425: SLB Announces Strong Third-Quarter 2024 Results Driven by Digital Growth and International Expansion

SLB reports a solid third quarter with revenue of $9.16 billion, driven by digital solutions and international markets, leading to increased earnings and margin expansion.

Summary

• SLB announced its third-quarter 2024 results, reporting revenue of $9.16 billion, a 10% increase year-on-year.
• GAAP EPS was $0.83, up 6% year-on-year, while EPS excluding charges and credits was $0.89, a 14% increase year-on-year.
• Net income attributable to SLB was $1.19 billion, a 6% increase year-on-year.
• Adjusted EBITDA reached $2.34 billion, a 13% increase year-on-year, with an adjusted EBITDA margin of 25.6%.
• Cash flow from operations was $2.45 billion, and free cash flow was $1.81 billion.
• The board approved a quarterly cash dividend of $0.275 per share.
• International revenue increased by 12% year-on-year, while North America revenue increased by 3%.
• Digital & Integration revenue increased by 11% year-on-year, driven by a 25% growth in digital revenue.
• Production Systems revenue increased by 31% year-on-year, including the impact of the Aker subsea business acquisition.
• SLB repurchased 11.3 million shares for $501 million during the quarter and expects to exceed its $3.0 billion return to shareholders commitment for the year.
• The company expects to deliver a full-year adjusted EBITDA margin at or above 25%.

Sentiment

Score: 8

Explanation: The document presents a positive outlook with strong financial results, growth in key areas like digital and international markets, and a commitment to returning value to shareholders. The company's strategic initiatives and focus on new energy also contribute to a favorable sentiment.

Positives

• Revenue increased by 10% year-on-year, reaching $9.16 billion.
• Adjusted EBITDA increased by 13% year-on-year to $2.34 billion.
• Digital & Integration revenue grew by 11% year-on-year, driven by a 25% increase in digital revenue.
• Production Systems revenue increased by 31% year-on-year, boosted by the Aker subsea business acquisition.
• Strong cash flow from operations at $2.45 billion and free cash flow at $1.81 billion.
• Increased returns to shareholders through stock repurchases and dividends.
• Expansion in international markets, particularly in the Middle East & Asia and Europe & Africa.
• Successful deployment of digital technology and cloud-based platforms.
• Progress in new energy initiatives, including carbon capture and storage and sustainable lithium production.

Negatives

• Well Construction revenue declined by 3% sequentially and year on year due to lower drilling activity.
• Reservoir Performance pretax operating margin contracted 53 bps sequentially due to lower profitability in evaluation.
• Latin America revenue decreased 3% sequentially, reflecting lower production system sales in Brazil and reduced drilling activity in Mexico and Guyana.
• Some customers have adopted a more cautious approach to their near-term capital expenditures and discretionary spending amid lower commodity prices.

Risks

• Changing global economic and geopolitical conditions could impact the business.
• Fluctuations in oil and natural gas prices may affect customer spending.
• The ongoing conflict in Ukraine could disrupt global energy supply.
• Challenges in the supply chain could lead to operational delays.
• The inability to achieve financial and performance targets could impact future results.
• Competition from alternative energy sources or product substitutes could affect market share.
• Regulatory changes and requirements could impact operations and costs.

Future Outlook

SLB anticipates delivering strong cash flows and a full-year adjusted EBITDA margin at or above 25%, supported by its international leadership, robust digital sales, and ongoing cost optimization initiatives.

Management Comments

• SLB delivered strong third-quarter results, achieving earnings growth and margin expansion in line with our full-year adjusted EBITDA margin goal of 25% or higher, said SLB Chief Executive Officer Olivier Le Peuch.
• Although the rate of upstream spending growth has moderated in the last few months due to the macroenvironment, we continue to expect a sustained level of upstream investment in the years to come, Le Peuch said.
• Overall, our business remains well positioned to deliver further margin expansion and increased returns to shareholders, Le Peuch said.

Industry Context

SLB's focus on digital solutions and international markets aligns with the broader industry trend of leveraging technology to improve efficiency and expanding operations in key growth regions. The company's emphasis on new energy initiatives also reflects the industry's increasing focus on sustainability and the energy transition.

Comparison to Industry Standards

• SLB's adjusted EBITDA margin of 25.6% is competitive with industry peers such as Halliburton and Baker Hughes.
• The company's growth in digital revenue mirrors the digital transformation strategies being adopted by other major oilfield service companies.
• SLB's investments in carbon capture and storage and sustainable lithium production are in line with the industry's broader efforts to address climate change and diversify into new energy sources.
• The OneSubsea joint venture with Aker Solutions is similar to other partnerships in the subsea sector, such as TechnipFMC and Subsea 7, aimed at providing integrated solutions for offshore projects.

Stakeholder Impact

• Shareholders will benefit from increased returns through stock repurchases and dividends.
• Employees will benefit from the company's growth and strategic initiatives.
• Customers will benefit from innovative technology and digital solutions.
• Suppliers will benefit from the company's continued operations and expansion.
• Creditors will benefit from the company's strong financial performance and cash flow.

Next Steps

• Continue to execute on digital transformation strategies.
• Expand operations in international markets.
• Advance new energy initiatives, including carbon capture and storage and sustainable lithium production.
• Close the transaction to sell its working interests in the Palliser Block located in Alberta, Canada.
• Pay the quarterly cash dividend of $0.275 per share on January 9, 2025.

Key Dates