[Communication 1 of 3 - https://www.sec.gov/Archives/edgar/data/12927/000119312509207923/filename1.htm]
May 17, 2013
United States Securities and Exchange Commission
Division of Corporate Finance
100 F Street NE
Washington, D.C. 20549
Attn: H. Roger Schwall, Assistant Director
Re: Schlumberger N.V. (Schlumberger Limited)
Form 10-K for the Fiscal Year Ended December 31, 2012
Filed January 31, 2013
Form 8-K
Filed March 18, 2013
File No. 1-04601
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4. Please update us on the status of the administrative subpoena related to your operations in these countries.
Response:
On March 24, 2009, the Office of Foreign Assets Control (“OFAC”) of the U.S. Department of the Treasury issued an administrative subpoena (the “Subpoena”) to Smith International, Inc. (“Smith”) requesting information and materials related to the past business activities of certain non-U.S. subsidiaries of Smith in Iran and Sudan. The Company has cooperated with OFAC in its investigation, which is ongoing. Smith has not received any new information requests from OFAC since February 2012.
5. Please discuss the materiality of your contacts with Syria, Sudan and Cuba and whether those contacts constitute a material investment risk for your security holders. You should address materiality in quantitative terms, including the approximate dollar amounts of any associated revenues, assets, and liabilities for the last three fiscal years and the subsequent interim period. Also, address materiality in terms of qualitative factors that a reasonable investor would deem important in making an investment decision, including the potential impact of corporate activities upon a company’s reputation and share value. Various state and municipal governments, universities, and other investors have proposed or adopted divestment or similar initiatives regarding investment in companies that do business with U.S.-designated state sponsors of terrorism. Your materiality analysis should address the potential impact of the investor sentiment evidenced by such actions directed toward companies that have operations associated with Syria, Sudan and Cuba.
Response:
Pursuant to Rules 418 and 12b-4, we are supplementally furnishing a schedule setting forth the revenues, assets and liabilities with respect to the Listed Countries. We hereby request that the schedule be returned to us upon completion of your review, and that pending its return it be afforded confidential treatment and not be made part of any public record and not be disclosed to any person, as the schedule contains confidential information, disclosure of which would cause the Company competitive harm. The supplemental information demonstrates that our revenue, assets and liabilities with respect to the Listed Countries are not quantitatively material, either individually or collectively, to Schlumberger as a whole.
We understand that some investors have policies limiting or prohibiting investments in companies that do business with countries that are designated by the U.S. Department of State as state sponsors of terrorism. However, Schlumberger has considered the quantitative and qualitative aspects of its contacts with each of the Listed Countries and concluded that the impact of these contacts and activities is not likely to materially affect its reputation or share value.
Qualitatively, Schlumberger concludes that these contacts are also immaterial and that the risk of reputational damage, and any resulting negative effect on its share price, is remote and insignificant. Our management continues to believe that our stockholders and other investors understand and expect that, as an oilfield services company, we will pursue sound business opportunities in hydrocarbon-producing countries around the world, provided that we do so lawfully and in a manner that is protective of our personnel, assets and overall financial condition.
Although we continue to believe that our operations and associated risks in the Listed Countries are not material in either a quantitative or qualitative sense, we believe that our disclosures provide a reasonable investor with the necessary qualitative factors that such an investor would deem important in making an investment decision, including the potential impact of our corporate activities in the Listed Countries on our reputation and share value.
Our business activities with respect to the Listed Countries are guided by our strict internal compliance policies and procedures that we have designed to promote full compliance with applicable laws, including U.S. export controls and trade and economic sanctions. Specifically, our business activities involving Listed Countries have been undertaken and independently managed by indirectly wholly owned non-U.S. subsidiaries of Schlumberger Limited (a Curaçao corporation). These non-U.S. subsidiaries provide a broad range of oilfield services throughout the world.
Schlumberger takes very seriously its obligations to comply with applicable U.S. sanctions laws and dedicates significant human and financial resources to implementing and enforcing its commitment to compliance. To this end, Schlumberger requires that all of its affiliates and all U.S. and foreign personnel adhere to a comprehensive U.S. trade control (including economic sanctions and export and re-export controls) compliance program. This program provides, among other things, that “U.S. persons” (as defined under relevant U.S. sanctions regulations) are prohibited from conducting business involving or specifically supporting, approving, or facilitating transactions in or with any country, person or entity subject to U.S. embargo, absent U.S. government approval. Relevant personnel receive ongoing U.S. sanctions compliance training to reinforce their understanding of the law and of the Company’s trade control compliance policy and procedures.
For these reasons, we do not believe that Schlumberger’s contacts with the Listed Countries are material to Schlumberger as a whole, nor do they constitute a material investment risk for our security holders.
6. Please tell us about the impact of Executive Order 13582 dated August 17, 2011 on your business in Syria.
Response:
Executive Order 13582 has had no impact on Schlumberger’s business in Syria. Our business in Syria is conducted by indirectly wholly-owned foreign subsidiaries that are not United States persons as defined in Section 8(c) of Executive Order 13582.
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[Communication 2 of 3 - https://www.sec.gov/Archives/edgar/data/87347/000156459014000090/slb-10k_20131231.htm]
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In addition, we are subject to risks associated with our operations in countries, including Sudan and Cuba, that are subject to trade and economic sanctions or other restrictions imposed by the United States or other governments or organizations. United States law enforcement authorities are currently conducting a grand jury investigation and an associated regulatory inquiry related to our historical operations in countries that are subject to United States trade and economic sanctions. If any of the risks described above materialize, or if any governmental investigation results in criminal or civil penalties or other remedial measures, it could reduce our earnings and our cash available for operations.
We are also subject to risks related to investment in our common stock in connection with certain US state divestment or investment limitation legislation applicable to companies with operations in these countries, and similar actions by some private investors, which could adversely affect the market price of our common stock.
During 2013, certain non-US subsidiaries of Schlumberger provided oilfield services to the National Iranian Oil Company and certain of its affiliates (“NIOC”). Schlumberger’s 2013 revenue attributable to this activity was $102 million, which resulted in a net loss of $69 million. During the second quarter of 2013, Schlumberger completed the wind down of its service operations in Iran. As a result, Schlumberger has reclassified the results of this business as a discontinued operation. All prior periods have been restated accordingly.
Schlumberger’s activity in Iran during 2013 included obtaining services from and engaging in other dealings with the government of Iran that were incidental to operating in Iran, and the expenses of which are reflected in the results disclosed above. These services and other dealings consisted of paying taxes, duties, license fees and other typical governmental charges, along with payments for utilities, transportation, hotel accommodations, facility rentals, telecommunications services, newspaper advertisements, recreational and fitness memberships, and the purchase of routine office and similar supplies from entities associated with the government of Iran. Collections of amounts owed to Schlumberger for services rendered in Iran were received in part by depository accounts held by two non-US subsidiaries of Schlumberger at a branch of Bank Saderat Iran (“Saderat”), and in part by a depositary account held by one of such non-US subsidiaries at Bank Tejarat (“Tejarat”) in Tehran. The accounts at Tejarat are also used in connection with payment of expenses incidental to collection of amounts owed to Schlumberger for prior services. The accounts at Saderat are maintained solely for the deposit by NIOC of amounts owed to non-US subsidiaries of Schlumberger for prior services. One of the non-US subsidiaries also maintained a depository account at Bank Sarmayeh (“Sarmayeh”) which, together with the account at Tejarat, was maintained for the payment of expenses such as payroll expenses, rental payments and taxes. In addition, NIOC maintained bank accounts at Bank Melli Iran (“Melli”) through which it made payments to a non-US subsidiary of Schlumberger for services provided in Iran under letters of credit issued by Melli. Schlumberger maintains no bank accounts at Melli. Schlumberger has discontinued dealings with Melli and Sarmayeh, and anticipates that it will discontinue its dealings with Saderat and Tejarat following the receipt of all amounts owed to Schlumberger for prior services rendered in Iran.
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[Communication 3 of 3 - https://www.sec.gov/Archives/edgar/data/87347/000119312516535491/filename1.htm]
April 8, 2016
United States Securities and Exchange Commission
Division of Corporate Finance
100 F Street NE
Washington, D.C. 20549
Attn: Karl Hiller, Branch Chief, Office of Natural Resources
Re: Schlumberger N.V. (Schlumberger Limited)
Form 10-K for the Fiscal Year Ended December 31, 2015
Filed January 27, 2016
Comment Letter dated March 28, 2015
File No. 1-04601
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General
3. “In your letter to us dated May 17, 2013, you described contacts with Syria and Sudan. We note your disclosure on page 62 about 2014 and 2015 government settlements relating to the sale of products and services in Sudan. We note also your disclosure in the 2014 10-K that you completed the wind down of your operations in Sudan during the fourth quarter of 2014. As you are aware, Syria and Sudan are designated by the State Department as state sponsors of terrorism and are subject to U.S. economic sanctions and export controls. Please describe to us the nature and extent of your past, current, and anticipated contacts with Syria and Sudan since your 2013 letter, whether through subsidiaries, affiliates, distributors, resellers or other direct or indirect arrangements. In this regard, we note that your website provides contact information for Syria in several places, and a recent article reported that in 2011 a South African employee was promoted to be your geomarket HR manager for Sudan and South Sudan, a position he still holds. You should describe any products, services, technology or components you have provided to Syria and Sudan, directly or indirectly, and any agreements, commercial arrangements, or other contacts with the governments of those countries or entities they control.”
United States Securities and Exchange Commission
Response:
Since our May 17, 2013 letter to the Staff (the “2013 Response”), Schlumberger’s business operations in Syria and Sudan (the “Listed Countries”), which consisted solely of providing oilfield services, continued to decline and then ceased, as described below. As stated in the 2013 Response, we assess our operations and pursue sound business opportunities in hydrocarbon-producing countries around the world, provided that we do so lawfully and in a manner that is protective of our personnel, assets and overall financial condition. Consistent with this approach, the immaterial amount of business that we conducted in the Listed Countries and that was disclosed in the 2013 Response has ceased, and we now have no business operations in the Listed Countries.
Full-year 2015 revenues in Sudan constituted approximately 0.01% of Schlumberger’s 2015 worldwide consolidated revenues, while full-year 2015 revenues in Syria were zero. Moreover, Schlumberger’s total assets and total liabilities in each of the Listed Countries constituted less than 0.05% of Schlumberger’s worldwide consolidated assets and consolidated liabilities at December 31, 2015. Information as to assets and liabilities in the Listed Countries for the first quarter of 2016 is not yet available, although we can confirm that we will not record any revenue in either of the Listed Countries for such interim period. Additional details related to revenues, assets and liabilities for the Listed Countries for the periods set forth in Comment 3 since the 2013 Response are provided in response to Comment 4.
In 2014, we notified all of our clients in Sudan with whom we had active contracts that we would be ceasing operations in Sudan no later than the end of 2014. No contracts were extended and no new contracts were entered into subsequent to that notification. As the Staff notes in Comment 3, we disclosed in our 2014 Form 10-K that we had completed the wind-down of operations in Sudan. However, after we filed our 2014 Form 10-K, we determined that one of our segments provided services in Sudan in January 2015 under a contract that did not contain an early termination provision. This resulted in our recording a de minimis amount of revenue ($2 million) in January 2015 relating to such services. We ceased all services and operations in Sudan in January 2015.
Furthermore, we have not operated in, nor have we recorded any revenue from, Syria since 2012. Since the cessation of operations in Sudan, we have been engaged in attempts at collecting past due receivables, closing our facilities, releasing or transferring employees out of Sudan (including the employee referred to by the Staff in Comment 3), and exporting equipment and supplies from Sudan. Our residual transactions or dealings with the government of Sudan relate to our attempts to collect past due receivables and consist of payments of taxes and other typical governmental charges. At this time, there are no current or currently anticipated future operations in Syria or Sudan.
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1) For consolidated commentary on the 2015 OFAC and DOJ enforcement actions pertaining to Schlumberger, along with the relevance of these communications for the question of the scope of the term "U.S. person," refer to Consolidated Commentary on the 2015 Schlumberger Penalties, the B Whale Corporation Case and the Scope of the Term “U.S. Person” (System Ed. Note).