SLB Limited Common Shares

Thank you everyone for standing by. Welcome to the SLB Second 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 SOB Second Quarter 2024 Earnings Conference Call. Today's call is being hosted from London, 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'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. For more information, please refer to our latest 10-K filing and other SEC filings, which can be found on our website. Our comments today also include non-GAAP financial measures. Additional details and reconciliations to the most directly comparable GAAP financial measures can be found in our second quarter press release, which is on our website. And finally, in conjunction with our proposed acquisition, SLB and ChampionX have filed materials with the SEC, including a registration statement with a proxy statement and prospectuses. These materials can be found on the SEC's website or from the party's websites. With that, I will turn the call over to Olivier.

Thank you, James. Ladies and gentlemen, thank you for joining us on the call. This was a very strong second quarter for SLB, showcasing our ability to harness the ongoing growth cycle while driving efficiencies throughout our business. During today's call, I will cover three topics. First, I will review our second quarter results. Then I will describe the dynamics of the cycle and how we are positioning our business in for further growth and margin expansion. And finally, I will share our updated outlook for the full year and discuss our ongoing commitment to returns to shareholders. Stéphane will then provide additional details on our financial results, and we will open the line for your question. Let's begin. I'm very pleased with our strong second quarter performance. Sequentially, revenue increased 5%. Adjusted EBITDA grew 11%. Adjusted EBITDA margin expanded 142 basis points, and we generated $776 million of free cash flow. These results were driven by continued growth momentum in international markets, with more than half of our international units posting the highest revenue quarter of the cycle. International revenue grew 6% sequentially, led by the Middle East and Asia, which continued to set new records with two-thirds, 8 out of 12, of the EU units in the area posting record-high quarterly revenue. This was fueled by capacity expansion projects, new gas developments, and production recovery investments across the region. Additionally, the ongoing strength of the offshore markets supported further growth in Europe and Africa, as well as Latin America. This was particularly pronounced in deep water basins, including Brazil, West Africa, and Norway, where we continued to benefit from strong backlog conversion in one subsea. We also benefited from new projects on land, notably in Argentina and North Africa. Meanwhile, in North America, revenue increased 3% sequentially. This was led by the Gulf of Mexico, where we saw increased running and higher digital revenue from sales of exploration data licenses. However, this sequential growth was partially offset by lower drilling in U.S. land as the market continues to be constrained by weaker gas prices, capital discipline, and ongoing market consolidation. Next, let me describe how this growth played out across the divisions. In our core divisions, we continue to harness this cycle, with revenue growing 4% sequentially and pre-tax segment operating margins expanding by 120 basis points. was led by our production systems and reservoir performance divisions, which visibly expanded margins due to the favorable conversion of backlog, as well as many business lines operating at record activity levels. Demand for services and equipment is being further reinforced by the combination of long-cycle development activity and the acceleration of production recovery investments, particularly in the Middle East and Asia and Latin America. Well construction also grew sequentially supported by offshore developments, although this was partially offset by weaker land activity in North America. Overall, the core divisions continue to deliver margin expansion, combining to post their 14th consecutive quarter of year-on-year pre-tax segment operating margin expansion. Meanwhile, in digital integration, I was very pleased. to see highly accretive sequential growth, highlighted by our digital business reaching a new quarterly high and supporting visible sequential margin expansion. This puts us on track to achieve our full year ambition of digital revenue growth in the high teens. We have opportunities to build on this momentum as customers are increasingly choosing to partner with SLB to modernize their digital infrastructure, as you have seen in a number of announcements included in today's release. At the end of the second quarter, we had 6,900 users on the Delphi platform, an increase of 28% year-on-year. Additionally, the number of connected assets increased by 57%, and trading 12-month compute hours increased by 43%. Combined with our first quarter results, SLB first-half adjusted EBITDA grew in mid-teens compared to the same period last year, in line with our full-year ambition. Moving forward, We will remain focused on driving quality revenue growth and leveraging operational efficiency to grow EBITDA, expand operating margins, generate robust cash flows, and meet our commitment to return to shareholders. I want to here to clearly express my full gratitude to the entire S&P team for delivering such a strong second quarter and first half results. Next. Let me describe how the market is evolving and the steps we are taking to capture profitable growth across the business. As the cycle continues, investments will increasingly be targeted in the most resilient areas of the market, including key international markets such as the Middle East and Asia, and offshore globally. In these areas, we are seeing long-cycle gas and deepwater projects production recovery activity to address natural decline, and increased digital adoption to drive efficiency and performance. This is an optimal environment for our business, and we are seizing each of these opportunities. In the Middle East, in addition to the exposure to the oil capacity expansion program across the region, we continue to benefit from the acceleration and scale of investments in gas development, both conventional and unconventional, leveraging our feed-for-basin technology and differentiated integration capability. Offshore, we see the benefits of our OneSubsea JV as highlighted by the number of high-value contracts awarded and partnerships included in today's release. Through OneSubsea, we're helping customers unlock reserves and reduce cycle times through an extensive Subsea production processing technology portfolio. And we're increasingly being offered the opportunity to partner with customers in early engineering phases unlock the economics of their assets. In production and recovery, we are seeing customers embrace offerings as they work to offset natural decline, extend performance, and maximize the value of their producing assets. We have many solutions to help customers access resources through our production system and with our performance division. And this is showing up in the strong results these divisions are achieving. As this market continues to evolve, We expect to strengthen our portfolio to fully capture this growing opportunity through our pending acquisition of ChampionX. Finally, underpinning nearly everything we do is the power of digital and AI. In today's market, accelerating the time to returns and extracting new level of efficiency are top of mind for our customers. And they are increasingly recognizing that upscaling their digital infrastructures is a key enabler in these areas. presenting us with significant opportunities for high margin growth. In summary, SLB is well positioned across key resilient markets. We remain focused on expanding margins to quality revenue growth, and this is complemented by heightened focus on operating efficiency, support structure optimization, and strategic resource allocation in certain markets to align with expected levels of activity going forward. To support this ongoing Cost efficiency actions, we recorded a charge this quarter and Stéphane will share additional details on this topic later in the call. Overall, the positive market dynamics and our continued focus on operating efficiency present a strong backlog for continued outperformance. We look forward to harnessing these dynamics to deliver further growth and margin expansion in the second half of 2024 and in 2025. On that note, let me conclude my opening remarks by showing an updated outlook for the year. Based on our strong second quarter and first half results, we expect full-year adjusted EBITDA growth in the range of 14 to 15 percent, and full-year adjusted EBITDA margins at or above 25 percent. Specific to the third quarter, we expect sequential revenue growth in the low single digits, enhanced by further margin expansion. This will accelerate as we move towards the end of the year with visible increase in top-line growth and an uptick in margin expansion during the first quarter due to seasonally higher year-end digital and product sets. Lastly, we return $1.5 billion to shareholders over the first quarter through the combination of stock repurchase and dividends. In the second half of the year, we expect to generate higher EBITDA and strong cash flows supporting our full year commitments. Directionally, we expect a strong exit of the year to position us for continued revenue growth, margin expansion, and cash generation, reinforcing our commitment to continue returns to shareholders in 2025. I will now turn the call over to Stéphane.