<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
ANNUAL REPORT
Pursuant to Section 15(d) of the Securities Exchange Act of 1934
For the Three Months Ended December 31, 1998
Commission File Number 001-04601
_______________
PRODUCTION OPERATORS THRIFT PLAN
(Full title of the plan)
_______________
SCHLUMBERGER LIMITED
(Name of issuer of the securities held pursuant
to the plan)
277 Park Avenue
New York, NY 10172-2066
(Address, including zip code, of principal
executive office)
(212) 350-9400
(Telephone number, including area code)
====================================================================
<PAGE>
PRODUCTION OPERATORS THRIFT PLAN
INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULES
____________________
<TABLE>
<CAPTION>
FINANCIAL STATEMENTS
<S> <C>
Page
----
Independent Auditors' Report..................................... 1
Statements of Net Assets Available for Benefits,
December 31, 1998 and September 30, 1998........................ 2
Statement of Changes in Net Assets Available for Benefits with
Fund Information, Three Months Ended December 31, 1998.......... 3
Notes to Financial Statements.................................... 4
____________________
SUPPLEMENTAL SCHEDULES
Schedule of Assets Held for Investment Purposes,
December 31, 1998............................................... 9
Schedule of Reportable Transactions, Three Months Ended
December 31, 1998............................................... 10
</TABLE>
All other schedules are omitted because they are not applicable, not required or
the information is included in the Notes to Financial Statements.
____________________
SIGNATURES
THE PLAN. Pursuant to the requirement of the Securities Exchange Act of 1934,
the trustees (or other persons who administer the employee benefit plan) have
caused this annual report to be signed on their behalf by the undersigned
hereunto duly authorized.
PRODUCTION OPERATORS THRIFT PLAN
BY /s/ J. CHRISTOPHER HOLLAND
--------------------------------
J. Christopher Holland
Secretary, Retirement Plan Committee
Date: June 11, 1999
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Retirement Plan Committee of the
Production Operators Thrift Plan:
We have audited the accompanying statements of net assets available for benefits
of the Production Operators Thrift Plan as of December 31, 1998 and September
30, 1998, and the related statement of changes in net assets available for
benefits for the three months ended December 31, 1998. These financial
statements are the responsibility of the Plan's management. Our responsibility
is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Production
Operators Thrift Plan as of December 31, 1998 and September 30, 1998, and the
changes in net assets available for benefits for the three months ended December
31, 1998, in conformity with generally accepted accounting principles.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules of assets
held for investment purposes and reportable transactions are presented for the
purpose of additional analysis and are not a required part of the basic
financial statements but are supplementary information required by the
Department of Labor's Rules and Regulations for Reporting and Disclosure under
the Employee Retirement Income Security Act of 1974. These supplemental
schedules are the responsibility of the Plan's management. The Fund Information
in the statement of changes in net assets available for benefits is presented
for purposes of additional analysis rather than to present the changes in net
assets available for plan benefits of each fund. The supplemental schedules and
Fund Information have been subjected to the auditing procedures applied in the
audits of the basic financial statements and, in our opinion, are fairly stated
in all material respects in relation to the basic financial statements taken as
a whole.
/s/ LARKIN, ERVIN & SHIRLEY, L.L.P.
Houston, Texas
June 11, 1999
-1-
<PAGE>
PRODUCTION OPERATORS THRIFT PLAN
Statements of Net Assets Available for Benefits
<TABLE>
<CAPTION>
December 31 September 30
1998 1998
------------------ ------------------
<S> <C> <C>
Assets
Investments:
At fair value -
Registered investment company shares:
IDS International Fund $ 27,198 $ 4,151
IDS New Dimensions Fund 5,831,555 4,695,161
IDS Mutual Fund 3,251,966 2,888,506
IDS Federal Income Fund 559,757 294,557
AIM Constellation Fund 798,965 626,383
Schlumberger Stock Fund 55,525 1,511
Participant notes receivable 1,114,147 1,014,866
------------------ ------------------
11,639,113 9,525,135
------------------ ------------------
At contract value -
AET Equity Index Fund I 9,956,645 8,236,266
AET Income Fund II 5,107,977 5,341,613
------------------ ------------------
15,064,622 13,577,879
------------------ ------------------
Total investments 26,703,735 23,103,014
Other assets - -
------------------ ------------------
Total assets 26,703,735 23,103,014
Liabilities
Total liabilities - -
------------------ ------------------
Net assets available for benefits $ 26,703,735 $ 23,103,014
================== ==================
</TABLE>
The accompanying notes are an integral
part of these financial statements.
-2-
<PAGE>
PRODUCTION OPERATORS THRIFT PLAN
Statement of Changes in Net Assets Available for Benefits
with Fund Information
For the Three Months Ended December 31, 1998
<TABLE>
<CAPTION>
IDS IDS New IDS IDS AIM
International Dimensions Mutual Federal Constellation
Fund Fund Fund Income Fund Fund
---------------- ------------- ------------ -------------- ----------------
<S> <C> <C> <C> <C> <C>
Additions
Additions to net assets attributed to:
Investment income
Net appreciation/(depreciation) in
fair value of investments $ 2,076 $ 794,584 $ (57,055) $ (11,160) $ 135,766
Interest - - - - -
Dividends 444 335,366 357,272 12,725 19,597
---------------- ------------- ------------ -------------- ----------------
2,520 1,129,950 300,217 1,565 155,363
---------------- ------------- ------------ -------------- ----------------
Contributions
Participants' 19,700 81,491 63,813 7,168 32,490
Employer's 747 20,283 11,575 2,514 4,435
---------------- ------------- ------------ -------------- ----------------
20,447 101,774 75,388 9,682 36,925
---------------- ------------- ------------ -------------- ----------------
Total additions 22,967 1,231,724 375,605 11,247 192,288
---------------- ------------- ------------ -------------- ----------------
Deductions
Deductions from net assets attributable to:
Benefits paid to participants - 37,186 13,211 - 93
Administrative expenses 3 205 113 17 36
---------------- ------------- ------------ -------------- ----------------
Total deductions 3 37,391 13,324 17 129
---------------- ------------- ------------ -------------- ----------------
Net increase/(decrease) prior to
interfund transfers 22,964 1,194,333 362,281 11,230 192,159
Interfund transfers 83 (57,939) 1,179 253,970 (19,577)
---------------- ------------- ------------ -------------- ----------------
Net increase/(decrease) 23,047 1,136,394 363,460 265,200 172,582
Net assets available for benefits:
Beginning of year 4,151 4,695,161 2,888,506 294,557 626,383
---------------- ------------- ------------ -------------- ----------------
End of year $ 27,198 $ 5,831,555 $ 3,251,966 $ 559,757 $ 798,965
================ ============= ============ ============== ================
</TABLE>
<TABLE>
<CAPTION>
AET AET
Equity Index Income Schlumberger Participant
Fund I Fund II Stock Fund Notes Total
--------------- ------------ -------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Additions
Additions to net assets attributed to:
Investment income
Net appreciation/(depreciation) in
fair value of investments $ 1,741,346 $ 75,274 $ (6,212) $ - $ 2,674,619
Interest - - - 24,898 24,898
Dividends - - 183 - 725,587
--------------- ------------ -------------- ------------- -------------
1,741,346 75,274 (6,029) 24,898 3,425,104
--------------- ------------ -------------- ------------- -------------
Contributions
Participants' 221,923 52,870 3,402 - 482,857
Employer's 27,312 17,020 964 - 84,850
--------------- ------------ -------------- ------------- -------------
249,235 69,890 4,366 - 567,707
--------------- ------------ -------------- ------------- -------------
Total additions 1,990,581 145,164 (1,663) 24,898 3,992,811
--------------- ------------ -------------- ------------- -------------
Deductions
Deductions from net assets attributable to:
Benefits paid to participants 39,293 290,621 - 10,787 391,191
Administrative expenses 284 236 5 - 899
--------------- ------------ -------------- ------------- -------------
Total deductions 39,577 290,857 5 10,787 392,090
--------------- ------------ -------------- ------------- -------------
Net increase/(decrease) prior to
interfund transfers 1,951,004 (145,693) (1,668) 14,111 3,600,721
Interfund transfers (230,625) (87,943) 55,682 85,170 -
--------------- ------------ -------------- ------------- -------------
Net increase/(decrease) 1,720,379 (233,636) 54,014 99,281 3,600,721
Net assets available for benefits:
Beginning of year 8,236,266 5,341,613 1,511 1,014,866 23,103,014
--------------- ------------ -------------- ------------- -------------
End of year $ 9,956,645 $ 5,107,977 $ 55,525 $ 1,114,147 $ 26,703,735
=============== ============ ============== ============= =============
</TABLE>
The accompanying notes are an integral
part of these financial statements.
-3-
<PAGE>
PRODUCTION OPERATORS THRIFT PLAN
Notes to Financial Statements
December 31, 1998
NOTE 1 - DESCRIPTION OF THE PLAN
The Production Operators Thrift Plan (the "Plan"), a defined contribution plan,
was established on July 1, 1974. It covers substantially all domestic employees
and certain employees in foreign service of Production Operators, Inc. (the
"Company"). The following description of the Plan and Plan Amendments is
provided for general purposes only. Participants should refer to the Plan
Document, as amended, for more complete information.
General
Administration of the Plan is conducted by a committee consisting of no less
than three members appointed by the board of directors of the Company. The Plan
was amended and restated effective July 1, 1998, to become the mirror image of
two other defined contribution plans sponsored by Camco International Inc. (see
Note 2 - Corporate Structure and Continuation of Plan). On that date, American
Express Trust Company ("American Express") succeeded Fidelity Management Trust
Company ("Fidelity") as asset custodian and record keeper for the Plan, and the
board of directors appointed two officers of the Company to succeed Fidelity as
Trustees for the Plan. Concomitantly, the end of the Plan's fiscal year was
changed from September 30 to December 31 for fiscal years beginning after
October 1, 1998, so that after December 31, 1998, the Plan's fiscal year will
coincide with the calendar year.
Eligibility and Vesting
Prior to July 1, 1998, employees were eligible to participate in the Plan on the
first day of the next calendar quarter after one year of service, provided they
had completed one thousand hours of service. Participants were fully vested in
their contributions and the related earnings/losses. Participants were not
vested in Company matching contributions and related earnings/losses until they
had completed five years of service.
On July 1, 1998, and thereafter, employees are eligible to participate in the
Plan after completing one hour of service. Participants continue to be fully
vested in their contributions and the related earnings/losses. Participants
vest in Company matching contributions and related earnings/losses at 20% per
year, becoming fully vested after five years of service. In the event the Plan
is partially or completely terminated, all participants will become 100% vested
in their account balances.
Contributions
Prior to July 1, 1998, participants could elect to defer from 1% to 15% of their
compensation on a pre-tax basis, subject to maximum annual contributions of
$10,000 ($9,500 in 1997), and have the Company contribute to the Plan on their
behalf the amount so deferred. The Company made matching contributions of 50%
of the participants' first 6% of pre-tax contributions. Participants' accounts
also
-4-
<PAGE>
included frozen after-tax contributions made by participants to the Production
Operators, Inc. Profit Sharing Plan, that was merged into the Plan on October 1,
1996.
On July 1, 1998, and thereafter, participants could continue to elect to defer
from 1% to 15% of their compensation on a pre-tax basis, subject to maximum
annual contributions of $10,000, and have the Company contribute to the Plan on
their behalf the amount so deferred. After-tax contributions of up to 10% of
compensation also became permitted. The Company matching contributions of 50%
of participants' pre-tax contributions became subject to a maximum contribution
amount of $1,500 per year.
Expenses
Prior to July 1, 1998, administrative expenses incurred by the Trustee and
record keeper were paid by the Plan participants. On July 1, 1998, and
thereafter, the accounts of participants have been charged fees of $2.50 per
quarter, which have been applied to the cost of administering the Plan, and the
Company has paid all administrative expenses in excess of these fees.
Transaction fees are also charged for participant loans, withdrawals and
distributions.
Withdrawals
All after-tax contributions may be withdrawn by participants by making written
application to the Plan's record keeper. Company matching contributions, pre-
tax contributions and rollover contributions may be withdrawn after the
participant has attained age 59-1/2 or if the participant suffers an immediate
and heavy financial hardship that cannot be satisfied from other reasonably
available resources. Additionally, Company matching contributions may be
withdrawn only if they have been credited to a participant's account for more
than two years. Prior to July 1, 1998, no more than one withdrawal could be
made during any Plan Year. On July 1, 1998, and thereafter, withdrawals are
permitted once each calendar quarter.
Loans
Participants may borrow a portion of their account balance to relieve a
financial hardship or for any other suitable purpose. Loan amounts are limited
in accordance with a formula based on 50% of the present value of a
participant's vested account balance, not to exceed $50,000. Loans must be
repaid within five years and are secured by the participant's account balance.
Forfeitures
Participants who terminate employment forfeit the non-vested portion of their
account. Forfeited amounts will be restored for former participants who resume
employment if they repay, within five years, the full amount of termination
distribution they received. Amounts forfeited are used first to restore
accounts, as above, and then to reduce Company contributions.
NOTE 2 - CORPORATE STRUCTURE AND CONTINUATION OF PLAN
Production Operators, Inc. is a wholly owned subsidiary of Production Operators
Corp. On June 13, 1997, Production Operators Corp. merged into Camco
International Inc. ("Camco"). On August 31, 1998, Camco merged into
Schlumberger Technology Corporation ("STC"), a wholly owned subsidiary
-5-
<PAGE>
of Schlumberger Limited ("Schlumberger"). Schlumberger maintains defined
contribution plans similar to the Plan and expects to merge the Plan into a
Schlumberger plan before the end of 2001. Nevertheless, the Company has reserved
the right to terminate the Plan at any time by resolution of the board of
directors.
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The financial statements of the Plan are presented on the accrual basis of
accounting in compliance with generally accepted accounting principles. Certain
reclassifications have been made to prior year balances to conform to current
year financial statement presentation.
The preparation of financial statements in conformity with generally accepted
accounting principles requires the Plan administrator to make estimates and
assumptions that affect certain reported amounts and disclosures. Accordingly,
actual results may differ from those estimates.
Investments in registered investment companies (mutual funds) are valued at
quoted market prices. American Express Trust Equity Index Fund I and American
Express Trust Income Fund II are collective trusts stated at contract value.
Units of the Schlumberger Stock Fund, invested primarily in Schlumberger common
stock, but also in cash or cash equivalents to provide liquidity, are valued
using quoted market prices for the common stock. Gains and losses on the sale
of investments were calculated using the first-in-first-out (FIFO) method.
NOTE 4 - INVESTMENT PROGRAMS
Participants may invest their account balances and all contributions made to
their accounts in the investment choices described below. Investments may be
made in one or more of the funds in 1% increments and choices may be changed any
business day. The number of participants investing in each fund at December 31,
1998, is shown parenthetically.
IDS International Fund (14 participants)
A specialty growth fund for aggressive investors whose objective is
long-term growth of capital that invests in common stocks of foreign
companies.
IDS New Dimensions Fund (205 participants)
A growth fund for aggressive investors whose objective is long-term
growth of capital that invests in a portfolio of company stocks in
which powerful economic and/or technical changes may take place.
IDS Mutual Fund (163 participants)
A growth and income fund for investors with moderate tolerance for
risk whose objective is balance of growth of capital and current
income that invests in a portfolio of common and preferred stocks and
bonds.
IDS Federal Income Fund (32 participants)
-6-
<PAGE>
An income fund for conservative investors whose objective is current
income and preservation of capital that invests in a portfolio of
U.S. government and government agency securities.
AIM Constellation Fund (69 participants)
A growth fund for aggressive investors whose objective is capital
appreciation primarily through investments in common stocks with
emphasis on medium-sized and smaller emerging growth companies.
American Express Trust Equity Index Fund I (239 participants)
A growth fund for aggressive investors whose objective is to achieve a
rate of return as close as possible to the return of the Standard &
Poor's 500 Index that employs a passive portfolio structuring and
stock selecting strategy by investing primarily in common stocks of
the S&P 500 Index.
American Express Trust Income Fund II (150 participants)
A stable capital fund for conservative investors whose objective is to
preserve principal and income while maximizing current income that
invests in investment contracts and stable value contracts.
Schlumberger Stock Fund (17 participants)
A stock fund for aggressive investors whose objective is growth of
capital and dividend income that invests in Schlumberger common stock.
Participants may invest no more than 25% of their account balances
and/or contributions in this fund. See Note 6, below.
NOTE 5 - REGULATORY STATUS OF THE PLAN
In a determination letter dated March 12, 1996, the Internal Revenue Service
(the "IRS") stated that the Plan met the requirements of Section 401(a) of the
Internal Revenue Code of 1986, as amended (the "Code"), and that the trust
established thereunder was entitled to exemption from federal income tax under
the provisions of Section 501(a) of the Code. Company matching contributions
will not be required to be included in participants' taxable income until they
are distributed to the participants.
Shortly after the 1997 merger of the Company into Camco, the Plan was
extensively reviewed incident to an internal audit of all the Company's employee
benefit plans. As a result, a determination was made that the Production
Operators, Inc. Profit Sharing Plan (Note 1) should have been terminated as of
September 30, 1989, and the account balances of all participants should have
become 100% vested at that time. The Profit Sharing Plan was not terminated
until September 30, 1996, at which time, remaining participant account balances
were merged into the Plan. Thus, potential operational defects of the Profit
Sharing Plan have been brought forward into the Plan.
The Plan Administrator and the Plan's tax counsel believe that all Profit
Sharing Plan participants who terminated employment after September 30, 1989,
and suffered a forfeiture of a portion of their account balance due to
incomplete vesting are entitled to payment of the amounts so forfeited. The
Company
-7-
<PAGE>
intends to seek relief for the Plan under the IRS's Walk-in Closing Agreement
Program. The Plan Administrator and the Plan's tax counsel believe that the
Company will be able to obtain an agreement with the IRS incorporating the steps
necessary to correct the defects described above, to include payment by the
Company of the amounts forfeited along with earnings on the forfeited amounts
imputed from the date of forfeiture. The amount of the required payments has not
yet been quantified. However, the Plan Administrator believes the effect on the
Plan Financial Statements will not be material.
As indicated above in Note 1, the Plan was amended and restated effective July
1, 1998, to become the mirror image of two other defined contribution plans
sponsored by Camco International Inc. These other plans received favorable
determination letters from the IRS dated February 12 and February 19, 1998.
Although a separate request for an IRS redetermination for the Plan has not been
made, the Plan administrator and the Plan's counsel believe that the Plan
currently is designed and being operated in compliance with the applicable
requirements of the Code. They believe, therefore, subject to obtaining the
agreement with the IRS noted in the paragraph above, that the Plan was qualified
and the related trust was tax-exempt as of the financial statement date. The
Plan is also in compliance with the provisions of the ERISA.
NOTE 6 - SUBSEQUENT EVENT
The Company has been the plan sponsor of the Production Operators Employee Stock
Ownership Plan (the "ESOP"). Based on a careful study and analysis of the ESOP
following the merger described in Note 2 of Production Operators into Camco, the
Company determined that the ESOP did not integrate well with plans sponsored by
Camco. Accordingly, on February 23, 1999, the ESOP was merged into the Plan,
retroactively effective to September 30, 1998, by transferring 566,053 shares of
Schlumberger common shares with a September 30, 1998 market value of
approximately $28,800,000 from the ESOP's custodian to American Express. Each
ESOP participant's share of the ESOP was credited to their Plan accounts and
invested in the Schlumberger Stock Fund. The Plan's 25% limit on investments in
the Schlumberger Stock Fund was waived by the Plan's administrative committee
for the ESOP transfers.
-8-
<PAGE>
Line 27a - Schedule of Assets Held for Investment Purposes
Production Operators Thrift Plan
EIN: 74-1622039; P/N 002
December 31, 1998
<TABLE>
<CAPTION>
(c)
Description of investment
(b) including maturity date,
Identity of issue, rate of interest, (e)
borrower, lessor, or collateral, par or (d) Current
(a) similar party maturity value Cost value
- --- ------------------------------- ------------------------------- --------------- ---------------
<S> <C> <C> <C> <C>
Participant loans 9.25% - 10.0% interest $ - $ 1,114,147
Employer common stock
Schlumberger Stock Fund 3,516 units 61,763 55,525
Common/collective trusts:
AET Equity Index Fund I 284,346 shares 9,203,550 9,956,645
AET Income Fund II 276,975 shares 4,967,133 5,107,977
Registered investment
companies:
IDS International Fund 2,350 shares 25,753 27,198
IDS New Dimensions Fund 202,169 shares 5,686,182 5,831,555
IDS Mutual Fund 249,690 shares 3,555,724 3,251,966
IDS Federal Income Fund 110,953 shares 565,184 559,757
AIM Constellation Fund 26,178 shares 778,522 798,965
--------------- ---------------
$ 24,843,811 $ 26,703,735
=============== ===============
</TABLE>
-9-
<PAGE>
Line 27d - Schedule of Reportable Transactions
Production Operators Thrift Plan
EIN: 74-1622039; P/N 002
For the Three Months Ended December 31, 1998
<TABLE>
<CAPTION>
(a) (c) (d) (i)
Identity of (b) Purchase Selling Net gain
party involved Description of asset price price or (loss)
- -------------------------- -------------------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Employer common stock
Schlumberger Stock Fund 14 purchases, 1 sale $ 60,231 $ 5 $ (1)
Common/collective trusts:
AET Equity Index Fund I 10 purchases, 18 sales 382,658 403,625 (12,281)
AET Income Fund II 10 purchases, 17 sales 149,372 458,282 8,844
Registered investment
companies:
IDS International Fund 14 purchases, 1 sale 20,974 3 (1)
IDS New Dimensions Fund 11 purchases, 19 sales 437,458 95,648 (11,334)
IDS Mutual Fund 15 purchases, 11 sales 462,376 41,861 (1,445)
IDS Federal Income Fund 17 purchases, 1 sale 276,376 17 -
AIM Constellation Fund 14 purchases, 5 sales 58,202 21,387 (4,981)
-------------- -------------- --------------
$ 1,847,647 $ 1,020,828 $ (21,199)
============== ============== ==============
</TABLE>
-10-
<PAGE>
EXHIBIT INDEX
Exhibit
No. Description
- ------- -----------
23 -- Consent of Larkin, Ervin & Shirley, L.L.P.
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 of Schlumberger Limited filed concurrently herewith of our
report dated June 11, 1999, appearing in this Annual Report on Form 11-K of the
Production Operators Thrift Plan for the period ended December 31, 1998.
/s/ LARKIN, ERVIN & SHIRLEY, L.L.P.
Houston, Texas
June 28, 1999
