425: SLB Announces Strong Q1 2024 Results and Acquisition Update

SLB reports a strong start to 2024 with revenue and EBITDA growth, driven by international markets, and provides an update on the ChampionX acquisition.

Summary

• SLB's Q1 2024 revenue increased by 13% year-on-year, and EBITDA grew in the mid-teens.
• Adjusted EBITDA margins expanded for the 13th consecutive quarter.
• International revenue grew strongly, with 21 of 25 GeoUnits increasing revenue year-on-year.
• The Middle East & Asia exhibited remarkable growth of 29% compared to the same period a year ago.
• North America saw a 6% revenue decline due to weaker gas prices and capital discipline.
• Digital revenue grew in the double digits year on year, and the company maintains its ambition to grow digital revenue in the high teens for the full year.
• SLB is confident in its full-year financial guidance, expecting international activity to offset slower growth in North America.
• The company expects sequential revenue growth in Q2, with international markets growing in the mid-single digits and North America in the low-single digits.
• Adjusted EBITDA margins are expected to expand by 75 to 100bps in Q2.
• SLB raised its 2024 target for total returns of capital to shareholders from $2.5 billion to $3 billion, evenly split between dividends and share repurchases.
• The S-4 registration statement relating to the ChampionX acquisition is planned to be filed in the next couple of weeks.

Sentiment

Score: 8

Explanation: The document presents a positive outlook with strong financial results, strategic acquisitions, and confidence in future performance. The company is performing well and is optimistic about the future.

Positives

• Strong revenue and EBITDA growth in Q1 2024.
• Significant international revenue growth, particularly in the Middle East & Asia.
• Expansion of adjusted EBITDA margins for the 13th consecutive quarter.
• Double-digit growth in digital revenue.
• Increased target for total returns of capital to shareholders.
• Confidence in achieving full-year financial guidance.

Negatives

• Revenue decline in North America due to weaker gas prices and capital discipline.
• Margins declined in Digital & Integration due to higher APS amortization expense and lower commodity prices on the APS project in Canada.
• Free cash flow was negative $222 million in Q1, although this is expected to improve throughout the year.

Risks

• Slower growth in North America due to weaker gas prices and capital discipline.
• Potential risks and uncertainties related to the proposed transaction with ChampionX, including regulatory approvals and integration challenges.
• Global market, political, and economic conditions, including inflation, rising interest rates, and potential recessionary conditions.
• Cyber-attacks, information security, and data privacy risks.
• Failure to effectively and timely address energy transitions.

Future Outlook

SLB anticipates continued activity momentum in international markets, driven by increasing global demand and a focus on energy security, offsetting slower growth in North America. The company expects to realize further growth in the strengthening production and recovery market. Specific to the second quarter, they expect sequential revenue growth internationally in the mid-single digits and North America in the low-single digits and expect to expand adjusted EBITDA margins by 75 to 100bps.

Management Comments

• Olivier Le Peuch, CEO: 'I'm very pleased with our strong start to 2024.'
• Olivier Le Peuch, CEO: 'We will remain focused on the quality of our revenue, capital discipline, and execution efficiency to generate strong cash flows and shareholder returns throughout the year.'
• Olivier Le Peuch, CEO: 'SLB remains optimally positioned to harness the ongoing oil and gas cycle for further growth.'
• Stephane Biguet, CFO: 'This is in line with our guidance for adjusted EBITDA to grow in the mid-teens for the full year of 2024.'

Industry Context

The announcement highlights the ongoing strength in international oil and gas markets, particularly in the Middle East and offshore, driven by energy security concerns and long-cycle projects. The acquisition of ChampionX is aimed at increasing SLB's exposure to the production and recovery market, aligning with the industry's focus on maximizing the value of existing assets and emissions reduction.

Comparison to Industry Standards

• SLB's growth in international markets outpaces some of its peers who are more heavily weighted towards North America, such as Halliburton and Baker Hughes.
• The focus on digital transformation and new energy solutions aligns with industry trends, as companies like Siemens Energy and ABB also invest in these areas.
• The ChampionX acquisition positions SLB to compete more directly with companies like Ecolab and Newpark Resources in the production chemicals and artificial lift markets.
• The expansion of adjusted EBITDA margins demonstrates SLB's operational efficiency compared to industry averages.

Stakeholder Impact

• Shareholders will benefit from increased returns of capital through dividends and share repurchases.
• Customers will benefit from SLB's expanded portfolio of technologies and services, particularly in production and recovery.
• Employees may experience opportunities for growth and development as SLB continues to expand its business.
• The acquisition of ChampionX could impact suppliers and competitors in the production chemicals and artificial lift markets.

Next Steps

• File the S-4 registration statement relating to the ChampionX acquisition.
• Obtain approval from ChampionX shareholders for the proposed transaction.
• Continue to execute on the company's strategy to achieve full-year financial ambitions.
• Focus on integrating the Aker subsea business and the future ChampionX business.

Key Dates