SLB Limited Common Shares

Ladies and gentlemen, thank you for standing by. 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. Instructions will be given at that time. If you should require assistance, please press star, then zero, and we will assist you offline. As a reminder, today's conference call is being recorded. I would now like to turn the conference over to N.D. Maduamazia, the Vice President of Investor Relations. Please go ahead.

Thank you, Leah. Good morning, and welcome to the Schlumberger Limited fourth quarter and full year 2021 earnings conference call. Today's call has been hosted from Houston, following the Schlumberger Limited board meeting held earlier this week. Joining us on the call are Olivier Lepuche, Chief Executive Officer, and Stéphane Biguet, Chief Financial Officer. 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 SEC 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 fourth quarter press release, which is on our website. With that, I'll turn the call over to Olivier. Thank you, Andy.

Ladies and gentlemen, thank you for joining us on the call today. In my prepared remarks, I will cover our Q4 results and full year 2021 achievements. Thereafter, I will follow with our view of the 2022 outlook and some insight into our near-term financial ambitions. Stéphane will then give more detail on our financial results, and we will open for your questions. The fourth quarter was characterized by broad-based activity growth, with continued momentum in North America, activity acceleration in international markets, and an accretive offshore market contribution, upon which we delivered strong sequential revenue growth, our sixth consecutive quarter of margin expansion, an outstanding double-digit free cash flow generation. These financial results conclude an exceptional year of financial and performance for Chouin-Merger, at a pivotal time for the company and in our industry at large. Underlying these results are the following highlights from the quarter. Geographically, sequential growth in North America exceeded reactivity, growing in excess of 20% offshore, and international revenue growth accelerated closing the second half of 2021 up 12% versus the prior year. All international areas posted growth driven by gains in more than 75% of our international business units. By division, revenue in all four divisions grew sequentially and went compared to the same period last year. Digital integration led growth, posting double-digit sequential growth and record high margins. Well-construction and reservoir performance are predominantly service-oriented divisions, outperform expectations with strong sequential growth and approximately 30% growth year-over-year on a pro-forma basis. Production systems recorded year-end sales, which drove mid-single-digit growth, though partially impacted by logistics change. Operating margins expanded in spite of seasonality effects, improving further beyond pre-pandemic And finally, we generated outstanding cash flow from operations, exceeding $1.9 billion in the quarter. All in all, I am very pleased with our operational execution, our safety performance, and our financial results through the fourth quarter. Now, let me briefly reflect on what we achieved in 2021. In our core, we fully operationalized our returns-focused strategy, leveraging our new division and baseline organization, to seize the start of the upcycle. In North America, this resulted in full-year top-line revenue growth, excluding the effects of divestiture, and significantly expanded margins, achieving double digits, one of the financial targets we laid out in 2019. Internationally, we also grew the top-line and expanded margins significantly as international activity strengthened in the second half of the year. This also resulted in full-year international margins, that exceeded 2019 levels. Taken together, these margins result in the highest global operating margins of the last six years, setting an excellent foundation for further expansion as activity accelerates and market conditions further support pricing improvement. In digital, our second engine of growth, I am very proud of the momentum it established during the year. We advance on our goals to expand market access and accelerate adoption of our platform, AI capabilities, and powerful digital tools to reduce cycle time, improve performance, and lower carbon intensity. We built partnerships to achieve comprehensive cloud access globally, collaborated with AI innovators to deploy machine learning and AI solutions, and enabled digital operations through the automation of key workflows in well construction and production operations. At the end of 2021, we have more than 240 commercial Delphi customers, recorded more than 160% Delphi user growth year over year, and so a more than tenfold increase in compute cycle intensity on our Delphi cloud platform. We also made significant progress in our data, business stream, and digital operation, advancing our OSDU commercial offerings, autonomous draining, and the adoption of Agora Edge, AI, and IoT solutions with great success. The Q4 results, including significant uptake in digital sales and sizable incremental margin, are a clear testament of this success. In Schumerger New Energy, we continue to advance the development of clean energy technologies and low-carbon projects. In 2021, we took a position in stationary energy storage, expanding our total addressable market, and advanced all of our ventures in hydrogen, lithium, geoenergy, and a suite of CCUS opportunities, including our bioenergy CCS project. Some notable milestones achieved include the signature of pilot agreements with Genvia, our hydrogen venture with Acerlor, Mittal, Uzitech, Vika, and Hanamix, leading company in steel and cement. And in Celsius, our geoenergy venture, we secured five commercial contracts in Europe and won in North America for a prestigious university campus. This was also a pivotal year for us in terms of our commitment to sustainability. We announced a comprehensive 2050 net zero commitment inclusive of scope 3 emissions and launched a transition technology portfolio to focus on decarbonisation of oil and gas operations with much success. Schlumberger earned a AA rating by MSCI and won an ESG Top Performer Award by Hart Energy, recognizing our sustainability efforts, our enhanced disclosure, and our commitment to apply our technology and capabilities towards helping the world meet future energy demand. In summary, 2021 was a great year for Schlumberger. Beyond its operational and financial results and ESG accomplishments, we made excellent progress in our core digital and new energy, the three engines of growth that support our success now and well into the future. Above all, I'm most proud of our people, their unique ability to execute, remobilizing operations across the world through numerous pandemic constraints, adapting the logistics and supply chain dynamics, and setting new performance benchmarks, all of which earn the recognition of our customers. I would like to thank the entire team for delivering a year of our performance on every metric. They surpassed all of our targets this year and created excellent momentum as we entered 2022, for which I would like now to share our outlook. Looking ahead, we have increased confidence in our view of robust multi-year market growth. Tight oil supply and demand growth beyond the pre-pandemic peak are projected to result in a substantial step up in capital spending amid shrinking spare capacity declining inventory balance and support the whole price. In addition, we expect more pervasive service pricing improvements in response to market conditions as technology adoption increases while service capacity tightens. In essence, 2022 will be a period of stronger short-circle activity resurgence driven by improved visibility in the demand recovery and greater confidence in the whole price environment. And as all demand exceeds Pre-pandemic levels in 2023 and beyond, long cycle development will augment capital spending growth in response to the call on supply. This demand-led capital spending growth sets the foundation for a strong multi-year up cycle. Indeed, this scenario has already been established. As the number of FID increases, service pricing has begun to improve and multi-year long cycle capacity expansion plans have started, particularly internationally. and offshore as seen during the last quarter. Turning to 2022 more specifically, we expect an increase in capital spending of at least 20% in North America, impacting both the offshore and offshore markets. While internationally, capital spending is projected to increase in the low to mid teens, building momentum from a very strong exit in the second half of 2021. All areas and operating environments, short and long cycle, including deep water, are expected to post strong growth, with upside potential as Omicron disruptions dissipate as the year advances. In this scenario, increased activity and pricing will drive simultaneous double-digit growth both internationally and in North America that will lead our overall 2022 revenue growth to reach mid-teens. Our ambition is to once again expand operating and EBITDA margins on a full-year basis, Exiting the year of EBITDA margins at least 200 BPS higher than the fourth quarter of 2021. In this context, let me show how we see the year unfolding. Directionally, while we are still experiencing COVID-related disruptions, we anticipate typical seasonality in the first quarter with revenue and margin progression similar to historical sequential trends, which will be seen most prominently in digital integration. will be followed by a strong seasonal uptick in the second quarter across all divisions, with growth further strengthening through the second half of the year, supporting our full-year mid-teens revenue growth ambition and EBITDA margin expansion. This growth and margin expansion trajectory gives us further confidence that we will reach or exceed our mid-second ambition of 25% adjusted EBITDA margin before the end of 2023, leading to adjusted EBITDA that should visibly exceed 2019 levels in dollar terms. With this, I will now turn the call over to Stéphane.