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.
Interest Expense
Interest expense of $298 million in 2011 increased by $91 million compared to 2010 primarily due to the $4.6 billion
of long-term debt that Schlumberger issued during 2011.
Interest expense of $207 million in 2010 decreased by $14 million compared to 2009 primarily due to a decline in the
weighted average borrowing rates, from 3.9% to 3.2%.
Other
Research & engineering
and
General & administrative
expenses, as a percentage of
Revenue
, were as follows:
2011
2010 2009
Research & engineering
2.7%
3.3% 3.5%
General & administrative
1.1%
1.1% 1.1%
Although
Research & engineering
decreased as a percentage of revenue in 2011 as compared to 2010 and in 2010
compared to 2009, it has increased in absolute dollars by $154 million and $117 million, respectively. These increases
in absolute dollars were driven in large part by the impact of the Smith acquisition.
Income Taxes
The Schlumberger effective tax rate was 24.4% in 2011, 17.3% in 2010, and 19.6% in 2009.
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.
The effective tax rate for both 2011 and 2010 was impacted by the charges and credits described in Note 3 to the
Consolidated Financial Statements
. Excluding the impact of these charges and credits, the effective tax rate in 2011
was 24.0% compared to 20.6% in 2010. This increase in the effective tax rate, excluding the impact of the charges and
credits, was primarily attributable to the fact that Schlumberger generated a larger proportion of its pretax earnings in
North America in 2011 as compared to 2010 as a result of improved market conditions and the effect of a full year’s
activity from the acquired Smith businesses.
The effective tax rate for 2009 was also impacted by the charges and credits described in Note 3 to the
Consolidated
Financial Statements
, but to a much lesser extent. Excluding charges and credits, the effective tax rate in 2010 was
20.6% compared to 19.2% in 2009. This increase is largely attributable to the geographic mix of earnings as well as the
inclusion of four months’ results from the acquisition of Smith, which served to increase the Schlumberger effective tax
rate.
Charges and Credits
Schlumberger recorded significant charges and credits in continuing operations during 2011, 2010 and 2009. These
charges and credits, which are summarized below, are more fully described in Note 3 to the
Consolidated Financial
Statements
.
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