425: SLB Eyes Continued Growth Through Technology, Digitalization, and ChampionX Acquisition

SLB anticipates continued market growth and margin expansion, driven by technology adoption, digitalization, and the acquisition of ChampionX.

Summary

• SLB is focused on leveraging its technology, digital capabilities, and strategic acquisitions to drive margin expansion, generate cash, and increase returns to shareholders.
• The company anticipates continued market growth, fueled by long-cycle gas and deepwater projects, short-cycle production recovery, technology adoption in North America, and digital and decarbonization trends.
• SLB's strategy includes a capital-light, technology-levered approach, which will be bolstered by the acquisition of ChampionX, adding production chemicals and artificial lift capabilities.
• Key international and deepwater markets are expected to grow, driven by gas markets in the Middle East & Asia, resilient offshore projects, and the need to offset decline rates.
• Digitalization, AI, and decarbonization are significant opportunities for high-margin growth, with SLB leveraging its expertise in carbon capture and storage (CCS).
• SLB reaffirms its commitment to grow adjusted EBITDA at a CAGR of more than 20% between 2021 and 2025, exceeding this target with the ChampionX acquisition.
• The ChampionX acquisition is expected to be neutral to adjusted EBITDA margins in year 1 and accretive from year 2, with synergies from reduced operating costs, supply chain optimization, G&A savings, and revenue expansion.
• SLB aims to deliver more than $4 billion in additional subsea bookings in 2024, representing an increase of more than 20% year-on-year.
• The company is on track to reach approximately $3 billion in Digital revenue annually by 2025, driven by the adoption of Cloud, AI, and Edge platforms.
• SLB has committed to return $7 billion to shareholders through dividends and share repurchases.

Sentiment

Score: 8

Explanation: The document presents a positive outlook for SLB, highlighting its strong performance, strategic acquisitions, and growth opportunities. The company's confidence in achieving its financial targets and delivering shareholder value contributes to the positive sentiment.

Positives

• SLB is outperforming in the current cycle with impressive revenue and adjusted EBITDA growth.
• The company is well-positioned in high-quality areas of the market, supported by its technology and digital capabilities.
• The ChampionX acquisition is expected to be accretive to earnings and enhance SLB's market position.
• SLB has a strong foothold in key international and deepwater markets, which are expected to grow.
• The company is experiencing significant growth in its Digital business, driven by the adoption of Cloud, AI, and Edge platforms.
• SLB is committed to returning value to shareholders through dividends and share repurchases.

Risks

• Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially.
• These risks include changing global economic and geopolitical conditions, fluctuations in oil and gas prices, and the inability to achieve financial and performance targets.
• The success of the ChampionX acquisition depends on the ability to integrate the business and achieve anticipated synergies.
• Regulatory approvals for the ChampionX acquisition may be delayed or not obtained at all.
• The ongoing conflict in Ukraine and other geopolitical events could impact global energy supply and demand.

Future Outlook

SLB expects continued market growth and is focused on achieving its 2025 financial commitments, which will be exceeded with the ChampionX acquisition. The company anticipates continued innovation and margin expansion, leading to higher cash generation and increased returns to shareholders.

Management Comments

• SLB is optimally positioned for continued outperformance.
• The market is presenting multiple opportunities for quality growth through technology deployment and enhanced performance.
• We remain on track to achieve the 2025 ambitions we shared at our Investor Day in 2022, and as a result of the synergies and strategic fit we anticipate through the acquisition of ChampionX, we will exceed them.

Industry Context

SLB's focus on technology, digitalization, and strategic acquisitions aligns with broader industry trends towards efficiency, sustainability, and digital transformation. The acquisition of ChampionX positions SLB to capitalize on the growing demand for production chemicals and artificial lift solutions.

Comparison to Industry Standards

• SLB's subsea portfolio is described as the most profitable in the industry, suggesting a leading position compared to competitors like TechnipFMC and Subsea 7.
• The company's digital revenue target of $3 billion by 2025 indicates a significant presence in the digital oilfield market, competing with companies like Halliburton and Baker Hughes.
• The focus on carbon capture and storage (CCS) aligns with the industry's increasing emphasis on decarbonization, with SLB competing with companies like Aker Carbon Capture and others offering CCS solutions.

Stakeholder Impact

• Shareholders are expected to benefit from increased returns through dividends and share repurchases.
• Customers are expected to benefit from enhanced technology and integrated solutions.
• Employees may experience changes related to the integration of ChampionX.
• The company's focus on sustainability and decarbonization may positively impact the environment and society.

Next Steps

• Complete the acquisition of ChampionX.
• Continue to deploy digital capabilities and expand the Digital business.
• Focus on innovation and margin expansion.
• Deliver on returns-focused strategy and commitment to shareholder returns.

Key Dates