Q4 2024 Schlumberger Ltd Earnings Call
Yeah.
Kate: Good morning, My name is Kate and I will be your conference operator today, and we'd like to welcome everyone to the fourth quarter S. L. P earnings call.
Kate: At this time all participants are in a listen only mode. After the Speakers' remarks, there will be a Q&A session. If you would like to ask a question. During this time simply press star followed by the number one on your telephone keypad.
Kate: You may remove yourself from the queue by pressing star two.
Speaker Change: As a reminder, this call is being recorded I will now turn the call over to James Our Mcdonald Senior Vice President of Investor Relations and industry Affairs. Please go ahead.
Speaker Change: Thank you Kate good morning, and welcome to the <unk> fourth quarter and full year 2024 earnings Conference call. Today's call is being hosted from Houston. Following our board meeting held earlier this week joining us on the call are lithium push chief Executive Officer, and <unk> Chief Financial Officer.
Speaker Change: Sure.
Speaker Change: Before we begin I would like to remind all participants that some of the statements we'll be making today are forward looking these.
Speaker Change: These matters involve risks and uncertainties that could cause our results to differ materially from those projected in these statements for more information. Please refer to our latest 10-K filing and other SEC filings, which can be found on our website.
Speaker Change: Our comments today also include non-GAAP financial measures additional details and reconciliation to the most directly comparable GAAP financial measures can be found in our fourth quarter and full year earnings press release, which is on our website.
Olivia: Finally in conjunction with our proposed acquisition <unk> and champion X have filed materials with the SEC, including a registration statement with the proxy statement and prospectus of these materials can be found on the sec's website or from the parties website with that I will turn the call over to Olivia. Thanks.
James: James Ladies and gentlemen, thank you for joining us on the call.
Olivia: This morning, I will begin by discussing our fourth quarter and full year results.
Olivia: Then I will provide an update on the evolving macro environment and are already activity outlook for the first quarter ended for you and so on that I would describe I always say to be yes.
Olivia: Diverse portfolio is uniquely positioned to continue delivering strong financial results in 2025 and beyond.
Olivia: Stephane will then provide more details on our financial performance and we will open the line for questions.
Olivia: Let's begin.
Olivia: We concluded the year with solid earnings and free cash flow growing globally, both sequentially and year on year and mentoring a second high margins.
Although the rate of pet stream investment golf continues to move the rates during the quarter <unk> benefited from a broad exposure to global markets. The divestiture of a portfolio across the upstream oil and gas lifecycle and from our differentiated digital offerings.
Olivia: We saw strong growth in EBITDA as well once again, we achieved a new quarterly high contribution from the UAE.
Olivia: Kuwait and Qatar and you also performed very well in North America benefited from higher activity in U S land, along with higher <unk> said.
Olivia: U S Gulf of Mexico.
Olivia: Despite the well known declines in Saudi Arabia, and in Mexico, Our fourth quarter financial performance remains consistent and the resident.
Olivia: Illustrates the strength of <unk> diversified portfolio.
Olivia: We closed the year with fourth quarter International revenue, reaching a new second IDE and we generated strong free cash flow of $1 six three.
Olivia: For the quarter.
Olivia: Turning now to the full year.
Olivia: We achieved our full year adjusted EBITDA margin target of 25% generated robust free cash flow of $4 billion and returned $3 3 billion to shareholders.
Olivia: Of course, the core divisions, we grew by 9% compared to the previous year prediction systems led the way growing by 24% and expanding margin by almost 300 bps for the full year.
Olivia: This performance was supported by double digit increases in Safaie system completion of the shift leading to 9% organic growth for the division Nonetheless, complemented by Deca subsea acquisition.
Olivia: There's other performance also continued its momentum growing by 9% year on year and expanding margins by approximately 100 bps with tongue stimulation any demand connected.
Olivia: And well construction, although revenue was flat year on year. It continues to lead in the call.
Olivia: Across our core divisions, all technology that they're shipping domain expertise and scale, enabling us to continue innovating data solutions for customers in every region and I'm proud to share that our fifth probation revenue crossed the 1 billion for the first time in 2024.
Olivia: This was.
Olivia: Also a very exciting year for digital as demand for our product and services continued to accelerate and a strong strategy partnerships with industry leaders, including Nvidia Amazon Web services and Palo Alto networks.
Olivia: Our customers continue to embrace the power of cloud computing AI and.
Olivia: And digital operations to shorten cycle times, and improve operating efficiencies and you said <unk>.
Olivia: Total revenue growing 20% for the full year exceeding our targets of high teens schools.
Olivia: Finally, we continue to increase our exposure beyond oil and gas and it has significant growth momentum in the low carbon markets. While we have a strong position to our portfolio of technologies for carbon capture and sequestration, Joe Camel and critical minerals.
Olivia: And we are competitive in this so growing exposure to data center infrastructure solutions are responding to our basket is to deliver a solution that meet the demands of a rapidly evolving digital landscape.
Olivia: Revenue from these activities exceeded $850 million in 2024, and we expect this to increase significantly in 2025.
Olivia: As you can see we are pursuing a wide range of opportunities within and beyond oil and gas.
Olivia: This is positioning us to benefit from a very diverse mix of new and existing customer spend.
Olivia: I want to thank the <unk> team for delivering this progress we should all be proud.
I am very impressed by our team's innovative spirit.
Olivia: Centricity and Thats, almost mindset and I look forward to building on our successes in the year ahead.
Olivia: Next let me discuss the evolving macro environment.
Olivia: Over the back half of 2024 customer adopted a more cautious approach to near term activity and discretionary spending primarily driven by concerns of an oversupplied oil market.
Olivia: Although these concerns persist we anticipate the oil supply imbalance, we gradually abate.
Olivia: Economic growth and heightened its focus on energy security, coupled with rising as your demand from AI and data centers, we support the investment outlook for the oil and gas industry throughout the rest of the decade.
Olivia: We can get the global oil supply, we expect that Opex plus we maintained its focus from commodity price stability throughout 2025 and in the U S. The ongoing focus on capital discipline by operators with limited near term supply growth in the region.
In this environment the current level of global upstream investment seems to be keeping the market imbalance absence of any further geopolitical disruptions.
Olivia: Overall, we expect global upstream investment to be steady in 2025 compared to 2024 with the deceleration in some resource plays being offset by a resilient growth across select countries and customers.
Olivia: Let me now provide a bit more detail on our 2025 activity outlook.
Olivia: International markets, while southern countries will continue to expand strong growth this will be balanced by reducing spending in others.
Olivia: <unk> EBITDA reached in Asia increases in the United Arab Emirates.
Olivia: It's Kuwait.
Olivia: China, and India will be offset by declines in Saudi Arabia, Egypt and Australia.
Olivia: Net in America growth in Argentina, and Brazil will be tempered by decreased spending in Mexico and Vietnam.
Olivia: And in European Africa growth in North Africa, Nigeria, Azerbaijan, and Kazakhstan will be more than offset by declines in Scandinavia and West Africa.
Olivia: Turning to North America oil and gas activity is expected to decline due to lower publicly announced capex in U S.
Olivia: Our drilling efficiency and historical green gas and LNG capacity expansions our result.
Olivia: That does center, such as a solution or the news going academia region supporting growth outside of our core business.
Olivia: Specific to the offshore markets, we expect a muted environment in 2025 attributed to white space in the productivity basket I E.
Olivia: North Sea, Australia, and Angola, Central and East Africa.
Looking ahead, we anticipate these white space in deepwater to start improving as the year progresses in preparation for a significant number of Fid's humping up in 2026 across several deepwater basins.
Olivia: Let me now describe how this activity dynamics will unfold quarter divisions.
Olivia: Digital integration, we expect revenue to remain steady year on year with growth in digital being offset by a decline in EPS due to the <unk> divestiture.
Olivia: Is it all we maintained its very strong growth momentum with full year revenue growth in the high teens supported by digital operation and data and AI solutions.
While Nicole we expect revenue to be flat year over year with modest growth in <unk> and a window of performance offsetting the decline in well construction across regions.
Olivia: Collection systems growth will be driven by artificial lift completions valve and midstream pollution systems, while reserve our performance will be supported by <unk> and commercial activity growth in international markets.
Olivia: When excluding the impact of <unk>, we expect the mix of geographies and Division I've. Just described to result in a steady revenue outlook for 2025.
Olivia: This will be translated into adjusted EBITDA and margins.
Olivia: At both 2024 levers.
Olivia: Now turning to the first quarter, we expect revenue and adjusted EBITDA to be at similar levels as last year in line with our full year guidance.
This will be followed by an activity rebounding in the second quarter, particularly in international markets.
Olivia: Finally, let me discuss why I believe is the best positioned company to navigate the evolving market dynamics that I just discussed looking.
Olivia: Looking at the evolution of the market in 2025 and beyond SMB size digital leadership integration capabilities and performance advantage our differentiators.
<unk> profit cost global operating <unk> line, and our combined exposure to short and long cycle projects, bringing resilience, enabling us to navigate regional and market situations.
Olivia: For example, our digital business is growing with accretive margins at an elevated rate as customers embrace the power of data and AI to drive performance and efficiency of course that will close and producing assets.
Olivia: Our integration capabilities are shipping shaping our engagement with customers beyond noc's, allowing us to add further resiliency and diversity against an industry backdrop.
Olivia: And pollution recovery is becoming a larger part of our business as customer work to maximize the producing assets and this will be further enhanced by the contribution from <unk>.
Olivia: Furthermore, and as illustrated in our success in 2020 for a cost of carbon and digital infrastructure.
Olivia: We are developing new growth pathways beyond oil and gas.
Olivia: Fast growing markets decoupled from the upstream sector.
Olivia: As you can see while operating from a very strong position.
And as we remain focused on cost optimization and process enhancements leveraging digital transformation to become a more efficient organization. This will support our margin expansion journey.
Olivia: The combined combination of strengths I've just described along with our continued business performance provide us with confidence in our ability to continue delivering strong cash flows and increase return to shareholders.
Olivia: You have already seen the action we have taken in our earnings release today, as we increase our dividends and accelerated share repurchase to start the year.
I'll now turn the call over to Stefan to discuss these announcements and our financial results in more detail.
Stefan: Thank you Olivia and good morning, ladies and gentlemen.
Stefan: I will start by providing an overview of our full year results.
Stefan: Before getting into the specifics of our fourth quarter performance.
Stefan: Full year of 2020 for revenue of $46 3 billion.
Stefan: 10% year on year with you acquire a doctor of subsea business accounting for half of the growth.
Stefan: Organic revenue grew 5%.
Stefan: Entirely driven by the international markets.
Stefan: This was led by the Middle East.
Stefan: <unk> grew 19% year on year to reach a record high.
Stefan: Despite the well publicized headwinds in the second half of the year.
Stefan: International pre tax segment operating margins of 21, 4% improved 44 basis points year on year.
Stefan: With more than two firms of our international units.
Stefan: Im seeing both topline growth and margin expansion year on year.
Stefan: In North America full year, 2024 revenue declined 1% compared to the previous year. However.
Stefan: However, pre tax segment operating margins of 17% only dropped by 23 basis points with pricing pressure or mostly offset by a favorable technology mix cost efficiencies and higher digital revenues.
Stefan: From a dividend standpoint organic growth was led by digital and integration, which grew 10% year on year entirely driven by our digital business.
Stefan: On a full year basis digital revenue of $2 44 billion grew 20% year on year.
Stefan: Supported by close to 35% growth from cloud AI and edge technology.
Stefan: Our digital business was accretive to both <unk> overall revenue growth and its global margins.
Stefan: Yeah.
Stefan: Finally, our full year adjusted EBITDA margin of 25% increased by 52 basis points year on year.
Reaching the highest levels since 2015.
Stefan: Turning to the fourth quarter results.
Stefan: Fourth quarter revenue of $9 3 billion increased 1% sequentially driven by record high digital revenue.
Stefan: From a geographical perspective, the middle East led the way.
Stefan: With 5% sequential revenue growth.
Stefan: Driven by the startup of unconventional gas activities in the United Arab Emirates.
As well as strong performance in Egypt and catch up.
Stefan: Adjusted EBITDA margin for the fourth quarter reached a cycle high of 25, 7%.
Stefan: This is 33 basis points higher than the same period of last year.
Stefan: Fourth quarter earnings per share excluding charges and credits.
Stefan: Was <unk> 92.
Stefan: This represents an increase of <unk> <unk> sequentially and <unk> when compared to the same period of last year.
Stefan: We recorded 15 of net charges during the fourth quarter.
Stefan: This included.
Stefan: 10 cents of impairment relating to certain equity investments in fixed assets.
Stefan: <unk> in connection with our ongoing cost out program.
Stefan: <unk> <unk> of merger and integration charges relating to <unk> and champion X transactions.
And a <unk> <unk> gain on the sale of an equity investment.
Stefan: Let me now go through our fourth quarter results for each division.
Stefan: Fourth quarter of digital and integration revenue of $1 2 billion increased 6% sequentially.
Stefan: Given by 10% growth in digital while Ats revenue was essentially flat.
Stefan: Pre tax operating margin expanded 274 basis points.
Stefan: 238, 3% as a result of higher digital sales and cost efficiencies.
Stefan: Reservoir performance revenue of $1 8 billion declined 1% sequentially on reduced intervention and stimulation activity.
Stefan: Margins increased 45 basis points to 25% due to improved profitability in evaluation services.
Stefan: Well construction revenue of $3 3 billion decreased 1% sequentially and margins contracted 70 basis points.
Stefan: Similarly, due to lower drilling activity in Mexico, and Saudi Arabia.
Stefan: And finally.
Stefan: Production systems revenue of $3 2 billion increased 3% sequentially on higher international sales of <unk>.
Stefan: Artificial lift midstream production systems and completions.
Stefan: Pre tax operating margins decreased 93 basis points to 15, 8% due to lower profitability in subsea.
Stefan: Nearly offset by improved profitability in artificial lift and midstream production systems.
Stefan: Yes.
Stefan: Now turning to our liquidity.
Stefan: We generated $2 4 billion of cash flow from operations and $1 6 billion of free cash flow during the fourth quarter.
Stefan: This strong performance resulted in full year of free cash flow of $4 billion.
Stefan: As a result, we reduced our net debt by $1 1 billion during the quarter to $7 4 billion.
Stefan: This represents our lowest net debt level since the first quarter of 2016.
Capital investments, including Capex and investments in Ats projects and exploration data.
Stefan: We have $759 million in the fourth quarter.
Stefan: And $2 6 billion for the full year.
Stefan: Looking ahead, we will continue to be disciplined as it relates to our capital investments.
Stefan: In 2025, we expect to reduce capital investments, excluding the impact of <unk>.
Stefan: To approximately $2 3 billion.
Stefan: With the Capex portion at the low end of our previously shared guidance of 5% to 7% of revenue.
Stefan: During the fourth quarter, we repurchased 11 8 million shares of our common stock for a total purchase price of $501 million.
Stefan: For the full year, we returned a total of $3 3 billion to our shareholders in the form of dividends and stock repurchases.
Stefan: Okay.
Stefan: With continued focus on capital discipline and clear visibility into strong cash flow generation in 2025, we.
We are committed to increasing returns to shareholders. Once again this year.
Stefan: When.
Stefan: Finally, the increased quarterly dividend that was announced today, we've increased share repurchases. We are targeting to return a minimum of $4 billion to our shareholders in 2020.
Stefan: Notably as you saw in our earnings announcement this morning.
Stefan: We entered into accelerated share repurchase transactions to repurchase $2 3 billion of our company's common stock.
Stefan: These transactions not only reflects our confidence in our continued financial performance.
Stefan: But also our belief that our stock is undervalued relative to the strength of our business.
Stefan: Furthermore, this will accelerate the repurchasing of shares that will be issued in connection with the pending champion X transaction.
Stefan: As it relates to <unk> the.
Stefan: The transaction received Cpus clearance in December.
Stefan: And the engagement we've over our regulatory authorities is progressing with.
Stefan: We continue to work towards closing the transaction before the end of the first quarter.
Stefan: With respect to our over our pending transaction, we expect the divestiture of our interest in the <unk>.
Stefan: <unk> project in Canada to close in the next few months.
Stefan: I will now turn the conference back to you.
Stefan: Yes.
Stefan: Thank you Stefan.
Speaker Change: Kate I believe we are ready to open the floor.
To the questions.
Speaker Change: We will now begin the Q&A session. If you would like to ask a question. Please press star followed by the number one on your telephone keypad. Your first question comes from the line of Dave Anderson with Barclays.
Dave Anderson: Morning, Dave Hi, good morning.
Speaker Change: Yes.
Speaker Change: In your outlook.
Speaker Change: Good morning.
In your outlook talking about the outlook for our international upstream spending.
Speaker Change: A flat outlook overall, but a lot of puts and takes scenarios you were highlighting I was wondering if you could sort of simplify a little bit in terms of Schlumberger has exposure to where two or three regions or countries that are kind of have the most upside for you had the potential to get better.
Speaker Change: Kind of maybe where the kind of two or three regions that could potentially get worse like whereas historically upside and the downside scenarios.
Speaker Change: Our international outlook.
Speaker Change: Yes, I think I will start with the middle East at large the meter is at large are being impacted.
Speaker Change: All noted by the decline of activity sequentially cannot affect even Saudi is still very bright spot when it comes to multiple countries multiple customers having their.
Speaker Change: <unk> ongoing commitment to either expand okay.
Speaker Change: <unk> in all of our capacity for the future such as the UAE.
Speaker Change: In Kuwait and gas gas and conventional gas or commercial gas across the region is becoming a theme there.
Speaker Change: It will result into 40% expansion from 2020 to 2014 of gas collection. So these these are resilient.
Speaker Change: Commitment is resident Bridget.
Hesitant in growth that.
Speaker Change: His way.
Is offsetting the decline we're seeing in the top tier in Saudi and to this extent in <unk>.
Speaker Change: In Egypt and.
Speaker Change: <unk>.
Speaker Change: Set the offsetting a globally as as the Middle East is a region with my opening still.
Speaker Change: Long term residents, if not long term growth and.
Speaker Change: I believe that the short cycle activity that was a bit suppressed in the last few months I will come back as a result of that.
Speaker Change: All of our supply.
To be abated over time and has had into this combination of.
Speaker Change: More short cycle and is long cycle project gas and conventional and oil capacity.
Speaker Change: Again running at on all cylinders. So I believe middle East first is certainly widespread it will continue to be an advantage basin for us and international markets. Secondly, despite the commodity are put on the on the deepwater are still having quite a lot of white space and as a team into a low activity done.
Speaker Change: And could that be anticipated in 2025, and set and basing certain risks place I believe that.
Speaker Change: This first is creating the conditions for districts to be picked up later in the anticipation of the <unk> signing up and that will result in 2026 and 27.
Speaker Change: Partially.
Speaker Change: Free of.
Speaker Change: Suriname there in EMEA.
Speaker Change: The Indonesia Southeast China.
Speaker Change: And other part of the Globe, where exploration has been very active in in new basin and return in the coming quarters and coming at months into appraisal in two <unk>.
Speaker Change: So I'm still optimistic long term and very constructive about the deepwater despite.
Speaker Change: This year in <unk>.
Speaker Change: Guided by this.
Speaker Change: This activity, but yes. This is what I will recommend you to look at some international I would conclude by maybe the gas international gas market is still <unk>.
Speaker Change: Due to security in Asia due to your regional.
Speaker Change: Demand in the Middle East, we see drive.
Speaker Change: Long term investment and unconventional activity across the international market.
Speaker Change: Okay.
Speaker Change: Thank you.
Speaker Change: So we can shift the focus a little bit on the production side of the business. This is an area where in your portfolio is becoming a bigger part of the mix.
Speaker Change: Other than alcohol in Azure pulling in champion X going forward.
Speaker Change: Highlighted kind of a pro forma was about 9% year on year growth.
Speaker Change: We are kind of extremely awkward and overall production systems looking forward.
Speaker Change: How are you viewing sort of the growth trajectory of the kind of the overall production driven business should that be I mean, 9% is a starting point where does it go from here when you kind of fold everything and it looks like I do.
Speaker Change: Do you see kind of high single digit low double digit going forward do you have enough visibility to kind of help us understand that because I want to be part of your business that could be showing so much critical over the next few years.
Speaker Change: Yes, I think as you have seen our commentary production system will be having positive growth driven by discretionary recovery, we are seeing that.
Speaker Change: Performance is pulled this year by intervention and.
Speaker Change: Stimulation prediction because the activity. So this seems to stay the investment we're making technology investments, we are making our portfolio. The investment you are making creating integration opportunity in this space.
Speaker Change: He's exiting this year into visible growth Poole, England.
Speaker Change: In the Middle East.
Speaker Change: Across deepwater basin into this so we are very positive that this will become long term earnings potential for us it will become more and more backlog driven.
Speaker Change: A significant part of our mix in the long term be it related to opex or be tolerated long cycle. Capex. So we are constructive about the long term future of functional recovery. This is <unk>.
Speaker Change: One challenge I will say that the industry is facing.
Speaker Change: Intimately increased the recovery and demonstrate that digital integration and technology.
Speaker Change: At least the recovery factor of the most of the basins and can improve the pollution of existing producing asset and is through from U S shale to middle East.
Speaker Change: <unk> seen deepwater basin. So I think it is something that we are strategically investing into from technology from portfolio and that's something where we are starting to see the benefit as this year, indeed depletion recovery across the reservoir performance cost pollution system and in digital.
Speaker Change: We will outpace the growth we see from exploration and development in 2025 and expect this to continue going forward.
Speaker Change: Okay. Thank you very much.
David: Thank you David.
Speaker Change: Your next question comes from the line of Scott Gruber with Citi. Your line is open.
Scott Gruber: Yes, good morning.
Monica the color on the market.
Scott Gruber: Morning.
Scott Gruber: I guess following up on Dave's question.
Scott Gruber: Around the outlook for international activities revenues.
The normal sequential improvement into Q4 the second.
Scott Gruber: Second half of the year going to be a little bit.
Scott Gruber: Higher weighted how do you see that the shape of the year progressing.
Speaker Change: Is it normal or a little bit more kind of second half weighted.
Speaker Change: No I think it's fair to assume that we see the typical pattern of.
Speaker Change: A low first quarter, followed by a rebound in the second half and followed by later in the year.
Speaker Change: Strong activity in putting some resource plays and including the upside that we foresee that could commercialize in deepwater, but yes I think.
Speaker Change: It's an H two.
Speaker Change: Hi.
Speaker Change: TVT and higher.
Speaker Change: I will subside to some extent.
Speaker Change: Following a niche one pattern that will either.
Speaker Change: Loading in Q1, resulting from the seasonal effect and also as a theme from the sequential.
Speaker Change: Declines from some of the highs we added in the fourth quarter <unk> with a record higher international revenue.
Speaker Change: Got it.
Speaker Change: At this juncture to comment on Russia, and the continuity of your operations there.
Speaker Change: I had a chance to digest.
Speaker Change: Ladies sanctions language and you can you.
Speaker Change: Can you maybe provide an update on just kind of overall contribution to the business.
Speaker Change: Yeah, Let me comment on this our revenue in Russia continues to decline and accounted for 4% of our global revenue.
Speaker Change: In 2024 down from 5% in previous year.
Speaker Change: And as you know since the start of the conflict, we have taken voluntary measure to curtail a rush of activity, including halting Hudson shipments of product and technology to Russia from all SMB facilities worldwide in 2023.
Speaker Change: And actually we are reviewing the new U S sanction and at this point really is that our voluntary measures aligned with the new sanctions.
Speaker Change: Okay I appreciate the color I'll turn it back thank you.
Speaker Change: Thank you.
Speaker Change: Your next question comes from the line of Irene <unk> with J P. Morgan Your line is open.
Irene: Yes, good morning, Olivier I wanted to see if you could provide maybe a little bit of clarity around the updated outlook for 2025.
Speaker Change: Is it fair you expect flattish <unk>.
Irene: Revenue on a standalone basis.
Speaker Change: And adjusted EBITDA.
Speaker Change: At or above 2024 level is that I.
Speaker Change: Just want to make sure that I have that correct.
Speaker Change: Yes fin. This is you collected captured what we prepared and disclosed in our prepared.
Speaker Change: Indeed.
Speaker Change: We foresee that the mix of activity both in the U S. The mix of the.
Speaker Change: The give and takes that.
Speaker Change: They contracted this year.
Speaker Change: Resulting to a flat.
Also revenue outlook globally and.
Speaker Change: Will result into also.
Speaker Change: Our ability to deliver earnings EBITDA dollar to be at both 2024, excluding all of this excluding <unk>.
Speaker Change: Okay got it got it and just maybe you could clarify or elaborate you mentioned, how some of your non.
Speaker Change: Oil and gas.
Speaker Change: Segments low carbon solutions carbon capture minerals datacenter solutions that youre seeing.
Speaker Change: What could be some significant growth in 2025 can you just provide maybe a little bit of.
Speaker Change: The thoughts I think you cited at $850 million.
Speaker Change: Number for 2024, what kind of growth or you.
Speaker Change: Could we see at that level.
Speaker Change: I'll take this needed to defend so so yes just to.
Speaker Change: To earn rapid unwrapped at a little bit.
Speaker Change: More than 850 million these made the.
Speaker Change: Low carbon activities.
Speaker Change: For example, carbon sequestration.
Speaker Change: And capture in geothermal.
Speaker Change: As well as as.
Speaker Change: As new activities.
Speaker Change: We have started to.
Speaker Change: We have started in 2024, which relate to the data center infrastructure solutions. So altogether in 2020 of all of this was this was more than 850 and then.
Speaker Change: And just to clarify some of these activities.
Speaker Change: A recorded as part of our core business, such as carbon sequestration Geo download well, we provide reservoir characterization drilling services or even digital solutions.
Speaker Change: Some of it is captured in the relevant core divisions are in digital.
Speaker Change: And some of the overall activities such as carbon capture capture.
Speaker Change: <unk> joint venture is capture of the under the overall category and our digital reporting Susan. This is just to clarify now going forward. This is growing very fast.
Speaker Change: Faster than <unk>.
Our core NIM.
Speaker Change: So this is providing.
Speaker Change: Never never.
Speaker Change: One way to to offset some of the headwinds on the core business and it is a particularly growing on the.
Speaker Change: The Ccs side on the geothermal in both data center infrastructure solutions I mentioned.
Speaker Change: <unk>.
Speaker Change: Okay. Thanks, a lot.
Speaker Change: Thank you. Thank you.
Your next question comes from the line of Neil Mehta with Goldman Sachs. Your line is open.
Neil Mehta: Good morning, Neil.
John I just wanted to.
Speaker Change: My friend I, just wanted to talk about the share repurchase program.
Speaker Change: Takeda that you want to take salary.
Speaker Change: Great.
And then how do you think about taking advantage.
Speaker Change: Some of the volatility in the stock and you said.
Speaker Change: At least 4 billion. So how do you think about capturing upside to the extent that the free cash flow materializes.
Speaker Change: Sure. So first you mentioned it all.
Speaker Change: All good here.
Speaker Change: Especially the accelerated chap transaction is to take advantage of what we believe is a is a low valuation for our stock as we especially as we start the year so make any please.
Speaker Change: What we did is we paid $2 $3 billion upfront to the banks, which are helping us with this program. We paid about $2 3 billion of Judy earlier. This week and we received delivery on January 13, and exactly of approximately 48 million shares of our stock and this represent.
Speaker Change: About 80% of the total shares to be bought.
Speaker Change: On the other programs.
Speaker Change: <unk> sales was 48 million shares where data to us.
Speaker Change: I'll now removes from more outstanding share count.
And now we will be a true up in the next few months before the end of May the banks go at their pace, but the deadline at the end of May we.
Speaker Change: It will be a true up based on the volume weighted average price of the sales minus the discount and when we received.
Speaker Change: The remaining shares so we've always with $2 3 billion of sales that can be removed right away for more outstanding job count and.
Speaker Change: At what we believe is very favorable prices due to the second part of your question.
Speaker Change: About $2 3 billion is to take care of.
Speaker Change: Of the majority of what we include in the in the total 4 billion returned to shareholders. So we mentioned that this 4 billion.
Speaker Change: Is indeed a minimum.
Speaker Change: We do have the option to increase we will if we increase this 4 billion it will be only in the form of additional.
Speaker Change: Additional buybacks.
Speaker Change: We can go we will go with bps above the $2 3 billion because this was just the.
Speaker Change: High level.
Speaker Change: The total for the year. So we will go slightly above but we can go even beyond that to exceed the $4 billion total returns to shareholders will decide when he says.
Speaker Change: As the year unfolds.
Speaker Change: Pending on.
On how much the generics businesses for example will contribute to free cash flow once the transaction closes depending on our free cash flow performance.
Speaker Change: In the year and potential M&A opportunities, but there is clearly the option to increase that $4 billion total returns.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Okay, that's very helpful.
Speaker Change: And then the follow up is just can you talk about where we stand.
Speaker Change: Helping the market better isolate the value of the digital business in Canada was an important piece of it and then maybe post champion X there could be some segment.
Speaker Change: Re segmenting, how do we think about that.
Speaker Change: That $3 billion number and when we can get a little bit more clarity.
Speaker Change: About the multiyear outlook for it on a standalone basis.
Speaker Change: Yes, Neil I think we are still very confident that the dynamic we are witnessing in leveraging to grow our digital business across the different elements in that.
We have an offering will continue.
Across the rest of the decade.
Speaker Change: We will be this will continue to be accretive as we have said from the margin and this will be in a position and we will decide.
Speaker Change: In the coming months or quarters.
Speaker Change: The best way to.
Speaker Change: <unk> provides a further disclosure on appropriate disclosure so that.
Speaker Change: You and everybody kind of understand how this.
Speaker Change: It's being built and understand the making of these.
Speaker Change: Based on the actual performance of digital accretive and will in due time project beyond 2025.
Speaker Change: Set ambition for the years to come and and.
Speaker Change: That we believe that.
Speaker Change: Market leadership position we have.
Speaker Change: Have taken.
Speaker Change: The platform approach, we have the combination of digital portion workflow and the first mover advantage, we have had in cloud and AI, we continue to contribute to.
Speaker Change: Give us time.
Speaker Change: Wind and accretive growth.
Speaker Change: Across the rest of the decade.
Clearly above and beyond the upstream market spend going forward. So we see this as a very advantaged position that we have that will.
Speaker Change: I gave enough disclosure detail too so that everybody understands and nothing to making off but also the trajectory the trend.
Speaker Change: Actual performance underlying performance on margins and capital.
Tony: Thanks, Tony.
Yeah.
Okay.
Tony: Thank you Danny.
Speaker Change: Your next question comes from the line of Rob <unk> with Bank of America. Your line is open.
Rob: Thank you good morning Olivia.
Speaker Change: Ahmed.
Speaker Change: It's not execution.
Speaker Change: If you don't mind I'll start with a clarification clarification, so I'd say its a double clarification, but the 2025 Guy that does still include the ballots that asset in Canada, right because that sale has not closed yet.
Speaker Change: So that transaction is.
Speaker Change: Not closed so yes.
Speaker Change: Still the guide.
Speaker Change: <unk> the divestiture of.
Speaker Change: Canada I.
Speaker Change: Still the few months, we still need or potentially even a few weeks, we still need to close the transaction.
Speaker Change: Right right no I got that that's what I was guessing.
Speaker Change: Okay, Perfect and then maybe I wanted to touch a little bit on pricing like you said across your portfolio. Some markets are going up some are going down and as a result of the 25 outlook is about flattish, but what does that mean for pricing.
The industry appears to have been very disciplined in terms of capex deployment capacity deployed in the cycle, but.
Speaker Change: Are there any pockets where pricing is at or slightly.
Speaker Change: Likely to soften as we move through 'twenty side should investors be worried about that.
Speaker Change: Well I think I believe that the market remains capital discipline, the market internationally being international and Dana at the second half in terms of activity.
Speaker Change: We remain stretch in capacity you have a combination of the year will support.
Speaker Change: <unk> seem to be to be resilient now obviously, it's a competitive market.
Speaker Change: We are seeing seeing this but I think it was.
Speaker Change: That.
Speaker Change: The pricing trend is not a steadier infecting considering that the market is still that activity high internationally and and I think we have.
Speaker Change: The benefit of performance technology, and integration capability that are giving us the ability to defend and support our pricing going forward. So.
Speaker Change: Construction on this.
Speaker Change: Okay Fantastic and then if I can sneak one more.
Quickly.
Speaker Change: You said, the second is mature and right and it seems like it should be a good opportunity for the industry, including SMB to go back and assess the cost structure right as I'm thinking about the sentiment side of the equation taking cost out is there some opportunity that you have in EMEA over the next year or so to look at your cost structure and maybe something comes out of it that can help your margins.
Speaker Change: You can talk to that a little bit.
Speaker Change: So I'll take this.
Speaker Change: So first.
Speaker Change: We have progressed quite well in executing the.
Speaker Change: The program, we initiated missed mid last year in which you may remember a covered both the adjustment of operational resources in certain geographies and the optimization of our support structure. So that first set direction is is almost complete and sweat supported our margin expansion in the <unk>.
Speaker Change: The fourth quarter of last year, and you can see that by doing particularly in digital with our DNA margins, reaching 58% in Q4 compared to 44% in the in the same period of the previous year. So.
Speaker Change: Those actions will of course, those first set of action will continue to support margins going forward.
Speaker Change: The specific cost out program, we are of course continuously monitoring both.
Speaker Change: The operational resources than the support resources versus our activity levels as well as versus efficiency benchmark that we set for ourselves. Yes. This may result into additional adjustments as necessary in certain parts of the organization. This is really one of the key lever too.
Speaker Change: Protector.
Speaker Change: Our margins in with.
Speaker Change: Certain digital additional digital tools, we have.
Speaker Change: Functional back office et cetera, we still have efficiencies to two extracts.
Speaker Change: Okay Fantastic that's great color, Okay Olivier. Thank you thanks for that.
Speaker Change: Thank you.
Speaker Change: Thank you so a question.
Speaker Change: Your next question comes from the line of Roger read with Wells Fargo. Your line is open.
Yes, thank you and good.
Speaker Change: Congrats on the quarter and glad to see that.
Speaker Change: Celebrated share repos.
Speaker Change: What I'd like to dig into just maybe a little deeper here on the digital side I know you've already answered a few questions on it but I'm just curious as you look at the business here.
Speaker Change: Some of the.
Speaker Change: What are some of the things we should focus on in terms of growth opportunities you highlighted.
Speaker Change: Heres.
Contracts or collaborations.
Speaker Change: Move forward during the fourth quarter.
Speaker Change: But it is the law.
Speaker Change: <unk> patients on growth here to the extent one exists a function.
Speaker Change: Internal resources be that people or capital is it any hesitancy.
Speaker Change: From the customers.
Speaker Change: Is there has it didn't see the spend overall affecting what they are willing to spend.
Speaker Change: On the digital side.
Speaker Change: Well I think let me first describe.
Speaker Change: And clarify the vector of growth that we see.
Speaker Change: The growth pathways to digital and I think I will.
Speaker Change: Ill summarize it in three buckets.
Speaker Change: First digital operation the ability, we have to provide products or to provide services and solutions.
Speaker Change: To help our customers extract efficiency in drilling in production and producing assets and to transform the way, we operate and to transform the way they operate and I think it comes in the form of product that we sell that have the customer automate their provision and extract value and or come into the form of the service.
Speaker Change: Solution, we are setting such as the one that <unk> seen in to one of our press release statement that is.
Speaker Change: New autonomous steering and hence we are creating a unique value.
Speaker Change: And sending it.
Speaker Change: At the time and one customer at a time and then the adoption will come from the success and the value we demonstrate to our customers. So that's the first bucket is digital operation at large this is.
Speaker Change: The fastest growing segment, we have seen in the last couple of years and we expect this to be seagoing and the rate of adoption is the bumps on the value we demonstrate and the ability we have to connect to the digital operations work for the customers and do it for every well and do it for every pad five we producing assets in Italy.
Speaker Change: And I think this is happening at scale the only limit is in infrastructure.
Speaker Change: Two.
Speaker Change: Untangled when we launched <unk> connected to the Regal connected asset, but I think this is happening recognize a lot of a lot of success in this in and this is decoupled completely from from the Capex and Opex spend is discretionary and supermodel spend that customer committing to when they see the value can be.
Speaker Change: The second bucket is the <unk>.
Speaker Change: Our transition we have initiatives described condition by creating a unique platform the industry leading platform that.
Speaker Change: And that allows a customer to get the benefit of the cup competing escape.
Speaker Change: And to create new workflows on the clouds and the adoption is going to be one customer at a time.
Speaker Change: On Sunday.
Speaker Change: The balance of on Prem and cloud transitions, we offer hybrid support to our customers and you may have seen during the last few.
Speaker Change: A few months into quarter, we keep adding one customer adoption. This is a long tail of customer adoption, we have 15 on with that.
Speaker Change: Similarly in our digital portfolio, we have 200 of them are starting to transition to the cloud and we expect to happen over a 1000 that we did over the years to come continue transitioned and every time, we transition with Tia and uplifting to a SaaS and into our total revenue and again. This is the transition from desktop and on plan to cloud capability that the customer will.
Speaker Change: Continued tier.
Speaker Change: Due to extract efficiency into their own Asia southeast into their own workflow from exploration to depletion and finally.
Speaker Change: And we have been.
Speaker Change: Unlocking new markets by creating a new platform called Leumi on data and AI that kept the benefits of connecting.
Speaker Change: And should the data connecting clouds and on Prem data sets very complex assets. Both from exploration to you and is unique domain rich and Christina are realizing this and that we are seeing a tick up in adoption of this system anomaly warranty.
Speaker Change: Look the part the data and use and look for a platform that can do this.
Speaker Change: Openly and scanned with scale, but also they want to get access to an AI platform.
Speaker Change: Yes.
Speaker Change: Domain engineered AI capability and platform capability that we offer to our customers. So here you have a combination of digital operation.
Speaker Change: <unk> positioned and data and AI.
Speaker Change: That gives us multiple growth plus the old.
Speaker Change: Independent and decouple from the Capex and Opex spend as we see as you can see this year ambition instead of AI on a market that is about flat.
Speaker Change: I appreciate the great great description ill turn it back there.
Speaker Change: Thank you.
Speaker Change: Your next question comes from the line of Kurt <unk> with benchmark. Your line is open.
Kurt: Hey, good morning, everybody.
Speaker Change: Hey, guys good morning.
Kurt: Olivia I think what.
Speaker Change: Well I could do is maybe follow up on Roger's line of questioning with a focus on digital but maybe you can kind of get to get down to the.
Speaker Change: Maybe an update on the adoption rate that you've seen with respect to lumi.
Speaker Change: And.
Speaker Change: If you had some early success stories that you can potentially referencing.
Speaker Change: I think when you guys had talked about this last September.
Speaker Change: You saw some pretty significant growth opportunities in Europe.
Speaker Change: Customer base, you know going from maybe 300 customers to 15 other customers or something along those lines. So maybe just an update on lumi first would be great.
Speaker Change: Yes, no let me figure out very pleased having relaunched this less than four months ago. Its early early days, but I think the interest.
Speaker Change: The pilots not pilots. We have is Asia is very very strong and I think again, it's both the customers that are interested in.
Speaker Change: In connecting data sets and unlocking the power of data to production workflow.
Speaker Change: Joe sounds workflow and.
Speaker Change: Also.
Speaker Change: Customers are interested in getting access to our AI platform with Gen II in engineered.
Speaker Change: Engineered AI capability set so what you're seeing this is too early to disclose numbers in term of revenue and in terms of growth right. Because it's we are talking weeks, okay, plus plus allowance, but I think where they have been very pleased with the take up with interest with the intake and the number of pilots that we have.
Speaker Change: And you have.
Speaker Change: Customers across the across the World that you will see will continue to adopt lumi going for a while then you will see example to the east.
Speaker Change: Using AI into your operation.
Speaker Change: Optimize assets and you will see more in my example of customers adopting this chest for their benefit and for playing with or using AI as the capability set beyond what we can offer directly on our rigs while we cannot directly on a producing asset so.
Speaker Change: Confidence is too early to give you numbers, but I think the trend is.
Speaker Change: Very interesting and the early feedback.
Speaker Change: A number of pilots and early adoption to destin and explore what can this is.
Speaker Change: It's very very good.
Speaker Change: Okay. Appreciate that and then maybe a follow up just on full circle on the on the macro we talk talk talk through the dynamics for this year and how things.
<unk> to be kind of mapping out.
Speaker Change: And that is predicated on your commentary about a rebalancing of the oil market on the horizon and boding well for an investment through the end of the year.
Speaker Change: Alright.
Speaker Change: How do you how do you think it could all play out do you think your customer base is getting a little bit more aware, even they were about project economics or is this more just a tap the brakes, let's digest, what we've done and then we can kind of start if you will start jargon again in 2026.
Speaker Change: Yeah.
Speaker Change: No I think that first and foremost I think the adjustment that we have seen in the last six months I.
Speaker Change: I think it was driven by the oversupply of considerable above supply market.
Speaker Change: So a cautious approach on wharf.
Speaker Change: The timing for a Friday, the cautious approach on discretionary spending that is translating to.
Speaker Change: Moreover, at a moderating pace of growth and partly in the international market and a continuation of compression with activity in the U S. Now the outlook both from from the long term rebalance.
Speaker Change: From the guys.
Speaker Change: And as playing in the data center and our global Energy security.
All combined to put this to <unk> so.
Speaker Change: Some of it materializing at the end of this year and early early.
Speaker Change: Early pickup in deepwater or higher level of short cycle activity in second half of the year will depends on the on the macroeconomics.
Speaker Change: I think directionally as we said, we see an outlook which is steady.
Speaker Change: Flat year on year, and we see the early signs of.
Speaker Change: Long term.
Speaker Change: The upside in the 26 driven by deepwater drill.
Speaker Change: Driven by the continuous gas in Canadian commercial and driven by short cycle that you would have to come back in for in full full play to sustain these collections going forward.
Speaker Change: Yeah.
Speaker Change: That's awesome. Thank you so much really appreciate it.
Speaker Change: Thank you.
Speaker Change: Your next question comes from the line of Stephen <unk> with Stifel. Your line is open.
Speaker Change: Oh, Thanks, and good morning, everybody.
Hi, good morning.
Speaker Change: Yeah.
Speaker Change: The first is when we think you dug into this a little bit at the beginning of the call, but when we think about.
Speaker Change: Maybe the margin profile of the different segments in 2025.
Speaker Change: Could you just give us some flavor for how you're thinking about the puts and takes in the different segments.
Speaker Change: We typically don't guide the annuity is not immune to guide and I think but you can understand the mix is slightly changing as we come up with.
Speaker Change: The growth of in the core the growth of production system and our performance will be offset by the decline in well construction. So you can do the math.
The consequence of this you also understand that the digital.
Speaker Change: Integration to <unk>.
Speaker Change: In a fit of digital growth will have a margin.
Speaker Change: Margin expansion. So you did all of this and you get a different mix than last year.
Speaker Change: You add the cost out program and.
Speaker Change: Our discipline that we need to enforce.
Speaker Change: <unk>.
Speaker Change: Too much ambition to maintain earnings.
Speaker Change: At.
Speaker Change: Above the level that we delivered in 2024, excluding <unk>.
Speaker Change: Okay great.
Speaker Change: That's helpful. And then just my follow up question was just.
Speaker Change: Just your perspective on what's happening in Mexico, and what your sort of what are you sort of think about when you think about Mexico and maybe the prospects for a recovery maybe in 'twenty section later.
Speaker Change: I think it's too early to call I think.
Speaker Change: The government the budgets in.
Speaker Change: And the leadership team of Pemex is.
Speaker Change: The transition I think is what is clear is that.
Speaker Change: Mexico activity will.
Speaker Change: It will decline and as already decline.
Speaker Change: This is <unk>.
Speaker Change: Set by in Latin America.
Speaker Change: By Argentina and Brazil.
Speaker Change: So it's something that.
We have a diversified portfolio across the Latin America and this is our strength and I think the belief that we will leverage to the growth in select countries, where there is residence or growth as indicated thoughtfully, Argentina and resilient growth in the in Brazil to offset the exposure that we foresee in Mexico, but it's too early to call.
Speaker Change: Uh huh.
Speaker Change: The outlook in the outcome of the election change of leadership in the priority of the government to Walter to outspend.
Speaker Change: Yeah.
Speaker Change: Okay, great. Thank you for the color.
Speaker Change: Thank you.
Speaker Change: I will turn the call over to <unk> for closing comments.
Kate: Thank you Kate.
Speaker Change: Ladies and gentlemen, as we conclude today's call I would like to leave you with the following takeaways first our 2024 results underscore the strength of <unk> diverse portfolio to navigate evolving market dynamics moving forward, we will continue to honor our unique market exposure and performance advantage to further margin expansion journey.
Speaker Change: Deliver a strong cash flows and increase returns to shareholders second we remain focused on expanding the value we create for customers to our technology leadership integration capabilities offshore exposure and an expanded production recovery portfolio to the announced acquisition of <unk>.
Speaker Change: I am confident in our strategy, including inclusive of the progress, we're making growing beyond oil and gas and <unk>.
Speaker Change: ADT to continue creating value for our customers partners and shareholders with this I will conclude today's call I look forward to sharing our progress with you throughout the year. Thank you.
Speaker Change: This concludes today's conference call you may now disconnect.