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    SLB
    Earnings call· Jun 2025(Q2 FY25)

    SLB LIMITED/NV Q2 FY25 earnings call SLB

    Jul 18, 2025 Source

    Executive summary

    SLB Q2 FY25 — ChampionX Integration and Resilient Performance Amidst Macro Headwinds

    SLB delivered solid Q2 FY25 results, expanding EBITDA margins and generating strong free cash flow despite macro headwinds and market volatility. The company completed its acquisition of ChampionX, which is expected to enhance its production recovery market position and drive significant synergies, positioning SLB for resilient growth in the second half of the year, particularly in Q4, while navigating tariff impacts and selective market adjustments.

    Highlights

    5

    • Q2 revenue of $8.5 billion increased 1% sequentially, driven by 2% growth in international markets.

    • Company-wide adjusted EBITDA margin expanded 21 basis points sequentially to 24%.

    • Free cash flow increased by $519 million sequentially to $622 million, largely due to seasonal improvements in working capital.

    • Production Systems revenue grew 3% sequentially to $3 billion, with margins increasing 28 basis points to 16.4%.

    • Digital & Integration margins expanded 240 basis points sequentially to 32.8%, driven by greater digital adoption and efficiency gains.

    Concerns

    4

    • Q2 EPS, excluding charges and credits, decreased $0.11 year-over-year to $0.74.

    • Well Construction margins decreased 119 basis points sequentially to 18.6% due to unfavorable technology and geography mix.

    • Second half adjusted EBITDA margins are expected to be flat compared to Q2, inclusive of a 20-40 basis points tariff impact.

    • North America revenue declined sequentially, and certain offshore projects, notably in Sub-Saharan Africa, have been pushed to the right.

    Guidance & targets

    6
    CategoryTargetConfidence
    Second half revenue
    $18.2 billion and $18.8 billion
    high materiality
    High
    Second half adjusted EBITDA margins
    flat compared to the second quarter
    high materiality
    High
    Full-year capital investments
    approximately $2.4 billion
    medium materiality
    High
    Annual pretax synergies from ChampionX acquisition
    $400 million
    high materiality
    High
    ChampionX acquisition accretion
    accretive to both margins and earnings per share
    high materiality
    High
    Second half revenue growth (like-for-like H1 vs H2)
    flat to low single digits
    high materiality
    High

    Segment performance

    4
    SegmentRevenueYoYQoQMargin
    Digital & Integration
    Overall revenue decreased due to lower exploration data sales following a strong Q1 and lower APS revenue in Canada, offset by strong growth in other digital areas. Margins expanded due to greater digital adoption and efficiency gains. Digital business will be reported as a separate segment from Q3.
    Digital revenue: flat sequentiallyPlatforms, applications, and digital operations growth: double-digit sequentialDELFI platform users: >7,800 (double-digit YoY growth)
    		$1 billion—-1%32.8%
    Reservoir Performance
    Revenue declined due to a slowdown in evaluation and stimulation activity across international markets, partially offset by strong intervention activity. Margins improved due to higher intervention activity and absence of Q1 start-up costs.
    		$1.7 billion—-1%18.6%
    Well Construction
    Revenue was essentially flat sequentially. Margins decreased due to an unfavorable technology and geography mix internationally.
    		$3 billion—flat18.6%
    Production Systems
    Revenue increased driven by strong sales in artificial lift, midstream production systems, valves, and increased data center infrastructure solutions revenue. Margins increased due to continued growth and a favorable activity mix. ChampionX activities will be reported under this division from August 1, 2025 (except digital activities).
    		$3 billion—3%16.4%

    Operational metrics

    13
    Adjusted EPS
    $0.74up $0.02 sequentially, down $0.11 YoY
    Q2 FY25

    Excluding charges and credits.

    Charges and credits impact on EPS
    $0.00
    Q2 FY25

    Net impact of charges and credits on EPS. Charges related to headcount reductions, equity method investment impairment, and merger/integration were offset by a gain from the Palliser APS project sale.

    Pretax segment operating margins
    18.5%up 20 bps sequentially
    Q2 FY25

    Margins increased in 3 of 4 divisions.

    Company-wide adjusted EBITDA margin
    24%up 21 bps sequentially
    Q2 FY25
    Capital investments
    $520 million
    Q2 FY25

    Inclusive of CapEx and investments in APS projects and exploration data.

    ChampionX Revenue (ex-drilling tech)
    $850 million
    Q2 FY25

    Revenue for ChampionX, excluding the drilling technology business disposed of concurrently with the SLB transaction.

    ChampionX Adjusted EBITDA (ex-drilling tech)
    $190 millionvisible margin expansion sequentially and YoY
    Q2 FY25

    Adjusted EBITDA for ChampionX, excluding the drilling technology business disposed of concurrently with the SLB transaction.

    Incremental annual recurring pretax intangible asset amortization
    $80 millionover and above ChampionX historical annual amortization of $50 million
    Annual

    Estimated impact from purchase accounting for ChampionX acquisition.

    Shares issued for ChampionX acquisition
    141 million
    Q2 FY25

    Issued in connection with the ChampionX transaction.

    Shares repurchased since ChampionX announcement
    78 million55% of shares issued for transaction
    since April 2024

    Repurchased to reduce total shares outstanding.

    Palliser assets revenue
    $215 million
    H1 FY25

    Revenue generated from the Palliser assets before their sale.

    Digital CPU hours consumed
    40 million50% more than Q2 last year
    Q2 FY25

    Reflects usage of the DELFI platform.

    Wells drilled using Drill Plan
    almost 1,000
    Q2 FY25

    One of SLB's planning cloud applications.

    Industry KPIs

    5
    MetricValueDetails
    Rpo backlogsteady
    FCF CAPEX leverageexceeding 10%%
    M a integration progress$400 millionUSD
    Digital recurring revenueflat
    Segment adjusted EBITDA margin32.8%%

    Deals & partnerships

    3
    ChampionXAcquisition of a leading production chemicals and artificial lift company to enhance SLB's production recovery portfolio.

    Transaction completed earlier this week. ChampionX's activities will be consolidated from August 1, 2025, primarily under the Production Systems division, with digital activities under the new Digital division. Issued 141 million shares of SLB stock.

    not statedSale of SLB's interest in the Palliser APS project in Canada.$338 million

    Sale completed near the end of Q2 FY25.

    WoodsideDeepwater project in Mexico, involving subsea and well construction services.

    Project starting early next year, covering both subsea and well construction.

    Risks & headwinds

    4
    Macro headwinds and market volatilityQ2 FY25 and H2 FY25

    Q2 EPS down $0.11 YoY; H2 EBITDA margins flat due to 20-40 bps tariff impact

    Mitigation: Broad operating footprint, technology leadership, strong execution; increased exposure to less cyclical production recovery market via ChampionX acquisition.

    OPEC+ supply releases into a well-supplied marketNear term, H2 FY25

    Could exert pressure on commodity price in the near term

    Mitigation: Incremental barrels absorbed by peak summer demand, China restocking, and global crude inventory replenishment (below 5-year average). Expect market stabilization over time as overhang is removed.

    Tariff impact on marginsH2 FY25

    20 to 40 basis points of margin impact

    Mitigation: Company-wide adjusted EBITDA margin in H2 FY25 expected to be flat compared to Q2, absorbing this impact. Synergies from ChampionX will further enhance margins in the future.

    Activity decline in U.S. and certain deepwater marketsQ2 FY25 and H2 FY25

    North America revenue declined sequentially; certain offshore projects pushed to the right (e.g., Sub-Saharan Africa, Namibia); Ecuador pipeline disruption.

    Mitigation: Growth in Production Systems and Digital, combined with ChampionX contribution, expected to fully offset anticipated activity decline. Focus on resilient Middle East/Asia and advantaged offshore projects.

    What to watch in Q3 FY25

    5

    Digital business revenue and margin

    Q3 FY25 and Q4 FY25
    CurrentQ2 Digital & Integration revenue $1B (-1% QoQ), Digital revenue flat, margins 32.8% (+240bps QoQ)
    TargetContinued growth and margin expansion, significant uptick in Q4

    Why it matters

    Digital business is being reported as a separate segment from Q3, highlighting its strategic importance and potential for decoupled growth and margin expansion.

    In order to provide you with increased visibility into this business as it continues to grow, I am pleased to announce that we will start reporting the results of our digital business as a separate segment beginning in the third quarter.

    Q&A highlights

    7

    Clarification on H2 guidance (flat to LSD growth), impact of OPEC+ supply releases on customer activity, and SLB's view on the evolving energy macro.

    Olivier clarified H2 guidance implies growth (flat to low single digits) when accounting for ChampionX and Palliser. He noted major adjustments in international markets are largely behind, but short-cycle markets (North America, some LatAm) are more reactive to lower commodity prices. He expects a resilient market if prices remain range-bound ($60-$60s), with Middle East/Asia showing most resilience and offshore projects providing support.

    “So we have definitely growth. We project growth in the second half compared to the first half when accounting for the moving parts in and out of our portfolio, clearly, okay?”

    asked by John Anderson (Barclays) · answered by Olivier Le Peuch

    2 min read6 chapters

    Detailed Narrative

    01

    Q2 Performance Highlights

    SLB delivered a solid second quarter with $8.5 billion in revenue, a 1% sequential increase, primarily driven by 2% growth in international markets. The company achieved a 20 basis point sequential expansion in pretax segment operating margins to 18.5% and a 21 basis point increase in company-wide adjusted EBITDA margin to 24%. This performance reflects strong execution and technology leadership amidst challenging macro conditions.

    02

    ChampionX Acquisition & Strategic Rationale

    The acquisition of ChampionX was completed, marking a new chapter for SLB. This strategic move enhances SLB's portfolio in the less cyclical, OpEx-driven production recovery market, adding strength in production chemicals and artificial lift. The combined entity aims to optimize full production potential from aging infrastructure and complex wells, leveraging ChampionX's digital production technology and SLB's international reach to expand into new markets and applications.

    03

    Market Dynamics and Regional Outlook

    The macro environment remains uncertain, particularly with OPEC+ supply releases, but the oil and gas industry has demonstrated resilience. SLB expects continued resilience in the Middle East and Asia due to lower breakeven costs and energy security focus. Advantage offshore projects in Europe, Africa, and the Americas are expected to provide steady support, while North America and Latin America land activity face downside risk from short-cycle spending.

    04

    Digital & Integration Growth

    Digital & Integration revenue remained steady at $1 billion, with double-digit growth in platforms, applications, and digital operations offsetting lower exploration data sales. The DELFI platform now boasts over 7,800 users, representing double-digit year-on-year growth. SLB will report its digital business as a separate segment starting Q3, highlighting its increasing importance and margin expansion potential, especially with year-end sales.

    05

    Synergy and Financial Impact of ChampionX

    SLB anticipates $400 million in annual pretax synergies from the ChampionX acquisition within three years, with 75% from cost savings (supply chain, operating costs, G&A) and 25% from revenue synergies. The transaction is expected to be accretive to both margins and EPS on a full-year basis in 2026, with half of the synergies realized within the first 18 months. An incremental $80 million in annual recurring pretax intangible asset amortization is expected.

    06

    Capital Allocation and Shareholder Returns

    The company generated $1.1 billion in cash flow from operations and $622 million in free cash flow in Q2, a significant sequential increase. SLB completed the sale of its Palliser asset for $338 million in net cash proceeds. Since the ChampionX announcement, SLB has reduced its total shares outstanding by 78 million, representing 55% of the 141 million shares issued for the acquisition, demonstrating a commitment to shareholder value.

    AI-generated summary of the company’s earnings call. Not investment advice.