Schlumberger Announces Third Quarter 2002 Results.

Business Editors

NEW YORK--(BUSINESS WIRE)--Oct. 16, 2002

Schlumberger Limited (NYSE: SLB) reported today third quarter operating revenue of $3.5 billion and net income of $173 million.

Diluted earnings were $0.30 per share. This compares with an adjusted $0.50 per share for the same period last year and $0.34 per share in the second quarter of 2002.

The loss from the WesternGeco joint venture in the quarter included the Schlumberger share of losses- to-completion of $21 million ($0.04 per share) for contracts primarily in Mexico and India. SchlumbergerSema results in the quarter included a $12 million after-tax charge ($0.02 per share) for workforce reductions.

Oilfield Services revenue of $2.53 billion increased 3% versus the second quarter of 2002. The worldwide M-I rig count increased 6% over the same period. Revenue decreased 4% year-on-year, substantially less than the rig count decline of 21%.

SchlumbergerSema revenue of $896 million for the quarter increased 5% sequentially despite the continued depression in the IT services industry.

Chairman and CEO Euan Baird commented:

"Faced with huge economic and political uncertainties our customers, particularly in North America, have become risk averse and are tending to use the proceeds of higher oil and gas prices to strengthen balance sheets rather than expand exploration & production programs. Lack of visibility about oil demand may mean that this mood of caution will persist well into next year."

Note:

Supplemental information in the form of a question and answer document on this press release is available at http://www.slb.com/ir.

             Consolidated Statement of Income (Unaudited)

                       (Stated in thousands except per share amounts)
                          Third Quarter             Nine Months
For Periods Ended
 September 30          2002         2001(1)      2002         2001(1)

Revenue
 Operating         $ 3,501,370  $ 3,772,473  $10,199,287  $10,557,568
 Interest and
  other income(2)       40,917       40,762      112,930      190,179
                   -----------  -----------  -----------  -----------
                     3,542,287    3,813,235   10,312,217   10,747,747
                   -----------  -----------  -----------  -----------
Expenses
 Cost of goods sold
  and services(3)    2,778,651    2,856,755    8,016,236    8,359,101
 Research &
  engineering(4)       166,232      177,366      492,721      527,171
 Marketing             102,356      120,277      293,430      348,642
 General               169,233      189,836      493,860      504,316
 Interest               98,238      102,319      276,904      287,277
                   -----------  -----------  -----------  -----------
                     3,314,710    3,446,553    9,573,151   10,026,507
                   -----------  -----------  -----------  -----------
Income before taxes
 and minority
 interest              227,577      366,682      739,066      721,240
 Taxes on income(3)     60,843      157,358      195,273      356,388
                   -----------  -----------  -----------  -----------
Income before minority
 interest              166,734      209,324      543,793      364,852
 Minority interest       6,103      (14,676)      (2,449)     (27,601)
                   -----------  -----------  -----------  -----------
Net Income         $   172,837  $   194,648  $   541,344  $   337,251
                   -----------  -----------  -----------  -----------

Diluted Earnings
 Per Share:
 Net Income        $      0.30  $      0.34  $      0.94  $      0.59
 Add back
  amortization
  of goodwill                -         0.16            -         0.34
                   -----------  -----------  -----------  -----------
 Adjusted earnings
  per share        $      0.30  $      0.50  $      0.94  $      0.93
                   ===========  ===========  ===========  ===========

Average shares
 outstanding           579,632      575,019      577,727      573,843
Average shares
 outstanding
 assuming dilution     581,856      579,472      581,468      580,307

Depreciation and
 amortization
 included in
 expenses(5)       $   394,711  $   464,468  $ 1,150,061  $ 1,368,308
                   -----------  -----------  -----------  -----------


    1)  Reclassified, in part, for comparative purposes.

    2)  Includes interest income of :

        --  Third quarter 2002 - $ 17 million (2001 - $28 million).
        --  Nine months 2002 - $ 56 million (2001 - $129 million).

    3)  The first quarter of 2002 includes a $29 million charge
        (pretax $30 million and minority interest credit of $1
        million) related to the financial/economic crisis in Argentina
        ($0.05 per share - diluted). The second quarter of 2001
        includes a $280 million charge (pretax and after tax) for the
        estimated impairment charge from the disposition of certain
        Resource Management Services Businesses ($0.48 per share -
        diluted). In the third quarter of 2001, Cost of goods sold and
        services includes a pretax credit of $42 million representing
        the gain on sale of the worldwide gas compression business
        partially offset by an impairment charge related to the
        disposition of certain other activities. Taxes on income, in
        the third quarter of 2001, includes a net charge of $39
        million relating to these items. The third quarter 2001
        effective tax rate was 36% excluding these items.

    4)  The first quarter of 2001 includes a charge of $25 million
        (pretax and after tax) for in-process R&D related to the Bull
        CP8 acquisition ($0.04 per share - diluted).

    5)  Including multiclient seismic data costs.


                  Condensed Balance Sheet (Unaudited)

                                               (Stated in thousands)
Assets                                         Sept. 30,    Dec. 31,
                                                 2002         2001

Current Assets
 Cash and short-term investments            $  1,558,289 $  1,617,701
 Other current assets                          5,921,942    6,087,189
                                            ------------ ------------
                                               7,480,231    7,704,890
Fixed income investments,
 held to maturity                                428,000      576,000
Fixed assets                                   4,721,705    4,827,879
Multiclient seismic data                       1,179,667    1,028,954
Goodwill                                       6,750,956    6,260,969
Other assets                                   1,847,809    1,927,675
                                            ------------ ------------
                                            $ 22,408,368 $ 22,326,367
                                            ------------ ------------


Liabilities and Stockholders' Equity
Current Liabilities
 Accounts payable and accrued liabilities   $  4,166,845 $  4,506,634
 Estimated liability for taxes on income         487,880      587,328
 Bank loans and current portion
  of long-term debt                              761,586    1,015,181
 Dividend payable                                109,533      108,642
                                            ------------ ------------
                                               5,525,844    6,217,785
Long-term debt                                 6,757,090    6,215,709
Postretirement benefits                          523,667      504,797
Other liabilities                                251,036      372,696
                                            ------------ ------------
                                              13,057,637   13,310,987
Minority interest                                649,044      636,899
Stockholders' Equity                           8,701,687    8,378,481
                                            ------------ ------------
                                            $ 22,408,368 $ 22,326,367
                                            ------------ ------------


                            Business Review
                                                  (Stated in millions)

                   Oilfield Services     SchlumbergerSema    Other(1)
Third Quarter  2002   2001  % chg  2002   2001 % chg 2002   2001 % chg
               ----   ----  -----  ----   ---- ----- ----   ---- -----
Operating
 Revenue     $2,531 $2,640  (4)% $  896 $  848   6%  $ 94  $295  (68)%
Pretax
 Operating
 Income(2)   $  340 $  502 (32)% $    4 $   21 (83)% $(6)  $ 12    - %

Nine Months

Operating
 Revenue     $7,410 $7,671  (3)% $2,585 $2,026  28%  $273  $911  (70)%
Pretax
 Operating
 Income(2)   $1,091 $1,391 (22)% $   15 $   15  - %  $(19) $ 17    - %


    1)  2001 includes the divested Resource Management Services
        businesses.

    2)  Pretax operating income represents income before taxes and
        minority interest, excluding interest income, interest
        expense, gain on sale of securities and amortization of
        intangibles.

Oilfield Services

Operating revenue of $2.53 billion in the third quarter decreased 4% versus last year, but increased 3% sequentially. In comparison, the M-I rig count decreased 21% year-on-year and increased 6% sequentially. Pretax operating income of $340 million decreased 32% year-on-year and 11% sequentially.

North America revenue decreased 26% compared with the previous year and was flat sequentially as the M-I rig count declined 29% versus last year and increased 12% on a sequential basis. In contrast, revenues outside North America increased 10% versus 2001 and 6% sequentially as the M-I rig count decreased 6% and 1% respectively.

Outside North America revenue growth was led by the Europe/CIS/West Africa Area both year-on-year and sequentially primarily due to the demand for well completions and productivity technologies. Overall, the Russia, Caspian, Mexico and China GeoMarkets experienced the strongest revenue growth sequentially and year-on-year.

From a technology standpoint, the Well Completions & Productivity segment continued to record the strongest growth increasing 13% year-on-year and 9% sequentially primarily due to increased market share gained through the accelerated introduction of innovative cost-effective new technologies. These included the Sensa* distributed temperature fiber optic system and the Poseidon(TM) artificial lift system, which is used in gaseous oil wells where conventional electrical submersible pumps can lock and fail.

Pretax operating income was negatively impacted by lower pricing in proprietary WesternGeco marine services and losses relating to land seismic contracts in Mexico and marine contracts in India.

North America

Revenue of $718 million decreased 26% versus last year but was flat versus last quarter. The M-I rig count decreased 29% year-on-year but increased 12% sequentially. Pretax operating income of $99 million decreased 61% year-on-year and 8% sequentially.

Initial signs of improvement in rig count at the beginning of the quarter slowed amid continued economic uncertainty, a slower pick-up in Canadian activity post-Spring break-up and lower natural gas prices in the West. These reasons, combined with the initial impact of tropical storms in the Gulf of Mexico, resulted in year-on-year and sequential revenue decreases across the Area.

All technology segments posted year-on-year and sequential revenue decreases with the exception of Drilling & Measurements which achieved significant growth following the introduction of DD Direct*. This new acquisition software allows reduced field crew size leading to improved efficiency and reduced costs resulting in increased margins. In addition, the success of drilling & measurements technologies led to two three-year contract awards for LWD/MWD services in the Gulf of Mexico.

Pricing pressures across the board and operational interruptions due to hurricane activity negatively affected pretax operating income.

Latin America

Revenue of $370 million decreased 5% year-on-year but increased 10% sequentially in sharp contrast to the M-I rig count, which decreased 22% year-on-year and increased 1% sequentially. Pretax operating income of $29 million fell 37% year-on-year and 25% sequentially. Excluding the effect of WesternGeco, pretax operating income increased 17% sequentially.

The sequential increase in revenue was led by improved demand for well services, drilling & measurements, and well completions activities in the Mexico GeoMarket. Schlumberger also won a new integrated services contract for 100 wells in the Burgos project. In the Latin America South GeoMarket, increased activity for Petrobras in Brazil resulted from a drive to reduce oil imports, together with a higher demand for integrated services and solutions. This trend was highlighted when Schlumberger was awarded a key integrated well construction project for the development of the Albacora Leste field in the Campos Basin covering 29 wells over three years.

Europe/CIS/West Africa

Revenue of $761 million grew 22% year-on-year and 13% sequentially in contrast to the M-I rig count, which fell 10% and 6% respectively. Pretax operating income of $102 million increased 5% and 6% versus last year and last quarter respectively.

Year-on-year and sequentially, the Russia and the Caspian GeoMarkets recorded the highest growth as a result of unusually high artificial lift sales in Russia and ongoing drilling activity related to major contracts in both countries. This was partially offset by lower than expected revenues in the UK and Norway where activity slowed towards the end of the quarter as a result of the start of seasonal lower activity in the UK and employee strikes in Norway.

The strongest growth was experienced by the Well Completions & Productivity segment led by artificial lift sales. WesternGeco posted solid revenue growth, as seismic activity peaked in the North Sea.

Softer pricing in proprietary marine seismic services, combined with the effects of the strikes in Norway, resulted in lower pretax operating income.

During the quarter, the first integrated Q-Land* surface seismic and Q-Borehole* vertical seismic profile acquisition was completed in Algeria. These results provided the customer with high-resolution data to image the target channel sands. The Q-Borehole survey was acquired using the Versatile Seismic Imager* (VSI) downhole tool, recorded by the wireline logging unit and transmitted over a network connection to the Q-Land recorder. From there the information was transferred to the seismic camp by microwave link for rapid quality control and geometry updating. This technology enabled the channel sands to be imaged for the first time.

Middle East & Asia

Revenue of $612 million increased 7% year-on-year but decreased 2% sequentially as the M-I rig count increased 6% versus 2001 and 1% sequentially. Pretax operating income of $113 million decreased 13% year-on-year and 12% sequentially principally due to WesternGeco losses associated with marine contracts in India.

The slowdown in activity during the quarter was attributable to a combination of factors that included a number of major projects nearing completion and lower equipment sales. Year-on-year growth was led by well services technologies in the China GeoMarket and increased pricing on contract renewals in the India GeoMarket. Sequentially, revenue fell in all GeoMarkets with the exception of China, which experienced strong marine seismic activity, robust well services related to a production optimization contract in Bohai Bay, and increased data and consulting services. Growth in the latter services was highlighted by the award of four key reservoir evaluation contracts in China with a combined work scope that spans reprocessing and interpreting petrophysical and geological data, building reservoir models and characterizing geophysical parameters for oil and gas fields in the region.

    Highlights

    --  Launched a multi-year joint technology development project
        with ChevronTexaco Corp. to develop a next-generation
        reservoir management solution that will enhance the use of
        real-time oilfield sensor data from wells and facilities to
        improve real-time oilfield management. This project will
        provide the industry with automated tools and services to
        screen pertinent data, flag under-performing wells, diagnose
        production problems and recommend corrective actions to
        optimize field production.

    --  Completed the world's first installation of a distributed
        fiber optic system directly into a sand face completion across
        the whole length of the horizontal section of a well in
        Trinidad. This industry-leading technique, combining
        Schlumberger expertise in sand control technology with the
        Sensa* distributed temperature fiber optic system, offers
        customers the unique ability to monitor the temperature
        profile of produced fluids across the wellbore sand face
        continuously for real-time production optimization.

    --  Won two major contracts in Norway during the quarter. First, a
        major three-year coiled tubing drilling contract in Norway by
        Statoil to increase and maintain production from its fields on
        the Norwegian Continental Shelf. Second, a rotary steerable,
        directional drilling, MWD/LWD services contract, which
        significantly increases Schlumberger market share for these
        services in Norway.

    --  Entered into a 10-year service contract with Romgaz, S.A., the
        national gas company of Romania, to enhance production from
        the 54-well Laslau Mare gas field. The pilot project will be
        used to confirm technical data and provide a wide range of
        services from wireline logging and data analysis to reentry
        drilling, perforating and fracturing. After the initial pilot
        phase, activities will focus on gas compression services to
        decrease wellhead pressure, perforating and fracturing
        services to increase individual well performance, uphole
        completion work to recover previously bypassed zones and
        reentry drilling to deepen existing wells for access to
        previously non-producible tight gas zones.

    --  Introduced the OrientXact* perforating system to improve well
        productivity and prevent sand production in horizontal and
        deviated wells. In the North Sea, it was used to perforate a
        6,000ft horizontal section in a single trip resulting in a
        flow rate of more than 50,000 barrels per day making the well
        the biggest producer in the Visund field. The OrientXact
        system increases production in mechanically weak formations,
        which would typically produce sand when perforated by
        conventional technology.

    --  Selected by Houston-based international offshore drilling
        contractor, Atwood Oceanics, to provide communications for its
        offshore and land facilities around the world using the
        Schlumberger DeXa.Net* global connectivity solution. This
        includes the deployment of DeXa.Net very small aperture
        terminal (VSAT) links between offshore oil rigs in the
        Mediterranean, Gulf of Mexico and South East Asia and their
        respective land offices in Cairo, Houston and Kuala Lumpur
        ensuring continuous connectivity independent of rig mobility.

    --  Won a three-year DeXa.Touch* contract for IT infrastructure
        support for Petrozuata, a joint venture between ConocoPhillips
        and PDVSA in Venezuela. The award is significant in that it
        demonstrates the unique ability of Schlumberger to offer oil
        and gas customers IT support wherever they are based in the
        world.

SchlumbergerSema

Operating revenue of $896 million in the third quarter increased 6% year-on-year and 5% sequentially despite the weak IT spending environment. Customers continued to revise budgets downwards and to delay decisions on contract awards. However, focus on specific markets resulted in growth particularly in managed services, mobilecom and banking-card shipments, the public sector and the UK GeoMarket. These positive effects were partially offset by lower energy and utilities activities in North America.

Pretax operating income of $20 million, before charges, declined 8% year-on-year but doubled sequentially due to continuous cost-containment efforts and improved margins in the UK GeoMarket. However, prices continued to weaken. To adapt to the slower growth environment, the cost reduction program continued during the quarter resulting in a pretax operating charge of $16 million ($12 million after tax) for employee severance costs.

Volume products revenue of $210 million experienced strong year-on-year and sequential growth of 10% and 5% respectively. This improvement reflected an all-time record volume of mobilecom cards, higher demand in the banking card segment, and sustained activity in banking and parking terminals. Pretax operating income of $9 million improved 42% sequentially, mainly attributable to better productivity in smart cards and terminals.

Europe, Middle East and Africa

Revenue of $672 million increased 5% year-on-year and 9% sequentially despite the overall economic slowdown in Europe and the continued fall in demand for discretionary consulting and systems integration services. These results demonstrated that SchlumbergerSema continued to gain incremental market share in its focus customer and business segments.

The UK GeoMarket experienced strong activity across the board due mainly to the growing managed services practice in the public sector, increased shipments of banking cards and improved activity in mobilecom cards for One2One and Orange.

GeoMarket activity in France was weak due to the summer slowdown. Companies continued to reduce spending and to delay decisions. Low activity in the telecommunications and finance segments was partially offset by steady growth in the public sector.

The Italy and Spain GeoMarkets also suffered from seasonally slow summer months, which primarily impacted IT consulting and systems integration services.

With increasing market uncertainty, the Germany GeoMarket showed softness, mainly in the telecommunications sector but this was partially offset by increased activity in IT services for the energy & utilities and transport sectors.

Pretax operating income of $32 million decreased 27% year-on-year and 5% sequentially. Despite significant cost reductions, the continued excess capacity in IT services, with consequently tougher pricing pressure, led to flat margins and lower income for the quarter.

North & South America

Revenue of $159 million decreased 10% year-on-year but grew 1% sequentially. The yearly decrease was due to across-the-board declines in IT spending and the economic challenges experienced by utilities companies in the energy trading industry. The sequential gain came mainly from stronger activity in the telecommunications sector in North America, which was partially offset by continued weakness in the financial services and telecommunications markets in South America as a result of economical and political uncertainty.

Despite weak demand for consulting and systems integration services, pretax operating losses of $2 million decreased year-on-year and sequentially. The sequential improvement came almost entirely from reduction in overhead and the closure of one facility in the US. Margin improvement in Real-Time Energy Management activities contributed to reduced pretax losses.

Asia

Revenue of $88 million increased 18% year-on-year but decreased 2% sequentially. The sequential decline was due to lower mobilecom deliveries to China Mobile coupled with pricing pressure. However this was partially offset by higher card deliveries in the Philippines and Thailand together with improved managed services activity in the financial sector. The significant yearly improvement was due to the recovery in mobilecom cards from an all-time low level that offset a decline in the average card-selling price.

Pretax operating income of $3 million decreased 37% year-on-year but increased sequentially.

The year-on-year decrease was a direct consequence of the significant pricing pressure in the card market, where excess capacity could not be matched by the recovery in demand. The sequential improvement was due to better card gross margins as a result of productivity improvements.

    Highlights

    --  Awarded a multimillion-dollar business process outsourcing
        contract by the Department for Work and Pensions (DWP) in the
        UK. SchlumbergerSema will provide a high capacity customer
        conversion center to support the program, enabling the DWP to
        convert up to 13 million customers currently reliant on
        paper-based payment methods to payments made directly into
        bank or building society accounts, or into the new Post Office
        card account.

    --  Signed a $56 million substation automation contract with Los
        Angeles Department of Water and Power (LADWP), to improve
        security, customer service, and operating and maintenance
        efficiency. The contract represents one of the world's largest
        substation automation projects, and includes the retrofitting
        of 179 existing substations and the supply of two
        development/testing systems and a training simulator.

    --  Won the contract to supply the Royal Bank of Scotland (RBOS)
        with EMV smart cards for both its RBOS credit and debit card
        products. These products will enable RBOS to be at the
        forefront of the UK's move to "PIN at the point of sale"
        replacing signature as the form of customer identification in
        a card sales transaction, thus minimizing card fraud.

    --  Selected by UK Railtrack Major Stations as preferred supplier
        for customer information systems. These systems manage and
        transmit accurate travel information in real time to
        passengers via multiple sources, including information screens
        and public address systems in stations.

    --  Selected as provider by Mobipay - the Spanish joint venture
        company formed by all of the country's mobile operators and
        80% of its financial institutions - to launch m-commerce
        services in Spain.


    Change in Liquidity

    Liquidity represents cash, short-term investments and fixed income
investments, held to maturity, less debt. A summary of the major
components of the third quarter and nine months change in liquidity
follows:

                                          (Stated in millions)
                                       Third                Nine
2002                                  Quarter              Months

Funds provided by:
    Net income                     $    173              $    541
    Charges                               -                    29
    Depreciation and amortization       395                 1,150
    Employee stock option plan           14                    61
    Employee stock purchase plan          6                   108
Funds used for:
    Capital expenditures               (401)               (1,303)
    Dividends paid                     (108)                 (324)
    Working capital                     197                  (163)
    Impact of change in exchange rates    5                  (350)
    Other                                 6                  (244)
                                   --------              --------
Change in liquidity                     287                  (495)
Liquidity, beginning of period       (5,819)               (5,037)
                                   --------              --------
Liquidity, end of period           $ (5,532)             $ (5,532)
                                   --------              --------


*Mark of Schlumberger
(TM) Mark of IFP, TotalFinaElf and Statoil

    Schlumberger holds the exclusive license to manufacture and market
these products for oilfield applications.

    This press release is available at http://www.slb.com.