Schlumberger(SLB)2024-10-18 18:54Financial Data and Key Metrics Changes - The third-quarter earnings per share excluding charges and credits was 0.04 sequentially and 9.2 billion, essentially flat sequentially, but represented another quarter of margin expansion [19] - Adjusted EBITDA margin increased by 55 basis points to 25.6%, the highest level since Q1 2016 [19] Business Line Data and Key Metrics Changes - Digital & Integration revenue was 1.8 billion, with margins contracting 53 basis points due to an unfavorable technology mix [20] - Well Construction revenue decreased 3% sequentially to 3.1 billion, with margins expanding 110 basis points to 16.7% [21] Market Data and Key Metrics Changes - Revenue in North America increased 3% sequentially, driven by higher offshore activity in the Gulf of Mexico, while U.S. land drilling activity remained constrained [8] - International markets saw steady revenue despite lower reactivity due to cautious discretionary spending influenced by commodity prices [8] - Revenue in Europe and Africa was largely unchanged, with strong production in North Africa offset by declines in Latin America [8] Company Strategy and Development Direction - The company aims to leverage its differentiated market positioning, digital leadership, and operational efficiency to navigate the evolving macro environment [7] - SLB is focused on maintaining margin expansion and expects to deliver full-year adjusted EBITDA margins at or above 25% for 2024 [16] - The company is well-positioned to benefit from long-cycle deepwater projects and gas investments, particularly in Asia and the Middle East [14] Management's Comments on Operating Environment and Future Outlook - Management noted that commodity prices have been under pressure due to oversupply concerns and weaker demand, leading to cautious spending by customers [13] - Despite current market conditions, long-term fundamentals for oil and gas remain strong, with increasing energy demand and a focus on energy security [14] - The company anticipates muted revenue growth in Q4, with a favorable mix of digital and product sales offset by budget exhaustion in U.S. land [16] Other Important Information - The company generated strong free cash flow of 1 billion increase compared to the previous quarter [21] - SLB signed a definitive agreement to sell its interests in the Palliser APS project for approximately 4 billion to shareholders in 2025, reflecting confidence in cash flow generation [24] Q&A Session Summary Question: Can you discuss the drivers of margin expansion as we move into 2025? - Management expressed confidence in maintaining margin expansion through digital technology and cost optimization initiatives [27][28] Question: What were the key takeaways from the recent digital forum? - The forum was deemed a success, showcasing the digital value proposition and the acceleration of digital adoption among customers [30][31] Question: How does the sale of the Palliser Block impact financials? - The sale will remove approximately 150 million in annual CapEx, along with significant future abandonment liabilities [45][46] Question: What is the outlook for deepwater projects driving growth beyond 2025? - Management indicated that deepwater projects are expected to remain a growth engine, with significant offshore FIDs anticipated [36] Question: How does the company view the pricing dynamics in the current environment? - The pricing environment is seen as constructive, with capital discipline in the industry supporting pricing stability [48] Question: What are the growth opportunities in the lithium extraction space? - The company is optimistic about its lithium DLE technology and plans to work with partners to commercialize it [50][51] Question: How will free cash flow and capital discipline impact returns to shareholders? - Management confirmed that free cash flow is expected to increase in 2025, supporting the commitment to return capital to shareholders [56][57]