Interest Income
The average return on investments decreased to 1.2% in 2010 from 1.4% in 2009 and the weighted average investment
balance of $4.0 billion in 2010 decreased $0.5 billion compared to 2009.
The average return on investments decreased to 1.4% in 2009 from 3.5% in 2008 and the weighted average investment
balance of $4.5 billion in 2009 increased $1.1 billion compared to 2008.
Equity in Net Earnings of Affiliated Companies
Equity income from the M-I SWACO joint venture in 2010 represents eight months of equity income through the
closing of the Smith transaction. The decrease in equity income relating to this joint venture from 2008 to 2009 was
attributable to a significant decline in M-I SWACO activity levels, primarily in its United States and Europe/Africa
regions, as well as increased pricing pressures.
Interest Expense
Interest expense of $207 million in 2010 decreased by $14 million compared to 2009 due to a decline in the weighted
average borrowing rates, from 3.9% to 3.2%. The weighted average debt balance of $6.4 billion in 2010 increased
$0.8 billion compared to 2009.
Interest expense of $221 million in 2009 decreased by $26 million compared to 2008 primarily due to a decline in the
weighted average borrowing rates, from 4.5% to 3.9%.
Other
Gross margin was 21.7%, 24.0% and 30.2% in 2010, 2009 and 2008, respectively.
The decline in gross margin in 2010 compared to 2009 was primarily attributable to the inclusion of the acquired
Smith businesses as well as pricing pressure for Oilfield Services, particularly in the Europe/CIS/Africa Area, partially
offset by improved activity levels and pricing in the North America Area.
The decline in gross margin in 2009 compared to 2008 was primarily attributable to lower activity coupled with the
impact of a significant reduction in pricing across all of Oilfield Services, most notably in North America and Europe/
CIS/Africa. Weaker Marine activity and pricing and reduced Multiclient sales in WesternGeco also contributed to the
margin decline.
Research & engineering
and
General & administrative
expenses, as a percentage of
Revenue
, were as follows:
2010
2009 2008
Research & engineering
3.3%
3.5% 3.0%
General & administrative
2.4%
2.4% 2.1%
Research & engineering
expenditures were as follows:
2010
2009 2008
(Stated in millions)
Oilfield Services
$748
$679 $686
WesternGeco
103
108 118
Acquired Smith businesses
58
–
–
Other
10
15
15
$919
$802 $819
Income Taxes
The Schlumberger effective tax rate was 17.3% in 2010, 19.6% in 2009, and 20.9% in 2008.
The Schlumberger effective tax rate is sensitive to the geographic mix of earnings. When the percentage of pretax
earnings generated outside of North America increases, the Schlumberger effective tax rate will generally decrease.
Conversely, when the percentage of pretax earnings generated outside of North America decreases, the Schlumberger
effective tax rate will generally increase.
25
Part II, Item 7
