425: SLB Announces Strong First-Quarter 2024 Results, Plans $7 Billion Shareholder Return

SLB reports a robust first quarter with revenue up 13% year-on-year and announces plans to return $7 billion to shareholders over the next two years.

Summary

• SLB announced its first-quarter 2024 results, reporting revenue of $8.71 billion, a 13% increase year-on-year.
• GAAP EPS was $0.74, up 14% year-on-year, while EPS excluding charges and credits was $0.75, a 19% increase.
• Net income attributable to SLB was $1.07 billion, a 14% increase year-on-year.
• Adjusted EBITDA was $2.06 billion, up 15% year-on-year.
• The company's board approved a quarterly cash dividend of $0.275 per share.
• SLB is targeting to return $7 billion to shareholders over 2024-2025, with $3 billion in 2024 and $4 billion in 2025.
• International revenue grew 18% year on year, while North America revenue declined 6%.

Sentiment

Score: 8

Explanation: The document presents a positive outlook with strong financial results, strategic acquisitions, and a commitment to returning capital to shareholders. While there are some challenges in North America, the overall tone is optimistic and confident.

Positives

• Strong revenue growth driven by international markets and the Aker subsea acquisition.
• Increased profitability, with adjusted EBITDA margin expanding year-on-year for the 13th consecutive quarter.
• Commitment to returning capital to shareholders through dividends and share repurchases.
• Strategic acquisitions, including ChampionX and Aker Carbon Capture, to enhance portfolio and capture growth opportunities.
• Successful deployment of digital technologies and new energy solutions, contributing to emissions reduction and operational efficiency.
• Significant contract wins in key regions, including Brazil, Libya, Iraq, Oman, the Philippines and Malaysia.

Negatives

• North America revenue declined by 6% year-on-year due to reduced drilling activity in US land and lower APS revenue in Canada.
• Sequential revenue decline of 3% in both North America and international markets due to seasonality.
• Digital & Integration pretax operating margin contracted 300 bps year on year and 735 bps sequentially.
• Cash flow from operations was $327 million and free cash flow was negative $222 million.

Risks

• Changing global economic and geopolitical conditions could impact demand and production.
• Fluctuations in oil and natural gas prices could affect customer spending and SLB's revenue.
• The integration of acquired businesses, such as ChampionX and Aker Carbon Capture, may present challenges.
• Regulatory changes and environmental concerns could impact operations and increase costs.
• The ongoing conflict in Ukraine could disrupt global energy supply and affect SLB's business.

Future Outlook

SLB remains confident in its global revenue growth outlook for 2024, with softness in North America being offset by upside in the international markets. The company affirms its previous guidance of mid-teens EBITDA growth for the full year and expects broad sequential margin expansion across all Divisions and geographies in the second quarter.

Management Comments

• SLB CEO Olivier Le Peuch commented, 'We have had an exciting start to the year with our announced agreement to acquire ChampionX Corporation (ChampionX), which will bolster our production and recovery portfolio.'
• Olivier Le Peuch stated that the company continued its growth momentum, with a strong first-quarter performance resulting from robust year-on-year revenue and EBITDA growth consistent with their first quarter and full-year guidance.
• Olivier Le Peuch noted that the oil and gas industry continues to benefit from strong market fundamentals driven by a growing demand outlook.

Industry Context

SLB's results reflect the ongoing recovery in the oil and gas industry, particularly in international and offshore markets. The company's strategic acquisitions and focus on digital and new energy solutions position it well to capitalize on long-term growth opportunities. The emphasis on emissions reduction aligns with broader industry trends and regulatory pressures.

Comparison to Industry Standards

• SLB's revenue growth of 13% year-on-year is comparable to other major oilfield service companies such as Halliburton and Baker Hughes, which have also reported strong international growth.
• The planned $7 billion return to shareholders is a significant commitment, reflecting confidence in the company's future cash flow generation.
• The acquisition of ChampionX is similar to other consolidation moves in the industry, such as Baker Hughes' acquisition of AccessESP, aimed at expanding production enhancement capabilities.
• SLB's focus on digital transformation and new energy solutions aligns with industry efforts to improve efficiency and reduce emissions, as seen in initiatives by companies like Siemens Energy and ABB.

Stakeholder Impact

• Shareholders will benefit from increased dividends and share repurchases.
• Employees may see new opportunities and career growth through acquisitions and expansion.
• Customers will have access to a broader range of technologies and services.
• Suppliers may see increased demand for their products and services.
• The company's commitment to emissions reduction will benefit the environment and society.

Next Steps

• Complete the acquisition of ChampionX, expected to close before the end of 2024.
• Integrate Aker Carbon Capture into SLB's carbon capture business.
• Continue to execute on digital transformation and new energy initiatives.
• Monitor global economic and geopolitical conditions and adjust strategies as needed.
• Deliver on the commitment to return $7 billion to shareholders over the next two years.

Key Dates