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SLB, formerly known as Schlumberger Limited, is a global technology company dedicated to advancing energy innovation and supporting the energy transition. Operating in over 100 countries, SLB is organized into four main divisions: Digital & Integration, Reservoir Performance, Well Construction, and Production Systems . The company offers a range of products and services designed to enhance energy efficiency, optimize reservoir productivity, and improve well and production systems . In 2023, SLB's international operations represented a significant portion of its revenue, underscoring its global reach .
- Reservoir Performance - Focuses on reservoir-centric technologies and services to optimize reservoir productivity and performance, developing technologies for evaluating, intervening, and stimulating reservoirs to maximize return on investment .
- Well Construction - Offers a comprehensive portfolio of products and services aimed at optimizing well placement and performance, maximizing drilling efficiency, and improving wellbore assurance .
- Production Systems - Develops technologies and provides expertise to enhance production and recovery from subsurface reservoirs to the surface, into pipelines, and to refineries, including artificial lift, completions equipment, surface systems, valves, processing solutions, and OneSubsea integrated solutions for the subsea market .
- Digital & Integration - Combines SLB's digital solutions and data products with its Asset Performance Solutions (APS) to enhance performance by reducing cycle times, accelerating returns, and lowering costs and carbon emissions, including digital solutions, exploration data, and data processing services .
What went well
- SLB's strategic investments in production recovery technologies are yielding visible growth, with production systems expected to have positive growth driven by production recovery. This area is anticipated to outpace growth in exploration and development in 2025 and beyond, providing a strong long-term earnings potential. SLB is very positive that this will become a long-term earnings potential, becoming a significant part of their mix.
- Despite a flat revenue outlook for 2025, SLB expects to maintain or exceed 2024 adjusted EBITDA levels due to positive growth in production systems, reservoir performance, digital integration, and effective cost management. This demonstrates the company's resilience in challenging market conditions and ability to deliver strong financial performance.
- SLB is well-positioned to benefit from future growth opportunities in the Middle East and deepwater projects. The Middle East remains a bright spot with commitments to expand oil and gas capacity, offsetting declines elsewhere. Additionally, deepwater projects are expected to ramp up in 2026 and 2027, with multiple FIDs (Final Investment Decisions) pending in regions like Suriname, Namibia, and Southeast China, positioning SLB for future growth.
What went wrong
- SLB anticipates flat revenue in 2025 on a stand-alone basis, indicating limited growth prospects in the near term.
- Declines in certain regions, such as Mexico, where "activity will decline and has already declined", may offset growth in other regions and impact overall performance.
- The well construction segment is expected to decline in 2025, which may offset growth in other segments and potentially affect profitability.
Q&A Summary
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2025 Revenue Outlook
Q: Is 2025 revenue expected to be flat, with adjusted EBITDA at or above 2024 levels?
A: Management confirmed they expect flat revenue for 2025 on a stand-alone basis, with adjusted EBITDA at or above 2024 levels, excluding the impact of the ChampionX acquisition. -
Share Repurchase Program
Q: How will the accelerated share repurchase program affect returns to shareholders?
A: The company paid $2.3 billion upfront to accelerate share repurchases, removing approximately 48 million shares from the outstanding count. This is part of returning at least $4 billion to shareholders in 2025, with potential to exceed this amount depending on free cash flow and M&A opportunities. -
Production Systems Growth
Q: What is the growth outlook for the production-driven business, including ChampionX?
A: Management expects positive growth in production systems, driven by production recovery. They anticipate growth to be high single-digit to low double-digit, outpacing exploration and development in 2025. Investments in technology, portfolio expansion, and the integration of ChampionX will contribute to this growth. -
International Activity Outlook
Q: Is international activity expected to improve sequentially or be second-half weighted?
A: A typical pattern is expected, with a low first quarter, followed by a rebound. Activity will be higher in H2, with potential upside from deepwater projects emerging later in the year. -
Russia Operations and Sanctions
Q: What is the impact of sanctions on Russia operations and revenue contribution?
A: Revenue from Russia has declined to 4% of global revenue in 2024, down from 5% the previous year. The company has curtailed activities and believes their measures align with new U.S. sanctions. -
Low Carbon Solutions Growth
Q: How is growth in low carbon solutions and new energy segments expected in 2025?
A: New energy activities generated more than $850 million in 2024 and are growing faster than the core business. Significant growth is expected, particularly in carbon capture and sequestration, geothermal, and data center infrastructure solutions. -
Digital Business Outlook
Q: Is there an update on isolating the value of the digital business and its outlook?
A: Management is confident in the digital business's growth, anticipating it to continue growing above and beyond the upstream market spend. They plan to provide more details on performance, margins, and capital in the coming months. Growth will be driven by cloud transitions and AI capabilities. -
Pricing Dynamics
Q: Are there concerns about pricing softening in 2025, affecting margins?
A: Management expects pricing to be resilient, supported by a disciplined market and high international activity levels. They remain constructive, leveraging performance technology and integration capabilities to defend and support pricing. -
Cost Structure Optimization
Q: Is there an opportunity to reduce costs to improve margins?
A: The company has executed cost-out programs that supported margin expansion in 2024. They will continue to monitor and adjust resources, using digital tools to extract efficiencies and enhance margins. -
International Upside Regions
Q: Which regions have the most upside and downside in the international outlook?
A: The Middle East is a bright spot, with ongoing commitments to expand oil capacity and gas production in countries like UAE, Iraq, and Kuwait, offsetting declines in other areas. Deepwater opportunities in Suriname, Namibia, Indonesia, and Southeast China are also expected to contribute to long-term growth.
Guidance Changes
Annual guidance for FY 2025:
- Revenue: Flat revenue growth globally (no prior guidance)
- Adjusted EBITDA: Expected to be at or above FY 2024 levels, excluding the impact of the ChampionX acquisition (no prior guidance)
- Capital Investments: $2.3 billion (no prior guidance)
- Shareholder Returns: Minimum of $4 billion (no change from prior guidance of $4 billion )
- ChampionX Transaction: Expected to close before the end of Q1 2025 (no prior guidance)
- Palliser FPS Project Divestiture: Expected to close in the next few months (no prior guidance)
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Given the cautious approach to discretionary short-cycle spending and the expectation of low to mid-single-digit growth in international upstream spending in 2025, how confident are you in delivering further margin expansion, and what specific strategies will you employ to achieve this in a potentially flat revenue environment?
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With the integration of ChampionX now anticipated to close in the first quarter of 2025, have any new challenges emerged that could impact the expected synergies, and can you provide more detail on how this acquisition will enhance your financial performance amidst evolving market conditions?
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Considering the ongoing pressures from commodity price fluctuations and concerns over an oversupplied market, how are you adjusting your strategy in North America where activity remains constrained, and what specific measures are you taking to mitigate the impact on your revenues and margins in this region?
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Your digital business has shown strong growth, but as upstream spending potentially slows, how sensitive is your digital revenue growth to reductions in upstream investment, and can you quantify the potential impact on your digital growth trajectory?
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With the planned sale of the Palliser asset, which contributes approximately $500 million in annual revenue, how do you plan to offset the loss of this revenue in the long term, and what impact will this divestment have on your production capacity and earnings volatility?
Q3 2024 Earnings Call
- Issued Period: Q3 2024
- Guided Period: Q4 2024 and FY 2024, with early thoughts on FY 2025
- Guidance:
- Full Year 2024 Adjusted EBITDA Margins: Expected to be at or above 25% .
- 2025 Outlook:
- International Upstream Spending: Expected to grow in the low to mid-single digits .
- North America Spending: Expected to be flat to slightly down .
- Digital Business Revenue Growth: On pace to achieve full year revenue growth in the high teens .
- Digital Revenue Target for 2025: Aiming for approximately $3 billion .
- Capital Investments for Full Year 2024: Expected to be approximately $2.6 billion .
- Shareholder Returns:
- Expects to exceed the previous commitment to return $3 billion to shareholders in 2024 .
- Reaffirms a minimum of $4 billion in returns to shareholders in 2025 .
Q2 2024 Earnings Call
- Issued Period: Q2 2024
- Guided Period: FY 2024, with expectations for Q3 2024 and Q4 2024
- Guidance:
- Full Year Adjusted EBITDA Growth: Expected to be in the range of 14% to 15% .
- Full Year Adjusted EBITDA Margins: Expected to be at or above 25% .
- Third Quarter Revenue Growth: Expected to be sequential growth in the low single digits, with further margin expansion .
- Fourth Quarter: Anticipated acceleration in top-line growth and an uptick in margin expansion due to seasonally higher year-end digital and product sales .
- Cash Flow: Expected to generate higher EBITDA and strong cash flows in the second half of the year, supporting full-year commitments .
- Returns to Shareholders: Continued commitment to return capital to shareholders, with a total of $3 billion in returns planned for 2024 .
- Capital Investments: Expected to be approximately $2.6 billion for the full year .
Q1 2024 Earnings Call
- Issued Period: Q1 2024
- Guided Period: FY 2024
- Guidance:
- Revenue Growth: Sequential revenue growth internationally in the mid-single digits and in North America in the low single digits for the second quarter .
- Adjusted EBITDA Margins: Anticipate expanding adjusted EBITDA margins by 75 to 100 basis points in the second quarter .
- Digital Revenue Growth: Aiming to grow digital revenue in the high teens for the full year .
- Capital Investments: Expected to be approximately $2.6 billion for the full year .
- Total Returns of Capital to Shareholders: Raised 2024 targets for total returns of capital to shareholders from $2.5 billion to $3 billion, evenly split between dividends and share repurchases .
- Free Cash Flow: Expected to be higher in the second quarter and to continue increasing in the third and fourth quarters .
- North America Growth: Muted but positive growth expected for the full year, with international growth offsetting slower growth in North America .
- Well Construction Margins: Margin expansion expected for the full year, despite lower activity in North America .
Q4 2023 Earnings Call
- Issued Period: Q4 2023
- Guided Period: FY 2024
- Guidance:
- Revenue Growth:
- International markets expected to see full-year revenue growth reaching the mid-teens, led by the Middle East, Asia, Europe, and Africa .
- North America expected to achieve full-year revenue growth in the mid-single digits .
- EBITDA Growth: Anticipates adjusted EBITDA growth in the mid-teens for 2024 compared to 2023 .
- Margin Expansion: Continued margin expansion expected, driven by sustained operating leverage, a favorable geographic mix, and pricing tailwinds .
- Capital Investments: Expected to remain at approximately the same level as in 2023 .
- Cash Flow and Shareholder Returns: Aims to return more than $2.5 billion to shareholders in 2024 through dividends and share repurchases, an increase of more than 25% compared to 2023 .
- Divisional Growth:
- All core divisions expected to grow, led by production systems and reservoir performance .
- Digital integration expected to grow, with digital revenue growing in the high teens .
- Subsea Bookings: Expects to deliver more than $4 billion in additional subsea bookings in 2024, an increase of more than 25% year-on-year .
- First Quarter 2024: Anticipates year-on-year revenue growth in the low teens and EBITDA growth in the mid-teens .
- Revenue Growth: