Simon Ayat - Chief Financial Officer and Executive Vice President Malcolm Theobald - Vice President of Investor Relations Andrew Gould - Chairman and Chief Executive Officer

Alan Laws - BMO Capital Markets U.S. David Anderson - Palo Alto Investors William Herbert - Simmons Kurt Hallead - RBC Capital Markets, LLC Kevin Simpson - Miller Tabak Geoff Kieburtz - Weeden & Co. Research William Sanchez - Howard Weil Incorporated Brad Handler - Crédit Suisse AG John Olaisen - Carnegie Investment Bank AB Douglas Becker - BofA Merrill Lynch Michael LaMotte - Guggenheim Securities, LLC Angie Sedita - UBS Investment Bank Daniel Boyd - Goldman Sachs Group Inc. Michael Urban - Deutsche Bank AG Ole Slorer - Morgan Stanley

Ladies and gentlemen, thank you for standing by, and welcome to the Schlumberger Limited earnings conference call. [Operator Instructions] I would now like to turn the conference over to Mr. Malcolm Theobald, Vice President of investor Relations. Please go ahead.

Thank you, Julie. Good morning, and welcome to the Schlumberger Limited Fourth Quarter and Full Year 2010 Results Conference Call. Joining me for today's call are Andrew Gould, Chairman and Chief Executive Officer; and Simon Ayat, Chief Financial Officer. Before we begin with the opening remarks, I'd like to remind the participants that some of the information in today's call may include forward-looking statements, as well as non-GAAP financial measures. A detailed disclaimer and other important information are included in the FAQ document, which is available on our website or upon request. We will welcome your questions after the prepared statement. And now I will turn the call over to Simon.

Thank you, Malcolm. Ladies and gentlemen, thank you for participating in this conference call. Fourth quarter earnings per share, excluding charges and credits was $0.85 per share. This is an increase of $0.15 sequentially and $0.18 compared to the same quarter of last year. During the quarter, we recorded $0.09 of charges relating to the repurchase of certain bonds and other merger-related items. We anticipate we would continue to incur merger-related charges throughout 2011, as we continue the integration of Smith. The Q4 results include a full quarter of activity from the acquired Smith companies as compared to only one month in the Q3. We have continued to make significant progress on our integration during the quarter, and while the transaction was dilutive to the quarter's result by approximately $0.05, we continue to believe it will be breakeven by the end of the fourth quarter of this year. Turning to the business segments, Oilfield Services fourth quarter revenue increased 9% sequentially while WesternGeco revenue increased 17%. The legacy Smith businesses contributed $2.5 billion in revenue for the quarter. Approximately 25% of the growth in Oilfield Services was attributable to the traditional year end surge in product and software sales. The remaining increase was largely due to the continued strong Well Services performance in U.S. Land, as well as the revenue generated from the early payout of an IPM [Integratd Project Management] gain share project in North America. Oilfield Services pretax operating income of $1.3 billion increased 21% compared to the prior quarter. While pretax operating margin increased 224 basis points to 22.1%. This increase was largely driven by the strong performance in North America where margin improved by 6.6 percentage points. Now margins grew 658 basis points to 24% led by U.S. Land. The early payout of the IPM gain share project, which contributed approximately $0.02 to the fourth quarter earnings per share accounted for just over 2 percentage points of the North America margin improvement. International margins improved sequentially by 49 basis points to 21.9%. This improvement was primarily driven by a more favorable revenue mix in the Peru, Colombia, Ecuador and North Sea GeoMarkets. In the Middle East, pretax operating margin decreased as effects of year-end product and software sales were not sufficient to offset the impact of the weather-related delays in Australia, start-up costs in Iraq and an overall less favorable revenue mix. Sequentially, WesternGeco pretax operating income increased by $73 million to $113 million and pretax operating margin increased by almost 12 percentage points to 20.2% on account of robust monthly client sales. The legacy Smith segment, particularly Smith Oilfield Services performed very well, contributing $275 million of pretax operating income to the quarter's results. Now turning to Schlumberger as a whole, the effective tax rate, excluding charges and credits was 23.1%, representing an increase of just over 2 percentage points compared to last quarter. This increase was primarily driven by the fact that we generated a significantly larger portion of our earnings in North America in the Q4, as well as the continued impact of the Smith merger. We expect the ETR for the full year of 2011 to be in the mid-20s. This reflects the planned mix of activity between North America and the rest of the world, as well as the full-year impact of the Smith merger. However, I continue to remind you that we can experience volatility on a quarterly basis due to the geographic mix of business. We ended the quarter with $5.5 billion of cash and investments on hand and short-term debt of $1.7 billion. Net debt was $2.6 billion at the end of the quarter as compared to $3.5 billion at the end of Q3. This improvement reflects very strong cash collections in the fourth quarter. Other significant liquidity events during the quarter, included $1 billion of CapEx, $449 million of stock repurchases and $200 million contribution to our retiree medical plan. During the quarter, we issued $1.3 billion of 2.75% notes due in 2015. And subsequent to the quarter end, we issued $1.1 billion of 4.2% notes due in 2021 and $500 million of 2.65% notes due in 2016. Yesterday, our Board of Directors approved a 19% increase in our dividend, which brings our annual dividend to $1 per share. This increase reflects the fact that we have not increased our dividend over the past two years and is consistent with our intention to return excess cash to our shareholders. Along the same lines, we will continue to be opportunistic and aggressive, when appropriate with our stock buyback activity. Throughout all of 2010, we spent $1.7 billion repurchasing 26.6 million shares at an average price of $64.48. Despite the fact that we were blacked out for a significant period as a result of the Smith transaction. CapEx for all of Schlumberger is expected to approach $4 billion in 2011 as compared to $2.9 billion in 2010. Lastly, I just want to remind everyone that starting next quarter, our primary segment reporting will be based on our group structure. In this regard, shortly after this call, we will be publishing an update to the pro forma financial information that were released in early December to reflect the Q4 and full year 2010 result in this new format. This information can be found on our website. And now, I will turn the conference over to Andrew.

Thank you, Simon, and good morning, ladies and gentlemen. Schlumberger fourth quarter revenue was at $9.07 billion versus $6.85 billion in the third quarter of 2010 and $5.74 billion in the fourth quarter of 2009. These figures reflect the full quarter of activity from the acquired Smith businesses. In Oilfield Services, North America activity remained strong through growing demand for services in liquid-rich plays and from seasonal improvements in Canada. Improved pricing and the restructuring efforts that we began in April continued to contribute to margin expansion, particularly for Well Services activities. Results also benefited from the accelerated IPM gain share on the sale by the customer for projects on land in the U.S., which clearly demonstrates how this business model can create value. Outside North America, activity improvements in the North Sea, West Africa and Middle East & Asia GeoMarkets, coupled with strong year and product sales, particularly for software, more than offset the combination of continued weakness in Mexico and the seasonal activity decline in Russia. While this was balanced to some degree by the rapid ramp up of activity in Iraq, which did not yield equivalent profitability as it was impacted by heavy start-up costs. Our WesternGeco, excellent fourth quarter multiclient sales were mostly due to the enhanced quality of subsalt imaging products in the Gulf of Mexico, while the acquired Smith businesses continue to outperform our original expectations with revenue synergies, through the acquisition, increasing in each successive month of the quarter. This quarterly report is particularly rich in technical success, whether through the continuing market penetration of leading services such as the Scope advanced logging-while-drilling measurements, scanner Wireline technologies or ACTive coiled tubing services, the integrated nature of the portfolio underscored considerable success. Scanner services, for example, are being boosted by the commercial introduction of the latest family member, the Dielectric Scanner, the unique industry service capable of measuring saturation and a variety of reservoir applications, the service completed a two-year pilot project in Saudi Arabia, targeted at reservoir monitoring where 35 logs have been recorded in various fields, both on land and offshore to assess water flooding sweep efficiency as an aid to field development planning. The result showed the technology is capable of determining oil saturation, independent of water salinity while achieving efficiency gains over previous monitoring methods, and have now led to the service being considered for use in heavy oil and [indiscernible] sand environments. In Reservoir production, ACTive realtime coiled tubing services saw growth particularly with the ACTive conveyance of wireline close scanner production logging technology and with fiber optics' continuous measurements of temperature and pressure along the wellbore. Expanding the primary integrated technologies such as these, confirmed conveyance enabled wireline services to have exciting growth opportunities, particularly in horizontal and extended reach wells. It is however, in the drilling portfolio that displayed some of the most exciting successes. These included the completion of the remote three-well exploration project offshore Greenland that use Schlumberger technologies combined with Smith and M-I SWACO services, as well as Geoservices mud logging. In Brazil, a similar combination of services helped one well record substantial increases in rates of penetration while meeting all the directional drilling goals. In this case, the integrated nature of the bottomhole assembly demonstrated how technology optimization can impact performance in the high cost deepwater drilling environment. A third such operation offshore Indonesia, further confirm the value of integrated bottomhole assemblies. Finally, I would like to mention the inauguration of two new Schlumberger facilities in Brazil to support one of becoming the fastest-growing regions in the world. On November 16, we opened the Brazil Research and Geoengineering Center in Rio de Janeiro. And the following day, our latest new generation operations based in Macaé. The new research center is designed to promote the integration of geosciences and engineering to improve hydrocarbon production and recovery from the complex deep water reservoirs and pre-salt carbonates offshore Brazil. The center also has as a new WesternGeco geo-solutions center dedicated to processing of the revolutionary single-vessel full azimuth Q-Marine services that have now penetrated all the major offshore areas around the world. As we look forward to 2011, it is important to remember that the primary driver of our business has always been and will remain the demand for oil and gas. For oil, 2010 turned out to be the year of the second largest demand increase in the last 30 years. The consensus forecast of demand in 2011 shows a further healthy increase. Oil prices are moving to a range that would encourage increased investment particularly in exploration, which remains the swing factor in operators' budgets. While we do not anticipate any substantial recovery in the deepwater U.S. Gulf of Mexico, we do expect a marked increase in deep water activity in the rest of the world. These factors, coupled with increases in development activity and production enhancement in many other areas promise stronger growth rate as the year unfolds. For natural gas, demand recovery has been less marked. The increases in supply of both unconventional gas in the United States and liquified natural gas around the world will limit the progress of prices. Nonetheless, activity in the United States is likely to remain strong, at least through the first half of the year, due to commitments necessary to retain leases, the backlog of wells to be completed and the contribution of natural gas liquids to overall project economics. Increased service capacity, however, will negatively affect pricing at some stage during the year. Overseas, the governing factor on gas activity, particularly in the Middle East will be the ability of many nations to use gas as a substitute for oil to meet increased local energy demand, thus freeing up more liquids for export. Elsewhere, the long lead time necessary to execute large gas projects for LNG exports will ensure that a certain level of activity is maintained. Unconventional gas resources will continue to attract considerable interest outside North America. The leading activity will continue to be in conventional gas, in tight or low permeability reservoirs and in coal-bed methane development. There will be exploration activity around the potential that shale gas offers in many other parts of the world. Increased activity, coupled with greater technology needs of higher exploration, deepwater spend and tight gas, particularly outside North America, will make 2011 a stronger year for Schlumberger. The importance of risk reduction and the minimization of drilling cost make the acquisitions of Geoservices and Smith, major contributors to our future growth in this scenario. Thank you. And Julie, I think we're ready for questions.

[Operator Instructions] And we'll go to the line of Brad Handler with Credit Suisse. Brad Handler - Crédit Suisse AG: I guess, and then the first question, I would just love to hear a little bit more on what was a very impressive revenue growth number in the U.S. land market? For just a little bit more color, if you would, sort of utilization of assets, if you could comment on capacity increase and then on pricing, that would be helpful?

The biggest contributors in Q4 as opposed to Q3 were still efficiency gains in activity, with some contribution though not huge from increased capacity. So it really was more the results of the restructuring efforts. In terms of price, the Q4 effect was less than the Q3 effect. So it really was the results of the restructuring efforts, much better efficiency and much better utilization that led the improvement. Brad Handler - Crédit Suisse AG: Perhaps as a follow-up, let's stick with the same part of the world, could you offer some thoughts on the Gulf of Mexico and your outlook? I know you spoke to it a little bit in your comments, but your outlook for the next couple of quarters specifically, and then, also as we move into the end of this year?

I don't think we anticipate any major return to work in the first half of the year. I think we may see a few rigs come back, but we still think that there are a number of issues that the operators really need clear resolution on, before they are in a position to apply for new permits. And we anticipate that in the second half of the year, the rate of increase will accelerate, but we don't think we're going back to anything like the 33 rigs that we're drilling when the moratorium started in 2011. Brad Handler - Crédit Suisse AG: But you're assuming that your...

In 2012, if you're asking do I doubt the future of deepwater Gulf of Mexico? Absolutely not. And I think that our multi-client sales we are very good proxy for the fact that there is still a huge interest in deepwater Gulf of Mexico. But until some of the questions around the regulation and the definition of liability and the definition to what constitutes well containment is settled, it's difficult to know exactly who the client base is going to be.

The next question is from Kurt Hallead with RBC Capital Markets. Kurt Hallead - RBC Capital Markets, LLC: Andrew, you referenced, obviously, on your commentary the IPM project in North America. And you put that to impact in the commentary as well. So I'm just curious here. Can you elaborate a little bit more on this IPM gain sharing project and can you elaborate more on how this business model has evolved for Schlumberger and how can we think about that impacting Schlumberger differentially compared to its peers as we move forward?

So the project in question was in the Bakken. The owner of the project was a private equity, so therefore we did absolutely everything. We invested service as our share of the investment. Normally, we would have been paid out on the ratio of our services over the balance of the whole project life. But the agreement contained a resolution in case if the owners selling the property, which gave us the same multiple on our invested services cost as the seller obtained on his sale. So what I'm saying is that it is unlikely that these projects get sold very often because it's far more likely that a continue for a long period of time, particularly outside the United States where they tend to be with national oil companies rather than with private investors. But it does demonstrate how well our technology allows the customer to create considerable value in a short period of time, how we can share in it. Kurt Hallead - RBC Capital Markets, LLC: So in the context of that, as we think about this from a financial community standpoint, it's something that could recur, but it's something...

No. It's something which is providing a new income agreement in Schlumberger, which is not particularly visible yet, it is not big enough. But very satisfactory returns. The only reason you saw this in one quarter was because the operator sold it. And overseas particularly, it's unlikely that operators, particularly as the national oil companies will sell them, so the gain will be spread over the contract life as opposed to come in one quarter. Kurt Hallead - RBC Capital Markets, LLC: In U.S., you referenced, again, some concern about potential pricing pressure in the market. How would you characterize your conviction in that perspective? And is it something that we could be looking to update and change maybe on a quarter-on-quarter basis?

I mean, I don't -- I've been wrong on North America so often Kurt, that I'm reluctant to say too much. I don't think there's a huge risk to activity in the first half of the year. I do think that pricing momentum is going to slow progressively. But at the point where it tips over, I suspect it's going to depend on when the capacity out there is sufficient to address the current activity. And it looks, it's in fact, in the second half of the year, not the first.

The next question is from Ole Slorer with Morgan Stanley. Ole Slorer - Morgan Stanley: Andrew, when do you think that, most probably, is the first exploration well and deep well in Gulf of Mexico?

I'm going to go out on a limb here, and say the end of 2011 or the beginning of 2012. Are you're saying rank exploration or delineation? Ole Slorer - Morgan Stanley: Rank exploration.

2012. I'm going out on a limb, I'm guessing. Ole Slorer - Morgan Stanley: So could talk a little bit about what could -- your thought process around why 2012 and the...

Well, but for all the reasons I gave to Brad earlier. Firstly, while there's some of the regulations have been defined, some of them haven't, the need for environmental assessments and spill containment capability is on the way but is not yet there and it's not yet, I think, necessarily clearly understood how the operators are going to share that. I think that the operators are not going to commit until they're pretty sure of the framework within which they're going to operate. And I just doubt that for ranked exploration, we're going to get that clarity in 2011. Ole Slorer - Morgan Stanley: And if we look elsewhere in the world, what you'll see is the most prospective exploration basis at the moment, and whether it'd be seismic activity or well testing or any other of your exploration-oriented services, are there any new basins that could, in 2011, pick up the slack from Gulf of Mexico?

Well, I mean, when we look at -- let me answer you that another way. When we a look at deepwater in 2011, the number of effective rig years added, so this is not the number of rigs added, it's the number of rig years, which is the number of months they're actually drilling, right? It is much is substantially greater than in 2010. And if I leave aside Brazil, where everybody knows the story and you can, to some extent, make your own estimate of how may rigs will actually get added, then I think the most prospective area we're going to see in terms of deepwater exploration in 2011 is West and East Africa. And to some extent, remote Indonesia. Ole Slorer - Morgan Stanley: What are your thoughts on WesternGeco in this context? Is the fact that the Gulf of Mexico is a bit of a vacuum, maybe this year a problem or is the international momentum strong enough?

We think that the momentum in proprietary seismic outside of the United States is sufficient to absorb capacity, but the lack of the Gulf of Mexico is going to slow pricing. We thought we would get pricing momentum back early this year. We are now thinking that if we do get it back, it's going to be late this year. The big question I think on seismic for 2011 is if there is prospectively a large lease sale at the beginning 2012, then multiclient could be very strong in the second half of this year.

The next question is from Michael LaMotte with Guggenheim Partners. Michael LaMotte - Guggenheim Securities, LLC: If I could ask a question on fracing, as it relates to a comment you made earlier. Last year, about drilling geometrically versus drilling geologically. The frac market has been essentially geometric as well, but there's evidence that, that market is perhaps migrating more towards an intelligent model faster than the shale drilling market in North America. Could you talk about that?

What are you comparing to the shale market? The liquid market or what? The drilling... Michael LaMotte - Guggenheim Securities, LLC: I'm sorry, I'm referring to drilling versus completions, and the trend of geometric to geologic activity.

I think you have to assume that over time, that you call it geologically. But geologically, what we're trying to do is to drill in such a way that we can identify the place where we want to have completions instead of geometrically completing it because we don't really know where the sweet spots are. We can't classify them well enough to do in other ways. I think that progress is being made. I think that this is going to go faster outside the U.S. than inside the U.S. for the reason that a lot of the environmental concerns and the infrastructure concerns that can be addressed in the North American market cannot be addressed overseas, and therefore, people are going to be a lot more careful. And we, definitely, are seeing that. So over time, yes, I still believe that completions will be designed geologically as opposed to geometrically. And that drilling & measurements will become a tool to reduce the intensity of fracs, but we're not there yet. Michael LaMotte - Guggenheim Securities, LLC: But those markets are essentially trending in tandem as opposed to -- it strikes me that perhaps the completions market with microseismic and variable staging is perhaps moving more towards an intelligent model faster than...

Yes, I don't think we would include microseismic in that because microseismic is a saltwater service. In other words, it's done after the frac. What we're talking about is services that are rendered before the fact in such a way that you design the completion to minimize the footprint and eliminate the fracs, but inevitably the preparations for the frac can never produce anything. Michael LaMotte - Guggenheim Securities, LLC: For a follow-on, can you talk quickly about the reservoir surveillance collaborations with Shell and what that the broader opportunity might look like?

We are seeing a very considerable increase in business associated around the design of EOR programs, particularly in the Middle East. Shell is very active, particularly in Oman in EOR. And the programs that we have with Shell are around services where our capacity to do characterization with downhole tools can be matched with Shell's knowledge of how the reservoir behaves. And I would say that the collaboration at the moment is linked to two very specific services and going forward, we'll see how it goes. Michael LaMotte - Guggenheim Securities, LLC: Is it a scalable model though?

I'm sorry in terms of collaboration? Michael LaMotte - Guggenheim Securities, LLC: In terms of participating and the size of programs with other operators?

Well, to be honest Michael, we have programs and this is what we liked about Brazil, really, as I talked about Petrobras, right? And I mean, in the same we have it with the many others around the world. In this particular case, Shell wanted to make press release. Michael LaMotte - Guggenheim Securities, LLC: So it falls within the classification of generally technical collaboration?

Yes.

Our next question comes from Mike Urban with Deutsche Bank. Michael Urban - Deutsche Bank AG: Andrew, you talked about exploration as a swing factor in operator budgets. Is that something that you're already seeing and is reflected in your current outlook? Or would you view it as upside as you see, I guess oil demand continue to improve in confidence, improving as the commodity price hold up?

I think it's a little bit of both. I mean, I think everybody noticed that Total made a public statement about the amount of exploration that we're going to do. And when we visit potentially strong exploration GeoMarkets at this point in time, we find customers making a lot of inquiries that they weren't making 3 months ago. So a lot of it will be second-half year. And why is it the swing factor? It's the swing factor because it's the only thing they can ramp up quickly. They can't ramp up big new development projects quickly because the amount of engineering that's necessary. And therefore, the swing factor is exploration, and to some extent, trying to enhance production from existing fields. Michael Urban - Deutsche Bank AG: And unrelated follow-up, on the CapEx side, a decent increase but less than might have thought, given that you have a full year of the Smith. Is that function of better asset utilization and synergies between the two or is that something that we could see under upward pressure because opportunities materialize or cost inflation or...

So firstly, we will review CapEx particularly in the CapEx-intensive segments every quarter. And any CapEx that we authorize in the end of March, for example, will hit the end of the year. If it's beyond that, it's 2012. You have to remember that Smith is not a CapEx intensive business. It was not a CapEx intensive business nearly to the extent that Schlumberger is, so you can assume that the bulk of the increase is Schlumberger not Smith.

We'll go to the line of Bill Herbert with Simmons & Company. William Herbert - Simmons: Andrew, similar to the exercise that you took us through on deepwater, in terms of markets that are expected to witness the most pronounced positive rate of change year-over-year. Can you walk us through that exercise for international onshore markets? 2011 versus 2010, what looks to witness the biggest positive deltas ex-Iraq?

Sort of the one huge unknown, which is Mexico, right? And if you exclude that, then you have to assume that Russia will be very positive, could be. I don't think that the recent change in the export duty law that was announced a couple of days ago will have a great deal effect in 2011 because most of the guys have fixed their budgets already. Then I think you have to assume that places like Peru, Colombia, Ecuador, Land Brazil, where you have a lot of new independent operators. That we will see a recovery in what was a very weak North Africa in 2010. Weak, as you know, for a number of reasons, but we should see some recovery this year until the extent that the oil price is higher, then it will be that much better. William Herbert - Simmons: Are there markets which are building over and mobilizing over the course of this year, which set up for a very strong or much stronger 2012? Two markets, for example, which come to mind, which have announced significant multiyear spending programs. KPC, a $90 billion program over 5 to 7, 8 years, something like that. ADNOC putting $60 billion dollars to work in Zakum, places like that. I mean, are there markets that are really mobilizing hard in '11 that's set up for a much bigger 2012?

Yes. William Herbert - Simmons: Which are?

I will mention 2 obvious ones. Yes. If you look back into the 2004, 2007 cycle, the only country in the Middle East that substantially increased its oil production was Saudi Arabia. And I think the Saudis feel that it's time the neighbors do their bit. William Herbert - Simmons: And then the second lined of inquiry, if you will, is North America, and not going to pin you down here with regard to when exactly margins roll, but I guess in terms of your expectation here, using '06 to 2008 before the world came going to an end as an analog, when we had the capacity growth and then the market became more balanced and the margins over kind of '06 to '08 normalize, if you will, and if I look at Schlumberger, specifically, your margins peaked out at 30%, 31% in North America. And then, over two years, basically you regressed to kind of a low 20s range. So it wasn't a collapse, but it was a normalization.

Can I just say, it was a lot better than previous cycle though. William Herbert - Simmons: Indeed. And those are good margins even in sort of a normalized state. And so I'm wondering, is the expectation this time around for a similar evolution or are you looking for something more dramatic with regard to a margin response based upon all the capacity that's coming?

You mean capacity... William Herbert - Simmons: No, the impact on capacity. You mentioned that sensibly, that you think that the pricing momentum is going to slow and the implicit statement there is that margin is obviously, but that momentum is going to slow as well, and at some point, they're going to roll. And I guess what I'm interested in is your perspective with regard to the evolution of that margin roll, is it a normalization or is it a more dramatic reduction in margins over time? What's your expectation at this stage?

I think that the service intensity is such that absent the collapse in the oil price, because the collapse in the gas price we basically have already. Absence the collapse in the price that there will be a normalization but not a total collapse. In North America I'm talking about.

It comes from the line of Daniel Boyd with Goldman Sachs. Daniel Boyd - Goldman Sachs Group Inc.: Andrew, I'd like to just to get your thoughts on the progression of margins internationally? Just when you think about there are three drivers, right? There's pricing, volumes but then there's also mix that can be impacted as you upsell technology. Can you just give us your thoughts on where you are on the pricing front, but also, where you're on the product and exploration cycle? Seismic isn't picking up, but you did mention in the commentary that you had a poor mix in the Middle East?

The fourth quarter is traditionally not a great mix in the Middle East because of the Artificial Lift in completion sales, which obviously have lower margins than our measurement technology. I think that international margins, bidding international markets on large developments will remain for comparable technology extremely competitive because everyone wants to grow overseas. But the higher the oil the price is, the more people are in a hurry, the more exploration they do, the more that we are going to be able to upgrade our technology sales. And if you remember, I think, I said publicly on several occasions that we actually did slow technology introduction a little bit in 2009, 2010 because we felt that the pricing environment was not such that we could realize the full value. I think you will see in 2011 and 2012 the rate at which we introduced new technology, particularly towards the end of this year and even most importantly in 2012, it's going to increase considerably. Daniel Boyd - Goldman Sachs Group Inc.: And then a follow-up on a comment you made earlier, on one hand you have exploration, which oil companies can pick up quickly, but then you also have work on mature field, which I know it goes back to the root of IPM. Can you comment on whether you're -- are you seeing IPM bidding activity on mature fields picking up? And what type of growth rate could we expect as we look out over the year?

I don't think, well -- IPM tends to be a huge project or nothing. So is the dollar volume of projects on which we're bidding are much higher? It's much, much higher. But actually how many deals we will land, and what effect it will have an 2011 is very difficult to put a number on. So I've absolutely learned, no doubt we will land a couple of big deals, but I suspect they're more likely to be significant in 2012 rather than 2011. Daniel Boyd - Goldman Sachs Group Inc.: Andrew, do you just come out which regions are you're seeing that activities increasing the most?

I would much rather not. I'm not going to give a roadmap to some of my friends.

We'll go to the line of Bill Sanchez with Howard Weil. William Sanchez - Howard Weil Incorporated: Andrew, I was hoping perhaps you could talk a little bit about, just in the short-term how we should think about the progression in Eastern hemispheres as we look at fourth quarter to first quarter with product and software sales not recurring in 1Q, and more intense whether Russian say the North Sea causing them seasonal disruptions there. How do we think about the progression for the first quarter either top line, in margin in Eastern hemispheres as a whole or maybe some sort of cents per share that you could patch that for us, perhaps that's a bit of question for Simon.

Well, we don't give guidance, Bill, as you know. But we won't be as totally surprised if the earnings, EPS in Q1 is lower than in Q4, because of the seasonality of both the Russian market, which you know is very large for us. The weather effects of the North Sea and the absence of the sales, the product and software sales that we have been known for. And the big number there, of course, is that Q4 is always the highest quarter for multiclient seismic, and which did extremely well, and Q1 will be much lower in, of course, Mexico. William Sanchez - Howard Weil Incorporated: I know we've especially reiterated outlook as it relates to an expected kind of breakeven expectation on Smith by fourth quarter '11. In the past, you've quantified the cost savings related to this deal. I think we've heard more positive commentary about the revenue synergies here. Anything, Andrew in terms of mix that's changing your outlook and how you get to breakeven, at some point, do we start getting a little bit more quantification on the revenue pull-through or revenue synergies you see from the Smith deal?

Bill, we will give you a full update on revenue and cost synergies at Investor Day in Boston in February, Bill.

We'll go to the line of David Anderson of JPMorgan. David Anderson - Palo Alto Investors: Just a quick question for Simon, or it's about -- in your release, you've mentioned a $0.05 gain of inventory adjustments. I assume that is mostly North America. If so, did that contribute to the sequential market margin gain this quarter, North America? Just trying to get ahead on how sustainable these margins are?

No, this is actually related to the Smith integration. That's not only North America. It's total and it is a step up in inventory that you know it gets amortized over the period of the consumption of the inventory. No, it has no impact on the sequential gain in North America. David Anderson - Palo Alto Investors: And Andrew, just want to move on to the Middle East. In your comment and your statements, you were talking about gas in the Middle East. And it's pretty obvious, we all know the region is short of gas, but it doesn't seem to really be sense of urgency over there on the part of the NOCs. How do you see that playing out in the next couple of years? And how much of the catalyst can this be for your business do you think?

You cannot be talking to the same NOCs as I am, David, because without mentioning names, we see considerable urgency and worry, which is reflected in, for example, in a lot of exploration work that we're doing in one country. And the fact that we are heavily participating in the gas development in another country, so I don't know where you got your information though. I don't see it at all, that way. David Anderson - Palo Alto Investors: Just in terms of market dynamics in the Middle East. If you go back and we compare it now to late ‘05. How do you see the kind of the overall competition kind of playing out. It seems like some of your competitors have used that downturn to buildout capacity. Are you concerned about, at all, about share losses or do you think that the gas side can more than make up for any kind of capacities that's been built up out there?

First, you going to have to identify the share losses for me because we don't see them. We don't make press releases every time we win a contract. And it's not -- the spectacular announcement that we made had been in markets where we didn't participate very much anyway. So we don't see any significant share loss across the Middle East and in fact, in one or two of the new programs we see significant share gains.

We'll move on to the line of Alan Laws with BMO Capital Markets. Alan Laws - BMO Capital Markets U.S.: I guess, my first question will be on the international shale here. A commentary on this, or on the opportunities around this sort of dominated your press release and spoken commentary here this morning. Can you talk about the expectations here, maybe in the areas of the regional growth and maybe how this may affect your expectations or relative growth in mix, a D&E versus completion services?

I was very careful to say in the commentary that the principal activity in unconventional gas, not shale. Unconventional gas in the international market for the next year or so is going to be in tight gas that is low permeability formation. That is pretty general across the Eastern hemisphere, particularly in North Africa and Middle East, to some extent in Russia. And coal-bed methane, which is essentially Australia. The international shale gas activity, which is going on at the moment can be classified very much as exploration activity as opposed to development because, as for the reasons I mentioned before, there is no way that the overseas people can mobilized the land or the infrastructure or the environmental constraints the same way as in the United States. And therefore, they're going to be much more careful before they go into full scale development. And in terms of unconventional gas develop -- or shale gas exploration overseas, we have a very high participation. The essential places where this is taking place at the moment are Poland, Argentina, India, Algeria and China. And tight gas would be the Middle East, and Russia, and to a certain extent, North Africa. Alan Laws - BMO Capital Markets U.S.: So it's big D&E late in activity still?

Look, you're not going to get me to say the international market is going to go to the same fracing solutions as the U.S. because they won't. Yes, it's drilling and evaluations at the moment. Fracing will always be a part of it and therefore, fracing is important once they've done their D&E to see how these wells are actually going to flow, but it is not going to be on the scale of the U.S. Alan Laws - BMO Capital Markets U.S.: My follow-up is international pricing question. When you look at your current spare capacity and notionally, that of your peers, how long do you think it will take to absorb this capacity to a point where pricing becomes a material contributor?

I've always said that it doesn't depend on the capacity. It depends on the rate of acceleration in activity. Therefore, the significant pricing traction in services that all the principal oilfield service companies can provide to take place would require a much greater activity increase that we see at this point in time. And I suspect that if it does happen, it's going to be because oil prices are sustained roundabout $90 to $100 into 2012.

We'll go to the line of Doug Becker with Bank of America. Douglas Becker - BofA Merrill Lynch: Andrew, you've highlighted a number of times that new technology introductions will accelerate in late 2011 and 2012. I generally think of new technology, just introduced over the last 5 years, accounting for about 30% of revenue in any given year. Is just in the ballpark for Schlumberger? Is that revenue mix of new technology for Schlumberger, whatever that is, meaningfully below normal right now given the downturn in 2009 and in 2010?

Yes, it's been meaningfully below the normal. And therefore, the acceleration in the rate of which we introduced will be a meaningful increment. Douglas Becker - BofA Merrill Lynch: Andrew, is that 30% figure in the ballpark?

No, it's a little high. For the oilfield services industry. But, in fact, if this is a very -- has been difficult area because everyone puts their own metric on what they call new technology. Douglas Becker - BofA Merrill Lynch: Switching to Mexico. Still seeing weakness in that market. Are there any signs of a meaningful recovery in 2011 and what do you see the implications of the performance-based contracts in Mexico being for Schlumberger?

I think the there is -- in my mind, there is considerable uncertainty around how the PEMEX budget gets spent in 2011. I don't think it's necessarily going to be exactly what was laid out. And therefore, we remain very cautious on the overall level of activity in Mexico. We think it will be good in the South. We think there'll be some improvement offshore. But as far as the North is concerned, we were quite reluctant to be anything, other than very conservative. In terms of the performance contracts, the only ones that have been let out so far is so small, that I don't think they are great interest to us and possibly not the other service companies. I think the first wave will probably go to local Mexican companies. And obviously, we will be bidding with local Mexican companies to provide the services necessary to execute the contracts. I think that the first wave is to test the system and the really interesting ones will come later. Douglas Becker - BofA Merrill Lynch: And later being potentially 2012?

Yes.

And our next question comes from the line of Angie Sedita with UBS. Angie Sedita - UBS Investment Bank: Andrew, could you give us a little bit more color on what you're seeing specifically in Iraq and Russia? On Iraq, obviously, you had high start up of cost in Q4. Do you expect that to continue into Q1, as well as Q2, and thus, the margins as for the rest of the year generally? And then on Russia, activity growth outlook for 2011 and color on the Asia the duration asset swap as and when you're getting traction in the region?

So on Iraq, our revenue in the fourth quarter was closer to $50 million than $10 million. We have three rigs drilling for BP. We are currently mobilizing three rigs for Exxon Mobil. We are providing services to a number of other customers on a callout basis and on a discrete basis. We have inherited some business from Smith in Kurdistan. So we will have further start up cost in Q1, but we are optimistic that we will break even in Q1, be profitable in Q2, and we will, with careful contract management, have an ambition to be in double-digit margins by the end of the year. Angie Sedita - UBS Investment Bank: And on Russia?

Russia? Western Siberia will have a better year. Sakhalin will have some slowdown because basically one of our customers is doing a six-month rig move. And the rest of it, Eastern Siberia I think we'll continue to see some good exploration and development in some of the new fields. So overall Russia will have a better year than it did in 2010. But not a gangbusters year because of the slowing in Sakhalin. Angie Sedita - UBS Investment Bank: And then as unrelated follow-up, you mentioned in the press release, you're seeing revenue synergies from Smith and specifically, you mentioned drill bits in Brazil. Where else are you seeing revenue synergies, as far by product line or region? And are you seeing traction with PathFinder internationally?

Well, the answer is all over. And actually, again, I would much rather that we gave you a comprehensive update at the Investor Day in February, and then, piecemeal stuff now. But synergies are all over.

The next question comes from Geoff Kieburtz with Weeden. Geoff Kieburtz - Weeden & Co. Research: In the press release, you talked about stronger growth rates as the year unfolds. How should we think about the trajectory? I think that comment refers to international growth and related to your comment earlier about pricing being tied to the pace of growth?

I think that the best proxy for the growth rate going through the year is going to be the rates which you see offshore rigs either coming in the service as new builds or being contracted after the existing fleet. Because as I said in answer to an earlier question, we could see a lot of inquiries but the rigs don't yet have contracts, so it's likely to be second-half. Geoff Kieburtz - Weeden & Co. Research: You've also mentioned several times the expectation of increased exploration activity. You've made these comments, forecast before. It doesn't seem like they've necessarily come to fruition in the past. What's your confidence level on this increase in exploration activity?

I was extremely confident last year until Macondo. Macondo, as I said before, put significant delays all over the world, not because people abandoned programs, but because everybody wanted to check their rigs before they proceeded. We think most of the Macondo delay is behind us, outside the United States. And that the number of rig years from new builds in 2011 is significantly higher than in 2010. So my confidence level is the fact that I hope to God we don't have another Macondo, and the fact that -- so that the inefficiencies that came overseas because of Macondo has been absorbed. And because the number of new deepwater rigs as being added is higher this year than it was in 2010. Geoff Kieburtz - Weeden & Co. Research: And if I could add just one more question directed to Simon. You gave us a 2011 tax rate guidance. I wondered if you could give us a sense, and just kind of rough estimate of what the pro forma tax rate for Schlumberger would've been if you would own Smith for the entirety of 2010? The question is really, mid 20s, it seems like you're kind of expecting North America contribution to be at or maybe even slightly above what it was in 2010, which doesn't seem to be consistent with the other commentary. But I don't have a pro forma for the combination with Smith.

Geoff, I don't think you can conclude on our growth rates from a tax rate. But to answer your question obviously, if we had Smith for the whole year, it will be higher because the Smith is a US-based source income. We do see the mix, I mean, as you know, the U.S. source income during 2010 increased gradually. So in 2011, we'll continue at the same pace, and obviously, that's the result of the increased effective tax rate. It's both the mix of revenues, not only from North America but other places as well and the Smith. I said it's hard to reconcile where the growth rate is coming compared to the tax rate, that is the element of Smith, yes. Geoff Kieburtz - Weeden & Co. Research: What I was saying is we shouldn't assume that higher tax rate necessarily means higher North American contributions.

No, because of the heritage Smith. The other thing, Geoff is that Simon will of course be gradually restructuring throughout the year in such a way that we tried to minimize the effect of the fact that Smith is a U.S. It is very difficult for him to predict exactly what the tax rate's going to be this year.

And our final question for today comes from Kevin Simpson with Miller Tabak. Kevin Simpson - Miller Tabak: I guess, Andrew, I guess close with North America margins, the nice improvement in the quarter and even excluding that one-time win. But you're still below your largest competitor. Is there still more upside, do you think? And then secondarily, where do you need, because your guys are so strong in the deep gulf, need, really some normalization before you can get margins back to the mid 20s or maybe even better?

We still have upsides certainly through the first quarter. You are probably correct in that for us. Our margins to be considerably better than our principal competitors, we need the [indiscernible] back. Kevin Simpson - Miller Tabak: And there's a little bit of your normal, whatever skepticism about sustainability in North America in the comments, as you're allocating CapEx, there's some of these bigger plays with a fairly pretty robust budget for '11. Is there a kind of a contingency for the second half that you're going to wait and see in certain areas before putting additional frac crews or directional crews into specific markets that might even cause you a little bit of share? I'm just wondering how you're handling?

We got caught out on the way up by our organization. And we have reorganized in such a way that we understood. We now fairly understand what we're managing and how we're managing it. And you can assume that the true test of the systems that we put in place will actually be on the downside rather than the upside. So without wanting to tell you exactly what we plan, I can tell you that we have a very robust planning system to deal with any rollover in activity in North America. John Olaisen - Carnegie Investment Bank AB: So you think you have more flexibility, in terms of managing your rollover?

Much more. All right, on behalf of the Schlumberger management team, I would like to thank you for participating in today's call. Julie will now provide some closing comments.

Thank you. Ladies and gentlemen. This conference will be available for replay after 10:30 a.m. today through midnight February 21, 2011. You may access the AT&T teleconference replay system at anytime by dialing 1 (800) 475-6701 and entering the access code 176290. International participants dial (320) 365-3844. That does conclude our conference for today. Thank you for your participation and for using AT&T Executive Teleconference. You may now disconnect.