SLB Limited Common Shares

Good morning, my name is Kate and I will be your conference operator today and would like to welcome everyone to the fourth quarter SLB earnings call. At this time, all participants are in a listen-only mode. After the speaker's remarks, there will be a Q&A session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. You may remove yourself from the queue by pressing star two. As a reminder, this call is being recorded. I will now turn the call over to James R. McDonald, Senior Vice President of Investor Relations and Industry Affairs. Please go ahead.

Thank you, Kate. Good morning, and welcome to the SLB fourth quarter and full year 2024 earnings conference call. Today's call is being hosted from Houston, following our board meeting held earlier this week. Joining us on the call are Olivier Lepuche, Chief Executive Officer, and Stephane Begay, 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. For more information, please refer to our latest 10-K filing and other FCC 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 fourth quarter and full year earnings press release, which is on our website. Finally, in conjunction with our proposed acquisition, SOB 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 morning, I will begin by discussing our fourth quarter and full year results. Then I will provide an update on the evolving microenvironment and our early activity outlook for the first quarter and the full year. And finally, I will describe our SLB's Diverse portfolio is uniquely positioned to continue delivering strong financial results in 2025 and beyond. Stéphane will then provide more details on our financial performance, and we'll open the line for questions. Let's begin. We concluded the year with solid earnings and free cash flow, growing revenue both sequentially and year-on-year, and maintaining our cycle-high margins. Although the rate of upstream investment growth continued to moderate during the quarter, SLB benefited from a broad exposure to global markets, the diversity of our portfolio across the upstream oil and gas lifecycle, and from our differentiated digital offerings. Notably, we saw strong growth in the Middle East, where once again, we achieved a new quarterly revenue high, with contributions from the UAE, Iraq, Kuwait, and Qatar. And we also performed very well in North America, where we benefited from a higher activity in U.S. land, along with higher digital sales in the U.S. Gulf of Mexico. Despite the well-known declines in Saudi Arabia and in Mexico, our fourth quarter financial performance remained consistent and resilient. This demonstrates the strength of SLB's diversified portfolio. Overall, we closed the year with fourth-core international revenue reaching a new second high, and we generated a strong free cash flow of $1.63 billion for the quarter. Turning now to the full year, we achieved our full-year adjusted EBITDA margin target of 25%, generated robust free cash flow of $4 billion, and returned $3.3 billion to shareholders. We closed the core divisions. We grew by 9% compared to the previous year. Production systems led the way, growing by 24% and expanding margin by almost 300 BPS for the full year. This performance was supported by double-digit revenue increases in surface system completion and share lift, leading to 9% organic growth for the division that was complemented by the hacker subsidy acquisition. Our performance also continued its momentum, going by 9% year-on-year and expanding margin by approximately 100 BPS with strong stimulation and intervention activity. And in well construction, although revenue was flat year-on-year, it continues to lead margins in the core. Overall, across our core divisions, our technology leadership, domain expertise, and scale are enabling us to continue innovating tailored solutions for our customers in every region. And I'm proud. to share that our feed-for-basin revenue crossed $1 billion for the first time in 2024. This was also a very exciting year for digital, as demand for our products and services continued to accelerate and reform strategic partnerships with industry leaders, including Nvidia, Amazon Web Services, and Palo Alto Networks. Our customers continued to embrace the power of cloud computing, AI, and digital operations to shorten cycle times and improve operating efficiencies. And this led to digital revenue growing 20% for the full year, exceeding our targets of high-teens growth. Finally, we continue to increase our exposure beyond oil and gas. There is a significant growth momentum in the low-carbon markets, where we have a strong position through our portfolio of technologies for carbon capture and sequestration, geothermal, and critical minerals. And we are complementing this for growing exposure to data center infrastructure solutions. by responding to hyperscalers to deliver solutions that meet the demands of a rapidly evolving digital landscape. Combined, revenue from these activities exceeded $850 million in 2024, and we expect this to increase significantly in 2025. As you can see, we are pursuing a wide range of opportunities within and beyond oil and gas, and this is positioning us to benefit from a very diverse mix of new and existing customer spend. I want to thank the SLB team for delivering this progress. We should all be proud. I'm very impressed by our team's innovating spirit, customer centricity, and performance mindset, and I look forward to building on our successes in the year ahead. Next, let me discuss the evolving macro environment. Over the back half of 2024, customers adopted a more cautious approach to near-term activity and discussionary spending, primarily driven by concerns of an oversupplied oil market. Although these concerns persist, we anticipate the oil supply imbalance will gradually abate. Global economic growth and a heightened focus on energy security, coupled with rising energy demand from AI and data centers, will support the investment outlook for the oil and gas industry throughout the rest of the decade. Looking at the global oil supply, we expect that OPEC Plus will maintain its focus on commodity price stability throughout 2025. And in the US, the ongoing focus on capital discipline by operators will limit near-term supply growth in the region. In this environment, the current level of global upstream investment seems to be keeping the market in balance, absent of any further geopolitical disruptions. Overall, we expect global upstream investment to be steady in 2025 compared to 2024, with the deceleration in some resource plays being offset by resilient growth across select countries and customers. The webinar provides a bit more detail on our 2025 activity outlook. In international markets, while certain countries will continue to expand strong growth, this will be balanced by reducing spending in others. For instance, in the Middle East and Asia, increases in the United Arab Emirates, Kuwait, Iraq, China, and India will be offset by declines in Saudi Arabia, Egypt, and Australia. In Latin America, growth in Argentina and Brazil will be tempered by decreased spending in Mexico and Guyana. And in Europe and Africa, growth in North Africa, Nigeria, Azerbaijan, and Kazakhstan will be more than offset by declines in Scandinavia and West Africa. Turning to North America, oil and gas activity is expected to decline due to lower publicly announced capex in U.S. lands, higher drilling efficiency, and a slow recovery in gas until energy capacity expansions are resolved. However, at Datacenter Infrastructure as a Solution, revenue is growing rapidly in this region, supporting growth outside of our core business. Specific to the offshore markets, we expect a muted environment in 2025 attributed to white space in deepwater activity, particularly in the North Sea, Australia and Angola, Central and East Africa. Looking ahead, we anticipate this white space in deepwater to start improving as the year progresses in preparation for the significant number of FIDs ramping up in 2026 across several deporter basins. Let me now describe how this activity dynamics will unfold across the divisions. In digital integration, we expect revenue to remain steady year-on-year, with growth in digital being offset by a decline in APS due to the palisade divestiture. Digital will maintain its very strong growth momentum, with full-year revenue growth in the IT, supported by digital operations and data and AI solutions. Meanwhile, in the core, we expect revenue to be flat year-over-year, with modest growth in production systems and over-the-counter performance, offsetting the decline in well constructions across regions. In production systems, growth will be driven by artificial lift, competition valves, and midstream production systems, while over-the-counter performance will be supported by intervention and unconventional activity growth in international markets. Overall, when excluding the impact of ChampionX, we expect a mix of geographies and division as just described to result in a steady revenue outlook for 2025. This would translate into adjusted EBITDA dollars and margins being at or above 2024 levels. Now turning to the first quarter, we expect revenue and adjusted EBITDA to be at similar levels as last year, in line with our four-year guidance. This will be followed by an activity rebound in the second quarter, particularly in international markets. Finally, let me discuss why I believe SAP is the best positioned company to navigate the evolving market dynamics that I just discussed. Looking at the evolution of the market in 2025 and beyond, SAP's size, digital leadership, integration capabilities, and performance advantage are differentiators. Our diversified portfolio across global operating areas and business line and our combined exposure to short and long cycle projects bring resilience, enabling us to navigate regional and market situations. For example, our digital business is growing with our creative margins at an elevated rate as customers embrace the power of these data and AI to drive performance and efficiency across their workflows and producing assets. Our integration capabilities are shaping our engagement with customers beyond NOCs, allowing us to add further resiliency and diversity against the industry backdrop. And production recovery is becoming a larger part of our business as customers work to maximize their producing assets. And this will be further enhanced by the contribution from Champonnex. Furthermore, and as illustrated in our success in 2024 across low-carbon and digital infrastructure, we are developing new growth pathways beyond oil and gas in fast-growing markets, decoupled from the upstream sector. As you can see, we're operating from a very strong position, and as we remain focused on cost optimization and process enhancement, leveraging digital transformation to become a more efficient organization, this will support a margin expansion journey. The combination of strengths I've just described, along with our continued business performance, provide us with confidence in our ability to continue delivering strong cash flows and increase return to shareholders. You have already seen the action we have taken in our earnings release today as we increase our dividend and accelerated share repurchase to start the year. I will now turn the call over to Stéphane to discuss this announcement and our financial results in more detail.