BUSINESS REVIEW



                                                 First Quarter
                                         2008      2007 (1)    % change
                                             (Stated in millions)
              Oilfield Services
              Revenue                   $ 5,605   $    4,759         18 %
              Pretax Operating Income   $ 1,502   $    1,405          7 %

              WesternGeco
              Revenue                   $   676   $      706         (4 )%
              Pretax Operating Income   $   196   $      266        (26 )%

1. Effective January 1, 2008, a component of the Middle East & Asia Area was reallocated to the Europe/CIS/ Africa Area. 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. 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 as these items are not allocated to the segments.

Revenue for the first quarter of 2008 was $6.29 billion versus $5.46 billion for the same period last year. Income before income taxes and minority interest was $1.62 billion for the three-month period ending March 31, 2008 compared to $1.55 billion for the same period in 2007.

First-quarter revenue of $5.60 billion was 3% higher sequentially and 18% higher year-on-year. Sequential revenue increases were highest in the Canada, US Gulf Coast, South Russia, Australia/Papua New Guinea, West & South Africa and Alaska GeoMarkets*. In addition, double-digit growth rates were recorded by the North Russia, Thailand/Vietnam, Continental Europe and Caspian GeoMarkets. Among the Technologies, demand was strongest for Wireline, Drilling & Measurements, Well Services and Well Testing services. Sequential revenue also grew through inclusion of FRAMO revenue in the Europe/CIS/Africa Area following the acquisition, in the prior quarter, of a majority stake in the company. However, overall sequential growth was moderated by operational delays in the North Sea, project transitions and delays on Integrated Project Management (IPM) activities in Latin America, and seasonal weather-related reductions in the China/Japan/Korea GeoMarket. Lower sales of Schlumberger Information Solutions (SIS), Completions and Artificial Lift Systems products were also recorded following the seasonal highs of the prior quarter.

First-quarter pretax operating income of $1.50 billion decreased 2% sequentially but increased 7% year-on-year. Sequential growth was recorded through demand for high-margin Wireline and Drilling & Measurements services in the US Gulf Coast; strong demand for Wireline and Well Services technologies in Canada; and higher activity levels with a more favorable technology mix in East Mediterranean, Australia/Papua New Guinea and Thailand/Vietnam. However, this growth was more than offset by the impact of the seasonal land access restrictions in US West; a less favorable activity mix in the North Sea; project delays in Peru/Colombia/Ecuador; higher IPM project startup and third-party managed costs in Mexico/Central America; the weather-related slowdown in China/Japan/Korea; and an overall reduction in Completions and Artificial Lift Systems product sales together with reduced high-margin SIS sales across all Areas. These events resulted in an overall pretax operating margin of 26.8% compared to 28.2% in the fourth quarter of 2007 and 29.5% in the first quarter of 2007.

* Mark of Schlumberger

Year-on-year revenue increases were highest in the Europe/CIS/Africa Area led by the West & South Africa, North Russia and Continental Europe GeoMarkets, followed by the Middle East & Asia Area where growth was strongest in the Brunei/Malaysia/Philippines, East Mediterranean and Arabian GeoMarkets. In the Latin America Area, increases were led by Mexico/Central America followed by Brazil. The consolidation of FRAMO also contributed to the year-on-year increase. Growth was also recorded in North America led primarily by the Canada and US Gulf Coast GeoMarkets. Among Oilfield Services Technologies, double-digit growth rates were registered by SIS, IPM, Drilling & Measurements, Artificial Lift Systems, Wireline, Completions and Well Testing.

Year-on-year pretax operating income growth was driven by a more favorable activity mix in the Middle East & Asia, Europe/CIS/Africa and Latin America Areas. This growth was partially offset by pricing declines in well stimulation related activities in North America.

North America

Revenue of $1.42 billion increased 6% sequentially and 3% year-on-year. Pretax operating income of $363 million increased 7% sequentially but decreased 16% year-on-year.

Sequentially, the US Gulf Coast GeoMarket continued to grow following the return of deep-water rigs together with stronger demand for Wireline and Drilling & Measurements exploration services. Growth was also registered in Canada, resulting from a robust winter drilling season with high demand for Wireline and Well Services technologies, as well as in Alaska due to strong demand for exploration-related services. This performance was partially offset by the seasonal land access restrictions in US West, the impact of weather on operations in US North, and lower Completions and SIS product sales across the Area.

Pretax operating margin for the Area increased sequentially from 25.4% to 25.6% due to a more favorable exploration-driven activity mix and higher operating leverage in the US Gulf Coast, Canada and Alaska GeoMarkets. This was partially offset by a lower pricing environment for well-stimulation-related activities in US Central, lower efficiency in US West, and reduced Area-wide high-margin SIS product sales.

The year-on-year revenue growth was primarily due to a strong, exploration-driven, winter drilling season in Canada and higher deep-water activity in the US Gulf Coast. Alaska and US Central also experienced growth due to higher rig count. These increases were partially offset by the impact of the weather delays in US North and pricing declines in well-stimulation-related activities in US West.

Year-on-year pretax operating margins decreased from 31.4% to 25.6% primarily due to pricing declines in well stimulation related activities together with lower operating leverage in the US Land GeoMarkets.

Latin America

Revenue of $922 million decreased 2% sequentially but increased 27% year-on-year. Pretax operating income of $185 million decreased 11% sequentially but increased 14% year-on-year.

Sequential revenue growth was recorded in the Venezuela/Trinidad & Tobago GeoMarket due to higher demand for Drilling & Measurements, Wireline and Well Services technologies together with increased SIS product sales. However, this growth was more than offset by project transitions and delays in Peru/Colombia/Ecuador and Mexico/Central America, and lower Artificial Lift Systems and SIS product sales in Brazil.

Pretax operating margin declined sequentially from 22.1% to 20.1% primarily due to higher IPM project startup and third-party managed costs in the Mexico/Central America GeoMarket. An unfavorable activity mix in both Peru/Colombia/Ecuador and Brazil together with reduced high-margin SIS and Artificial Lift Systems product sales also contributed to this result.

Year-on-year growth in the Area was driven by the startup of IPM projects in Mexico/Central America; increased Completions product sales together with higher demand for Well Services, Well Testing and Wireline technologies in Brazil; exploration-driven growth in Peru/Columbia/Ecuador; and by higher SIS product sales together with increased demand for Wireline, Drilling & Measurements and Well Services technologies in Venezuela/Trinidad & Tobago.

Year-on-year pretax operating margin declined from 22.4% to 20.1% as increased demand for high-margin SIS products and for high-margin Wireline and Well Services technologies in Venezuela/Trinidad/Tobago was more than offset by higher startup costs together with increased contribution from low-margin third party managed services associated with IPM activities in Mexico/Central America.

Europe/CIS/Africa

Revenue of $1.9 billion increased 7% sequentially and 24% year-on-year. Pretax operating income of $500 million increased 1% sequentially and 16% year-on-year.

Sequential revenue growth was driven by higher Artificial Lift Systems product sales and increased market penetration for Well Services technologies in South Russia; strong demand for Well Services technologies in Continental Europe; higher demand for Drilling & Measurements technologies in West & South Africa and the Caspian; higher IPM and Drilling & Measurements activities in North Russia; and by the consolidation of FRAMO revenue. This was partially offset by operational delays in the North Sea GeoMarket, the seasonal impact of winter weather in East Russia, and lower SIS product sales across the Area.

Pretax operating margin declined sequentially from 28.0% to 26.3% due to an unfavorable activity mix in the North Sea, lower-margin Artificial Lift Systems product sales in South Russia, reduced high-margin Area-wide SIS product sales, and the effect of consolidation of FRAMO in the Area.

Year-on-year revenue growth increased due to higher demand for Drilling & Measurement services in West & South Africa, increased IPM project activities in North Russia and increased demand for Drilling & Measurements and Well Services technologies in Continental Europe. The consolidation of Tyumenpromgeofizika revenue following the completion of this acquisition, during the second quarter of 2007, together with the consolidation of FRAMO revenue also contributed to this increase.

Year-on-year pretax operating margin declined from 28.3% to 26.3%, primarily due to a reduction in high margin exploration activity, lower Drilling and Measurements margins in the North Sea on unfavorable weather conditions, and further reductions in Well Services in South Russia and the Caspian. The effect of the consolidation of FRAMO in the Area also contributed to the margin decline.

Middle East & Asia

Revenue of $1.32 billion decreased 2% sequentially but increased 22% year-on-year. Pretax operating income of $460 million decreased 2% sequentially but increased 24% year-on-year.

Sequentially, the Australia/Papua New Guinea GeoMarket grew with exploration-driven demand for Wireline and Well Testing services. Sequential growth was also registered in the Gulf, East Mediterranean and Thailand/Vietnam GeoMarkets with strong demand for Wireline, Well Testing and Well Services technologies. However, this performance was more than offset by the impact of winter weather in the China/Japan/Korea GeoMarket together with lower Completions and Artificial Lift Systems product sales across the Area.

The pretax operating margin of 34.9% was essentially flat compared to the prior quarter with a more favorable activity mix in the Australia/Papua New Guinea, East Mediterranean, Gulf and Thailand/Vietnam GeoMarkets being offset by the slowdown in China/Japan/Korea together with a lower-margin activity mix for Drilling & Measurements services in the Area.

Year-on-year revenue growth resulted from increased demand for Drilling & Measurements, Wireline and Well Testing technologies in Brunei/Malaysia/Philippines, China/Japan/Korea and East Mediterranean GeoMarkets. Strong double-digit growth rates were also recorded in Australia/Papua New Guinea, Qatar, and in India. In addition, higher demand for Wireline and Drilling & Measurements services in Indonesia, Arabian and Gulf GeoMarkets also contributed to this growth. This performance was partially offset by lower activity in Thailand/Vietnam.

Year-on-year pretax margin recorded a modest improvement due to increased overall activity coupled with a more favorable mix of high margin exploration activities in Brunei/Malaysia/Philippines, Australia/ Papua New Guinea and China/Japan/ Korea together with increased demand for high-margin Drilling & Measurements, Wireline and Well Testing technologies in East Mediterranean being partially offset by the lower activity in Thailand/Vietnam and lower operating leverage in India and the Arabian GeoMarket.

First-quarter revenue of $676 million decreased 15% over the prior quarter and 4% compared to the same period last year. Pretax operating income of $196 million decreased 28% sequentially and 26% year-on-year.

Sequentially, Marine revenue increased as both vessel utilization and productivity improved following the vessel dry-docks and the seasonal transits of the prior quarter. Data processing also recorded a sequential increase in revenue, but these increases were more than offset by a significant decrease in Multiclient revenue in North America following the record sales in the previous quarter. The Gulf of Mexico lease sale late in the first quarter, coupled with the increased cost of wide-azimuthal data sets that are fast becoming the norm for new multiclient purchases, delayed new sales activity until customers absorb the results of the March leasing round. Land revenue also declined following project completions in North Africa and lower demand in the Middle East.

Pretax operating margin declined sequentially from 34.1% to 29.1% as the increase in Marine was more than offset by the decline in high-margin Multiclient sales.

Year-on-year Marine revenue grew due to higher efficiency, increased pricing and the addition of the seventh Q-vessel in the fleet. Data Processing also recorded a growth primarily driven by increased demand in North America and Africa. However, these increases were more than offset by the decline in Multiclient sales in North America and lower crew count on Land.

Year-on-year pretax margin declined from 37.7% to 29.1% primarily due to reduced sales of high-margin multiclient data and the lower revenue on Land.

Interest & Other Income

Interest & other income consisted of the following for the first quarter of 2008
and 2007:



                                                             First Quarter
                                                             2008      2007
                                                              (Stated in
                                                               millions)
          Interest income                                  $     37    $  35
          Equity in net earnings of affiliated companies         65       49

                                                           $    102    $  84

Equity in Net Earnings of Affiliated Companies

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

Other

Gross margin was 30.7% and 33.7% in 2008 and 2007, respectively. The decrease in gross margin was driven by a less favorable activity mix, seasonal weather related effects and higher start-up and third party managed costs in IPM in Oilfield Services. Lower high-margin multiclient sales in WesternGeco also contributed to this result.

As a percentage of Revenue, Research & engineering, Marketing and General & administrative expenses for the first quarter of 2008 and 2007 were as follows:

                                                First Quarter
                                                2008       2007
                    Research & engineering        3.0 %     3.1 %
                    Marketing                     0.4 %     0.3 %
                    General & administrative      2.2 %     2.2 %

Research and engineering expenditures, by business segment for the first quarters of 2008 and 2007, were as follows:

                                              First Quarter
                                              2008      2007
                                               (Stated in
                                                millions)
                        Oilfield Services   $    159    $ 136
                        WesternGeco               28       27
                        Other                      4        4

                                            $    191    $ 167

The effective tax rate for the first quarter of 2008 was 19.1% compared to 24.0% for the same period in 2007. The decrease in the effective tax rate is primarily attributable to the geographic mix of earnings as both Oilfield Services and WesternGeco had a lower proportion of pretax earnings in North America. In addition, the favorable resolution of tax examinations in a number of countries also contributed to the decrease in the effective tax rate.

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 by
reflecting cash and investments that could be used to repay debt. Details of Net
Debt follow:



                                                   Mar. 31        Mar. 31
                                                    2008            2007
                                                   (Stated in millions)
            Net Debt, beginning of period        $    (1,857 )    $ (2,834 )
            Net income                                 1,338         1,181
            Excess of equity income                      (57 )         (49 )
            Depreciation and amortization (1)            517           441
            Increase in working capital                 (547 )        (568 )
            Capital expenditures (1)                    (832 )        (615 )
            Business acquisitions                        (24 )         (18 )
            Dividends paid                              (209 )        (147 )
            Proceeds from employee stock plans            79           184
            Stock repurchase program                    (564 )        (332 )
            Conversion of debentures                      47            -
            Translation effect on Net Debt               (25 )          (1 )
            Other                                        (22 )         (15 )

            Net Debt, end of period              $    (2,156 )    $ (2,773 )

(1) Includes Multiclient seismic data costs.

                                                     Mar. 31      Mar. 31      Dec. 31
  Components of Net Debt                               2008         2007         2007
                                                            (Stated in millions)
  Cash                                               $    145     $    135     $    197
  Short-term investments                                3,008        2,456        2,972
  Fixed income investments, held to maturity              424          216          440
  Bank loans and current portion of long-term debt     (1,273 )       (960 )     (1,318 )
  Convertible debentures                                 (722 )     (1,425 )       (769 )
  Other long-term debt                                 (3,738 )     (3,195 )     (3,379 )

                                                     $ (2,156 )   $ (2,773 )   $ (1,857 )

Key liquidity events during the first quarters of 2008 and 2007 included:

• On April 20, 2006, the Board of Directors of Schlumberger approved a share repurchase program of up to 40 million shares of its common stock to be acquired in the open market before April 2010, subject to market conditions, of which approximately 36.9 million shares of common stock have been repurchased as of March 31, 2008. It is expected that this share repurchase program will be completed during the second quarter of 2008. The following table summarizes the activity under this share repurchase program during the three months ended March 31, 2008 and 2007, respectively:

                           Total cost     Total number     Average
                           of shares       of shares      price paid
                           purchased       purchased      per share
                            (Stated in thousands, except per share
                                           amounts)
                  2008   $      564,302        6,953.3   $      81.16

                  2007   $      332,438        5,179.0   $      64.19

On April 17, 2008, the Board of Directors of Schlumberger approved an $8 billion share repurchase program for shares of its common stock to be acquired in the open market before December 31, 2011.

• Total dividends paid during the three months ended March 31, 2008 and 2007 were $209 million and $147 million, respectively. On January 18, 2008, Schlumberger announced that its Board of Directors approved a 20% increase in the quarterly dividend to $0.21 per share effective commencing with the dividend payable April 4, 2008.

• Cash flow provided by operations was $1.1 billion in the first quarter of 2008 compared to $1.0 billion in the first quarter of 2007. This improvement was primarily driven by the revenue and consequent net income increases experienced in the first quarter of 2008, partially offset by increases in working capital requirements.

• Capital expenditures, including multiclient seismic data costs, were $832 million in the first quarter of 2008 compared to $615 million during the first quarter of 2007. Capital expenditures, including multiclient seismic data costs, are expected to approach $4.2 billion in 2008.

FORWARD-LOOKING STATEMENTS

This report and other statements we make contain "forward-looking statements" within the meaning of the federal securities laws, which include any statements that are not historical facts, such as our forecasts or expectations regarding business outlook; growth for Schlumberger as a whole and for each of Oilfield Services and WesternGeco (and for specified products or geographic areas within each segment); oil and natural gas demand and production growth; Schlumberger's stock repurchase programs; and future results of operations. These statements are subject to risks and uncertainties, including, but not limited to, the global economy; changes in exploration and production spending by Schlumberger customers and changes in the level of oil and natural gas exploration and development; general economic and business conditions in key regions of the world; political and economic uncertainty and socio-political unrest; project start-up costs and third-party service costs; operational and new equipment delays; seasonal factors and weather-related events; and risks and uncertainties factors detailed in our most recent Form 10-K, this Form 10-Q and other filings that we make with the Securities and Exchange Commission. If one or more of these risks or uncertainties materialize (or the consequences of such a development changes), or should underlying assumptions prove incorrect, actual outcomes may vary materially from those forecasted or expected. Schlumberger disclaims any intention or obligation to update publicly or revise such statements, whether as a result of new information, future events or otherwise.