SLB Limited Common Shares

time, simply press star followed by the number 1 on your telephone keypad. You may remove yourself from the queue by pressing star 2. 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.

James R. Thank you, Megan. Good morning, and welcome to the SOB First Quarter 2025 Earnings Conference Call. Today's call is being hosted from Houston following our board meeting in the Middle East last week. Joining us on the call are Olivia LaPouche, Chief Executive Officer, and Stephon 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. Certainties that could cause our results to differ materially from those projected. 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 first quarter earnings press release, which is on our website. Finally, in conjunction with our proposed acquisition, SLB and ChampionX have filed materials with the SEC. including a registration statement for the proxy statement and prospectuses. These materials can be found on the SEC's website or from the parties' 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'll begin by discussing our first quarter performance. Then I will provide updates on the evolving macro, and I will manage our business in this uncertain environment. Stéphane will then provide more details on our financial performance and will open the line for questions. Let's begin. As you have seen in our earnings press release this morning, it has been a soft start of the year. In addition to the typical seasonal activity decline in the northern hemisphere and the absence of year-end product and software sales, upstream investments have remained constrained by the oversupplied oil markets. This has been amplified over the past few weeks with additional economic uncertainty stemming from the acceleration of super-raises by OPEC+, and recent TAIF announcements. Again, this is more challenging by go-up. I was proud to see our teams continue to deliver for our customers, and we finished the quarter by achieving further adjusted EBITDA margin expansion year-on-year. Overall, across the business, first quarter revenue decreased by 3% year-on-year, as our strong results in North America were more than offset by lower revenue in the international markets, attributed to a combination of lower running activity in Mexico and Saudi Arabia and a steep decline in Russia. Excluding declines in these three countries, international revenue was steady year-on-year, and we achieved double-digit growth in a number of markets, including the United Arab Emirates, North Africa, Kuwait, Argentina, and China, as well as a solid performance in Europe and Scandinavia. Altogether, this resulted in international recounts at performance. Turning to North America, we delivered positive results driven by the offshore market with higher sales of both digital and surface pollution systems. We also saw continued growth momentum in our data center infrastructure solution business industry. However, This growth was partially offset by lower drilling revenue in U.S. land due to rig efficiency gains. Next, let me discuss the performance of our divisions. In the core, production systems continue to lead the way with steady revenue growth and further margin expansion. Customers continue to demonstrate strong demand for surface production systems, completions, and artificial lists. And this late cycle business is becoming more profitable, with margins increasing by approximately 197 basis points year on year, supported by a favorable activity mix, execution efficiency, and conversion of improved price backlog. Specific to subsea, we ran constructive on the market outlook with a significant pipeline of projects planned over the next couple of years. I was pleased to see margins in this area expand materially compared to the same period last year as a result of strong execution and the realization of cost synergies within our subsea one subsea joint venture. In reserve of performance, revenue was slightly down year-on-year, and margins were significantly impacted by changes on several new projects that resulted in startup and operational cost overruns. We continued to see strong demand for unconventional stimulation in international markets, including the United Arab Emirates and Argentina. However, this was fully offset by lower evaluation and exploration activity as a result of lingering white space in deep water. In oil construction, revenue declined year-on-year due to lower drilling activity across both North America and international markets. Despite this decline, I was pleased to see that one-third of our international units actually grew year-on-year in the first quarter. In digital integration, growth was entirely driven by digital, where revenue grew 17% year-on-year as customers continued to embrace digital technologies and solutions. Customers are accelerating the adoption of digital and AI solutions. to extract further efficiency and performance across the upstream lifecycle, both in planning and in operations across development and production. In our earnings press release, you can see several examples of customers adopting our digital solutions. Finally, as an update on our progress beyond oil and gas, we continue to experience positive momentum in the low-carbon market, driven by capture acquisition, as well as in our data center infrastructure solution business. Combined, revenue from CCS geothermal critical minerals and data center solution is on pace to visibly exceed $1 billion in 2025. Overall, I'm proud of the performance our team delivered this quarter, and I want to thank the entire SLB team for their hard work and commitment to customer success. Next, let me discuss the Macron Diamond Center SLB is adapting accordingly. The industry is navigating global economic uncertainty stemming from the supply-demand imbalance and recent TAIF announcement. In this environment, commodity prices are challenged, and until they stabilize, customers are likely to take a more cautious approach to near-term activity and discretionary spending. Beginning with the supply-demand imbalance, we expect to see new supply enter the market as OPEC Plus has announced plans to increase their production beginning in May. This comes at a time where the macroeconomic picture remains uncertain due to global trade concerns, which have the potential to result in lower liquid demand than originally expected for the year. Taken together, these factors are resulting in uncertain market backlog. At this point, we expect global upstream investment to decline compared to 2024, with customer spending in the Middle East and Asia being more resilient than other regions across the rest of the world. Against this uncertain backdrop, we remain focused on what we can control. We'll continue to execute our strategy, deliver decentralized performance to our customers, carefully manage costs, and remain committed to returns to shareholders. In the core, we remain positive on the long-term fundamentals for oil and gas, and we will continue to deepen our partnership with our customers throughout the last second of their assets. This includes an increase in phases on the production and recovery market, where we expect to unlock new growth potential and long-term resilience through opportunity for technology deployment. In digital, customers are investing in solutions to reduce cycle time, improve performance, and drive efficiency, and will continue to pursue opportunities in AI, cloud computing, and digital operations. Today, we are seeing the decoupling of digital investment from upstream spending, and this will increasingly represent a unique and exciting opportunity for our business. In our business, Beyond Online Guides, we continue to capitalize on low-carbon markets with our new energy offering, particularly in carbon capture and geothermal, while harnessing adjacencies as we have demonstrated with our rapidly growing data center infrastructure solution business. Let me quickly elaborate on our data center business. Over the past two years, we have engaged at Escalers, whom we partner with in digital. unlock new opportunities for our business through the development of data centers. This has attained a six-second contract award for the provision of manufacturing services and modular cooling units with which we are currently fulfilling. Based on our performance and unique capabilities, we are also gaining access to new opportunity pipelines, and we are expanding our technology offering with low-carbon solutions to serve new potential customers. Overall, This is a very exciting and fast-growing market. Driven by AI demand, I am expected to contribute to our diversified exposure beyond oil and gas in the coming years. Beyond our operational performance, we also have been on a journey of cost optimization and process enhancement. And moving forward, this will support our mission to protect margins despite softer customer spending. What matters in this environment is our ability to continue to generate strong margins and cash flows, deliver resilient returns to shareholders and come out stronger. Our first quarter results demonstrate our ability to do this, and I believe that the combination of our strategy and cost actions will help to protect our business moving forward. As a result, we remain committed to return at least $4 billion in returns to shareholders in 2025. Now, before I hand over to Stéphane, let me quickly share our guidance for the second quarter and the rest of the year. Specific to the second quarter, assuming there is no further escalation of tariffs and that all price remains approximately at current levels, we expect revenue to be flat sequentially, excluding ChampionX, with an adjusted EBITDA margin expansion between 50 to 100 basis points. Looking at the full year, while a number of different scenarios could materialize, including TARIS and OPEC Plus actions. Assuming all price remains similar to current level, we expect flat to mid-single digit revenue growth in the second half of the year compared with the first half, excluding ChampionX. This will be supported by a combination of the seasonal activity uptick, new startups in the border, and further growth in our digital and data center business. And under these conditions, we also expect further margin expansion. I know there is a lot of uncertainty in this market, but we have been here before. We are operating from a strong position and have a clear priority of preserving margins while generating robust cash flows. Our broad exposure is providing resilience against uncertainty and short cycles of weakness, as you have seen in our results today. And I'm confident that our people, our technology leadership, and our financial strength will clearly position us for long-term success. I'll now turn the call over to Stéphane to discuss our financial results in more detail.