The paragraph is an introduction to the SLB First Quarter 2025 Earnings Conference Call. The conference is hosted by Megan, the conference operator, who hands over to James R. MacDonald, Senior Vice President of Investor Relations and Industry Affairs. James welcomes attendees, mentions the call is hosted from Houston and provides a reminder about forward-looking statements and non-GAAP financial measures. He also notes the availability of related materials on the company's and SEC's websites, including those concerning a proposed acquisition involving Schlumberger Limited and ChampionX. James then hands over to Olivier Le Peuch, the CEO, who will discuss the company's first-quarter performance and macroeconomic updates, followed by financial details from CFO Stephane Biguet, and a Q&A session.

The company's first quarter experienced a downturn due to seasonal declines and constrained upstream investments amidst an oversupplied oil market. Additional economic uncertainty arose from OPEC+ supply increases and recent tariff announcements. Despite these challenges, the company achieved adjusted EBITDA margin growth. Overall revenue decreased by 3% year on year, with strong North American results offset by declines in Mexico, Saudi Arabia, and Russia. Excluding these countries, international revenue remained steady with growth in markets like the UAE, North Africa, Kuwait, Argentina, and China. In North America, positive results were driven by offshore sales, although US land drilling revenue was weak. The Production System division showed steady revenue growth and margin expansion, with strong demand for surface production systems and related products.

The paragraph discusses the profitability and challenges of a late-cycle business, noting a 197 basis point increase in margins due to favorable activity mix and improved pricing backlog. The subsea segment shows positive market prospects with expanding margins due to strong execution and cost synergies in the OneSubsea joint venture. Revenue decreased year-on-year, impacted by new project start-up challenges and cost overruns. Despite a decline in new well construction and drilling activity, especially in North America, one-third of international units experienced growth. Digital integration drove a 17% revenue increase, as customers increasingly adopt digital and AI solutions to enhance efficiency and performance across the upstream lifecycle. Examples of digital solution adoption are highlighted in the earnings press release.

The paragraph discusses Schlumberger Limited's progress in transitioning beyond oil and gas, with strong performance in low carbon markets like carbon capture, geothermal, critical minerals, and data center solutions, projecting over $1 billion in revenue by 2025. Despite industry challenges due to global economic uncertainty, supply-demand imbalances, and volatile commodity prices, the company remains focused on executing its strategy, managing costs, and maintaining shareholder returns. While global upstream investment is expected to decline, spending in the Middle East and Asia may be more stable.

The paragraph highlights the company's positive outlook on the long-term fundamentals of oil and gas, emphasizing deepened customer partnerships and technology deployment to drive growth and resilience. It notes an increasing investment in digital solutions, such as AI and cloud computing, distinct from upstream spending. The company is also expanding into low carbon markets like carbon capture and geothermal energy, with significant growth in their data center business, leveraging partnerships and unique capabilities to unlock new opportunities. This sector is driven by AI demand and contributes to business diversification beyond oil and gas. Additionally, the company is focusing on cost optimization and process improvement.

The company is focused on maintaining strong margins and cash flows despite potential challenges from softer customer spending. They aim to deliver consistent returns to shareholders, with a commitment to return at least $4 billion by 2025. For the second quarter, they anticipate flat revenue and a slight increase in adjusted EBITDA margin, assuming stable oil prices and no tariff escalations. For the full year, they expect revenue growth in the second half, driven by seasonal activity, new start-ups, and growth in digital and data center businesses. The company emphasizes its resilience and strategic focus on preserving margins amid market uncertainties.

Stephane Biguet reported the company's financial results, highlighting a decrease in first quarter earnings per share to $0.72 compared to the previous year, excluding charges and credits. The company faced $0.14 in charges, primarily due to its cost-out program and merger-related activities. Fourth quarter revenue fell to $8.5 billion, with international revenue decreasing due to reduced activity in specific regions. However, North America revenue rose by 8% thanks to increased sales in digital, subsea production systems, and data center infrastructure solutions. Adjusted EBITDA margins slightly improved, while operating margins experienced a minor decline. The company remains focused on cost discipline and aligning resources with market activity to safeguard margins and cash flow, amid uncertainties like tariffs. The diverse international market mix and supply chain network offer some protection against these challenges.

The paragraph discusses the company's exposure to tariffs on US-China trade, particularly affecting their Production Systems division with raw material imports and exports subject to retaliatory tariffs. The company is taking proactive measures to mitigate impacts by optimizing their supply chain, seeking exemptions, and negotiating cost recoveries with customers. Despite the challenges, first-quarter results show a 6% year-on-year increase in digital and integration revenue, driven by a 17% growth in digital revenue, though impacted by a temporary disruption in Ecuador. The digital and integration margin improved significantly, while Reservoir Performance revenue saw a slight decrease due to varied activity levels in different sectors.

In the latest quarter, the company experienced a 311 basis point decline in margins to 16.6% compared to the previous year, primarily due to an unfavorable activity mix and project start-up costs. Well Construction revenue fell by 12%, with a 71 basis point margin decline due to reduced drilling activity, especially in Mexico and Saudi Arabia. Production Systems revenue rose by 4%, with margins improving by 197 basis points, driven by product portfolio resilience and growth in data center infrastructure solutions. The company generated $600 million in operational cash flow, marking a year-over-year increase, while free cash flow stood at $103 million despite seasonal expenses. Capital investments totaled $557 million for the quarter, with expectations of $2.3 billion for the year, excluding ChampionX's anticipated closure. Net debt rose by $2.7 billion to $10.1 billion, impacted by a $2.3 billion accelerated share repurchase transaction that reduced 56.8 million shares outstanding.

The paragraph discusses financial and corporate developments within a company. In the first quarter, 47.6 million shares were received, with an additional 9.2 million shares in April, as part of an ASR transaction aligned with the goal of returning $4 billion to shareholders by 2025. Updates on pending M&A transactions include progress with ChampionX, with the UK's Competition and Markets Authority reviewing the proposal, expecting closure between the second and early third quarter of 2025. Additionally, the divestiture of interest in the Palis APS project in Canada is anticipated to close in the second quarter. The paragraph concludes with the commencement of a Q&A session, where a participant, David Anderson from Barclays, questions the outlook on upstream spending, which is expected to decline this year.

Olivier Le Peuch discusses Schlumberger's positioning amid a global decline in upstream spending, emphasizing the company's strategic focus over the past five years. Despite a greater downside in North America compared to international markets, Schlumberger's resilience is supported by its offshore, digital, and production services, especially in North America. The company's reduced exposure to regional frac fleets and growth in data center solutions underscore this resilience. Internationally, less proportional decline is anticipated due to strong performance in the Middle East and Asia, including offshore, unconventional resources, and gas. Overall, Schlumberger is positioned well against short-cycle exposure and benefits from its diversified exposure.

The article discusses a company's strategic positioning and future prospects, emphasizing its exposure in international gas markets, digital growth, and the benefits of integrating ChampionX for enhanced resilience and improved market mix in North America. The conversation shifts to Saudi Arabia, where slow activity at the start of the year and recent rig reductions are noted. However, there is an expectation for potential growth, driven by conventional oil activities picking up and increased unconventional natural gas activities as OPEC barrels re-enter the market. The overall outlook suggests possible sustained growth from Saudi Arabia starting later in the year and extending into 2026, despite recent activity declines.

The paragraph discusses a company's strategy for increasing its gas production by 40% by 2030, focusing on both conventional and unconventional gas sources. This plan is important for maintaining a production level of 12 million barrels MSC, with anticipated growth leading up to 2026 in Saudi Arabia. There is an acknowledgment of potentially adjusting operations based on market conditions and commodity prices. The paragraph includes remarks from Olivier Le Peuch, expressing optimism about overcoming past declines and expecting recovery through gas-led growth. Additionally, Scott Gruber from Citigroup inquires about the company's ability to maintain an EBITDA margin of 25% in a potentially weaker market, particularly excluding influences from ChampionX.

Olivier Le Peuch discusses the company's ambition to grow its margins by 25% for the full year, excluding factors like ChampionX and potential tariff escalations, which could pose challenges. Despite potential headwinds, he remains optimistic about digital growth, aiming for a high teens growth rate. He believes that the trend of digital adoption in the industry is accelerating, driven by efficiency gains and productivity improvements, even though some discretionary projects might be reconsidered. Overall, he feels the benefits of digital solutions are resonating with customers who seek efficiency.

In the paragraph, Olivier Le Peuch discusses Schlumberger Limited's strategy to diversify its portfolio beyond oil and gas. He highlights the company's efforts, initiated three to four years ago, to focus on new energy sectors, particularly carbon capture and sequestration (CCS). Schlumberger has taken steps to enhance its capture technology and has multiple active projects and products in the pipeline. This emphasis on CCS capitalizes on the company's core capabilities in exploration and reservoir characterization, positioning Schlumberger for long-term growth in the new energy market. Le Peuch expresses confidence that these initiatives will drive continued success and expansion in this area.

The paragraph discusses the increasing focus and adoption of commercial geothermal energy and next-generation Azure thermal, particularly in the U.S., supported by the administration. It also highlights successful pilot projects in direct lithium extraction, resonating with critical minerals priorities. The company is also involved in manufacturing and cooling solutions for data centers, with a plant in Louisiana fulfilling large contracts, contributing to growth in North America. The ambition is to increase revenue from over $850 million to more than $1 billion, continuing to grow in the coming years. Additionally, there's an inquiry about the 2025 EBITDA outlook, estimating it at $8.4 to $8.5 billion.

In the paragraph, Stephane Biguet explains that the company will maintain revenue-only guidance for the rest of the year due to uncertainty in forecasting EBITDA, particularly because of tariff impacts. Although they are partially protected by domestic manufacturing and sourcing, the tariffs could still have an impact. The company plans to mitigate this impact by optimizing their supply chain and passing costs to customers. Despite current tariffs, they experienced margin expansion in Q2 and expect further margin growth in the second half of the year, provided oil prices remain stable. However, they refrain from giving specific margin expansion figures for the second half. Following this, Arun Jayaram and Scott Gruber acknowledge the information, and Neil Mehta from Goldman Sachs asks about the status of gating items related to ChampionX.

In the paragraph, Olivier Le Peuch expresses optimism about the progress made regarding regulatory approvals, particularly citing the UK's CMA acceptance of proposed remedies and positive engagements with Norwegian authorities. He believes these developments increase their confidence in concluding the process by the end of this quarter or early next quarter. Neil Mehta then inquires about Olivier's thoughts on the macroeconomic environment, especially concerning the supply side and the impact of lower commodity prices on activity levels. Le Peuch is asked to elaborate on his long-term perspective, considering his belief in eventual repercussions from historical underinvestment in the sector.

The paragraph discusses the long-term role of oil and gas in the global energy mix, despite natural declines in many basins and the need for continued investment. It emphasizes the importance of the Middle East's capacity expansion and Asia's focus on energy security. While short-term fluctuations may impact short-cycle activities, particularly in the US, international regions like the Middle East and Asia show resilience due to commitments and strategic plans independent of current oil prices. The paragraph also highlights the potential growth areas, such as unconventional sources and deepwater activities, alongside the role of digital advancements.

The paragraph discusses the current state and future of exploration within the oil and gas industry. Olivier Le Peuch notes that despite some short-term declines in capital expenditure, there are growth opportunities internationally. Roger Read asks about exploration, specifically in regions like West Africa and Latin America. Olivier responds that the reserve replacement ratio is a key driver for exploration among international oil companies (IOCs), large independents, and some national oil companies (NOCs). He acknowledges a rebound in exploration commitments over the past 18 months and expects this trend to continue, driven by the need to replace reserves and develop long-term oil and gas plays, particularly in Asian offshore areas. Exploration is seen to occur in three forms, with near-field exploration being one of them.

The paragraph discusses various global regions experiencing fresh exploration investments, such as the Metro Basin, Gulf of Mexico, Brazil, North Sea, Namibia, Suriname, and parts of Asia like Indonesia. It mentions digital exploration and processing activities benefiting from these investments, anticipating a healthy exploration outlook despite potential discretionary decisions and challenges in deepwater areas. The conversation shifts to Russia, where activity is declining due to sanctions restricting technology access and support. The discussion then moves to the production segment, where there is interest in understanding its resilience compared to other company areas.

In the paragraph, Olivier Le Peuch discusses the company's strengths in the production system division, particularly highlighting its technological advancements and market position in North America, especially in US land markets. He mentions success in various technologies, such as electrical completion technology and subsea processing, which contribute to market gains. Despite not commenting directly on margin expectations, Le Peuch expresses confidence in the division's ability to maintain and potentially expand its market position, even amidst market uncertainties. He assures that the team is executing well, which should help protect and expand margins. Stephen Gengaro then asks about the company's confidence in free cash generation and its commitment to returning significant cash to stakeholders.

In the paragraph, Olivier Le Peuch discusses the company's approach to managing cash flow amid economic uncertainties and their commitment to shareholder returns. Despite potential challenges, such as lower commodity prices, they plan to maintain a strong cash flow and return at least EUR 4 billion to shareholders. The discussion also touches on segment margins, particularly the positive performance of Production Systems and Digital, which supports the business well. Keith Mackey asks about the company's strategic focus in light of the current oil and gas market cycle, seeking insight into future business direction.

In the paragraph, Olivier Le Peuch discusses the company's strategy to leverage its market position across various segments, including onshore, offshore, gas, and unconventional resources. The company aims to maintain resilience and protect its margins despite uncertain market conditions and downward pressure on rig activity. This will be achieved by extracting efficiencies, focusing on digital growth, production systems, and managing margin pressures in reservoir performance. The overall mission remains to protect margins amid fluctuating oil prices. Keith Mackey then briefly mentions the fluid situation regarding tariffs.

In the paragraph, Olivier Le Peuch acknowledges that the current guidance assumes tariffs will remain unchanged in the second quarter, which is factored into a projected 50 to 100 basis point margin expansion. However, the margin expansion in the second half of the year will depend on changes to the tariff framework. Dan Cutts from Morgan Stanley then inquires about new energy opportunities across various pillars, particularly the data center infrastructure and the significant potential in Carbon Capture, Utilization, and Storage (CCUS). Olivier Le Peuch does not provide new details on their $2 billion new energy revenue target but confirms that CCUS will be a major component of their ambitions.

The paragraph discusses Jotamol's momentum in pursuing unconventional and next-generation geothermal energy in Europe and the US, with support from authorities. It touches on the potential for growth and mentions lithium as a smaller yet exciting opportunity receiving interest from prospective customers. Evogene and energy storage are long-term ambitions, with a focus on low-carbon solutions to decarbonize power sources and improve cooling for data centers. By the end of the year, they aim to support over 15 data center solutions in the US. Olivier Le Peuch notes that these efforts could lead to growth rates surpassing the oil and gas sector, enhancing the company's resilience. Dan Cutts then inquires about the priority of completing the Palisir deal in the asset performance solutions (APS) business.

The paragraph discusses the future of Schlumberger Limited's portfolio following the Palisar transaction. Olivier Le Peuch explains that the company will primarily be left with their assets in Ecuador, consisting of three projects. These projects are structured as service contracts with the local national oil company rather than equity positions and are currently economically beneficial, providing significant cash flow and profitability. Although the projects have finite contractual terms, they may be extended, suggesting they will remain part of the portfolio for the foreseeable future. Le Peuch concludes by emphasizing Schlumberger's resilience amidst market uncertainties, highlighting the company's global reach, innovation, digital offerings, diversification, and cost management strategies.

The paragraph expresses confidence in the company's ability to maintain strong cash flows and protect margins despite changing market conditions. The focus is on increasing returns to shareholders by 2025 and continuing to create value for customers, partners, and shareholders in the future. The speaker concludes the call and thanks participants, with the operator indicating the end of the conference call.

This summary was generated with AI and may contain some inaccuracies.