Schlumberger’s $450 million 3.00% Notes due 2013. Under the terms of this swap, Schlumberger receives interest at a
fixed rate of 3.0% annually and will pay interest quarterly at a floating rate of three-month LIBOR plus a spread of
0.765%. This interest rate swap is designated as a fair value hedge of the underlying debt. This derivative instrument is
marked to market with gains and losses recognized currently in income to offset the respective losses and gains
recognized on changes in the fair value of the hedged debt. This results in no net gain or loss being recognized in the
Consolidated Statement of Income
.
The second swap was for a notional amount of $600 million in order to hedge a portion of the changes in fair value of
Schlumberger’s $650 million 6.50% Notes due 2012. Under the terms of this swap agreement, Schlumberger received
interest at a fixed rate of 6.50% semi-annually and paid interest semi-annually at a floating rate of one-month LIBOR plus
a spread of 4.84%. During the third and fourth quarters of 2010, Schlumberger repurchased all of the outstanding
$650 million 6.50% Notes due 2012. Accordingly, this interest rate swap, which had previously been designated as a fair
value hedge of the underlying debt, was settled during the fourth quarter and resulted in Schlumberger receiving
proceeds of approximately $10 million.
At December 31, 2010, Schlumberger had fixed rate debt aggregating approximately $4.9 billion and variable rate debt
aggregating approximately $3.2 billion, after taking into account the effects of the interest rate swaps.
The fair values of outstanding derivative instruments are summarized as follows:
Derivative assets
Dec. 31
2010
Dec. 31
2009
Fair Value of
Derivatives
Classification
(Stated in millions)
Derivative designated as hedges:
Foreign exchange contracts
$4
$14
Other current assets
Foreign exchange contracts
37
216
Other Assets
Interest rate swaps
14
–
Other Assets
$55
$230
Derivative not designated as hedges:
Commodity contracts
$3
$1
Other current assets
Foreign exchange contracts
9
11
Other current assets
Foreign exchange contracts
9
28
Other Assets
$21
$40
$76
$270
Derivative Liabilities
Derivative designated as hedges:
Foreign exchange contracts
$9
$15
Accounts payable and accrued liabilities
Foreign exchange contracts
77
51
Other Liabilities
Interest rate swaps
7
–
Accounts payable and accrued liabilities
$93
$66
Derivative not designated as hedges:
Commodity contracts
$–
$3
Accounts payable and accrued liabilities
Foreign exchange contracts
14
–
Accounts payable and accrued liabilities
Foreign exchange contracts
–
25
Other Liabilities
$14
$28
$107
$94
The fair value of all outstanding derivatives is determined using a model with inputs that are observable in the market
or can be derived from or corroborated by observable data.
56
Part II, Item 8
