Performing with Purpose

Dear Schlumberger Stakeholder,

2021 was an excellent year of performance and a turning point for our company. As an exceptional growth cycle continued to develop in oil and gas, we began to see the shape of a new Schlumberger, seizing growth and new opportunities in our core and beyond.

The entire global energy industry is being urged to help meet the dual challenge—improving the lives of billions of people with access to reliable energy, while at the same time rapidly decarbonizing to reduce the impacts of climate change. Oil and gas have a key role to play in meeting this challenge, as they will be called upon to provide a substantial portion of the global energy mix, supporting economic growth affordably across the transition. Energy demand returned broadly this year, and we anticipate returning to prepandemic peaks in the near term. Meeting that demand will require technology and execution, which we will continue to deliver for our customers.

In that context, the entire Schlumberger team generated strong financial results this year by executing our strategy and enhancing performance for customers with our innovative technology and digital solutions. I am very proud of the people of Schlumberger, who continue to be determined in their effort, precise in their execution, and thoughtful in their care for our communities and our environment. In 2021, our people created strong momentum that will underpin our success for years to come.

As a company of people driven to make a difference with science and engineering, we believe Schlumberger plays a unique role in the world. We do that with our leading operational execution and innovation capabilities to create and deploy, at scale, technology that enhances performance and reliability for our customers. I would like to thank the entire team who navigated continuing COVID impacts and supply chain disruption to provide business continuity and improved performance for our customers. Despite the challenges, the extraordinary people of Schlumberger delivered a year of outperformance on every metric, surpassing all our targets this year.

Our core business demonstrated robust results in the early stages of a multiyear growth cycle. Our sharp focus on the performance of our customers throughout the year drove outstanding financial performance. Our unique integration capabilities, industry-leading international footprint, and differentiated technology are enabling us to achieve customer performance goals.

Our new organization, which is maximizing our potential both internationally and in North America, has been instrumental in meeting customer performance goals by fostering stronger customer engagement, accelerating our fit-for-basin approach to technology development that creates solutions tailored to regional customer performance needs, and enabling our people to set new benchmarks in operational performance. Our unique capacity to integrate domain expertise, digital capabilities, and technology across our Divisions is resonating with customers as integrity and performance are increasingly critical to their success. These differentiated capabilities were recognized with enhanced market positions and significant project awards during the year.

At the same time, our new organization and high-graded portfolio have enhanced our earnings power, and we ended the year marking six consecutive quarters of pretax segment operating margin expansion even before the multiyear growth cycle has fully unfolded. During the year, we saw oil supply tighten and demand growth increase while industry activity accelerated across all geographies and environments—onshore and offshore. We see this growth expanding in 2022 and beyond, at first driven by supply tightness, which will eventually give way to demand-led industry capital spending growth, setting the foundation for a strong multiyear upcycle. Indeed, this scenario is already being established, as the number of final investment decisions increases, service pricing has begun to improve, and multiyear long-cycle capacity expansion plans have started—particularly internationally and offshore, as seen during the fourth quarter of 2021.

Against this backdrop, our core strengths will be magnified going forward by our decarbonization leadership, where we made a significant step this year with the debut of our Transition Technologies* portfolio of solutions. This technology portfolio is decarbonizing oil and gas operations, with a focus on reducing power consumption and eliminating flaring and venting. These are our largest opportunities to reduce the oil and gas industry greenhouse gas (GHG) emissions footprint, and deploying technologies in these areas will help Schlumberger and our customers work to reach our sustainability commitments, together.

We also announced in 2021 a bold net-zero commitment inclusive of Scope 3 emissions—the majority of which occurs for us when we deploy technology on customer projects. These Scope 3 emissions constitute 75% of our total GHG emissions. Reducing Scope 3 emissions is a goal we share with our customers as well as an enormous growth opportunity and a radical differentiator for Schlumberger, and we have already started to deploy Transition Technologies with customers around the world. We are uniquely positioned to develop and deploy these solutions and believe our opportunity to assist our customers in reducing their GHG emissions will generate significant growth and sustainability impact.

This was the year we set the foundations of our oil and gas future, a future that will support our digital market ambition and our expansion into new energy as the growth cycle continues to expand.

When we imagined the digital future of our industry, we were inspired to create an extensive digital platform supporting an ecosystem where innovation and collaboration at scale could unlock the full impact of digital—across the energy industry.

We built our platform on a data framework, which we contributed to the Open Subsurface Data Universe (OSDU) as the foundation of an open-source industry standard. This year, we expanded access to our platform, adding collaborators to an unmatched network of best-in-class digital partners, and unlocked market access across all basins through the most comprehensive public, hybrid, and private cloud capabilities. From this, we have seen accelerated adoption at scale—across countries, customers, and end users. The diversity and magnitude of announcements made this year by majors, independents, and national oil companies reflect the broad adoption and diverse market reach we have generated.

 

New and Expanded Digital Partnerships

 

We also formed an AI consulting and cloud operations support structure, enabling us to accompany our customers in their digital journey, from innovative workflow deployment to asset operations transformation. Furthermore, we are experiencing an increase in the breadth of adoption per customer and end user, as exemplified in the significant growth of cloud native applications being used on the platform, and the acceleration of computational intensity, as geoscientists and reservoir engineers increase their collaborative, on-demand use of modeling and simulation applications.

Through the power of our platform, we are empowering customers with AI and digital innovation, and connecting digitally enabled hardware to realize autonomous solutions.

We are proud of the progress we have made in digital this year and are honored to be increasingly selected as the digital partner of choice by our customers. We are confident in our ambition to lead the industry and to generate accretive growth in the upcycle with our digital offering, which we see growing beyond our core, driving further decarbonization and low-carbon opportunities.

We have taken a collaborative approach to working with customers and the wider industry to achieve new levels of performance that would not be possible working in a traditional framework. This mindset has helped us overcome challenges and create more value together. We are taking this same approach in digital and new energy, where we are building visionary partnerships that are opening new markets where our innovation can make an impact.

The enormous capability and flexibility of our digital platform enables us to generate new revenue streams in oil and gas and is enabling access to other industries, as well. Built on partnerships, our platform is constantly advancing and is already being used by other industries, who are also striving for higher performance from their workflows, data, and operations. The architecture of our platform and the domain knowledge it was designed to harness makes it ideal for other industries, such as carbon capture and storage (CCS), geothermal, and new energy.

This year, we began leveraging partnerships to bring our scale and industrialization capability to new energy, expanding our total addressable market. Unprecedented investment will occur in the energy space over the coming decades to realize energy transition. That investment has already begun, and we are participating through a portfolio of ventures in Schlumberger New Energy. We are focusing on the fastest growing sector of energy—end-use efficiency and conversion—which presents a massive market opportunity for us. For perspective, if we capture a little more than 1% of this total market sector over the next decade or so, the resulting business would equal the oil and gas business of Schlumberger as it stands today.

To do this, we have created ventures in low-carbon and carbon-neutral energy sectors, including green hydrogen, lithium, energy storage, CCS, geothermal, and geoenergy. This portfolio builds on three fundamental Schlumberger strengths: first, our unique subsurface domain expertise, applicable beyond oil and gas; second, our differentiated track record for innovation and industrialization—the DNA of our company; and last, our ability to deploy at scale in any region in the world with local knowledge and talent.

 

Global Energy Investment

 

New Energy Partnerships Advanced in 2021

 

This year, we advanced all of our Schlumberger New Energy portfolio ventures and announced partnerships that are engaged in key projects to apply technology and digital solutions. The partnership approach brings together knowledge of energy production with industry expertise to realize projects that drive decarbonization. For example, our Genvia™ clean hydrogen production technology venture is a unique private-public partnership with the French Alternative Energies and Atomic Energy Commission (CEA) and partners in other industries. In 2021, the Genvia partnership struck agreements with leading steel and cement companies to pilot Genvia technology, setting a path to scale this decarbonization solution.

Empowered to apply our technology and digital solutions in new areas, our people will drive performance and sustainability around the world—just as they already make an impact for the people in our communities.

People are always a priority in Schlumberger: the exceptional people who join us make our ambitions possible. Their meaningful engagement drives a positive employee experience that is fundamental to our talent acquisition and retention philosophy—and to sustaining our pulse and spirit.

The results of our people-first efforts this year were encouraging on multiple fronts. First, we were able to meet our aggressive recruiting targets in a highly competitive environment; and second, we maintained our solid employee engagement score from 2019—a significant achievement in light of the challenging work environment.

In a dynamic and challenging technical industry that is bridging into new areas, attracting and retaining top talent is a necessity, and diversity and development differentiate our culture as we seek to build the future of the company. For decades, people have come to work with colleagues from all over the world, because we hire and develop people from the communities where we live and work. Today, our ten-member executive team collectively represents nine nationalities.

Nationality diversity is just one aspect of diversity that is important to us. In 2021, we also continued to improve gender diversity, increasing the representation of women at all levels of the company. In terms of talent acquisition, women represented approximately 48% of new hire salaried employees with science, technology, engineering, and mathematics (STEM) backgrounds. As we strive to build a more inclusive culture, I was also pleased to commit Schlumberger to the Valuable 500—the largest network of global CEOs committed to innovating together for disability inclusion.

Reflecting a change in the way employees want to work and the success of our BlueFLEX pilot project in 2020, we introduced a flexible work policy globally in 2021 based on a hybrid working model. This is an important step in providing employees with improved flexibility to manage the demands of their work and personal lives and is key to attracting experienced professionals who will help fuel our core, digital, and new energy growth objectives.

As we expand our markets and our digital reach, our career growth opportunities and learning programs are also evolving to meet the needs of industries and develop our leaders of the future. This has never been more tangible than in 2021, when we hired and began to train the first cohort of engineers who will be remote from the start by design—a model that is adapting to customer needs while creating an environment that promotes diversity and inclusion, accelerates learning, and reduces exposure to safety incidents.

 

Leader in Global Diversity

 

We have continued to maintain a workforce nationality mix aligned to the revenue derived from the countries in which we work.

The same people who bring their passion and commitment to their everyday work help to set us apart as a leader in energy transition. The people of Schlumberger care about the planet and its future, and they are working to deliver the best outcome for our customers and communities—today and tomorrow. Our climate action is only part of how we make a sustainability impact in the communities where we live and work.

We are committed to creating opportunity in our communities, and there are two avenues through which we make these contributions. First is our shift toward fit-for-basin solutions. Fit for basin describes not only our approach to developing discrete technologies to address regional operational challenges, but also encompasses an inherently high degree of local content—local workforce, manufacturing, and supply chain—which develops the people in the communities around our operations.

The second is through the contributions of our engaged employees, who are attuned and dedicated to their local environments. Our local operating units have been tasked with developing and implementing meaningful local sustainability plans, and today we have initiatives in 95 countries. Aligning with national and customer priorities, our local teams bring projects and technology that make a relevant impact to the people and the environment around them.

The people of Schlumberger are always seeking ways to make a difference—be it on a global scale, or locally with the people they interact with every day. It is this ambition and motivation that made 2021 such a successful year, and I want to thank everyone in Schlumberger for an outstanding performance.

Our direction is clear, and I am very excited about the future of Schlumberger. We are uniquely positioned at the beginning of a growth cycle in energy unlike any before it. This period will bring us new opportunities through which—staying true to our innovative spirit and ambition to drive positive change in the world—we will make an impact while we grow our business in oil and gas and beyond. Together, we create amazing technology that unlocks access to energy for the benefit of all.

Olivier Le Peuch, Chief Executive Officer

* Mark of Schlumberger or Schlumberger companies.