2. Charges and Credits

Schlumberger recorded the following charges and credits during the first nine months of 2016:

Third quarter of 2016:

•

In connection with Schlumberger’s acquisition of Cameron International Corporation (“Cameron”) (see Note 4 – Acquisition of Cameron), Schlumberger recorded $237 million of charges consisting of the following: $149 million relating to the amortization of purchase accounting adjustments associated with the write-up of acquired inventory to its estimated fair value; $11 million of facility closure costs; $46 million of employee benefits; and $31 million of other merger and integration-related costs. These amounts are classified in Merger & integration in the Consolidated Statement of Income.

Second quarter of 2016:

•

As a result of the persistent unfavorable oil and gas industry market conditions that continued to deteriorate in the first half of 2016, and the related impact on the first half operating results and expected customer activity levels, Schlumberger determined that the carrying values of certain assets were no longer recoverable and also took certain decisions that resulted in the following impairment and other charges:

$646 million of severance costs associated with headcount reductions.

$209 million impairment of pressure pumping equipment in North America.

$165 million impairment of facilities in North America.

$684 million of other fixed asset impairments primarily relating to other underutilized equipment.

$616 million write-down of the carrying value of certain inventory to its net realizable value.

$198 million impairment of certain multiclient seismic data, largely related to the US Gulf of Mexico.

$55 million of other costs, primarily relating to facility closure costs.

The fair value of the impaired fixed assets and multiclient seismic data was estimated based on the projected present value of future cash flows that these assets are expected to generate. Such estimates included unobservable inputs that required significant judgments. Additional charges may be required in future periods should industry conditions worsen. The above items are classified in Impairments & other in the Consolidated Statement of Income.

•

In connection with Schlumberger’s acquisition of Cameron, Schlumberger recorded $335 million of charges consisting of the following: $150 million relating to the amortization of purchase accounting adjustments associated with the write-up of acquired inventory to its estimated fair value; $47 million relating to employee benefits for change-in-control arrangements and retention bonuses; $45 million of transaction costs, including advisory and legal fees; $40 million of facility closure costs, and $53 million of other merger and integration-related costs. These amounts are classified in Merger & integration in the Consolidated Statement of Income.

The following is a summary of the charges and credits recorded during the first nine months of 2016:

	(Stated in millions)

	Pretax		Tax		Net
Workforce reduction	$	646	$	63	$	583
North America pressure pumping asset impairments		209		67		142
Facilities impairments		165		58		107
Other fixed asset impairments		684		52		632
Inventory write-downs		616		49		567
Multiclient seismic data impairment		198		62		136
Other restructuring charges		55		-		55
Amortization of inventory fair value adjustment		299		90		209
Merger-related employee benefits		93		17		76
Professional fees		45		10		35
Facility closure costs		51		13		38
Other merger and integration-related		83		11		72
	$	3,144	$	492	$	2,652

There were no charges or credits recorded during the first quarter of 2016.

Schlumberger recorded the following charges and credits during the first quarter of 2015:

•

As a result of the severe fall in activity in North America, combined with the impact of lower international activity due to customer budget cuts driven by lower oil prices, Schlumberger decided to reduce its headcount during the first quarter of 2015. Schlumberger recorded a $390 million charge associated with this headcount reduction as well as an incentivized leave of absence program.

•

In February 2015, the Venezuelan government replaced the SICAD II exchange rate with a new foreign exchange market system known as SIMADI. The SIMADI exchange rate was approximately 192 Venezuelan Bolivares fuertes to the US dollar as of March 31, 2015. As a result, Schlumberger recorded a $49 million devaluation charge during the first quarter of 2015, reflecting the adoption of the SIMADI exchange rate. This change resulted in a reduction in the US dollar reported amount of local currency denominated revenues, expenses and, consequently, income before taxes and net income in Venezuela.

The following is a summary of these charges, all of which were classified as Impairments & other in the Consolidated Statement of Income:

	(Stated in millions)

	Pretax		Tax		Net
Workforce reduction	$	390	$	56	$	334
Currency devaluation loss in Venezuela		49		-		49
	$	439	$	56	$	383

There were no charges or credits recorded during the second and third quarters of 2015.