Key Acquisition And Outlook: During Q1, SLB’s featured activity was its agreement to combine the carbon capture business with Aker Carbon Capture. It will leverage SLB’s new technology development and industrialization capability with Aker’s commercial carbon capture offerings. SLB is slated to hold 80% of the combined entity, and the acquisition is expected to close in 2H 2024.

Following the tightness in service and equipment capacity in the OFS industry, SLB will look to expand its margin in international business. In Q2, it will look to benefit from a seasonal rebound in the Northern Hemisphere and a sequential margin expansion in all geographies. This will likely lead to “mid-teen” EBITDA growth in FY2024.

Revenue And EBITDA Fell in Q1: SLB’s all four operating segments witnessed a quarter-over-quarter revenue decline in Q1. Its Digital & Integration segment saw the sharpest revenue fall in Q1 (9% down), followed by Production Systems (4% down). The company’s adjusted EBITDA decreased by 9.7% in Q1 2024 compared to Q4 2023. Geographically, the company’s North American market slowed down marginally in Q1. Lower sales of production systems in the US GoM due to softer drilling activity caused this fall.   

Despite the mild setback in Q1, the company’s management continues to place high hopes on global offshore activities and investments in production and reservoir recovery. Recently, SLB acquired ChampionX, which should enhance its chemical portfolio and artificial lift offerings. Plus, the potential acquisition of Aker Carbon Capture will strengthen its CCS (carbon capture and sequestration) portfolio.

Cash Flow And Leverage Unchanged: SLB’s cash flow from operations remained steady in Q1 2024 compared to a year ago. Its FCF remained negative over this period. Debt-to-equity (0.56x) also remained unchanged compared to FY2023. During Q1, it repurchased shares worth $270 million. You may read more about the company in our previous article here.

Thanks for reading the SLB take three, which is designed to give you three critical takeaways from SLB’s earnings report.  Soon, we will present a second update on SLB earnings highlighting its current strategy, news, and notes we extracted from our deeper dive.