BUSINESS REVIEW



                                     Third Quarter                     Nine Months
                               2007      2006 (1)    % chg       2007     2006 (1)    % chg
                                                  (Stated in millions)
    Oilfield Services
    Revenue                   $ 5,128   $    4,297      19 %   $ 14,862   $  12,134      22 %
    Pretax Operating Income   $ 1,505   $    1,223      23 %   $  4,424   $   3,316      33 %
    WesternGeco
    Revenue                   $   794   $      661      20 %   $  2,165   $   1,754      23 %
    Pretax Operating Income   $   306   $      232      32 %   $    788   $     550      43 %

Pretax operating income represents the business segments' income before taxes and minority interest. The pretax operating income excludes corporate expenses, interest income, interest expense, amortization of certain intangible assets, interest on postretirement medical benefits and 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.

Revenue for the third quarter of 2007 was $5.93 billion versus $4.95 billion for the same period last year. Income before income taxes and minority interest was $1.71 billion for the three-month period ending September 30, 2007 compared to $1.32 billion for 2006.

Oilfield Services revenue of $5.13 billion increased 3% sequentially and 19% year-on-year.

Pretax operating income of $1.51 billion was essentially flat sequentially, but increased 23% year-on-year. Sequentially, growth through stronger demand for Well Services and Wireline technologies in Canada; a more favorable activity mix in the Mexico/Central America GeoMarket; higher activity levels and a favorable technology mix in Peru/Colombia/Ecuador; and increased high-margin Drilling & Measurements activity in China/Japan/Korea and Eastern Russia was experienced. However, this growth was offset by the weather-related effects in the US Gulf of Mexico and the pressure-pumping pricing erosion on land in the US. The overall Oilfield Services pretax operating margin was 29.4%, a sequential decrease of 107 basis points.

Year-on-year growth for both revenue and pretax operating income was driven by higher activity in Latin America, followed by the Middle East & Asia and Europe/CIS/Africa Areas. This growth was partially offset by a decline in North America.

North America

Revenue of $1.30 billion decreased 3% sequentially and 3% year-on-year. Pretax operating income of $350 million decreased 16% sequentially and 15% year-on-year.

Sequentially, revenue in the Canada GeoMarket rebounded on the higher rig count led by demand for Well Services and Wireline technologies following the seasonal spring break-up. However, this growth was more than

offset by a slowdown in the US Gulf Coast due to operator caution during the hurricane season; lower exploration-driven activity associated with seasonal facilities and rig maintenance in Alaska; and the pricing erosion in pressure-pumping stimulation services in all three US land GeoMarkets.

Year-on-year revenue increases were registered in the US Land Central GeoMarket driven by higher rig count and increased demand for Drilling & Measurements technologies; in US Land North resulting from higher rig count; and in Alaska driven by higher demand for new technology applications. However, these increases were more than offset by a decline in rig count in Canada, lower rig count and operator caution during the hurricane season in the US Gulf Coast, together with lower activity in US Land West.

Pretax operating margin for the Area declined 427 basis points sequentially to 26.9% primarily due to the weather-related effects on activity in the US, particularly in the Gulf of Mexico; lower high-margin exploration activity in Alaska; and the lower pricing environment for pressure-pumping stimulation services in the US land GeoMarkets. In Canada, however, margins grew as a result of improved utilization of people and equipment as activity rebounded.

Pretax operating margin reduced year-on-year by 360 basis points. During the period, an improvement in margins in Alaska was more than offset by a decline in the US land GeoMarkets together with a decline in the US Gulf Coast and in Canada.

Latin America

Revenue of $863 million increased 13% sequentially and 37% year-on-year. Pretax operating income of $204 million increased 14% sequentially and 58% year-on-year.

Sequential revenue growth was primarily driven by a continuing ramp-up in Integrated Project Management (IPM) activity in Mexico/Central America. A higher rig count coupled with stronger demand for Drilling & Measurements, Artificial Lift Systems and Schlumberger Information Solutions technologies in the Peru/Colombia/Ecuador GeoMarket also contributed to growth.

Year-on-year revenue growth in the Area resulted from higher activity in IPM projects in Mexico/Central America, together with higher rig counts in the Peru/Colombia/Ecuador and Venezuela/Trinidad & Tobago GeoMarkets. In addition, Latin America South also contributed to growth through increases in exploration-related activities.

Sequentially, pretax operating margin increased by 10 basis points to 23.7% as a result of an increase in exploration-related higher-margin Drilling & Measurements services in Peru/Colombia/Ecuador and a more favorable activity mix on IPM projects in Mexico/Central America.

Pretax operating margin increased year-on-year by 307 basis points, driven by demand for higher-margin services in Peru/Colombia/Ecuador and Latin America South, and an improved activity mix in the Mexico/Central America and Venezuela/Trinidad & Tobago GeoMarkets.

Europe/CIS/Africa

Revenue of $1.69 billion increased 5% sequentially and 28% year-on-year. Pretax operating income of $495 million increased 7% sequentially and 38% year-on-year.

Sequential revenue growth was driven by seasonally higher activity levels on land and offshore in the East Russia GeoMarket; increased demand for IPM services and for Artificial Lift Systems products in South Russia; higher demand for Drilling & Measurements technologies in North Russia; and the impact of the consolidation of Tyumenpromgeofizika. Increased demand for Well Services and Drilling & Measurements technologies in North Africa; higher demand for Artificial Lift Systems products in Continental Europe; and stronger demand for

Wireline and Well Testing technologies in West and South Africa also contributed to growth. However, this was partially offset by project slowdowns in Nigeria and the Caspian, and by lower activity in Libya.

Year-on-year revenue growth in the Area was driven by higher rig count and increased demand for Well Services and Drilling & Measurements technologies in North Africa; higher demand for Drilling & Measurements technologies in North Russia, increased demand for Artificial Lift Systems products in South Russia together with the impact of the consolidation of Tyumenpromgeofizika. Increased exploration-driven activity in the North Sea, Continental Europe and West and South Africa and higher rig count in Libya also contributed to growth.

The Area pretax operating margin increased by 50 basis points sequentially to reach 29.2% driven primarily by increased demand for higher-margin Well Services and Drilling & Measurements technologies in North Africa and a more favorable activity mix in the Russia GeoMarkets. This performance was partially offset by the project slowdowns in Nigeria and the Caspian and by lower demand for higher-margin Wireline and Drilling & Measurements technologies in Libya.

Pretax operating margin increased year-on-year by 218 basis points as a result of efficiency gains in IPM projects across Russia, demand for higher-margin exploration related services in the North Sea, Continental Europe and West & South Africa GeoMarkets, and a favorable activity mix in North Africa. This increase was partially offset by pricing erosion in Libya.

Middle East & Asia

Revenue of $1.23 billion increased 1% sequentially and 28% year-on-year. Pretax operating income of $438 million increased 2% sequentially and 42% year-on-year.

The sequential growth in revenue resulted from higher activity in the China/Japan/Korea, Indonesia, Australia/Papua New Guinea, India, Brunei/Malaysia/Philippines and Gulf GeoMarkets. This growth was partially offset by lower activity in Qatar and Thailand/Vietnam.

The year-on-year revenue increased from higher demand for Drilling & Measurements and Wireline technologies together with increased Completions and Artificial Lift Systems product sales in Australia/Papua New Guinea; higher land activity in China/Japan/Korea; higher rig count in India; higher rig count and increased demand for Drilling & Measurements technologies in Qatar; and higher demand for Well Testing services in Brunei/Malaysia/Philippines. In addition, revenue increases were also recorded in the East Mediterranean with strong demand for IPM and Wireline technologies, and in the Arabian and Indonesia GeoMarkets driven by higher demand for Well Services technologies.

Pretax operating margin increased by 39 basis points sequentially to 35.7% driven by the activity mix in China/Japan/Korea; increased demand for higher-margin Drilling & Measurements and Well Testing technologies in Australia/Papua New Guinea; and higher demand for Wireline and Well Testing technologies in Brunei/Malaysia/Philippines. This performance was partially offset by the slowdown in the Thailand/Vietnam GeoMarket.

Pretax operating margin increased by 353 basis points year-on-year driven by exploration-related higher-margin activities in the Australia/Papua New Guinea, Eastern Mediterranean and China/Japan/Korea GeoMarkets, an increased demand for high-margin Wireline and Drilling & Measurements technologies in the Gulf and Qatar GeoMarkets, together with an increased demand for high-margin Well Services technologies in Indonesia.

Third-quarter revenue of $794 million increased 19% sequentially and was 20% higher compared to the same period last year. Pretax operating income of $306 million increased 42% sequentially and 32% year-on-year.

Sequentially, Marine revenue increased due to higher vessel utilization following seasonal transits and scheduled dry dock inspections in the prior quarter, full-quarter utilization of the seventh Q* vessel, and improved pricing for conventional and Q-Marine* surveys. Data Processing revenue also increased driven primarily by higher sales in Europe, North America and Asia. These increases were partially offset by lower Multiclient sales while Land activity was flat.

Year-on-year Marine revenue increased primarily due to significantly higher pricing on both Q and conventional surveys. Data Processing revenue increased driven by higher demand and better pricing across all regions. In addition, Land revenue increased due to higher demand in the Middle East, North Africa and Latin America. These increases were partially offset by lower Multiclient sales in North America.

Pretax operating margins increased sequentially by 611 basis points to reach 38.6% driven by higher operating leverage in Marine and higher-margin Data Processing activities.

Increase in pretax income year-on-year was led by higher operating leverage in Marine and increased efficiency in Data Processing. However, these increases were partially offset by lower demand for Multiclient sales while Land activity remained essentially flat.

Revenue for the nine-month period ended September 30, 2007 was $17.03 billion versus $13.88 billion for the same period last year. Income before income taxes and minority interest was $4.88 billion for the nine-month period ended September 30, 2007 compared to $3.48 billion for the nine-month period ended September 30, 2006. The 2006 results included pretax charges of $46 million. These Charges and Credits are described in detail in Note 3 to the Consolidated Financial Statements.

Nine-month revenue of $14.86 billion increased 22% year-on-year. Pretax operating income of $4.42 billion increased 33% year-on-year. Year-on-year revenue growth was strongest in the Australia/Papua New Guinea, Thailand/Vietnam, Qatar, North Africa, West & South Africa, and East Mediterranean GeoMarkets. In addition, double-digit growth was achieved in all Technologies.

North America

Revenue of $4.01 billion increased 5% year-on-year and pretax operating income of $1.20 billion increased 3% versus the same period last year. Year-on-year growth was driven by a strong exploration season in Alaska, and by increased application of higher-margin Drilling & Measurements technologies and Well Testing services in the deep-water environment of the US Gulf Coast. In addition, US Land North grew on rig count increases promoting robust Wireline open hole and Well Services activities, while growth in US Land Central was driven by an increased volume of horizontal well drilling in unconventional gas plays. This was partially offset by declines in Canada with an extended spring break-up period together with the effect of weak gas prices.

Latin America

Revenue of $2.35 billion was 25% higher year-on-year. Pretax operating income of $546 million increased 54% versus the same period last year. Increases were highest in Venezuela/Trinidad & Tobago with strong demand for Drilling & Measurements technologies, Well Testing services, increased Completion and Artificial Lift product sales, and the recognition of revenues related to the drilling barges projects. Strong growth was also generated in Mexico/Central America with higher demand for Well Services and Drilling & Measurements technologies associated with IPM projects. Peru/Colombia/Ecuador increased on a higher exploration activity together with

strong performance on IPM projects and further enhanced by Artificial Lift Systems product sales. Growth in Latin America South was driven by rising offshore exploration activity in Brazil.

Europe/CIS/Africa

Revenue of $4.82 billion increased 33% year-on-year. Pretax operating income of $1.39 billion increased 53% year-on-year. Growth in the Area was driven by rising offshore activity with higher application of premium technologies in North Africa; higher rig count and improved activity mix together with pricing gains in West & South Africa; increased exploration activity in Continental Europe; and higher IPM activity across Russia together with the impact of the consolidation of Tyumenpromgeofizika. In addition, growth was also recorded in the North Sea and Nigeria GeoMarkets. Year-on-year double-digit growth was achieved across all Technologies.

Middle East & Asia

Revenue of $3.53 billion was 31% higher year-on-year. Pretax operating income of $1.24 billion was 45% higher versus the same period last year. Growth in the Area resulted from higher activity, an improved technology mix together with higher Completions product sales in Australia/Papua New Guinea; exploration-driven demand for services in Thailand/Vietnam and Qatar; higher demand for Well Services and Wireline technologies in East Mediterranean; and increased rig count together with higher demand for Drilling & Measurements services and Completions systems product sales in India. In addition, higher rig count together with stronger demand for Artificial Lift Systems and Completions products in the Arabian GeoMarket together with exploration-driven activity growth in China/Japan/Korea and the Gulf GeoMarkets contributed to this growth. Across the Area, all Technologies recorded double digit growth.

Nine-month revenue of $2.17 billion was 23% higher compared to the same period last year. Pretax income of $788 million increased 43% year-on-year. Growth was driven primarily by higher conventional and Q-Marine pricing and by the addition of the seventh Q vessel, higher Multiclient sales predominantly in North America together with higher pricing and increased demand for Data Processing services.

Interest & Other Income

Interest & other income consisted of the following for the third quarter and
nine months ended September 30, 2007 and 2006:



                                                           Third Quarter            Nine Months
                                                          2007        2006        2007        2006
                                                                   (Stated in millions)
Interest income                                         $     44      $  25      $   114      $  90
Equity in net earnings of affiliated companies                64         46          175        119
Loss on liquidation of investment to fund the
WesternGeco transaction (1)                                   -          -            -          (9 )

                                                        $    108      $  71      $   289      $ 200

Interest Income

Interest income increased $19 million in the third quarter of 2007 as compared to the third quarter of 2006 and by $24 million for the nine months ended September 30, 2007 as compared to the same period last year. These increases were primarily attributable to increases in the average investment balances year-on-year.

Equity in Net Earnings of Affiliated Companies

The increase in net earnings of affiliated companies is primarily due to the results of the drilling fluids joint venture that Schlumberger operates with Smith International, Inc.

Interest Expense

Interest expense of $69 million in the third quarter of 2007 increased by $6 million compared to the same period last year and by $31 million in the first nine months of 2007 compared to the same period last year. The increases were primarily attributable to the increases in the average debt balance year-on-year.

Other

Gross margin was 34.1% and 32.2% in the third quarter of 2007 and 2006, respectively, and 33.9% and 30.8% in the nine-month periods ended September 30, 2007 and 2006, respectively. The increase in gross margin was driven by higher overall activity, a favorable technology mix and efficiency gains in Oilfield Services, together with higher Marine pricing and utilization in WesternGeco.

As a percentage of revenue, research & engineering, marketing and general & administrative expenses for the third quarter and nine months ended September 30, 2007 and 2006 were as follows:

                                          Third Quarter        Nine Months
                                          2007       2006     2007      2006
              Research & engineering        3.2 %     3.0 %     3.1 %    3.2 %
              Marketing                     0.4 %     0.4 %     0.3 %    0.4 %
              General & administrative      2.3 %     2.4 %     2.2 %    2.3 %

Research and engineering expenditures, by business segment for the third quarter and nine months ended September 30, 2007 and 2006, were as follows:

                                        Third Quarter       Nine Months
                                        2007      2006     2007     2006
                                             (Stated in millions)
                  Oilfield Services   $    151    $ 128   $   429   $ 368
                  WesternGeco               36       20        91      51
                  Other                      3        2        12      31

                                      $    190    $ 150   $   532   $ 450

The effective tax rate in the third quarter of 2007 was 20.8% compared to 24.1% in the third quarter of 2006. The effective tax rate for the nine months ended September 30, 2007 was 22.3% compared to 24.5% in the same period of 2006. The decreases in the effective tax rate compared to prior year periods were primarily attributable to the geographic mix of earnings. Both Oilfield Services and WesternGeco had a lower proportion of pretax earnings in North America. Outside North America, various GeoMarkets with lower tax rates contributed a greater percentage to pretax earnings.

Minority Interest

Minority interest decreased in 2007 compared to 2006 reflecting the acquisition, on April 28, 2006, of the 30% minority interest in WesternGeco from Baker Hughes Incorporated.

Stock-Based Compensation

Stock-based compensation expense was $32 million in the third quarter of 2007 compared to $30 million in the third quarter of the prior year, and $102 million for the nine months ended September 30, 2007 compared to $84

million for the nine months ended September 30, 2006. Total stock-based compensation expense for all of fiscal 2006 was $114 million, and it is currently estimated to be $135 million in 2007.

CASH FLOW

Net Debt represents gross debt less cash, short-term investments and fixed
income investments, held to maturity. Management believes that Net Debt provides
useful information regarding the level of Schlumberger indebtedness. Details of
Net Debt follow:



                                                         Sept. 30       Sept. 30
                                                           2007           2006
                                                          (Stated in millions)
     Net Debt, beginning of period                      $    (2,834 )   $    (532 )
     Net income                                               3,793         2,579
     Charges and credits, net of tax                             -             43
     Excess of equity income over dividends received           (128 )        (119 )
     Depreciation and amortization (1)                        1,400         1,122
     Increase in working capital                               (856 )        (476 )
     US pension plan contributions                             (150 )        (203 )
     Capital expenditures (1)                                (2,207 )      (1,741 )
     Proceeds from employee stock plans                         521           346
     Stock repurchase program                                  (798 )        (949 )
     Dividends paid                                            (562 )        (420 )
     Acquisition of minority interest in WesternGeco             -         (2,406 )
     Other business acquisitions and related payments          (196 )        (331 )
     Conversion of debentures                                   490            -
     Distribution to joint venture partner                       -            (60 )
     Translation effect on Net Debt                             (92 )         (54 )
     Other                                                      (64 )          31

     Net Debt, end of period                            $    (1,683 )   $  (3,170 )

                                                    Sept. 30      Sept. 30      Dec. 31
 Components of Net Debt                               2007          2006          2006
                                                            (Stated in millions)
 Cash and short-term investments                    $   3,238     $   1,901     $  2,999
 Fixed income investments, held to maturity               383            95          153
 Bank loans and current portion of long-term debt        (771 )      (1,235 )     (1,322 )
 Convertible debentures                                  (934 )      (1,425 )     (1,425 )
 Other long-term debt                                  (3,599 )      (2,506 )     (3,239 )

                                                    $  (1,683 )   $  (3,170 )   $ (2,834 )

During the first nine months of 2007, $483 million of the $975 million 1.5% Series A Convertible Debentures due June 1, 2023 were converted by holders into approximately 13 million shares of Schlumberger common stock and $7 million of the $450 million 2.125% Series B Convertible Debentures due June 1, 2023 were converted by holders into approximately 175,000 shares of Schlumberger common stock.

During the first nine months of 2007, cash provided by operations was $4.11 billion, as net income plus non-cash items were partially offset by an increase in working capital requirements. Cash used by investing activities was $3.05 billion due mainly to the purchase of fixed assets ($2.01 billion). Cash used by financing activities was

$1.07 billion as the net repayments of debt ($308 million), payment of dividends to shareholders ($562 million) and stock repurchase program ($798 million) were partially offset by the proceeds from employee stock plans ($521 million).

On April 28, 2006, Schlumberger acquired the 30% minority interest in WesternGeco from Baker Hughes Incorporated for $2.4 billion in cash. Approximately 50% of the purchase price was funded from Schlumberger cash and investments. The remaining 50% was financed through existing Schlumberger credit facilities.

During the first nine months of 2006, cash provided by operations was $3.12 billion, as net income, depreciation/amortization and deferred income taxes were partially offset by increases in customer receivables and a decrease in accounts payable and accrued liabilities, which included a US pension funding contribution of $203 million. Cash used by investing activities of $2.79 billion primarily was due to capital expenditures ($1.62 billion), the acquisition of the 30% minority interest in WesternGeco ($2.40 billion) and the sales of investments ($1.84 billion). Cash used in financing activities was $369 million . . .