10-Q: Schlumberger Reports Third Quarter 2024 Results, Revenue Flat Sequentially

Schlumberger's third-quarter 2024 results show flat revenue compared to the previous quarter, with earnings growth driven by cost optimization and digital adoption.

Summary

• Schlumberger (SLB) reported third-quarter 2024 revenue of $9.159 billion, which was essentially flat compared to the second quarter of 2024.
• Net income attributable to SLB was $1.186 billion, or $0.83 per diluted share, compared to $1.123 billion, or $0.78 per diluted share, in the third quarter of 2023.
• The company's performance was driven by cost optimization, increased adoption of digital products, and contributions from long-cycle projects.
• Revenue growth was seen in the Middle East & Asia and offshore North America, but this was offset by declines in Latin America.
• For the first nine months of 2024, revenue was $27.005 billion, a 12% increase year-on-year, with approximately 50% of the increase coming from the acquisition of the Aker Solutions subsea business.
• International revenue grew by 16% year-on-year, or 8% excluding the Aker acquisition, while North America revenue decreased by 3% due to lower drilling in US land.
• The company's total backlog was $5.2 billion at September 30, 2024, with approximately 60% expected to be recognized as revenue over the next 12 months.

Sentiment

Score: 7

Explanation: The sentiment is moderately positive. While revenue was flat, the company showed earnings growth, margin expansion, and strategic moves like acquisitions. There are some concerns about cautious customer spending and a slowdown in certain regions, but overall the outlook is stable.

Positives

• Earnings growth and margin expansion were achieved through cost optimization and greater adoption of digital products.
• Digital & Integration segment saw a 4% sequential revenue increase and a 456 basis point margin expansion.
• Production Systems segment experienced a 3% sequential revenue increase and a 110 basis point margin expansion.
• International revenue grew by 16% year-on-year, or 8% excluding the Aker subsea acquisition.
• The company has a strong backlog of $5.2 billion, indicating future revenue potential.
• SLB has $4.5 billion of cash and short-term investments on hand and $5.0 billion in committed credit facilities.
• The company increased its quarterly cash dividend by 10% in January 2024.

Negatives

• Global revenue was essentially flat sequentially, indicating a slowdown in growth.
• Reservoir Performance pretax operating margin contracted 53 bps sequentially.
• Well Construction revenue declined 3% sequentially due to lower drilling activity.
• North America revenue decreased by 3% year-on-year due to lower drilling in US land.
• Some customers have adopted a more cautious approach to capital expenditures due to lower commodity prices.
• The company recorded $176 million in restructuring charges during the first nine months of 2024.

Risks

• The company faces risks related to changing global economic and geopolitical conditions.
• Fluctuations in oil and natural gas prices could impact customer spending and SLB's revenue.
• The ongoing conflict in Ukraine could affect global energy supply and SLB's operations.
• The company is exposed to foreign currency risk and inflation.
• There are risks associated with the integration of acquired businesses, such as the Aker Solutions subsea business and the pending ChampionX transaction.
• The company faces challenges in its supply chain and potential operational delays or cancellations.
• There are risks related to government regulations and regulatory requirements, including those related to climate change.

Future Outlook

SLB is well-positioned to navigate evolving market conditions by leveraging its exposure to long-cycle projects in international, deepwater, and gas markets. The company anticipates the ChampionX transaction will close in the first quarter of 2025. SLB expects full year 2024 capital investments to be approximately $2.6 billion.

Management Comments

• SLB delivered strong third-quarter 2024 results, achieving earnings growth and margin expansion due to its ongoing focus on cost optimization, greater adoption of SLBs digital products and solutions, and the contribution of long-cycle projects in deepwater and gas.
• Recent geopolitical events have further highlighted the importance of long-term energy security and reducing potential supply disruptions.

Industry Context

The report indicates a mixed environment for the oilfield services industry, with some customers adopting a more cautious approach to spending due to lower oil prices. However, SLB's focus on long-cycle projects and digital solutions positions it well to navigate these challenges. The acquisition of Aker Solutions and the pending acquisition of ChampionX are strategic moves to expand SLB's capabilities and market presence.

Comparison to Industry Standards

• While specific competitor results are not detailed in this document, SLB's performance can be compared to other major oilfield service companies such as Halliburton and Baker Hughes.
• SLB's focus on digital solutions aligns with industry trends towards increased automation and efficiency.
• The company's international revenue growth, particularly in the Middle East & Asia, is a positive sign compared to the slowdown in North America.
• The acquisition of Aker Solutions is comparable to other industry consolidation efforts to gain market share and expand service offerings.
• The pending acquisition of ChampionX is a strategic move to enhance SLB's production systems capabilities, similar to other companies' efforts to diversify their portfolios.

Legal Proceedings

• SLB is party to various legal proceedings from time to time, but management believes that the probability of a material loss with respect to any currently pending legal proceeding is remote.

Stakeholder Impact

• Shareholders will benefit from the increased dividend and share repurchase program.
• Employees may be affected by the restructuring program, but the company's overall performance is positive.
• Customers will benefit from SLB's focus on digital solutions and long-cycle projects.
• Suppliers may be impacted by changes in SLB's supply chain and operational modifications.

Next Steps

• The company expects the ChampionX transaction to close in the first quarter of 2025.
• SLB will continue to focus on cost optimization, digital adoption, and long-cycle projects.
• The company will continue to execute its share repurchase program.
• SLB will continue to monitor and manage its exposure to market risks.

Key Dates

Keywords

Schlumberger, oilfield services, digital, revenue, earnings, profit, drilling, production, energy, capital expenditures, backlog, Aker Solutions, ChampionX, restructuring, dividends, share repurchase