Schlumberger Business Consulting Principals meeting

Schlumberger Business ConsultingPrincipals meeting Feedback to SBC team January 2005

Structure of the document • Minutes of SBC Principals meeting • SBC 2004 achievements • ECA review • NSA review • MEA review • Finance review

Objectives of the week • Review achievements to date, plan & challenges for 2005 • Set the foundation for 2005 success and decide key evolution required in our model • Share experience on practices, clients, projects & dealings with OFS • Present the team to Schlumberger CEO • Create personal connections & team spirit

Agenda • Monday: SBC status & plan, area strategy for 2005 • Tuesday: Practice reviews and plans • Wednesday: • Discussion with Andrew Gould • Performance review (Managers & Consultants) • Thursday: SBC internal process • Friday & Saturday • Project reviews • Account plans

Goods Business Best team in place Defined practices & offerings Repeat business with clients Good geographical coverage Link with GM & segments Right Business Model Basic processes in place (Finance & HR) Bads Profit Help between Principals Knowledge Management Resource sharing between Principals & areas Quality Process SBC situation after one year: an achievement, still fragile

Our focus this week: setting the conditions to better manage profit • Profit / Principal = Margin * Productivity * Leverage • Margin = Profit / Fees • Productivity= Fees / Staff = Fees / Hour * Hour / Staff • = Value * Utilization • Leverage = Staff / Principal Profit is key to our freedom of action

Typical profitability tactics in professional services • Raise prices, ie fee levels • Better work, better clients, better account strategy (incl OFS) • Selling value vs time (fixed price) • Better skill & knowledge sharing between Principals & managers • Higher-value services • Lower variable costs (sales & delivery cost for each engagement) • Optimize leverage • Decrease sales cost, optimize go-to-market • Use contractors & source low cost resources • Engagement management performance, Methodologies • Fix under performers (people, services, clients) • Increase volume • Increase utilization (longer projects, better resource sharing) • Lower overhead costs

SBC decisions to manage profit • Systematically raise price level • Define pricing strategies to escape from Time & Materials • Design an appropriate contract strategy for each of our target accounts (within SIS contract or not, need for a separate SBC contract vehicle…) • Define appropriate per-diems by country to achieve our profitability target • Per-diems will be used as internal cost to measure Project P&L • Use a higher-leverage team structure in our engagements

Questions for AG • Could you please give us your summary of Schlumberger’s strategy and the role SBC has to play. • What are your views on what we've done in our first year? What do you hear about SBC from others in Schlumberger and from clients? • We feel we have the capability and are now demonstrating the ability to play a key role in developing and delivering integrated service solutions for clients (eg in the iField area) that combine what several segments have to offer. With which clients do you think Schlumberger has most to benefit from this? What are the critical client projects that come to your attention which could benefit from this? • Do you believe Schlumberger's way of managing R&D needs to change in the move from products to solutions? What's the best way for SBC's understanding of business needs to be incorporated in Schlumberger's R&D management process? • In your view, what are the accounts where SBC can play a key role in changing SLB's position or help those clients achieve their business objectives? • What SBC success would be worthy of mention in the quarterly analysts meeting? • How do you see the balance between offering products and services evolving in Schlumberger? Does the company need to make a major move such as IBM's recent sale of its PC division? • While Schlumberger's position on not taking equity stakes is clear, in what cases do you see the company as taking a degree of risk in the outcome of what we do and is this likely to change? • Where do you see Schlumberger as competing with the Supermajors? Is this likely to increase & how can this be managed? • When you meet the CEO's of Schlumberger's clients, has SBC come up in the discussions and, if so, what was said? • We feel we are working hard to achieve the ambition you have set for us, should there be a strategy for Schlumberger leveraging what we have to offer? • Management of the selection, development & implementation of technology is an area where our clients spend significant sums with our competitors. If SBC were to work in this area, how could we avoid conflicts with Schlumberger's interests? • We believe we understand your aims behind current changes in the balance of responsibilities between segments & geomarkets (Segments having the perspective to make the most out of limited resources in a rising market). Should we change how we work? Do these changes increase or decrease the role of account management? • We're aware that Schlumberger hasn't often recruited people with the experience/seniority that we have. What career paths beyond SBC should we have in mind when the time is right? • SBC's place in SIS reflects a number of factors. Do people outside SBC comment on this & suggest otherwise? Is there yet a longer term position in mind?

Andrew Gould’s presentation summary • SBC role in Schlumberger strategy: • Increase Schlumberger intimacy with clients • Consolidate our position with MRHs • Help clients better use technology through appropriate process & organization changes • SBC position • Stay independent, be objective, do your job • Be managed as a Business Consulting practice • Get business results, trust from OFS will then come

Bonus: decisions • Initial targets (as per September plan) are confirmed for PIP • Main focus is SBC level IBT, and Turbo for Directors & Principals will be solely linked to SBC IBT • Managers & Consultants financial objectives are mainly linked to their utilization level • Utilization includes days spent on approved internal projects & proposals, targets are higher than in 2004 • Personal objectives have to be closely linked to the competency development plan

Directors & Principals incentive plan

Managers & Consultants

Knowledge sharing: decisions • Tools • Create a zone dedicated to Principals • Simplify the web structure • Check if Google is searching confidential items • Organization • Create a centralized team in charge of KM in a low-cost country (Mexico, Malaysia…), with access to database, SLB resources… • Process • Build cost of document production in proposal • Make Knowledge capture a compulsory part of project closure • Use OFS CRM to get more visibility on clients

Communication: decisions • Get more awareness in trade magazines • Only approved speaker: Antoine • Announce Principals arrivals in trade & business press • No articles to be written this year • Publish 2 white papers • One NSA on Operations • One ECA on HR • Have a round of “Operations breakfasts” • Launch formally 2005 HR Forum and “HR Breakfasts”

Practices: way forward • Practices are the main way to share knowledge in SBC, their role in 2005 need to be re-enforced • Operations • Package a “Structured Discovery” offering to evaluate potential production uplift using Husky approach • Sell 2 discoveries in S1 • IT • Randy to take ownership of IT business opportunities & delivery in ECA • HR • Increase global animation of the Practice • Exploit 2004 HR Forum

Clients • 3 accounts are “key global priorities” • Sonatrach, Petrobras, Pemex • Petronas might be added later • Accounts to be coordinated globally • Shell (Peterson, Elmes), BP (Elmes, Willis), CoP (Tidd), ChevTex • Accounts with specific cross-area support required • Total, Sonatrach, Statoil • Other to be added as needed

Take away of the week • Collaborate! • SBC target clients • Practices • Knowledge sharing • Manage profit • Leverage • Pricing • Manage geomarkets professionally

Goods Business Best team in place Defined practices & offerings Repeat business with clients Good geographical coverage Link with GM & segments Right Business Model Basic processes in place (Finance & HR) Bads Profit Help between Principals Knowledge Management Resource sharing between Principals & areas Quality Process SBC situation after one year: an achievement, still fragile

An impressive growth rate, to be sustained

A profitability challenge

Approaching optimum utilization level

Revenue covering compensation costs

Decent order cover, but in the low side End of last year backlog was $3m

Planned Revenues vs. ActualsECA – 2004 – Million dollars, cumulated Note: Actuals include 280 000 USD of Inter-Area revenues and 60 000 USD of Projects for Schlumberger

Conclusions of 2004 activity • Activity in second semester is roughly flat: Gérald and Tony’s teams at full capacity • “Current” activity (as per Q4) is break-even: Gérald & Tony • Current Per-Diems are at the MINIMUM level for a sustainable activity, given the leverage of the CURRENT activity: 19 consultants staffed by 4 Principals (Gerald, Tony, Ian & Eric), i.e. leverage of 5 • NOCs strategy high short term pay-offs: Sonatrach, Sonangol, hopefully Statoil • Human Resources angle confirmed as a productive approach: Sonatrach, Sonangol, Romgaz

Key Delivery Priorities • Confirm ramp-up of team additions: 7 Principals with deep knowledge of O&G and senior Management Consulting experience – David, Farooq, Jean, Tim, Gavin, Jean Matthieu, Colin • Increase current Per-Diems • Continue ramp-up of RCM opportunities: Tony & Gavin, with support of David • Move into Operations Efficiency • Define strategies for IT, QHSE, Downstream

Geographic and Client Targets • Increase leverage of NOCs – Sonatrach, Sonangol, NOC, Statoil and 2 others to identify (Middle East, Africa, Russia): Gérald, Jean Matthieu, Farooq, Tim, Frank and all others • Approach Majors at Operating Subsidiaries – Nigeria, Lybia: Tim, Farooq • Cover Shell, BP & Total at HQ: Colin, David, Jean • Approach clients with SWAT teams of Principals working together, rather than with individuals

Move into Operations Efficiency • Seeing first opportunities on the radar: Gassco, Statoil, Sonangol • Skills become available: RCM, Gavin, ADL experience, new hires • Bring together “Asset Management”, Process/Organisation optimisation & I-Field to reduce the cost of operations (direct & overhead), and increase output • Create a Practice team to write Capability Pack and organise an ECA “Operations Day” with ECA principals

Develop NOCs and approach IOCs Subsidiaries • Apply “Piers Strategy”: Structured Roadshows with Antoine, 1 Director & 1 Principal • Target NOCs with “Gerald’s Strategy”: plant SBC tent in the courtyard and brew tea for 2 months • Enter with soft spots: organisation, HR… • Then extend to operations • Nigeria: Tim & David/Jean • Libya & Saudi Arabia: Farooq & Frank • Angola: Gerald, Colin & Eric • Algeria: Gerald, Jean Matthieu & Jean • Romania: Jean, Gabriel • Norway: Farooq & TBD • 2 additional high potential NOCs to be targeted/confirmed (Libya?)

Approach Clients with SWAT Teams of Principals • ECA Principals share quantitative targets for 2005: one for all and all for one • Implementation of “Client Service Teams” matrix (Barbizon updated) • Differentiation of Principals roles: Client Service Leader (coordination of initiatives, consolidation of account plans & numbers, organisation of account team meetings), Initiative Leader (in charge of projects or subsets of account), Support Leaders (contributors with knowledge or support time) • Flexible reallocation of client priorities of Principals, according to opportunities and developments • Every proposal or negotiation involves more than 1 Principal: 1 leader, and at least 1 in support • Every proposal distributed to selection of Principals/Directors for comments & suggestions

Current SWAT Teams for ECA

Key challenges • Ramp-up recruitment of Consultants and Managers at the RIGHT pace • Work together within & without ECA: leverage our differences, maintain some accountability while promoting cooperation and mutual assistance • Crack Middle East • Win the hearts of ECA GeoMarket Managers • Develop SBC image in Industry • Build a great team and have fun together

NSA – FY04 Highlights • Rapid, successful recruiting, Principal training, and market offering launch in Q1 • Very positive SBC “launches” and introductions in all geomarkets (NAM, MCA, LAN, PCE, VTT) • Established key SBC hubs in Houston, Mexico City, Rio, and Bogota • Good progress in driving fundamental business operational metrics toward sustained profitability, despite late start and Sema divestiture impacts • Pipeline • Signings/Backlog • Headcount • Utilization • Revenue • Larger opportunities were developed and signed • Shell MARS (~$1.5M, $4-5M for SLB, Peterson, Perino) • Pemex IT PMO (~$1.5M, Tidd) • Unocal QHSE (~$1.5M, Roopchand, Ongkwan) • Anadarko (>$1.5M, Tidd)

NSA – FY04 Highlights (Cont’d) Good progress in engaging client executive leadership to deliver strategic business improvements - examples

NSA – FY04 Highlights (Cont’d) • Good progress in developing diversified business covering targeted market offerings and competencies, with strengths to-date in • Operational Strategy, esp., • iField Business Transformation Strategy • Dynamic Asset Operations, esp., • Dynamic Production • Dynamic Drilling • Operational and Information Technology, esp., • KCM • Program Management • Organizational Enablement, esp., • Change Management • Good progress in driving strategic iField-related business • Active Engagements • Shell MARS (Peterson, Perino) • Husky iField Program Roll-out (Peterson, Johannson) • ConocoPhillips Real-time Drilling (Willis, Johannson, Tidd) • Chevron Texaco iField Program Strategy (Willis) • IMP Integrated Reservoir Management (Volkenborne, Willis, Peterson) • Near-term Opportunity Pursuits • Petrobras iField Strategy and Pilot (Marques, Willis) • ConocoPhillips Upstream Transformation Strategy (Tidd, Willis) • Shell Canada iField Strategy (Peterson, Youmans, Johannson) • Routine involvement and increasing leadership in iField-related pursuits (e.g., CVX RTDC, ONGC, Shell RTDC, Petrobras)

NSA – FY04 Highlights (Cont’d) • Good progress in engaging across all NSA geomarkets and across the full spectrum of client types • Clients • IOCs • ExxonMobil • Shell Group and SCL • ConocoPhillips • ChevronTexaco • Global Independents • Unocal • BCG • Regional Independents • Husky • Anadarko • MRHs and Govt Agencies • Pemex • Petrobras • Ecopetrol • NIOC • IPM • Trinidad Oil Ministry • ANH • Countries (Geomarkets) engaged • USA (USL) • Mexico (MCA) • Brazil (LAS) • Canada (CAN) • Columbia (PCE) • Trinidad (VTT)

NSA – FY04 Highlights (Cont’d) • Good progress in developing synergies with other OFS and SIS Segments • SBC is leading or contributing to major cross-segment (OFS, SIS) iField opportunities and initiatives with • Shell (MARS iField Pilot w/ SIS Products, RTDC w/ OFS D&M) • ChevronTexaco (Carthage iField Pilot w/ DCS, RTDC w/ OFS D&M) • ConocoPhillips (E&P IT Assessment w/ SIS IM , Real-time Drilling w/ OFS D&M, Upstream Transformation Strategy w/ SIS) • Petrobras (iField Program Strategy) • Husky (iField Production w/ OFS DCS) • SBC is adding new capabilities and value to major IM opportunities • Anadarko KCM (Program Strategy, Architecture, and Management) • Pemex IM (Complex Program Management, Change Management) • Pemex NDC and LiveQuest (Business Case Development, Process Optimization, Complex Program Management) • Pull from Geomarkets on internal improvement initiatives • OFS Canada (Brooks Wireline Business Improvement Strategy and Planning)

Bringing Value and Synergies to Schlumberger … “ the SBC team gives (us) a distinct differentiating advantage over the competition that our technology alone cannot provide…… Our clients see SBC as a means of helping them integrate and manage the change these innovative projects will bring to the private, commercial and government institutions …” - NSA SIS Operations … “ We believe that you (SBC) bring a complementary business improvement orientation and capability that we don’t have and we would like to bring that to our (Cassabe) project., … because we win when the client becomes more efficient” - NSA Business Development Manager, PCE … “ I think the Business Consulting engagement will gives us a change to influence the client’s requirements and develop the business value for the drilling center..” - D&M Product Champion … “ We’ve been trying to get this (iField) project going for a year and a half and have been stuck….Business Consulting was the key to getting it moving, again...” - DCS Business Development Manager, LAS

SBC NSA FY04 Operations Overview – Pipeline size and quality grew steadily and systematically with account penetration and geographic presence • Continued growth expected in 1H05 with growing presence in key LAM and CAN hubs • Increasing pipeline “quality” reflected in growing revenue outlook

SBC NSA FY04 Operations Overview – Monthly revenue and activity levels accelerated steadily through the year • “Earned” revenue accelerated steadily (ex., “vacation effects”), as size and number of engagements tripled from 1Q to 4Q • Experienced some “noise” in the revenue “actuals” as administrative, contracting, and revenue recognition processes got established • Best current information indicates that targeted profitability requires monthly revenue at ~$1.1M at current levels of utilization (ie., slightly above YE04 run rates)

Operating AreaIn 2004, we operated in South East Asia – the BMP, ING and TMV Geo-markets. Singapore OFS – Middle East and Asia Area Geo-markets

Internal dynamicsWe now enjoy strong support from these Geo-markets. • Initial resistance / legacy issues • Now enjoy Strong Backing from Geomarkets • Demand beyond our resources • Demand from Geomarkets where we do not have a presence • CHG, APG, INM • Developing Synergies with Geomarkets • High level relationships • Mutual Sales opportunities • Intellectual property development • Transfer of staff

OfferWe focused on the offers we were able to deliver – HR, QHSE, and strategy. • Offers • HR, organisation and capability related issues • QHSE • Strategy - Market related

ClientsWe targeted MRH’s and independents with the HR, QHSE and strategy offers. • Clients • Major Resource Holders • PTTEP • Petronas • Pertamina • Medco • Petrovietnam • Independents • Unocal • Premier • Hess • Kufpec • Cuu Long • JVPC

Schlumberger Business Consulting Principals meeting