425: SLB Announces Strong Second-Quarter 2024 Results, Raises Full-Year Outlook

SLB reports a strong second quarter with revenue growth, margin expansion, and increased free cash flow, leading to an updated and raised full-year outlook.

Summary

• SLB reported strong second-quarter results, with revenue up 5% sequentially and adjusted EBITDA growing by 11%.
• Adjusted EBITDA margin expanded by 142 basis points, and the company generated $776 million in free cash flow.
• International revenue grew 6% sequentially, driven by the Middle East & Asia, which saw record high quarterly revenue in two-thirds of its GeoUnits.
• North America revenue increased 3% sequentially, led by the Gulf of Mexico.
• Digital & Integration showed strong growth, with the Digital business reaching a new quarterly high.
• SLB has updated its full-year adjusted EBITDA growth outlook to a range of 14 to 15% and expects adjusted EBITDA margins at or above 25%.
• The company returned $1.5 billion to shareholders in the first half of the year through stock repurchases and dividends.
• SLB expects higher EBITDA and strong cash flows in the second half of the year, supporting its full-year commitments to shareholders.
• The company recorded charges related to realigning and optimizing the support and service delivery structure, which will drive further margin expansion.
• At the end of the second quarter, there were 6,900 users on the DelfiTM platform, an increase of 28% year on year.
• The number of connected assets increased by 57% and trailing twelve months compute hours increased by 43%.

Sentiment

Score: 9

Explanation: The document presents a highly positive outlook with strong financial results, margin expansion, and a commitment to shareholder returns. The company is well-positioned in key markets and is benefiting from industry trends.

Positives

• Strong revenue growth, particularly in international markets and Digital & Integration.
• Significant margin expansion, leading to increased profitability.
• Robust free cash flow generation.
• Commitment to returning capital to shareholders through dividends and stock repurchases.
• Positive outlook for continued growth and margin expansion in the second half of the year and into 2025.
• Increased adoption of digital technologies and solutions.
• Strong performance in the Middle East & Asia, driven by capacity expansion and new gas developments.
• Growth in deepwater basins, supported by strong backlog conversion in OneSubsea.
• The DelfiTM platform has seen a 28% increase in users year on year.
• Connected assets increased by 57% and trailing twelve months compute hours increased by 43%.

Negatives

• Weaker gas prices, capital discipline, and ongoing market consolidation constrained drilling in US land.
• The company recorded charges related to realigning and optimizing the support and service delivery structure, although this is expected to drive future margin expansion.

Risks

• Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially.
• The proposed transaction with ChampionX is subject to various risks, including regulatory approvals and integration challenges.
• Global market, political, and economic conditions could impact SLB's performance.
• Fluctuations in crude oil and natural gas prices could affect demand for SLB's products and services.
• Cyber-attacks and disruptions of information technology systems pose a risk.
• Failure to effectively and timely address energy transitions could adversely affect the business.

Future Outlook

SLB expects full-year adjusted EBITDA growth in the range of 14 to 15% and adjusted EBITDA margins at or above 25%. They anticipate sequential revenue growth in the low-single digits for the third quarter, with further margin expansion. A visible increase in topline growth and an uptick in margin expansion are expected in the fourth quarter.

Management Comments

• Olivier Le Peuch, CEO, stated that this was a very strong second quarter for SLB, showcasing their ability to harness the ongoing growth cycle while driving efficiencies.
• Le Peuch highlighted that investments will increasingly be targeted in the most resilient areas of the market, including key international markets and offshore globally.
• Le Peuch expressed confidence that SLB will continue to deliver outstanding performance for customers and shareholders in the quarters ahead.
• Stephane Biguet, CFO, mentioned that the company is pleased with its current capital structure, which allows it to prioritize returns to shareholders.

Industry Context

SLB's strong performance reflects the ongoing recovery and growth in the oilfield services sector, particularly in international markets and offshore developments. The company is benefiting from increased investments in capacity expansion, new gas developments, and production and recovery activities. The focus on digital solutions aligns with the industry's trend towards leveraging technology to improve efficiency and performance.

Comparison to Industry Standards

• SLB's margin expansion of 142 basis points is a strong result compared to peers such as Halliburton and Baker Hughes, who are also focused on margin improvement.
• The growth in international markets aligns with the trend of increased spending in regions like the Middle East and Asia, where national oil companies are investing heavily in capacity expansion.
• SLB's digital initiatives, such as the Delfi platform, are comparable to similar offerings from competitors like Baker Hughes' JewelSuite and Halliburton's iEnergy, but the reported user growth and connected assets suggest strong adoption.
• The OneSubsea JV positions SLB well to compete with TechnipFMC and Subsea 7 in the subsea production and processing market.

Stakeholder Impact

• Shareholders will benefit from increased returns through dividends and stock repurchases.
• Employees may be affected by the realignment and optimization of the support and service delivery structure.
• Customers will benefit from SLB's continued investment in technology and solutions.
• Suppliers may see increased demand as SLB continues to grow its business.

Next Steps

• Continue to drive quality revenue growth and leverage operational efficiencies to grow EBITDA and expand operating margins.
• Focus on expanding margins through quality revenue growth, operating efficiency, and strategic resource allocation.
• Fulfill commitment to returns to shareholders in 2024 and 2025.
• Complete the program to realign and optimize the support and service delivery structure.
• Continue to monitor and address risks related to the proposed transaction with ChampionX.

Key Dates