425: SLB Announces Solid Q4 and Full Year 2024 Results, Increases Shareholder Returns

SLB reports solid earnings and free cash flow for Q4 and full year 2024, driven by international growth and digital offerings, while increasing dividend and accelerating share repurchases.

Summary

• SLB concluded 2024 with solid earnings and free cash flow, maintaining cycle-high margins.
• The company benefited from its broad global exposure, diverse portfolio, and digital offerings, despite moderating upstream investment growth.
• 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.
• 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, driven by cloud computing, AI, and digital operations adoption.
• Revenue from low carbon markets and data center infrastructure solutions exceeded $850 million in 2024 and is expected to increase significantly in 2025.
• Global upstream investment is expected to be steady in 2025 compared to 2024.
• For Q1 2025, SLB expects revenue and adjusted EBITDA to be at similar levels as last year, with an activity rebound expected in Q2, particularly in international markets.
• SLB increased its dividend and accelerated share repurchases, targeting a minimum of $4 billion to be returned to shareholders in 2025.

Sentiment

Score: 8

Explanation: The document presents a positive outlook with solid financial results, strategic acquisitions, and a commitment to increasing shareholder returns. While acknowledging some challenges, the overall tone is optimistic and confident in the company's ability to navigate the evolving market.

Positives

• Strong growth in international markets, particularly in the Middle East.
• Significant growth in digital revenue, driven by cloud computing, AI, and digital operations.
• Increasing revenue from low carbon markets and data center infrastructure solutions.
• Commitment to increasing returns to shareholders through dividends and share repurchases.
• Successful execution of cost optimization programs, supporting margin expansion.
• Expected closing of the ChampionX acquisition, enhancing the production and recovery portfolio.

Negatives

• Moderation of upstream investment growth in the back half of 2024.
• Decline in activity in Saudi Arabia and Mexico impacted Q4 financial performance.
• Expected decline in oil and gas activity in North America due to lower CapEx in US land and higher drilling efficiency.
• Muted environment expected in offshore markets in 2025 due to white space in deepwater activity.
• Well Construction revenue was flat year on year.

Risks

• Concerns of an oversupplied oil market may impact customer spending.
• Geopolitical disruptions could affect global oil supply and investment.
• Delays in LNG capacity expansions could slow the recovery in gas activity.
• White space in deepwater activity may lead to a muted offshore environment in 2025.
• Transition of government, budget, and leadership team of PEMEX in Mexico may impact activity.

Future Outlook

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

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: 'Our customers continue to embrace the power of cloud computing, AI and digital operations to shorten cycle times and improve operating efficiencies.'
• Olivier Le Peuch: 'We expect global upstream investment to be steady in 2025 compared to 2024.'
• 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 transformation and expansion into low carbon markets aligns with broader industry trends. The company's diversified portfolio and global presence provide resilience in a market facing uncertainties in oil supply and demand. The acquisition of ChampionX is expected to strengthen SLB's position in production and recovery, a growing area of focus for the industry.

Comparison to Industry Standards

• SLB's adjusted EBITDA margin of 25% is competitive with industry peers such as Halliburton and Baker Hughes.
• The company's digital revenue growth of 20% exceeds the average growth rate of digital solutions in the oil and gas industry.
• SLB's commitment to returning $4 billion to shareholders in 2025 demonstrates strong financial discipline and confidence in future performance, comparable to shareholder return programs of other major oilfield service companies.
• The acquisition of Aker Solutions subsea business is similar to TechnipFMC's focus on subsea technologies.

Stakeholder Impact

• Shareholders will benefit from increased dividends and share repurchases.
• Employees will have opportunities for growth and development in a company focused on innovation and digital transformation.
• Customers will gain access to enhanced solutions and technologies through the ChampionX acquisition and SLB's continued investment in digital.
• Suppliers and partners will benefit from SLB's continued growth and expansion in key markets.

Next Steps

• Close the ChampionX transaction before the end of Q1 2025.
• Continue to execute the accelerated share repurchase program.
• Monitor and adjust capital investments based on market conditions.
• Further develop and expand digital offerings and low carbon solutions.
• Continue to focus on cost optimization and process enhancement.

Key Dates