Recent Events And Outlook: SLB focuses on digital and data analytics in the changing scenario as the industry goes through a relative slowdown. It recently collaborated and partnered with NVIDIA, Amazon Web Services, Aramco, and others while integrating advanced AI capabilities following the launch of the Lumi data and AI platform. It also agreed to sell its interests in the Palliser Block located in Alberta, Canada (The Palliser Block consists of oil and gas wells, a pipeline network, and development rights.) SLB’s management expects to exceed $3.0 billion in return to shareholders in FY2024. It also believes that the company is in line with achieving the FY2024 adjusted EBITDA margin goal of 25% or higher.
Revenue And EBITDA Moved Up in Q3: SLB’s Digital & Integration and Production Systems segments witnessed a similar quarter-over-quarter revenue rise in Q3. On the other hand, the Well Construction segment saw a revenue fall in Q3 (3% down). The company’s adjusted EBITDA improved by 2.4% in Q3 compared to Q2. Geographically, the company’s International businesses registered growth compared to a modest decrease in revenue in North America in Q2. Increased contribution from long-cycle projects in deep water and gas and steady performance from the digital business concerning cloud computing and automation strengthened its performance in Q3.
Readers may note that the energy activity remained relatively subdued in Q3 as short-cycle activity softened, while a few international producers lowered capex following lower oil prices and increased supply. So, SLB’s investment in digital technology to shorten planning cycle times, automation, and efficiency resulted in modest sales and profit growth in Q3.
Cash Flows Improved As Buyback Accelerated: SLB’s cash flow from operations increased in 9M 2024 compared to a year ago, led primarily by higher revenues. Its FCF also increased over this period. Due to the higher debt level, debt-to-equity increased (0.56x) compared to FY2023. During Q3, it returned $900 million through stock repurchases and dividends. 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.
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