Further integration of Schlumberger and Smith drilling-focused technologies boosted Drilling Group results. In
particular, the growing use of Smith IDEAS* modeling software enabled optimal selection of bottomhole assembly
components, particularly in matching drillbits to rotary steerable systems. Among individual product lines, Smith
drillbit technologies benefited from the larger Schlumberger geographical footprint, while Drilling & Measurements
Scope Family* logging-while-drilling services played significant roles in enhancing performance in a number of
complex, high-profile wells. In particular, China and Russia saw increasing penetration of Schlumberger Drilling Group
technologies.
Demand for reservoir production technologies was boosted by growing deployment of the HiWAY* channel fracturing
service in unconventional and tight reservoir applications around the world. By midyear, HiWAY technology had been
introduced across all four geographical Areas, with more than 1,200 stages pumped. The HiWAY service is part of the
Schlumberger approach that achieves more performance with less equipment and resources and this number of stages
alone saved over 60,000 tons of proppant compared to conventional operations. In the fourth quarter, stages pumped
grew by 50% sequentially and operations were conducted for 35 customers.
A number of small technology-based acquisitions were completed during 2011 in addition to completion of the
Eurasia Drilling Company Ltd asset swap and strategic alliance announced in 2010. These included the purchase of the
remaining equity interest in Framo Engineering AS, a privately owned Norwegian company specializing in the sales and
manufacture of products and services related to multiphase pumps and subsea pump systems, multiphase metering
systems and swivel and marine systems. Schlumberger also completed the purchase of ThruBit LLC, a company
providing openhole logging services using a unique through-the-bit deployment technique that offers a novel way of
obtaining wireline logs in horizontal wells in shale plays.
In IPM, Schlumberger and Saxon Energy Services merged their respective land-based rig fleets resulting in
Schlumberger rigs and crews operating in Oman, Pakistan and Venezuela becoming part of Saxon’s operations. Under
the terms of the agreement, Saxon will also provide technical drilling contracting support to existing Schlumberger
joint ventures in Saudi Arabia, Algeria, Iraq and Venezuela, ensuring availability and support to Schlumberger well
construction activities. As part of a stronger focus on the growing production services enhancement market,
Schlumberger Production Management was formed during the year to increase market participation and became
responsible for the Casabe and Bokor projects that were previously managed by IPM.
For 2012, projected Gross Domestic Product (GDP) growth continued to be revised downwards during the fourth
quarter, and positive signs from the US and Japan are offset by continued concerns over the Eurozone and the
potential slowing of growth in China. In spite of the political efforts to resolve the issues, the uncertainty surrounding
the global financial markets is expected to continue in the coming quarters, and although the chance of a global
double-dip recession remains a possibility, this is not expected to be the most likely scenario.
In line with lower GDP growth, oil demand outlook has also been revised downwards during the fourth quarter
although the increasing weight of the emerging economies, the weakness of non-OPEC supply, and a number of
geopolitical concerns have supported oil prices. Absent a global recession, these are not expected to weaken
significantly. For natural gas worldwide, little change is expected in the behavior of the main geographical markets in
2012 compared to 2011.
Feedback from Schlumberger customers and the findings from recently published spending surveys suggest that
exploration and production investment in 2012 will be higher than that of 2011, although the predicted levels vary. The
same surveys suggest that exploration spending will continue to increase.
Against this backdrop Schlumberger is planning for growth in 2012, although with significant flexibility. In North
America, land rig count is expected to remain flat with 2011 fourth-quarter levels, provided the ongoing drop in gas rig
activity will be countered by increasing activity in liquids and liquids-rich basins. A continued recovery in the
deepwater Gulf of Mexico is also expected, with strong demand for high-value technologies. In international markets,
rig count in 2012 is expected to increase by around 10% versus 2011, driven by strong offshore activity in West Africa,
North Sea and Brazil, and by land activity in the Middle East, North Africa and Western Siberia.
Overall Schlumberger remains confident that any potential reductions in activity will be short-lived due to limited
spare oil capacity and to growing international demand for natural gas. Further, the company believes its competitive
position remains strong given its strength in the international market in terms of global footprint and contract
portfolio, and given the balance that has been established between reservoir characterization, drilling and production
services in North America.
The following discussion and analysis of results of operations should be read in conjunction with the
Consolidated
Financial Statements
.
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