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Item 8 Notes to Consolidated Financial Statements
3. Hanover Compressor Company
In August 2001, Schlumberger sold its Oilfield Services worldwide gas compression
activity to Hanover Compressor Company. The proceeds included 8.7 million
shares of Hanover Compressor common stock, with a value at closing of $173
million, which is restricted from marketability until August 30, 2004, and
a $150 million long-term subordinated note maturing December 15, 2005.
In the fourth quarter of 2003, Schlumberger sold the subordinated note for
$177 million and realized a pretax gain of $32 million ($20 million after-tax).
At December 31, 2003 the carrying value of Schlumberger's investment in Hanover
Compressor common stock exceeded the market value. As required by generally
accepted accounting principles (SFAS 115), Schlumberger wrote down its investment
to the fair market value of $91.4 million at December 31, 2003 and recorded
a pretax and after-tax charge of $81.2 million.
As part of the sale agreement, Hanover Compressor had an option to put its
interest in the PIGAP II joint venture in Venezuela back to Schlumberger
if certain financing conditions were not met. Hanover Compressor did not
exercise this option.
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