The following discussion and analysis contains forward-looking statements including, without limitation, statements relating to our plans, strategies, objectives, expectations, intentions and resources. Such forward-looking statements should be read in conjunction with our disclosures under "Item 1A. Risk Factors" of this Report.

Executive Overview

Oil markets exhibited considerable variation in 2007. The OPEC production cuts of November 2006 that provoked the recovery in the price per barrel entering the winter period in the Northern Hemisphere were overweighed by mild early winter weather conditions that lead to WTI (West Texas Intermediate) falling to the year low of $50.50-per-barrel by mid-January. However, price for WTI ending the year within striking distance of $100-per-barrel. Market fundamentals supported this upwards trend as evidenced by the need for an OPEC production increase in September and by the reduction in the days of forward cover of OECD (Organization for Economic Co-operation and Development) oil stocks which had fallen below 53 days by the end of year. Spare production margins remained narrow, driven by geopolitical events and inherent production decline, while non-OPEC production levels continued to be revised downwards as project delays added further uncertainty to performance.

In natural gas markets, the weak prices seen at the beginning of 2007 strengthened significantly as colder weather drove demand in North America. The region's gas supply results from four separate components that include domestic production, LNG (Liquefied Natural Gas) imports, Canadian exports to the US, and US exports to Mexico. Changes in any of these affect overall supply and during the year higher production and higher imports, particularly of LNG, led to above-average levels of natural-gas storage in the US with consequent weaker commodity pricing later in the year.

Maintaining the production base for both oil and natural gas continues to face challenges. In both cases, the aging of reservoirs that have been in production for many decades gives rise to increasing production decline rates that require constant stemming, while weak reserves replacement ratios and heightened resource nationalism dictate that exploration for new hydrocarbon deposits-in increasingly more remote areas and complex geologies-must increase.

Within this context, Schlumberger revenue in 2007 grew by 21%, driven by strong demand for oilfield services, particularly overseas. Year-on-year growth rates reached 31% in Middle East & Asia, 30% in Europe/CIS/Africa and 29% in Latin America. In North America however, revenue was essentially flat relative to 2006. All Oilfield Services Technologies showed double-digit improvement, with Drilling & Measurements, Well Testing and Integrated Project Management recording the highest overall growth rates year-on-year.

The business pattern that emerged in 2007-with significant differences in growth inside and outside North America-marked a change in the oil and gas industry growth cycle. There were two reasons for this. North American activity is largely driven by natural gas exploration and production and the number of active drilling rigs proved sufficient to maintain satisfactory levels of production-at least in the short term. In addition, the strong international growth was mainly directed to oil and primarily land-based as the available offshore rig fleet reached full utilization-particularly in deep water.

New Schlumberger products and services contributed to growth in 2007. In line with the need for improved well performance for example, particularly through stimulation of natural gas wells, Schlumberger introduced the Contact* family of staged fracturing and completion services early in the year. These services penetrated a number of key markets with a broad range of efficient and effective stimulation technologies. In North America, Contact services demonstrated their ability to place fracture treatments more accurately while stimulating multiple productive sands in a single operation to increase production and lower cost. Contact technologies were also demonstrated and deployed in Gabon, Kuwait and Saudi Arabia, with significant production improvements in every case.

Within this landscape, Schlumberger made further progress in areas where competitive advantage exists in technology and business model. In Russia, Schlumberger further expanded operations through the acquisition of TyumenPromGeofizika, a West Siberian wireline logging company. Elsewhere in Siberia, manufacturing activities increased as Wireline and Well Services began assembly of perforating and pumping equipment in Tyumen. Research and engineering activity accelerated with the opening of the new Moscow research center and the extension of the engineering center in Novosibirsk. And to address the needs of the increased staff in Russia, the Siberian Training Center partially opened for a number of training courses at the end of the year with full operation expected early in 2008.

Russia also benefited from expanding take-up of Integrated Project Management services in Siberia. Similar operations began in other GeoMarket regions in Europe/CIS/Africa, and there was further strong growth in the well construction businesses in Latin America, where a new phase of deeper, hotter and more complex operations started in Mexico. These events are consistent with our goal of growing project management services at a much higher rate than the rest of the business.

Growth at WesternGeco, where full-year 2007 revenue increased by 20% over 2006, matched the overall trend set by Oilfield Services. This was driven by demand for marine seismic and multiclient data sales while Q-Technology* revenue increased again to a new high of $1.14 billion, up 57% versus 2006. Vessel utilization for the year reached 93%, with half of the marine fleet now equipped with Q-Technology systems. The strength of the seismic market, particularly in marine services, led us to review our long-term plans for the fleet, resulting in the acquisition of Eastern Echo in November. The six new high-performance, high-capacity vessels on order are ideally suited to the exploration and development markets of the future, and all six will be fitted with Q-Technology equipment.

In addition to the acquisitions of TyumenPromGeofizika and Eastern Echo, technology-based growth was furthered through a number of smaller acquisitions made during the year. These included Insensys Oil & Gas fiber-optic technology for the expanding subsea market, VIPS reservoir software and interpretation expertise to accelerate Schlumberger strength in geomechanics, InnerLogix information management technology for data quality improvement and Geosystem electromagnetic technology to expand WesternGeco electromagnetics solutions. The technology portfolio was also boosted by the acquisition of a further 5.5% share in Framo Engineering AS to take the Schlumberger holding to a majority 52.75%. Framo is a Norwegian-based company providing multiphase booster pumps, flow metering equipment and swivel stack systems. We will begin consolidating the results of Framo in the first quarter of 2008.

In early 2007, we reiterated our view that while Schlumberger would continue to see high growth through the end of the present decade, growth rates would ultimately slow from the breakneck pace of the earlier part of 2006. Strong growth was indeed seen in 2007, but the shorter-term outlook for 2008 has become more complex, with several factors set to influence the business in the coming year. On the positive side, growth in land activity outside North America will remain strong, and seismic exploration services worldwide will remain in high demand on land and offshore as the industry gears up for an expanded exploration phase. However, in North America we do not expect levels of natural gas drilling to vary greatly in the absence of severe winter weather. Overall growth will also be restricted by the high utilization of the existing offshore rig fleet and the fact that only limited new builds will enter the market over the next 12 months. This will make activity vulnerable to operating efficiency.

Maintaining and increasing the production base for both oil and natural gas will continue to be challenging. The aging of reservoirs that have been in production for many decades requires high levels of activity in order to stem decline, while weak reserves replacement ratios and heightened resource nationalism dictate that exploration for new hydrocarbon deposits-in ever more remote areas and complex geologies-must increase.

In the longer term, current levels of drilling are insufficient to meaningfully slow decline rates, improve reservoir recovery or add sufficient new production capacity. The explosion in exploration licenses awarded in the last three years, the continual expansion of the number of new offshore rigs being ordered for delivery

through and beyond the end of the decade, and the industry-wide, as well as our own plans to increase both capital expenditure and research and development spending, are clear indicators of future growth.

The following discussion and analysis of results of operations should be read in conjunction with the Consolidated Financial Statements.

(Stated in millions)
                               Total Year       Total Year                     Total Year       Total Year
                                     2007          2006(1)     % Change           2006(1)          2005(1)     % Change
OILFIELD SERVICES
Revenue                      $     20,306     $     16,762           21 %    $     16,762     $     12,647           33 %
Pretax Operating Income      $      5,959     $      4,644           28 %    $      4,644     $      2,827           64 %

WESTERNGECO
Revenue                      $      2,963     $      2,476           20 %    $      2,476     $      1,663           49 %
Pretax Operating Income      $      1,060     $        812           31 %    $        812     $        295          176 %




                                   Fourth Qtr.     Third Qtr.
                                          2007           2007   % change
       OILFIELD SERVICES
       Revenue                   $       5,445   $      5,128          6 %
       Pretax Operating Income   $       1,535   $      1,505          2 %

       WESTERNGECO
       Revenue                   $         798   $        794          1 %
       Pretax Operating Income   $         272   $        306        (11 )%

1. Effective January 1, 2007, a GeoMarket that had been included in the Middle East & Asia Area was reassigned to the European/CIS/Africa Area. Certain activities were also reallocated between Oilfield Services and WesternGeco. Prior period data has been reclassified to conform to the current organizational structure.

Pretax operating income represents the business segments' income before taxes and minority interest. Pretax operating income excludes corporate expenses, interest income, interest expense, amortization of certain intangibles, interest, stock-based compensation costs and the Charges and Credits described in detail in Note 3 to the Consolidated Financial Statements, as these items are not allocated to the segments.

Oilfield Services

Fourth Quarter 2007 Results

Fourth-quarter revenue of $5.44 billion was 6% higher sequentially and 18% higher as compared to the fourth quarter of 2006. Sequential revenue increases were highest in the Middle East & Asia Area led by the Arabian, China/Japan/Korea and India GeoMarkets*, followed by the Latin America Area where growth was strongest in the Mexico/Central America, Latin America South and Peru/Colombia/Ecuador GeoMarkets. In the Europe/CIS/Africa Area, increases were led by the North Sea, Caspian and Continental Europe GeoMarkets. Growth was also recorded in North America, led primarily by the Canada and US Gulf Coast GeoMarkets. Among Schlumberger Technologies, Artificial Lift Systems, Completions Systems and Schlumberger Information Solutions (SIS) registered strong growth due to seasonal end-of-year product sales.

Fourth-quarter pretax operating income of $1.54 billion increased 2% sequentially and 16% as compared to the fourth quarter of 2006. Sequentially, growth was driven by demand for higher-margin Drilling & Measurements services in the Middle East & Asia Area and by increased product sales in Artificial Lift Systems in Europe/CIS/Africa and Middle East & Asia, and by Completions Systems product sales in the Middle East & Asia and Latin America. However, these increases were offset by pricing erosion for well stimulation related activities on land in the US; exceptional weather-related and operational delays in Mexico/Central America; and weather and seasonal effects in the US West, North Sea and East Russia GeoMarkets. These events resulted in an overall pretax operating margin in the fourth quarter of 28.2% as compared to 29.4% in the third quarter of 2007.

North America

Revenue of $1.33 billion increased 3% sequentially but decreased 7% as compared to the fourth quarter of 2006. Pretax operating income of $338 million decreased 3% sequentially and 23% year-on-year.

Sequentially, revenue in the Canada GeoMarket continued to grow led by demand for Well Services and Wireline technologies. In the US Gulf Coast GeoMarket, activity partially recovered from the slowdown experienced during the hurricane season of the third quarter with higher demand for Wireline, Well Testing and Well Services technologies. In addition, higher SIS product sales were recorded across the Area. This performance was largely offset by the continuing pricing erosion in well stimulation related activities in the US land GeoMarkets, seasonal land access constraints in the west, and by lower activity in Alaska.

Pretax operating margin for the Area declined sequentially from 26.9% to 25.4% due to the lower pricing environment for well stimulation related services in the US land and Canada GeoMarkets, as well as lower operating leverage in Alaska and Canada. This was partially offset by a more favorable activity mix and higher operating efficiency in the US Gulf Coast GeoMarket together with the Area-wide SIS product sales.

Latin America

Revenue of $943 million increased 9% sequentially and 40% as compared to the fourth quarter of 2006. Pretax operating income of $208 million increased 2% sequentially and 47% year-on-year.

Sequential revenue growth was recorded in all GeoMarkets primarily driven by IPM activities in Mexico/Central America, Peru/Colombia/Ecuador and Venezuela/Trinidad & Tobago. Increased demand for Well Testing technologies and higher sales of Artificial Lift Systems, Completions Systems and SIS products in Latin America South, together with higher sales of Artificial Lift Systems and Completions Systems products in the Mexico/Central America and Peru/Colombia/Ecuador GeoMarkets, also contributed to growth.

Pretax operating margin declined sequentially from 23.7% to 22.1% primarily due to the activity mix in the Mexico/Central America GeoMarket, which was affected by higher IPM project startup and third-party costs as well as by flooding in the south and operational delays offshore. These startup costs are expected to continue for the next few quarters. A lower mix of higher-margin Drilling & Measurements activity in Venezuela/Trinidad & Tobago and higher-margin Wireline technology in Peru/Colombia/Ecuador also contributed to this result.

Europe/CIS/Africa

Revenue of $1.77 billion increased 4% sequentially and 23% as compared to the fourth quarter of 2006. Pretax operating income of $493 million was flat sequentially but increased 28% year-on-year.

Sequentially, the North Sea GeoMarket recorded the highest revenue growth driven by increased demand for Wireline and Well Services technologies together with higher Artificial Lift Systems and SIS product sales. Higher demand for Drilling & Measurements technologies in the Caspian GeoMarket, increased Artificial Lift Systems product sales in North Russia, and high demand for Drilling & Measurements, Well Services and Well Testing technologies in Continental Europe also contributed to growth. This performance was partially offset by the seasonal slowdown in Sakhalin and subdued activity in Nigeria.

Pretax operating margin declined sequentially from 29.2% to 27.9% due to the seasonal slowdown in Sakhalin, and to weather-related delays which led to reduced demand for higher- margin Drilling & Measurements and Well Testing technologies in the North Sea. A less favorable activity mix in the West & South Africa and North Africa GeoMarkets also contributed to this result.

Middle East & Asia

Revenue of $1.35 billion increased 10% sequentially and 30% as compared to the fourth quarter of 2006. Pretax operating income of $473 million increased 8% sequentially and 40% year-on-year.

The sequential growth in revenue resulted from high demand for Drilling & Measurements and Wireline technologies together with higher Completions Systems, Artificial Lift Systems and SIS product sales in the Arabian GeoMarket; higher demand for exploration-related Drilling & Measurements technologies and for Artificial Lift Systems products in Qatar; increased demand for Drilling & Measurements and Well Testing services in China/Japan/Korea; and higher deepwater exploration-driven demand for Wireline and Drilling & Measurements technologies together with higher SIS product sales in India.

The pretax operating margin of 35.0% as compared to 35.7% in the third quarter resulted from the more favorable activity mix in the Arabian and India GeoMarkets being offset by reduced demand for higher-margin Wireline, Well Services and Well Testing technologies in the Indonesia, Thailand/Vietnam and Australia/Papua New Guinea GeoMarkets.

Total Year 2007 Results

Full-year 2007 revenue of $20.31 billion increased 21% versus 2006, led by Area growth of 31% in the Middle East & Asia, followed by 30% in Europe/CIS/Africa and 29% in Latin America while North America remained essentially flat. Pretax operating income of $5.96 billion in 2007 was 28% higher than 2006.

Pretax operating margins of 29.3% improved 164 basis points (bps) in 2007 versus 2006. Higher activity and expansion of higher-margin new technology deployment across Europe/CIS/Africa, Middle East & Asia and Latin America Areas were the principal contributors to this performance. In North America, pricing erosion in pressure-pumping well-stimulation activities moderated year-on-year margin growth within the Area.

Among the GeoMarkets, the greatest increases in revenue were recorded in the North Sea, followed by Mexico, West & South Africa, Arabian and Venezuela/Trinidad & Tobago GeoMarkets.

Significant demand was seen for all Technologies led by Drilling & Measurements, Wireline, Well Testing, and Completions Systems as customers continued to improve exploration and production performance in the search for new hydrocarbon reserves and in the need to increase production and boost recovery from existing fields.

To adapt the existing Schlumberger GeoMarket structure to expanding activity levels worldwide, Qatar was established as a separate GeoMarket and new GeoMarkets were established in Russia and on land in the US, bringing the total number of GeoMarkets to 31.

North America

Revenue of $5.34 billion increased marginally over 2006 primarily due to higher demand for Drilling & Measurements, Well Testing and Wireline activities in the US Land Central, US Land North and the US Gulf Coast GeoMarkets. However, this performance was offset by pricing erosion in well stimulation activities across the Area.

Activity across US Land continued to grow driven by the increase in rig count and higher service intensity in unconventional natural gas reservoirs. However, weakness in natural gas prices and excess well stimulation-related pressure pumping capacity led to a year-on-year decline in pricing in stimulation related activities. The US Gulf Coast GeoMarket continued to grow driven by demand for exploration related activities.

In Canada year-on-year revenue declined sharply due to operator slowdown driven by weakness in natural gas prices and uncertainty over the fiscal regime.

Pretax operating margin declined by 167 bps to 28.8% primarily due to lower pricing in well stimulation related activities across the Area together with lower activity in Canada.

Latin America

Revenue of $3.30 billion in 2007 increased 29% over 2006 led by a surge in IPM related activity in Mexico following the budget-related slowdowns in the previous year, followed by the growth in exploration-related activities in the Peru/Columbia/Ecuador and Latin America South GeoMarkets. The Venezuela/Trinidad & Tobago GeoMarket also grew with higher rig count-driven activity in addition to finalization of the contracts related to drilling barges.

The Mexico GeoMarket recorded robust growth with the start of several integrated projects. Peru/Columbia/Ecuador and Latin America South witnessed strong growth in exploration-related activities. Demand was strong for all Technologies led by IPM, followed by Drilling & Measurements, Wireline and Well Testing services.

Pretax operating margin increased strongly by 358 bps to reach 22.9%. This increase resulted mainly from a favorable activity mix and improved pricing.

Europe/CIS/Africa

Revenue of $6.59 billion in 2007 increased 30% over 2006 with the highest growth recorded in the North Sea, West & South Africa and North Africa GeoMarkets.

Strong revenue increases were recorded in the North Sea, West & South Africa and North Africa driven by the expansion of exploration-related activities. GeoMarkets in Russia continued to grow strongly due to a combination of organic growth and the completion of the acquisition of Tyumenpromgeofizika during the second quarter of the year.

Pretax operating margins increased by 299 bps to reach 28.5%. This performance was due to a combination of increased activity, improved pricing and accelerated new technology deployment across most GeoMarkets partially offset by a pricing decline in well stimulation activities in the East Russia and subdued activity in Nigeria.

Middle East & Asia

Revenue of $4.88 billion in 2007 increased 31% over 2006 with the largest increases recorded in the Arabian GeoMarket, followed by East Mediterranean, Australia/Papua New Guinea, Qatar, Gulf and India.

The Australia/Papua New Guinea GeoMarket recorded the highest growth rate in the Area driven by higher exploration related activity. Growth in East Mediterranean, Qatar, Gulf and India resulted from higher exploration and development activity while the Arabian GeoMarket continued to grow, albeit at a lower rate than the previous year, as new rig additions slowed down in Saudi Arabia.

Pretax operating margin increased by 299 bps to an impressive 35.1%. This performance was driven by continued increase in activity and pricing increases together with deployment of higher-margin Wireline and Drilling & Measurements new technologies.

Total Year 2006 Results

Revenue of $16.76 billion increased 33% in 2006 versus 2005 driven by growth in oilfield services activities as operators responded strongly to increasing global hydrocarbon demand through renewed exploration and increased focus on production operations. Within the geographic Areas, North America revenue increased 40%, Europe/CIS/Africa increased 36%, Middle East & Asia increased 31% and Latin America increased 16%.

Pretax operating income of $4.64 billion in 2006 grew by 64% over 2005 resulting in operating margins climbing by 535 bps to reach 27.57%. Stronger activity, accelerating higher-margin new technology deployment and increased pricing across all Areas were the principal contributors to this performance.

Among the GeoMarkets, the greatest increases in revenue were recorded in US Land, followed by the Arabian, Russian, North Sea, US Gulf Coast, Canada, West & South Africa, Nigeria and North Africa GeoMarkets. The growth in Russia was driven by a combination of activity within the established GeoMarkets and the impact of the acquisition of PetroAlliance Services.

Significant demand was seen for all Technologies as customers sought to improve exploration and production performance while mitigating technical risk in the search for new hydrocarbon reserves and in the need to increase production and boost recovery from existing fields.

A number of key acquisitions were made during the year. These included the acquisition of the outstanding 49% of PetroAlliance Services in Russia; as well as TerraTek - a global leader in geomechanics measurements and analysis; Odegaard - a leader in advanced surface seismic data inversion software; and Reslink - a leading supplier of advanced completion solutions which offer a broad spectrum of engineering applications and products for sand management, zonal isolation and intelligent well completions.

North America

Revenue of $5.27 billion increased 40% over 2005 mainly driven by the US Land and US Gulf Coast GeoMarkets, which benefited from strong Well Services, Drilling & Measurements and Wireline activities coupled with continued pricing improvements. Increasing demand for Well Testing activities offshore also contributed to growth.

Sharply increased activity in the US Land GeoMarket led to strong equipment and personnel utilization, higher pricing and increased demand for high-tier, new-technology services. The US Gulf Coast GeoMarket rebounded strongly from the effects of the disastrous 2005 hurricane season with growth driven by a combination of new exploration and increased production-related activities.

Canada continued to grow due to strong demand for Drilling & Measurements and Wireline technologies. Growth was somewhat offset by lower Well Services activity in the coal bed methane and shallow gas areas in the second half of the year.

Pretax operating income of $1.60 billion was 72% higher than in 2005 led by the US Land and US Gulf of Mexico GeoMarkets. The steep growth was primarily due to continuing strength in pricing, particularly for Well Services, Wireline and Drilling & Measurements technologies, and a more favorable activity mix resulting from the deployment of higher-margin new-technology Drilling & Measurements, Wireline and Well Testing services.

Latin America

Revenue of $2.56 billion in 2006 increased 16% over 2005 led by the Venezuela/Trinidad & Tobago GeoMarket, followed by the Latin America South and Peru/Colombia/Ecuador GeoMarkets. Growth in the Area was impacted by budget-related activity slowdowns in Mexico together with geopolitical concerns in other parts of the region.

The Venezuela/Trinidad & Tobago GeoMarket recorded strong growth due to solid . . .