SLB (NYSE: SLB) today announced results for the second-quarter 2023.
International- and Offshore-Led Growth Fueling Strong Margin Expansion and Cash Flows SLB CEO Olivier Le Peuch commented, 'I am very pleased with our second-quarter results, which reflect significant growth in the international markets, particularly in the Middle East & Asia, and offshore.
North America revenue also grew sequentially benefiting from our agility across the most resilient basins and market segments, although the rig count in the area declined. As the upcycle continues to unfold, we are excited about the opportunities for our business, with international- and offshore-led growth fueling strong pretax segment operating margin expansion and cash flows as highlighted in this quarter's results. We are very well positioned in these markets, as international represents nearly 80% of our global revenue, and offshore constitutes approximately half of that. Both sequentially and year on year, we saw broad international revenue growth that resulted in margins expanding across all Divisions and geographical areas.
'Our focus on the quality of our revenue continues to drive margins, and during the second quarter, we received numerous multiyear contract awards. This is bolstering our outlook for long-term growth that will outlast near-term commodity price volatility, and it is reinforcing our belief in the breadth, resilience, and durability of the upcycle.
'Compared to the same period a year ago, international revenue grew 21%, outpacing North America which increased 14%. Year on year, revenue grew 20% and pretax segment operating margin expanded 240 basis points (bps), representing the tenth straight quarter that we have increased our pretax segment operating margin year on year. This was driven by the international markets, where we posted our highest year-on-year incremental margin in the last three years, demonstrating the earnings power of our operations in these markets.'
Middle East & Asia and Offshore Drove Strong Sequential Performance
'Sequentially, our revenue grew 5%-more than $350 million-driven largely by the Middle East & Asia area which increased 10%, or $249 million. This increase was propelled by strong double-digit growth in Saudi Arabia, Kuwait, United Arab Emirates, Egypt, India, and China. Similarly, our offshore businesses in the US Gulf of Mexico, Brazil, Angola, Namibia, and the Caspian Sea posted double-digit growth sequentially.
'Overall, our second-quarter pretax segment operating margin expanded 154 bps sequentially. Margin expansion was driven by operating leverage, increased technology adoption, and pricing that stemmed from contracts being adjusted for inflation and tight service capacity in key markets.
'Second-quarter cash flow from operations vastly improved to $1.61 billion-$1.28 billion higher sequentially-and free cash flow was $986 million. Contributing to this very strong cash flow performance were higher earnings, robust receivable collections, improved inventory turnover, and continued capex discipline. We expect free cash flow generation in the second half of the year to be visibly higher than the first half, firmly positioning us to outperform last year's free cash flow.
'I am very proud of the exceptional results delivered by the SLB team.'
Confidence in the Long-Term Outlook
'We continue to see positive upstream investment momentum in the international and offshore markets. These markets are being driven by resilient long-cycle offshore developments, production capacity expansions, the return of global exploration and appraisal, and the recognition of gas as a critical fuel source for energy security and the energy transition.
'This is resulting in a significant baseload of activity as you can see from the number of contract awards in our quarterly highlights. The nature of these awards displays the duration and magnitude of this upcycle, both on land and offshore. We remain proud to be the partner of choice for our customers.
'As international spending builds further momentum in the second half of 2023 and North America moderates as anticipated, this cycle continues to align closely with SLB's strengths, affirming our confidence in our full-year financial ambitions.
'This is a compelling environment for our industry, and SLB is a disciplined and efficient company that is moving in sync with our customers and our shareholders. We believe we are well positioned to execute our returns-focused strategy and commitment to shareholder returns.'
Other Events
During the quarter, SLB repurchased approximately 4.5 million shares of its common stock at an average price of $47.33 per share for a total purchase price of $213 million.
Also during the quarter, SLB issued $500 million of 4.500% Senior Notes due 2028 and $500 million of 4.850% Senior Notes due 2033.
On July 20, 2023, SLB's Board of Directors approved a quarterly cash dividend of $0.25 per share of outstanding common stock, payable on October 12, 2023, to stockholders of record on September 6, 2023.
International
Revenue in Latin America of $1.62 billion was essentially flat sequentially as higher drilling activity offshore Brazil, increased stimulation activity in Argentina, higher sales of midstream production systems offshore Guyana, and increased Asset Performance Solutions (APS) revenue in Ecuador were offset by lower revenue in Mexico. Year on year, revenue grew 22% led by higher drilling activity in Mexico and Brazil, increased sales of production systems in Guyana, and increased intervention and stimulation activity in Argentina.
Europe & Africa revenue of $2.03 billion grew 3% sequentially due to higher offshore activity in Angola and Namibia, increased drilling in Scandinavia, and higher sales of subsea production systems in the Caspian Sea. These increases were partially offset by the non-repeat of last quarter's significant midstream production systems project milestones. Year on year, revenue grew 20% resulting from increased exploration, drilling, and production activity offshore Africa and higher drilling in Scandinavia and Europe.
Revenue in the Middle East & Asia of $2.64 billion increased 10% sequentially driven by double-digit revenue growth in Saudi Arabia, Egypt, United Arab Emirates, Kuwait, China, and India. This was a result of higher drilling, intervention, stimulation, and evaluation activity, both on land and offshore. Year on year, revenue grew 22% with double-digit growth across Saudi Arabia, United Arab Emirates, Qatar, Egypt, Oman, Iraq, India, East Asia, and Australia.
North America
North America revenue of $1.75 billion grew 3% sequentially-despite the decrease in rig count-benefiting from our agility across the most resilient land basins and market segments. In addition, our strong offshore position in the US Gulf of Mexico contributed to our revenue growth as activity increased sequentially. US land revenue grew sequentially, outperforming the rig count decline, while offshore experienced double-digit growth, boosted by increased sales of completions and subsea production systems as well as higher drilling and evaluation activity. In contrast, Canada land revenue decreased due to the spring breakup. Year on year, North America revenue grew 14% due to strong land and offshore drilling and higher sales of production systems, although this was partially offset by lower APS project revenue in Canada due to lower commodity prices.
About SLB
SLB (NYSE: SLB) is a global technology company driving energy innovation for a balanced planet. With a global presence in more than 100 countries and employees representing almost twice as many nationalities, we work each day on innovating oil and gas, delivering digital at scale, decarbonizing industries, and developing and scaling new energy systems that accelerate the energy transition. Find out more at slb.com.
This second-quarter 2023 earnings press release, as well as other statements we make, contain 'forward-looking statements' within the meaning of the federal securities laws, which include any statements that are not historical facts. Such statements often contain words such as 'expect,' 'may,' 'can,' 'believe,' 'predict,' 'plan,' 'potential,' 'projected,' 'projections,' 'precursor,' 'forecast,' 'outlook,' 'expectations,' 'estimate,' 'intend,' 'anticipate,' 'ambition,' 'goal,' 'target,' 'scheduled,' 'think,' 'should,' 'could,' 'would,' 'will,' 'see,' 'likely,' and other similar words. Forward-looking statements address matters that are, to varying degrees, uncertain, such as statements about our financial and performance targets and other forecasts or expectations regarding, or dependent on, our business outlook; growth for SLB as a whole and for each of its Divisions (and for specified business lines, geographic areas, or technologies within each Division); oil and natural gas demand and production growth; oil and natural gas prices; forecasts or expectations regarding energy transition and global climate change; improvements in operating procedures and technology; capital expenditures by SLB and the oil and gas industry; our business strategies, including digital and 'fit for basin,' as well as the strategies of our customers; our APS projects, joint ventures, and other alliances; our response to the COVID-19 pandemic and our preparedness for other widespread health emergencies; the impact of the ongoing conflict in Ukraine on global energy supply; access to raw materials; future global economic and geopolitical conditions; future liquidity, including free cash flow; and future results of operations, such as margin levels. These statements are subject to risks and uncertainties, including, but not limited to, changing global economic and geopolitical conditions; changes in exploration and production spending by our customers, and changes in the level of oil and natural gas exploration and development; the results of operations and financial condition of our customers and suppliers; the inability to achieve our financial and performance targets and other forecasts and expectations; the inability to achieve our net-zero carbon emissions goals or interim emissions reduction goals; general economic, geopolitical, and business conditions in key regions of the world; the ongoing conflict in Ukraine; foreign currency risk; inflation; changes in monetary policy by governments; pricing pressure; weather and seasonal factors; unfavorable effects of health pandemics; availability and cost of raw materials; operational modifications, delays, or cancellations; challenges in our supply chain; production declines; the extent of future charges; the inability to recognize efficiencies and other intended benefits from our business strategies and initiatives, such as digital or SLB New Energy; as well as our cost reduction strategies; changes in government regulations and regulatory requirements, including those related to offshore oil and gas exploration, radioactive sources, explosives, chemicals, and climate-related initiatives; the inability of technology to meet new challenges in exploration; the competitiveness of alternative energy sources or product substitutes; and other risks and uncertainties detailed in this press release and our most recent Forms 10-K, 10-Q, and 8-K filed with or furnished to the Securities and Exchange Commission. If one or more of these or other risks or uncertainties materialize (or the consequences of any such development changes), or should our underlying assumptions prove incorrect, actual results or outcomes may vary materially from those reflected in our forward-looking statements. Forward-looking and other statements in this press release regarding our environmental, social, and other sustainability plans and goals are not an indication that these statements are necessarily material to investors or required to be disclosed in our filings with the SEC. In addition, historical, current, and forward-looking environmental, social, and sustainability-related statements may be based on standards for measuring progress that are still developing, internal controls and processes that continue to evolve, and assumptions that are subject to change in the future. Statements in this press release are made as of the date of this release, and SLB disclaims any intention or obligation to update publicly or revise such statements, whether as a result of new information, future events, or otherwise.
Contact:
Joy V. Domingo
Tel: +1 (713) 375-3535
Email: investor-relations@slb.com
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