Schlumberger NV (SLB) reported its Q1 2025 financial results, revealing earnings per share (EPS) of $0.72, slightly below the forecasted $0.74. The company’s revenue for the quarter was $8.49 billion, falling short of the anticipated $8.64 billion. Following the announcement, Schlumberger’s stock saw a minor decline of 0.53% in pre-market trading, with shares priced at $34.74, down from the previous close of $34.93. According to InvestingPro analysis, the company maintains a GOOD financial health score and appears undervalued based on its Fair Value model. The company’s performance reflects a challenging market environment, despite growth in certain segments.
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Key Takeaways
- Schlumberger’s Q1 2025 EPS of $0.72 missed the forecast by $0.02.
- Revenue decreased by 3% year-on-year, totaling $8.49 billion.
- North American revenue increased by 8%, while international revenue fell by 5%.
- Digital revenue grew 17% year-on-year, indicating strong demand.
- Stock price decreased by 0.53% following the earnings announcement.
Company Performance
Schlumberger’s overall performance in Q1 2025 showed mixed results, with revenue declining by 3% compared to the same period last year. The company experienced a 5% drop in international revenue, while North American operations saw an 8% increase, highlighting regional variances in demand. Despite the revenue decline, Schlumberger’s digital revenue grew significantly, demonstrating robust market interest in its technological offerings.
Financial Highlights
- Revenue: $8.49 billion, down 3% year-on-year
- Earnings per share: $0.72, a decrease of $0.03 from Q1 2024
- Adjusted EBITDA margin: 23.8%, up 18 basis points year-on-year
- Cash flow from operations: $660 million
- Positive free cash flow: $103 million
Earnings vs. Forecast
Schlumberger’s actual EPS of $0.72 was below the forecast of $0.74, marking a 2.7% miss. The revenue also fell short of expectations by approximately $150 million. This performance contrasts with the company’s historical trend of meeting or exceeding forecasts, suggesting potential challenges in adapting to current market conditions.
Market Reaction
The stock price of Schlumberger fell by 0.53% in pre-market trading, reflecting investor disappointment with the earnings miss. The current share price is $34.74, still within the company’s 52-week range of $31.11 to $50.94. This downward trend aligns with broader market concerns over declining global upstream investments.
Outlook & Guidance
Looking ahead, Schlumberger projects flat to mid-single-digit revenue growth in the second half of 2025. The company aims to expand its margin by 50-100 basis points in Q2 and achieve an approximately 25% full-year EBITDA margin. The anticipated closure of the ChampionX acquisition in Q2 or early Q3 is expected to bolster Schlumberger’s market position.
Executive Commentary
CEO Olivier Lapouche emphasized the company’s focus on efficiency gains and commitment to capacity expansion in resilient markets like the Middle East and Asia. CFO Stephane Migne expressed confidence in future quarters, stating, "We are still quite confident that it will follow the pattern we usually see every year and it will increase significantly in the following quarters."
Risks and Challenges
- Global upstream investment decline could impact future revenue.
- Potential tariff impacts may affect operational costs.
- Market volatility in short-cycle activities, especially in U.S. Land.
- Supply chain disruptions could hinder production.
- Competition in digital and low-carbon solutions may intensify.
Q&A
During the earnings call, analysts queried Schlumberger’s strategy for navigating market uncertainty and tariff mitigation. The company detailed its approach to diversifying beyond oil and gas, focusing on carbon capture and storage (CCS), geothermal, and critical minerals, which are expected to drive future growth.
Full transcript - Schlumberger NV (SLB) Q1 2025:
Megan, Conference Operator: Good morning. My name is Megan, and I’ll be your conference operator today and would like to welcome everyone to the First Quarter SLB Earnings Call. At this time, all participants are in a listen only mode. After the speakers’ remarks, there will be a Q and A session. 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. McDonald, Senior Vice President of Investor Relations and Industry Affairs, SLB: Thank you, Megan. Good morning, and welcome to the SOB first quarter twenty twenty five 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 Olivier Lapouche, Chief Executive Officer and Stephane Migne, 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 ks 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.
Olivier Lapouche, Chief Executive Officer, SLB: 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 how we’ll manage our business in this uncertain environment. Stephane will then provide more details on our financial performance and we’ll 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 has 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 supply releases by OPEC plus and recent tariff announcement. Against this more challenging backdrop, I was proud to see our teams continue to deliver for our customers and we finished the year the quarter by achieving further adjusted EBITA 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 drilling 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 rig count outperformance. Turning to North America, we delivered positive results, driven by the Offshore market with higher sales of both Digital and Subsea Solutions Systems. We also saw continued growth momentum in our Data Center Infrastructure Solutions business in this region. 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 continued to lead the way with steady revenue growth and further margin expansion. Customers continued to demonstrate strong demand for Surface Producing Systems, Completions and Artificial List.
And this late cycle business is becoming more profitable, with margins increasing by 197 basis points year on year, supported by favorable activity mix, execution efficiency and conversion of improved price backlog. Specific to Subsea, we remain 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 OneSubsea joint venture. In Reservoir Performance, revenue was slightly down year on year and margins were significantly impacted by challenges on several new projects that resulted in start up and operational cost overruns. We continue 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 deepwater. In Well Construction, we really 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 and Integration, growth was entirely driven by digital, where revenue grew 17% year on year as customers continue 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 markets, driven by Captur acquisition as well as in our Data Center Infrastructure Solutions business. Combined, revenue from CCS Geothermal Critical Minerals and Data Center Solutions is on pace to visibly exceed $1,000,000,000 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 macro environment and our SLB is adapting accordingly.
The industry is navigating global economic uncertainty stemming from the supplydemand imbalance and recent tariff enhancement. 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 balance, we expect to see new supply enter the market as OPEC plus has announced plan 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 an uncertain market backdrop. 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 differentiated performance for 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 lifecycle of the assets.
This includes an increase emphasis on the production recovery market, but 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 we 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 oil and gas, 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 Solutions business.
Let me quickly elaborate on our Data Center business. Over the past two years, we have engaged our Perseggers, whom we partner with in digital, to unlock new opportunities for our business through the development of Data Centers. This has attained a significant contract award for the provision of Manufacturing Services and modular cooling units, which we are currently fulfilling. Based on our performance and unique capabilities, we are also gaining access to new opportunity pipeline. And we are expanding our technology offering with low carbon solution to serve new potential customers.
Overall, this is a very exciting and fast growing market, driven by AI demand and 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 $4,000,000,000 in returns to shareholder in 2025. Now before I hand over to Stephane, 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 ties and that oil price remains approximately at current levels, we expect revenue to be flat sequentially including excluding Champ NX with an adjusted EBITA margin expansion between 50 to 100 basis points. Looking at the full year, while a number of different scenario could materialize, including tariffs and OPEC plus actions. Assuming oil 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 Champagne X.
This will be supported by a combination of the seasonal activity uptick, new starts up in the border and further growth in our Digital and Data Center business. And under these conditions, we also expect further margin expansion. Look, I know there is a lot of uncertainty in this market, but we have been here before. We’re 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 cycle 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 Stephane to discuss our financial results in more detail.
Stephane Migne, Chief Financial Officer, SLB: Thank you, Olivier, and good morning, ladies and gentlemen. First quarter earnings per share excluding charges and credits was $0.72 This represents a decrease of $03 when compared to the first quarter of last year. We recorded $0.14 of charges during the quarter. This included $0.11 of charges in connection with our cost out program that we initiated last year and $03 of merger and integration charges related to the ChampionX and Aker subsea transactions. Overall, our fourth quarter revenue of $8,500,000,000 decreased 3% year on year.
International revenue decreased 5% year on year, largely driven by reduced activity in Mexico, Saudi Arabia, offshore Africa and Russia. North America revenue increased 8% year on year due to higher digital and subsea production system sales as well as strong growth in our Data Center Infrastructure Solutions business. Companywide adjusted EBITDA margin for the first quarter was 23.8%, up 18 basis points year on year. Pretax segment operating margin was 18.3%, representing a 60 basis point decline year on year as two of our four divisions experienced lower margins, partially mitigated by the effects of our cost out program. As we navigate the current market dynamics, we will continue to exercise cost discipline and we will align our resources with activity levels in the coming quarters as necessary to protect our margins and cash flows.
As it relates to tariffs, the evolving landscape clearly introduces uncertainty, which makes it challenging to fully assess their impact at this time. Broadly speaking, we are partially protected by our activity mix, with approximately 80% of our revenue derived from international markets, as well as by our diversified supply chain network that includes in country manufacturing and local sourcing. However, parts of our operations are still potentially exposed to increasing tariffs, primarily from imports of raw material into The U. S. In our Production Systems division, as well as exports from The U.
S. Subject to retaliatory tariffs. Under the current tariff framework, the majority of the impact is on import and export flows between The U. S. And China.
So any resolution or conversely escalation between those two countries can significantly impact the tariffs we may be subject to. While those discussions are taking place, we are taking proactive steps to mitigate the potential impacts. This includes reviewing how to further optimize our supply chain and manufacturing network, as well as diligently pursuing all applicable exemptions and drawbacks. We are also actively engaging with customers to recover our tariff induced cost increases through contractual adjustments. We have made progress on all these fronts in the last two weeks and we are stepping up those actions across the organization as we speak.
As the second quarter progresses and ongoing trade negotiations continue, we will hopefully gain better visibility of where tariffs may settle and the extent to which we will be able to mitigate their effects on our business. Let me now go through the first quarter results for each division. First quarter Digital and Integration revenue of $1,000,000,000 increased 6% year on year, driven by 17% growth in digital revenue. This growth was partially offset by lower APS revenue due to a temporary pipeline disruption that impacted production in our projects in Ecuador. While this issue has been resolved, it did cost us $01 of earnings in the quarter.
Digital and Integration margin of 30.4% expanded three eighty basis points year on year, entirely due to improved profitability in Digital. Reservoir Performance revenue of $1,700,000,000 decreased 1% year on year, as strong unconventional stimulation and intervention activity was offset by lower evaluation and exploration activity. Margins of 16.6% declined three eleven basis points as compared to the first quarter of last year due to the less favorable activity mix as well as project start up costs. Well Construction revenue of $3,000,000,000 declined 12% and margins declined 71 basis points year on year on significantly lower drilling activity. Mexico and Saudi Arabia alone represented approximately two thirds of the revenue decrease.
Finally, Production Systems revenue of $2,900,000,000 increased 4%, while margins of 16.2% grew 197 basis points year on year. These results were driven by the resilience of our portfolio in production and recovery activities and were augmented by significant revenue growth in our Data Center Infrastructure Solutions business. Now turning to our liquidity. During the quarter, we generated $660,000,000 of cash flow from operations, a significant increase compared to the first quarter of last year. We generated positive free cash flow of 103,000,000 despite the payment of annual employee incentives and the seasonal increase in receivables due to continued capital discipline and working capital management.
Despite the uncertain economic environment, we expect our cash flow generation to remain strong and to grow throughout the year consistent with our historical trends. Capital investments, inclusive of CapEx and investments in ATS projects and exploration data, were $557,000,000 in the first quarter. For the full year, we are still expecting capital investments to be approximately 2,300,000,000.0 excluding any impact from the anticipated closure of the ChampionX transaction. Our net debt increased $2,700,000,000 sequentially to 10,100,000,000.0 This increase largely reflects the $2,300,000,000 we spent on our accelerated share repurchase transaction during the quarter. This ASR transaction was completed in April and resulted in us reducing ultimately our shares outstanding by a total of 56,800,000.0 shares.
47,600,000.0 of these shares were received in the first quarter, while the remaining 9,200,000.0 shares were received in April. The ASR transaction, together with the dividend increase announced last quarter, will allow us to meet our commitment to return a minimum of $4,000,000,000 to shareholders in 2020. Let me conclude with an update on our pending M and A transactions. While these transactions are obviously taking more time to complete than initially anticipated, we are pleased with the progress made during the quarter and continue to work towards successful closure. As it relates to ChampionX, as we announced a couple of weeks ago, the United Kingdom Competition and Markets Authority has agreed to consider our proposed actions to address their concerns as part of their Phase one review.
We will continue our collaboration with The U. K. And other regulators towards an anticipated closing in the second quarter or early third quarter of twenty twenty five. With respect to our overspending transaction, we now expect the divestiture of our interest in the Palace APS project in Canada to close in the second quarter. I will now turn the conference call back to Olivier.
Thank you, Stephane. I think Megan, we
Olivier Lapouche, Chief Executive Officer, SLB: are ready for taking the questions from the floor. Thank you.
Megan, Conference Operator: We will now begin the Q and A session. Your first question comes from the line of David Anderson with Barclays. Your line is open.
David Anderson, Analyst, Barclays: Thanks. Good morning, Olivier. How are you?
Stephane Migne, Chief Financial Officer, SLB: Good morning, Dave. Very well.
David Anderson, Analyst, Barclays: So we’ve heard from a number of other service companies this week on the outlook. So some of them more sobering than others, but I think we’re starting to frame sort of some of the potential outcomes for international North America for the rest of the year. You said, upstream spending you’re expecting to decline this year, but I was hoping you can maybe clarify a little bit how you see international North America from here at these oil prices? And how does this factor into your guide for mid single digit growth in the second half of the year in which you have a very different mix than your peers?
Stephane Migne, Chief Financial Officer, SLB: No, absolutely. No, thank you. Thank you, Dave, for the question. Indeed, I would like you to clarify. So as you know and as we have highlighted in the
Olivier Lapouche, Chief Executive Officer, SLB: prepared remarks, global Upstream spend will be down year on year and with higher decline than originally anticipated. There is no argument against that nor against the current public data in the penalty of the tariff impact itself. It’s already slowing down. What is important is how SLB is positioned against this backlog. And now we see more downside exposure in NAM than International Market in this negative revision.
But first, if you look at NAM and our position there, we are now tied to the rig nor frac fleets. And actually, we are long in offshore, in digital and in production in this market. And furthermore, we have data center solution there. So I think if you look at it, our exposure here has been three factors due to a strategy we initiated about five years ago. And we are hitting now the benefits of having better resilience against the short cycle exposure we have as part of NAM because our Offshore Pollution market exposure, digital and now the new business.
I mean excluding the Data Center Infrastructure Solution, our year on year would have been growing year on year, proving that resilience is in place for now. Now flipping to International, we see less exposure or less decline proportionally, directionally than in North America, as the resilience, as I said, of Middle East and Asia, including Offshore, including Uncommercially, including Gas, will continue to play a role into holding better this market. So we have the right exposure in Offshore. We have the right exposure in Gas internationally, partially uncommercial. We are growing, as you have seen, our digital.
And production recovery remain nice exposure we have across the group. Speaking of which, I believe that the upcoming acquisition integration of Champagneux will not only enhance our resilience, but improve our mix in North America and give us further digital and further offer exposure across the world as well. So feel good about where we are in this cycle. And I think just wanted to reconcile a little bit why we have maybe having differentiated performance going forward we expect.
David Anderson, Analyst, Barclays: Great. Thank you. Very much appreciate on the different mix here. I wanted to focus on one of your kind of core countries, Saudi Arabia. You mentioned it got off to a bit of a slow start this year.
We recently heard another rig company just talked about another rig being dropped. Can you talk how you see Saudi playing out kind of from here for the rest of the year? On the one hand, do you think conventional oil activity maybe picks up later this year with these OPEC barrels coming back in the market? And then you have the unconventional natural gas activity ramping up. So I guess I’m wondering overall, should we start to see sort of more sustained growth from Saudi starting later this year and into 2026?
A lot of moving parts here, if you could help us understand those. Thank you.
Olivier Lapouche, Chief Executive Officer, SLB: Yes. A lot of moving parts indeed. And I think, again, you have to step the clock back to what happened last year. And I think an adjustment of the ambition from 13 to 12 MSC that has led to a steep decline of activity that is translating into what we are seeing today year on year on our rig related activity. Now when it comes to this year and next, I think indeed the priority of The Kingdom clearly to stabilize the production and to be able to respond to this OPEC plus pool as they materialize in short term at least and to continue to execute that gas ambition to grow 40% agas and beyond by 02/1930.
And as such, the gas, land and the unconventional gas will remain a priority that we see and receive further activity increase. Now is there pending further reduction to adjust to the level of activity and adjust the commodity price like other accounts we will do? Possibly, but I think directionally, the commitment to long term gas, the commitment to maintain and the activity that relates to maintaining this 12,000,000 by LMSC will indeed represent likely an uptick as we go into 2026 for Saudi. So that’s what we expect. So yes, a lot of moving parts, but our exposure there is we love our position in Saudi.
I was just recently here with a few more members visiting The Kingdom, and I think we have the opportunity to measure firsthand the engagement, the I would say, the proximity we have and the feedback on our performance that is stellar. And I think we’d like to keep it that way and thank the team for what they are delivering on a difficult market condition. But yes, I think I believe that the worst is behind us from decline. And if there is some adjustment this year, believe that the gas led growth will help us rebound going forward.
David Anderson, Analyst, Barclays: Great. Thank you very much, Olivier.
Stephane Migne, Chief Financial Officer, SLB: Thank you.
Megan, Conference Operator: Thank you. Your next question comes from the line of Scott Gruber with Citigroup. Your line is open.
Scott Gruber, Analyst, Citigroup: Yes. Good morning.
Stephane Migne, Chief Financial Officer, SLB: Good morning, Sam. So
Scott Gruber, Analyst, Citigroup: I wanted to ask about what EBITDA margin level you think you could defend in a modestly weaker market year on year. Previously, with the cost restructuring, it felt like you were targeting to defend 25%. It looks like take a margin slightly north of 25 in the second half to get there this year. But do you think you can get the EBITDA margin back to the 25% level in the second half excluding the impact of ChampionX?
Olivier Lapouche, Chief Executive Officer, SLB: I think excluding the ChampagneX and excluding escalation of Thijs, I think I believe that if we assume that the scenario condition we have put out, but oil price remaining in check with current approximately current level and the guidance we gave on the growth in the second half and the leverage we’ll have and realizations of our cost out program, the digital effect and the rest. We’ll have the ambition to grow our margin in second half and we’ll try to keep our ambition to approximately 25% for the full year. That’s something that we’ll ambition, but the tariff is a big question mark. And I think if the tariff were to stay or escalate from where they are, obviously the impact you will have, as Stephane described, I think will have a will represent a headwind to this margin expansion in the second half.
Scott Gruber, Analyst, Citigroup: I appreciate the color. And then turning to Digital, how do you think about the cadence of digital growth in this environment? You know, on the one hand, digital is is obviously an efficiency enabler. I think, you know, in that vein, it could accelerate. But on the other hand, there is some, you know, exploration spend, some discretionary spend, you know, within the digital mix.
How do you think about the resilience of digital growth in this environment? And should we continue to think about that high teens growth rate for the year?
Olivier Lapouche, Chief Executive Officer, SLB: I think this remains our mission. We believe that I think this secular trend of digital adoption in the industry is actually accelerating. Now there will be some discretionary decision. There will be some pressure here and there. There will be some projects that will be reconsidered.
But overall, I think we believe that the realization of the efficiency gain, both productivity for the and effectiveness for the planning Geoscience workflows and the direct impact on the performance to the cost of ownership for workflows, I think, is still playing out and resonating very well for customers at the time they want to extract efficiency. So against the global Upstream CapEx, I think as we commented in your previous question that we declined year on year, we are still seeing mid to high teens clearly growth into our digital business driven by this secular trend that we are fully capturing. Our technology strategy and our platform strategy is clearly playing out. And you have seen the diversity of the awards that we get, different customers, different region, Geosound’s operation, all that we are making with many customers across the world.
Scott Gruber, Analyst, Citigroup: Great. I appreciate the color, Olivier. Thank you.
Olivier Lapouche, Chief Executive Officer, SLB: Thank you, Scott.
Megan, Conference Operator: Thank you. Your next question comes from Arun Jayaram with JPMorgan. Your line is open.
Arun Jayaram, Analyst, JPMorgan: Yes. Good morning. Olivia, was wondering if you could elaborate on SLB strategy kind of to diversify the portfolio beyond oil and gas. I think you mentioned you’re in pace to exceed maybe $1,000,000,000 of revenue this year versus I think $850,000,000 last year. But maybe talk about some of the steps you’re taking there and some of the longer term growth potential.
Olivier Lapouche, Chief Executive Officer, SLB: No. Thank you, Arun. I think, yes, I think we have initiated about three to four years ago a strategy with new energy. I think the major aspect of that, that will continue to impact us in short term are three ways. First is CS, where we took a position to acquire Capturie.
And I think we have our SMB Capturie venture, I think is the Capturie technology that I think we have four active projects and many projects in the field that will continue to materialize and create a growth pattern going forward. So this combined with our sequestration adjacent to the core capability in exploration and characterization of this reservoir sequestration capability, I think it’s leading to visible growth on our CCS OE business and this will continue. So we don’t see the pattern slowing down. We see this as a long term market position we want to continue to own and grow. Geothermal, starting from commercial geothermal has been something that has been getting more focused and more adoption for customers.
And now there is a lot of pilots on new generation or next generation Azure Thermal that is being highly supported by the new administration, particularly in The U. S. I believe this is also something that we continue to grow. And finally, I will mention the lithium direct lithium extraction, where I think the pilots we had successfully completed last year, the first pilot at scale in The U. S, I think is again resonating very well with the Critical Minerals priority of the current administration.
And we see this in South America. We see this in Saudi, where we’re actually participating into pilot as well. So this is successful. And separately, you have seen that the data center is something that we have used. I think the relationship, the engagements we had to position ourselves as a provider of manufacturing capability, manufacturing services as well as modular cooling solutions for this data center.
And the success is great. And I think I’m very pleased with the progress of the team. We have a plant in Louisiana that is serving this business. And we have large contract that we are fulfilling. And that has been now have growth in North America, and we expect it to continue going forward this year and next, clearly.
So yes, the ambition is to go from the $850,000,000 plus to a a vis more than $1,000,000,000 when we put all of this together. And we’ll not expect it to slow in 2026, but to continue to accelerate.
Arun Jayaram, Analyst, JPMorgan: Great. That’s helpful. Maybe my follow-up is for Stefan and maybe just to maybe clarify some of the outlook comments. My team tried to estimate what your outlook comments would translate into 2025 EBITDA. Are we’re getting to somewhere between 8.4 to 8,500,000,000.0.
I don’t know, Stefan, if you could if you could maybe give some color if that makes sense. And maybe the clarification is how are you treating Palliser and some of the tariff related impacts in terms of the full year outlook?
Stephane Migne, Chief Financial Officer, SLB: So, Arun, we will stick with revenue only guidance for the rest of the year. As Olivier mentioned, the growth assuming current oil price more or less stay at the current level. So we stick with revenue. Think it’s premature to give you an EBITDA for the second half and hence for the full year. And some of the reason is indeed the tariff, the application of tariff.
We think giving you a number on tariff at this stage is would not be useful for financial modeling. Unfortunately, we’d love to, but it’s quite difficult. But as I said, we are partially shielded by domestic manufacturing and sourcing, but it is clear. If it stays that way, we will have an impact. We will try to mitigate it and we are already doing that for optimization of supply chain and through ultimately trying to pass the impact to customers.
But what matters at the end is that we are still seeing margin expansion in the second quarter despite tariffs being affected now. And this is to the tune of 50 to 100 basis points as we mentioned for Q2 sequentially. And for the second half of the year, our margin expansion assuming again that oil price stay more or less at this level, we will have growth in H2 and this will come with margin expansion. But quantifying that margin expansion in H1 to H2, it will not be the right thing for us to do today.
Arun Jayaram, Analyst, JPMorgan: Totally understand. Thanks a lot, Stephane.
Stephane Migne, Chief Financial Officer, SLB: Thank you. Thank you. Thank
Megan, Conference Operator: you. Your next question comes from the line of Neil Mehta with Goldman Sachs. Your line is open.
Neil Mehta, Analyst, Goldman Sachs: Yes. Thanks team for all this color. So as you think about ChampionX, recognize there’s some limitations about what you can say around this, but where are we in terms of the gating items at this point? It does feel like we’re in the end zone here, but curious what your perspective is on what remains outstanding and confidence around closing?
Stephane Migne, Chief Financial Officer, SLB: Yes. I think as Stephane did come on
Olivier Lapouche, Chief Executive Officer, SLB: his prepared remarks, I think we are very pleased with progress we made very recently, particularly The U. K. CMA authorities and obtained that they have accepted that we go into remedies extension of Phase one through remedies as it has been commented and they have accepted the remedies. So now to walk through these remedies and implement them as soon as effectively we can. And that’s the reason why we have increased our confidence to conclude the end of the quarter or early next quarter.
Now the other outstanding, I think Norway is known to be outstanding. And I think we have been engaged very effectively the last few days and few weeks with the Norwegian authority. And I believe as well that I think we are, as we commented, going to hopefully a resolution there. So that’s the reason why we maintain our confidence into the end of this quarter or early next quarter.
Neil Mehta, Analyst, Goldman Sachs: Yes. Thanks. And Olivier, would love you to share your thoughts on the macro, particularly from the supply side. You spent a lot of time all around the world. Where do you expect activity if we’re in a lower commodity price environment to be dialed back?
What do you think is relatively price inelastic? Is there a price level at which point you see activity particularly cut back? Just your perspective on the near term macro and then also your perspective on the long term macro because you’ve had an underinvestment view that ultimately long term that’s going to catch up here. Does this just reinforce that?
Olivier Lapouche, Chief Executive Officer, SLB: Yes. I think starting with the long term, maybe it’s easier. I believe that the position of oil and gas to feed the energy mix of the world and progress and driven by different demand, be it the global sales, it AI, be it the electrification, I think we’ll continue to pull for the long term. And this combined with the natural decline that is pressing on many basins as you’ve seen, we’ll continue to call for replenishments and maintaining, if not increasing, the level of investment that we see today. So long term, the view is intact and I think the role of our store to address this, the role of the commitment of execution to capacity expansion in Middle East, the role of gas, partly through security of gas supply in Asia and the development of unconventional international to address this.
I think, will continue to be the area of growth that we foresee long term to remain. And I’m not talking about digital here. Now in short term, I think it’s very difficult to gauge, but I think generally speaking, the short cycle activity will be the first exposed. And Americas has quite a few areas of short cycle starting with The U. S.
Land. And I think this will be the first that certainly will have the most impact. Internationally, I think the Residences, we mentioned, of Middle East, many countries are committed here relatively in the penalty of oil price for their capacity expansion and with UAE, with Kuwait and activity in some other part of the country around Middle East will continue to stay and or if not accelerate. Asia, driven by Energy Security, we’ll also have Residance and driven by deepwater activity there, offshore deepwater activity there that is strong and not forgetting about China that is holding the activity because they base it on five year plan, not on necessarily on oil price of today. So you combine all this, you still have quite a few exciting pockets of growth geography.
And you have some secular trend in digital, you have increased production recovery and you have unconventionally internationally that will continue to be a level of growth. So yes, there are opportunity to capture and there are ways to offset the decline of the short term decline we expect into the total CapEx spend.
Neil Mehta, Analyst, Goldman Sachs: Yes. Thanks, Olivier.
Megan, Conference Operator: Thank you. Your next question comes from the line of Roger Read with Wells Fargo. Your line is open.
Roger Read, Analyst, Wells Fargo: Yes, thank you and good morning.
Stephane Migne, Chief Financial Officer, SLB: Good morning.
Scott Gruber, Analyst, Citigroup: Maybe maybe if we could, Olivier, just,
Roger Read, Analyst, Wells Fargo: you were mentioning deepwater there. We we certainly well, it didn’t sound like exploration was a was an uplift for you in in q one. We certainly seen the industry start to lean into exploration a little more. And I was just wondering if you could kind of take us around the world a bit on where we are seeing things pick up. I mean, West Africa has looked good.
Certainly, Latin America ex Mexico has continued to look pretty good. South America. And then I was just curious anything else on that front?
Olivier Lapouche, Chief Executive Officer, SLB: Yes. I think the reserve replacement ratio is still what drives the IOCs and many large independents and some critical NOCs to continue to explore. And we have seen a rebound in commitment to exploration in the last eighteen months that I don’t see changing directionally, although there will be some discussion taken by some some customers and we have to go one customer at a time to review this. But directionally, I think the need for replacing reserve for mild measures and the need for developing long term oil or long term gas play in Asia or in the offshore basis at large, I think remains intact. And I think you are seeing it’s also into FID that we expect to be piling up in twenty twenty six, twenty seven that will impact Subsea business going forward.
But yes, exploration is not over. And exploration takes two forms. Exploration, I think three forms I would say. One is the near field exploration in Metro Basin Gulf Of Mexico or even Brazil or the North Sea, including Norwegian sector. And then you have the Frontier Basin, be it Namibia, it Suriname, it part of Asia, Indonesia particularly that are seeing new fresh exploration investment.
And finally, you have the other way to explore, which is digital exploration. And I think this is what we are benefiting from as well, lot of reprocessing, a lot of activity for beta processing. And hence, we are exposed to those. So yes, I think that the exploration will remain healthy. But this year, it may suffer from discretionary decision and from some lingering white space, as we call it, in deepwater.
Roger Read, Analyst, Wells Fargo: Appreciate that. The other question I had, just because it was called out as part of this order, things softer in Russia. Ironically, there was an article in the press today implying that Russia activity was at a multiyear high in the first quarter. So a bit of a juxtaposition there. It’s just if you could give us any more insights on what you’re seeing there?
Olivier Lapouche, Chief Executive Officer, SLB: I think I will restrict my the comment amount of Russia because we have taken this position to implement sanction and critical control of activity there. And this is what has led to a deep decline in Russia and we expect this to continue as we continue to restrain and take every measure to sanction technology access technical support to our team.
Scott Gruber, Analyst, Citigroup: Appreciate that. Thank you.
Stephane Migne, Chief Financial Officer, SLB: Thank you.
Megan, Conference Operator: Thank you. Your next question comes from the line of Stephen Gengaro with Stifel. Your line is open.
Stephen Gengaro, Analyst, Stifel: Thank you, and good morning, everybody.
James R. McDonald, Senior Vice President of Investor Relations and Industry Affairs, SLB0: Good
Stephen Gengaro, Analyst, Stifel: morning. I was wondering, as you talked about the outlook, and I was sort of focused on the production segment here, can you talk a little bit about your views on the resiliency of that business versus other parts of the company and maybe even the margin stability or contribution to margin expansion you see coming from that segment as
James R. McDonald, Senior Vice President of Investor Relations and Industry Affairs, SLB: we go through the year?
Olivier Lapouche, Chief Executive Officer, SLB: I mean, I will not comment directionally on the margin. I think we don’t provide guidance on margins on our divisions. However, I think the strengths of the Production System division, think it stems from the adoption of this technology and the success we have in market position across the globe both internationally and North America. There has been a growing market in North America, U. S.
Land particularly lately. So I think we have a market share, market gain, market position due to technology. We have FIT technology. We have a unique electrical completion technology. We have we are unlocking some efficiency in performance on our share lift.
And we have some success in subsea, partly in processing that is in combination giving us this distraction into this market. So that’s the first. The secondly, I think, Deep, as you said, we expect that the long cycle side of this operation system will be more resilient against this market uncertainty as we see it. And so on the short cycle, it’s all about performance. If we maintain our performance as we have in The U.
S. Land market, I think we’ll maintain our market position or go against the tide and be able to grow in those markets. So I feel confident about the ability of the production systems going to do well this year and it’s going to gain market position or to leverage the long cycle exposure, possibly the quarter for success. So I feel confident, but I will not comment on the margin. We are confident that the team is executing very well.
Hence, as we contribute to protecting our margin and contribute to margin expansion going forward.
Stephen Gengaro, Analyst, Stifel: Great. Thank you. And then the second question I have was around your confidence in free cash generation for the year. I mean, you’re obviously committed to returning a significant amount of cash. How do we think about you sort of stress testing that against the uncertain macro and sort of preservation of cash and balance sheet versus returning capital?
Like is there a stage at which you slow that down or your confidence is pretty high?
Stephane Migne, Chief Financial Officer, SLB: So first, thanks for the question, Stephen. So we did start the year on cash flow as we expected even a bit better as I mentioned. And we are still quite confident that it will follow the pattern we usually see every year and it will increase significant in the following quarters. And the second half is really when we make the majority of the free cash flow from here. So yes, you’re absolutely right.
We do stress testing. H2 is uncertain as we said in a lower activity scenario, which is not the best case today. But in case commodity pricing drop further, we would actually expect headwinds on earnings to be partially offset by lower working cap requirements that would provide quite a buffer. So in many cases, believe actually our free cash flow for the year will continue clearly to support our commitment of minimum €4,000,000,000 returns to shareholders. So we are confident on our cash flow and we are confident that clearly this commitment is not going to change.
Stephen Gengaro, Analyst, Stifel: Great. Thank you.
Stephane Migne, Chief Financial Officer, SLB: Thank you. Thank you.
Megan, Conference Operator: Thank you. Your next question comes from the line of Keith MacKey with RBC Capital Markets. Your line is open.
James R. McDonald, Senior Vice President of Investor Relations and Industry Affairs, SLB1: Hi, good morning. Just wanted to start out maybe on the margins now. Olivier, without commenting on segment margins specifically, certainly, we did see Production Systems and Digital up nicely year over year, which seem to support the business very well. But can you just comment on the strategy from here relative to what you’re seeing in the cycle in terms of where ultimately the business goes relative to what we’re seeing as the cycle being a later cycle in the general oil and gas market? And just how you think that all plays out with the different segments and being a more cross E and P life cycle business?
Olivier Lapouche, Chief Executive Officer, SLB: Yes. I believe the strategy we have, first and foremost, to continue to, I think, leverage the market position we have. They are just the strategy we had in the NAM, as I mentioned, I think, fit for this market condition going forward. We believe that our exposure internationally, very diverse, broad exposure, both from onshore, offshore and gas exposure including unconventional, digital and production, as you mentioned, I think we continue to support and production is I would call it, production recovery. And I think that includes element of our Reservoir Performance division as well as our Pollution Systems division, I think is will have resilience going forward.
The drilling, as you have seen, I think, has is more directly linked to the rig activity that I think in this uncertain environment has and will continue to be getting downward pressure. But I think from as you commented earlier from the margin, we will continue to anticipate, take cost action and continue to extract efficiency from our organization to partially offset this and continue to focus on maintaining our margins. So we believe that, as we said, our mission remain intact to protect our margins with all the commentary and provision of oil price and tariff. I think our mission remains intact that in this mix, we believe that digital growth and the growing success we have in Production System and containing the margin pressure on the Reza Performance and Well Construction will result into maintaining and protecting our margin as much as we can, excluding tariff as we commented.
James R. McDonald, Senior Vice President of Investor Relations and Industry Affairs, SLB1: Yes. Appreciate comments there. Maybe just one more on tariffs. I know the situation is certainly incredibly fluid. But does the guidance that you’ve provided imply continuation of existing tariffs that are on?
Or can you help us think about those pieces a little bit more?
Stephane Migne, Chief Financial Officer, SLB: Well, for the second quarter, absolutely, yes. It’s assuming current tariff unchanged. That 50 to 100 basis point margin expansion sequentially includes the current tariff framework. And again for the second half, it will depend on the final tariff framework, which we all know will change in one way or another. So it will the margin expansion will fluctuate based on that.
James R. McDonald, Senior Vice President of Investor Relations and Industry Affairs, SLB1: Okay. Thanks very much.
Olivier Lapouche, Chief Executive Officer, SLB: Thank you.
Megan, Conference Operator: Thank you. Your last question comes from the line of Dan Cutts with Morgan Stanley. Your line is open.
James R. McDonald, Senior Vice President of Investor Relations and Industry Affairs, SLB0: Hey. Thanks a lot. Good morning.
Stephane Migne, Chief Financial Officer, SLB: Good morning, Don.
James R. McDonald, Senior Vice President of Investor Relations and Industry Affairs, SLB0: Good morning. So, I was maybe hoping we could dig in a little bit deeper on, new energy across your kind of five pillars and, I guess, the, I don’t know if you wanna call it the the sixth pillar with the, data center infrastructure. But I I think I I think you guys have done a great job of quantifying the opportunities around data center infrastructure and and kinda get the sense that, among the five other pillars, CCUS is is is maybe the largest. But as you as you think about your $3,000,000,000.2030 new energy revenue target, how do you think about the contributions across those five pillars? Where do you see kind of more or less growth potential, more or less contribution?
Any color you can share there would be great. Thank you.
Olivier Lapouche, Chief Executive Officer, SLB: Yes. We’re not ready to we’re not here to comment, let’s say, as an update on our $3,000,000,000 ambition for new energy. But indeed, I think CCS all in, as I call it, okay, both the sequestration and all the services, including digital that we have there will be a large component of that, okay, clearly. Geothermal has quite a good momentum. And I think it’s too soon to say whether the unconventional or next generation geothermal as it’s being pursued both in Europe and in The U.
S. With the support of the authority everywhere, I think will unlock and give us the second leg of growth clearly, too early to say. The lithium, as I commented, I think is a smaller opportunity, but I think it’s quite exciting and we are getting a lot of inbound requests to use the pilot and to test against the critical mineral ambition that many of our prospect customers have, be it the mining company or be it a few company that are former LAM Yards that are stepping into that business. Hydrogen is more next decade ambition that we have and the same for Energy Storage, I would say. And Data Center, I think the ambition we have is continue to consolidate and leverage the success we have with this engagement we have developed and success growth that we have developed and expand towards low carbon solution that are in need for decarbonizing the power source of this data center as well as providing effective cooling and support some manufacturing capacity, deploy and deliver these data centers.
We would have at the end of this year, they supported more than 15 data center solutions across The U. S. So that’s quite something we have thought. Again, can see all of this as a sum of business that it will grow at a higher rate than the oil and gas sector for the years to come. Hence, it is again adding to the resilience and to the ability we have to navigate difficult time as we have today and keep extracting growth or resilience across the region.
James R. McDonald, Senior Vice President of Investor Relations and Industry Affairs, SLB0: Awesome. That’s all really helpful. And then maybe a quick one, just on the APS, on the asset performance solutions business. You know, I’m I’m sure the highest priority is kind of getting the Palisir, deal across the finish line. But how do you think about the remainder of that portfolio?
My understanding is that the Ecuador, asset, which is which is kind of, fairly oil levered, is is the biggest remaining or perhaps only remaining component. Is that something that, you guys could potentially be divesting at some point in the future? Is that an asset that you’re planning on keeping? Just wondering how you think about the APS portfolio moving forward following the Palacer transaction. Thank you.
Stephane Migne, Chief Financial Officer, SLB: Yes. So indeed following Palacer, we’ll only be left with Ecuador and it will remain that way. And in Ecuador, we have three projects. And as we explained in the past, these projects are quite different from equity positions such as we have in Canada. They are more like service contracts with the local NOC, with the operator.
So you are actually closer to our core business here. The only difference, if I may say, is that we are paid in production equivalent through a barrel instead of an invoice for services. So at this stage, we it’s quite economic. These projects are providing a lot of cash flow for the company. They are providing good profitability.
So considering the nature of the projects, they are likely to stay at least for they have a finite contractual term actually, which we can negotiate and extend with our customer. But at this moment for the next few years, you have to assume they will stay within our portfolio.
James R. McDonald, Senior Vice President of Investor Relations and Industry Affairs, SLB0: Understood. Thank you both very much. I’ll turn it back.
Stephane Migne, Chief Financial Officer, SLB: Thank you. Thank you, Dan.
Megan, Conference Operator: Thank you.
Olivier Lapouche, Chief Executive Officer, SLB: So ladies
Stephane Migne, Chief Financial Officer, SLB: and gentlemen, as we conclude today’s call, I would like to
Olivier Lapouche, Chief Executive Officer, SLB: leave you with the following takeaways. First, while the market outlook remains uncertain, SAB is positioned to demonstrate resilience through our strategy, leveraging our global reach, innovation capabilities, differentiated digital offering, diversification beyond oil and gas and disciplined cost management. Second, we are confident in our ability to continue generating strong cash flows despite the evolving market dynamics and remain focused on protecting margins and committed to increase return to shareholders in 2025. And finally, we look forward to creating value for our customers, partners and shareholders in the coming quarters. With this, I will conclude today’s call.
Thank you all for joining.
Megan, Conference Operator: This concludes today’s conference call. You may now disconnect.
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