# Letter to Shareholders

_Source: `DeepSeekOCR_Ardian_pruned_1k/energy-oil-gas-equipment-services/NYSE_SLB_2019/NYSE_SLB_2019.mmd` · pages 3-9_

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Letter to Shareholders

In my first letter to shareholders, I would like to convey how honored I am to be leading this iconic company into the next chapter. Schlumberger has outstanding people and I trust that, together, we will create a new performance benchmark for the industry.

As we close out a very productive year and head into 2020 with resolve, I want to thank you, our shareholders, for your continued support. I would also like to personally thank each Schlumberger employee and contractor for their commitment to the company. Of course, our success hinges on the continued trust of our customers, whom we also thank.

The energy industry is changing, and our vision is to define and drive high performance sustainably. Simply put, our ambition is to be the performance partner of choice for our customers and the industry. We believe that by focusing on performance, we can help usher in a new era for the energy industry, improving our results while addressing our shareholders' and other stakeholders' environmental, social, and governance concerns.

Energy demand fundamentals remain favorable for the oil and gas sector. The International Energy Agency (IEA) predicts that the exploration and production (E&P) industry will continue to contribute about 55% of the energy mix through 2030, though markets are becoming more regionalized and volatile.

Oil demand growth slowed in 2019 in response to tariff disputes and their impact on trade while the Organization of the Petroleum Exporting Countries (OPEC) worked to mitigate oversupply at the global level. At the same time, US production overwhelmed global demand due to elevated drilling and completions activity during the first half of the year. Budget discipline caused a sharp reduction in activity during the second half of 2019, resulting in an annual contraction of North America spending. In contrast, international upstream investment grew for a second consecutive year, particularly offshore. This trend is expected to continue.

Against this backdrop, Schlumberger full-year 2019 revenue of $32.9 billion was essentially flat with 2018. International revenue, however, grew in the high single digits as we had anticipated.

Indeed, our performance also reflects new technology sales that represented 26% of total sales—the highest since 2014—and demonstrates how our new technology portfolio delivers a quantifiable performance impact for our customers. During 2019, we commercialized several new technologies, such as the GAIA digital subsurface platform for rapid access to basin-scale data and management of exploration opportunities, the Ora \( ^{*} \)  intelligent wireline formation testing platform for dynamic reservoir characterization, and the NeoSteer \( ^{*} \)  at-bit

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"Together we create amazing technology that unlocks access to energy for the benefit of all."

steerable system, a fit-for-basin technology for drilling horizontal wells in a single run.

Throughout the year, I had the privilege of participating in many customer meetings and industry events across our GeoMarkets. Our customers have reacted very positively to our vision and the elements of the strategy that we shared with them. And, as a leader in the digital transformation of the industry, perhaps our most significant customer event of the year was our Software Integrated Solutions (SIS) global digital forum, the SIS Global Forum 2019, which took place in Monaco in September with more than 700 customers in attendance.

During the Forum we announced the open sourcing of the DELFI* cognitive E&P environment and its contribution to The Open Group Open Subsurface Data Universe™ (OSDU) organization. Contributing elements of our core technology provides a foundation to unleash the power of open digital innovation for the benefit of upstream oil and gas industry performance. The Forum's theme was "The Future is Open," and the feedback from customers and partners was unanimous—we have opened a new digital chapter for the industry. The digital era will enable new levels of efficiency and sustainable outcomes for our customers and for Schlumberger.

To make the leap in performance that our customers need to deliver energy in today's competitive environment, we are developing and deploying digital solutions—focused on generating richer data and deeper insights—to achieve performance not previously possible across the E&P

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industry. We are also accelerating the commercialization of new digital solutions built in the DELFI environment—spanning exploration, development, and production from office to field operations—each of which leverages the scalability and cognitive features of the DELFI environment.

We also formed the Sensia joint venture with Rockwell Automation, creating the most integrated provider of measurement solutions, production domain expertise, and automation to the oil and gas industry. Sensia will play an important role in the digital transformation of our industry and create value for our customers through its comprehensive solution that can forecast, track, report, and resolve hydrocarbon production and transportation challenges.

Our technology platform and modernized operating system form the foundation that will enable our vision. Building on this, in the third quarter we embarked on a new corporate strategy for long-term outperformance—a strategy that will define the Schlumberger of tomorrow.

Customer performance is positioned at the center of our strategy, which consists of three key themes: Strengthen the Core, Expand the Go-to-Market, and Next Horizons of Growth. This year we launched 4 of 10 key elements of our strategy, including leading and driving digital transformation, developing fit-for-basin solutions, capturing value from the performance impact for our customers, and fostering capital stewardship.

We have generated a great deal of enthusiasm in response to our corporate strategy, the first element of which is People First—because without the commitment and engagement of our highly skilled and diverse workforce, we would not be able to achieve our vision.

Central to our ability to drive high performance is, first and foremost, keeping our people safe. We improved our safety performance in 2019, decreasing our industry-recognized figures for the rate of auto accidents per million miles and combined lost-time injury frequency. This was our best year on record in terms of safety performance and sets a new benchmark for the industry as we extend our leadership and partner with more of our customers to share best practices.

An integral part of our vision is our responsibility to our stakeholders, the environment, and the communities where we live and work. We took a major step on our stewardship journey in December, when we became the first company in upstream E&P services to commit to setting a science-based target in line with the expectations of the Science Based Targets initiative to reduce our greenhouse gas (GHG) emissions and drive measurable progress related to climate change. This step reinforces our commitment to leverage our talented people, including our extensive scientific community, in building a future where high performance supports a more resilient and sustainable industry—a better, cleaner, safer industry.

Before closing, I want to share with you our company's purpose as we move forward:

"Together we create amazing technology that unlocks access to energy for the benefit of all."

This purpose is timeless and enduring. It will drive us through the decades to come, whatever challenges they bring. I look forward to guiding the people of Schlumberger as we embrace this new chapter, align around our vision and purpose, and strive to live our values through our behaviors every day.

Since stepping into the role of chief executive officer, I have been striving to make clear that the Schlumberger of the future will balance shareholder returns, capital discipline, and customer focus with investment in our people and technology. We intend to be leaders of the energy transition, and our ability to improve our margins, cash flow, and returns is crucial to this ambition.

I want to close by emphasizing the "we" of that commitment. I am only one of Schlumberger's 105,000 employees. It is my job to continue Schlumberger's ability to attract the best global talent. To be a great technology and operations company, we must also be a great "people" company. For this reason, I cannot close my first letter to shareholders without, once again, saying thank you to each of you who makes these things possible.

As a company, Schlumberger is at the center of the issues on which the world's future depends. And while that responsibility is great, so are our opportunities.

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Olivier Le Peuch
Chief Executive Officer