Schlumberger(SLB) - 2025 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported a fourth quarter revenue of $9.7 billion, an increase of $817 million or 9% sequentially, with approximately $300 million attributed to an additional month of activity from the acquired ChampionX businesses [18] - Adjusted EBITDA margin for the fourth quarter was 23.9%, an increase of 83 basis points sequentially, primarily driven by strong digital performance [18] - Fourth quarter earnings per share, excluding charges and credits, was $0.78, representing an increase of $0.09 sequentially and a decrease of $0.14 compared to the same quarter last year [17] Business Line Data and Key Metrics Changes - Digital revenue for the fourth quarter was $825 million, increasing 25% sequentially, with a pre-tax operating margin expanding to 34% [19] - Reservoir Performance revenue was $1.7 billion, up 4% sequentially, driven by strong international activity, particularly in Saudi Arabia and East Asia [19] - Production Systems revenue increased by 17% sequentially to $4.1 billion, reflecting a full quarter of activity from ChampionX [20] Market Data and Key Metrics Changes - The company observed sequential revenue growth across all geographies for the first time since Q2 2024, indicating stabilization in global upstream activity [5] - The Middle East market is expected to rebound in drilling and workover activity, particularly in Saudi Arabia, with rig counts potentially returning to early 2025 levels by the end of 2026 [11] - Latin America and Asia are leading the rebound in international markets, with double-digit growth noted in the UAE, Iraq, and Kuwait [11] Company Strategy and Development Direction - The company aims to leverage technology and digital solutions to enhance efficiency and reduce costs for customers, focusing on performance assurance across the asset lifecycle [10] - The integration of ChampionX is expected to provide synergies that will enhance production systems margins, with approximately half of the $400 million in total synergies anticipated by the end of 2026 [22] - The company is expanding its data center solutions business, expecting to reach a quarterly revenue run rate of $1 billion by year-end 2026 [13] Management's Comments on Operating Environment and Future Outlook - Management anticipates that near-term oversupply may exert downward pressure on commodity prices, but geopolitical uncertainties could provide a price floor [9] - The company expects a gradual recovery in upstream investment as supply and demand rebalance into 2027, driven by economic growth and infrastructure investments [9] - For 2026, the company projects revenue between $36.9 billion and $37.7 billion, with growth expected from Latin America and the Middle East, while Europe and Africa may see slight declines [14] Other Important Information - The company generated $3 billion of cash flow from operations in the fourth quarter, with free cash flow of $2.3 billion [21] - The company plans to return more than $4 billion to shareholders in 2026 through dividends and stock buybacks [24] - The company is the only international service company actively operating in Venezuela, with plans to ramp up activities as conditions allow [16][40] Q&A Session Summary Question: CapEx outlook and capital intensity - The company increased CapEx slightly to $2.5 billion, indicating improved capital efficiency compared to the past [25] Question: Customer mix and market opportunities - Management expressed confidence in national companies executing capital programs and noted a rebound in Saudi Arabian drilling activity [27] Question: Exit rate for 2026 - The company expects the fourth quarter of 2026 to be higher than the fourth quarter of 2025, driven by international market recovery [30] Question: Digital business penetration - The company is seeing significant traction in digital operations, with platforms like Lumi and Tela gaining customer adoption [35] Question: Venezuela's revitalization potential - The company has a strong historical presence in Venezuela and is prepared to ramp up operations if conditions allow [40] Question: Data center infrastructure growth - The company expects to reach a $1 billion run rate in revenue for its data center solutions by year-end 2026, with plans for international expansion [41]