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.
Executive Overview
Schlumberger revenue reached a new high of $42.15 billion in 2012 – an increase of 14% over 2011 – driven by robust
exploration and development both offshore and in key land markets. Outside North America, revenue grew 16%, while
North America revenue grew 9%, with strong offshore activity in the US Gulf of Mexico outweighing a challenging land
market.
Global demand for oil recorded annual growth of some 0.8 million barrels per day for the second year running
following the exceptionally strong recovery of 2010. Lower demand in the OECD countries through energy efficiency
gains tempered stronger growth in the non-OECD economies and in China in particular. Oil supply grew by more than
one million barrels per day in North America as light tight oil production accelerated although this was partially offset
by decline in a number of non-OPEC countries. Within OPEC, production in Libya continued to recover leading to a
slight increase in spare capacity, which remained relatively slim. This, together with ongoing geopolitical tension and
the associated risk of supply disruption, continued to support oil prices.
For natural gas, the three main markets continued to behave independently. In North America, storage levels
remained at record highs throughout the year as a result of growing domestic production and mild weather that pushed
spot prices to 10-year lows in April. Toward the end of the year, however, storage levels returned closer to historical
averages. In Asia, natural gas prices remained close to oil parity, supported by sustained high demand in Japan
following the 2011 nuclear incident and by strong demand in China. In Europe, lower demand was offset by declining
domestic supply and the effect of demand in Asia.
In this environment, Schlumberger achieved a record high for revenue, with strong contributions from all Areas.
International performance was led by the Europe/CIS/Africa Area, where revenue was up 18%, mainly from strength in
Russia and in the Nigeria & Gulf of Guinea, Angola, East Africa and North Sea GeoMarkets. In Latin America, revenue
grew by 17%, driven by Integrated Project Management contracts on land, and activity for Wireline services and Drilling
Group product and services offshore – mainly in the Mexico & Central America; Venezuela, Trinidad & Tobago; and
Ecuador GeoMarkets. Revenue in the Middle East & Asia Area increased by 13% on strong results in the Saudi Arabia &
Bahrain, Australasia, Brunei, Malaysia & Philippines, and China GeoMarkets. And in North America, revenue grew by
$1.2 billion to reach $13.5 billion, driven by a robust 38% increase in demand for deepwater and exploration services
offshore, particularly in the US Gulf of Mexico. Revenue from North America land also improved a modest 4% on strong
demand for Production Group technology, although this was tempered by weakness in the hydraulic fracturing market.
All Product Groups recorded double-digit revenue growth. Reservoir Characterization revenue of $11.4 billion
increased by 15%, with all Technologies also posting double-digit growth driven by offshore exploration activity across
the Areas. Drilling Group revenue increased 15% to $16.0 billion, led by strong growth in M-I SWACO, Drilling &
Measurements, and Drilling Tools & Remedial technologies. Production Group revenue of $14.9 billion increased 13%,
with double-digit growth in Well Intervention, Completions and Artificial Lift Technologies. Well Services revenue also
increased, primarily from offshore activity.
Entering 2013, the world macroeconomic environment remains uncertain with the GDP growth outlook unchanged.
However, global oil demand is expected to grow at similar levels to those seen in 2012 and 2011 and supply will see
further growth in North America as light tight oil production increases. Other non-OPEC production, however, can be
expected to continue to face delays and decline challenges. As a result, global spare capacity should remain largely
unchanged absent any unexpected macroeconomic or geopolitical events, and this will support oil prices within the
band we have seen since 2011. For natural gas, little change is expected in the behavior of the main geographical
markets in 2013.
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