Q3 2023 Schlumberger NV Earnings Call
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Ladies and gentlemen, thank you for standing by welcome to the S. L. B earnings conference call. At this time all participant lines are in a listen only mode. Later, we will conduct a question and answer session. If you would like to ask a question. Please press. One then zero you may remove yourself from.
Speaker 1: Ladies and gentlemen, thank you for standing by. Welcome to the SLB earnings conference call. At this time, all participant lines are in a listen-only mode. Later, we will conduct a question-and-answer session. If you would like to ask a question, please press 1, then 0.
Speaker 1: You may remove yourself from cue by repeating the same one-zero command. As a reminder, this conference is being recorded.
Q by repeating the same one zero command as a reminder, this conference is being recorded I would now like to turn the conference over to the senior Vice President of Investor Relations and industry Affairs James Mcdonald. Please go ahead.
Speaker 1: I would now like to turn the conference over to the Senior Vice President of Investor Relations and Industry Affairs, James McDonald. Please go ahead.
Speaker 2: Thank you, Leo. Good morning and welcome to the SOB third quarter 2023 earnings conference call. Today's call is being hosted from New York City following our board meeting held earlier this morning.
Thank you Leah good morning, and welcome to the <unk> third quarter 2023 earnings Conference call.
Today's call is being hosted from New York City. Following our board meeting held earlier this week joining.
Speaker 2: Joining us on the call are Olivier Lapouche, Chief Executive Officer, and Stéphane Piguet, Chief Financial Officer.
Joining us on the call are Olivier able to push Chief Executive officer, and Stefan be gay Chief Financial Officer.
Speaker 2: Before we begin, I would like to remind all participants that some of the statements we will be making today are forward-looking.
Before we begin I would like to remind all participants that some of the statements we'll be making today are forward looking.
Speaker 2: These matters involve risks and uncertainties that could cause the results to differ materially from those projected in these tables.
These matters involve risks and uncertainties that could cause our results to differ materially from those projected in these statements.
Speaker 2: I therefore refer you to our latest 10K filing and our other SEC filing.
I, therefore refer you to our latest 10-K filing and our other SEC filings.
Speaker 2: Our comments today may also include non-GAAP financial measures. Additional details and reconciliation to the most directly comparable GAAP financial measures can be found in our third quarter press release, which is on our website. With that, I will turn the call over to Olivier.
Our comments today May also include non-GAAP financial measures additional details and reconciliation to the most directly comparable GAAP financial measures can be found in our third quarter press release, which is on our website with that I will turn the call over to Olivier.
Speaker 3: Thank you James. Ladies and gentlemen, thank you for joining us on the call.
Thank you James ladies and gentlemen.
Thank you for joining us on the call today.
Speaker 3: In my remarks this morning I will begin by reviewing the third quarter financial results represented in today's earnings release.
In my remarks. This morning, I will begin by reviewing the first quarter financial results presented in todays earnings release.
Speaker 3: Then I will discuss the progress we are achieving across our tree and genes of growth and the micro environment supporting.
Discuss the progress we are achieving across our three engines of growth and then microenvironment supporting them.
Speaker 3: And finally, I wish you outlook for the fourth quarter and...
And finally, I will share our outlook for the fourth quarter and there from you.
Speaker 3: Séphane will then provide more details on our financial results and we will open the line to your questions.
So finally will then provide more details on our financial results and we'll open the line to your questions.
Speaker 3: Our first quarter results have built upon the positive momentum we established in the first half of the year and firmly positioned us to achieve our full year of financial ambition.
Our first quarter results are built upon the positive momentum we established in the first half of the Yale and firmly position us to achieve our full year financial ambitions.
Speaker 3: We continued to grow revenue and adjusted EBITDA both sequentially and year on year, and we generated free cash flow of 1 billion dollar for the second consecutive quarter.
We continued to grow revenue and adjusted EBITDA, both sequentially and year on year, and we generated free cash flow of $1 billion for the second consecutive quarter.
Speaker 3: Internationally, we continue to seize the cycle. We achieve our highest international revenue quarter since 2015 by growing revenue in this market for the ninth consecutive quarter year.
Internationally, we continue to see the cycle, we achieved our highest international revenue quarter since 2015 by going over in this market for the ninth consecutive quarter year on year.
Speaker 3: This was particularly visible in the Middle East and Asia, where we posted 22% year-on-year revenue growth. They'd buy single-fick-on-growth in Saudi Arabia, the United of Emirates, Kuwait, and...
This was particularly visible in the middle Eastern Asia, while we posted 22% year on year, we're going to go they might seem to come and go off in Saudi Arabia United.
Hey, Matt I mean, the rates, Kuwait and Egypt.
Speaker 3: Our strong international activity was so augmented by the residents, investments in the offshore markets, notably in Africa, Brazil, and Scandinavia.
For International OTT was felt like most of the Delta residents investment in the offshore markets, notably in Africa, Brazil and Scandinavia.
Speaker 3: Our short continues to offer many opportunities for our business. And I will shortly discuss how the recent closing of our one-sepsy John Venture with Accord solution and Sub-C7 will help us to expand our footprint in the market going moving forward.
Sure continues still so many opportunities for our business and I will shortly discuss how do we since closing of one subsea joint venture with Iqos will be shown in subsea seven will help us to expand our footprint in the market moving forward.
Speaker 3: In North America, although revenue decreased significantly due to productivity, we continue to grow your new up-performing tree.
And in North America, although revenue decreased sequentially due to normal activity, we continued to grow year on year.
Our performing doing count.
Speaker 3: Once again, I focus on the quality of our revenue, combined with this differentiated value we deliver to technology, towards margin expansion.
Once again I'll focus on liquidity off our revenue combined with the differentiated value we deliver to predict energy.
<unk> margin expansion.
Speaker 3: Abita margins, which a new cycle high of 25% and a pre-tax segment of our team margin expanded for the 11th consecutive quarter. Yon.
EBITDA margins, which are new second high of 25% and a pretax six months operating margin expanded for the 11th consecutive quarter year on year.
Speaker 3: These are very positive results. And I want to thank the entire CBT team for delivering this strong performance.
These are very positive results.
I want to thank the entire CPB team for delivering this strong performance.
Yeah.
Speaker 3: Next, I would like to share some updates about progress across our three engines of growth, core, digital, and new energy.
Next I would like to share some updates about progress across our three engines of growth go digital and new energy.
Let me begin with the call.
Speaker 3: The oil and gas sector continues to benefit from broad, durable, and resilient material growth cycles that are being supported by long-cycle developments, production capacity expansions, exploration appraisal, and the recognition of gas as a critical fuel source for the energy transition.
The oil and gas sector continues to benefit from broad durable and resilient.
<unk> is being supported by long cycle developments <unk> capacity expansions exploration appraisal and the well completion of gas as a critical source for the <unk> coalition.
These market fundamentals remain very very compelling for our core business, which has grown 22% year to date and is materially expanded margins.
Speaker 3: This market for now will remain very, very compelling for our core business, which has grown 22% year to date and has materially expanded.
Speaker 3: This strong performance is being driven by the diversity of our portfolio, our industry-leading technology, and our unique integration capability.
He is talking about problems is being driven by the diversity of our portfolio, our industry, leading technology and our unique integration capabilities.
Speaker 3: Reserva performance achieved exceptional results with stronger evaluation.
Our performance achieved exceptional results with stronger evaluation activity.
Speaker 3: Production systems achieve its highest level of margin in the cycle, led by subsea, surface and earth shells.
In systems achieved its highest level of margin in the cycle led by subsea so face and actually.
Speaker 3: Our construction maintained impressive results through new technology innovations and differentiated performance. Or in all, it was a very strong quarter across our code.
Our construction maintaining impressive results through new technology innovation and differentiated performance or you know this was a very strong quarter across our core divisions.
Speaker 3: The support is microenvironment is also leading operators to make long cycle investments offshore, where advanced inefficiency have significantly improved project economy.
The supportive macro environment is also leading operators to make long second investments offshore well advanced in efficiency have significantly improved project economics.
Speaker 3: We have this little bit team to FIDs, extending well beyond 2025. And it could not be a better time to join force with our solutions and to drive a new era for.
We have visibility into <unk>, extending well beyond 2025, and it cannot be a better time to joined forces with ACA solutions and subsea seven two guys and urea for subsea.
Today, it should be recognized for its unique ability to handle large complex and fully integrated offshore projects from subsurface development to midstream processing.
Speaker 3: Today, I said we recognize the unique ability to handle large, complex and full-intake other short projects from sub-surface development to mid-stream process.
Speaker 3: 12th, one-step siege on venture will further enhance the suffering by bringing new levels of technology and partnership to the market.
12, one subsea joint venture will further enhance this offering by bringing new levels of technology and partnership to the market.
Speaker 3: Together, a company is air the clear leader in sub-symultiface boosting and sub-figast compression. And we will provide electrification and digital solutions to further enhance the
Together, our companies out of the clear leader in subsea multiphase boosting in subsea gas compression and will really pull that electrification and digital solutions to further enhance the business.
Speaker 3: Dispartanially, we also create a more flexible custom offering to scale through scale, increase capacity and life of field.
This partnership approach. We're also cater more flexible custom offering to skate through scale increase capacity and life of field services.
Speaker 3: Collectively, this will drive meaningful change to subsidy asset performance as we partner with customers to help them unlock their reserves, drive efficiency, reduce cycle times, and reduce emission in the deep water market.
Do you believe this will drive meaningful change to subsea asset performance as we partner with customers to help them unlock their reserves drive efficiency and reduced cycle times and reduce emission in the deepwater market.
Okay.
Now, let me turn to digital.
Speaker 3: On the last call quarter, I share the updates on the emerging digital trends shaping.
On the last school core quartile I shared an update on the emerging digital trends shaping the industry.
Speaker 3: This included the adoption of cloud computing, the power of data and AI scale, and digital operation gaining maturity.
This included the adoption of cloud computing, the power of data and <unk>.
AI at scale and digital operation gaining maturity.
Speaker 3: at a recent investor conference, at this case, our SLB is capitalizing on this opportunity with our platform strategy, comprising of a workflow platform that serves as the backbone for our customer's planning and operation, now data and AI platform that unlocks data at scale for digital transformers.
At the recent Investor Conference and discuss how <unk> is capitalizing on this opportunity with our platform strategy comprising of a workflow platform that serves as the backbone for our guests and our planning and operation and a beta and then I've got one that unlocks data at scale for digital transformation.
Today, we are seeing increased digital adoption across the industry.
Speaker 3: Today, we are seeing increased digital adoption across India.
Speaker 3: Delphi, continue this year over year growth momentum. We have 49% increase in users and an 89-86% increase in compute hours compared to the third quarter last.
<unk> continued its year over year growth momentum, we saw 49% increase in users and then 80, 986% increase in compute hours compared to the first quarter of last year.
Speaker 3: Additionally, our customers and embracing are connected and autonomous drilling solution, with 1.9 million feet of automated drilling completed in a third quarter, and in case of 60% year-over.
Additionally, our customers are embracing our connected.
So numerous drilling solution with $1 9 million feet of automated drilling completed in the first quarter, an increase of 60% year over year.
As a result, instead of this platform, representing a new digital technology offering sustained growth at the CAGR rate of about 60%.
Speaker 3: As a result, a service platform, representing a new digital technology offering, sustained growth at the Kaggle rate of about...
Speaker 3: The benefit of this technology is clear. And you can see this illustrated in our earnings press release this morning if our share at the US collaborative agreement and the co-weight energy basal limited digital field contract Davies serving as just two recent examples of customer choosing SLB digital technology to reimagine their workflows across the YNP value.
The benefit of this technology is clear and you can see this illustrated in our earnings press release. This morning before shared at UBS collaborative agreements and Kuwait in Azure bus saw limited digital physical impact.
He is serving as just two recent examples of customers choosing us there'll be digital technology to imagine that we'll close across the E&P value chain.
Speaker 3: And finally, let me quickly discuss some of the exciting opportunities in our new energy business and transition technology for for you.
And finally, let me quickly discuss some of the exciting opportunities in our new energy business and transition technology portfolio.
Speaker 3: As we address the energy dilemma, our industry has an imperative to decarbonize our approach.
As we address the energy Palomar our industry as an imperative to Decarbonize operations.
Speaker 3: Two of the most immediate opportunities to do this are reducing mid-air emissions and scaling CCUS as a solution for mitigating climate change.
Two of the most immediate opportunities to do this or have you seen me 10 emissions and <unk> as a solution for mitigating climate change.
Speaker 3: Hoganine methane. We have opportunity to address fugitive methane and flaring to better monitoring and leak the text.
We're getting butane, we have opportunity to address could you see that methane and training to better monitoring and leak detection.
Speaker 3: A few weeks ago, we launched a new IoT enabled methane point instrument for continuous monitoring that seamlessly connects to a methane digital platform for insights and analysis, eliminating the need for intermittent site visits and enabling operators to quickly scale up across their progress.
A few weeks ago, we launched a new Iot enabled maintain point instruments for continuous monitoring that seamlessly connect to Amit and digital platform for insights and analysis, eliminating the need for intermittent site visits and enabling operators to quickly get up across the operations.
Speaker 3: This and our solutions are available today. To help clouds abate their methane.
And of those solutions are available today to.
Threat clouds abate that maintain emissions.
Speaker 3: And in CCUS, momentum is building a cross industry, both in oil and gas, as well as in other half-to-abate.
And in this U S momentum is building across the industry, both in oil and gas as well as in other hard to abate sectors.
Speaker 3: SLB is actively involved with more than 20 CCUS project globally and we're investing in capture technology as underscored by the partnership with TDA Research highlighted in our earnings release.
<unk> is actively involved with Marlin <unk> pilot globally, and we're investing capture technology as underscored by the partnership with Tdm research highlighted in our earnings release.
Speaker 3: Overall, we are pleased with our pipeline of technology and projects, and we have confidence. But by establishing ourselves as a leader in this space, we've re-tried yet another avenue for diversified long-term growth.
We are pleased with our pipeline of technology and products projects and we have confidence that by establishing ourselves as a leader in this space will be tried yet another avenue for diversified long term growth.
Speaker 3: Now we'll turn to our outlook for the first quarter and the f***.
Now I will turn to our outlook for the fourth quarter and the full year.
Yes.
Speaker 3: In the fourth quarter, we expect continued sequential revenue growth driven by UN, digital sales and seasonal product and equipment sales in production.
In the fourth quarter, we expect continued sequential revenue growth driven by year, and digital sales and seasonal product and equipment sales and production systems.
Speaker 3: The quarrel will also reflect the results of the one-sepsy John van.
The quota will also reflect the results of the one subsea joint venture.
Speaker 3: As a result, we expect overall second-hand short revenue growth to be in the high single.
As a result, we expect overall sequential revenue growth to be in the high single digits.
Speaker 3: We've continued focus on the quality of revenue, harnessing operating leverage and further technology-visual adoption. We expect to maintain global pre-tax segment-proweeting and EBITAM margins at their highest levels in the cycle in line with our third product.
With a continued focus on the quality of revenue harnessing operating leverage and further adoption.
Adoption, we expect to maintain global pretax Sigma Prorating and EBITDA margins at the highest levels.
In line with our first quarter performance.
Speaker 3: Stefan, we provide additional color on the net contribution of the one-septiceye adventure and our fourth quarter guide.
Stephane will provide additional color on the net contribution of the one subsea joint venture on our fourth quarter.
<unk>.
Speaker 3: Turning to the fuller, we expect to achieve a balance ambition we share back in the era.
Turning to the full year, we expect to achieve a balance of ambition we shut back in January .
Speaker 3: Extruding the effects of the one-satige adventure, we expect to prove it earlier by increasing revenue more than 15% and growing EBITDA in the mid-20s.
Excluding the effects of the one city joint venture, we expect to conclude the year by increasing revenue more than 15% and growing EBITDA in the mid twenties.
Speaker 3: We've risen North America, I'd win big more than us, by strong international.
There's some north America headwinds being more than offset by strong international rules.
Speaker 3: This wrongful year results will remain a well-positioned to continue returning value to our shareholders. I will now turn the call over to Stefan.
This strong full year results will remain well positioned to continue returning value to our shareholders.
I will now turn the call over to Stephane.
Thank you Olivier and good morning, ladies and gentlemen.
Speaker 4: Fert Court Leu, earnings per share was 78 cents.
Third quarter earnings per share was <unk> 78.
Speaker 4: This represents an increase of 6 cents sequentially.
This represents an increase of six sequentially.
Speaker 4: and 15 cents when compared to the third quarter of last.
And 15 cents when compared to the third quarter of last year.
Speaker 4: We did not recall any charges or credits during any of those periods.
We did not record any charges or credits during any of those failures.
Speaker 4: Overall, our third quarter revenue of 8.3 billion increased 3% sequence.
Overall, our third quarter revenue of $8 3 billion increased 3% sequentially.
Speaker 4: International sequential revenue growth of 5% was led by the Middle East and Asia, which increased 8%. While North America revenue decreased 6%.
International noticed sequential revenue growth of 5% was led by the Middle East in Asia, which increased 8%.
While North America revenue decreased 6%.
Sequentially.
Speaker 4: Pre-tax segment operating margin increased 73 basis points.
Pretax segment operating margin increased 73 basis points.
Speaker 4: which resulted in incremental margins of 48%.
Which resulted in incremental margins of 48%.
Speaker 4: largely due to the high-quality international rubble.
Largely due to the high quality international revenue.
Companywide adjusted EBITDA margin for the third quarter reached 25%.
Speaker 4: Companywide adjusted the bidum engine for the third quarter reached 25%. The highest level since 2015.
The highest level since 2015.
On a year on year basis.
First quarter revenue increased 11%.
Speaker 4: as international revenue grew 12% while North America revenue increased 6%.
As international revenue grew 12%, while North America revenue increased 6%.
Speaker 4: The strong international performance was led by broad-based growth across the Middle East and Asia and of Shoma.
The strong international performance was led by broad based growth across the middle East and Asia.
Sure markets.
Let me now go through the third quarter results for each division.
Speaker 4: Let me now go through the third quarter results for each.
First quarter of digital and integration revenue of 982 million increased 4% sequentially with margins decreasing two percentage points to 42%.
Speaker 4: First quarter, the digital and integration revenue of 982 million increased 4% sequentially. With margins decreasing 2% change points to 30%.
Speaker 4: The sequential revenue growth was primarily driven by increased APS revenue and increased digital revenue, including higher sales of exploration data analysis.
The sequential revenue growth was primarily driven by increased EPS revenue and increased digital revenue, including higher sales of exploration data licenses.
Speaker 4: margins decline sequentially as lower profitability in APS more than offset improved digital margin.
Margins declined sequentially as lower profitability in Aps more than offset improved digital margins.
Speaker 4: Reservoir performance revenue of 1.7 billion increased two persons sequentially. While margins improved, 190 basis points to 20.5.
Reservoir performance revenue of $1 7 billion increased 2% sequentially, while margins improved 190 basis points to 25%.
These increases were due to strong international growth.
Speaker 4: This increases where due to strong international growth, a favorable technology mix, and improved price.
A favorable technology mix and improved pricing.
Speaker 4: While construction revenue of 3.4 billion increased 2.6%.
Well construction revenue of $3 4 billion increased 2% sequentially.
Speaker 4: led by strong growth in the Middle East and Asia, which was partially offset by lower revenue in North America.
Led by strong growth in the Middle East and Asia, which was partially offset by lower revenue in North America.
Margins of 22, 1% increased 58 basis points driven by the international markets.
Speaker 4: Finally, production systems revenue of 2.4 billion increase 2% sequentially as international revenue increased 7%. Let's buy the Middle East and Asia and let's in America.
Finally production systems revenue of $2 4 billion increased 2% sequentially as international revenue increased 7% led by the Middle East in Asia, and Latin America.
North America revenue decreased by 8% due to lower subsea activity.
Speaker 4: margins expanded 147 basis points to 30
Margins expanded 147 basis points.
13, 5%.
Representing the highest margin since we began reporting results for the division.
This expansion was primarily driven by higher sales of completions artificial lift and surface production systems as well as pricing improvements.
Speaker 4: This expansion was primarily driven by higher sales of completions, artificial lift and surface production systems, as well as pricing improvements.
Now turning to our liquidity.
Speaker 4: During the quarter, we generated 1.7 billion of cash flow from operations. And 3 cash flow of...
During the quarter, we generated $1 7 billion of cash flow from operations.
And free cash flow of just over $1 billion.
Speaker 3: As a result of his strong cash flow performance, our net debt reduced sequentially by 741 million to 9.4 billion.
As a result of its strong cash flow performance, our net debt reduced sequentially.
731 million to $9 4 billion.
Speaker 4: Our net debt to training 12 months, a bit better leverage ratio of 1.2, is at its slowest level since 20.
Our net debt to trailing 12 month EBITDA leverage ratio of 1.2 is at its lowest level since 2015.
Speaker 4: Capital investments, inclusive of CAPEX and investments in APS projects, and exploration data, were 640 million in the first quarter.
Capital investments, including both Capex and investments in Aps projects and exploration data were $640 million in the third quarter.
Speaker 4: For the full year, we are still expecting capital investments to be approximately 2.5 to 2.6 billion dollars.
For the full year, we are still expecting capital investments to be approximately $2 five to $2 6 billion.
Speaker 4: We repurchased 2.6 million shares of our spread during the quarter for a total purchase price of 151 million.
We repurchased two 6 million sales of our stock during the quarter for a total purchase price of $151 million.
We continue to target to return $2 billion.
Speaker 4: We continue to target to return $2 billion to our shareholders this year between dividends.
To our shareholders this year.
Dividends and stock buybacks.
Before closing I would like to add some color to the Q4 outlook that Olivia just provided.
Speaker 4: Before closing, I would like to add some color to the Q4 Outlook that Olivier just provided.
Speaker 4: We are expecting sequential fourth quarter of a new growth to be in the high single digit.
We are expecting sequential fourth quarter revenue growth to be in the high single digits.
Speaker 4: We've pretext margins remaining at the same high level we achieved in the third course.
We have pre tax margins remaining at the same high level, we achieved in the third quarter.
Speaker 4: As Olivier highlighted, without looking includes the contribution from the recently acquired Accurcept CBN.
As Olivier highlighted this outlook includes the contribution from the recently acquired <unk> subsea business.
Speaker 4: which will be consolidated under our production systems division, starting in the fourth.
Which will be consolidated under our production systems Division.
Starting in the fourth quarter.
The subsea business is expected to contribute approximately $400 million to $500 million of incremental revenue in the fourth quarter.
Speaker 4: The Acre-Subtibusiness is expected to contribute approximately 400 to 500 million of incremental revenue in the fourth quarter.
Speaker 4: with pre-tax operating margins in the lotines.
<unk> pre tax operating margins in the low teens.
Therefore, excluding the effects of the acquirer of that subsea business <unk>.
Speaker 4: including the effects of the acquired Blackhear Subsea business. SLB's fourth quarter sequential revenue growth is expected to be similar to the second-show revenue growth we experienced in the first.
<unk> fourth quarter of sequential revenue growth is expected to be similar to the sequential revenue growth we experienced in the third quarter.
<unk> organic pre tax operating margin again, excluding the effects of the acquirer of that business is expected to continue expanding sequentially.
Speaker 4: SLB's organic pre-packed operating margin, again, excluding the effects of the acquired Acre business, is expected to continue expanding sequence.
Okay.
Speaker 4: After considering the impact of Velo de lain items relating to his joint venture such as amortization of intangibles, taxes and non-controlling interests.
After considering the impact of below the line items relating to these joint venture such as amortization of intangibles taxes and Noncontrolling interest.
Operator: Ladies and gentlemen, thank you for standing by.
Operator: Welcome to the SLB earnings conference call. At this time, all participant lines are in a listen only mode.
Speaker 4: The transaction is expected to be slightly accretive to our fourth quarter earnings per share, excluding charges and credit.
This transaction is expected to be slightly accretive to our fourth quarter earnings per share excluding charges and credits.
Operator: Later, we will conduct a question and answer session. If you would like to ask a question, please press one, then zero. You may remove yourself from cue by repeating the same one zero command. As a reminder, this conference is being recorded.
In closing we are very excited about the prospects of this venture, which strengthens our offshore portfolio and has the potential to deliver more than $100 million of net annual synergies.
Speaker 4: including we are very excited about the prospects of his venture, which strengthens our offshore portfolio and has the potential to deliver more than 100 million of net annual synergies, starting your free after closing. I will now turn the...
James McDonald: I would now like to turn the conference over to the senior vice president of investor relations and industry of affairs, James McDonald. Please go ahead. Thank you, Leo.
In your free after closing.
I will now turn the conference call back to Olivier.
Speaker 3: Thank you Stefan, ladies and gentlemen who will now open the line for your question.
Thank you Stefan that ladies and gentlemen, we'll now open the line for your questions.
James McDonald: Good morning and welcome to the SLB third quarter, 2023 earnings conference call. Today's call is being hosted from New York City, following our board meeting held earlier this week. Joining us on the call are Olivier LaPouche, Chief Executive Officer, and Stephan Biguet, Chief Financial Officer.
Speaker 1: Lay out to me from the line. Certainly ladies and gentlemen, once again, if you'd like to ask a question, you may press one then zero on your telephone keypad. And our first question is from the line of James West with Evercore. Please go ahead. Excuse me, Mr Hood.
Let me.
Underlying.
Certainly ladies and gentlemen, once again, if you'd like to ask a question you May press. One then zero on your telephone keypad.
And our first question is from the line of James West with Evercore. Please go ahead.
James McDonald: Before we begin, I would like to remind all participants that some of the statements will be made by making today are forward looking. These matters involve risk and uncertainties that could cause the results to differ materially from those projected in these statements. I therefore refer you to our latest 10K filing and our other SEC filings.
Hey, good morning Olivier.
Good morning, gentlemen.
Speaker 5: So, again, I know you recently returned from Auditec and most likely met with all of the major will...
So.
<unk> recently returned from artifact.
Most likely.
Met with all.
All of the major.
Well producers in the region.
James McDonald: Our comments today may also include non gap financial measures, additional details and reconciliation to the most directly comparable gap financial measures can be found in our third quarter press release, which is on our website.
Good to hear your thoughts on the Middle East and how we should think about the middle East with respect to Schlumberger over the next several years because it looks like it's gonna be a huge driver of growth.
Speaker 5: I respect the slumberjay, you know, over the next several years, because it looks like it's gonna be a huge drive.
Okay.
Olivier Peuch: With that, I will turn the call over to Olivier. Thank you, James.
Speaker 3: Now, thank you James, I hope everybody could catch your question relating to Middle East.
No. Thank you James I hope everybody could that could get to your question relating to your middle East Indeed, I've been privileged to be there for about a week in there and not really went to you to the conference and met.
Speaker 3: Indeed, I've been the privilege to be there for about a week and nobody went to the conference and met a lot of people.
Olivier Peuch: Ladies and gentlemen, thank you for joining us on the call today. In my remarks this morning, I will begin by reviewing the third quarter financial results represented in today's earnings relief. Then I will discuss the progress we are achieving across our three engines of growth and the macro environments supporting them.
Olivier Peuch: And finally, I will share our outlook for the fourth quarter and the four year.
A lot of.
Speaker 3: customers in the region, but also the benefit to go to operation in Saudi and visit the customer in South over there. So great insights. Just to say that this is clearly...
Customers in the region, but also had the benefit.
To go into operation in Saudi and visit the customer itself.
Over there so great insights.
Needless to say that this is clearly.
Speaker 3: The largest investment cycle is clear in our own way. The momentum is set, it's not about the current set, and I think the sentiment is correct.
The allows us at that investment cycle is is clearly underway the momentum set it's not about the concept and I think the sentiment the clock.
Olivier Peuch: Stephan would then provide more details on our financial results and will open the line to your questions. Our third quarter results have built upon the positive momentum establishing the first half of the year and firmly position us to achieve our full year financial ambitions. We continue to grow revenue and adjust the debit above sequentially and the earlier and we generated free cash flow of one billion dollars for the second consecutive quarter.
Extremely positive.
Speaker 6: for these, Leah, there's a noise on the line. Yes, Mr. Weft, if you could mute your phone, sir.
But as a layout Asia noise on the yes, Mister well if you could mute your phone Sir.
Okay. You May proceed.
Thank you so if I had <unk> attributes I think breath.
Speaker 3: Thank you. So if I have to characterize the previous, I think breath.
Speaker 3: Resilience, the ability that you have a character is for the full cycle, a thing very much in full display in Middle East.
Residents durability that we have got guys for the for the full cycle I think are very much in full display in middle East I.
Olivier Peuch: Internationally, we continue to see the cycle. We achieve our highest international revenue quarter since 2015 by going revenue in this market for the ninth consecutive quarter year. This was particularly visible in the Middle East and Asia, where we posted 22% year-on-year revenue growth, laid by significant growth in Saudi Arabia, the United Arab Emirates, Kuwait and Egypt. Our strong international activity was submitted by the resident investments in the offshore markets, notably in Africa, Brazil and Scandinavia.
Speaker 3: I think the durability, 27 is the target for capital expansion. Breath is not only oil, but also gas, as a driver for regional gas consumption and energy export.
I think the.
The durability 27 is the target for GAAP the expansion.
The breadth is not only oil, but it's also gas as a driver for example, a version of our gas consumption and LNG exports.
Speaker 3: offshore and onshore is conventional and unconventional and goes beyond one or two countries that are very well known into co-weight, into Iraq, into Egypt and more and it's clearly decoupled from some of the short-term and certain
Offshore and onshore is conventional and unconventional.
And it goes beyond one or two countries that are very well known.
<unk> integrates into <unk>.
In transit and more and it's clearly decoupled from some of the short term uncertainty. So it's all made about alpha.
Olivier Peuch: Our offshore continues to offer many opportunities for our business. And I will shortly discuss how the recent closing offer, one subsidiary venture with Accord Solutions and Sub-C7, will help us to expand our footprint in the market going moving forward.
Speaker 3: So it's all made about a long term contract from the recondracting to the...
A long term contract from the re contracting to the service contract.
Speaker 3: And we are a clear beneficiary of this situation. We have a unique footprint in origin. And indeed, we see that this will continue to support.
And we are a clear beneficiary of this situation, we have a unique footprint in the region and indeed, we see that this will continue to support growth in the years to come for <unk> and this year as stated before with a record a record revenue in the region.
Olivier Peuch: And in North America, although revenue decreased sequentially due to low activity, we continue to grow year-on-year up-performing three. Count. Once again, I've focused on the quality of our revenue combined with this differentiated value we delivered through technology to all margin expansion. A bit of margins, which a new cycle high of 25% and a pre-tax segment of our margin expanded for the 11th consecutive quarter year on year. These are very positive results and I want to thank the entire facility team for delivering this strong performance.
Speaker 3: growth in the years to come for SLB. And this year, as stated before, we'll record revenue in the region, and we will continue to grow and use this to be active to an international growth, and active to an international margin and the company. A great, a great...
And we will continue to grow and use this to be accretive to our international growth and accretive to our international emerging in the company.
A great a great outlook in essence.
That's great. Thanks, Thanks, Olivier for that sorry about my my phone issues here.
Speaker 5: Thanks Olivier for that. Sorry about my phone issues here. Probably a follow-up for me, maybe for Stefan, is on FX. How much was FX? They headwind during the quarter.
Probably a follow up for me moved for Stephane is on FX, how much was FX a headwind during the quarter.
Olivier Peuch: Next, I would like to share some updates about progress across our three engines of growth, core, digital and new energy. Let me begin with the core. Dolengas sector continues to benefit from broad, durable and resonant mutilier growth cycle that is being supported by long cycle developments, production capacity expansions, exploration and proposal and recognition of gas as a critical source for the energy transition. This market fundamentals remain very, very compelling for our core business, which has grown 22% year to date and has materially expanded margins.
Thanks, <unk>. So look most of our revenue is building in U S dollars, but indeed.
Speaker 4: Thanks James. So look, most of our revenue is built in US dollars, but indeed in a few countries, it's partially not the case. For some of you, we indeed had an favorable impact of the US dollar strengthening against local currencies, and that was both sequentially and here and here.
In a few countries, it's partially not the case for so for some of rules, we indeed had.
<unk> favorable impact of the U S dollar strengthening against local currencies and that was both sequentially and year on year I prefer I'm not giving you a specific amount as we have contractual adjustment clauses that.
Speaker 4: I prefer not giving you a specific amount as we have contractual adjustment clauses that come and have set the negative effect at least partially. But yes, the revenue would have been slightly higher without that. And the last point here to remember is a lot of our costs as well are expressed in local currency. So we have a natural hedge on this and the net impact on earnings is quite marginal. It's limited.
That comment offset the negative effect at least partially.
Yes, the revenue would have been.
Olivier Peuch: This strong performance is being driven by the diversity of our portfolio, our industry dealing technology and our unique integration capabilities. Reserva performance achieved exceptional results with stronger evaluation activity. Production systems achieved this highest level of margin in the cycle led by sub-C, surface and archer list. Our construction maintained impressive results through new technology innovations and differentiated performance. Or in all, this was a very strong quarter across core divisions. The support is my environment is also leading operator to make long cycle investments offshore, where advanced inefficiency have significantly improved project economics.
Slightly higher without that then and there.
The last point here to remember is a lot of our cost as well are expressed in the in local currencies. So we have a natural hedge on this end.
Net impact on earnings it is quite marginally it's limited.
Okay.
Yes.
We will move on to David Anderson with Barclays. Please go ahead.
Speaker 1: We will move on to David Anderson with Barclays. Please go ahead. Thank you. Good morning.
Thank you good morning, good morning Olivier.
Speaker 7: With Ocarnapp part of the one sub-CJV, I was hoping he could talk a little bit more about the value proposition of...
With alcohol.
<unk> part of the one subsea JV I was hoping you could talk a little bit more about the value proposition of not only a larger subsidy entity, but how it fits kind of within the whole.
Speaker 7: Not only a larger substance entity, but how it fits within the whole, how now fits in a fully consolidated mark.
Olivier Peuch: We have this little bit into FIDs, extending well beyond 2025, and it could not be a better time to join force with hacker solutions and sub-C7 to drive a new rear for sub-C. Today, SAP is recognized for its unique ability to handle large, complex and fully integrated offshore projects from sub-Sophage development to mid-stream processing. Towards one-step siege on venture, we will further enhance this offering by bringing new levels of technology and partnership to the market.
I'll now fits in our quarterly consolidated market in terms of offshore working RFID is obviously the timing really can be couldn't be any better but what are the larger more robust one subsea greater schlumberger as a whole.
Speaker 7: In terms of offshore wars and FIDs, obviously the time you really couldn't be any better, but what is a larger, more robust, one-sepsy brainter, Sumbarjay as a whole? And then as a follow-up, if you could talk about some of the integration steps you're planning, culture is such a big part of Sumbarjay, just wondering how you're thinking about bringing in one of your long-standing competitors into the fold and how do you think about culture and that?
Then as a follow up if you could talk about some of the integration steps you're planning culture is such a big part of Schlumberger, just wondering how youre thinking about bringing in one of your long standing competitors into the fold and kind of any how do you think about culture and that makes sense. Thank you.
Speaker 3: Oh, great question, Dave. And I think indeed we have been working on this. And very proud and I believe that the timing could not be better that closing this now as the onset of the offshore growth and the long duration that we see with FID beyond 2025. So if I have to detect three keywords, I would say technology fit.
No great question, Dave and I think indeed, we have been working on this and we're very proud of and believe that the timing could not be better that.
Olivier Peuch: Together, our companies are the clear leader in sub-C multi-phase boosting and sub-C gas compression, and we will provide electrification and digital solutions to further enhance the business. This partnership approach will also create a more flexible customer offering to scale through scale, increase capacity and life of FID services. Collectively, this will drive meaningful change to sub-C asset performance as we partner with customers to help them unlock their reserves, drive efficiency, reduce cycle times, and reduce emission in the Deepwater market.
Closing this now as at the onset of the offshore growth under long duration that we see with RFID beyond 2025. So you have to detect three keywords I will set technology fit.
Speaker 3: Integration, capability and scale are the three elements that I think resonate very well and trade value for customers. Technology, whether we are enhancing and getting with this addition a very comprehensive portfolio that is fit to every Deepwater market that exists.
Integration capability and scale are the three elements that I think has done it very well and trade value for customers technology, whether we are enhancing and getting with this addition, a very comprehensive portfolio that is fit to every deepwater market that exist and that includes a further capability.
Olivier Peuch: Now, let me turn to digital. On the last core quarter, a share of an update on the emerging digital trends shaping the industry. This included the adoption of cloud computing, the power of data and AI scale and digital operation gaining maturity. At a recent investor conference, at this case, our SLB is capitalizing on this opportunity with our platform strategy, comprising of a workflow platform that serves as the backbone for our customer's planning and operation, now data and AI platform that unlocks data at scale for digital customers.
Speaker 3: and that includes further capability, complementing capability in sub-ciple processing, and also in the own vehicles that complete the portfolio and allow us to fully participate and being differentiated in every basin, in every depot or condition in the world.
A complementary capability subsea processing.
And also in their own vehicles that complete the portfolio and allow us to fully participate in and being additional shaded in every basin in everyday polar conditioning. The world integration, we bring and we keep our unique subsurface reservoir.
Speaker 3: integration, we bring and we keep our unique sub surface reservoir.
Speaker 3: to processing capability that I do already in one sub-C.
Two processing capability, we had already in one subsea well to announcing it with.
Speaker 3: but we are announcing it with a larger and a very competent team running us from acquisition and engineering capability. So that we can take any deployer prospect and help customers and collaborate to get the best outcome.
A larger and a very competent team joining us fall from that acquisition on engineering capability. So that we can we can take any any deepwater.
Olivier Peuch: Today, we are seeing increased digital adoption across the industry. Delphi continue this year over year growth momentum with a 49% increase in users and an 89-86% increase in compute hours compared to the third quarter last year. Additionally, our customers and embracing are connected and autonomous drilling solution with 1.9 million feet of automated drilling completed in a third quarter, an increase of 60% year over year. As a result, a service platform representing a new digital technology offering sustained growth at the Kaggle rate of about 60%.
<unk> and <unk> customers and collaborate to get the best outcome and we are getting.
Speaker 3: and we are getting our subsea seven partner to join.
Our subsea.
Seven partner to joining and to be aligned with making this a success and when and as we are required to deliver as integrated with <unk>. So all in all this is what the value. It brings an integration scale scale give us.
Speaker 3: and to be aligned with making this a success.
Speaker 3: when and as we are required to deliver as integrated with surf. So all in all, this is what the value is brings in integration. Scale, scale give us...
Speaker 3: Give us manufacturing footprints that give us flexibility and ability to respond fast and to respond to customers everywhere. And give us the unique life of field with the largest install base of the P3, where we will use digital, we'll use our integration capability for other performance to provide further integration and further life of field and looking a production recovery, if you like long term. So, customer feedback.
Give us manufacturing footprint that gives us flexibility.
The ability to respond fast and to respond to customer need everywhere and give us the unique life of field.
Olivier Peuch: The benefit of this technology is clear, and you can see this illustrated in our earnings press release this morning, with our share of the U.S, collaborative agreement and the co-weight energy basal-limited digital field contract, Davies serving as just two recent examples of customer choosing SLB digital technology to reimagine their workflows across the YNB value chain.
The largest installed base of subsea tree.
Use digital would use our integration capabilities with our performance to provide further integration and further the actual field and looking.
Pollution recovery should like long term so customer feedback.
Speaker 3: is excellent at the onset. I think the customer really appreciate and recognize the recovery potential, the conference is technology for you, the lower emission, the digital and the indication guidancewas technology.
Is excellent at the onset I think the customer really appreciate and recognize the recovery potential.
Olivier Peuch: And finally, let me quickly discuss some of the exciting opportunities in our new energy business and transition technology portfolio. As we address the energy dilemma, our industry has an imperative to decarbonize operations. Two of the most immediate opportunities to do this are reducing methane emissions and getting CCUS as a solution for mitigating climate change. Hoganine methane, we have opportunity to address fugitive methane and flaring to better monitoring and leak detection. A few weeks ago, we launched a new IoT enabled methane point instrument for continuous monitoring that seamlessly connect to our methane digital platform for insights and analysis, eliminating the need for intermittent site visits and enabling operators to quickly scale up across the operations.
The comprehensive technology portfolio, the lower emission the digital and the integration capability.
Speaker 3: Coucher, I think we have discovered throughout this engagement.
Gotcha I think we have discovered throughout this engagement that created a culture are very much aligned and I think we have had a day one set of events.
Speaker 3: Actually the culture are very much aligned and I think we have had a day one set of events last week or two weeks ago that were really outlining our line we are and our complementary are culture and portfolio are to go into this. So I'm very optimistic.
Last week or two weeks ago that we are really outlining how aligned we are in a complementary culture and portfolio.
To go into this so I'm very optimistic and very positive and customer feedback so far extremely positive to onboard this and you may have seen the BT side.
Speaker 3: very positive and customer feedback is so far extremely positive to onboard this and you may have seen the BP STIA announcement video earlier which is a precursor in our opinions what we can do to partner with our customers and to help unlock the future of safety reserve and to impact their recovery.
Hey announcement, we did area, which is a precursor and my opinion is what we can do to partner with our customers and to help unlock the future of subsea reserve and to impact their recovery.
Speaker 3: their guidance
Efficiency, and economics, and Theyre lower carbon outlook.
Olivier Peuch: This and our solutions are available today to help clients abate their methane emissions. And in CCUS, momentum is building across the industry, both in oil and gas, as well as in other hard-to-abate sectors. SLB is actively involved with more than 20 CCUS project globally, and we are investing in capture technology as underscored by the partnership with TDA Research highlighted in our earnings release. Overall, we are pleased with our pipeline of technology and projects, and we have confidence by by establishing ourselves as a leader in this space, we will trade yet another avenue for diversified long-term growth.
Speaker 7: Obviously all things that your customers are looking to achieve.
Obviously, all things that your customers are looking to.
Looking to achieve.
Speaker 7: If I could shift over to your digital business, just more specifically digital within DNI, APS has been kind of noisy this year between Canada and Ecuador.
If I can shift over to your digital business.
Specifically digital within DNI Aps has been kind of noisy this year between Canada, and Ecuador kind of hard for us to get a real sensitive to what's happening in software in your release you talked about higher software margins I was wondering if you could provide a little more context around that have margins improved from a year ago is this necessarily about margins you just gave some interesting quarter.
Speaker 7: It's kind of hard for us to get a real sense of what's happening in software. In your release, you should talk about higher software margins. I was wondering if you could provide a little more context around that. Have margins improved from a year ago? Is this necessarily about margins? You just gave some interesting statistics here about an increase in number of users, increasing computing time. And what's the 60% growth? Can you use repeating that to what you mentioned by that? Is that the top line of that business?
About an increase in number of users increase in computing.
And 60%.
Can you can you just repeat exactly what you meant by that the topline of that business.
Olivier Peuch: Now, we turn to our outlook for the fourth quarter and the full year. In the fourth quarter, we expect continued sequential revenue growth driven by UN digital sales and seasonal product and equipment sales in production systems. The quarter will also reflect the results of the one-sepsy joint venture. As a result, we expect overall sequential revenue growth to be in the high-single digits. We will continue to focus on the quality of revenue, harnessing operating leverage and further technology-visual adoption. We expect to maintain global pre-tax segment-provoting and habitat margins at their house levels in the cycle in line with our fourth quarter.
Thank you.
Speaker 8: Yeah, I think we, no, thank you, thank you James. I think we, we continue to be very positive about digital business and its adoption with our customers. You continue, you will continue to see announcement being made from workflow and, and, and Joe sounds adoption for customers and also more and more announcement of
I think we no. Thank you. Thank you James I think we continue to be very very positive about the digital.
<unk> and its adoption with our customers. You continue you will continue to see announcements being made from a workflow and and and Joe sounds.
Adoption for customers and also more and more announcement of.
Speaker 3: of digital operation, edge AI, as you have seen, many of them, example, into our press release earlier today.
All of our digital operation edge AI as you have seen many of them example into our press release earlier today. So we are very satisfied with the <unk>.
Speaker 3: So we are very satisfied with the momentum.
The momentum and it is going it's going fairly well I think youre seeing that we have quoted that the new technology digital portfolio from workflows to operation and is growing at a CAGR of about 60% and I think this is in line with what we expected and this is on top of the baseline.
Speaker 8: And it's going very well. I think you are seeing that we have quoted that the new technology digital portfolio from workflows to approversion is going at the Kaggle about 60%. And I think this is in line with what we expected.
Olivier Peuch: Stephane, we provide additional color on the net contribution of the one-seption venture on our fourth-quarter guidance. Turning to the full year, we expect to achieve a financial ambition we share back in January.
Speaker 8: And this is on top of the baseline that includes the legacy software maintenance and all the services including the data sales that we do. That is somehow offsetting some of this that still represent total growth. So we expect this role to...
That includes the legacy software maintenance and all the services, including the data.
Olivier Peuch: Extruding the effects of the one-seption venture, we expect to conclude the year by increasing revenue more than 15% and growing EBITDA in this wrongful year results will remain the well-positioned to continue returning value to our shareholders.
Says that we do.
That is some.
While offsetting.
Some of this but still represents a total growth. So we expect this roof too.
To be.
Very visible into the fourth quarter as we typically have.
Speaker 8: very visible into the fourth quarter, as we typically have a urine cell effect. And we expect this to continue in accedulate, actually, next year.
And so its effect and we continue we expect this to continue and accelerate actually next year.
Stephan Biguet: I will now turn the call over to Stephan.
Stephan Biguet: Thank you, Olivier, and good morning, ladies and gentlemen. Third-quarter earnings per share was 78 cents. This represents an increase of 6 cents sequentially and 15 cents when compared to the third-quarter of last year. We did not record any changes or credits during any of those periods. Overall, our third-quarter revenue of 8.3 billion increased 3% sequentially. International sequential revenue growth of 5% was led by the Middle East and Asia, which increased 8%, while North America revenue decreased 6%.
Thank you very much.
Next we'll move to the line of Scott Gruber with Citigroup. Please go ahead.
Speaker 1: Next we move to the line of Scott Gruber with City Group. Please go ahead.
Speaker 7: The asking morning question on the production systems outlook, you know, for margins post the the author JV just how should we think about the path forward? You know, for margins in the business, you know, I'm thinking about, you know, legacy contracts and so see.
Yes, good morning.
On oney.
The production systems.
Outlook.
For for margins post the Orca JV, how should we think about the path forward for margins in the business I'm thinking about legacy contracts in subsea.
Speaker 7: rolling out that are largely lower margin, better price contracts rolling in, and then as you capture synergy, just one is a re-selected occasion for incrementals or where margins could go.
Rolling out that are likely lower margin and better price contracts rolling in and then as you capture synergy.
What is a reasonable expectation for incrementals of where margins could go.
Stephan Biguet: Sequentially, pre-tax segment operating margin increased 73 basis points, which resulted in incremental margins of 48%, largely due to the high-quality international revenue. Companywide adjusted the EBITDA margin for the third-quarter reached 25%. The highest level since 2015. On a year on your basis, third-quarter revenue increased 11%, as international revenue grew 12%, while North America revenue increased 6%. The strong international performance was led by broad-based growth across the Middle East and Asia and offshore markets.
Speaker 9: overall in production systems out over the next two years.
Overall in production systems over the next few years.
Speaker 8: I think Scott, simply said, we believe that we'll continue to have a continued journey of margin expansion. As you have seen, we have reached the highest level of margin in collection systems since we have been reporting this division on the back of
I think Scott.
Simply said, we believe that will continue to have a.
We continue our journey of margin expansion as you have seen we have reached the highest level of our margin in <unk> systems. Since we've been reporting this division.
On the back of <unk>.
Speaker 8: rolling in contract that in the backlog into Revenue Generation that are more creative that the previous contract and that the results of not only the pricing environment that is more positive also the results of better supply chain and increased efficiency and use of additional technology that I think the entire team in production system has been very good at setting to our customers.
We're holding in contract.
In the backlog into into revenue generation that are as bill accretive.
Please contact in it the results of the not only the pricing environment that is more positive, but also the result of better supply chain and increased efficiency and use of additional technology that Duffy the entire team and pollution system has been very good at selling to our customers and I think the handset the results now very.
Stephan Biguet: Let me now go through the third-quarter results for each division. Third-quarter digital and integration revenue of 982 million increased 4% sequentially, with margins decreasing 2% change points to 32%. The sequential revenue growth was primarily driven by increased APS revenue and increased digital revenue, including higher sales of exploration data licenses, margins declined sequentially as lower profitability in APS, more than offset improved digital margins. Reservoir performance revenue of 1.7 billion increased 2% sequentially, while margins improved 190 basis points to 20.5%.
Speaker 3: And I think the results now are very specifically to the subciandum. The one subci, we have been few months back.
Keytruda to the assumption on the island. The one subsea you have been a few months back highlighting that our performance is <unk> <unk> is already in the high teens EBITDA as.
Speaker 8: I think that our performance of one sub-C is already in high-teens EBITDA as a Previous on organic one sub-C
In our per user or an organic one subsea. The addition of the we expect to continue to.
Speaker 8: The addition of the, we expect to continue to, and to recap that this margin and long term continue to increase at this level and beyond. You know, I'll set here, I will generate $100 million from year three on this one set, the one that you're going forward. So, all in all, I believe that the element of our production system portfolio.
And two hiccup that this this margin and long term continues to increase.
At this level and beyond <unk>, we will generate 100 million dollar.
From <unk>.
On this on this one subsea joint venture going forward. So all in all I believe that element of our production system portfolio.
Speaker 8: are set to continue to not only grow but also have incremental margin going forward and so we expect the journey of margin expansion to continue next year and beyond. And the journey will be a creative.
Asset to continue to not only grow but also add incremental margin going forward. Hence we expect the journey of margin expansion to continue next year and beyond.
Stephan Biguet: These increases were due to strong international growth, a favorable technology mix, and improved pricing. While construction revenue of 3.4 billion increased 2% sequentially, led by strong growth in the Middle East and Asia, which was partially offset by lower revenue in North America. Margins of 22.1% increased 38 basis points driven by the international market. Finally, production system revenue of 2.4 billion increased 2% sequentially as international revenue increased 7% left by the Middle East and Asia and Latin America.
And the JV will be accretive to this.
Speaker 9: Got it. And it turned into North America, a couple of years ago, you took it to your sales model toward more product sales and fewer boots on the ground. But now we're going through a wave of consolidation amongst your customers. We're seeing more private staking out and now potentially a wave of larger and larger. How does that impact your strategy in North America?
Got it.
And then turning to North America couple of years ago, you talked in your sales model toward more product sales.
Your boots on the ground.
But now we're going through a wave of consolidation amongst your customers. What we're seeing more private is taken out and now potentially a wave of larger mergers how does that impact your strategy in North America.
I think we are we have been way.
Speaker 3: Certified with the onset of our strategy and the plan of strategy as we initially did four years ago. And I think I've turned out to be both.
Satisfied with the onset of our strategy and the deployment strategy as we initially did four years ago and I think you have turned out to be both.
Stephan Biguet: North America revenue decreased by 8% due to lower subsidy activity. Margins expanded 147 basis points to 13.5% representing the highest margin since we began reporting results for the division. This expansion was primarily driven by higher sales of completions, artificial lift and surface production systems, as well as pricing improvements.
Speaker 8: According to the adoption of our technology, my private through partners, through this feed-for-based anti-access modern, as well as
Our bidding too.
The adoption of our technology by private through partners III.
Our fit for basin and take access model as well as.
Speaker 8: Art, focus technology and focus field processing offering has been resonating with large public Interacted company that have adopted art technology for performance purposes
<unk> focused.
<unk> and focus fit for basin offering has been resonating with large public.
Integrate the company that have adopted our technology for performance bubbles as the market matures.
Speaker 8: as the market mature and as some consideration will happen. We still believe that our technology performance...
And has some consideration.
Stephan Biguet: Now turning to our liquidity. During the quarter we generated 1.7 billion of cash flow from operations and 3 cash flow of just over 1 billion.
Will will happen, we still believe that our technology performance.
Speaker 8: including what impact impacts recovery.
<unk> weather impacts recovery digital will continue to resonate very well and will continue to be adapted very well by our customers. So we have an external exposure at this point to the public and integrated company and I think this consideration will give us opportunity to further showcase our techs.
Speaker 8: Digital will continue to resonate very well and will continue to be adopted very well by our customers. So we have an excellent exposure at this point to the public and integrated company and I think this consideration will give us opportunity to further showcase our technology, showcase our digital showcase our feed for basin across both production system and and during well-consoctioned particular.
Stephan Biguet: As a result of this strong cash flow performance, our net debt reduced sequentially by a 741 million to 9.4 billion. Our net debt to trailing 12 month EBITDA leverage ratio of 1.2 is at its lowest level since 2015. Capital investments, inclusive of CAPEX and investments in APS projects and exploration data, were 640 million in the first quarter. For the full year, we are still expecting capital investments to be approximately 2.5 to 2.6 billion dollars.
Energy showcase of digital showcase our fit for basin.
Of course, both pollution system and <unk>.
Drilling and well construction basket out and let's not forget that our Ccs is as new as a new exploration world. In NAND is also playing a critical role to our growth towards about performance and the evolution before you even have digital in that context. So we will continue to use our take access and people seem to be agile.
Speaker 8: And let's not forget that CCS is a new exploration world. In NAM this is also playing a critical role to our growth, to our server performance and evaluation for you, if not digital in that compact. So.
Speaker 3: We will continue to use Tech Access and Citroa Bessin to be agile.
Stephan Biguet: We repurchased 2.6 million shares of our stock during the quarter for a total purchase price of 151 million. We continued to target to return 2 billion dollars to our shareholders this year between dividends and stock buybacks.
Speaker 8: in this market to respond to the projects that are set to come back next year.
Bill.
In this market to respond to the privates that are set to come back next year and at the same time continue to engage with.
Speaker 8: And at the same time, continue to engage with a larger customer and the customer that has the top of our portfolio through technology and integration capabilities. So we believe we are set for success in this new mature market in NAM.
A larger customer and the consumer that's at the top of our portfolio to technology and integration capability, So where.
We I believe we believe we are set for success in this new mature market in <unk>.
Stephan Biguet: Before closing, I would like to add some color to the Q4 outlook that Olivier just provided. We are expecting sequential fourth quarter of a new growth to be in the high single digits. With pre-tax margins remaining at the same high level we achieved in the third quarter. As Olivier highlighted, this outlook includes the contribution from the recently acquired Acre subsea business, which will be consolidated under our production systems division starting in the fourth quarter.
Okay. Thank you.
Thank you.
Speaker 1: Next we move on to Arun Jai Ram with JP Morgan Chase. Please go ahead.
Next we move on to our Roone Jairam with J P. Morgan Chase. Please go ahead.
Speaker 10: Yeah, good morning. I was wondering Olivier if you'd, Stefan, could elaborate on kind of the margin performance in the core, in particular you come into the bout.
Yeah. Good morning, I was wondering Olivier if you stfan could could elaborate on kind of the margin performance in the core.
In particular, you commented about our pricing.
Speaker 10: pricing gains particularly in reservoir performance. If you can highlight what you're seeing on pricing and excluding, obviously, the impact from the close of the one sub-CJV, would you expect similar margin expansion in the fourth quarter for the legacy SLB?
Pricing gains, particularly in reservoir performance, if you could highlight what youre seeing on pricing.
And excluding you know obviously the impact.
Stephan Biguet: The Acre subsea business is expected to contribute approximately 400 to 500 million of incremental revenue in the fourth quarter with pre-tax operating margins in the low teams. Therefore, excluding the effects of the acquired Acre subsea business, SLB's fourth quarter sequential revenue growth is expected to be similar to the second revenue growth we experienced in the third quarter. SLB's organic pre-tax operating margin, again, excluding the effects of the acquired Acre business, is expected to continue expanding After considering the impact of below-the-line items relating to this joint venture, such as amortization of intangibles, taxis and non-controlling interests, the transaction is expected to be slightly accretive to our fourth quarter earnings per share, excluding charges and credits.
From the close of the one subsea JV would you expect similar margin expansion in the fourth quarter on a for the legacy S. L. B.
So let me let me start I will let stephane can comment on the on the margin because I believe you provided some remarks to that effect.
Speaker 3: So let me start. I would like to step on the mountain on the margin, because I believe it provided some remarks to that effect. First, I believe that the core is benefiting from three things in my opinion. It benefits from different performance in the eyes of the customer.
First I believe that the core is benefiting from a four.
For <unk> in my opinion.
It benefits from differentiated performance in the eyes of the customer and.
Speaker 3: And hence is benefiting by this, creating an opportunity to secure market position and command pricing premium or favorable commercial terms to support this performance. Performance is recognized, performance is critical in all projects, but particularly in the foreign environment and is something that differentiates us and it's been recognized. Performance is a key factor. The second ability is technology.
And hence is benefiting by this.
Creating an opportunity to secure market position and commands a pricing premium or favorable commercial terms to support. This performance performance is recognized performance is critical.
In all project by partnering deeper on valent, and US and is something that differentiate us and has been recognized so performance is a key factor. The second I believe is technology technology adoption has been that has been accelerating I think are the targets in the basket of technology, we have set this year, including the transition technology, where we.
Speaker 3: Technology adoption has been accelerating. I think the targets and the basket of technology we have set this year, including the transition technology where we set the target for one billion dollars for a year, as it would be achieved year to date.
Stephan Biguet: In closing, we are very excited about the prospects of this venture, which strengthens our offshore portfolio and has the potential to deliver more than 100 million of net annual synergies, starting your free after closing.
Set the targets for $1 billion for the year as already been achieved year to date, and hence we see thickness adoption as being <unk>.
Speaker 3: And hence, we see Techno-resolution as being unique in this environment, has it differentiates, again, on performance, in differentiating, and creating insight and features, and differentiating the value for the customer and being recognized. And that is a creative to the margin. That drives our margin in the core. Finally, integration and output digital.
Olivier Peuch: I will now turn the conference call back to Olivier.
Unique in this environment has it differentiate again on performance and differentiated on trading insight and teachers and.
Operator: Thank you, Stephan. Ladies and gentlemen, we will now open the line for your questions. Ladies and gentlemen, once again, if you would like to ask a question, you may press one then zero on your telephone keypad.
And differentiated value for our customer and being recognized in that seat that is accretive to the margin that drives our margin Nicola finally integration and put digital into this liability.
James West: And our first question is from the line of James West, with Evercore, please go ahead. Good morning, Olivier. Good morning, James.
Speaker 8: The ability to enter Twin and add digital capability to an integration has the desired value. And you see that the well construction is benefiting from high-level margin that are very much held by integration and digital, as well as performance.
<unk> and added digital capability to our integration has delivered value and youll see that well construction is benefiting from high level margins that are very much helped by integration and digital as well as performance back to reserve our performance from a performance had a very strong quarter on the back of our performance evaluation.
Olivier Peuch: So, Olivier, I know you recently returned from Auditech and most likely met with all of the major oil producers in the region, curious to hear your thoughts on the Middle East and how we should think about the Middle East with respect to Slumberger over the next several years because it looks like it's going to be a huge driver of growth. No, thank you, James. I hope everybody could catch your question relating to Middle East.
Speaker 8: Back to reservoir performance, where our performance had a very strong quarter on the back of reservoir performance evaluation, which is used in exploration of the present particularly, where our different technology portfolio has again, being recognized with a premium. So that is what we have been seeing from.
Which is using the exploration appraisal, particularly well differentiated technology portfolio has again.
Being a hog organized with a premium so that is what we are benefiting from technology performance and integration with digital.
Speaker 8: technology, performance and integration with digital, driving a different shade of the value proposition, recognize with a pricing premium, with our customers.
Driving a differentiated value proposition cocco manager for pricing premium, which our customers.
Olivier Peuch: Indeed, I have been at the privilege to be there for about a week and nobody went to the conference and met a lot of customers in the region but also had the benefit to go to operation in Saudi and visit the customer in South over there. So, great insights. Just to say that this is clearly the largest investment cycle is clear now on the way. The momentum is set. It's not about the current set.
Speaker 3: And relating to margins, our own 4Q4, yes, we do expect excluding the effect of the ACCORC-Subsci contribution to continue expanding margins, particularly the digital and integration margins will definitely improve from...
And relating to margins.
<unk> for Q4, yes, we do expect a excluding the effect of the <unk> subsea contribution to to continue expanding our margins, particularly.
The digital and integration margins will definitely improve from.
Speaker 4: from a creative Uran digital sales, so that will clearly be a tailwind. And then we'll have probably improved margins, I'd say across the over-divisions, particularly in production systems, where we have typically Uran sales.
<unk> accretive year, and digital sales and so that will clearly be a tailwind and then we love our probably improve margins I'd say across the overall divisions, particularly.
Olivier Peuch: And I've been the sentiment to call. Thank you. Today's a, later, there's a noise. Yes, Mr. West, if you could mute your phone, sir. Okay, you may proceed. Thank you. So, if I had to to characterize, I've reviewed something breath, resilience, durability, that you have characterized for the full cycle, I think, a very much in full display in Middle East. I think the durability 27 is the target for capital expansion. Breath is not only oil, but it's also gas as a driver of original gas consumption and energy exports.
In production systems, where we have typically year end sales.
Speaker 3: that bring good incrementals. So yes, continue smartening expansion, excluding the JVN24. And...
But bring good incrementals. So so yes continuous margin expansion within the JV in Q4.
Speaker 3: You could expect this to come in 2024, as you believe, the attributes of differentiation as outlined before and the favorable environment in which we are operating part of the international, will continue to support margin expansion for the core.
You could expect D C to kion in 2024 hours, we believe that distribute of differentiation as outlined before and.
The favorable environment in which we're operating partners internationally will continue to support margin expansion for the Coke great. My follow up Stefan a $1 billion of free cash flow generation and three Q.
Speaker 10: Great. My follow-up, Stefan, a billion dollars of free cash flow generation in 3Q. Any thoughts on what could impact a free cash flow in 4Q just given, you know, working capital in just the one subsidy, JV? Just anything to flag.
Any thoughts on what could impact our free cash flow in <unk>, just given you know working capital and just the one subsea JV just anything to flag.
Olivier Peuch: It's offshore and unsure. It's conventional and unconventional and goes beyond one or two countries that are very well known into into Kuwait, into Iraq, into into Egypt and more. And it's clearly decoupled from some of the short-term uncertainty. So, it's all made about a long term contract from the re-contracting to the service contract. And we are a clear beneficiary of this situation. We have a unique footprint in the region. And indeed, we see that this will continue to support growth in the years to come for SLB.
Sure. So first we are actually quite pleased with our free cash flow performance. So far this year. It's indeed, the second quarter in a world, where we we generate about $1 billion of free cash flow and it's it's really a combination of course of higher EBITDA, but also discipline in capital investments and an.
Speaker 3: Sure, sure. So first we are actually quite pleased with our free cash flow performance. So far this year it's indeed the second quarter in a row where we generate about a billion dollars free cash flow and it's really a combination of course of higher EBITDA but also discipline in capital investments and then improve the working capital performance quarter after quarter. So relating to Q4, we typically see a strong end of the year as it relates to our... Nem
The working capital performance quarter after quarter, so relating to Q4, we typically see a strong end of the year as it relates to two.
Speaker 4: to free cash flow. So we are hoping that it will be the case this year as well. They are always moving targets based on customer collections. It's the main variability, but in general, we expect a strong free cash flow performance as we close the year. All right, thanks, gentlemen.
To free cash flow so.
Olivier Peuch: And this year, as stated before, we will recall revenue in the region. And we will continue to grow and use this to be accretive to an international growth and accretive to international margin and the company. A great outlook in essence. That's great. Thanks, Olivier, for that. Sorry about my phone issues here.
We are hoping that it will be the case this year as well we are always a moving target based on on customer collections.
The main variability but.
In general we expect a very.
Our strong free cash flow performance as we close the year alright, thanks gentlemen.
Thank you.
Next we move on to Marc Bianchi with TD Cowen. Please go ahead.
Speaker 1: Next we move on to Mark Bianchi with TD Cohen. Please go ahead.
James West: Probably a follow-up for me, maybe for Stephan, is on FX. How much was FX a headwind during the quarter? Thanks, James.
Hi, Thank you.
Speaker 11: I thank you. On you. Good morning. You previously discussed an expectation for directionally one and a half billion dollars of EBITDA improvement in 2024. I'm curious what the underlying assumption for the JV is here, just so we can get a sense of how it's doing versus what appears to be the fourth quarter run rate here.
Good morning.
You previously discussed an expectation for Directionally, one $5 billion of EBITDA improvement in 2024, I'm curious what the underlying assumption for the JV is here just so we can get a sense of how it's doing versus the what appears to be the fourth quarter run rate here.
Stephan Biguet: So, look, most of our revenue is built in US dollars. But indeed, in a few countries, it's partially not the case. For some of us, we indeed had an favorable impact of the US dollar strengthening against local currencies, and that was both sequentially and year on year. I prefer not giving you a specific amount as we have contractual adjustment clauses that come and have set the negative effect at least partially. But yes, the revenue would have been slightly higher without that.
Speaker 3: I don't think we will at this point comment specifically on nature. I think it's directionally, I think it's an indication of the game. I think the market as it stands today, we have under the scenario of international growth from MIMECOM and also...
Well I don't think at this point come on.
Specifically on next year I think it's a it's a directionally I think it's an indication that we gave I think.
The market as it stands today, we have on the asset.
On the scenario of international growth momentum and also.
Stephan Biguet: And the last point here to remember is a lot of our costs as well are expressed in local currency. So, we have a natural hedge on this, and the net impact on the earnings is quite marginal. It's limited.
Speaker 8: The North America coming to a year near growth activity.
The North America coming to your year on year growth activity I think we see a scenario by which indeed this guidance we gave of this.
Speaker 8: I think we see a Senouf by which indeed these ganons we gave, or this Senouf we outlined will materialize.
So now we outline will materialize, but I will not go into the detail of at this point until our Q4 conference call in January .
Speaker 8: But I will not go into the detail of at this point until our Q4 confirms coal and January and until we have time to triangulate some of our expectation with the custom engagement. We will come back with more detail, including
David Anderson: We will move on to David Anderson with Barclays. Please go ahead. Thank you, guys.
And until we have time to triangulate some of our expectation with the casino engagement.
Olivier Peuch: Good morning, Olivier. With Ocarina, part of the one sub-CJV, I'm hoping you could talk a little bit more about the value proposition of not only a larger sub-C entity, but how it fits within the whole, how now fits in a fully consolidated market. In terms of offshore worth and FIDs, obviously the timing really couldn't be any better, but what is a larger, more robust one sub-C branches, some are the whole. And then the follow-up if you could talk about some of the integration steps you're planning culture is such a big part of some budget.
I'll come back with more detail, including the contribution we expect for the the JV set here at that time.
Speaker 8: the contribution we expect for the the jelly sort here that time. Okay, thank you.
Okay. Thank.
Thank you.
Another question on <unk>.
Speaker 11: Another question on offshore, but specifically related to exploration. I think you earlier said that you expect 20% type growth in 23. I'm curious how that's playing out. And then can you remind us how large exploration is for SLB?
On offshore, but specifically related to exploration I think you earlier said that you expect 20% type growth in 'twenty three I am curious, how that's playing out.
And then can you remind us how large exploration is for S. L. B.
Speaker 8: We don't come out from exploration, because exploration, I think, is a subset of our market segmentation touch many, many aspects, I think.
We don't come up on exploration, but gas exploration of thing isn't it.
Olivier Peuch: Just wondering how you're thinking about bringing in one of your long-standing competitors into the fold and how do you think about culture in that sense? Thank you. I have a great question, Dave, and I think indeed we have been working on this and very proud and believe that the timing could not be better that closing this now as the onset of the offshore growth and the long duration that we see with FID beyond 2025.
As a subset of our market.
<unk> touch many many aspect I think primary reservoir performance, but also our digital some element of integration and obviously some are some components of some PSN.
Speaker 8: Primarily, it has a performance, but also digital, some memory integration and obviously some components of some PS and the well-construction. So all in all.
The well construction so all in all.
Speaker 8: We believe that the expression of ozone market has been aligned with the international growth.
We believe that our exploration appraisal market has been aligned with international growth. This year and I think has been an element of our offshore momentum that has been set this year I think the results of <unk> and margin.
Olivier Peuch: If I have to detect three keywords, I would say technology fit, integration, capability and scale are the three elements that I think resonate very well and trade value for customers. Technology, whether we are enhancing and getting with this addition, a very comprehensive portfolio that is fit to every deeper market that exists and that includes further capability. Complimenting capability in a sub-C processing and also in vehicles that complete the portfolio and allow us to fully participate and being differentiated in every basin, in every deeper condition in the world.
Speaker 3: this year and I think has been an element of offshore momentum that has been set this year. I think the results of and margin that we have seen for the performance are very much a reflection of that success.
We have seen further performance are very much a reflection of that success.
Speaker 8: We are seeing success as well in our digital sales when it relates to data exploration.
We are seeing success as well.
Yeah.
Diesel sales when it relates to data exploration and we are seeing that the campaign of appraisals that have been made around Africa.
Speaker 8: And we are seeing that the campaign of appraisal that happened is made around Africa, particularly continuing to be sustained. And in the search of confirming these signs and to develop a fighting in 24, 25. So...
Oscar Alley continuing to be.
To be sustained and and in the search of confirming this design center and to develop exciting in 'twenty four 'twenty five. So we are positive about the exploration, we don't see a setback for customers on exploration and we see that the breadth of exploration appraisal in offshore and in onshore markets.
Olivier Peuch: Integrations, we bring and we keep our unique subsurface, reservoir to processing capability that we had already in one sub-C, but we are enhancing it with a larger and very competent team joining us from acquisition and engineering capability so that we can take any deployer prospect and help customers and collaborate to get the best outcome. And we are getting our sub-C7 partner to joining and to be aligned with making this a success when and as we are required to deliver as integrated with surf.
Speaker 8: We are positive about the exploration. We don't see a setback for customers on exploration and we see that the breath.
Speaker 3: expression of Brazil in offshore and in non-shore markets.
Speaker 8: He's a much higher than he was a couple of years ago.
Is a is a much higher than it was a couple of years ago.
Speaker 8: It touched many geographies in basins from Southeast Asia to obviously Middle East. It's made Africa and also in South America. It's very broad and that is what I think is quite unique in this cycle. Very good. Thank you very much.
It's touch many geographies in basins from Subsys age out here, obviously middle East.
It led to Africa, and North and South America, I'd say broad and that is what I think is quite unique in the sector.
Very good thank you very much.
Thank you Mark.
Speaker 1: Our next question is from Luke Lemoine with Piper Sandler. Please go ahead. Whoops, one moment please. Mr. Lemoine, your line is now open.
Our next question is from Luke Lemoine with Piper Sandler. Please go ahead, just one moment please.
Olivier Peuch: So all in all, this is what the value is brings in integration, scale give us manufacturing footprints that give us flexibility and ability to respond fast and to respond to customer need everywhere and give us the unique life of field with the largest install base of sub-C3 where we will use digital, we will use our integration capability, reservoir performance to provide further integration and further life of field. And looking at production recovery, if you like, long term.
Yeah.
Okay.
Mr. <unk>. Your line is now open. Please go ahead.
Okay. Thanks Olivier good morning.
U D.
The enhanced capabilities of the new one subsea and maybe to fine tune it a bit more could you talk about what you'd like to achieve on a commercial basis and maybe qualitatively on an operational level within the first year and maybe the next few years as well.
Speaker 12: and maybe to fine tune it a bit more, could you talk about what you'd like to achieve on a commercial basis and maybe qualitatively on an operational level? Would it be?
First and foremost is the ability to satisfy fully there.
Olivier Peuch: So customer feedback is excellent at the onset. I think the customer really appreciate and recognize the recovery potential, the comprehensive technology portfolio, the lower emission, the digital and the integration capability. Couture, I think we have discovered throughout these engagements that actually the culture are very much aligned and I think we have had a day one set of events last week or two weeks ago that were really outlining our line we are and our complementary our culture and portfolio are to go into this.
Speaker 8: The customer base and the backlog that we have, respectively, from ACA solution and former, the organic one-step C secured in the last 18 months. And I think execution will be the first priority, a first and foremost, to measure the power.
Customer base and the backlog that we have.
Actively from ACA solution from.
The organic one subsea sick.
Secured in the last day in the last 18 months and I think our execution will be the first priority first and foremost to.
To measure the performance.
By joining team will not be affected and I think we have been rashard.
Speaker 8: would not be affected and I think we have been rachored from the engagement with our team, that this is the case. I think next I believe that what we want to achieve is to demonstrate for every arsenic customers that we have in the portfolio today that the combination of engineering, new technology portfolio, broader portfolio, and integration capability that SLB brings with a Sub-C7 and the rest of the SLB portfolio is differentiated. We will add value to all the backlog that we have. And third, I'm going to...
From the engagement of our team.
That this is the case I think next I believe that what we want to achieve is to demonstrate for every outstanding customers that we have in the portfolio today that the combination of engineering, new technology portfolio, a broader portfolio and integration capability that the S&P brings with subsea seven.
Olivier Peuch: So I'm very optimistic and very positive and customer feedback is so far extremely positive to onboard this and you may have seen the BP style and answer and be the earlier which is a precursor in our opinions what we can do to partner with our customers and to help unlock the future of safety reserve and to impact their recovery, their efficiency and economics and their lower carbon outlook.
And the rest of this SMB.
Portfolio is differentiated and will add value to all of the backlog that we have and third and maybe the most interesting and most exciting part that we are seeing is that customer at the onset of these announcements have come to us.
Speaker 8: And third, and maybe the most interesting and most exciting part that we are seeing is that customer at the onset of this announcement have come to us.
Speaker 3: for asking partnership to be explored so that we can unlock economics, we can unlock recovery and we can accelerate the path to the capitalization of the poor operation to you by the combining and using and leveraging the food portfolio we have. So I would say performance in execution. I would say sell up an integration capability for technology and finally this partnership model that I believe will be defining the new era for??.
For asking partnership to be explored so that you can unlock economics, we get unlock recovery and we can accelerate.
James West: Obviously all things that your customers are looking to are looking to achieve if I can shift over to your digital business, just more specifically digital within D and I, APS has been kind of noisy this year between Canada and Ecuador. It's kind of hard for us to get a real sense of what's happening in software and you really should talk about higher funds for margins. I was wondering if you could provide a little more context around that.
The path to de Carbonization of Diebold operation do you buy the combining and using and leveraging different Buffalo, we have shall we say performance and execution.
We say a setup an integration capability through technology and finally this partnership model that I believe will be defining the new era for subsea.
James West: Have margins improved from a year ago? Is this necessarily about margins? You just gave some interesting details about an increase in number of users, increasing computing time. And what is the 60 percent? Can you repeat exactly what you mentioned? Is that the top line of that business? Thank you. Yeah, I think we know. Thank you. Thank you, James. I think we we continue to be very very positive about digital business and its adoption with our customers.
Alright, great. Thanks Olivier.
Thank you.
Speaker 13: Next we go to Neil Metta with Goldman Sachs. Please go ahead. Yeah, thank you. I had a couple of geography questions. The first is around North America, recognizing it's a smaller part of the growth driver of the business.
Next we go to Neil Mehta with Goldman Sachs. Please go ahead.
Thank you I had a couple of geographies geography questions. The first is around North America, recognizing it's a smaller part of the growth driver of the business, but what are you seeing real time in this market and do you think we're in a bottoming phase as we move into 2024.
Speaker 13: But what are you seeing real time in this market? And do you think we're in a bottoming phase?
James West: You will continue to see announcement being made from workflow and and Joe sounds adoption for customers and also more and more announcement of digital operation edge AI as you have seen many of them, example into our press release earlier today. So we are very satisfied with the momentum and it is going is going very well. I think you are seeing that we have quoted that the new technology digital portfolio from workflow, which allows the operation is going at the Kaggle about 60 percent.
Yeah, Great question, Neil I think indeed I put this is for the west for the number here specific discuss the the U S.
Speaker 3: Yeah, great question, Neil. I think indeed, I protest for the way forward and I'm here specifically to discuss the US land activity.
US land activity and I apologies, we have is that a combination of the gas price.
Speaker 8: The hypothesis we have is that by the combination of the gas price, creating a bit of a pull-on supply and pull-on activity on gas, as well as the favorable oil-community price, we create a pull-on on the private, in the private community.
Creating a bit of a pull on supply.
And the pull on activity on gas as well as the sub level.
Oil commodity price, we create a pull on on the private E&P privates coming back.
Speaker 8: into this market. The magnitude of which is at this point difficult to judge and I think there are plenty of scenario and it will be a little bit of the swing factor more open in 2024 planning. Yet we believe that the trophy's...
James West: And I think this is in line with what we expected. And this is on top of the baseline that includes the legacy software maintenance and all the services including the data says that we do that is a somehow offsetting some of this that still represent a total growth. So we expect this role to be very visible into the fourth quarter as we typically have a year and sales effect. And we continue we expect this to continue and accelerate actually next year. Thank you very much.
Into this into this market the magnitude of which is.
He is at this point difficult.
To judge and I think there are plenty of scenario and it will be a little bit of the swing factor my opinion in the in 2020 for planning, yes, we believe that the trough is it.
Speaker 8: He is Bianne, so he is about a Disponent we see in Cremontal from H2 of Bissur.
Let's be honest stories about our discipline and we're seeing chemical from etch drove this year in the in the U S market going forward, our biggest discount multiple again, we will come back to that as we guide 2024, when it comes to North America offshore.
Speaker 8: In the US market going forward, our big is this car motor again. We will come back to that as we guide in 2024.
Speaker 3: When it comes to North-Termaca offshore, I think from Miss Canada to go from Mexico, we see robust...
From from Michigan adapt to Gulf of Mexico, we see a robust and steady activity going.
Speaker 8: and steady activity going forward and we see that we'll continue to benefit.
Going forward and we see that will continue to benefit.
Scott Gruber: Next we move to the line of Scott Gruber with city group. Please go ahead. Yes, good morning question on the production systems outlook, you know, for margins post the the offer JV to possibly think about the path forward, you know, for margins in the business, you know, I'm thinking about, you know, legacy contracts and subsea rolling out that are largely lower margin, better price contracts rolling in.
Speaker 8: to our exposure and the one-substitial JV will continue to magnify this where we have opportunity to do so and we are very satisfied with our performance there. So I believe that the activity and the outlook is if anything steady and as a potential for upside in 2024.
Two our exposure and the one subsea JV will continue to magnify these where we have opportunity to do so and we are very satisfied with our performance. There. So I believe that the the activity and the outlook is if anything a steady and as a potential for upside in 2024.
Yeah. Thanks, Olivia and then just the follow up is on Russia I'm proud of it released a couple of months ago talking about how you continue to wind down the business and our expectation is that's going to go to zero here, but just any any update on where you stand there and any color you can give the market. Thank you.
Speaker 13: Thanks for living in. And then just to follow up, it is on Russia. You've probably released a couple months ago talking about how you continue to wind down the business and our expectation is that's going to go to zero here. But...
Olivier Peuch: And then as you capture synergy, you know, just what is a reasonable expectation for incremental or where margins could go overall in production systems out over the next two years. I think Scott simply said, we believe that we'll continue to have a continued journey of margin expansion. As you have seen, we have reached the highest level of margin in collection systems since we have been reporting this division, on the back of rolling in the contract that in the backlog into Revenue Generation that are more accretive than the previous contract and that the results of not only the pricing environment that is more positive, but also the results of a better supply chain and increased efficiency and use of additional technology that I think the entire team in production system has been very good at selling to our customers.
Speaker 3: As you could find in today's FAQ document that you are releasing Rochelle Raviniu present approximately a five-person of our Consolidated Revenue here today.
As you could find in today's secure document that you are really seeing.
Russia revenue represent approximately 5% of our consolidated revenue year to date.
Speaker 14: And we expect it indeed to decline as a percentage, but not to zero in 2024. And any kind of answer that we provide, we always include Russia effect and how you anticipate this to happen. This has always been built in our model and does not impact our financial gallons, as I said. And I remind you that we continue to ensure that there are many presence in Russia, meets and exceeds all international functions. That's great. Thanks, Olivia.
And we expect it indeed to decline as a percentage, but not to zero in 2024 and Andy can answer as we provide you always include Russia effect and how you anticipate this to happen. It has always been built in our model and does not impact our financial guidance as I said and I'll remind you that we continue to ensure that our remaining presence in Russia.
Meets and exceeds all international sanctions.
That's great. Thanks Olivia.
Thank you.
Yeah.
Yes.
Yeah.
Yeah.
Olivier Peuch: And I think the results now very specifically to the exception of the one subsidy we have been few months back, I think that our performance in one subsidy is already in high teams EBITDA, as in a previous or an organic one subsidy. The addition of the we expect to continue to and to recap this margin and long term continue to increase at this level and beyond. You know what, subsidy, I will generate $100 million from year three on this one subsidy, June 20th, going forward.
EMEA.
Yeah.
Do we have any further calls on the line.
Yes, Mr. Javier Curt who lead with benchmark you May go ahead.
Hey, good morning, everybody.
Speaker 15: Good morning, honey. Yeah, Olivia, I'm kind of curious. Just this week, it looks like the US that agreed to let sanctions on the export of Venezuela and oil products. I know that Venezuela had been a very fairly large market for slumber jay, prior to the sanctioned dynamics. And I think these guys have maintained a
Good morning.
Yeah Olivia.
Kind of curious just this week it looks like.
Great.
And on the export of Venezuela.
Oil products.
Venezuela has been a very.
A fairly large market for slumber J.
Olivier Peuch: All in all, I believe that the element of our production system portfolio are set to continue to not only grow, but also have incremental margin going forward and so we expect the journey of margin expansion to continue next year and beyond. And the JV will be accretive to this. Got it.
Here too the sanction dynamics, there and I think you guys have maintained a.
Speaker 15: the presence there. So just kind of curious as to what you think the opportunity could be, you know, one of these sanctions are lifted in terms of providing incremental revenue growth.
Our presence there so just kind of curious as to what you think the opportunity could be.
One sanctions are lifted in terms of providing incremental revenue growth.
I think it's early stage I don't think it's a it will be appropriate to comment on the on the size of the opportunity, but surely I think we have that historically.
Speaker 8: I think it's early stage. I don't think it will be appropriate to comment on the size of the opportunity, but surely I think we have that historically based on factory code and set of capability in country that have...
Olivier Peuch: And it turned into North America, you know, a couple of years ago, he tilted your sales model toward more product sales and fewer boots on the ground. But now we're going through a wave of consolidation, you know, most of the customers, you know, we're seeing more privates taken out and now potentially a wave of larger and mergers, how does that impact your strategy in North America? I think we have been very satisfied with the onset of our strategy and the plan of strategy as we initiated it four years ago.
Very strong track record and set of capabilities in country that we have.
Speaker 8: that have been dormant since we had to shut down the operation. But as soon as we get support from our partners' customers into this, we will be responding and as fast as we can, mobilizing resource.
That had been dormant since we had to shut down the operation, but as soon as we get support from <unk>.
Our partners customers into this and we will be.
Responding and and as fast as we can.
Mobilizing resources and equipment that is a that.
Speaker 8: and the equipment that is over there to respond and participate to this to this opening but it's truly to say and it's truly to give a gallons of any sort on the impact it will have but it's potential in this upside if it comes in this.
That is about how to respond and participate to this to this reopening but it's too early to say and it's too early to give a guidance of any thoughts on the impact it will have but its potential and as upside if it comes indeed.
Olivier Peuch: I think it turned out to be both, appealing to the adoption of our technology by privates through partners through this feed-for-based and tech-access model as well as our focus technology and focus feed-for-based offering has been resonating with a large public integrated company that have adopted our technology for performance purposes. As the market mature and has some consideration will happen, we still believe that our technology performance, including what impacts recovery, digital will continue to resonate very well and will continue to be adopted very well by our customers.
That's great. Thanks, and I've got a follow up just I know you referenced you expect digital revenue.
Speaker 15: Great thanks, mate. And I got to follow up just, you referenced the expected digital revenue to grow to be about $3 billion by 2025. So kind of curious as to what contribution you think AI will have in that growth and whether or not the adoption rate of AI among your customer base.
ROE.
To be about $3 billion by 2025.
Just kind of curious as to why.
What contribution you think AI will have in that growth and whether or not the adoption rate of AI.
Among your customer base.
Speaker 15: you know, gives you, you know, even greater conviction of getting to that level.
Give him.
Even greater conviction of getting to that level.
Yes, Indeed, I think for making sure that we're all aligned we quoted that we expect the revenue of digital to double from 21% to 25% to reach approximately attributable by 'twenty five and indeed very much.
Speaker 3: Yeah indeed, I think for making sure that we are all aligned, we quoted that we expect a revenue of digital to double from 21 to 25 and to reach approximately a $3.25. And indeed.
Olivier Peuch: So we have an excellent exposure at this point to the public and integrated company and I think this consolidation will give us opportunity to further showcase our technology, showcase our digital, showcase our feed-for-based across both a production system and during well-construction in particular. And let's not forget that CCS is a new exploration world in NAMD is also playing critical role to our growth towards our performance and evaluation portfolio if not digital in that complex.
Speaker 8: very much a component of what we call the new
Components of what we call the new technology.
Speaker 3: Technology digital portfolio includes ability to unlock.
Technology digital portfolio includes our ability to unlock data.
Speaker 8: data inside through AI, the ability to create and imagine new workflow to AI into the sounds.
It's true AI liability.
I create an emerging new workflow to AI into Joe towns and to support.
Speaker 8: and to support the key elements of these derborsion slash like autonomous
A key element of digital operations.
Like autonomous.
Drilling through AI and you will see very soon some announcements of industry first that have used the automation and AI.
Olivier Peuch: So we will continue to use tech-access and feed-for-based to be agile in this market to respond to the profits that are set to come back next year and at the same time continue to engage with a larger customer and the customer that are at the top of our portfolio through technology and integration capabilities. So we believe we are set for success in this new mature market in NAMD. Thank you.
Speaker 8: that have used automation and AI to enable this automation, to enable this new insight. So we are very positive about what AI can bring to this. We have unique capability. We have domain AI capability and bettering to our platform. We have data IQ as a partner with really to go portfolio of routines and AI capability that have been recognized as best in class and allowing our customers to rapidly unlock and use AI and scare AI into their application. And we have...
To enable this automation to enable these new insights. So we are very positive about what AI can bring can bring to this we have a unique capability.
Liability, we have domain AI capability embedded into our platform where did the IQ as a partner with a ready to go.
Our portfolio of a routine and AI capability, that's been recognized us as best in class in allowing a customer to rapidly unlock and use AI and scared AI into their application and we have further as you all know have launched innovation factory, which our labs.
Arun Jayaram: Next we move on to Arun Jayaram with JP Morgan Chase, please go ahead. Yeah, good morning. I was wondering Olivier if you and Stephan could elaborate on kind of the margin performance in the core. In particular, you come into the about pricing gains particularly in reservoir performance, if you could highlight what you're seeing and pricing and excluding, you know, obviously the impact from the closer to the one sub-CJV, would you expect some more margin expansion in the fourth quarter for the legacy SLB?
Speaker 8: unlock and use AI and scale AI into their application. And we have, for the last year and a half, launch innovation factory.
Speaker 8: which are labs that we use to collaborate for customers and we have six of them across the globe, where we collaborate and we have more than 100 project already achieved with our customers through this innovation factor is so great, pick up.
We used to collaborate for customers and we have six of them across the globe, where we collaborate and we have more than 100 projects already achieved with our customers through this innovation factory. So great pick up and you may have seen during a debate we announced in <unk>.
Speaker 8: and you may have seen during a deep echo announcement, an AIQ project that we have released with our partners in the Emirates to support AI capability with AdNoc. So it's all over the place. It's in Joe's sounds.
The project that we have already with <unk>.
With our partners in our in the Emirates to she bought.
AI capability, we've had knock so it's all over the place it's in the <unk> sounds it's in planning and execution in the state operation children with <unk>. So, it's it's picking up and it would indeed hopefully contributes.
Olivier Peuch: So let me start. I would like to defend Commandant D on the margin because I believe he provided some remarks to that effect. First, I believe that the core is benefiting from three things in my opinion. It benefits from differential performance in the eyes of the customer and hence is benefiting by this creating an opportunity to secure market position and commands a pricing premium or favorable commercial terms to support this performance.
Speaker 8: It's in planning, it's in execution, in digital operations, through autonomous operations. So it's picking up and it would indeed hopefully contributes and give us that opportunity in 2025.
Contributes and give us that opportunity in 2025.
That's great. Thanks for the color.
Speaker 1: And our last question will come from Roger Reed with Wells Fargo. Please go ahead. Hey, thank you. The more.
You're welcome.
Our last question will come from Roger read with Wells Fargo. Please go ahead.
Hey, Thank you good morning.
Good morning, Roger.
Speaker 16: I'd like to come to it from a margin standpoint. I mean, margins are pretty fantastic here for certainly where we are in the cycle and everything like that. Thank you. We look back. We look back. We look back to, you know, the up cycle and there's still a ton of room to go. And I recognize this question, maybe premature relative.
I'd like to come to it from a margin standpoint, I mean, your margins are pretty fantastic here for certainly where we are in the cycle and everything like that thank you and.
Olivier Peuch: Performance is recognized, performance is critical in all projects, but partly in different environments and is something that differentiates us and is being recognized. So performance is a key factor. The second ability is technology. Technology adoption has been accelerating. I think the target and the basket of technology we have set this year, including the transition technology where we set a target for one billion dollars for a year, as already been achieved a year to date.
We look back.
Look back.
You look back just the.
Upcycle and Theres still a ton of room to go and I recognize this question may be premature relative to.
Speaker 16: maybe an update when we're really looking more at 24. But what do you see as things that could lift margins from here? What do you see as it would restrain margins from reaching sort of max levels? Or what would we need to see in the market fundamentals to make a significant uplift from margins?
Maybe an update when we're really looking more at 24, but what do you see as things that can lift margins from here what do you see it with restrained margins from from reaching sort of Max levels or what would we need to see in the market fundamentals to make.
Olivier Peuch: And hence, we see technology adoption as being unique in this environment, has it differentiates gain on performance in different shade and creating insight and features and differentiated value for the customer and being recognized. And that is a creative to the margin that drives our margin in the core. Finally, integration and I'll put digital into this. The ability to intertwine and add digital capability to our integration has delivered value and you see that the well construction is benefiting from high level margin that are very much held by integration and digital as well as performance.
A significant uplift from margins here.
Speaker 3: I don't want to first put a ceiling on the max on the margin we can achieve. I think the future and the market outlook will dictate that. But most importantly, our ability to execute, to continue to execute on our performance strategy, we continue to define our ability to capture and enhance our margin whatever the market condition are. And I think this is what we have been achieving for the last four years. And I think again technology difference.
I don't want to first put a ceiling on the and on the Max on the margin we can achieve in the future and the market outlook.
Take that but most most most importantly, our ability to execute to continue to execute on our performance strategy.
We will continue to define our ability to capture and hence our margin whatever the market conditions.
And I think this is what we have been achieving for the last the last four years and I think again technology differentiation.
Olivier Peuch: Back to reservoir performance, where our performance had a very strong quarter on the back of reservoir performance evaluation, which is used in exploration and present particularly, where different technology portfolio has again being recognized with a premium. So that is what we are benefiting from. Technology performance and integration with digital are driving driving a different shade of the value proposition, recognized with a pricing premium, with our customers. And relating to margins, our own Q4, yes, we do expect excluding the effect of the the accuracy contribution to to continue expanding margins, particularly the digital and integration margins will will definitely improve from from a creative urine digital sales.
Speaker 8: intergration in capability?!
Progression capability.
Speaker 3: augmented by digital and performance on everything with deliver is what is getting our customer trust.
Okay wanted by digital and and and performance on everything we deliver is what is getting our customers trust us to give us premium and to give us favorable commercial condition and further growth potential by better shelf of their of their businesses.
Speaker 3: to give us premium and to give us favorable commercial condition and further growth potential by a better share of their business allocation.
<unk> so.
Speaker 3: I think again, we initiated the, and we telegraphed very well three years ago that will be initiating a margin expansion journey. We have been on that journey for the last three years from the 12th of 2020. We committed to expand. And I think we have delivered a bond with this commitment.
I think again, we initiated and we telegraphed pretty well three years ago that we'll be initiating a margin expansion journey, we've been on that journey for the last the last three years from the trough of 2020.
We committed to expand and I think we have delivered upon this commitment.
Speaker 3: Some of you were looking forward to see when we will cross the 25%.
Olivier Peuch: So that will clearly be a tailwind. And then we probably improve margins. I'd say across the over-divisions, particularly in production systems, where we have typically urine sales that bring good incrementals. So yes, continuous margin expansion, extruding the JVN Q4. And You could expect this to die on in 2024, as you believe, the attributes of a differentiation as outlined before and the favorable environment in which we are operating part of the internationally will continue to support margin expansion for the core.
Some of you were looking forward to see when we really crossed the 25%.
Arun Jayaram: Great.
Speaker 3: some of some scenario we're putting this in 2025. We said we would likely be able to cost this before. It came slightly ahead of our expectation. Because I think I'm impressed by what our team is able to deliver. And yes, the market conditions are favorable, but to expect that the breadth, duration, and resiliency of the cycle will continue. The effect of mid-airst. And of course,
Some of our some scenario of putting this in 2025, we said we would likely be able to cross. This before again slightly ahead of our expectation because I think I'm impressed by what our team is able to deliver and yes, the market condition offer level, but we expect that the breadth duration and also.
We don't see the cycle will continue.
Fact of Middle East.
And offshore.
Speaker 16: We'll continue to give us the favorable backdrop so that this strategy will We'll continue to support margin expansion so that's our belief and again I don't want to put a ceiling. I don't want to put a max, but I will continue to push my team To continue to extract the best and see the cycle as we say Good luck with everything and thank you
We will continue to give us the favorable backdrop, so that this strategy will.
Stephan Biguet: My follow-up, Stephane, a billion dollars of free cash flow generation in 3Q. Any thoughts on what could impact a free cash flow in 4Q, just given, you know, working capital and just the one subsidy, JV, just anything to flag. Sure, sure. So first, we are actually quite pleased with our free cash flow performance. So far this year, it's indeed the second quarter in a row where we generate about a billion dollars of free cash flow, and it's really a combination, of course, of higher EBITDA, but also disciplining in capital investments and then improved working capital performance quarter after quarter.
We'll continue to see both margin expansion. So that's our belief and again I don't want to put those sitting at a lunch with the Max but I will continue to boost my team.
To continue to extract the best and sees the cycle as we say.
Yes.
Sounds good good luck with everything and thank you.
Thank you Roger Thank you very much.
Speaker 1: and I will turn the conference back over to the Schlumberger Management team for closing remarks.
And I will turn the conference back over to the Schlumberger management team for closing remarks.
Thank you, ladies and gentlemen, as we conclude today's call I would like to leave you with the following takeaways.
Speaker 3: Thank you, there. Lady Jean-Genteleman, as we conclude to the school, I would like to leave you with the following takeaways.
Speaker 3: First, the ongoing on-and-gather cycle continues to display the unique attributes of breath, residence and durability, that are closely aligned with our business.
First the ongoing oil and gas cycle continues to display the unique attributes of breath resident some durability that are closely aligned with our business strategy.
Stephan Biguet: So relating to Q4, we typically see a strong end of the year as it relates to free cash flow. So we are hoping that it will be the case this year as well. They are always moving targets based on customer collections. It's the main variability, but in general, we expect a strong free cash flow performance as we close the year.
Speaker 3: in this environment and parallel of things in our core, ability to enhance value through digital and our investments in new energy have us positioned to in both today and tomorrow.
And diesel diamond unparalleled offerings in our core our ability to enhance value through digital and our investments in new energy averse position doing both today and tomorrow.
Stephan Biguet: All right.
Second our international reach continue to drive our financial performance as investment momentum has shifted internationally and offshore businesses well positioned for sustained growth and will be further supported by one subsea joint venture.
Speaker 3: Second, our international reach continues to drive our financial path.
Speaker 3: As investment momentum has shifted internationally and offshore, our business is well positioned for sustained growth. And will be further supported by our one-septice joint venture.
Operator: Thanks, gentlemen.
Operator: Thank you.
Mark Bianchi: Next, we move on to Mark Bianchi with TD Cohen. Please go ahead. Hi, thank you. Good morning. You previously discussed an expectation for directionally one and a half billion dollars of EBITDA improvement in 2024. I'm curious what the underlying assumption for the JV is here just so we can get a sense of how it's doing versus what appears to be the fourth quarter right here. I don't think we'll at this point comment specifically on nature.
Speaker 3: Third, after posting an impressive nine months, there are today's performance and with visibility into the four-scroller and 2024, we remain confident in our full year and through cycle in the final part of the target.
Third after posting an impressive nine months.
To date performance and with visibility into the fourth quarter and 2024.
I'm confident in our <unk>.
Full year and through cycle financial targets.
This.
Speaker 3: is an exciting time for the energy industry. And SLB is ideally positioned for success across all time or rise.
This is an exciting time for the energy industry and I said this is ideally positioned for success across all time horizons.
Speaker 3: This is an excellent environment to continue delivering value to our shareholders. Arrimane, fully confident in our strategy and look forward to another successful quarter and close to the year. With that, we conclude our call this morning. Thank you and good day, everyone.
This is an external diamond to continue delivering value to our shareholders.
I'm pretty confident in our strategy and look forward to another successful quarter and close to the year with that we conclude our call. This morning, Thank you and good day everyone.
Mark Bianchi: I think it's directionally. I think it's an indication that we gave. I think the market as it stands today, we have understood the scenario of international growth momentum and also the North America coming to a year on your growth activity.
Speaker 1: Ladies and gentlemen, that does conclude your conference for today. Thank you for your participation. You may now disconnect.
Ladies and gentlemen that does conclude your conference for today. Thank you for your participation you may now disconnect.
Olivier Peuch: I think we see a scenario by which indeed these ganons we gave or this scenario we outlined will materialize, but I will not go into the detail of at this point until our Q4 conference called on January and until we have time to triangulate some of our expectations with the customer engagement. We will come back with more detail, including the contribution we expect for the JV. We should hear that time. Okay, thank you.
Mark Bianchi: Another question on offshore, but specifically related to exploration. I think you earlier said that you expect 20% type growth in 23. I'm curious how that's playing out.
Olivier Peuch: And then can you remind us how large exploration is for SLB? We don't come out from exploration because exploration, I think, is a subset of our market segmentation touch many, many aspects. I think primary reservoir performance, but also digital, some memory integration, and obviously some components of some PS and well construction. So all in all, we believe that the exploration approach on market has been aligned with the international growth this year.
Olivier Peuch: And I think has been an element of offshore momentum that has been set this year. I think the results of an margin that we have seen from the performance are very much a reflection of that success. We are seeing success as well in our digital sales when it relates to data exploration. And we are seeing that the campaign of appraisal that happened is made along Africa, particularly continuing to be to be sustained.
Olivier Peuch: And in the search of confirming these signs and to develop a fighting in 24, 25. So we are positive about the exploration. We don't see a setback for customers on exploration and we see that the breadth of exploration appraisal in offshore any non-shore market is a much higher than was a couple of years ago. It touched many geographies in basins from Southeast Asia to obviously Middle East. It's made Africa and also in South America, it's very broad and that is what I think is quite unique in this cycle.
Speaker 17: We're sorry, your conference is ending now. Please hang up.
We're sorry your conferences ending now please hang up.
Mark Bianchi: Very good, thank you very much. Thank you, Marc.
Luke Lemoine: Our next question is from Luke Lemoine with Piper Sandler, please go ahead, whoops one please. Mr. Lemoine, your line is now open, please go ahead. Thanks, Olivier, good morning. You have everything in hand, given abilities of the new one subsidy and maybe to fine tune it a bit more.
Olivier Peuch: Could you talk about what you'd like to achieve on a commercial basis and maybe qualitatively on an operational level within the first year and maybe the next few years as well? I think first and foremost is the ability to satisfy it fully. The customer base and the backlog that we have respectively from Acre solution and former, the organic one-sepsy secured in the last 18 months and I think execution will be the first priority, first and foremost, to measure the performance by joining team would not be affected and I think we have been rachured from the engagement with our team that this is the case.
Olivier Peuch: I think next I believe that what we want to achieve is to demonstrate for every arsenic customers that we have in the portfolio today that the combination of engineering, new technology portfolio, broader portfolio and integration capability that SLB brings with a sub-C7 and the rest of the SLB portfolio is differentiated and will add value to all the backlog that we have. Third and maybe the most interesting and the most exciting part that we are seeing is that customers at the onset of this announcement have come to us for asking partnership to be explored so that we can unlock economics, we can unlock recovery and we can accelerate the path to the carbonisation of depot operation to you by the combining and using and leveraging the full portfolio we have. So I would say performance in execution, I would say SLB and integration capability for technology and finally this partnership model that I believe will be defining the new era for sub-C.
Operator: Thank you.
Neil Mehta: Next we go to Neil Metta with Goldman Sachs please go ahead. Yeah thank you. I had a couple of geography questions.
Olivier Peuch: The first is around North America recognizing it's a smaller part of the growth driver of the business but what are you seeing real time in this market and do you think we're in a bottoming phase as we move into 2024? Yeah great question Neil I think indeed I put this for the way forward and I'm here specifically to discuss the US land activity. The hypothesis we have is that by the combination of the gas price creating a bit of a pool on supply and pool on activity on gas as well as the favorable oil community price we create a pool on the private in the private coming back into this into this market.
Olivier Peuch: The magnitude of which is is at this point difficult to judge and I think there are plenty of scenario and it will be a little bit of the swing factor more opinion in the in the 2024 planning yet we believe that the trophies is behind us so it's about at this point and we see incremental from H2 of this year in the in the US market going forward our big is this incremental gain we will come back to that as we guide 2024 but it comes to North America offshore I think from from Miss Canada to to go from Mexico we we see robust and steady activity going forward and we see that will continue to benefit to our exposure and the one subsidy JV will continue to magnify this where we have opportunity to do so and we are very satisfied with our performance there so I believe that the activity and the outlook is if anything steady and as a potential for outside in 2024 Thanks, Olivier.
Olivier Peuch: And then just to follow up, it is on Russia. You've probably released a couple of months ago talking about how you continue to wind down the business and our expectation is that's going to go to zero here, but just any any update on where you stand there and any color you can give the market. Thank you. As you could find in today's FAQ document that you are releasing Russia revenue present approximately a five percent of our consolidated revenue here to date.
Olivier Peuch: And we expect it indeed to decline as a percentage, but not to zero in 2024. And any ganons that we provide will always include Russia effect and how you anticipate this to happen. This has always been built in our model and does not impact our financial ganons, as I said. And I remind you that we continue to ensure that our remaining presence in Russia meets and exceeds all international functions. That's great. Thanks, Olivier.
Kurt Healy: Yes, Mr. Healy, Kurt Healy with Benchmark, you may go ahead. Hey, good morning, everybody. Good morning, honey.
Olivier Peuch: Yeah, Olivier, I'm kind of curious. Just this week, it looks like the US has agreed to let the sanctions on the export of Venezuelan oil products. I know that Venezuela had been a very fairly large market for slumber jay, you know, prior to the sanctioned dynamics. And I think these guys have maintained the presence there. So just kind of curious as to what you think the opportunity could be, you know, once these sanctions are lifted in terms of providing a mental revenue growth. I think it's early stage.
Olivier Peuch: I don't think it's it will be appropriate to comment on the on the size of the opportunity, but surely I think we have that historically based on factory code and set of capability in country that have that have been dormant since we had to shut down the operation. But as soon as and we get support from our partners customers into this will be responding and as fast as we can mobilizing resource and equipment that is there to respond and participate to this to this opening, but it's truly to say and it's truly to give a gallons of any sort on the impact it will have, but it's potential in this upside if it comes indeed. That's great. Thanks.
Olivier Peuch: And I got to follow up just I know you referenced the expect digital revenue to grow to be about $3 billion by 2025. Kind of curious as to what contribution you think AI will have in that growth and whether or not the adoption rate of AI, you know, among your customer base, you know, gives you even greater conviction of getting to that level. Yeah, indeed, I think for making sure that we are all aligned, we quoted that we expect a revenue of digital to double from 21 to 25 and to reach approximately $3 billion by 25, and indeed, very much a component of what we call the new technology digital portfolio includes ability to unlock data inside through AI, the ability to create and imagine new workflow to AI into the sounds and to support the key elements of digital operations like autonomous drilling through AI, and you will see very soon some announcement of industry first that I've used automation and AI to enable this automation, to enable this new insight.
Olivier Peuch: So we are very positive about what AI can bring to this. We have unique capability, we have domain AI capability and bettering to our platform. We have data IQ as a partner, we've really to go portfolio of routines and AI capability that have been recognized as best in class and allowing our customers to rapidly unlock and use AI and scale AI into their application.
Olivier Peuch: And we have for the last year and a half launch innovation factory, which labs that we use to collaborate for customers and we have six of them across the globe, where we collaborate and we have more than 100 project already achieved with our customers through this innovation factory. So great pick up and you may have seen during a deep pack we announce an AIQ project that we have released with our partners in the Emirates to support AI capability with AdNoc.
Olivier Peuch: So it's all over the place, it's in Joe Sounds, it's in planning, it's in execution, in digital operations, through autonomous operations. So it's it's picking up and it would indeed hopefully contribute and give us that opportunity in 2025. That's great. Thanks for the color.
Roger Reed: Our last question will come from Roger Reed with Wells Fargo, please go ahead. Hey, thank you. Good morning. Good morning, Roger.
Olivier Peuch: I'd like to come to it from a margin standpoint. I mean, margins are pretty fantastic here for certainly where we are in the cycle and everything like that. Thank you. We look back. We look back just, you know, the up cycle and there's still a ton of room to go. And I recognize this question may be premature relative to, you know, maybe an update when we're really looking more at 24. But what do you see as things that could lift margins from here?
Olivier Peuch: What do you see as it would restrain margins, you know, from reaching sort of max levels, you know, or what would we need to see in the market fundamentals to make a significant uplift from margins here? I don't want to first put a sitting on the max on the margin we can achieve. I think the future and the market outlook will dictate that. But most importantly, our ability to execute, to continue to execute on our performance strategy will continue to define our ability to capture and enhance our margin whatever the market condition are.
Olivier Peuch: And I think this is what we have been achieving for the last four years. And I think, again, technology differentiation. Integration Capability, Augmented by Digital, and performance on everything we deliver is what is getting our customers first to give us premium and to give us favorable commercial condition and further growth potential by a better share of their business allocation. So I think again we initiated and we telegraphed very well three years ago that will be initiating a margin expansion journey.
Olivier Peuch: We have been on that journey for the last three years, from the 12th of 2020. We committed to expand and I think we have delivered a bond with this commitment. Some of you were looking forward to see when will it cost the 25 percent. Some of some scenario were putting this in 2025. We said we would likely be able to cost this before. It came exactly ahead of our expectation because I think I'm impressed by what our team is able to deliver and yes the market conditions are favorable but we have to expect that the breadth, duration and resiliency of the cycle will continue.
Olivier Peuch: The effect of Middle East and offshore will continue to give us the favorable back drop so that this strategy will continue to support margin expansion so that's our belief and again I don't want to put a ceiling, I don't want to put a max but I will continue to push my team to continue to extract the best and see the cycle as we say. Sounds good, good luck with everything and thank you. Thank you, Roger. Thank you very much.
Olivier Peuch: And I will turn the conference back over to the Schlumberger management team for closing remarks. Thank you there. Ladies and gentlemen as we conclude to the school I would like to leave you with the following takeaways. First the ongoing on and gas cycle continues to display the unique attributes of breath, residence and durability that are closely aligned with our business strategy. In this environment I am parallel of things in our core.
Olivier Peuch: Ability to enhance value through digital and our investments in new energy have us position to involve today and tomorrow. Second, our international reach continues to drive our financial performance. As investment momentum has shifted internationally and offshore, our business is well positioned, persistent growth and will be further supported by our one-septice joint venture. Third, after posting an impressive nine months, there are today's performance and with visibility to the four-score and 2024, we remain confident in our full year and through cycle financial targets.
Olivier Peuch: This is an exciting time for the energy industry and SLB is ideally positioned for success across all-time horizons. This is an excellent environment to continue delivering value to our shareholders. I remain fully confident in our strategy and look forward to another successful quarter and close to the year.
Olivier Peuch: With that, we conclude our call this morning. Thank you and good day everyone.
Operator: Ladies and gentlemen that does conclude your conference for today. Thank you for your participation. You may now disconnect. Thank you. We're sorry. Your conference is ending now.
Operator: Please hang up.