SLB Limited Common Shares

Thank you, everyone, for standing by. Welcome to the SLB First Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. If you would like to ask a question, you may press 1, then 0. You will hear acknowledgement that your line has been placed in queue. You may remove yourself from 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 James R. McDonald, Senior Vice President of Investor Relations and Industry Affairs. Please go ahead.

Thank you, Leah. Good morning, and welcome to the SLB First Quarter 2024 Earnings Conference Call. Today's call is being hosted from Kuala Lumpur, following our 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 will 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 other SEC filings, which can be found on our website. We are under no obligation and expressly disclaim any obligation to update, alter, or otherwise revise any forward-looking statements whether as a result of new information, future events, or otherwise, except as required by law. 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 first quarter press release, which is on our website. And finally, SLB and ChampionX will fire materials related to the proposed transaction with the U.S. Securities and Exchange Commission, including a registration statement that will contain a proxy statement perspective of the parties. Investors and security holders are urged to read those materials once they are available, which can be obtained from the SEC's website and from the company's websites. SOB, ChampionX, their directors, executive officers, and certain members of management and their employees may be considered participants in the solicitation of proxies from their shareholders in connection with the proposed transaction. This will be described further in the proxy statement perspective when it is filed. With that, I will turn the call over to Olivier.

Olivier Roland Thank you, James. Ladies and gentlemen, thank you for joining us on the call today. During my prepared remarks, I will discuss three topics. I will begin by sharing an overview of our first quarter results. Then I will provide an update on the ongoing market dynamics and highlight areas where we anticipate opportunities for further growth. And finally, I will conclude with our outlook for the full year and the second quarter. Stefan will then provide more details on our financial results, and we will open the line for your questions. Let's begin. I'm very pleased with our strong start to 2024. Year-on-year revenue grew 13% and EBITDA grew in the mid-teens, in line with our full-year financial ambitions. Additionally, we demonstrated the differentiated value we deliver to our customers, the impact of our continued capital discipline and execution efficiency by expanding year-on-year adjusted EBITDA margins for the 13th consecutive quarter. Internationally, we harnessed board-based activity growth, with 21 of our 25 international GEO units increasing revenue year-on-year. Even when excluding the hacker contribution, our international revenue grew by double digits. These impressive results were led by the Middle East and Asia, which exhibited remarkable growth of 29 percent compared to the same period a year ago. Specifically in the Middle East and North Africa, Year-on-year growth was supported by continued investments in long-cycle developments and capacity expansion projects in both oil and gas across Algeria, Egypt, Iraq, Libya, Qatar, Saudi Arabia, and the United Arab Emirates. And in Asia, we saw strong activity across the region led by offshore, notably in China, Indonesia, Malaysia, the Philippines, and India. Meanwhile, in North America, activity remained soft due to weaker gas price, sustained capital discipline, and the effects of ongoing market consolidation. The slower activity contributed to revenue in the region declining by 6 percent year on year. Next, I will comment on division's performance. I was very proud to see the power of the core divisions continue to drive our performance this quarter. In particular, you may have seen the remarkable growth in production systems supported by our one subsidiary venture, and it was our performance led by increased simulation, evaluation, and intervention services. Well construction also delivered resilient growth. I was also pleased to see our core margins visibly expand year on year, and I trust that this will continue as we remain focused on efficiency and value creation for our customers. Turning to digital integration, I continue to follow our performance very closely. Although we experienced the typical pattern of seasonally slower sales to start the year, digital still grew in the double digits year-on-year during the first quarter, and we expect a visible uptick of digital sales throughout the rest of the year. This will be supported by increased customer adoption and a base load of ongoing projects, as you can see from the quarterly highlights included in our press release this morning. For the full year, we maintain our ambition to grow our digital revenue in the high teens. Overall, I'm very pleased with this strong start to 2024. We'll remain focused on the quality of our revenue, capital discipline, and execution efficiency to generate strong cash flows and shareholder returns throughout the year. I want to thank the entire Selvi team for delivering this first quarter performance. They continue to operate at a benchmark level for the industry, and I feel privileged to work with such a dedicated and talented team. Next, let me shift into the ongoing market dynamics and how these are creating opportunities for our business. We are in the midst of a unique oil and gas cycle, characterized by strong market fundamentals, growing demand, and an even deeper focus on energy security. As described on several occasions, this cycle continues to display breadth, resilience, and longevity. This is very much the case in the Asia region where we are hosting this call today. In this context, there are certain priorities that are increasingly critical to our customers. Project lifecycle reduction, particularly in exploration and appraisal to accelerate time to first gas or first oil. Capital efficiency in the development phase to set new benchmarks in every basin. Step change in production recovery for producing assets and for unconventional resources. And finally, adoption of digital and AI capabilities to transform operations, and use of technology to abate emissions. Against this backdrop, we continue to innovate with our customers through the combination of integration, feed-for-basing technologies, and digital, focusing on unlocking value by delivering lower costs and lower carbon bias. In our core Olandia's business, we are benefiting from these strengths with our exposure to the fastest-growing and most resilient markets. This cycle continues to be defined by broad growth across the international basins, and is nowhere more evident than in the Middle East and global offshore markets. In the Middle East, countries are investing to increase both oil and gas supplies to the end of the decade. The long cycle nature of the investments provides further confidence in the durability of the cycle, and we look forward to continue working for our customers to deliver on this target. And offshore, many of the FIDs from the past few years have come out, leading to broad-based activity across Asia, Africa, Latin America, and Europe. SLB has a strong foothold in each of these offshore regions, benefiting from our deep customer relationship, operational performance, and fit for basing solutions. For our one-subsidial venture, we offer a non-match port-to-process offering throughout the full lifecycle of offshore assets, and we continue to deliver on a substantial offshore backlog. Now looking at the priorities for producing assets today and tomorrow, we recognize the need to increase our exposure to the production and recovery market, including the more resilient OPEC spend as operators work to offset natural decline, extend performance, and maximize the value of their assets. Acquisition of Champagnex will further evolve our portfolio to capture this opportunity with the addition of a leading production chemicals business and well-established articholist portfolio, with significant benefits to our customers in every producing basin in the world. This would be particularly visible in the offshore environment, which requires a higher intensity of production chemicals for flow assurance, reinforcing the long cycle value of our offshore strategy. Another notable trend in the market is an enhanced focus on emission reduction and low-carbon energy. Our early investments in this space are beginning to deliver promising results, both in the core, through our transition technologies, and in new energy portfolios, notably in carbon capture and sequestration. CCS is one of the fastest-growing and most immediate opportunities to reduce carbon emissions, and we are leveraging our domain expertise and deep knowledge of the subsurface to respond to an increased demand in our storage solutions. At the same time, we're also expanding to address opportunities throughout the CCS value chain. As you saw in our announcement a few weeks ago, we have entered into an agreement to combine our carbon capture business with Acker Carbon Capture, and we own 80% of the combined entity. This is an exciting opportunity to bring together our complementary technology portfolio, leading process design expertise, and an established project delivery platform to innovate and deliver carbon capture technology solutions at an industrial scale. Looking across our broad portfolio, it is clear that our three engines of growth, each with differential technology and exciting project pipelines, are positioning us for continued performance across all time horizons. Supported by our strong international portfolio and our unique technology-driven approach to North America, we are truly making this investment cycle better for longer. Finally, I will conclude with our outlook for the full year and the second quarter. Based on the commentary I've just shared, the ongoing characteristics of the cycle and our strong first quarter results, we remain confident in our full-year financial guidance, with strength in international activity offsetting slower growth in North America. In particular, we anticipate the activity momentum in international markets to continue, driven by increasing global demand and an even deeper focus on energy security. The relevance of oil and gas in the energy mix continues to support further investments in capacity expansion, particularly in the Venetians, and in long-cycle projects across global offshore markets, fully aligned with our international review ambitions. Additionally, we expect to realize further growth in the strengthening production and recovery markets as operators work to maximize the efficiency and longevity of their producing assets. Altogether, this continues to present a very strong outlook for our business during 2024 and beyond. Specific to the second quarter, we expect sequential revenue growth internationally in the mid-single digits and North America in the low single digits. We also expect to expand adjusted EBITDA margins by 75 to 100 BPS. By division, we expect sequential growth to be led by digital integration, followed by reservoir performance, production systems, and well-consumption, all of which are rebounding from the conclusion of winter season rates. I will now turn the call over to Stéphane.