Q1 2025 Schlumberger Ltd Earnings Call
Megan: Good morning, my name is Megan and I'll be your conference operator today and would like to welcome everyone to the first quarter SLB earnings call. At this time, all participants are in a listen only mode.
Megan: 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.
Megan: You may remove yourself from the queue by pressing star 2.
Speaker Change: As a reminder, this call is being recorded. I will now turn a call over to James Armageddonald, Senior Vice President of Investor Relations and Industry Affairs. Please go ahead.
Speaker Change: Thank you, Megan. Good morning and welcome to the FLB First Quarter 2025 earnings conference call. Today's call is being hosted from Houston following our board meeting in the Middle East last week.
Speaker Change: So in this on the call are Olivier LaPouche, Chief Executive Officer, and Stephane Biguet, Chief Financial Officer.
Speaker Change: Before we begin, I would like to remind all participants that some of the statements will be making today are forward looking.
Speaker Change: For more information, please refer to our latest in-case filing and other SEC files which can be found on our website.
Speaker Change: Our comments today also include non-GAAP financial measures, additional details and reconciliations to the most directly comparable GAAP financial measures can be found in our first quarter earnings press release, which is on our website.
Speaker Change: Finally, in conjunction with our proposed acquisition, SOB and Champion X have filed materials with the SEC, including the registration statement for the proxy statement and prospectuses.
Speaker Change: These materials can be found on the SEC's website or from the party's websites.
With that, I will turn the call over to Olivier.
Olivier: Thank you, James. Ladies and gentlemen, thank you for joining us on the call this morning.
Olivier: I'll begin by discussing a first quarter performance. Then I will provide updates on the evolving macro and I will manage our business in this uncertain environment.
Olivier: Stephane, we then provide more details on our financial performance and we'll open the line for questions.
Let's begin
Olivier: As we have seen in our early press release this morning, it has been a soft start of the year.
Olivier: The addition to the typical seasonal activity decline in the northern hemisphere and the absence of year-end product and software sales, upstream investments as remain constrained by the other supplied or markets.
Olivier: He has been amplified over the past few weeks with additional economic uncertainty stemming from the acceleration of superb raises by OPEC plus and recent size announcement.
Olivier: Again, it's more challenging by Gop, I was proud to see our teams continue to deliver to our customers. And we finish the year, the quarter by chairing further adjusted in the time out in expansion year-on-year.
Olivier: Overall, across the business, first quarter revenue decreased by 3% year-on-year as our phone results in North America were more than upset by lower revenue in the international markets.
Olivier: attributed to a combination of lower running activity in Mexico and Saudi Arabia and a steep decline in Russia.
Olivier: Excluding declines in history countries, international revenue was steady on year, and we achieved double-digit growth in a number of markets, including the United Arab Emirates, North Africa, Kuwait, Argentina and China, as well as a solid performance in Europe and Scandinavia.
Altogether, this resulted in international weekends at performance.
Olivier: turning to North America with delivered positive results driven by the offshore market.
with fire sets of both digital and self-deposition systems.
Olivier: Roles also continue growth, momentum in a 100% infrastructure solution business in the States.
Olivier: However, this gophe was passed free of set by lower drilling rub in New Zealand due to rig efficiency gap.
Next, let me discuss the performance of our visions.
Olivier: The core, pollution system continue to lead the way, with steady revenue growth and further margin expansion. Customers continue to demonstrate strong demand for surface pollution systems, emissions and artificial waste.
Olivier: and this late cycle business is becoming more profitable, with margins increasing by more than 97 basis points a year, supported by a favorable activity mix execution efficiency and conversion of improved by McDonald.
Olivier: Specific to SUPSY, we rank constructives on the market outlook with a significant pipeline of projects planned over the next couple of years. I was pleased to see my audience in this area expand materially compared to the same period last year as a result of strong execution and the realization of course synergies within our safety.
One-sexy John Venture [inaudible]
Olivier: The result of our performance, revenue was slacked down the earlier, and margins were significant impacted by challenges on several new projects that resulted in start-up and abortion or cost overruns.
Olivier: We continue to see strong demand for uncoversional stimulation in international markets, including United Arab Emirates and Argentina.
Olivier: However, this was fully upset by lower evaluation and expression activity as a result of lingering
Olivier: We were construction, we declined the omni or due to lower drilling activity across both North America and international markets.
Olivier: Despite this decline, I was pleased to see that one-third of international units actually grew from the earlier in the first quarter.
Olivier: Digital integration was entirely driven by digital, where Ruben Grou, 17% of your customers continued to embrace digital technology and solutions.
Olivier: customer accelerating the adoption of digital and AI solutions takes back further efficiency and performance across the upstream life cycle.
Olivier: In the earnings press release, you can see several examples of customers adopting
Olivier: Fanari, as an update on a progress beyond regard to the continue to expand the positive momentum in the low carbon market, given by capital acquisition, as well as in our data center infrastructure solution business.
Olivier: Combined, provenly from six years geothermal, critical minerals and data center solution is on face to visit the exceed $1 billion in 2025.
Olivier: O'Rone, I'm proud of the performance I'll team deliver this quarter. And I'm going to sign the entire SAP team for their artwork and commitment to customer success.
Olivier: Next, let me discuss the Macron-Daman Senna, SLB, is adapting accordingly.
Olivier: The industry is not getting global economic uncertainty stemming from the supply demand balance and recent ties announcement.
In this indictment...
Olivier: Committed prices are challenged, and until they stabilize, customers are likely to take a more cautious approach to near-term activity than discussion is pending.
Olivier: Beginning with the supply demand balance, we expect to see new supply enter the market as a bit less as announced plan to increase that production beginning in May.
Olivier: This comes at the time where the macroeconomic picture remains uncertain. The global trade concerns which have the potential to result in lower liquid demand that positively expected for the year.
Olivier: Taken together, this sector are resulting in a certain market backlog. At this point, we expect a global mainstream investment to decline compared to 2024, with customer spending in the Middle East and Asia being more resilient than other regions across the rest of the world.
Olivier: Against an uncertain backlog, we remain focused on what we can control.
Olivier: We'll continue to execute our strategy to deliver distance to the performance of our customers carefully manage costs and remain committed.
Two hitters, two shelters.
Olivier: In the core, we remain positive on the long term for number both for all and again, and we will continue to deepen our partnership with our customers throughout the last second of the asset.
Olivier: This includes an increase in sales on the production of the recovery market, or we expect to unlock new growth potential and long-term resilience through opportunity for technology
Olivier: In digital, customers are investing in solutions to reduce cycle time in proof performance and drive efficiency.
Olivier: and continue to pursue opportunities in AI, cloud computing and digital operations. Today we are seeing the decoupling of digital investment from upstream planning and this will increasingly represent the leak and exciting your opportunity for business.
Olivier: and Albus Sess, Björn Orenganz, who continue to capitalize and look out on market. Thank you very much.
Olivier: with our new energy offering, particularly in cable capture and geothermal, but an interesting adjacencies as we have demonstrated with our happy big growing that doesn't tend to factor
Let me quickly get the right to the 20th of August . [inaudible]
Olivier: Over the past two years, we have engaged at Persecutors, whom we partner with in digital, and not new opportunities for business through development of data centers.
Olivier: This has obtained a six-digant contract that works for the provision of manufacturing services and modular cooling units.
We've...
Rich Raccoon, currently fulfilling. [inaudible]
Olivier: based on our performance and unique capabilities, we are also gaining access to new reporting
Olivier: And we are expanding our technology of things with look-up on solutions to serve robust potential customers.
Olivier: Ovo, this is a very exciting at fast-crowing market, driven by air demand I'm expected to contribute to our diversify exposure beyond gas in the coming years.
Olivier: Dionne, our operational performance. We also have been on the journey of cross-optimization and process and incident. And moving forward, this busy bottom mission to protect mountains the spikes of the customer spending.
Olivier: What matters in this environment is ability to continue to generate strong margins and cash flows.
Transmit resilient feedback to your doors and come out stronger.
Olivier: Our first quarter results demonstrate our ability to do this, and I believe that the combination of our strategy and core factions will help to protect our business moving forward. As a result, Gremlin committed to return at least $4 billion in returns to Schelver in 2025.
Olivier: And before I end over to Stephane, I'd be quickly share our guidance for the second quarter and the rest of the year.
Stéphane Biguet: Specific to the second quarter. Assuming there is no further escalation of ties, and that all prize remains approximately at current levels, we expect going to be flat to contrary including some excluding some connects.
Olivier: with an adjusted beta margin expansion between 50 to 100 base spots.
Olivier: Looking at the full year, what a number of different scenarios could matter lives, including
Olivier: Assuming all twice remains similar to current level, we expect flat to meet single digit revenue growth in the second half of the year compared with the first half, excluding
Olivier: This will be supported by a combination of the seasonal activity of the tick, you start up in the borrower and further growth in a digital and data center business.
and under these conditions, we will also expect further margin expansion.
Olivier: Abhole exposure is providing resilience against uncertainty and short cycles of weakness as you have seen in our results today.
Olivier: and I'm confident that our people, our technology leadership and our financial strength, we clearly position us for long-term success.
Stéphane Biguet: I am now turning the call over to Stephane to discuss our final surveillance in more details.
Thank you, Olivier, and good morning ladies and gentlemen.
Stéphane Biguet: First quarter on Inx Torchair, excluding charges and credits was 72 cents.
Stéphane Biguet: This represents a decrease of three cents when compared to the first quarter of last year.
We recorded $0.14 of charges during the quarter.
Stéphane Biguet: This included 11 cents of charge within connection with our cost-out program that we initiated last year.
Stéphane Biguet: and three cents of murder and integration charges related to the champion X and I could have
Stéphane Biguet: Overall, our first reactor revenue of 8.5 billion decreased 3% year-on-year.
Stéphane Biguet: International revenue decreased five percent year-on-year, largely driven by reduced activity in Mexico, Saudi Arabia,
North America Revenue Increased, 8% Junior Neil Mehta,
due to higher digital and circular production systems sales.
Stéphane Biguet: as well as phone booths in our data center infrastructure solutions business.
Stéphane Biguet: Company-wide, adjusted a bit of margins from the first quarter was 23.8%, but 18 basic points
Stéphane Biguet: Pre-packed segment operating margin was 18.3%, representing the 60 basis point decline in your ear as two of our four divisions experienced lower margins.
partially mitigated by the effects of our cost-out progress.
Stéphane Biguet: As we navigate the current market dynamics, we will continue to exercise cost discipline and we will align our resources with activity levels in the coming quarters as necessary to protect our margins and cash routes.
as it relates to targets.
Evolving, Lens Clayton,
Kinyar Lee, introduce yourself, Anthony.
Stéphane Biguet: which makes it challenging to fully assess the impact of this time.
Broadly speaking, we are partially protected by our activity mix.
with approximately 80% of our revenue derived from international markets.
Stéphane Biguet: as well as by our diversified supply chain network that includes income-free manufacturing and local
Stéphane Biguet: However, parts of our operations are still potentially exposed to increasing tariffs.
Primarily from imports of raw material into the US
in our production systems division.
Stéphane Biguet: As well as the exports from the US, subject to retaliatory tariffs.
Stéphane Biguet: Under the current Paris Framework, the majority of the impact is on import and export flows between the US and China.
Stéphane Biguet: So any resolution or conversely escalation between those two countries can significantly impact the territories we may be subject.
Stéphane Biguet: Whitewood discussions are taking place. We are taking proactive steps to mitigate the potential impacts.
Stéphane Biguet: This includes reviewing how to form her optimizer or supply chain and manufacturing network.
as well as the legendary pursuing all applicable exemptions and rowbacks.
Stéphane Biguet: We have made progress on all these fronts in the last two weeks and we are stepping up both actions across the organization as we speak.
Stéphane Biguet: as the second-point term progresses and ongoing trade negotiations continue. We will hopefully gain better visibility.
Stéphane Biguet: of Wertheir, Smithettel, and the extent to which we will be able to mitigate varied effects on our long business.
Stéphane Biguet: Let me now go through the first quarter results for each division.
Stéphane Biguet: First quarter, digital and integration revenue of 1 billion increased 6% year-on-year, driven by 17% growth in digital revenue.
This growth was partially upset by lower ATH revenue.
Due to a temporary pipeline disruption,
But in fact, it's production in our projects in Ecuador.
Stéphane Biguet: Why this issue has been resolved, it did cost us one cent of earnings in the quarter.
Stéphane Biguet: Digital and Integration margin of 30.4% expanded 380 basis points here and here, entirely due to improved profitability in digital.
Reader worked at 4 months, revenue of 1.7 billion, decreased 1% to 1.
as strong and conventional stimulation and intervention of activity.
was upset by lower evaluation and exploration activities.
Stéphane Biguet: Margins of 16.6% declined 311 billies points as compared to the first quarter of last year.
Due to the less favorable activity mix,
as well as Project Staten Cross.
Stéphane Biguet: Well-construction revenue of 3 billion declined 12,000 and margins declined 71
On Significantly Lower, I'm Drillin' Activie I'm Drillin'
Mexico and Saudi Arabia, Lone
We presented approximately two-thirds of the revenue decrease.
Stéphane Biguet: Finally, production systems revenue of 2.9 billion increased 4% while margins of 16.2% grew
Stéphane Biguet: These results were driven by the resilience of our portfolio in production and record reactivities and were augmented by significant revenue growth in our data center and infrastructure solutions business.
Now turning to our liquidity.
Stéphane Biguet: During the quarter, we generated 660 million of cash flow from operations a significant increase compared to the first quarter of last year.
Stéphane Biguet: We generated positive free cash flow of 103 million.
Stéphane Biguet: despite the payment of annual employee incentives and the seasonal increase in numbers.
due to continuous capital discipline and working as a tool management.
despite the uncertain economic environment.
Stéphane Biguet: We expect our cashflow generation to remain strong and to grow throughout the year consistent with our historical trends.
Thank you.
Stéphane Biguet: Capitore Investments, Inclusive of CapEx and Investments in APS projects and exploration data.
We are 567 million in the first quarter.
Stéphane Biguet: For the full year, we are still expecting capital investments to be approximately 2.3 billion, excluding an impact from the anticipated closure of the champion-extra-impact.
Our Mad Death increased $2.7 million exponentially to $10.1 million.
This increase lovesly reflects.
Stéphane Biguet: The 2.3 billion we spent on our accelerated share report chase transaction during the quarter.
Stéphane Biguet: This ASR transaction was completed in a print and resulted in us reducing ultimately our shares outstanding by a total of 56.8 million shares.
Stéphane Biguet: 47.6 million of these shares were received in the first quarter.
while the remaining $9.2 million share were received in April .
Yes, our transaction.
Stéphane Biguet: Together with the dividend increase in the non-slide quarter, we allow us to meet our commitment to return a minimum of 4 billion to shareholders in 2022.
Stéphane Biguet: Let me conclude with an update on our pending M&M transactions.
Stéphane Biguet: Why these transactions are obviously taking more time to complete than initially anticipated, we are pleased with the progress made during the quarter and continue to work toward successful closure.
Stéphane Biguet: As it relates to change your next, as we announced a couple of weeks ago, the United Kingdom competition and market authority has agreed to consider our proposed actions to address the concerns, as part of our phase one review.
Stéphane Biguet: We will continue our collaboration with the UK and over-regulated tones.
Stéphane Biguet: towards the anticipated closing in the second quarter or early third quarter of 2025.
Stéphane Biguet: We respect to our overfending transaction, we now expect the diverse features of our interest in the Parisian EPS project in Canada to close in the second point.
I will now turn the conference call back to Olivier.
Olivier: Thank you, Stephane. I think Megan, we are ready for taking the questions from the floor. Thank you.
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 David Anderson with Barclays. Your line is open.
Thanks. Good morning, Olivier. How are you?
Good morning Dave, very well [inaudible]
Thank you. Bye.
Speaker Change: So we've heard from a number of other service companies this week on the outlook, some of them more sobering than others.
Speaker Change: But I think we're starting to frame some of the potential outcomes for international North America for the rest of the year. You said upstream spending you're expecting to decline this year, but I was hoping you could maybe clarify a little bit how you see international North America from here at these oil prices.
Speaker Change: I was a factor into your guides amid single digit growth in the second half of the year, which you have a very different mix than your peers.
Absolutely. Thank you. Thank you, Dave, for the question. I'm...
Speaker Change: Indeed, I would like you to clarify. So, as you know, as we have highlighted in the prepared remarks, Global upstream spend will be down here and with higher decline than original anticipated. There is no argument against that, no against the current public data in the penalty of the type it's in fact itself, it's already swaying down. Why is importantly, how SMB's position against it's back home?
Speaker Change: and now we see more downside exposure in none than international market in this negative revision. But first, equally quick, at none, in our position there, we are now tied to
Speaker Change: and actually a long enough short in digital and in production in this market. And so the more we have data center solution.
Speaker Change: There. So I think if you look at it, I exposure here as three factors due to a strategy we initiated about five years ago. And we're hoping now the benefit of having the better resilience again to short cycle exposure we have as part of man because our offshore pollution.
Speaker Change: Market Exposure, Digital, and now a new business. I've been excluding the data center. It's a touch of solution. Are you on your own? Have you been going on your own your own your experiences in place or not?
Speaker Change: No flipping to the international, we see less exposure or less divine proportionally, directionally than in North America.
Speaker Change: As the residents of the set of Middle East, a major, including off-floor, and a commercial, and a gas.
Speaker Change: We continue to play all into your holding better this market.
Speaker Change: So, we have the right exposure for sure, we have the right exposure and gas internationally party and commercial mode, we are going as you have seen our digital and production recovery remain a nice exposure we have across the globe.
Speaker Change: Speaking of which, I believe that the upcoming acquisition integration of some projects would not only announce our residents, but improve next in North America and give us further digital and further exposure.
Speaker Change: across the world as well. So I feel good about where we are in this cycle and I think I just wanted to reconcile it a bit why we have maybe a little different performance going forward with respect.
Speaker Change: Thank you very much appreciate on the different mix here. I wanted to focus on one of your kind of core countries of Saudi Arabia. You mentioned it got to a bit of a slow start this year. We recently heard another recumbent just talked about another rig being dropped.
Speaker Change: Can you talk how you see Saudi playing out kind of from here for the rest of the year on the one hand do you think conventional oil activity? [inaudible]
Speaker Change: Maybe takes up later this year with these OPEC barrels coming back to the market.
Speaker Change: And then you have the unconventional natural gas activity ramping up. So I guess I'm wondering overall should we start to see sort of more sustained growth from Saudi? Let's see what we can do.
starting later this year into 2025. [inaudible]
Speaker Change: A lot of moving parts here if you could help us [inaudible]
Speaker Change: an adjustment of the ambition from 13 to 12 MSC that has led to a stiff decline of activity that is translating into what we are seeing today, year on year on our week rated activities. Now, when it comes to this year and next, I think indeed the priority of the Kingdom is to stabilize production and to be able to respond to this OPEC plus pool as they materialize in short-term at least.
Speaker Change: and to continue to execute that gas omission to go 40% of the gas and beyond by 2030 and as such the gas lands and the unconventional gas will remain a priority that we see and receive further activity increase.
Now, it's there.
Speaker Change: pending further reduction to adjust to the level of activity and just community-wise, like other
Possible, for the Directionary.
Speaker Change: The commitment to long-term gas, the commitment to maintain, and the activity that relates to maintaining these two has been on.
by the menacee, who will indeed represent likely noptic as we own to you.
Speaker Change: 2036 for Saurabh, so that's what we expect. So, yes, a lot of moving parts, but I'll explore there and we love.
Speaker Change: position in Sally. I was just recently here with a few more members visiting the kingdom and I think I have the opportunity to measure firsthand the engagement.
Speaker Change: We say the proximity we have and the feedback and our performance that is stellar and I think we want to like to keep it that way and find the team for what they are delivering on the difficult market condition. But yes.
Speaker Change: I think I believe that the worst is the others from the decline and there is some adjustment be sure that the gas lead growth will help us to rebound going forward.
Thank you very much, Olivier.
Thank you.
Speaker Change: Thank you. Your next question comes from a line of Scott Gruber with City Group. Your line is open.
Yes, good morning.
Speaker Change: Morning. Morning. Morning. When asked about what even the margin level you think you can defend in a modestly weaker market year and year, previously with the cost you're structuring, it's like you're targeting to defend 25%.
Speaker Change: It looks like, you know, it takes a margin for the north of 25% of the second half to get there this year. But do you think you can get the even that margin back to the 25% level in the second half, you know, excluding the impact of champion X. [inaudible]
Speaker Change: I'll be excluding the Champerex and excluding escalation of Tyre.
Speaker Change: I think I believe that if we assume that the scenario condition we have put out, but all prize remaining in effect with current opportunity current level.
Speaker Change: and Ganon Sugey, on the growth in the second half, and the leverage will have, and the realization of our cost, our program, the digital effect, and the West.
Speaker Change: We have the ambition to grow our March in the second half and we will try to keep our ambition to your approximately twenty-five percent for the full year.
Speaker Change: That's something that will be omissioned by the terrorists is the big question mark. And I think if the type were to stay or scale it from where they are, obviously the impact will have as the fund described. I think we'll have, we'll represent the headwind to this margin expansion
Dr. J.
Speaker Change: I appreciate the color. And I'm turning to digital. How do you think about
Speaker Change: The cadence of digital growth in this environment, you know, on the one hand, digital is obviously an efficiency enabler. I think, you know, that vein it could accelerate. But on the other hand, there is some, you know, exploration spend from discretionary spend, you know, within the digital mix. How do you think about the resilience of digital growth in this environment and should we continue to think about that high teams? [inaudible]
Gratric of the Year. [inaudible]
Speaker Change: No, there will be some discursionary decision, there will be some pressure here and there, there will be some project that will be reconsidered but overall I think we believe that the realization of the efficiency gain, both productivity for an effectiveness for the planning of your sounds and workflows .
Speaker Change: and the direct impact on the performance of the course of ownership, the optional...
Speaker Change: Wolfrose, I think he's deep playing out and resonating very well for customers at a time they want to expect efficiency. So, against the global upstream capex.
Speaker Change: Driven by the secular trend that we are fully capturing, our technology strategy and a platform strategy is clearly playing out.
Speaker Change: and you have seen the diversity of the award that we get, different customers, different [inaudible]
Thank you. Bye.
Good. I appreciate the color, Olivier. Thank you.
Thank you, Scott.
Speaker Change: Thank you. Your next question comes from Erin Jero-Ram with J.P. Morgan. Your line is open.
Aaron Geriram: Yeah, good morning. Olivier is wondering if you could elaborate on SOB strategy to diversify the portfolio beyond oil and gas. I think you've mentioned ear and paste to exceed maybe a billion dollars of revenue.
Aaron Geriram: This year versus I think 850 last year but maybe talk about some of the steps you're taking there and some of the longer-term growth potential.
Speaker Change: Thank you all. I think, yes, I think we have initiated about three to four years ago. It's hard to see with you energy. I think the measure aspect of that.
Aaron Geriram: that will continue to impact us in short-term, are three ways. First is yes, where we took a position to acquire capturing, and I think we have a big capturing, I think is
Aaron Geriram: The capture technology that I think we have before active projects and many projects in the field.
Aaron Geriram: that will continue to materialize and create a growth pattern going forward. So, this combined with our sequestration adjacent to the core capability in exploration and characterization of this.
Albiceux, Réjard Bois
Aaron Geriram: Sacrification, Capability, I think it's leading to a very big growth on our CCS O'Lean.
Stephane, this will continue, so we don't see a-
Aaron Geriram: The pattern's slowing down because it's a long-term market position you want to continue to own and go.
Aaron Geriram: Joe Thermon, starting from commercial Joe Thermon has been something that has been getting more focused and more adoption for customers and now there is a lot of pilot on the
Aaron Geriram: on New Generation, on Next Generation, Agile Thermal, that is being highly supported by the new administration, partly in the US, and believe this is also something that would come to go. And finally, I will mention the...
Aaron Geriram: The lithium-director, lithium extraction, where I think the products we have successfully completed last year, the first product at scale in the U.S. I think is, again, resonating very well with the clinical minerals.
Aaron Geriram: probably here the current administration and we see this in South America, we see this in Saudi where we're actually passing into a pilot as well.
Aaron Geriram: So, this is a successful and separately you have seen that the center is something that we have used.
I think the relationship, the engagement, we have. [inaudible]
Aaron Geriram: who position themselves as a provider of manufacturing, capability, manufacturing services as well as...
Aaron Geriram: modular cooling solutions for the tapas center and the success is great and I think I'm very pleased with the price of the tea. We have a plant in Louisiana that is serving this business.
Aaron Geriram: and we have a large compact that we are a full thing. And that has been the era of growth in North America and we expect it to continue going forward this year and next.
Aaron Geriram: Clearly, so yes, the ambition is to go from the 850 plus to be more than $1 billion when we put all of this together and we're not expected to slow in 26 but to continue to accelerate the light.
Speaker Change: Great, that's helpful. Maybe my follow up is for Stephane and maybe just to maybe clarify some of the outlook comments. My team tried to estimate what your outlook comments would translate into 2025 EBITDA.
Speaker Change: We're getting to somewhere between 8.4 to 8.5 billion. I don't know, Stephane, if you could maybe give some color if that makes sense.
Speaker Change: and maybe the clarification is, how are you treating palacer and some of the tariff related impacts in terms of the full year outlook?
So, Arun, we stick with, we've rather knew only, uh...
Speaker Change: Guy Duns for the rest of the year, as I already mentioned, the both assuming a current or a price more or less at the current level. So we think we've revenue, we think it's pretty much out to give you an EBITDA for the second half and hence for the full year. And some of the reason he's indeed...
Speaker Change: The tariff, the application of tariff, we think giving you a number on tariff at these stages would not be useful for financial modeling, unfortunately, we'd love to, but...
Speaker Change: It's quite difficult, but as I said, we are partially shielded by domestic manufacturing and sourcing, but it is clear if it stays that way, we will have an impact, we will try to mitigate it, and we are ready to...
Speaker Change: doing that for optimization of supply chain and for ultimately trying to pass the impact to customer of that.
Speaker Change: What matters as bien is that we are still seeing margin expansion in the second quarter.
Speaker Change: Pissed by Taribe being affected now and this is to the tune of 50 to 100 bellies points as we mentioned for 42 secondally.
Speaker Change: And for the second half of the year, Martin Expansion assuming again that all price is more or less at this level, we will have growth in H2. And this will come with Martin Expansion, but quantifying that's Martin Expansion, H1 to H2 in H2.
Speaker Change: would not be the right thing for us to do today.
Totally understand. Thanks a lot, Stephane.
Thank you. Thank you.
I'm sorry. I'm sorry. I'm sorry. I'm sorry. I'm sorry.
Speaker Change: Thank you. Your next question comes from the line of Neil Mehta with Goldman Sachs. Your line is open.
Speaker Change: Yeah, thanks, team, for all this color. So, as you think about champion acts, recognize there's some limitations that we could say around this. But, you know, where are we in terms of the gating items at this point? It does feel like we're in the end zone here, but curious.
Speaker Change: Kiry, the Red Zone, but curious what your perspective is on what remains outstanding and confidence around closing.
Speaker Change: Yeah, I think as Stephane did the commanding prepared remarks, I think we are very pleased with the progress we made very recently, particularly the UK.
Speaker Change: CMA authorities and obtain that they are accepted that we are going to remedies, extension of phase one through remedies, as they have been commented and they are accepted remedies, so they have now to walk through these remedies and implement them as.
Surna as effectively we can't. [inaudible]
Speaker Change: and that's a visual why we have included our confidence to conclude.
Speaker Change: Last few days and few weeks with the Norwegian Authority.
Speaker Change: and I believe as well that I think we are, as we commented, going to hopefully a resolution there. So that's the reason why we maintain our confidence into the end of this quarter or early next quarter.
Yum.
Speaker Change: Thanks, and Olivier, I would love you to share your thoughts on the macro, particularly from the supply side. You spent a lot of time.
All around the world. Where do you expect activity if we're in a lower commodity prices?
Speaker Change: Environment to be dialed back. What do you think is relatively priceless?
Speaker Change: Inelastic, is there a price level at which point you see activity particularly cut back just your perspective on the near-term macro and then also your perspective on the long-term macro because
Speaker Change: You know, you've had an underinvestment view that ultimately long term that's going to catch up here. Does this just reinforce that?
Speaker Change: Yeah, I think it's time for the long term maybe it's easier, I believe that's it.
Speaker Change: The position of one gas to feed the energy of the world and progress.
Speaker Change: and even some demand with the Global South, with the AI.
Speaker Change: Arby, the electrification at single continuity pool for the long term and this combined with the natural decline that is pressing on madey-basis as you see will continue to...
Speaker Change: Coal for replenishment and maintaining, if not increasing, that's not investment that we see today. So long term, the view is intact and I think the role of offshore to address this. The role of the Commissioner of Visigation, the capacity expansion in the Middle East.
Speaker Change: The role of gas, battery to security of gas supplied in Asia.
Speaker Change: I think we'll continue to build our way as close as we foresee long-term to remain and are not talking even digital here.
Mind shot down.
I think it's very difficult to hear.
Speaker Change: Engage, but I think generally speaking, the short cycle activity will be the first exposed Americans as quite a few hour of short cycle, starting with the Westland, and I think this will be the first that certainly will have the most impact.
Speaker Change: Ethan Archenri, I think the Resilience is a mansion of leaders. [inaudible]
Speaker Change: Many countries are committed here, relatively independent of all price for their capacity expansion and the U.S. Bitcoin.
Speaker Change: and an activity in some other part of the country around Middle East would contribute to stay and or it's not exerate.
Speaker Change: Engian, driven by energy security. We also have residents on November 1, D. Porter, activity there air offshore, D. Porter activity there that is strong, and not problem of China, that is holding the activity because they're basically on a failure plan, not on a necessary and oil price of today.
Speaker Change: So you go back on the list and you'll see it's tirades, Quarrel Schlexar, in the pocket of golf.
Speaker Change: Joe Vasiti, and I have some security and digital, I have increased political recovery, and I don't have shown interest in me, but I will continue to be out of growth, so yes, they are
Speaker Change: and there are ways to offset the decline of the short-term decline we expect into the total capital expanse.
Yeah, thanks for that.
Thank you.
Speaker Change: Your next question comes from the line of Roger Read with Will Fargo. Your line is open.
Yes, thank you and good morning.
Good morning.
Speaker Change: Maybe if we could, Olivier, you were mentioning deep water there. We certainly didn't sound like exploration was an uplift for you in Q1. We've certainly seen the industry start to lean into exploration a little more. I was just wondering if you could kind of...
Speaker Change: Marcus around the world a bit on, you know, where we are seeing things pick up. I mean, West Africa's looked good, certainly Latin America,
Speaker Change: Yeah, I think the reserve replacement ratio is still what drives the IOCs and many large independents and some critical analyses to your country to explore.
Speaker Change: and we have seen a rebound in commitment to exploration the last 18 months.
Speaker Change: I don't see a changing directionally, although there will be some discretion taken by some customers and we have to go one customer at a time to review this.
Speaker Change: But, directionally, I think the need for replacing reserve for might measures and the need for developing long-term oil or long-term gas play in Asia or in the offshore basis at large, I think, remains intact.
Speaker Change: and I think you are seeing it translated into FID that we expect to be piling up in 26, 27 that will impact the subsidy business going forward.
Speaker Change: But yes, exploration is not over, an exploration takes two forms, exploration I think three forms I will say, one is the near-field exploration in Patrick Beijing, go from Mexico or even Brazil or...
Speaker Change: the North Sea, including the Norwegian sector. And then you have the frontier facing, a bit of media, a bit of Serename, a bit of Asia, Indonesia, particularly, that has a new fresh exploration investment.
Speaker Change: And finally, you have the other way to explore which is digital exploration. I think this is what we are benefiting from as well. A lot of processing, a lot of activity for better processing. And hence we are exposed to those.
Speaker Change: So, yes, I think that the exploration will remain healthy, but this year, a massive effort from discussion and decision, and from some lingering white space as we call it in deep water.
Speaker Change: Appreciate that. The other question I had, just because it was called out as part of this...
Speaker Change: Porter, things softer in Russia. Ironically, there was an article in the press today implying that Russia activity was at a multi-year high in the first quarter. So a bit of a juxtaposition there. It's just you can get us any more insights on what you're seeing there.
Thank you. Bye.
Appreciate it, Todd. Thank you.
Thank you.
Speaker Change: Thank you. Your next question comes from a line of Stephen Gengaro with Stephal. Your line is open.
Thank you. Good morning, everybody.
and Stephane Biguet. Thank you.
Morning, I was wondering.
Speaker Change: as you as you talked about about the outlook and I was sort of focused on the production segment here. Can you talk a little bit about your views on the resiliency of that business versus other parts of the company and maybe maybe even the margin stability or contribution to margin expansion. You see coming from that segment as we go through the year.
Speaker Change: I mean, I will not command directly on the margin, I think we don't, we don't, we don't,
provide gallons of margins on our provisions. However, I think the strength of the production
Speaker Change: Division, I think, is stems from the adoption of this technology.
Speaker Change: and the success we have in market position across the globe, both in Russia and North America has been going market in North America, U.S.L. and Pratskina in that lately.
Speaker Change: So, we have a market share, market gain, market position due to technology. We have 5 technology, we have a unique technical competition technology, we are unlocking some efficiency in performance on our lift.
Speaker Change: and we have some success in subsequent processing that is in formulation giving us this distraction into this into this market.
Speaker Change: So that's the first. The second lead, I think, did, as you said, we expect that the long cycle side of this of this position system will be more resilient against this market and certain tiers we see. And some of the short cycle, sort of about performance.
Speaker Change: If we maintain a performance as we have in the US land market, I think we will maintain a market position or go against tide.
Speaker Change: and they're able to go in those markets. So, I feel confident about the ability of the production system to go into the world this year and to gain market position or to leverage the long cycle explorer, part of the power for success.
Speaker Change: So I feel confident, but I will not comment on the margin, we are confident that the team is executing very well and has the will contribute to protecting a margin and contribute to margin expansion going forward.
Speaker Change: Great. Thank you. And then the second question I have was that was around with confidence in free cash generation for the year. I'm obviously committed to returning.
Speaker Change: A significant amount of cash. How do we think about you sort of stress testing that against the uncertain macro and sort of preservation of cash and balance sheet. This is returning capital. I think there's a stage at which you slow that down or your confidence is pretty high.
Speaker Change: So first, thanks for the questions, Stephen. So we did start the year on cash flow as we expected, even a bit better as I mentioned and we are still quite confident that it will follow the pattern we usually see every year and it will increase significantly in the following quarters.
Speaker Change: and the second half is really when we make the maturity of the free cash flow for a year or so. Yes, you're absolutely right. We do stress testing.
Speaker Change: H2 is uncertain, as we said, in a lower activity scenario, which is not the best case today, but in case...
who's happy to take questions.
Speaker Change: In many cases, we believe that tree of free petrol for the year will continue clearly to support our commitment of minimum 4 billion rick pumps to shareholders so we are.
Speaker Change: We are confident on our cash flow and we are confident that clearly this commitment is not going to change.
Great, thank you.
Thank you.
Speaker Change: Thank you. Your next question comes from the line of Keith Mackie with RBC capital markets. Your line is open.
Hi, good morning.
who seemed to support the business very well. [inaudible]
Speaker Change: But can you just comment on the strategy from here relative to what you're seeing in this cycle?
in terms of...
Speaker Change: You know, where ultimately the business goes relative to what we're seeing as the cycle being a, you know, a later cycle in the general oil and gas market and just I think that all plays out with the different segments and being a, you know, more cross, cross, cross the ENP life cycle business.
Speaker Change: Yeah, believe the strategy we have, first and foremost, to continue to earn.
Speaker Change: I think the leveraged market position we have, they are just as close as we are in the numbers as I mentioned, I think it's fit for this market position going forward.
We believe that our exposure internationally is very diverse, broad exposure.
both on show and show.
offshore and gas explosion in green and commercial known.
Speaker Change: Visitor, I'm pollution as you manchere, I pay with constant support.
Speaker Change: and production is a production recovery, and I think that includes an amount of our reservoir performance division as well as our production system division. I think it will have resilience going forward. But reading as you have seen, I think is more directly linked to the rigactivity that I think in this, and so the environment has.
and we continue to be getting...
Speaker Change: Tamwa Pressure, but I think from as you commented earlier from the from the magazine.
We will continue to anticipate that...
Speaker Change: cross-action and to extract efficiency from our organization to partially offset this and continue to focus on maintaining our margins. So we believe that, as we said, the mission remains
Speaker Change: to protect our margins with all the commentary and provision of all price and price. I think
Speaker Change: We believe that digital growth and the growing success of a production system and containing the margin pressure on the result performance and well-construction result into maintaining and protecting the margin as much as we can, excluding time as we did as we commented.
Thank you.
Yeah, I appreciate the comments there.
Speaker Change: Maybe just one more on tariffs, I know the situation is certainly incredibly fluid, but does the guidance that you've provided imply continuation of existing tariffs that are on, or can you help us think about those pieces a little bit more?
Speaker Change: For the second quarter, absolutely yes, it's assuming current tires unchanged, but 50 to 100 that this point margin extension sequentially includes the current tires Fremont.
Speaker Change: And again, for the second half, it will depend on the final laboratory framework, which we all know will change in one way or another. So it will demand an expansion with it. We fluctuate based on that.
Okay, thanks very much [inaudible]
Thank you.
Speaker Change: Thank you. Your last question comes from the line of Dan Kutz with Morgan Stanley . Your line is open.
Hey, thanks a lot, good morning.
Dan Cutts: Morning, so I was really hoping we could get a little bit deeper on new energy across your kind of five pillars, and I guess the, I don't know, if you want to call out the six pillars
Dan Cutts: infrastructure, but I think I think you guys have done a great job of quantifying the opportunities around data center infrastructure and kind of get the sense that
Dan Cutts: Among the five other pillars, CQS is maybe the largest, but as you think about your $3 billion
Dan Cutts: 2030, UNRG Redneed, Target. How do you think about the contributions across?
Dan Cutts: It was five pillars. Where do you see more or less growth potential, more or less contribution? Any car that you can share that would be great. Thank you.
Dan Cutts: Yeah, we're not ready to, we're not here to, to come on to the series, I've done a date on a tribute on the ambition for new energy, but indeed, I think CCS, Olin, as I call it, both the sequestration and all the services, including digital, that we have there will be a large component of that. Okay, clearly, Joe Tamolaz.
Dan Cutts: Quite a good momentum, and I think it's too soon to say whether the international or next generation Joe Thamel has been pursued both in Europe and in the US with the support of the authority everywhere. I think we'll unlock and give us the second leg of course.
Clearly, too early to say.
The Lichon as a commoderate is a...
Dan Cutts: The critical meeting of all ambitions that many of our prospect customers have, with my company, or with a few companies that are former employers, that are stepping into that business.
Dan Cutts: Arbor Jen is the next decade ambition that we have and the same score for energy storage, I would say.
Dan Cutts: and that that center I think the ambition we have is continue to consolidate and leverage.
Dan Cutts: The success we have with this engagement we have developed, and the success...
Thank you very much.
Dan Cutts: and support some manufacturing capacity, deploy and deliver these data centers. We will have the end of this year supported more than 15 data centers solution across the US. So that's quite something we are proud of.
Dan Cutts: So again, you can see all of this as a sum of business that I would go and I rate them on a gas sector for the years to come. And it is again adding to the resilience and to the ability we have to navigate the difficult time as we have today and keep extracting growth in growth or resilience across the country.
Speaker Change: Awesome, that's all really helpful. And then maybe a quick one, just on the APS on the ACS at Performance Solutions Business.
Dan Cutts: You know, I'm sure the highest priority is Pant.
Speaker Change: Getting the Palacere deal across the finish line, but how do you think about the remainder of that portfolio? My understanding is that the Ecuador asset, which is kind of fairly oil levered is the biggest. [inaudible]
Speaker Change: Remaining or perhaps only remaining component? If that's something that you guys could potentially...
Speaker Change: Be the best thing at some point in the future is that an asset that you're planning on keeping, just wondering how you think about the APS portfolio moving forward following the policy of transaction. Thank you.
Yes, so indeed, following the police, we'll only be left with...
Speaker Change: We have Ecuador and it will remain that way. And in Ecuador we have...
Speaker Change: We have free projects and as we explained in the past these projects are quite different from...
Speaker Change: from equity positions such as we have in Canada. They are more like service contracts with the local N.C. with the operator.
Speaker Change: So you are actually closer to our core business here, the only difference if I may say that we are paid in production equivalent to a barrel instead of an invoice for services.
Speaker Change: So at this stage, it's quite economic. These projects are providing a lot of cash flow for the company. They are providing good profitability. So considering the nature of the project, they are likely to stay at this point.
Speaker Change: They have a finite contractual term actually which we can negotiate and extend with our customer but at this moment for the next few years we have to assume they will stay with
Speaker Change: Understood. Thank you both very much. I'll turn it back. Thank you.
Thank you, Dan. Thank you. So
Speaker Change: Ladies and gentlemen, as we conclude today's goal, I would like to review the following takeaways.
Speaker Change: Second, we are confident in our ability to continue generating strong cash flows despite evolving market dynamics.
Speaker Change: and we remain focused on projecting margins and committed to increasing the term to shareholders in 2025. And finally, we look forward to creating value for our customers, partners and shareholders in the coming quarters. With this, I will conclude today's call. Thank you all for joining.
This concludes today's conference call. You may not disconnect.