Q1 2024 Schlumberger NV Earnings Call
Operator: Thank you, everyone, for standing by. Welcome to the SLB First Quarter Earnings Conference Call.
Thank you everyone for standing by welcome to the S. L. B first quarter earnings conference call. At this time all participants are in a listen only mode. If you would like to ask a question. You May press. One then zero you will hear acknowledgment. That's your line has been.
Operator: At this time, all participants are in a listen-only mode. If you would like to ask a question, you may press 1, then 0. You will hear acknowledgment that your line has been placed in queue. You may remove yourself from the queue by repeating the same 1-0 command.
Placed in Q, you may remove yourself from 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 James Our Mcdonald Senior Vice President of Investor Relations and industry Affairs. Please go ahead.
Operator: As a reminder, this conference is being recorded. I would now like to turn the conference over to James R. McDonald, Senior Vice President of Investor Relations and Industry Affairs. Please go ahead.
James R. McDonald: Thank you, Leah. Good morning, and welcome to the SLB First Quarter 2024 Earnings Conference Call. Today's call is being hosted from Kuala Lumpur following our board meeting held earlier this week. Joining us on the call are Olivier LaPouche, Chief Executive Officer, and Stephane Biguet, Chief Financial Officer.
Thank you Lee.
Speaker Change: Good morning, and welcome to the <unk> first quarter 2024 earnings Conference call.
Speaker Change: Today's call is being hosted from Kuala Lumpur, Following our board meeting held earlier this week.
Speaker Change: Joining us on the call are Olivia the push Chief Executive Officer, and Stephane <unk> Chief Financial Officer.
James R. McDonald: Before we begin, I would like to remind all participants that some of the statements we will be making today are forward-looking. These matters involve risks and uncertainties that could cause our results to differ materially from those projected in these statements. I therefore refer you to our latest 10K filing and other SEC filings, which can be found on our website. We are under no obligation and expressly disclaim any obligation to update, alter, or otherwise revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law.
Speaker Change: Before we begin I would like to remind all participants that some of the statements, we'll really be making today are forward looking.
Speaker Change: These matters involve risks and uncertainties that could cause our results to differ materially from those projected in these statements I. Therefore refer you to our latest 10-K filing and other SEC filings, which can be found on our website.
Speaker Change: We are under no obligation and expressly disclaim any obligation to update alter or otherwise revise any forward looking statements, whether as a result of new information future events or otherwise except as required by law.
James R. McDonald: 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 first quarter press release, which is on our website. And finally... SLB and Champion X will file materials related to the proposed transaction with the U.S. Securities and Exchange Commission, including a registration statement that will contain a proxy statement perspective of the party. Investors and security holders are urged to read those materials once they are available, which can be obtained from the SEC's website and from the company's website.
Speaker Change: 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 first quarter press release, which is on our website.
Speaker Change: And finally <unk>.
Speaker Change: So being in champion X will fire materials related to the proposed transaction with the U S Securities and Exchange Commission, including the registration statement that will contain a proxy statement perspective of the parties investors.
Speaker Change: Investors and security holders are urged to read those materials. Once they are available which can be obtained from the SEC website and from the company's website.
James R. McDonald: SLB, Champion X, their directors, executive officers, and certain members of management and their employees may be considered participants in the solicitation of proxies from their shareholders in connection with the proposed transaction. This will be described further in the proxy statement perspective when it is filed. With that, I will turn the call over to Olivier. Thank you, James.
Speaker Change: So be champion X their directors executive officers and certain members of management and their employees may be considered participants in the solicitation of proxies from their shareholders in connection with the proposed transaction. This will be described further in the proxy statement perspective, when it is filed.
Speaker Change: With that I will turn the call over to Olivier.
Olivier: Thank you James.
Olivier Le Peuch: Ladies and gentlemen, thank you for joining us on the call today. During my prepared remarks, I will discuss three topics.
Ladies and gentlemen, thank you for joining us on the call today.
Olivier: During my prepared remarks, I will discuss three topics.
Olivier Le Peuch: I will begin by sharing an overview of our first quarter of the day. Then I will provide an update on the ongoing market dynamics and highlight areas where we anticipate opportunities for further growth. And finally, I will conclude with our outlook for the full year and the second quarter. Stephane will then provide more details on our financial results, and we will open the line for your questions.
Olivier: I will begin by Sig and the review of our first quarter results.
Olivier: Then I will provide an update on the ongoing market dynamics and I like.
Olivier: Well, we anticipate opportunities for topical.
Olivier: And finally, I will conclude with our outlook for the food Yale and the second quarter.
Olivier: So finally, then provide more details on our financial results, we will open the line for your questions.
Speaker Change: Let's begin.
Olivier Le Peuch: I'm very pleased with our strong start to 2024. Year on year, revenue grew 13%, and EBITDA grew in the mid-teens, in line with our full-year financial ambitions. Additionally, we demonstrated the differentiated value we deliver to our customers, and the impact of our continued capital discipline and execution efficiency by expanding year-on-year adjusted EBITDA margins for the 13th consecutive quarter. Internationally, we drive board-based activity growth, with 21 of our 25 international geo-units increasing revenue year on year. Even when excluding the Accur contribution, our international revenue grew by double digits.
Speaker Change: I'm very pleased with our strong start to 'twenty 'twenty four.
Speaker Change: <unk> revenue grew 13% and EBITDA grew in the mid teens 90, we fall who yeah financial ambitions.
Speaker Change: Additionally, we demonstrated the differentiated value we deliver I'll talk estimates the impact of our continued capital discipline and execution. If you don't see by expanding year on year adjusted EBITDA margins for the 13th consecutive quarter.
Speaker Change: Internationally, we harnessed the broad based activity growth with 21 or 25 international units increasing revenue year on year.
Speaker Change: Even when excluding the Alco contribution instead of.
Speaker Change: So revenue grew by double digits.
Olivier Le Peuch: These impressive results were laid by the Middle East and Asia, which exhibited remarkable growth of 29% compared to the same period a year ago. Specifically, in the Middle East and North Africa, year-on-year growth was supported by continued investments in long-cycle developments and capacity expansion projects in both oil and gas across Algeria, Egypt, Iraq, Libya, Qatar, Saudi Arabia, and the United Arab Emirates. And in Asia, we saw strong activity across the region led by offshore, notably in China, Indonesia, Malaysia, the Philippines, and India. Meanwhile, in North America, activity remains soft due to weaker gas prices. Sustained Capital Discipline and the Effects of Ongoing Market Consolidation. The slower activity contributed to revenue in the region declining by 6% year on year.
Speaker Change: These impressive results were led by the Middle East and Asia, which exhibited remarkable growth of 29% compared to the same period yoga.
Speaker Change: Specifically in the Middle East and North Africa year on year growth was supported by continued investments.
Speaker Change: Long cycle development and capacity expansion projects in both oil and gas of course, Algeria, Egypt, you like E B I'll get off.
Speaker Change: Woody Arabia, and the United Arab Emirates.
Speaker Change: And in Asia, we saw solid activity across the region led by offshore, notably, China, Indonesia, Malaysia, the Philippines and India.
Speaker Change: Meanwhile, North America activity remains soft.
Speaker Change: Due to weaker gas supplies.
Speaker Change: Sustaining capital discipline, and the effects of ongoing market consolidations.
Speaker Change: The solar activity contributed to revenue in the region declining by 6% year on year.
Olivier Le Peuch: Next, I will comment on divisions. I was very proud to see the power of the core divisions continue to drive our performance. In particular, you may have seen the remarkable growth in production systems supported by our One-Step Season Venture and in reserve of performance, led by increased stimulation, evaluation, and intervention studies. Well construction also delivered resilient growth.
Speaker Change: Next I would come on from division stuff on them.
Speaker Change: How about very proud to see the power of the core divisions continues to drive our performance this quarter.
Speaker Change: Basketball you may have seen the remarkable royalty collection systems. She bullied by one subsea joint venture and then there was about a four months they buy into stimulation evaluation and intelligent services.
Speaker Change: Well construction also delivered because he doesn't go off.
Olivier Le Peuch: I was also pleased to see our core margins visibly expand year on year, and I trust that this will continue as we remain focused on efficiency and value creation for our customers. Turning to digital integration, I continue to follow our performance very closely. Although we experienced the typical pattern of seasonally slower sales to start the year, digital still grew in the double digits year-on-year during the first quarter, and we expect a visible uptick in digital sales throughout the rest of the year.
Speaker Change: I was also pleased to see our core margins visibly expense you don't yeah, and I Trust that this will continue as we remain focused on efficiency and value creation for customers.
Speaker Change: Turning to digital integration continued to follow up off of months very closing.
Speaker Change: Although we expense the typical pattern in a seasonally slow well Scott says you start the year digital steger, who in the double digits year on year during the first quarter and we expect the digital uptake of digital sense throughout the rest of the year.
Olivier Le Peuch: This will be supported by increased customer adoption and a baseload of ongoing projects, as you can see from the quarterly highlights included in our press release. For a full year, we will continue our mission to grow our digital revenue amid the noise. Overall, I'm very pleased with this strong start to 2024. We'll remain focused on the quality of our revenue, capital discipline, and execution efficiency to generate strong cash flows and shareholder returns throughout the year. I want to thank the entire SELVI team for delivering this first quarter performance.
Speaker Change: This will be supported by increased customer adoption and a base load of ongoing projects as you can see from the quality Iron is included in our press release this morning.
Speaker Change: For the full year, we maintain our ambition to grow digital revenue.
Speaker Change: <unk>.
Speaker Change: Overall, I'm very pleased with the strong start to 2024.
Speaker Change: We remain focused on the quality of our revenue capital discipline and execution efficiencies to generate strong cash flows and shareholder returns throughout the year.
Speaker Change: I want to thank the entire <unk> team for delivering this first quarter performance. They continue to operate at a benchmark level for the industry.
Olivier Le Peuch: They continue to operate at a benchmark level for the industry, and I feel privileged to work with such a dedicated and talented team. Next, let me shift into the ongoing market dynamics and how this is creating opportunities for us. We are in the midst of a unique oil and gas cycle characterized by strong market fundamentals, growing demand, and an even deeper focus on energy security. As described on several occasions, this cycle continues to display breath, resilience, and longevity. This is very much the case in the Asia region where we are hosting this call.
Speaker Change: She'd privilege to work with such a dedicated and talented team.
Speaker Change: Next let me shift into the ongoing market dynamics and all these are creating opportunities for our business.
Speaker Change: We're in the midst of a unique oil and gas cycle.
Speaker Change: All eyes by swung buckets fundamentals growing demand and then they've been deeper focus on energy security.
Speaker Change: As described on several occasions this cycle continue to display resilience and longevity.
Speaker Change: This is very much the case in the Asia region.
Speaker Change: Yeah, well, well well well hosting this call today.
Olivier Le Peuch: In this context, there are certain priorities that are increasingly critical to our customers. Project Life Cycle Reduction, particularly in exploration and appraisal to accelerate time to first gas or first oil. Capital Efficiency in the Development Phase to Set New Benchmarks in Every Basin.
Speaker Change: In this context that setting priorities that are increasingly critical to our customers.
Speaker Change: What was that last cycle of addiction basket in exploration and appraisal to accelerate time to Phil's guys Oh sorry.
Speaker Change: But capital efficiency in the development phase to set new benchmarks in every basin.
Olivier Le Peuch: Step Change in Production and Recovery for Producing Assets and for Unconventional Resources. And finally, adoption of digital and AI capabilities to transform operations and use of technology to abate emissions. Against this backdrop, we continue to innovate with our customers through the combination of integration, feed-for-basing technologies, and digital, focusing on unlocking value by delivering lower costs and lower carbon values. In our core oil and gas business, we are benefiting from these trends, with our exposure to the fastest-growing and most resilient markets, which continues to be defined by broad growth across the international basis. And there is nowhere this is more evident than in the Middle East and worldwide of Soma.
Speaker Change: The change in collection Rico report for pushing assets until unconventional resources, and finally adoption of digital and AI capabilities to close some operations and use of technology to abate emissions.
Speaker Change: Against this backdrop, we continue to innovate we saw customers. So the combination of indication simple basic technologies and digital focusing on unlocking value by delivering lower cost and lower carbon box.
Speaker Change: In our coal oil and gas business, we are benefiting from these trends with our exposure to the fastest growing and most because it on market.
Speaker Change: This cycle continues to be defined by broad growth across the international basis and he's nowhere. This is more evident than in the middle East and global offshore markets.
Olivier Le Peuch: In the Middle East, countries are investing to increase both oil and gas supplies through the end of the decade. The long-term nature of the investments provides further confidence in the durability of the cycle. And we look forward to continuing working for our customers to deliver on this target, and offshore, many of the FIDs from the past few years have come, leading to broad-based activity across Asia, Africa, Latin America, and Europe. SLB has a strong foothold in each of these offshore regions, benefiting from a deep customer relationship. Proportional Performance and Feed-for-Basin Solution
Speaker Change: In the middle East down trees, I investing to increase both oil and gas suppliers to the end of the decade.
Speaker Change: The long cycle nature of the investments provides further confidence in the durability of the cycles and we look forward to continue working for customers to deliver on these targets.
Speaker Change: I'm not sure many of their Fridays from the past few years that come on.
Speaker Change: Leading to broad based activity across Asia Africa, Latin America, and Europe and said he has a strong foothold in each of these offshore regions benefiting from our deep customer relationships.
Speaker Change: Oh portion of about four months and she saw basing solutions.
Speaker Change: 12, one subsea joint venture will further much poultry process offering while the full lifecycle of box sets and we continue to deliver on our substantial offshore backlog.
Olivier Le Peuch: Through our one-subsidiary venture, we offer an unmatched port-to-process offering throughout the full life cycle of offshore assets, and we continue to deliver on our substantial offshore background. Now looking at the priorities for producing assets today and tomorrow, we recognize the need to increase our exposure to the production and recovery markets, including the more resilient OPEX spent as operators work to offset natural decline, extend performance, and maximize the value of their assets.
Speaker Change: Now looking at our priorities for producing assets today and tomorrow, we will recognize the need to increase our exposure to depletion there'd be coffee market.
Including the more resilient opex spend as operators work to offset natural decline extend to four months and maximize the value of the assets.
Speaker Change: Acquisition of Shopko next we further evolve our portfolio to capture this opportunity with the addition of the leading Pollutions chemicals business and well established.
Olivier Le Peuch: Our acquisition of Champenex will further evolve our portfolio to capture this opportunity with the addition of a leading production chemicals business and a well-established Schulich's Portfolio business with significant benefits to our customers in every producing basin in the world. This will be particularly visible in the offshore environment, which requires a higher intensity of pollution chemicals for flow assurance, reinforcing the long cycle value of our offshore strategy.
Speaker Change: Truly spot for you.
We are sticking to pick on benefits to our customers in every producing basin in the world. This would be particularly visible in the offshore environment, which requires a higher intensity of pollution chemicals before she wants painful thing the long cycle value for offshore strategy.
Speaker Change: And then let table training the market is in the hands focused on emission reduction and low carbon energy.
Speaker Change: Oh reinvestment in your space are beginning to deliver promising results both in the call, it's well positioned technologies and in U N. As you before you look there really in carbon capture and sequestration.
Olivier Le Peuch: And another notable trend in the market is the enhanced focus on emission reduction and low carbon energy. Our early investments in this space are beginning to deliver promising results, both in the core, through our transition technologies, and in new energy portfolios, notably carbon capture and secondary. CCS is one of the fastest-growing and most immediate opportunities to reduce carbon emissions.
Ccs is one of the fastest growing and most immediate opportunities to reduce carbon emissions.
Speaker Change: Hedging our domain expertise and deep knowledge of the subsurface to respond to increased demand in Australasia submissions.
Speaker Change: At the same time, we're also expanding to address opportunities throughout the sushi is unchanged.
As you saw in our announcement there should weeks ago, we've entered into an agreement to combine our carbon capture business. We've got Kevin I've got two and we own 80% of the combined entity.
Olivier Le Peuch: And we are leveraging our domain expertise and deep knowledge of the subsurface to respond to an increased demand for our storage solution. At the same time, we're also expanding to address opportunities throughout the CCS value chain. As you saw in our announcement a few weeks ago, we have entered into an agreement to combine our carbon capture business with Acker Carbon Capture, and we own 80% of the combined entity.
Speaker Change: This is an exciting opportunity to bring together our complementary technology portfolio, leading process. These unexpected and then established project delivery platform.
Speaker Change: And video a carbon capture technology solution.
Speaker Change: And then just to escape.
Speaker Change: Looking across our broad portfolio. It is clear that all three inches of growth each with different technology and exciting project pipelines are positioning us for continued performance across all time horizons.
Olivier Le Peuch: This is an exciting opportunity to bring together our complementary technology portfolio, leading process design expertise, and an established project delivery platform to innovate and deliver carbon capture technology solutions at an industrial scale. Looking across our broad portfolio, it is clear that our three engines of growth, each with different technologies and exciting project pipelines, are positioning us for continued performance across all time horizons. Supported by our strong international portfolio and our unique technology-driven approach to North America, we are truly making this investment cycle better for longer.
Speaker Change: Chipotle boss told international portfolio, and a unique technology driven approach to North America, we're actually making this investment cycle better for longer.
Speaker Change: Finally, I will conclude with our outlook for the full year and the second quarter.
Speaker Change: Based on the commentary you have just said the ongoing characteristics of the cycle and our strong first quarter results.
Speaker Change: We remain confident in our full year financial guidance with strength in international activity offsetting slower growth in North America.
Speaker Change: In basketball, we anticipated activity momentum in international markets to continue.
Speaker Change: And by increasing global demand and a level deeper focus on energy security.
Speaker Change: The relevance of oil and gas and then as the mix continues to support further investments and capacity expansion, particularly in the middle East and in long cycle projects across global offshore markets, who are aligned with our international movie ambitions.
Olivier Le Peuch: Finally, I will conclude with an outlook for the full year and the second part. Based on the commentary I have just shared, the ongoing characteristics of the cycle, and our strong first quarter results, we remain confident in our full year financial performance, with strength in international activity offsetting slower growth in North America. In particular, we anticipate the activity momentum in international markets to continue, driven by increasing global demand and an even deeper focus on energy security.
Speaker Change: Additionally, we expect you had I saw the golfing is strengthening Polish economy could remarket as operators work to maximize the efficiency and longevity of their producing assets.
Speaker Change: Altogether these contribute to present, a very strong outlook for our business during 2024 and beyond.
Speaker Change: Specific to the second quarter, we expect sequential revenue growth internationally in the mid single digits and North America in the low single digits.
Olivier Le Peuch: The relevance of oil and gas in the energy mix continues to support further investments in capacity expansion, particularly in the Middle East and in long-cycle projects across global offshore markets, fully aligned with our international lobbying ambitions. Additionally, we expect to realize further growth in the strengthening production and recovery market as operators work to maximize the efficiency and longevity of their producing assets. All together, this continues to present a very strong outlook for our business in 2024 and beyond.
Speaker Change: We also expect to expand adjusted EBITDA margins by 75 to 100 bps.
By Division, we expect sequential growth to be led by digital integration followed by it was a tougher month predictions stems and way to consume all of which are rebounding from the conclusion of winter season right.
Speaker Change: I would now to turn the call over to Stephane.
Stephane: Thank you Olivier and good morning, ladies and gentlemen.
Stephane: First quarter earnings per share excluding charges and credits was <unk> 75 cents.
Stephane: This represents an increase of 12 says when compared to the first quarter of last year.
Stephane: In addition, during the first quarter, we recorded one sense of merger and integration charges.
Olivier Le Peuch: Specific to the second quarter, we expect sequential revenue growth internationally in the mid-single digits and North America in the low single digits. We also expect to expand adjusted EBITDA margins by 75 to 100 BPI. By division, we expect sequential growth to be led by digital integration, followed by reservoir performance, production systems, and well construction, all of which are rebounding from the conclusion of the winter season. I will now turn the call over to Stephane.
Stephane: Associated with our 2020 free acquisition of subsea business.
Stephane: Overall, our first quarter revenue of $8 7 million increased 12, 6% year on year.
Stephane: Excluding the impact of the <unk> acquisition revenue increased six 5% when compared to the same quarter of last year.
Stephane: International revenue was up 18% year on year and more than 10% when excluding the contribution from Ikea.
Stéphane Biguet: Thank you, Olivier, and good morning, ladies and gentlemen. First quarter earnings per share, excluding charges and credits, were $0.75. This represents an increase of $0.12 when compared to the first quarter of last year. In addition, during the first quarter... We recorded one cent of merger and integration charges associated with our 2023 acquisition of the Aker Subsidies. Overall, our first quarter revenue of $8.7 billion increased 12.6% year-on-year. Excluding the impact of the Accur subsea acquisition, revenue increased 6.5% when compared to the same quarter last year.
Stephane: Driven in particular by your own your own growth of 29% in the Middle East and Asia.
Stephane: North America revenue decreased 6% year on year, primarily due to lower rig counts and U S land.
Stephane: And the effect of low oil and gas pricing, which impacted our Aps project in Canada.
Stephane: Companywide adjusted EBITDA margin for the first quarter was $23 6 billion.
Stephane: At 51 basis points year on year.
Stephane: In absolute adjusted EBITDA increased 15% year on year.
Stephane: This is in line with our guidance for adjusted EBITDA to grow in the mid teens for the full year of 2020.
Stephane: Our pre tax segment operating margin increased 95 basis points, driven by strong incremental margin internationally.
Speaker Change: Let me now go through the first quarter results for each division.
First quarter of digital integration revenue of $953 million.
Speaker Change: <unk>, 7% year on year.
Stéphane Biguet: International revenue was up 18% year-on-year and more than 10% when excluding the contribution from accounts, driven in particular by year-on-year growth of 29% in the Middle East and Asia. North America revenue decreased 6% year-on-year, primarily due to lower recounts in U.S. lands and the effect of lower gas prices, which impacted our APS project in Canada.
Speaker Change: Digital revenue, we experienced double digit growth, while EPS revenue was flat.
Speaker Change: Margins declined 300 basis points year on year to 26, 6%.
Speaker Change: Due to the effects of higher amortization.
Speaker Change: Amortization expense and lower commodity prices.
Speaker Change: Although ideas project in Canada.
Margins for the digital integration division are expected to improve in Q2.
Speaker Change: Who are the rest of the year as digital sales will increase sequentially in line with the usual seasonal trends.
Stéphane Biguet: Company-wide adjusted EBITDA margin for the first quarter was 23.6%, up 51 basis points year-on-year. In absolute dollars, adjusted EBITDA increased 15% year-on-year. This is in line with our guidance for adjusted EBITDA to go in the mid-teens for the full year of 2020. Our pre-tax segment operating margin increased 95 basis points, driven by strong incremental margins internationally. Let me now go through the first quarter results for each division.
Speaker Change: Reservoir performance revenue of $1 7 billion increased 15% year on year.
Speaker Change: Due to strong stimulation activity, particularly in middle East, Indonesia and offshore.
Speaker Change: Margins expanded 356 basis points as compared to the first quarter of last year to 19, 7% driven by higher activity and improved pricing.
Speaker Change: Well construction revenue of $3 4 billion increased 3% year on year as international growth of 9% was largely offset by lower revenue in North America.
Speaker Change: Margins of 25% were essentially flat year on year.
Stéphane Biguet: First quarter digital and integration revenue of 953 million increased 7% year-on-year. Has digital revenue experienced double-digit growth? while APS revenue was? Margins declined 300 basis points year-on-year to 26.6% due to the effects of higher APS amortization expense and lower commodity prices on our IPS project in Canada.
Speaker Change: Finally.
Speaker Change: Production systems revenue of 2.8 billion increased 28% year on year.
Speaker Change: Excluding the effects of the acquired Acura subsea business.
Speaker Change: Production systems revenue grew 6% driven by strong international sales.
Speaker Change: Margins of 14, 2% expanded 490 basis points year on year.
Speaker Change: Driven by a favorable activity mix strong execution and pricing improvements.
Speaker Change: Now turning to our liquidity.
Speaker Change: During the quarter, we generated $327 million of cash flow from operations.
Speaker Change: Free cash flow of negative 222 million was slightly better than the same period last year.
Stéphane Biguet: Margins for the digital and integration division are expected to improve in Q2 and throughout the rest of the year, as digital sales will increase sequentially, in line with the usual seasonal trend. Reservoir performance revenue of $1.7 billion increased 15% year-on-year due to strong stimulation activity, particularly in the Middle East and Asia, and margins expanded 356 basis points as compared to the first quarter of last year to 19.7%, driven by higher activity and improved pricing.
Speaker Change: These cash flows reflect the seasonal effects of the payout of our annual employee incentives.
Speaker Change: Lower cash collections following very strong receivable performance in the fourth quarter of last year.
Speaker Change: Consistent with our historical trends.
Speaker Change: Free cash flow is expected to be higher in the second quarter and to continue to increase in the third and fourth quarters.
Capital investments inclusive of Capex and investments in <unk> projects and exploration data were 549 million in the first quarter.
Speaker Change: For the full year, we are still expecting capital investments to be approximately $2 6 billion.
Stéphane Biguet: Well, construction revenue of 3.4 billion increased 3% year-on-year, as international growth of 9% was largely offset by lower revenue in North America. However, margins of 20.5% were essentially flat year-on-year. Finally... Production systems revenue of 2.8 billion increased 28% year-on-year, excluding the effects of the acquired Hacker Subsidy business. Production systems revenue grew 6%, driven by strong internationals. Margins of 14.2% expanded by 490 basis points year-on-year, driven by a favorable activity mix.
Speaker Change: During the quarter, we rebuilt raised $5 4 million sales.
Speaker Change: For a total purchase price of $270 million.
Speaker Change: As we disclosed a couple of weeks ago, we have raised our 2024 target for total returns of capital to shareholders.
Speaker Change: From $2 5 billion to $3 billion.
Speaker Change: These 3 billion will be evenly split between dividends and share repurchases.
Speaker Change: Lastly, we plan on filing our S. Four registration statement relating to the champion X acquisition in the next couple of weeks.
Speaker Change: The transaction will require the approval of attempt to Nextgen windows.
During the period as the champion X mails its proxy for the merger.
Speaker Change: Until its shareholder votes.
Speaker Change: We are required to suspend our share buyback program.
Speaker Change: While this will not impact our total share repurchases for the year of approximately $1 5 billion.
Stéphane Biguet: Strong execution and pricing improvements. Now, turning to our liquidity. During the quarter, we generated $327 million of cash flow from operations; free cash flow of negative $222 million was slightly better than the same period last time. These cash flows reflect the seasonal effects of the payout of our annual employee incentives and lower cash collections following very strong receivable performance in the fourth quarter of last year. Consistent with our historical trends, free cash flow is expected to be higher in the second quarter and to continue to increase in the third and fourth quarter
Speaker Change: It will potentially result in a.
Speaker Change: Our buybacks being more heavily weighted towards the second half of the year.
Speaker Change: I will now turn the conference call back to you. Thank.
Speaker Change: Thank you Stefan and ladies and gentlemen, I believe we are opening the floor to your questions.
Speaker Change: Ladies and gentlemen, as a reminder, if you would like to ask a question you May press. One then zero on your telephone keypad and our first question comes from James West with Evercore ISI. Please go ahead.
James Carlyle West: Hey, good morning, Olivier and Savannah.
James Carlyle West: Good morning.
James Carlyle West: So olivier.
James Carlyle West: So you alluded to it earlier and you and I have had conversations about the cycle.
James Carlyle West: Recently as well.
James Carlyle West: But how are you thinking about in the last six to eight weeks or so as we've seen.
Stéphane Biguet: Capital Investments, inclusive of CapEx and investment in APS projects and exploration data, were $549 million in the first quarter. For the full year, we are still expecting capital expenditures to be approximately $2.6 billion. During the quarter, we repurchased 5.4 million shares for a total purchase price of 270 million. As we disclosed a couple of weeks ago, we have raised our 2024 target for total returns of capital to shareholders from $2.5 billion to $3 billion.
James Carlyle West: Increased amounts of contracts and rig awards in subsea equipment Awards.
James Carlyle West: How are you thinking about where we are in the cycle today and the duration of the cycle because it seems to me we're right now.
James Carlyle West: Middle East.
James Carlyle West: Asia and offshore.
James Carlyle West: Sorry, but it was certainly going to broaden out to more regions.
Speaker Change: Well, so I'm curious to kind of get your your big picture high level thoughts.
Speaker Change: No time, thank you Jim so from our perspective, I think first and foremost I think the secret attributes that we have described.
Stéphane Biguet: This $3 billion will be evenly split between dividends and share repurchases. Lastly, we plan on filing our S4 registration statement relating to the ChampionX acquisition in the next couple of days. The transaction will require the approval of ChampionX shareholders. During the period after ChampionX mails its proxy for the merger until its shareholder votes, we are required to suspend our share buyback program. While this will not impact our total share repurchases for the year of approximately 1.5 billion, it will potentially result in our buybacks being more heavily weighted towards the second half of the year. I will now turn the conference call back to Olivier.
Describe the Oreo.
Speaker Change: The breadth the resilience there.
Speaker Change: The durability of the longevity of the cycle out are put in place and are driven by a combination of strong fundamental and as your demand.
Speaker Change: Oil and gas demand if anything is planning a fault on the revision.
Speaker Change: And as a security sit on top of the agenda. There is no other place in Asia to realize this underground and as such I think the basic activity is being supported by they are critical flow of investment. Both as you said in campus expansion, which is already committed.
Speaker Change: But also I think in our short cycle and long cycle offshore deepwater and shallow and I think I was here in Asia, I'd say, it will not be able to see the breadth the diversity of the opportunity the number of country offshore onshore are the new exploration and appraisal side.
Olivier Le Peuch: Thank you, Stephan, and ladies and gentlemen, I believe we are opening the floor to your questions.
Operator: Ladies and gentlemen, as a reminder, if you would like to ask a question, you may press 1 then 0 on your telephone keypad. And our first question comes from James West with Evercore ISI. Please go ahead.
Speaker Change: Called the new entrants coming in southeast Asia, but not before to invest because they are looking for securing gas supply and they're looking to put space to maintain oil Oh oil production. So I believe that if you combine this with.
James Carlyle West: Hey, good morning, Olivier and Stephan. Good morning.
Olivier Le Peuch: So, Olivier, I know you alluded to it earlier, and you and I have had conversations about the cycle recently as well, but how are you thinking about the last, you know, six, eight weeks or so, as we've seen, you know, just increased amounts of contracts and rig awards and subsea equipment awards? How are you thinking about where we are in this cycle today and the duration of the cycle? Because it seems to me we're, you know, right now it's a Middle East, Asia, and offshore story, but it's certainly going to broaden out to more regions as well. So I'm curious to kind of get your big picture, high-level thoughts.
Speaker Change: What is happening in North America, which is a semi calibrating within a threshold and not necessarily with our CV on anticipation of supply growth in that market and short term. This is only exxon trading the characteristic to disaggregate international.
Speaker Change: You can if I can on effect from the last.
Speaker Change: Two or three months of <unk>.
Speaker Change: A lot of customer engagement.
Speaker Change: The sentiment is attending.
Speaker Change: More positively than it was maybe six or 12 months ago and cause the mountain gauging to secure capacity on long project, such as deepwater and subsea and Theyre looking for partnership collaborations to make sure that we help them into securing the best capital efficiency as a as a highlighted look for integration.
James Carlyle West: No, thank you, James. So, from our perspective, I think, first and foremost, the cycle attributes that we have described earlier, the breadth, the resilience, the durability, or the longevity of the cycle are fully in place and are driven by a combination of strong fundamental energy demands. Oil and gas demand, if anything, is trending upwards from the revision. Energy security is still on top of the agenda. There is no other place than Asia to realize this on the ground.
Speaker Change: To accelerate the product cycle to get past 31st saw it first gas. So if anything I think I see more add stronger pipeline of projects that will help us has decided to prolong the owned electric around the seabed yoga.
James Carlyle West: And as such, I think the base of activity is being supported by a very critical flow of investment, both, as you said, in capacity expansion, which is already committed, but also, I think, in short cycle and long cycle offshore, deep water, and shallow. And I think I was here in Asia, and it's remarkable to see the breadth, the diversity of the opportunity, the number of countries offshore and onshore, the new exploration and appraisal cycle, the new entrants that are coming to Southeast Asia that were not before to invest, because they are looking for securing gas supply, and they are looking to participate to maintain oil production.
Speaker Change: Right got it Okay makes it makes a lot of sense and then maybe just as a follow up on the digital side and the rollout of the Delphi Delfi platform.
Speaker Change: How do you feel about the progress that's happening there the adoption by customers I know you've got a good number of customers so far but still the penetration is probably.
Speaker Change: Not nearly where it will be in three to five years, but.
Speaker Change: It's a powerful tool and so have had.
James Carlyle West: So I believe that If you combine this with... What is happening in North America, which is North America operating within a threshold and not necessarily with significant anticipation of supply growth in that market in the short term, this is only accentuating the characteristics of the cycle in international markets. And if I can reflect from the last two or three months of... a lot of customer engagement, the sentiment is trending more positively than it was maybe six or 12 months ago.
Speaker Change: Do you see adoption trending from here.
I think the adoption continued to trend favorably I think youll continue to see as we deliver quarter after quarter.
Speaker Change: Both set of announcements in digital operation and cloud adoption for Joe sounds cool flow or in data and AI is yes, you have seen the divers still what you announced this quarter do you expect the same next quarter and the following quarter.
Speaker Change: Because we believe that our guests are realizing that they need to unlock efficiency.
James Carlyle West: And customers are engaging to secure capacity on long projects, such as Deepwater and Subsea, and they are looking for partnership, and collaboration to make sure that we help them to secure the best capital efficiency, as highlighted, and look for integration to accelerate the product cycle to get faster to first oil, first gas. So, if anything, I think I see a stronger pipeline of projects that will help us help this cycle to prolong beyond what we could have anticipated a year ago.
Speaker Change: And they need to accelerate the cycle and the need to extract a lower carbon solutions for the assets. So this is putting so we are still and we have a new down vision and targets to reach or exceed the high teens.
Speaker Change: Mr. Wolf this year and we started the year I would say considering the seasonal low on the on the on teens low teens growth year on year double digit that is was fully aligned what we could have on <unk> and it will.
Olivier Le Peuch: Right. Got it. Okay. Makes a lot of sense.
Speaker Change: So I see.
Speaker Change: Quarter after quarter expansion of digital adoption and I see more and more contribution from digital operation.
David Anderson: And then maybe just as a follow-up on the digital side and the rollout of the Delphi platform, how do you feel about the progress that's happening there, the adoption by customers? I know you've got a good number of customers so far, but still, the penetration is probably not nearly where it will be in three to five years, but it's a powerful tool. And so how do you see adoption trending from here?
Speaker Change: Drilling automation we.
Speaker Change: Prediction.
Speaker Change: Operation a solution and you will see that to know coming quarter and the.
Speaker Change: The upcoming transaction with champion X will only strengthen this pollution operation offering as it will complement and give us.
Olivier Le Peuch: I think adoption continues to trend favorably. I think you'll continue to see as we deliver quarter after quarter both sets of announcements in digital operations, cloud adoption for geoscience workflow, or in data and AI. You have seen the diversity of what we announced this quarter. Do expect the same next quarter and the following quarter because we believe that customers are realizing that they need to unlock efficiency, they need to accelerate the cycle, and they need to extract lower carbon solutions for their assets. So this is pulling.
Speaker Change: And as a platform to expand our digital adoption, so I am I remain.
Speaker Change: Very constructive and I believe that it is a long trend of digital adoption and that will continue.
Speaker Change: Throughout the rest of the ticket.
Speaker Change: Got it perfect. Thanks Avi.
Speaker Change: Okay.
Thank you Dan.
Speaker Change: Next we move on to David Anderson with Barclays. Please go ahead.
David Anderson: Thank you good morning, Olivia in Stavanger.
David Anderson: Morning, Dave.
David Anderson: Just a question on kind of the timing of the champion X deal and so as it relates to where we are in the cycle. But these are all product lines are targeting targeting the production side of the world well lifecycle primary divers can be opex spending, particularly with deepwater development ramping up in the coming years, Conversely, Conversely, the timing.
David Anderson: So we are still, and we have renewed our ambition and target to reach or exceed high teens for digital growth this year. And we started the year, I would say, considering the seasonal low on teens, low teen growth year on year, double digits. That was fully aligned with what we could have anticipated, and it will continue. So, I see quarter after quarter expansion of digital adoption, and I see more and more contribution from digital operations with drilling automation and production operation solutions.
David Anderson: Are requiring a later cycle company might suggest that your position for upstream spending to structurally slow in the coming years. So could you just help us understand a little bit the dynamics as sort of the opex cycle and the Capex cycle.
David Anderson: Totally appreciate the duration of it but I guess I'm sort of thinking about the sort of the cadence of the different cycles can you just help us understand kind of how the timing of that works out and maybe you are to see the opex cycle standing higher but the two dynamics I think are causing a little bit of.
David Anderson: And you will see that in the coming quarter. And the upcoming transaction with Champenex will only strengthen this production operation offering as it will complement and give us another platform to expand our digital adoption. So I remain very constructive, and I believe that this is a long trend of digital adoption that will continue throughout the rest of the decade. Got it, perfect.
David Anderson: Questioning in the market I guess today.
Speaker Change: Yeah, No. It's a fair question I mean, I think first and foremost stepping back in time I think we have been as we prepare our core strategy. She goes back we identified that the pollution, because we and Pascal.
Olivier Le Peuch: Got it. Perfect. Thanks, Olivier.
Speaker Change: Production chemicals is about chemicals at least solution will be a domain, where we need to invest technology and we need to explore opportunity to accelerate our market participation. Because we believe the two things we've really felt that this market will benefit from further innovation from further integration.
Arun Jayaram: Next, we move on to David Anderson with Barclays. Please go ahead.
Olivier Le Peuch: Thank you. Good morning, Olivier and Stephan. Good morning Dave.
Arun Jayaram: So just a question on kind of the timing of the Champion X deal and so as it relates to where we are in the cycle. So these are all product lines that are targeting the production side of the well life cycle. Primary divers can be OPEX spending, particularly with deep water development ramping up in the coming years. Conversely, the timing of acquiring a later cycle company might suggest that your position for upstream spending to structure is slow in the coming year.
Speaker Change: However, disruption and hence our case through Opex.
Speaker Change: Ah the efficiency gains into prediction operation into recovery and we believe that the market is scurrying to some extent as discovered but has an opportunity to exploit more of this air pollution chemicals more optimized.
Arun Jayaram: So could you just help us understand a little bit about the dynamics of the OPEX cycle and the CAPEX cycle? I totally appreciate the duration of it, but I guess I'm sort of thinking about the, sort of, cadence of the different cycles. Can you just help us understand kind of how the timing of that works out? And maybe you're just seeing the OPEX cycle expanding higher, but the two dynamics, I think, are causing a little bit of questioning in the market again.
Speaker Change: Full life lift solution and combined with diesel so we believe that all in all these markets is not only an opex versus capex this market to ease.
Speaker Change: Responding to increased demand and increased opportunity we see in a market that has been there going and for which we are willing to respond and the customer feedback on long eschmann will add.
Rising the potential of what we can put together from a technology from a walk for integration from automation and optimization from the main reservoir of knowledge to process equipment.
Olivier Le Peuch: Yeah, no, it's a fair question. And I think first, first and foremost, stepping back in time, I think we have been as we prepared our core strategy a few years ago identified that pollution recovery in particular, pollution chemicals, reservoir chemicals, and leaf solution will be a domain where we need to invest in technology. And we need to explore opportunities to accelerate our market participation. Because we believe two things. First, that this market will benefit from further innovation, from further integration, from further disruption, and hence create, through OPEX, efficiency gains into production operations into recovery.
Speaker Change: Clearly creates a new leg into our into the technology deployment and into the efficiency of producing assets, So and I will not try to oppose Opex Capex I will just say that the partial recovery is becoming critically and it has been for the last few quarter has increasingly become part of a priority of our customers now.
Speaker Change: We believe as well that this market as further resilience.
Olivier Le Peuch: And we believe that the market is discovering, to some extent has discovered, but has an opportunity to exploit more of these pollution chemicals, more of this optimized full life leaf solution, combined with digital. So we believe that, all in all, this market is not only an OPEX versus CAPEX; this market is responding to increased demand and increased opportunity within the market that has been going on and for which we are willing to respond.
Speaker Change: Because the market every liquid produced in the world one less demand and then amount of pollution chemicals to to to assurance because you don't see production and at the same time, we believe that as the long term.
Speaker Change: The most of the assets will see a higher water cuts and some of the assets, we see a more complex because our fleets coming up at a process facility there will be an increasing need to adding more sophisticated in our north technical pushing chemicals to the fruit so all in all.
Olivier Le Peuch: And the customer feedback and engagement we had, realizing the potential of what we can put together from technology, from workflow integration, from automation, and from optimization of domain reservoir knowledge to process equipment will clearly create a new leg for the technology deployment and for the efficiency of producing assets. So I will not try to oppose OPEX and CAPEX; I will just say that pollution recovery is becoming increasingly, it has been for the last few quarters, increasingly part of the priority of our customers.
Speaker Change: An opportunity today.
Speaker Change: And as you don't outlook for Tomorrow.
Speaker Change: So it's not so much you can upstream capex slowing if there's more of that you'll see opex side, increasing and more technology, increasing that's exactly exactly I see what we see and engagement with customers. We see that they are in their quest for operational recovery opportunity, we see that the combination of pollution.
Speaker Change: Nichols at Digi.
Speaker Change: Digital capability, including optimizing some prediction lift solution and other intervention is in dire need for modernizing.
Olivier Le Peuch: Now we believe as well that this market has further resilience because the market, every liquid produced in the world more or less demands an element of pollution chemicals to assure its resilience in production. And at the same time, we believe that, in the long term, most of the assets will see a higher water cut, and some of the assets will see more complex reservoir fluids coming up to the process facility. There will be an increasing need to add more sophisticated and more technical pollution chemicals to the flow. So, all in all, an opportunity today and a Resilient Outlook.
Speaker Change: Modernizing our innovation and automation and we believe that the addition of this to our portfolio the significant talent and capability. We are getting through the addition of <unk> will help us fast track. This new path of our offer pollution Rico re market expansion that will be a combination of opex and capex.
Speaker Change: Rex and Opex, we only Superman and and.
Speaker Change: And ads are opportunities for growth and it is not at all relating to the well we are in the cycle for Capex.
Arun Jayaram: So it's not so much that you see upstream CapEx slowing; it's more that you see the OpEx side increasing and more technology increasing. Exactly, exactly.
Understood and then so this is a <unk>.
Speaker Change: Follow up on the champion X D. I was surprised to see you in a $400 million in synergies for a company that with the swell Radu champion active.
Olivier Le Peuch: I see, and what we see, and the engagement with our customers, we see that in their quest for pollution recovery opportunities, we see that the combination of pollution chemicals, digital capability, including optimizing some production lift solutions and other interventions, is in dire need of modernizing, innovation, and automation. And we believe that the addition of this to our portfolio, the significant talent and capability we are getting through the addition of Champenex, will help us fast-track this new path of pollution recovery market expansion.
Speaker Change: Can you help us break that down a little bit more like where do you see the greatest opportunity on the cost side and also if you could expand the revenue synergy side to be honest, we hear about revenue synergies all the time, but often they don't materialize. So what's different here in champion X, where you have more confidence on the revenue synergy side.
Speaker Change: Dave Yes. Thanks for the question. So again, yes $400 million of annual synergies, which we think we can achieve in the first three years and as we said 70% to 80% achieved in the second year, which makes the the transaction accretive to earnings per share in the.
Speaker Change: In year two so now we have the full integration team in place refining estimates going through all the buckets of synergies.
Olivier Le Peuch: That will be a combination of OpEx and CapEx, and OpEx will only supplement and add opportunity for growth, and it is not at all relating to where we are in the cycle for CapEx, understood. And then, as a follow-up on the Champion X deal, I was surprised to see you announced 400 million in synergies for a company that was just a well-run Champion X. Can you help us break that down a little bit more?
Speaker Change: I'm not going to give you their opinion to give numbers, but does as.
Speaker Change: The rough split the most of this is non res is most of the 400 million synergies let's.
Speaker Change: Let's say about 75% of it is.
Speaker Change: Is it related to goods and twenty-five concerns related to the initial revenue synergies so of the 75% cost synergies again, an approximate 75 concerns you can say that roughly half of that is on is on the oral and the SMB.
Olivier Le Peuch: Like where do you see the greatest opportunity on the cost side? And also if you could expand the revenue synergies side. To be honest, we hear about revenue synergies all the time, but they often don't materialize. What's different here in Champion X, where you have more?
Speaker Change: Spend.
Speaker Change: We mentioned earlier, we spend a lot of chemicals for example for overall operations and with the manufacturing and the internalization of <unk>.
Speaker Change: <unk> spend we can do with <unk>. We think we can have great savings there in the over a half or so of the of the cost synergies would be G&A and other operating cost savings if that helps.
David Anderson: So Dave, yeah, thanks for the question. So again, yes, 400 million in annual synergies, which we think we can achieve in the first three years. And as we said, 70% to 80% achieved in the second year, which makes the transaction accretive to earnings per share in year two. So now we have the full integration team in place, refining estimates, going through all the buckets of synergies. I'm not going to give you definitive numbers, but as a rough split, most of the synergies, most of the 400 million synergies, let's say about 75% of them are related to costs and 25% related to initial revenue synergies.
Speaker Change: Thank you very much appreciate it.
Speaker Change: Thank you thank you Dave.
Speaker Change: Next we move on to I'll ruin Jairam with J P. Morgan. Please go ahead.
Jairam: Good morning, Olivier I wanted to get your perspective on the spending picture in Saudi Arabia, and the potential impacts from from S. L. B.
Jairam: Given the decision to maintain their maximum spare capacity at 12 million barrels.
Jairam: But obviously a shift to higher levels of gas development and I was just wondering also if you could maybe address just the recent.
David Anderson: So of the 75% cost synergies, again an approximate 75%, you can say that roughly half of that is on our own SLB spend. As we mentioned earlier, we spend a lot of chemicals, for example, for over-operations. And with the manufacturing and internalization of spend we can do with ChampionX, we think we can have great savings there. And the over half or so of the cost synergies would be GNA and over-operating cost savings in bad health.
Jairam: The decision to suspend some.
Jairam: Some shallow water drilling in the country.
Olivier: Yeah, no. Thank Joe and I think that let me first maybe for simplicity and from aligning our views maybe let me unpack first.
Olivier: And give some additional color on this.
Speaker Change: It makes expansion and I think these are public data and I think a total of $20 to 22 rigs are being suspended two device for consolidation.
Stéphane Biguet: Thank you very much.
David Anderson: Thank you.
Neil Singhvi Mehta: Next, we move on to Arun Jayaram with J.P. Morgan. Please go ahead.
Speaker Change: But this is in the context of this.
Speaker Change: Stephanie on many of our projected oil and chemical project. The expansion program that has been suspended.
Olivier Le Peuch: Good morning, Olivier. I wanted to get your perspective on the spending picture in Saudi Arabia and the potential impacts from SLB, given the decision to maintain their maximum spare capacity at 12 million barrels but obviously a shift to higher levels of gas development. And I was just wondering also if you could maybe address the recent decision to suspend some shallow water drilling in the country.
Speaker Change: Both of these assets, we're adding a combined.
Speaker Change: Slightly above 20 Jackups operating in these two I said at the end of last year.
Speaker Change: The anticipation of the.
Speaker Change: The additional weakness SA for the expansion we have added another dozen rigs.
Speaker Change: When you make the math at the end of this year.
Speaker Change: This asset will host slightly above.
Speaker Change: Tend to those on rigs or a net 10 weeks less than at the end of last year.
Neil Singhvi Mehta: Yeah, no, thank you. And I think, maybe for simplicity and to align our views, maybe let me unpack first and give some additional color on this rig suspension. And I think these are public data, and I think a total of 20 to 22 rigs are being suspended for consideration. This is in the context of this both the Safani and Manifa project, an all incremental project expansion program that has been suspended.
Speaker Change: First what is happening in offshore.
Speaker Change: You contrast, this with the gas market. In addition that was almost coincidental with the NSE decision.
Speaker Change: To increase the gas capacity towards 2030 by 60% compared to 2021. This is actually resulting in a total.
Speaker Change: Hey activity increase.
Speaker Change: And net rig additions between now.
Speaker Change: Now and we ended the year with total approximately almost 60 weeks our cost across the entire unconventional and conventional.
Neil Singhvi Mehta: Both of these assets were having a combined slightly above 20 checkups operating in these two assets at the end of last year. In anticipation of the additional rig necessary for the expansion, we have added another dozen rigs. When you do the math at the end of this year, both of these assets will host... slightly above 10 to a dozen rigs, or a net 10 rigs less than at the end of last year.
Speaker Change: Both workover rigs.
Speaker Change: <unk> been drilling units and drilling eggs for the unconventional reservoir and for me for the.
Speaker Change: Commercial gas so they switched from offshore to onshore the switch from oil to gas.
Speaker Change: <unk> is actually the execution of strategy of Saudi Aramco, our belief and it happened that we have market exposure that is wrong.
Speaker Change: The on land.
Speaker Change: Lance and his balance and actually long on gas.
Neil Singhvi Mehta: So that's first, what is happening on and off... You contrast this with the gas market and a decision that was almost coincidental with the MSC decision to increase gas capacity towards 2030 by 60% compared to 2021. This is actually resulting in a total rig activity increase and net rig addition between now and the end of the year of a total of approximately 60 rigs, across the entire unconventional and commercial, both walkover rigs, cultivating drilling units, and drilling rigs for the unconventional Jaffa and for the commercial gas.
Speaker Change: So as a consequence for us while this is an activity that a change in the mix that wasn't anticipated six months ago.
Speaker Change: This is not as mature impact on our ambition for growth for Saudi This will not change all again on this fall in the middle East are sustained.
Speaker Change: Sustained growth and this will continue to support the ambition to grow international and hence the fully again on <unk> directed at this morning.
Speaker Change: Great. That's helpful and just my follow up Olivier could you just characterize the rest of the spending picture in the GCC in the Middle East.
Speaker Change: Outside of Saudi.
Speaker Change: Yeah, I think that's a very good point actually it's a it's very broad growth activity uptick in almost all the country.
Neil Singhvi Mehta: So this switch from offshore to onshore, this switch from oil to gas, is actually the execution of Saudi Aramco's strategy, I believe. And it happened that we have market exposure that is long on land, very long on land, and it's balanced and actually long on gas. So, as a consequence for us, while this is an activity that has changed and a mix that wasn't anticipated six months ago, this will not have a natural impact on our ambition for growth in Saudi. This will not change our guidance for Nubuisi's sustained growth, and this will continue to support our ambition to grow internationally, hence the full guidance reiterated this morning.
Olivier: With both possible exception of AR.
Olivier: These days the considering the the cash and devaluation situation, but almost every other country is having a very significant growth and been citing a few country. This morning, and I cannot stop listing all of them and it includes Qatar that is starting to you know are we mobilized for Ah.
Olivier: As shown of the west the North field.
Coates as we commented earlier that AR is coming now is very well structured to execute their capacity expansion UAE.
Olivier: Both gas and oil Oh man very steady.
Olivier: As you have seen we have had some nice contract also in that in that region. So we are very comfortable about the breadth the diversity of the activity growth rig activity growth in the region and actually slipped.
Olivier Le Peuch: Great, that's helpful. And just my follow-up question, Olivier, could you just characterize the rest of the spending picture in the GCC in the Middle East, you know, outside of Saudi? Yeah, I think that's...
Olivier: A couple of rigs or more could actually be how do you think that from the offshore selling contact too simple an answer to help accelerate some activity in the region, while some others are already.
Neil Singhvi Mehta: Yeah, I think that's a very good point, actually. It's very broad growth, and activity is uptick in almost all the country, with the possible exception of Egypt these days, considering the cash and devaluation situation. But almost every other country is experiencing very significant growth. And I've been citing a few countries this morning, and I could not stop listing all of them, and that includes Qatar, which is starting to now remobilize for the addition of the West North field.
Olivier: Being retained.
Olivier: Retained to some extent for such activity here in the southeast Asia. So I believe that are the middle East as we said earlier last year broker and had a total.
Olivier: Market spend that was recalled I assume these securities just extending this year and we saw very good breadth of oil and gas.
Onshore and offshore activity, despite the slight change of mix in Saudi.
Speaker Change: Great. Thanks, a lot.
Speaker Change: Thank you.
Speaker Change: Next we move on to Neil Mehta with Goldman Sachs. Please go ahead.
Neil Singhvi Mehta: Yeah. Thank you for all the strategic comments I had a couple of more financial questions. The first just the second quarter commentary if I look at Q1, EPS was <unk> 75, and I think the Street's got it move into 84 cents in the second quarter. So just would love your perspective on how we should think about the <unk>.
Neil Singhvi Mehta: Obviously Kuwait, as we commented earlier, that is now coming very well structured to execute its capacity expansion. UAE, on both gas and oil. Oman, very steady. Iraq, as you have seen, we have had some nice contracts also in that region. We are very comfortable about the breadth and diversity of the activity growth and rig activity growth in the region. And actually, a couple of rigs or more could actually be redirected from the offshore sailing contract to supplement and to help accelerate some activity in the region, while some others are already being retained to some extent for future activity here in Southeast Asia.
Neil Singhvi Mehta: Once you build as you have pretty good visibility at this point into the second quarter.
Speaker Change: So Neil as we mentioned the Q2, we always see.
Speaker Change: The real sort of seasonality if you want in a very strong margin expansion. So we are we just guided to 75 to 100 basis point of.
Speaker Change: Incremental.
Speaker Change: EBITDA margin in terms of basis points and the rate is below the EBITDA you can.
Speaker Change: You can very well assume to go down to EPS.
Speaker Change: Non operating expenses and just about all the rest is about the same as a as in the first quarter if that helps.
Speaker Change: That helps.
Pretty well with the Street I guess the follow up is just on EBITDA margins. It did come in a little bit softer than maybe where the street was on digital and integration.
Neil Singhvi Mehta: So I believe that the Middle East, as we said earlier, broke and had a total market spend that was a record high last year. I think this record is just expanding this year and with a very good breadth of oil and gas onshore and offshore activity despite the slight change of mix in Saudi.
Moller extent on on well construction just love your perspective on it as we work our way through the year, how we should be thinking about EBITDA margins.
Scott Andrew Gruber: Next, we move on to Neil Mehta with Goldman Sachs; please go ahead.
Olivier Le Peuch: Yeah, thank you for all the strategic comments. I had a couple more financial questions. The first, just the second quarter commentary. If I look at Q1, EPS was $0.75, and I think the streets got it moving to $0.84 in the second quarter. So just would love your perspective on how we should think about the 2Q versus 1Q build as you have pretty good visibility at this point in time.
Speaker Change: And your conviction on the recovery there. Thank you.
Speaker Change: So as Olivier mentioned.
Speaker Change: It has been felt in consecutive quarters.
Speaker Change: We increased EBITDA margins year on year. So it was the case in the first quarter as well and it will be the case in each and every single lever of the remaining quarters of the year. So these are this year on year growth of EBITDA and EBITDA expansion is is reverse for the year now you mentioned that.
Speaker Change: DNI margins as you know they are typically the lowest in the first quarter of the Euro this is mostly the seasonally.
Scott Andrew Gruber: So, Neil, as we have mentioned, Q2, we always see the reversal of seasonality, if you want, and very strong margin expansion, so we just guided to 75 to 100 basis points of incremental EBITDA margin in terms of basis points, and the rest below the EBITDA, you can You can very well assume, to go down to EPS, that non-operating expenses and just about all the rest is about the same as in the first quarter, if that helps.
Speaker Change: <unk> you mentioned digital sales will will increase quarter after quarter and this will be at.
Speaker Change: At high incremental margins from digital considering that most of the costs are.
Speaker Change: Our fixed so we we clearly continue to shoot for.
Speaker Change: Overall, the nine margins above 30% on the on a full year basis.
Stéphane Biguet: That helps and dials in pretty well with the street. I guess the follow-up is just on EBITDA margins. It did come in a little bit softer than maybe where the street was on digital and integration, to a smaller extent on well construction. I would love your perspective as we work our way through the year on how we should be thinking about EBITDA margins and your conviction on the recovery there. Thank you.
Speaker Change: Thank you so much.
Speaker Change: Thank you.
Speaker Change: Anthony.
Speaker Change: Our next question is from Scott Gruber with Citigroup. Please go ahead.
Scott Andrew Gruber: Yes, Hello, I wanted to circle back on the comments you got it.
I'm going to circle back on the Saudi comments, because it's a few investors have asked for some clarification.
Scott Andrew Gruber: Did you mention that the the rig growth.
Scott Andrew Gruber: What's the net 66 zero, even with the losses of 20 Jackups.
Yeah, I think that Oh.
Scott Andrew Gruber: <unk> seen I think some upset.
Scott Andrew Gruber: So, as Olivier mentioned, it has been 13 consecutive quarters that we have increased EBITDA margins year-on-year. So, it was the case in the first quarter as well, and it will be the case in each and every single of the remaining quarters of the year. So, this year-on-year growth of EBITDA and EBITDA expansion is with us for the year.
Scott Andrew Gruber: So there will be increase there was a plan that is unchanged for Saudi to accelerate that gas expansion program, whereas accelerated is that has improved is the pace of this expansion program driven by the raise of 15% to 60% target by 2030 and as a consequence of that.
Stéphane Biguet: Now, you mentioned D&I margins. As you know, they are typically the lowest in the first quarter of the year. This is mostly seasonalally lower digital sales. This year, it was made worse by lower APS revenue due to two kinds of related effects, actually. The lower gas pricing in our Palliser Canada assets and higher amortization expense per unit of production resulted in a year-on-year drop in the total digital and integration margin, but this is entirely due to APS.
Speaker Change: Yeah that was.
Speaker Change: Based on previous plans then now boosted by this accelerated expansion program will result into a total rigs a year on year that will all from beginning of the year to the end at 60 rigs in total to the gas market all of all onshore. So that's that's that's the reality of the market some of it.
Speaker Change: In unconventional.
Speaker Change: Up to 10 to 15 weeks in on commercial some of it in the gas conventional loans some of it in <unk> and and Rocco. So that's a total activity that gas is a strong market for for Saudi is becoming a significant market going forward. So that's where we expect.
Stéphane Biguet: The digital margins are intact. As the rest of the year unfolds, as Olivier mentioned, digital sales will increase quarter after quarter, and this will be at high incremental margins for digital, considering that most of the costs are fixed. We clearly continue to shoot for overall D&I margins above 30% on a full year basis. Thank you.
Activity to continue to grow going forward and we are essentially probably exposed to this.
Speaker Change: This activity set as we have an exposure that goes above a long on gas as we explained and hence we benefit from technology.
Kurt Kevin Hallead: Our next question is from Scott Gruber with Citigroup. Please go ahead.
In Saudi that is fit for the.
Olivier Le Peuch: Yes, hello. I want to just circle back on the Saudi comments. Good morning. I want to circle back on the Saudi comments because a few investors have asked for some clarification. Olivier, did you mention that the rig growth was a net 60, you know, 6-0, even with the loss of 20 jackets?
Kurt Kevin Hallead: Yeah, I think that I'm comparing, I think some offset. Okay, so there will be increased, there was a plan that has not changed for Saudi Arabia to accelerate the gas expansion program. What has accelerated is that the pace of this expansion program has improved, driven by the raise of the 50 to 60% target by 2030. And as a consequence of that, the whole year, which was based on previous plans that are now boosted by this accelerated expansion program, will result in a total of rigs year-on-year that will, from the beginning of the year to the end, add 60 rigs in total to the gas market, all So that's the reality of the market. Some of it is unconventional, up to 10 to 15 weeks in the unconventional, some of it is gas conventional, some of it is intervention and walkover.
Speaker Change: I know they'll improve seasonally and I always strong in the second half.
Should we be thinking about kind of flat year on year, and just thinking about the mix in that business.
Historically with greater offshore activity and weaker U S onshore activity.
Speaker Change: I would just expect those margins to be to be grinding higher.
Speaker Change: So maybe if you could comment on.
Speaker Change: What's kind of keeping those flat year on year, maybe the mix just isn't that.
Speaker Change: Impactful anymore between new sales strategy in the U S. But just some color on the year over year margins in well construction would be great.
Speaker Change: So look the way they were flat are indeed in Q1 year on year.
Speaker Change: For the full year I'll, usually don't really see margin expansion in the well.
Speaker Change: Well construction and whether what are what the headwind we have at least this is the lower activity in North America, so that kind of masks the.
Speaker Change: The margin expansion internationally, but.
Speaker Change: As we go through the year, you will see year on year growth in wealth.
Speaker Change: Construction, you have timing of something stuff and adjustments on a quarterly basis, but on a year on year basis, you will clearly see margin expansion coming from internationally.
Speaker Change: I mean just for clarity.
Olivier Le Peuch: So that's a total activity that gas is a strong market for Saudi. It's becoming a significant market going forward. So that's where we expect activity to continue to grow going forward, and we are essentially favorably exposed to this activity set as we have an exposure that goes above we are long on gas, as we explained, and hence we benefit from technology that we have deployed in Saudi that is fit for the Jaffa project, technology such as the under-balanced coal-tubing drilling solution that is being used on the Gawar gas, and the technology that we use across for So that's the benefit we see, and that's the total rig that we see going forward.
Speaker Change: All of the split.
Speaker Change: The net addition in.
Speaker Change: In the gas market in Saudi the net addition, due to the expansion.
Speaker Change: Acceleration is.
Speaker Change: It's about 20 weeks.
Speaker Change: Okay, great. Thanks.
Speaker Change: And traditional probably a bit more than half of that is in the.
Speaker Change: Little bit more than half of that in unconventional in the yoga and the rest.
Speaker Change: In the commercial so that's that's still hasn't seen the effects of these.
Speaker Change: Acceleration of gas expansion into two hence the shift indeed from.
Speaker Change: Offshore.
Speaker Change: Two onshore and from oil to gas characterized by these.
Speaker Change: Accelerated expansion consenting to 20 rigs and a reduction of the net of Shaw from end of year last year to end of this year that is both above that plus the mix changing for clients.
Kurt Kevin Hallead: Well, thanks. It's encouraging. Thanks for clarifying that.
Olivier Le Peuch: And then turning back to well construction margins, should we be expecting those to come in about flat for the year? I know they'll improve seasonally and are always strong in the second half. Should we be thinking about kind of flat year on year? And just thinking about the mix in that business, historically with greater offshore activity and weaker U.S. onshore activity, I would just expect those margins to be grinding higher. So maybe if you could comment on, you know, what's kind of keeping those flat year on year. Maybe the mix just isn't that impactful anymore with the new sales strategy in the U.S., but just some color on the year over year margins and well construction would be great.
Speaker Change: Okay got it I appreciate that thank you.
Speaker Change: Thank you.
Speaker Change: Next we go to Kurt <unk> with benchmark. Please go ahead.
Kurt: Hey, Hey, everybody. Thank you for slide me in here I appreciate that.
Kurt: So given the fact that you are currently in Kuala Lumpur, and Asia seems to be one of your growth vehicles, and something that really hasn't gotten a lot of airtime just kind of curious as to what you see what you see is driving that growth.
Kurt: What regions within Asia.
Kurt: Standing out to you.
Speaker Change: I think great Great question I think indeed, we had a reason to come here and the reason why first the team has delivered and have been delivering a resilient growth and margin expansion over the last two years since the rebound from a from the Covid.
Kurt Kevin Hallead: So, look, they were flat indeed in Q1 year-on-year, but for the full year, you should actually see margin expansion in well construction. The headwind we have a bit is lower activity in North America, so that kind of masks the margin expansion internationally, but as we go through the year, you will see year-on-year growth in well construction. You have timing of certain stuff and adjustments on a quarterly basis, but on a year-on-year basis, you will clearly see margin expansion coming from internationally.
Speaker Change: Fine and then and I think we have been observing supporting the team, but I think spinning spinning two weeks in a region I think is clearly, giving us 30 bit more spotlights onto the strengths of the vision I think first and foremost I'd like to say this region has got guys bye.
Speaker Change: The critical.
Olivier Le Peuch: And maybe for clarity on the split on the net addition in the gas market in Saudi Arabia, the net addition due to the expansion acceleration is about...
Speaker Change: <unk> they are putting to support security of supply parts of the gas and invest on DAU doing too.
Kurt Kevin Hallead: Thanks. Thanks. Thanks. Thanks, a little bit more than half of that in the non-commercial and the rest in the commercial. So that's the resulting effect of this acceleration of gas expansion into Saudi, hence the shift indeed from offshore to onshore and from oil to gas, characterized by this accelerated expansion translating to 20 rigs and the reduction of the net offshore from end of year last year to end of year this year that is above 10, that's the mix changing for light.
Speaker Change: I would say to support and stabilize our production and.
Speaker Change: And Tim on server decline, so stabilizing oil production and accelerating gas is certainly the ceiling that is come on to the entire region and I think it's further accentuated by a security and is translating into a new wave of investment.
Speaker Change: It was very telling to you to see that in Indonesia and Malaysia.
Speaker Change: In south.
Speaker Change: In offshore.
Olivier Le Peuch: Okay, I got it. I appreciate that. Thank you.
Speaker Change: China in Bangladesh, and India, we are seeing new round of exploration and appraisal.
Luke Lemoine: Next, we go to Kurt Hallead with Benchmark. Please go ahead.
Speaker Change: What's been seen with new entrants into this market that went up there certainly.
Olivier Le Peuch: Hey everybody, thank you for sliding me in here. I appreciate that. So given the fact that you are currently in Kuala Lumpur and Asia seems to be one of your growth vehicles and something that really hasn't gotten a lot of air time, just kind of curious as to, you know, what you see, what you see is driving that growth? What regions within Asia do you think are standing out?
Speaker Change: Fuel's back and I think this is creating a new set of opportunity.
Speaker Change: Our offshore primarily and some of them in deepwater.
Speaker Change: Asset and I think thats really create some opportunity for subsea and at the same time as I said in a stress.
Speaker Change: Also our focus and importantly onto <unk>.
Luke Lemoine: I think this is a great question. I think, indeed, we had a reason to come here. The reason why, first, the team has delivered and has been delivering resilient growth and resilient margin expansion over the last two years since the rebound from COVID. And I think we have been observing and supporting the team, but I think spending two weeks in the region is clearly giving us a little bit more spotlight on the strengths of the region.
Speaker Change: Supporting and preventing.
Speaker Change: Pollution decline for oil and this is visible across all our assets.
Speaker Change: Assets, both onshore and offshore and answer intervention recovery technology is being food.
At the investment so you combine this wave of new investments fluctuating gas from exploration to development projects with this.
Luke Lemoine: I think, first and foremost, I have to say, this region is characterized by the critical resources they are putting to support security of supply, partially gas, and the investment they are doing to, I would say, support and stabilize oil production and prevent further decline. So, stabilizing oil production and accelerating gas is certainly the theme that is common to the entire region. And I think it's further accentuated by energy security, and it's translating into a new wave of investment.
Speaker Change: Dan mentioned weaker refocus production on the existing declining assets that exist here in all markets.
Speaker Change: The region and you get the recipe for a significant investment in a steady investments in every country.
Speaker Change: She ought to.
Speaker Change: At the Malaysia.
Speaker Change: Thailand, China offshore and onshore India, Bangladesh is as I said, a new country and I think this is this very interesting and very exciting for the team and we're responding to this by deploying assets to bring resource center and catering Sip technology for the market to help us grow and continue to see.
Luke Lemoine: It was very telling to see that in Indonesia, in Malaysia, in South America, in offshore China, in Bangladesh, in India, we are seeing a new round of exploration appraisal that has not been seen with new entrants into this market that were not there certainly a few years ago. And I think this is creating a new set of opportunities, both offshore primarily and some of them in deep water assets, and I think that will create further opportunities for subsea.
Speaker Change: In this region.
Speaker Change: That's great that's great color I appreciate that so.
Speaker Change: Maybe yes, maybe a follow up here as you kind of referenced.
Speaker Change: Significant opportunities to tap into the production spending profile in your customer base and hence the dynamic.
Speaker Change: Dynamic related to the champion X acquisition.
Speaker Change: When you look at the production chemicals.
Luke Lemoine: And at the same time, as I said, under stress, there is also an independent focus on supporting and preventing pollution decline for oil. And this is visible across all assets, both onshore and offshore. And hence, intervention and recovery technology is being put to add investment. So, you combine this wave of new investment for accelerating gas from exploration to develop projects with this intervention and recovery focus production on the existing declining assets that exist here in all markets across the region.
Yeah.
Speaker Change: There.
Speaker Change: As the clear leader there.
Speaker Change: And I'm, just kind of curious as to.
Speaker Change: Is there.
Speaker Change: With that I'd like some secret recipes and production chemicals that you guys are bringing to the table that could potentially enhance.
Speaker Change: Our margins and substantially boost the revenue growth rate or boost the champion acquisition.
Speaker Change: I think there are multiple aspect to this first and foremost nothing we have been operating also in pollution chemicals, albeit at a smaller scale international market, we are actually adding quite a portfolio in a reservoir chemicals and helping us it's tied to recovery and optimize our internal <unk>.
Luke Lemoine: And you get the recipe for a significant investment and a steady investment in every country from Indonesia to Malaysia, to Thailand, China offshore and onshore, India, Bangladesh, as I said, a new country. And I think this is very interesting and very exciting for the team. And we are responding to this by deploying assets, deploying resources, and creating technology for the market to help us grow and continue to succeed in this region.
Speaker Change: And stimulation program in also in international market and we believe that combining this will help us open.
Speaker Change: And compare and optimize fit for reserve well solutions for process facility solution and I think we both could be from defense.
Speaker Change: Personal strengths, we have a <unk> portfolio of equipment process portfolio, both onshore and offshore.
Olivier Le Peuch: That's great. That's great, Kel. I appreciate that. So, maybe a follow-up here, as you kind of referenced, there are significant opportunities to tap into the production spending profile of your customer base and hence the dynamic related to the Champion X, you know, acquisition. You know, when you look at the production chemicals piece of the business, Champion X is a clear leader there, and I'm just kind of curious as to, you know, are there, lacking a better phrase, are there, like, some secret recipes in production chemicals that you guys are bringing to the table that could potentially enhance margins and substantially boost the revenue growth rate or boost Champion X's position?
Speaker Change: Is that what can equal and subsurface domain expertise and treat expertise and they have obviously frida and understanding of that well.
Speaker Change: The pollution can be sweet portfolio, so I think combining move our fingers.
Speaker Change: And in a unique opportunity and the feedback from customers is indicating that they see a lot of potential discrimination, where we'll obviously try to either and extend this to a food integrated pollution solution, including digital including lift solution reading intervention any green process if people an optimist.
Speaker Change: <unk> that we deliver on the CSO and other places. So there is a place where this will have the effect my opinion is in.
Luke Lemoine: I think there are multiple aspects to this. First and foremost, I think we have also been operating in the production of chemicals, albeit at a smaller scale, on the international market. We actually have quite a portfolio of reservoir chemicals that are helping us extract recovery and optimize our intervention and stimulation program also in the international market. And we believe that combining this will help us open up and compare and optimize fit-for-reservoir solutions, fit-for-process facility solutions. And I think we both are coming from different positional strengths.
Speaker Change: So diamond and also will compare and complementary sugar on trying to find a low carbon and solutions that help also created further differentiated the portfolio.
Speaker Change: Portfolio sustainable pollution chemical portfolio for the market. So we are we have quanta and upsides.
Speaker Change: Technology. In addition, do you have an upside on the on market expansion to use.
International footprint to complement the strengths of <unk>.
Speaker Change: <unk> pollution chemical into North America.
Speaker Change: That's fantastic Thanks, Olivier I appreciate it.
Olivier Le Peuch: We have a process portfolio, and equipment process portfolio, both onshore and offshore. We have reservoir chemical and subsurface domain expertise and fluid expertise. And they obviously have a fluid understanding of the reservoir and the production chemistry portfolio. So I think combining both is, in our opinion, a unique opportunity, and the feedback from customers is indicating that they see a lot of potential in this combination. We'll obviously try to add and extend this to a full integrated production solution, including digital, including lift solutions, including intervention, and including process equipment optimization that we deliver on FPSO and elsewhere.
Speaker Change: Got it got it thank you.
Speaker Change: And our last question comes from Luke Lemoine with Piper Sandler. Please go ahead.
Luke Lemoine: Hey, good evening.
Luke Lemoine: Olivier on carbon capture understand what <unk> is doing and what <unk> is doing but can you help frame. How you see this business developing along with how the combination is greater than the two standalone entities.
Olivier: Yes. Good good good question first and foremost I think we see gcs as they need it most.
Olivier: The most of the abuse in the most attractive.
Olivier: Market total addressable markets adjacent to our space, where we can contribute to.
Olivier: The carbonization and of the industry and just sort of space. So we believe we are first our market position in light of play into the into the sequestration two I'll take those each of our digital and solutions to deliver.
Olivier Le Peuch: So there is a place where this will have further effects, in my opinion, in the offshore environment. And also, we will compare and complement each other in trying to find a low carbon and solution that helps also create a further differentiated portfolio, a sustainable production chemical portfolio for the market. So we have quite an upside in technology, in addition to having an upside on the market expansion to use our international footprint to complement the strengths of Champonex pollution chemicals in North America.
Olivier: Not only site selection, but also site.
Olivier: Characterization and <unk>.
Olivier: And development of site for cabin for carbon sequestration, So that's Uh huh.
Olivier: Doing this we have significant access to a large number of customers within oil and gas.
Olivier: And beyond oil and gas to the greater that editors that are willing to develop so we have this as a starting point that gives us some market access.
Luke Lemoine: That's fantastic. Thanks, Olivier. I appreciate it. You're welcome. Thank you. And our last question comes from Luke Lemoine with Piper Sandler. Please go ahead.
Olivier: Across many of the <unk> and many of the project and we quoted more than 30 projects were always part of at any point in time and I think we have had quite a lot of fixed pounds. There. So we also have invested into capture technology that we have done such as FTE I for non aqueous solvents, which are trying to where we are.
Olivier Le Peuch: Hey, good evening. Olivier on carbon capture understands what SLB is doing.
Luke Lemoine: Yeah, good, good, good question. First and foremost, I think we see CCS as the most obvious and the most attractive market, the total addressable market adjacent to our space, where we can contribute to decarbonization of the industrial space. So we believe we are the first market position and right of play into sequestration through our technology, through our digital and solutions to deliver not only site selection but also site characterization and development of sites for carbon sequestration.
Olivier: To disrupt the intention that we have to disrupt the economics of capture for Lou.
Olivier: Lower stream local transmission stream of C. O two now to abate second, though but what I could carbon capture brings into this is a commercial.
Olivier: Sure solution platform or re commercialized that will serve us as a base for expansion for deployment of <unk> technology and also.
Luke Lemoine: So that's our, and by doing this, we have significant access to a large number of customers within oil and gas through the hubs and beyond oil and gas to the emitters that I will need to develop. So we have this as a starting point that gives us market access across many of the FIDs and many of the projects. And we have quoted more than 30 projects we are always part of at any point in time. And I think we have had quite a lot of experience there.
Olivier: Yields on the initial success they have had to deploy that throw them onto some European markets and use our footprint, where we see the market evolving fast in North America, and Middle East and in Asia, and using this platform and being.
Olivier Le Peuch: So we also have invested in capture technology that we have done, such as RTI for non-aqueous solvents, which are trying to, where we are trying to disrupt, the intention we have is to disrupt the economics of capture for low, low, low stream, low concentration stream of CO2 in our private sector. But what Acker Carbon Capture brings into this is a commercial, commercial solution platform, or re-commercialized one that will serve us as a base for expansion for the deployment of our capture technology.
The go to market for this.
Olivier: Carbon capture solution that they are offering but supermom ticket, we saw innovation and that's we're investing I'm using this as a platform to deploy innovation, so combining sequestration and capture to offer these combined opportunity for customers seeking energy solution and using the platform of the commercial carbon capture.
Olivier: Carbon capture it exists today and its commercial and using it as a platform to deploy them and add and Super among this with a new disruptive technology. That's the purpose and that's the intention we have that's the.
Olivier Le Peuch: And also, we will build on the initial success they have had to deploy this platform on some European markets and use our footprint where we see the market evolving fast in North America, the Middle East, and Asia. And using this platform and being the go-to market for this carbon capture solution that they are offering, but supplementing it with our innovation that we are investing in and using this as a platform to deploy innovation.
Olivier: The ambition we have in this market.
Okay, and then maybe on North America, it's a smaller piece of your business.
Olivier: But could you talk about how you see it developing over the course of the year past <unk>.
Olivier Le Peuch: So combining sequestration and capture to offer this combined opportunity for the customer's technology solution and using the platform of the commercial carbon capture, Acker Carbon Capture that exists today as a commercial product, and using it as a platform to deploy and add and supplement this with new disruptive technology.
Speaker Change: Yeah, I mean, we have been always you're guiding.
Speaker Change: And we are keeping our gan on stats, we believe that on a full year basis.
Speaker Change: It would be more muted than we I don't spend at the beginning of the year considering the softness of the of the market that the at the start of the year the persistent low gas price.
Luke Lemoine: That's the purpose. And that's the intention we have. That's the ambition we have in this market, and then maybe in North America, too, but smaller. Can you talk about how you see it developing over the course of the year? Yeah, I think we originally guided and we are keeping our guidance that we believe that on a full year basis, it will be more muted than we had anticipated at the beginning of the year considering the softness of the market at the start of the year, the persistent low gas price, the capital discipline, and also the consolidation in the market.
Speaker Change: Capital discipline and also the AR.
Speaker Change: The consolidation of the market and we expect going forward, if we get it.
Speaker Change: Low single digit growth sequentially.
Speaker Change: We anticipate at the end of the year to seal.
Speaker Change: <unk> outperformed the market that will see a year on year decline on the activity by posting.
Speaker Change: Muted, but positive growth.
Speaker Change: The shortfall that we may have considering this offset will be fully offset by a by international growth as we commented on where we see.
Luke Lemoine: And we expect going forward, we will see low single-digit growth sequentially. We anticipate at the end of the year still outperform the market that will see a year on year decline in reactivity by posting muted but positive growth. But the shortfall that we may have concerning this offset will be fully offset by international growth, as we commented, where we see resilience and we see further growth potential in many markets. So hence, we have reiterated our full support.
Speaker Change: Is it down and we see further growth potential in many markets.
Speaker Change: So hence we have reiterated our full year guidance.
Speaker Change: Okay, great. Thanks Olivier.
Olivier: Thank you.
Olivier: Turn the conference back to Olivier Le push for closing comments.
Yeah.
Olivier Le Peuch: Thank you very much ladies and gentlemen to conclude today's call I would like to leave you with the following takeaways.
Olivier Le Peuch: First the global energy landscape remains very compelling for our business demand for energy is accelerating and this is resulting in strong activity dynamics that are closely aligned with our three engines of growth.
Olivier Le Peuch: I'll turn the conference back to Olivier Lepouche for closing comments.
Olivier Le Peuch: Thank you very much. Ladies and gentlemen, to conclude today's call, I would like to leave you with the following takeaways. First, the global energy landscape remains very compelling for our business. Demand for energy is accelerating, and this is resulting in strong activity dynamics that are closely aligned with our three engines of growth. We will continue to innovate with customers across our core, digital, and new energy businesses to meet this demand in the years to come. Second, S&B remains optimally positioned to harness the ongoing oil and gas cycle for further growth.
Olivier Le Peuch: We will continue to innovate with customers across our core digital and new energy to meet this demand in the years to come.
So on SMB remains optimally positioned to address the ongoing oil and gas cycle.
Olivier Le Peuch: Silver growth, we operate in the most residents and fastest growing markets internationally.
Olivier Le Peuch: And we have a unique portfolio of technology and service that differentiate us in North America.
Olivier Le Peuch: Weather and much footprint and offerings will continue to set us apart and drive our performance globally.
Operator: We operate in the most resilient and fastest-growing market internationally, and we have a unique portfolio of technology and services that differentiate us in North America. Together, our unmatched footprint and offerings will continue to set us apart and drive our performance globally. And third, after a strong start to 2024 and clear visibility into the year ahead, we look forward to achieving our full year financial ambition and commitment to shareholders' return. This is an exciting time for the industry, and I'm fully confident in our strategy for the future.
Olivier Le Peuch: Third after a strong start to 2024 and clear visibility to the ahead, we look forward to achieving our full year financial ambition and commitment to shell does who to them.
Speaker Change: This is an exciting time for the industry and I'm pretty confident in our strategy for the future I cannot hope for a better back might go up to continue delivering for customers and shareholders with that we conclude this morning's call. Thank you all for joining.
Speaker Change: Ladies and gentlemen that does conclude your conference for today. Thank you for your participation you may now disconnect.
Operator: I could not hope for a better backdrop to continue delivering for our customers and shareholders. With that, we conclude this morning's call. Thank you all for joining. Ladies and gentlemen, that does conclude your conference for today. Thank you for your participation. You may now disconnect.
Speaker Change: We're sorry your conferences ending now please hang up.
Operator: We're sorry, your conference is ending now. Please hang up.