425: SLB Navigates Evolving Market with Strong Q4 and Full Year 2024 Results, Increases Shareholder Returns

SLB reports solid Q4 and full-year 2024 earnings, driven by international growth and digital solutions, while increasing shareholder returns through dividends and share repurchases.

Summary

• SLB concluded 2024 with solid earnings and free cash flow, maintaining cycle-high margins.
• The company benefited from its global market exposure, diverse portfolio, and digital offerings.
• Strong growth was seen in the Middle East, with record quarterly revenue, and in North America, driven by US land activity and digital sales in the Gulf of Mexico.
• Despite declines in Saudi Arabia and Mexico, Q4 financial performance remained resilient.
• Full-year adjusted EBITDA margin reached 25%, with free cash flow of $4 billion and $3.3 billion returned to shareholders.
• Production Systems led core division growth at 24%, supported by double-digit revenue increases in surface systems, completions, and artificial lift.
• Digital revenue grew 20% for the full year, exceeding targets.
• Revenue from low-carbon activities and data center infrastructure solutions exceeded $850 million in 2024.
• Global upstream investment is expected to be steady in 2025 compared to 2024.
• Excluding the impact of ChampionX, SLB expects a steady revenue outlook for 2025, with adjusted EBITDA dollars and margins at or above 2024 levels.
• Q1 2025 revenue and adjusted EBITDA are expected to be at similar levels as last year, followed by an activity rebound in Q2, particularly in international markets.
• SLB increased its dividend and accelerated share repurchases, targeting a minimum of $4 billion returned to shareholders in 2025.

Sentiment

Score: 8

Explanation: The document presents a positive outlook with strong financial results, strategic acquisitions, and a commitment to shareholder returns. While acknowledging some challenges, the overall tone is optimistic and confident.

Positives

• SLB's diversified portfolio and global presence provide resilience against regional and market fluctuations.
• The company's digital business is growing with accretive margins.
• SLB is expanding its presence in low-carbon markets and data center infrastructure solutions.
• The company is focused on cost optimization and process enhancement to support margin expansion.
• SLB is committed to increasing returns to shareholders through dividends and share repurchases.
• The ChampionX acquisition is expected to enhance SLB's production and recovery capabilities.

Negatives

• Upstream investment growth moderated during Q4 2024 due to concerns about an oversupplied oil market.
• Oil and gas activity is expected to decline in North America due to lower CapEx in US land and higher drilling efficiency.
• A muted environment is expected in offshore markets in 2025 due to white space in deepwater activity.
• Well Construction revenue was flat year-on-year, and is expected to decline in 2025.
• Activity in Mexico is expected to decline.
• Russia revenue continues to decline, accounting for 4% of global revenue in 2024, down from 5% in the previous year.

Risks

• Concerns about an oversupplied oil market could continue to impact customer spending.
• Geopolitical disruptions could affect the global oil supply and investment outlook.
• Delays in LNG capacity expansions could slow the recovery in gas activity.
• The integration of ChampionX may present challenges.
• The evolving macro environment could impact SLB's financial performance.
• The company is reviewing the new US sanctions and at this point, they believe that their voluntary measures are aligned with the new sanctions.

Future Outlook

SLB expects global upstream investment to be steady in 2025 compared to 2024. Excluding the impact of ChampionX, the company anticipates a steady revenue outlook for 2025, with adjusted EBITDA dollars and margins at or above 2024 levels. Q1 2025 revenue and adjusted EBITDA are expected to be at similar levels as last year, followed by an activity rebound in Q2, particularly in international markets.

Management Comments

• Olivier Le Peuch: 'We concluded the year with solid earnings and free cash flow, growing earnings both sequentially and year on year, and maintaining our cycle-high margins.'
• Olivier Le Peuch: '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 SLBs diversified portfolio.'
• Olivier Le Peuch: '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.'
• Stephane Biguet: 'With continued focus on capital discipline and clear visibility into strong cash flow generation in 2025, we are committed to increasing returns to shareholders once again this year.'

Industry Context

SLB's focus on digital solutions and expansion into low-carbon markets aligns with broader industry trends towards efficiency, sustainability, and diversification. The company's comments on capital discipline and cautious spending reflect the current industry environment, where operators are prioritizing returns and managing supply.

Comparison to Industry Standards

• SLB's adjusted EBITDA margin of 25% is a strong performance compared to its peers in the oilfield services industry.
• The company's digital revenue growth of 20% demonstrates its leadership in this area, outpacing many competitors.
• The focus on returning capital to shareholders through dividends and share repurchases is in line with industry trends, as companies seek to reward investors in a mature market cycle.
• Halliburton's (HAL) Q4 2024 earnings call will be on January 23, 2025, and Baker Hughes (BKR) will be on January 24, 2025. These calls will provide further insight into the industry's performance and outlook.

Stakeholder Impact

• Shareholders will benefit from increased dividends and share repurchases.
• Employees may be affected by ongoing cost optimization and resource adjustments.
• Customers will benefit from SLB's technology leadership and integration capabilities.
• Suppliers may be impacted by changes in SLB's spending patterns.
• The acquisition of ChampionX could impact competitors in the production and recovery market.

Next Steps

• Closing the ChampionX transaction before the end of Q1 2025.
• Closing the divestiture of the Palliser APS project in Canada in the next few months.
• Continuing to monitor and adjust operational and support resources to maintain or improve margins.
• Further developing and expanding the digital business across various segments.
• Continuing to increase returns to shareholders through dividends and share repurchases.

Key Dates