Skip to content
    SLB
    Earnings call· Dec 2024(Q4 FY24)

    SLB LIMITED/NV SLB

    Jan 17, 2025 Source

    Executive summary

    SLB Q4 FY24 — Strong Digital Growth and Shareholder Returns Amidst Flat 2025 Outlook

    SLB concluded 2024 with solid Q4 results, marked by record digital revenue and strong free cash flow, achieving its adjusted EBITDA margin target. While the company anticipates a flat global upstream investment environment in 2025 with regional shifts, it expects to maintain earnings at or above 2024 levels, driven by continued digital growth, low-carbon solutions, and production systems. Strategic capital allocation includes significant shareholder returns and disciplined capital investments, positioning SLB to navigate evolving market dynamics.

    Highlights

    5

    • Q4 revenue increased 1% sequentially to $9.3 billion, driven by record-high digital revenue.

    • Full year 2024 adjusted EBITDA margin reached 25%, an increase of 52 basis points year-on-year.

    • Full year 2024 digital revenue grew 20% to $2.44 billion, exceeding high-teens targets.

    • Generated robust free cash flow of $4 billion for the full year 2024.

    • Targeting a minimum of $4 billion in shareholder returns for 2025, including a $2.3 billion accelerated share repurchase.

    Concerns

    5

    • Global upstream investment is expected to be steady (flat) in 2025 compared to 2024.

    • North America oil and gas activity is expected to decline in 2025 due to lower CapEx and slow gas recovery.

    • Muted deepwater environment expected in 2025 due to 'white space' in activity.

    • Well Construction revenue declined 1% sequentially in Q4, with margins contracting 70 basis points.

    • Production Systems pretax operating margins decreased 93 basis points sequentially to 15.8% in Q4.

    Guidance & targets

    10
    CategoryTargetConfidence
    Global upstream investment
    steady
    high materiality
    Medium
    Digital revenue growth
    high teens
    medium materiality
    High
    Core revenue
    flat year-over-year
    high materiality
    Medium
    Total revenue (excluding ChampionX)
    steady
    high materiality
    Medium
    Adjusted EBITDA dollars and margins (excluding ChampionX)
    at or above 2024 levels
    high materiality
    Medium
    Q1 FY25 Revenue
    similar levels as last year
    medium materiality
    High
    Q1 FY25 Adjusted EBITDA
    similar levels as last year
    medium materiality
    High
    Shareholder returns
    minimum of $4 billion
    high materiality
    High
    Capital investments (excluding ChampionX)
    approximately $2.3 billion
    medium materiality
    High
    CapEx portion of capital investments
    low end of 5% to 7% of revenue
    medium materiality
    High

    Segment performance

    6
    SegmentRevenueYoYQoQMargin
    International
    International revenue reached a new cycle high in Q4. Full year 2024 organic revenue grew 5%, entirely driven by international markets, with the Middle East growing 19% year-on-year to a record high. International pretax segment operating margins improved 44 basis points year-on-year.
    FY24 Organic Revenue Growth: 5%FY24 Middle East Revenue Growth: 19%
    		new cycle high——21.4%
    North America
    Full year 2024 revenue declined 1% compared to the previous year. Pretax segment operating margins only dropped by 23 basis points, with pricing pressure mostly offset by favorable technology mix, cost efficiencies, and higher digital revenues.
    		—-1%—17%
    Digital & Integration
    Q4 revenue increased 6% sequentially, driven by 10% growth in digital, while APS revenue was essentially flat. Pretax operating margin expanded 274 basis points sequentially, as a result of higher digital sales and cost efficiencies. Full year organic growth was 10%, entirely driven by the digital business.
    FY24 Organic Growth: 10%Q4 APS Revenue: flat
    		$1.2B—6%38.3%
    Reservoir Performance
    Q4 revenue declined 1% sequentially on reduced intervention and stimulation activity. Margins increased 35 basis points sequentially due to improved profitability in evaluation services. Full year growth was 9% with margin expansion of approximately 100 basis points.
    FY24 Margin Expansion: 100 bps
    		$1.8B9%-1%20.5%
    Well Construction
    Q4 revenue decreased 1% sequentially, and margins contracted 70 basis points, primarily due to lower drilling activity in Mexico and Saudi Arabia. Full year revenue was flat.
    		$3.3Bflat-1%contracted 70 bps
    Production Systems
    Q4 revenue increased 3% sequentially on higher international sales of artificial lift, midstream production systems, and completions. Pretax operating margins decreased 93 basis points sequentially due to lower profitability in subsea, partially offset by improved profitability in artificial lift and midstream production systems. Full year growth was 24% (including Aker subsea acquisition), with 9% organic growth and margin expansion of almost 300 bps.
    FY24 Organic Growth: 9%FY24 Margin Expansion: 300 bps
    		$3.2B24%3%15.8%

    Operational metrics

    11
    Adjusted EBITDA margin
    25.7%+33 bps YoY
    Q4 FY24

    Adjusted EBITDA margin reached a cycle high in Q4.

    Adjusted EBITDA margin
    25%+52 bps YoY
    FY24

    Achieved full year adjusted EBITDA margin target.

    Earnings per share (excluding charges and credits)
    $0.92+$0.03 sequentially, +$0.06 YoY
    Q4 FY24

    Represents an increase sequentially and year-over-year.

    Net charges
    $0.15
    Q4 FY24

    Breakdown of net charges recorded in Q4.

    Net debt
    $7.4Breduced $1.1B sequentially
    Q4 FY24

    Significant reduction in net debt during the quarter.

    Capital investments (CapEx + APS projects + exploration data)
    $759M
    Q4 FY24

    Total capital investments for the fourth quarter.

    Capital investments (CapEx + APS projects + exploration data)
    $2.6B
    FY24

    Total capital investments for the full year.

    Share repurchases
    $501M
    Q4 FY24

    Amount and volume of common stock repurchased in Q4.

    Total shareholder returns
    $3.3B
    FY24

    Total amount returned to shareholders in 2024.

    Russia revenue as % of global revenue
    4%down from 5% in prior year
    FY24

    Continued decline in revenue from Russia operations.

    Fit-for-basin revenue
    $1B
    FY24

    Achieved a significant milestone for fit-for-basin revenue.

    Industry KPIs

    4
    MetricValueDetails
    FCF CAPEX leverageFCF $4B, Net Debt $7.4B, Capex $2.3BUSD
    M a integration progress—
    Digital recurring revenue$2.44BUSD
    Data center new energy revenue capacitymore than $850MUSD

    Orderbook & backlog

    1
    Accelerated Share Repurchase (ASR) transactions$2.3BQ4 FY24

    Repurchased approximately 48 million shares, representing about 80% of the total shares to be bought under the program. Remaining shares to be delivered by end of May.

    Deals & partnerships

    5
    ChampionXProposed acquisition to enhance production recovery portfolio.

    Received CFIUS clearance in December. Engagement with other regulatory authorities is progressing well. Expected to contribute to production recovery business.

    Palliser APS projectDivestiture of SLB's interest in the Palliser APS project in Canada.

    The transaction is expected to close in the next few months.

    NVIDIAStrategic partnership to accelerate digital transformation.

    Partnership formed to leverage cloud computing, AI, and digital operations.

    Amazon Web ServicesStrategic partnership to accelerate digital transformation.

    Partnership formed to leverage cloud computing, AI, and digital operations.

    Palo Alto NetworksStrategic partnership to accelerate digital transformation.

    Partnership formed to leverage cloud computing, AI, and digital operations.

    Risks & headwinds

    6
    Moderating pace of upstream investment growthH2 2024

    Moderated during H2 2024

    Mitigation: SLB's broad exposure to global markets and diverse portfolio.

    Concerns of an oversupplied oil marketNear-term

    Persist

    Mitigation: Anticipate oil supply imbalance will gradually abate; global economic growth and energy security focus will support investment outlook.

    Declining activity in specific regions2025

    Saudi Arabia, Mexico, Egypt, Australia, Scandinavia, West Africa

    Mitigation: Offset by increases in UAE, Kuwait, Iraq, China, India, Argentina, Brazil, North Africa, Nigeria, Azerbaijan, Kazakhstan.

    Muted deepwater environment2025

    White space in deepwater activity

    Mitigation: Anticipate improvement as the year progresses in preparation for significant FIDs ramping up in 2026 across several deepwater basins.

    North America oil and gas activity decline2025

    Expected decline

    Mitigation: Driven by lower publicly announced CapEx in U.S. land, higher drilling efficiency, and slow gas recovery. Offset by rapid growth in data center infrastructure solutions revenue in the region.

    Geopolitical disruptions

    General mention

    Mitigation: OPEC+ expected to maintain focus on commodity price stability; U.S. capital discipline limits near-term supply growth.

    What to watch in Q1 FY25

    5

    ChampionX acquisition closing

    before the end of the first quarter
    CurrentCFIUS clearance received, regulatory approval progressing
    TargetTransaction closed

    Why it matters

    This acquisition is expected to significantly enhance SLB's production and recovery portfolio and contribute to future growth.

    As it relates to ChampionX, the transaction received CFIUS clearance in December. And the engagement with other regulatory authorities is progressing well. We continue to work toward closing the transaction before the end of the first quarter.

    Q&A highlights

    6

    Which international regions/countries offer the most upside and downside for SLB in 2025?

    The Middle East (UAE, Iraq, Kuwait, Qatar) remains a bright spot with resilient long-term growth, offsetting declines in Saudi Arabia and Egypt. Deepwater, despite a muted 2025, is constructive long-term due to upcoming FIDs in 2026-2027 (Suriname, Namibia, Indonesia). International gas markets will also drive long-term investments.

    “I will start with the Middle East at-large. The Middle East at-large being impacted, as you all know, by the decline of activity, sequential decline of activity in Saudi is still a very bright spot when it comes to multiple countries and multiple customers having their commitments, ongoing commitment to either expand capacity in oil capacity for the future, such as UAE, Iraq and Kuwait and gas.”

    asked by John Anderson · answered by Olivier Le Peuch

    2 min read6 chapters

    Detailed Narrative

    01

    Q4 and Full Year 2024 Performance Highlights

    SLB concluded 2024 with solid Q4 results, achieving $9.3 billion in revenue, a 1% sequential increase, and a cycle-high adjusted EBITDA margin of 25.7%. For the full year, revenue grew 10% to $36.3 billion, with organic growth of 5% driven by international markets. The company met its full year adjusted EBITDA margin target of 25% and generated $4 billion in free cash flow, returning $3.3 billion to shareholders.

    02

    Evolving Macro Environment and 2025 Outlook

    Management noted a moderation in upstream investment growth in H2 2024 due to concerns of an oversupplied oil market. For 2025, global upstream investment is expected to be steady compared to 2024, with growth in some international regions offsetting declines in others and in North America. The company anticipates a low Q1, followed by an activity rebound in Q2, particularly in international markets, leading to a second-half weighted⚖️ year.

    03

    Digital & Low-Carbon Growth Pathways

    Digital revenue grew 20% in 2024 to $2.44 billion, driven by cloud, AI, and edge technology, and is expected to grow in the high teens in 2025. SLB is also expanding beyond oil and gas, with revenue from low-carbon activities (carbon capture, geothermal) and data center infrastructure solutions exceeding $850 million in 2024, with significant growth expected in 2025. These new growth areas are decoupled from the upstream sector and contribute to margin expansion.

    04

    Production Systems and Reservoir Performance Momentum

    Production Systems led core division growth in 2024, expanding 24% (9% organic) and improving margins by 300 bps, driven by surface systems, completions, and artificial lift. Reservoir Performance grew 9% with 100 bps margin expansion, supported by stimulation and intervention. These segments are expected to see modest growth in 2025, driven by production recovery efforts, offsetting declines in Well Construction.

    05

    Capital Allocation and Shareholder Returns

    SLB reduced net debt by $1.1 billion in Q4 to $7.4 billion, its lowest level since Q1 2016. The company is committed to increasing shareholder returns, targeting a minimum of $4 billion in 2025, including a $2.3 billion accelerated share repurchase initiated in Q4. Capital investments are expected to decrease to approximately $2.3 billion in 2025, with CapEx at the low end of the 5% to 7% revenue guidance.

    06

    Geographic Dynamics and Deepwater Outlook

    International markets, particularly the Middle East (UAE, Iraq, Kuwait, Qatar), continued to drive growth, reaching a new cycle high in Q4, offsetting declines in Saudi Arabia and Mexico. While a muted deepwater environment is expected in 2025 due to 'white space,' management anticipates improvement as the year progresses, in preparation for significant FIDs ramping up in 2026 across several deepwater basins.

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