SLB Limited Common Shares

Ladies and gentlemen, thank you for standing by, and welcome to the Schlumberger earnings conference call. At this time, all participant lines are in a listen-only mode. Later, there will be an opportunity for your questions. As a reminder, today's conference call is being recorded. I would now like to turn the conference over to Vice President of Investor Relations, N.D. Madhu Amasia. Please go ahead.

Thank you, Cynthia. Good morning. Good morning. and welcome to the Schlumberger Limited third quarter 2020 earnings call. Today's call is being hosted from Houston, following the Schlumberger Limited board meeting held earlier this week. Joining us on the call are Olivier Lepoche, Chief Executive Officer, and Stéphane Biguet, Chief Financial Officer. For today's agenda, Olivier will start the call with his perspective on the quarter and our updated view of the industry macro. after which the fan will give more detail on our financial results. Then we will open for questions. Before we begin, I would like to remind all participants that some of the statements we'll be making today are forward-looking. These matters involve risks and uncertainties that could cause our results to differ materially from those projected in these statements. I therefore refer you to our latest 10-K filing and our other NTT filings. Our comments today may also include non-GAAP financial measures. Additional details and reconciliation to the most directly comparable GAAP financial measures can be found in our third quarter press release. With that, I will turn the call over to Olivier.

Thank you, Andy. Ladies and gentlemen, good morning. Thank you for joining us on the call today. In my opening remarks, I would like to focus my commentary on three parts. First, Our first quarter, operational and financial performance. Next, progress with the implementation of our strategy. And third, our updated view on the near-term business outlook. After this, Stéphane will provide greater details on our financial results. In the first quarter, we had an opportunity to demonstrate the significance of the measures we have taken over the last few months and set a marker of our performance. Through our plan resilience, margin expansion, and by maintaining our strong cash generation track record. In an ongoing activity trough, our third quarter sequential performance was exceptionally strong. Yet again, we continue to maintain benchmarks of safety and service quality in our operations. Sequential margins expansion was bounded by more than 300 basis points for both ABT and EBITDA, and free cash flow was solidly positive. The strength for margin expansion and free cash flow performance is even more impactful in the context of a slight top-line decline and exceptional items during the quarter. I would like to thank the entire Schumerger team for this remarkable performance and for an excellence in execution. These results represent a defining step in the reset of our earnings power at the trough of the cycle and set the stage for a long-term outperformance. Starting with operations. In the first quarter, we maintained benchmark integrity performance with year-over-year improvements at 30% in HSE incident frequency and 34% in reliability. Operation integrity remains an hour of strength for Schumerger and the foundation of our performance strategy. Our consistent service delivery earned several letters of commendation from our customers and is the basis of multiple new contract awards recorded in the quarter. Financially, We posted higher sequential pre-tax operating margins, more than 20% EBITDA growth and positive free cash flow despite the sequence payments and reduced working capital release versus the prior quarter. These results clearly set us on the path to our intermediate goal of restoring 2019 EBITDA margins before the end of 2021. Now let me turn to our strategy. First, our restructuring program is progressing well. and we are on track to realize most of our permanent structural cost savings as we exit this year. We also began the transition to our linear customer-aligned structure, comprised of divisions and basins, designed to support the basin-specific innovation that will solidify Streamerge's position as the performance partner of choice. Next, in North America, we achieved key milestones on our scale-to-fit strategy, with two transactions that advanced the high grading of our portfolio while lowering capital intensity and volatility, the VAT transaction and the low-flow divestiture. The closing of this transaction will not only enhance our EBITDA margin at the global level, but will further support lower capital intensity and an accelerated path to our financial goals for North America. Looking ahead at the benefits of this strategy execution, we are set to significantly improve the company's future operating leverage and as the market activity recovers from the current trough, We have the potential to restore EBITDA to the 2019 mark of $6.6 billion by recovering only half of the year-on-year revenue decline. Our performance strategy also focuses on rising of growth, which includes digital and production recovery. The industry is rapidly embracing digital enablement and shifting capital investment towards maximizing production recovery from existing assets. While these two industry shifts converge, in essence, where digital intersects with production and recovery, Shroom RGA has a unique opportunity to deploy the full power of our industry digital platform and domain expertise spanning reservoir and production for the benefit of our customers. The best example of this was the application of our Agora Edge AI and IoT solutions in our APS project in Ecuador. By connecting field equipment to the cloud and running predictive AI at the edge, We boosted production 30% on Agora-connected wells while significantly reducing field crew visits to these wells and as such, cutting SFC exposure and environmental impact. This created revenue and margin on an AFPS project where we captured the value directly and is just an example of what is possible at scale when we use when we use the power of the industry digital platform to blend hardware and software to enable people, wherever they are located, to make performance impacts with digital. In addition, we continue to expand the reach of our digital platform, as demonstrated by the IBM Red Hat OpenShift agreement, further enabling adoption of our platform around the world and, particularly, with NOCs. In the quarter, we have also secured notable SEPSI and Artificial List contracts in the Gulf of Mexico and in the Middle East, which will result in a growth of our install base and greater exposure to production recovery CAPEX and OPEX, a strong platform for the future. Finally, we continue to develop our new energy portfolio, with progress in our hydrogen technology venture Genvia and the creation of a geothermal project development company, which complements our low-heat geothermal venture Celsius Energy. Exciting venture represents a mix of unique opportunities for Schoenmerger to create a differentiated market position through the energy transition. In parallel, we continue to develop avenues to contribute to the decarbonization of oil and gas operations, leveraging our technology, expertise, and execution platform to reduce our environmental impact while helping our customers reach their environmental goals. Let me take a few moments now to talk about the outlook. In the short to mid-term horizon, the market uncertainties persist as the economic recovery remains fragile. The pace of demand recovery could possibly slow a pause as a result of a second wave of pandemic outbreaks or heightened pandemic control measures. Similarly, to the third quarter, we also face risk of lingering COVID-19 operational disruption internationally as we enter the winter season. In this context, we will continue to focus on water and control, and react promptly if necessary. Now, absent of a pause in demand recovery or higher COVID-19 disruption, the fourth quarter activity will likely extend the trend's expanse as we close the third quarter, with the continuation of a modest activity uptake in North America and the stabilization towards a steady activity internationally, albeit with visible seasonal variations. the combination of which resulting into an about flat outlook overall for the quarter. Looking out farther, the prevailing uncertainties make it much too early to call. However, directionally, and absent of a slowdown in the pace of economic recovery, we anticipate the overall activity to consolidate gradually during 2021. In line with the most recent IEA projections, we see that the conditions still exist to rebalance demand and supply, with improving demand recovery supported by economic stimulus measures and continued supply discipline from the major producers, ultimately resulting into a visible activity rebound. North American land is expected to continue to subdue recovery in tract and drilling activity towards pollution maintenance levels. Internationally, as demand recovers, a pull on short cycle supply will result in an activity inflection. This being anticipated by most operators currently evaluating options to restore activity. Having shared our view on the outlook, let me now hand over to Stéphane who will talk more about our financial results. Stéphane.