Ladies and gentlemen, thank you for standing by and welcome to the Schlumberger earnings conference call. At this time, all lines are in a listen-only mode. Later, we will conduct a question-and-answer session. Instructions will be given to you at that time. And as a reminder, today's conference call is being recorded. I would now like to turn the conference over to Mr. Simon Farrant. Please go ahead.

Thank you, good morning and welcome to the Schlumberger Limited first quarter 2016 results conference call. Today's call is being hosted from Houston following the Schlumberger Limited board meeting. Joining us on the call are Paal Kibsgaard, Chairman and Chief Executive Officer, and Simon Ayat, Chief Financial Officer. Our prepared comments will be provided by Simon and Paal. Simon will first review the financial results, and then Paal will discuss the operational and technical highlights. However, before we begin with the opening remarks, I would like to remind the participants that some of the statements we will be making today are forward-looking. These matters involve risks and uncertainties that could cause our results to materially differ from those projected in these statements. I therefore refer you to our latest 10-K filings and other SEC filings. Our comments today may also include non-GAAP financial measures. Additional details and reconciliations to the most directly comparable GAAP financial measures can be found in our first quarter press release, which is on our website. We welcome your questions after the prepared statements. I'll now turn the call over to Simon. Simon Ayat - Chief Financial Officer & Executive Vice President: Thank you, Simon. Ladies and gentlemen, thank you for participating in this conference call. First quarter earnings per share was $0.40. Excluding charges recorded in the first and fourth quarters of last year, this represents decreases of $0.25 sequentially and $0.66 when compared to the same quarter last year. Our first quarter revenue of $6.5 billion decreased 16% sequentially, while pre-tax operating margin decreased 281 basis points to 14%. These decreases, which were driven by continued activity decline and pricing pressures, resulted in decremental margins of 32%. Highlights by product group were as follows. First quarter Reservoir Characterization revenue of $1.7 billion decreased 20%…

Thank you. And we'll go to the line of Ole Slorer with Morgan Stanley. Your line is open. Ole H. Slorer - Morgan Stanley & Co. LLC: Thank you very much and thanks for a good rundown there, Paal. Our CapEx numbers agree very closely with those you outlined. But despite that, at least here within Morgan Stanley, we have a pretty big debate about the exact timing and the expected impact of these cuts on production. I think U.S. and the Middle East is getting extremely well understood, but I'd be very grateful if you could share your insights on some of those areas, so the role that have headline rig counts that have gone down 80% – 90% in many cases, but very little data available. So what's your take on what's going on across some of the key Latin American markets or West Africa or let's say China? If you can, give us a high-level – without mentioning any specific country or customer of course, some insights into what gives you confidence that the markets are rebalancing. Paal Kibsgaard - Chairman & Chief Executive Officer: What I would say, you look at non-OPEC production outside of North America, it is very clear that it's now in full decline. If you look at non-OPEC production overall, it drops by 930,000 barrels over the course of Q1. About 50% of this was North America, and the other half was international non-OPEC. The leading driver outside of the U.S. in terms of this production drop is seen in Mexico, Colombia, Brazil, the UK, and in China. So 930,000 barrels of drop over the course of Q1 is quite significant, and non-OPEC production is now already 400,000 barrels a day down year over year. So based on this, we believe that…

Thank you, Ole.

We'll go to the line of David Anderson with Barclays. Your line is open.

Good morning, Paal. In the past you've talked about the massive overcapacity in land service markets and talked about the pricing recovery in the short to medium term looks really difficult. Some of the smaller peers have been talking about stacked capacity permanently impaired in North America, so maybe the market is a little tighter than it looks. So in your mind and as we think about the lag effects that you've talked about here, how does that look for you, the outlook on pricing and how that utilization and the capacity can all work together? Paal Kibsgaard - Chairman & Chief Executive Officer: For North America?

Yes, in North America. I'm just curious if you think that some of that stacked capacity doesn't come back and how that portends to margins. Paal Kibsgaard - Chairman & Chief Executive Officer: I think it would be great if it didn't come back, but I still think most of it is going to come back. I think some of it today probably isn't operational because it needs maintenance. But I think when activity starts to increase, most of this equipment through some maintenance investment can be brought back in. And that's why I still believe there's a large capacity overhang in North America land. And with the current depressed service pricing, we need significant pricing increases to get back in to generate profits in North America land. And that's why I don't think that pricing traction is going to be significant in the short term, and that's why also I think the earnings contributions from North America land is going to be a bit out in time.

And as we talk about decrementals and how those look for you, your decrementals have held up remarkably well here. But you also talk about preserving your core capabilities. Are we getting to the end of cost-cutting here, and would you expect decrementals to get maybe a little bit worse here before it starts turning the corner? Paal Kibsgaard - Chairman & Chief Executive Officer: You're right, it is increasingly difficult to maintain decrementals around the 30% mark. We did 32% even with the massive surprise we had in the first quarter. But yes, we are getting to the point where some of our technical capabilities, which take a long time to develop, we are going to revamp those and not cut them to be in line with current activity levels. But with that said, on the field capacity, we continue to tailor that to ongoing activity levels. This can be rebuilt within, I would say, plus or minus 12 months. What we are currently undergoing now is a detailed review of our overhead structure to see whether there is an opportunity to bring that further down, but that wouldn't be done to serve the next couple of quarters, it would be basically finding a way that we can lighten that burden more permanently. But to do that, it requires significant review, and that's the process we're currently going through at this stage.

Thank you.

Thank you. Our next question comes from the line of Angie Sedita with UBS. Your line is open.

Thanks. Good morning, guys. Good morning, Paal. Paal Kibsgaard - Chairman & Chief Executive Officer: Good morning. Simon Ayat - Chief Financial Officer & Executive Vice President: Good morning

So there has been a lot of discussion out in the marketplace about people and the challenges with people. And if you could, give us a little bit of color on what steps you've taken to retain your top talent, both internationally but also more importantly in the U.S., and then your thoughts on your ability to bring these new people back in or bring back your old people back in when things do slowly start to turn around in 2017. Paal Kibsgaard - Chairman & Chief Executive Officer: Okay. Maybe I can just start by one thing first. So if you look at our reported head count numbers, we reported at the end of Q4 95,000 people, and we reported 93,000 people at this stage, which indicates that we let go another 2,000 people during Q1. We actually released another 8,000 people during the first quarter. So we have now reduced our workforce by around 42,000 people from the peak in 2014. So the delta here is that we are now counting around 5,500 contractors which were previously not considered part of our permanent head count, so a drop of 8,000 in Q1. Now to your question around how we are managing this, we are obviously right-sizing field capacity continuously. This capacity, we can build back relatively quickly, probably within 12 months. But even in the field capacity, we have introduced a program called intent of leave of absence. And here for our senior field engineers and for key operational people, we are giving them basically half an annual salary, paid 20% up front when they take this leave of absence, and 30% of the salary is paid when they return back after 12 months. And we have several batches of this incentivized leave of absence where we can call people back in the coming 12 to 18 months. So that's a key part of how we preserve some of our core operational expertise. And then on the overhead and support structure, we continue to look at right-sizing that. But in this, our technical support organization, which takes a long time to develop, we are also ring fencing that to take sure that we have these people available as we get back into growth mode.

Okay. Okay, that was very helpful. And then you mentioned and you gave a little bit of color on your preservation of your core capabilities, but also a greater willingness to balance market share with profitability. Maybe a little bit more color there, particularly on the U.S. but internationally as well, and you referenced obviously still some pressure on revenues and margins going into Q2. And can you talk a little bit more how that plays out for the next quarter or two on the margin side? Paal Kibsgaard - Chairman & Chief Executive Officer: Q2 is going to be another very tough quarter. So the significant drop in activity that we saw during the first quarter is obviously now spilling over into Q2. In addition to that, we're going to have the impact on Venezuela to deal with. So again, we are expecting a significant percentage drop in revenue going into Q2, which again will make it difficult or challenging to maintain decremental margins around 30%, although we are going to continue to try. What we see in certain markets and certain basins in North America and also certain markets international, that activity is coming down to basically critical mass type of levels. And at that stage, it is not only about focusing in on cost reductions and managing margins. We are also considering what the startup costs again would be in the event we have to shut everything down. So in certain cases, we are carrying, I would say, contracts and operations losses for certain regions where we believe that's a better investment than actually shutting down and then having the lag in time and significant costs to start things back up again. But this is a review we do for every country or every basin on a continuous basis, what's the benefit of taking the losses versus shutting down and then making the investments later on to start back up again.

Great, that was actually very helpful. Thank you, Paal.

Thank you, Angie.

Thank you. Our next question comes from the line of James West with Evercore ISI. Your line is open.

Thanks. Good morning, Paal. Paal Kibsgaard - Chairman & Chief Executive Officer: Good morning.

So I don't think we have much of a debate here at Evercore ISI on the structure of oil prices, but I'd love to get your thoughts on prices given that you've said recently in public documents you're looking at medium-for-longer. I guess what do you see as medium-for-longer? And then my follow-up would be what does that mean for activity improving for your businesses? Paal Kibsgaard - Chairman & Chief Executive Officer: Our view on the medium-for-longer or the background for that statement is that I think that is the pricing level that the industry has and has to live with, and it's probably the pricing level that some of the core parts of OPEC is also believing is a reasonable target, although they have not told us, so that is our assumption. So in that environment, there is still a big jump for the industry to make sure that we can bring cost per barrel down to make projects viable in these pricing ranges as well as having enough projects to generate supply to meet future demand. So it is an opportunity for a company like ourselves to work closely with our customers in collaborative ways, where we look at jointly with them driving costs out of the system and production up from the assets that they have. And I think by having this focus, there is an opportunity for the industry to be quite successful in the medium-for-longer scenario. But we cannot continue to operate in the same way that we have done in the past. So we see significant opportunity for Schlumberger in that type of scenario, but it requires the industry to change both in the level of collaboration between customers and the service industry, as well as new investments in more efficient processes, better quality, and very importantly, total system innovation to drive performance.

Paal, are you seeing that collaboration come through during this down cycle? Are you seeing more evidence from your customers to actually collaborate more with you? Paal Kibsgaard - Chairman & Chief Executive Officer: There are some signs of it, James, but I wouldn't say it's prevalent or significant at this stage. We are obviously very interested in starting it. We have some small projects going on with some key customers. In fairness to our customers as well, they are in a very, I would say, significant cash crunch at this stage, in which case the priority for them would have to be to navigate that through before they start changing their business model. But I think there is an openness and willingness when things settle here to move in towards more collaborative relationships, and we are certainly ready to lead that.

Got it. Thanks, Paal.

Thank you. Our next question comes from the line of Jim Wicklund with Credit Suisse. Your line is open. James Wicklund - Credit Suisse Securities (USA) LLC (Broker): Good morning, guys. Paal Kibsgaard - Chairman & Chief Executive Officer: Good morning. James Wicklund - Credit Suisse Securities (USA) LLC (Broker): A little bit of a shift, I figure that about 25% to 30% of your operating income these days are coming from offshore and primarily deepwater work. And I'm in Washington at the NOIA [National Ocean Industries Association] meeting. And the consensus here seems to be that deepwater is going to decline or at least not begin to recover for at least the next couple years. You all have given us a great deal of view and guidance on the onshore outlook. Can you talk a little bit about the offshore outlook? Paal Kibsgaard - Chairman & Chief Executive Officer: I think it's fair to say that in terms of significant new projects being sanctioned offshore, I think that is not going to be the first area that our customers are going to start putting money into. So I think it's fair to say that the land part of the global operations will see higher investments before the offshore, and in particular the deepwater part. Now as to the percentage of our revenue and earnings, we haven't disclosed what deepwater and offshore is. But I would say that the current operating income we're getting from this part of our business is I would say significantly or massively reduced from what it was in more of a stable operating environment in 2014. So a lot of these hits I believe we have already taken. It still means that we have upside potential when these investments start. But we also have a…

Thank you.

Thank you. Our next question comes from the line of Bill Herbert with Simmons. Your line is open. William Herbert - Simmons & Co. International: Thank you, good morning. Paal Kibsgaard - Chairman & Chief Executive Officer: Good morning. William Herbert - Simmons & Co. International: Paal, I was curious as to your views with regard to the threshold oil price required to drive 2017 international E&P capital spending growth. Paal Kibsgaard - Chairman & Chief Executive Officer: I think it's going to be gradual. I don't think there's going to be one magical number. William Herbert - Simmons & Co. International: Yes. Paal Kibsgaard - Chairman & Chief Executive Officer: I think oil prices now for Brent being already in the mid-$40s is a positive sign. Still, we maintain our view that there's going to be a lag between oil price and increases and significant increases in E&P spend. And I think our customers will take a cautious view on how much they're going to spend as well, given the balance sheet state of many of them and also the significant volatility that you might also see going forward. So I think you will see a gradual comeback of investments as oil prices increase, we believe, over the course of the second half of this year. And then it's going to be I think a function maybe of how severe the supply situation is going to be. I think that might be a good guide in addition to the movement of the oil price because if supply is clearly weakening, I think it's going to be much safer to increase investments going forward as well, in which case the appetite might come up together with the oil price. So I think our customers will take a balanced but conservative…

Thank you. Our next question comes from the line of Waqar Syed with Goldman Sachs. Your line is open Waqar Syed - Goldman Sachs & Co.: Thank you. Paal, you had mentioned that international pricing concessions that you've given would start to go away as oil prices rise. I guess that's what you said. Would we start to see that at $60 per barrel Brent, or do we need higher prices to see those pricing concessions go away? Paal Kibsgaard - Chairman & Chief Executive Officer: I wouldn't tie it to a specific oil price. I would more tie it to activity levels. I think that's what's going to drive our pricing. And that's again, we see a lag between the move in oil price and E&P investments and our activity. But I think if there is a start of a third or at least a noticeable uptick in international activity, I think some of these pricing concessions that have been made, we should be able to get part of them back. And in fact, in many of our contracts, the concessions we have made are either time-limited or they are tied to oil price figures as well. So based on all of this, we believe that some of the pricing at least we will get back. Waqar Syed - Goldman Sachs & Co.: Okay, great, and then secondly, my follow-up on your SPM investments. How are the returns on your SPM investments relative to the overall corporate returns? Are they higher or lower? And then how does that differential change through the cycle? Paal Kibsgaard - Chairman & Chief Executive Officer: Simon? Simon Ayat - Chief Financial Officer & Executive Vice President: I'm going to take this question, Waqar. So normally, our SPM investments and our review of these projects, they are superior to our normal activity. That's the reason why we have developed this type of business, and it is even during the cycles it's giving us a baseline of activity that produces higher margins and higher returns. But you have to remember that this is a long-term project. And in the beginning the model, that it is a negative cash flow, which turns into a positive cash flow after a while. So over a cycle, yes, it is better return and better margins. Waqar Syed - Goldman Sachs & Co.: Now you mentioned almost $600 million in the quarter in SPM. What are your plans for the remainder of this year in terms of SPM investments? Paal Kibsgaard - Chairman & Chief Executive Officer: I think if you look at both the fourth quarter and the first quarter of this year, SPM investments have been higher than what you've seen before, and we expect the second quarter to go back into more of a level that you've seen preceding these two latest quarters. Waqar Syed - Goldman Sachs & Co.: Okay, great. Thank you very much. Paal Kibsgaard - Chairman & Chief Executive Officer: Thank you.

Thank you. Our next question comes from the line of Jud Bailey with Wells Fargo. Your line is open.

Thank you, good morning. Paal Kibsgaard - Chairman & Chief Executive Officer: Good morning.

Paal, if I could ask you, you mentioned briefly in your prepared comments that you could – the way the market is going, you could see revenue in the second quarter potentially decline by the same amount as the first quarter. It sounds like Latin America, it would stand to reason, could be worse because of Venezuela. Would you see a material difference amongst the regions in revenue decline to get to the same percentage decline, or is there more of a shift to one area or the other in terms of the decline in revenue from 1Q to 2Q? Paal Kibsgaard - Chairman & Chief Executive Officer: I think if you look at the four areas, we'll see again a significant drop in North America, purely based on how the rig count has fared over the course of Q1. In Latin America, as you point out, we will have a significant impact on Venezuela, where we are in the process of tailoring activity to the rate of collections, which will mean a fairly significant drop in activity in Venezuela in Q2. And just for the record, I'd just like to also say that our receivable balance in Venezuela at the end of the first quarter was around $1.2 billion, and our revenue in Venezuela was less than 5% of the total for the first quarter and also for the full year of last year, just to give you some perspective of the situation there. Then going to ECA and to MEA, I don't have the details of the projections there, but I think you would see a similar type of revenue headwinds also going into the second quarter there as well.

Okay, that's helpful. Thank you. And then I guess trying to think about decremental margins on a similar revenue decline, do we think we can perhaps get a little bit better decrementals, or does Venezuela cause decrementals to maybe deteriorate a little bit from what you were able to do in the first quarter? Paal Kibsgaard - Chairman & Chief Executive Officer: We've laid out the ambition of trying to keep decrementals around 30% since the start of this downturn, which was a lot easier to do five, six quarters ago than what it is to do currently. And obviously, when you have shutdown of significant operations in a large country like Venezuela, it is much more difficult to deal with because, for instance, in Venezuela, we are going to keep a large part of our local organization employed and on the payroll as we go forward. And also we keep our entire asset base in the country to make sure that we are ready to go back and serve our customers there once cash flow is available to pay us. So there are certain of these decisions that we are making now which are somewhat headwinds to decrementals, but I would say that our ambition is still to try to fight this out and deliver at least close to 30% decrementals, although I cannot promise it.

Thank you, Paal. Appreciate it. Paal Kibsgaard - Chairman & Chief Executive Officer: Thank you.

Thank you. Our next question comes from the line of Kurt Hallead with RBC Capital Markets. Your line is open.

Hi, good morning. Paal Kibsgaard - Chairman & Chief Executive Officer: Good morning.

Great rundown so far, Paal. I was wondering. You mentioned two things about the international, the call on international oil coming from the international markets, part of that coming from OPEC and then you also indicated Russia. Can you give us a little bit more color around Russia? There seems to be a lot of discussion in the marketplace that neither Russia nor Saudi in particular can increase output from where they are currently. Your comments seem to counter that viewpoint. So can you just give us some views on Russia in particular? Paal Kibsgaard - Chairman & Chief Executive Officer: I think if you look at Russia throughout this downturn, activity has been very strong, and they have done a good job from the oil industry in the country to keep production up between 10.5 million and 11 million barrels per day. So in spite of the challenges we have in Russia with the ruble and then the overall situation there, we've seen strong underlying activity and a very strong focus from the country and from the industry in the country to maintain and even try to increase production slightly. So I think through higher investments, obviously Russia has significant oil and gas reserves. And to increase investments, if there's an appetite to do that, I still think Russia has the potential to increase production yet going forward.

Okay. Paal Kibsgaard - Chairman & Chief Executive Officer: And I think to your comment on Saudi as well, obviously Saudi is sitting on several million barrels of spare capacity, which they can put into the market if they so choose to.

Great, and then just a quick follow-up on Cameron. I fully understand your business plan and business model on integrating the hardware with the reservoir dynamics. What has been the uptake on that? Have you had some definitive successes on selling that business model to the oil companies as of yet? Paal Kibsgaard - Chairman & Chief Executive Officer: I think it's still early days on that. I think the overall concept I think is widely accepted. This whole focus on total system innovation going forward, combining hardware with sensors, instrumentation, and software controls, this is the way of the future for the industry. So I still think it's early days. We are seeing some traction in OneSubsea, which has obviously been at this for several years already, and also things around the Rig of the Future system I explained. I think it will be quite interesting when we also roll out our new frac system in 2017. So we have a lot of investments already going on, which means that it's not going to be years before you see the impact of what we are talking about. I think I would expect there to be already some impact in 2016 and even more so in 2017 to introduce these new technology systems.

All right, that's great. Appreciate that color.

Thank you. And we have time for one last question, and that will be from the line of Scott Gruber with Citigroup. Your line is open.

Yes. Thanks for squeezing me in and good morning. Paal Kibsgaard - Chairman & Chief Executive Officer: Good morning.

Paal, in the release you highlighted that you're cautious regarding adding capacity in North America once recovery begins, which I think you highlighted reflects a cautious stance regarding your views towards long-term oversupply and hence profitability. But on the other hand, it appears that you have a good ability to take share in the U.S. given the financial stress being experienced by your smaller competitors. Can you just walk through that strategy a little bit more regarding balancing market share on U.S. land and expanding the U.S. business at what initially would be thin margins? Why not be aggressive during the initial recovery in terms of reactivating equipment to take share and then have greater share when profitability levels can improve later on? Paal Kibsgaard - Chairman & Chief Executive Officer: That's a fair question. I would say our general philosophy is that we do like not like contracts that are dilutive to earnings. So basically, losing money isn't something that we ideally want to get into. Now we take on contracts at this stage of the cycle that are dilutive to earnings per share if we believe that doing that is going to serve us long term either from a share standpoint or from keeping our capabilities intact as we work through the trough of the cycle. So in terms of being cautious and adding back capacity, if we are talking about being in the black and basically making profits, I have no issues at all releasing capacity and going for share. But if the share is associated with negative earnings, that's when we're going to be cautious and we're going to stick to basically preserving capabilities and infrastructure as long as pricing levels are at that stage. But I think as soon as you get into the black, we are quite keen to unleash all of the capacity we have available to gain share.

And then it's my understanding that those frac crews in the U.S. are underutilized today even when active. Do you have an idea of roughly how much more you can expand your frac workload in the U.S. without actually reactivating spreads? Paal Kibsgaard - Chairman & Chief Executive Officer: The spreads we have today are actually quite well utilized because if you have – with the current pricing levels, if you have poor utilization on top of it, it is a disaster from a profitability standpoint. So the fleets we have in operations are actually today reasonably well utilized. So there might be some upside in capacity on it, but I wouldn't say significant. We would have to reactivate new capacity in order to take on significantly more work.

Great, thanks. Paal Kibsgaard - Chairman & Chief Executive Officer: Thank you very much. So before we close this morning, I would like to summarize the most important points that we discussed. First, our industry is now in the deepest financial crisis on record, with profitability and cash flow at unsustainable levels for most oil and gas operators. This has created an equally dramatic situation for the service industry. Each successive quarter for the past 18 months has brought increasing cost in E&P spend that have led to falling activity and lower demand for oilfield products and services. This is the toughest environment we have seen for 30 years, and it is likely to get even tougher before the market turns. Second, so far in this downturn, we have successfully managed a very challenging commercial landscape by balancing margins against market share and aggressively reducing capacity and overhead costs. In parallel, we continue to focus on how to best preserve the long-term technical capabilities of the company. This approach together with the benefits of our ongoing transformation program has enabled us to outperform our surroundings and protect our financial strength. And third, the current market presents significant opportunities for companies that have both the required capital and strategic bandwidth that enables them to invest. In this respect so far in this downturn, we have closed our largest ever acquisition, made a series of smaller but still significant investments in specific technology niches, and invested in integrated services and projects that will boost our financial performance going forward. We are also actively investing in pre-funded multi-client seismic surveys that will underpin a return to solid exploration activity in several regions around the world. And we also regard the protection of our technical capabilities as well as our immediate operational needs as an investment in our future growth. In summary, we remain convinced that the tightening of the supply/demand balance is well underway. And while the operating environment remains tough, the market presents a range of opportunities which we will continue to actively pursue. Thank you very much for listening in today.

Thank you. And, ladies and gentlemen, today's teleconference will be available for replay after 10:00 AM today until midnight, May 22. You may access the AT&T teleconference replay system by dialing 1-800-475-6701 and entering the access code of 385312. International participants may dial 320-365-3844. Those numbers once again, 1-800-475-6701 or 320-365-3844, and enter the access code of 385312. That does conclude your conference call for today. Thank you for your participation and for using AT&T Executive Teleconference service. You may now disconnect.