schlumberger rbc

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RBC Capital Markets appreciates yourconsideration in the All-America ResearchInstitutional Investor Survey.

COMPANY UPDATE | COMMENTAPRIL 24, 2011

Schlumberger Limited (NYSE: SLB)

Not Standing Pat

OutperformAverage RiskPrice: 89.78

Shares O/S (MM): 1,376.0Dividend: 0.70Float (MM): NADebt to Cap: 22%Institutional Ownership: 81%

Price Target: 113.00Implied All-In Return: 27%Market Cap (MM): 123,537Yield: 0.8%Tr. 12 ROE: NAAvg. Daily Volume (MM): 11.133-Yr. Est. EPS Growth: NA

Post 1Q11 Conference Call

Investment Opinion. SLB is rated Outperform and remains one of our topinvestment ideas. Key elements of the story include a beneficial mix shift towarhigher-margin exploration and deepwater activity and additional merger-relatedsynergies.

Price target is $113, or 21x our '12 estimate. The average five-year multiple i17x with a one standard deviation band of 14x-21x. We believe the +1SDmultiple is warranted given our view that we are in the early stages of amulti-year up-cycle.

Tweaking EPS estimates. We adjust our '11/'12 EPS estimates to $3.90/$5.35from $3.85/$5.36. Current consensus estimates are $3.81/$5.06. We believe

upside earnings revisions are on the horizon.

International margin differential expected to widen. In 1Q11 SLB postedsubstantially better margins than its peers in all international geographic areas.Aggregate international margin differential relative to it next closest competitorwas ~700bps. SLB believes it can widen the spread due to its performanceexecution.

Gunning for the top margin spot in North America. SLB appears to be gainiconfidence that it can achieve industry-leading margins in NAM. This wouldimply +25% in '11.

Other Highlights

Gaining share in U.S. frac. This has been driven primarily by the introductioof the HiWAY stimulation product.

Smith International revenue profit synergies accelerating. Synergies arestarting to be realized and provide upside surprise material.

Seismic heating up. SLB commented that its seismic business is improving.GOM lease sales expected in '11/' 12 with contract pricing in 2H12.

Priced as of prior trading day's market close, EST (unless otherwise noted).

125 WEEKS 05DEC08 - 21APR11

40.00

48.00

56.00

64.00

72.00

80.00

88.00

D J F M A M J J A S O N2009

D J F M A M J J A S O N2010

D J F M A2011

HI-25FEB11 95.64

LO/HI DIFF 172.87%

C LOSE 8 9. 78

LO-27FEB09 35.05

50000

00000

50000

PEAK VOL.179026.1

VOLUME 37263.9

105.00

120.00

135.00

150.00

Rel. S&P 500 HI-18FEB11 158.64LO/HI DIFF 58.64%

CLOSE 150.49

LO-05DEC08 100.00

RBC Capital Markets, LLC

Kurt Hallead (Analyst, Co-Head Global EnergyResearch)(512) 708-6356; [email protected]

Brad Sanderson (Associate)(512)708-6383; [email protected]

FY Dec 2009A 2010A 2011E 2012E

EPS (Op) - FD 2.77 2.85 3.90 5.35

Prev. 3.85 5.36

P/E 32.4x 31.5x 23.0x 16.8x

EPS (Op) - FD Q1 Q2 Q3 Q4

2009 0.78A 0.68A 0.65A 0.67A

2010 0.62A 0.68A 0.70A 0.85A

2011 0.71A 0.90E 1.04E 1.14E

Prev. 0.74E 0.93E

All values in USD unless otherwise noted.

For Required Conflicts Disclosures, see Page 5.


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Valuation

Price target is $113, or 21x our '12 estimate. The average five-year multiple is 17x with a one standard deviation band of 14x-21x. Inour view, the higher multiple is warranted as we believe we are in the early stages of a multi-year up-cycle.

Price Target ImpedimentImpediments to our price target include reduced drilling activity, lower commodity price, global/oil natural gas supply/demandimbalances, and SLB's ability to successfully integrate Smith International.

Company DescriptionSchlumberger is a provider of exploration and production (E&P) services, solutions, and technology to the international petroleumindustry. Key elements of the story include a beneficial mix shift toward higher margin exploration and deepwater activity andadditional merger-related synergies.

Schlumberger LimitedApril 24, 2011


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SCHLUMBERGER LTD

OILFIELD SERVICES (including SII, WG)

($ Millions, Dec FY) 1Q11 2Q11E 3Q11E 4Q11E 2011E 2012E

REVENUE

NORTH AMERICA 2,589.0 2,847.9 3,047.3 3,199.6 11,683.8 13,755.0

LATIN AMERICA 1,386.0 1,552.3 1,707.6 1,878.3 6,524.2 7,851.6

EUROPE/CIS/AFRICA 2,190.0 2,518.5 2,770.4 3,019.7 10,498.5 12,836.9

MIDDLE EAST & ASIA 1,848.0 2,097.5 2,265.3 2,378.5 8,589.3 10,208.8ELIMINATIONS & OTHER 109.0 100.0 100.0 100.0 409.0 400.0

TOTAL OILFIELD REVENUE 8,122.0 9,116.2 9,890.4 10,576.1 37,704.8 45,052.3

1Q11 2Q11E 3Q11E 4Q11E 2011E 2012E

PRE-TAX INCOME

NORTH AMERICA 595.0 669.3 731.3 780.7 2,776.3 3,438.7

LATIN AMERICA 217.0 263.9 290.3 328.7 1,099.9 1,486.2

EUROPE/CIS/AFRICA 273.0 377.8 471.0 528.4 1,650.2 2,468.9

MIDDLE EAST & ASIA 405.0 513.9 577.6 618.4 2,114.9 2,795.1

ELIMINATIONS & OTHER (35.0) (35.0) (35.0) (35.0) (140.0) (140.0)

TOTAL PRE-TAX INCOME 1,455.0 1,789.8 2,035.2 2,221.3 7,501.3 10,049.0

PRE TAX MARGIN

NORTH AMERICA 23.0% 23.5% 24.0% 24.4% 23.8% 25.0%

LATIN AMERICA 15.7% 17.0% 17.0% 17.5% 16.9% 18.9%

EUROPE/CIS/AFRICA 12.5% 15.0% 17.0% 17.5% 15.7% 19.2%

MIDDLE EAST & ASIA 21.9% 24.5% 25.5% 26.0% 24.6% 27.4%

TOTAL OILFIELD MARGIN 17.9% 19.6% 20.6% 21.0% 19.9% 22.3%

Income Statement

1Q11 2Q11E 3Q11E 4Q11E 2011E 2012E

OPERATING REVENUE

OILFIELD SERVICES 8,122.0 9,116.2 9,890.4 10,576.1 37,704.8 45,052.3

DISTRIBUTION 594.0 629.6 667.4 707.5 2,598.5 3,201.7

TOTAL REVENUE 8,716.0 9,745.8 10,557.9 11,283.6 40,303.3 48,254.0

COSTS & EXPENSES

COST OF GOODS SOLD, ETC 6,272.0 6,938.5 7,491.6 8,018.5 28,557.6 33,841.8

PRE-TAX INCOME 2,444.0 2,807.4 3,066.2 3,265.2 11,745.7 14,412.2

MARGIN 28.0% 28.8% 29.0% 28.9% 29.1% 29.9%

CORPORATE COST SAVINGS (SII, GEOSERVICES)

RESEARCH & ENGINEERING 249.0 249.0 249.0 249.0 996.0 996.0

G&A 93.0 90.0 90.0 90.0 363.0 360.0

DD&A 788.0 790.2 802.0 813.0 3,193.2 3,404.1

OPERATING INCOME 1,314.0 1,678.1 1,925.3 2,113.1 7,193.5 9,649.1

OPERATING MARGIN 15.1% 17.2% 18.2% 18.7% 17.8% 20.0%

OTHER 0.0 10.0 10.0 10.0 30.0 40.0

INTEREST INCOME, OTHER 31.0 14.9 14.6 14.9 75.4 83.0

INTEREST EXPENSE (73.0) (64.6) (64.6) (64.6) (266.7) (258.3)

PRETAX EARNINGS 1,272.0 1,638.4 1,885.3 2,073.5 7,032.2 9,513.8

TAXES 301.0 409.6 471.3 518.4 1,700.3 2,283.3

TAX RATE 23.7% 25.0% 25.0% 25.0% 24.2% 24.0%

INCOME BEFORE MINORITY INTEREST 971.0 1,228.8 1,414.0 1,555.1 5,331.9 7,230.5

MINORITY INTEREST 1.0 1.0 1.0 1.0 4.0 4.0

NET INCOME - CONT. OPS. 972.0 1,229.8 1,415.0 1,556.1 5,335.9 7,234.5

NON-RECURRING ITEMS (28.0) 0.0 0.0 0.0 (28.0) 0.0

DISC OPS 0.0 0.0 0.0 0.0 0.0 0.0

NET INCOME - REPORTED 944.0 1,229.8 1,415.0 1,556.1 5,307.9 7,234.5

EPS - CONT. OPS $0.71 $0.90 $1.04 $1.14 $3.90 $5.35

REPORTED EPS $0.69 $0.90 $1.04 $1.14 $3.88 $5.35

AVERAGE SHARES 1,375.0 1,371.0 1,367.0 1,363.0 1,369.0 1,353.0

Source: Company reports, RBC Capital Markets Kurt Hallead (512) 708-6356



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SCHLUMBERGER LTDAFTER-TAX CASH FLOW/SHARE

CASH FLOW SUMMARY 1Q11 2Q11E 3Q11E 4Q11E 2011E 2012EAFTER-TAX CASH FLOW 1,760.0 2,020.0 2,216.9 2,369.1 8,529.1 10,638.6

AFTER-TAX CASH FLOW/SHARE $1.28 $1.47 $1.62 $1.74 $6.23 $7.86

FREE CASH FLOW ($688.8) $176.8 $255.2 $478.6 $385.9 $3,435.5

FCF/SHARE ($0.50) $0.13 $0.19 $0.35 $0.28 $2.54D&A $788.0 $790.2 $802.0 $813.0 $3,193.2 $3,404.1

CAPEX ($1,000.0) ($1,000.0) ($1,000.0) ($1,000.0) ($4,000.0) ($4,400.0)

DIVIDEND ($288.8) ($342.8) ($341.8) ($340.8) ($1,314.0) ($1,353.0)

DIVIDEND PER SHARE $0.21 $0.25 $0.25 $0.25 $0.96 $1.00

BALANCE SHEET SUMMARBOOK VALUE 31,414.0 31,941.1 32,654.3 33,509.6 33,509.6 39,391.1

BOOK VALUE PER SHARE $22.85 $23.30 $23.89 $24.59 $24.48 $29.11

CASH 4,163.0 4,059.8 4,035.0 4,233.7 4,233.7 8,029.1

DEBT 8,611.0 8,611.0 8,611.0 8,611.0 8,611.0 8,611.0

NET CASH (4,448.0) (4,551.2) (4,576.0) (4,377.3) (4,377.3) (581.9)

CASH PER SHARE $3.03 $2.96 $2.95 $3.11 $3.09 $5.93

DEBT PER SHARE $6.26 $6.28 $6.30 $6.32 $6.29 $6.36

NET CASH PER SHARE ($3.23) ($3.32) ($3.35) ($3.21) ($3.20) ($0.43)

DEBT/CAP 21.5% 21.2% 20.9% 20.4% 20.4% 17.9%

NET DEBT/CAP 11.1% 11.2% 11.1% 10.4% 10.4% 1.2%Source: Company reports, RBC Capital Markets Kurt Hallead (512) 708-6356



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Required Disclosures

Conflicts Disclosures

The analyst(s) responsible for preparing this research report received compensation that is based upon various factors, including totalrevenues of the member companies of RBC Capital Markets and its affiliates, a portion of which are or have been generated byinvestment banking activities of the member companies of RBC Capital Markets and its affiliates.

RBC Capital Markets, LLC makes a market in the securities of Schlumberger Limited and may act as principal with regard to sales or

purchases of this security.

A member company of RBC Capital Markets or one of its affiliates received compensation for products or services other thaninvestment banking services from Schlumberger Limited during the past 12 months. During this time, a member company of RBCCapital Markets or one of its affiliates provided non-securities services to Schlumberger Limited.

RBC Capital Markets is currently providing Schlumberger Limited with non-securities services.

RBC Capital Markets has provided Schlumberger Limited with non-securities services in the past 12 months.

The author is employed by RBC Capital Markets, LLC, a securities broker-dealer with principal offices located in New York, USA.

Explanation of RBC Capital Markets Equity Rating System

An analyst's 'sector' is the universe of companies for which the analyst provides research coverage. Accordingly, the rating assigned toa particular stock represents solely the analyst's view of how that stock will perform over the next 12 months relative to the analyst'ssector average.RatingsTop Pick (TP): Represents best in Outperform category; analyst's best ideas; expected to significantly outperform the sector over 12months; provides best risk-reward ratio; approximately 10% of analyst's recommendations.Outperform (O): Expected to materially outperform sector average over 12 months.Sector Perform (SP): Returns expected to be in line with sector average over 12 months.Underperform (U): Returns expected to be materially below sector average over 12 months.Risk Qualifiers (any of the following criteria may be present):Average Risk (Avg): Volatility and risk expected to be comparable to sector; average revenue and earnings predictability; nosignificant cash flow/financing concerns over coming 12-24 months; fairly liquid.Above Average Risk (AA): Volatility and risk expected to be above sector; below average revenue and earnings predictability; maynot be suitable for a significant class of individual equity investors; may have negative cash flow; low market cap or float.Speculative (Spec): Risk consistent with venture capital; low public float; potential balance sheet concerns; risk of being delisted.

Distribution of Ratings

For the purpose of ratings distributions, regulatory rules require member firms to assign ratings to one of three rating categories - Buy,Hold/Neutral, or Sell - regardless of a firm's own rating categories. Although RBC Capital Markets' ratings of Top Pick/Outperform,Sector Perform and Underperform most closely correspond to Buy, Hold/Neutral and Sell, respectively, the meanings are not the samebecause our ratings are determined on a relative basis (as described above).

Distribution of Ratings

RBC Capital Markets, Equity Research

Investment BankingServ./Past 12 Mos.

Rating Count Percent Count Percent

BUY[TP/O] 709 52.50 210 29.62

HOLD[SP] 582 43.10 132 22.68

SELL[U] 59 4.40 12 20.34



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Q1 Q2 Q3 Q1 Q2 Q3 Q1 Q2 Q3 Q1 Q220

40

60

80

100

120

2009 2010 2011

09/16/08SP:109

10/15/08SP:84

12/15/08OP:58

03/10/09SP:42

04/27/09SP:55

05/05/09OP:70

10/23/09OP:80

01/25/10OP:82

04/26/10OP:85

06/11/10OP:73

07/26/10OP:75

09/14/10OP:78

01/18/11OP:105

02/18/11OP:113

Rating and Price Target History for: Schlumberger Limited as of 04-22-2011 (in USD)

Legend:

TP: Top Pick; O: Outperform; SP: Sector Perform; U: Underperfor m; I: Initiation of Research Coverage; D: Discontinua tion of Research Coverage; NR: Not Rated; NA: Not Available;

RL: Recommended List - RL: On: Refers to date a security was placed on a recommended list, while RL Off: Refers to date a security was removed from a recommended list.

Created by BlueMatrix

References to a Recommended List in the recommendation history chart may include one or more recommended lists or model

portfolios maintained by a business unit of the Wealth Management Division of RBC Capital Markets, LLC. These RecommendedLists include the Prime Opportunity List (RL 3), a former list called the Private Client Prime Portfolio (RL 4), the Guided PortfolioPrime Income (RL 6), the Guided Portfolio: Large Cap (RL 7), the Guided Portfolio: Dividend Growth (RL 8), and the GuidedPortfolio: Midcap 111 (RL9). The abbreviation 'RL On' means the date a security was placed on a Recommended List. Theabbreviation 'RL Off' means the date a security was removed from a Recommended List.

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RBC Capital Markets Policy for Managing Conflicts of Interest in Relation to Investment Research is available from us on request. Toaccess our current policy, clients should refer tohttps://www.rbccm.com/global/file-414164.pdfor send a request to RBC CM Research Publishing, P.O. Box 50, 200 Bay Street, Royal Bank Plaza, 29th Floor, South Tower,Toronto, Ontario M5J 2W7. We reserve the right to amend or supplement this policy at any time.

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