],["","$","2,213"]]
[[/GREPCENT_TABLE]]

See Note 13, Leases of the Consolidated Financial Statements for details regarding SLB’s lease obligations.

SLB has outstanding letters of credit/guarantees that relate to business performance bonds, custom/excise tax commitments, facility lease/rental obligations, etc. These were entered into in the ordinary course of business and are customary practices in the various countries where SLB operates.

Critical Accounting Policies and Estimates

The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States requires SLB to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent liabilities and the reported amounts of revenue and expenses. The following accounting policies involve “critical accounting estimates” because they are particularly dependent on estimates and assumptions made by SLB about matters that are inherently uncertain.

SLB bases its estimates on historical experience and on various assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Allowance for Doubtful Accounts

SLB maintains an allowance for doubtful accounts in order to record accounts receivable at their net realizable value.  Judgment is involved in recording and making adjustments to this reserve.  Allowances have been recorded for receivables believed to be uncollectible, including amounts for the resolution of potential credit and other collection issues such as disputed invoices.  Adjustments

24

to the allowance may be required in future periods depending on how such potential issues are resolved, or if the financial condition of SLB’s customers were to deteriorate resulting in an impairment of their ability to make payments.

As a large multinational company with a long history of operating in a cyclical industry, SLB has extensive experience in working with its customers during difficult times to manage its accounts receivable. During weak economic environments or when there is an extended period of weakness in oil and gas prices, SLB typically experiences delays in the payment of its receivables.  However, except for a $469 million accounts receivable write-off during 2017 as a result of the political and economic condition in Venezuela, SLB has not historically had material write-offs due to uncollectible accounts receivable.  SLB has a global footprint in more than 100 countries.  As of December 31, 2022, three of those countries individually accounted for greater than 5% of SLB’s net accounts receivable balance, of which only two (the United States and Mexico) accounted for greater than 10% of such receivables.

Included in Receivables, less allowance for doubtful accounts in the Consolidated Balance Sheet as of December 31, 2022 is approximately $1.0 billion of receivables relating to Mexico.  SLB’s receivables from its primary customer in Mexico are not in dispute and SLB has not historically had any material write-offs due to uncollectible accounts receivable relating to this customer.

Goodwill, Intangible Assets and Long-Lived Assets

SLB records the excess of purchase price over the fair value of the tangible and identifiable intangible assets acquired and liabilities assumed as goodwill. The goodwill relating to each of SLB’s reporting units is tested for impairment annually as well as when an event, or change in circumstances, indicates an impairment may have occurred.

Under generally accepted accounting principles, SLB has the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of one or more of its reporting units is greater than its carrying amount. If, after assessing the totality of events or circumstances, SLB determines it is more likely than not that the fair value of a reporting unit is greater than its carrying amount, there is no need to perform any further testing. However, if SLB concludes otherwise, then it is required to perform a quantitative impairment test by calculating the fair value of the reporting unit and comparing the fair value with the carrying amount of the reporting unit. If the fair value of the reporting unit is less than its carrying value, an impairment loss is recorded based on that difference.

SLB has the option to bypass the qualitative assessment for any reporting unit in any period and proceed directly to performing the quantitative goodwill impairment test.

SLB elected to perform the qualitative assessment described above for purposes of its annual goodwill impairment test in 2022. Based on this assessment, SLB concluded it was more likely than not that the fair value of each of its reporting units was significantly greater than its carrying amount. Accordingly, no further testing was required.

Long-lived assets, including fixed assets, intangible assets, and investments in APS projects, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. In reviewing for impairment, the carrying value of such assets is compared to the estimated undiscounted future cash flows expected from the use of the assets and their eventual disposition. If such cash flows are not sufficient to support the asset’s recorded value, an impairment charge is recognized to reduce the carrying value of the long-lived asset to its estimated fair value. The determination of future cash flows as well as the estimated fair value of long-lived assets involves significant estimates on the part of management. If there is a material change in economic conditions or other circumstances influencing the estimate of future cash flows or fair value, SLB could be required to recognize impairment charges in the future.

Income Taxes

SLB conducts business in more than 100 tax jurisdictions, a number of which have tax laws that are not fully defined and are evolving. SLB’s tax filings are subject to regular audits by the tax authorities. These audits may result in assessments for additional taxes that are resolved with the authorities or, potentially, through the courts. SLB recognizes the impact of a tax position in its financial statements if that position is more likely than not of being sustained on audit, based on the technical merits of the position. Tax liabilities are recorded based on estimates of additional taxes that will be due upon the conclusion of these audits. Estimates of these tax liabilities are judgmental and are made based upon prior experience, and are updated in light of changes in facts and circumstances. However, due to the uncertain and complex application of tax regulations, the ultimate resolution of audits may result in liabilities that could be materially different from these estimates. In such an event, SLB will record additional tax expense or tax benefit in the period in which such resolution occurs.

Revenue Recognition for Certain Long-term Construction-type Contracts

SLB recognizes revenue for certain long-term construction-type contracts over time.  These contracts involve significant design and engineering efforts in order to satisfy custom designs for customer-specific applications.  Under this method, revenue is recognized as work progresses on each contract. Progress is measured by the ratio of actual costs incurred to date on the project in relation to total estimated project costs.  Approximately 5% of SLB’s revenue in 2022, 6% in 2021, and 5% in 2020, was recognized under this method.

The estimate of total project costs has a significant impact on both the amount of revenue recognized as well as the related profit on a project. Revenue and profits on contracts can also be significantly affected by change orders and claims.  Profits are recognized based on the estimated project profit multiplied by the percentage complete. Due to the nature of these projects, adjustments to estimates of contract revenue and total contract costs are often required as work progresses. Any expected losses on a project are recorded in full in the period in which they become probable.

25

Pension and Postretirement Benefits

SLB’s pension and postretirement benefit obligations are described in detail in Note 16 to the Consolidated Financial Statements. The obligations and related costs are calculated using actuarial concepts, which include critical assumptions related to the discount rate and the expected rate of return on plan assets. These assumptions are important elements of expense and/or liability measurement and are updated on an annual basis, or upon the occurrence of significant events.

The discount rate that SLB uses reflects the prevailing market rate of a portfolio of high-quality debt instruments with maturities matching the expected timing of payment of the related benefit obligations. The following summarizes the discount rates utilized by SLB for its various pension and postretirement benefit plans:

[[GREPCENT_TABLE]]
[["","\u2022","The discount rate utilized to determine the liability for SLB\u2019s United States pension plans and postretirement medical plan was 5.50% at December 31, 2022 and 3.00% at December 31, 2021."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u2022","The weighted-average discount rate utilized to determine the liability for SLB\u2019s international pension plans was 5.41% at December 31, 2022 and 2.83% at December 31, 2021."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u2022","The discount rate utilized to determine expense for SLB\u2019s United States pension plans and postretirement medical plan was 3.00% in 2022 and 2.60% in 2021."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u2022","The weighted-average discount rate utilized to determine expense for SLB\u2019s international pension plans was 2.83% in 2022 and 2.38% in 2021."]]
[[/GREPCENT_TABLE]]

The expected rate of return for SLB’s retirement benefit plans represents the long-term average rate of return expected to be earned on plan assets based on expectations regarding future rates of return for the portfolio considering the asset allocation and related historical rate of return. The average expected rate of return on plan assets for the United States pension plans was 4.40% in 2022 and 6.60% in 2021. The weighted average expected rate of return on plan assets for the international pension plans was 5.05% in 2022 and 6.73% in 2021. A lower expected rate of return increases pension expense.

The following illustrates the sensitivity to changes in certain assumptions, holding all other assumptions constant, for SLB’s United States and international pension plans:

[[GREPCENT_TABLE]]
[["(Stated in millions)"],["","","","Effect on"],["","Effect on 2022","","Dec. 31, 2022"],["Change in Assumption","Pretax Expense","","Obligation"],["25 basis point decrease in discount rate","+$31","","+$334"],["25 basis point increase in discount rate","-$30","","-$321"],["25 basis point decrease in expected return on plan assets","+$38","","","-"],["25 basis point increase in expected return on plan assets","-$38","","","-"]]
[[/GREPCENT_TABLE]]

The following illustrates the sensitivity to changes in certain assumptions, holding all other assumptions constant, for SLB’s United States postretirement medical plans:

[[GREPCENT_TABLE]]
[["(Stated in millions)"],["","","","Effect on"],["","Effect on 2022","","Dec. 31, 2022"],["Change in Assumption","Pretax Expense","","Obligation"],["25 basis point decrease in discount rate","-$3","","+$23"],["25 basis point increase in discount rate","+$3","","-$22"]]
[[/GREPCENT_TABLE]]

26