SLB Limited Common Shares

Ladies and gentlemen, thank you for standing by, and welcome to the Schlumberger Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, there will be an opportunity for your questions. You may press 1, then 0 to place your line into the question queue. You may remove yourself from the queue by repeating the same 1-0 command. As a reminder, this conference is being recorded. I would now like to turn the conference over to the Vice President of Investor Relations, N.D. Madhu Amazia. Please go ahead.

Thank you, Leah. Good morning, everyone, and welcome to the Schlumberger Limited Second Quarter 2022 Earnings Conference Call. Today's call has been hosted from Paris, following the Schlumberger Limited Board Meeting held earlier this week. Joining us on the call are Olivier Leperche, Chief Executive Officer, and Stéphane Diguet, 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 second quarter press release, which is on our website. With that, I will turn the call over to Olivier.

Thank you, Andy. Good day, ladies and gentlemen. Thank you for joining us on the call. In my prepared remarks today, I will cover three topics, starting with our second quarter results and our latest view of the macro environment. Thereafter, I will conclude with our outlook for the second half of the year and its competing attributes, which are very supportive of our raised guidance for the full year. The second quarter was a defining moment in the overall trajectory of the year, with significant growth in revenue, margin expansion, and earnings per share. Our execution was solid, and directionally, all trends were positively in our favor. Strong international activity growth, and steady drilling momentum in North America, sustained offshore recovery, and the broadening impact of improved pricing. We leveraged the power of our core, our global footprint, and differentiated technology to seize widening industry activity, demonstrating our ability to capture growth in every land and offshore basin from North America to most remote international basins. This was reflected in the broad dimension of growth in our second quarter results. as customers stepped up activity with a focus on increased performance and production. Above all, we effectively harnessed these positive dynamics and delivered very strong sequential quarterly revenue and earnings growth. In addition to the details provided in our earnings press release this morning, let me reiterate some performance highlights from the quarter. We recorded a 14% revenue increase, the largest sequential revenue increase in more than 10 decades, as revenue growth exceeded rate count increase both internationally and in North America. Year-on-year revenue growth accelerated to 20 percent, further sustaining robust growth momentum with a visible inflection in international markets at 50 percent growth over the same period last year. Growth was very broad across all dimensions, area, divisions, land and offshore, with spending visibly higher across all customer types. Internationally, sequential growth was recorded in all of our Middle East and Asia geo-units and all of Latin America. And in ECA, growth was pervasive across Europe, Scandinavia, and West Africa. In North America, we continue to post very solid growth offshore and onshore on increased drilling and completion activity. The rise of offshore activity, particularly deep water, was a key driver for our second quarter sequential growth in most regions, and in support of all divisions. Globally, all four divisions posted double-digit revenue growth and expanded margins sequentially, resulting in the highest quarterly operating margins level since 2015. In addition, another feature of the quarter was broadening pricing improvement, impacting all divisions, geographies, and operating environments. The quarter also marked a number of new contract wins and an increase in backlog for production systems and our re-equipment business, another leading indicator of the strength of the activity pipeline ahead of us. Notably, price improvement is also being reflected in production system backlog, which is significant for its later cycle implication for sustained margins expansion on an overall portfolio basis. To sum up, the second quarter emphasizes our clearly differentiated operational performance strategic execution, and financial results, both in North America and internationally. We have very strong momentum and have secured a solid pipeline of activity ahead of us. I'm very proud of the entire Schumerger team for delivering these exceptional results and demonstrating our unique value proposition for both our customers and our shareholders. Turning now to the macro. First, Energy security and urgency to establish more diverse and reliable source of oil and gas supply have become increasingly apparent through the year, exacerbated by the effect of ongoing conflict in Ukraine and a notable increase in periodic supply disruptions in certain regions. Second, supply and excess spare capacity remains very tight, as recent OPEC and IEA demand outlooks for 2022 and 23 remain constructive, continuing to suggest a coolant supply from North America and a more significant coolant supply from the international basins. Third, despite near-term concern of a global economic slowdown, the combination of energy security, favorable break-even price, and the urgency to grow long-term oil and gas production capacity will continue to support strong upstream E&P spending growth. Consequently, we are witnessing a decoupling of upstream spending from potential near-term deviant volatility, resulting in resilient global oil and gas activity growth in 2022 and beyond. Additionally, the factors supporting pricing tailwinds, more specifically the tightening service supply capacity both in NAM and increasingly in international markets, will continue to represent the defining characteristics of this upcycle and will support both revenue growth and margin expansion more than offsetting inflation. Looking more specifically at the second half of the year, we see very robust activity dynamics characterized by distinct acceleration of investment in the international and the continued strengthening of offshore activity as all operators, including IOC, step up spending. The energy security situation continues to drive structural activity increase, resulting from the increased focus on short-term production and the mid- to long-term capacity expansion across oil and gas plays. In addition, we also expect further exploration and appraisal activity, and the pricing dynamics expand so far to add further support to both the growth trajectory and the margins performance during the second half. This positive undercurrent will lead to an attractive mix and an increase in short and long cycle international projects, complementing already robust short cycle activity in North America. Directionally, during the second half of the year, we expect a strong continuation of growth in the core, led by production systems for the rest of the year, with digital integration benefiting from typically seasonally strong year-end sales. Also, as a result of the rotation of investment towards international basins, we anticipate a high growth rate during its second half to occur internationally, setting up a very nice backdrop for 2023 outlook. Based on this, we expect our H2 revenue this year to grow by at least high teens compared to the same period last year. Full year revenue growth will therefore be in high teens, presenting revenue of at least $27 billion for 2022. Furthermore, our adjusted EBITDA in absolute dollar terms will increase by at least 25% for the full year of 2022 when compared to 2021. Indeed, 2022 is shaping up to be an outstanding year for Sumeru. The power of our core, our digital and decarbonization leadership, and the expansive attribute of this upcycle enable us to leverage a focused North America business with an unparalleled international breadth. the combination of which favorably expose Schumerger to durable top-line growth, earnings, and further margin expansion potential that is unmatched in the sector. Beyond this, the momentum we are building through the second half of the year and the exit rates that we have achieved both very well for our 2023 outlook and financial ambition, both of which we will share in more details at our investor conference in November. I look forward to seeing many of you in person at this event. I will now turn the call over to Stéphane.