SLB LIMITED/NV Q4 FY2024 earnings call

Management Statement and Operational Highlights

• Fourth Quarter and Full Year Results: Concluded the year with solid earnings and free cash flow, growing revenue sequentially and year-on-year with cycle-high margins. Strong in Middle East (UAE, Iraq, Kuwait, Qatar) and North America (U.S. land and Gulf of Mexico digital sales), resilient despite declines in Saudi Arabia and Mexico. Full-year adjusted EBITDA margin was 25%, free cash flow was $4 billion, and $3.3 billion returned to shareholders.
• Macro Environment: Customers adopted a cautious approach due to oil oversupply concerns, but oil supply imbalance expected to abate; global upstream investment steady in 2025 with mixed growth across regions.
• 2025 Activity Outlook: International markets have mixed growth; North America oil/gas activity to decline but data center solutions growing. Core divisions: Digital & Integration steady, Core flat with modest growth in Production Systems and Reservoir Performance offsetting Well Construction declines.
• SLB's Position: Diversified portfolio, digital leadership, integration capabilities, and performance advantage; growing in low-carbon and digital infrastructure beyond oil and gas.

Segment Performance

• Digital & Integration: Fourth quarter revenue was $1.2 billion, up 6% sequentially, driven by 10% growth in Digital while APS was essentially flat. Full-year Digital revenue reached $2.44 billion, up 20% year-on-year.
• Reservoir Performance: Fourth quarter revenue was $1.8 billion, down 1% sequentially, but margins increased 35 basis points to 20.5% due to improved profitability in evaluation services.
• Well Construction: Fourth quarter revenue was $3.3 billion, down 1% sequentially, with margins contracting 70 basis points primarily due to lower drilling activity in Mexico and Saudi Arabia.
• Production Systems: Fourth quarter revenue was $3.2 billion, up 3% sequentially, but pretax operating margins decreased 93 basis points to 15.8% due to lower profitability in subsea. Full-year Core divisions grew 9%, with Production Systems leading at 24% growth, Reservoir Performance up 9%, and Well Construction flat year-on-year.

Guidance

• 2025 revenue expected flat year-on-year, adjusted EBITDA at or above 2024 levels excluding ChampionX.
• First quarter revenue and adjusted EBITDA similar to last year, second quarter activity rebound especially in international markets.
• Target to return at least $4 billion to shareholders in 2025, including accelerated $2.3 billion share repurchase program.

Risks

• Geopolitical disruptions impacting upstream investment.
• Uncertainty in regional market fluctuations (e.g., Mexico activity decline, Saudi Arabia activity changes).
• Volatility in oil market oversupply affecting customer spending.

Question and Answer

• Q: Outlook for international upstream spending regions? A: Middle East (UAE, Iraq, Kuwait) are bright spots; deepwater has white space in 2025 but potential FIDs in 2026; international gas market drives long-term investments.
• Q: Production business growth trajectory? A: Production Systems and Reservoir Performance show positive growth driven by production recovery, technology investment, and portfolio integration; long-term earnings potential.
• Q: Shape of 2025 activity progression? A: Low Q1, rebound in H2, with deepwater potential in later months.
• Q: Russia operations contribution? A: Revenue in Russia declined to 4% of global revenue in 2024, aligned with new sanctions.
• Q: Share repurchase program? A: Accelerated $2.3 billion program to take advantage of favorable stock valuation, aiming for at least $4 billion returns to shareholders.
• Q: Digital business growth opportunities? A: Growth via digital operation, cloud transition, data and AI; multiple growth paths decoupled from CapEx/OpEx spend.
• Q: Lumi platform adoption? A: Early pilots and interest, but too early for specific revenue numbers; positive trend.
• Q: Mexico prospects? **A: Activity decline, offset by growth in Argentina and Brazil; uncertain due to leadership transition in PEMEX.