Moody’s downgrades Schlumberger Ltd., Schlumberger Technology Corp.


New York, Oct. 3, 2002 — Moody’s Investors Service has changed the rating outlooks for Schlumberger Ltd. and Schlumberger Technology Corp. to negative from stable.

The investment ratings agency changed the outlook for Schlumberger Ltd. based on slower than anticipated progress in debt repayment, primarily as a result of lower than expected cash flow from operations, and delays in asset sales due to weak market conditions.

It subsequently changed the outlook for Schlumberger Technology Corp. to negative from stable. STC’s debt is not guaranteed by Schlumberger Limited, but its A1 rating reflects its 100% ownership by Schlumberger Limited (rated Aa3), by its strategic importance to the Schlumberger Group (Schlumberger Limited and its subsidiaries), and by the Group’s conservative financial policies. Moody’s noted that STC continues to maintain a solid liquidity profile.

Schlumberger’s Aa3 senior unsecured rating assumes management will achieve its net debt target of $3.75 billion by the end of 2003 through the application of free cash flow and asset sale proceeds to debt repayment.

The company has made some progress in divesting non-core assets, and Moody’s believes management remains committed to achieving its net debt target. However, the company’s ability to generate excess cash flow, as well as the timing of planned asset sales, will remain subject to conditions in the oilfield services sector and in the IT services market, as well as in the financial markets.

During the first half of 2002, Schlumberger’s consolidated net debt increased from $5.0 billion to $5.8 billion, partly because of seasonal working capital needs and exchange rate movements. However, delays in asset sales also contributed to the rise in the company’s financial leverage. Moody’s noted that Schlumberger continues to maintain a solid liquidity profile.

Schlumberger has a significant amount of goodwill ($6.7 billion at June 30, 2002), mainly as a result of its April 2001 acquisition of Sema. There is a risk that prolonged weakness in the IT services industry and intense competition may delay the achievement of management’s growth and profitability objectives for SchlumbergerSema in the medium term.

Schlumberger Limited is an oilfield services and technology company registered in Curacao, Netherlands Antilles. The company’s principal executive offices are located in New York, Paris, and the Hague.

Schlumberger Technology Corporation is an oilfield services company headquartered in Houston, Texas. It is a wholly owned subsidiary of Schlumberger Limited.

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