SLB: Q2 TAKE THREE

SLB's outlook for the second half of 2025 is described as "constructive." The company plans to expand its focus on the production and recovery segment. With the acquisition of ChampionX, SLB aims to strengthen its capabilities in this space. Management expects energy operators to remain disciplined in capital spending. SLB will focus on cost management to preserve competitive EBITDA margins.

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Key Awards And Outlook: SLB OneSubsea JV won a substantial offshore EPIC contract in Offshore Trinidad and Tobago from BP. OneSubSea won another critical EPIC contract from Equinor in Norway. In Congo, it received a multi-year contract for well construction measurement services. In Oman, it won two five-year contracts for integrated completion services, wireline & tubing-conveyed perforation projects. During Q2, SLB launched Electris — a portfolio of digitally enabled electric well completions technologies that will reduce the total cost of asset ownership. Also, it launched Retina - an at-bit imaging system that optimizes drilling efficiency, formation evaluation, and safety. In AI-related and new energy projects, SLB partners with customers to migrate their technology and workflows into the cloud to achieve new AI-enabled capabilities. The launch of Sequestri's carbon storage solutions and the opening of its full-scale carbon capture facility were also noteworthy in Q2.

SLB's management plans to increase its exposure to the production and recovery space, which appears to be less cyclical and growing. With that objective, it acquired ChampionX in July. It also expects commodity prices to remain range-bound as energy operators remain disciplined in their capital expenditure spending. It will also manage costs to maintain a competitive EBITDA margin in the industry. Overall, the company’s outlook remains “constructive for the second half of the year.”

North American Sales Down in Q2 : SLB's Production Systems segment witnessed the sharpest quarter-over-quarter revenue rise (3% up), while the segment operating income increased by 5% in Q2. Operating income growth in the Reservoir Performance segment was the highest in Q2 (11% up), although revenues declined marginally here. The Well Construction segment, on the other hand, saw the steepest operating income fall (6% down) in Q2. Overall, the company's adjusted EBITDA increased by 1.5% in Q2’25 compared to Q1’25. Geographically, the company's sales from international businesses fared better than those in North America in Q2.

In Q2, the divestment of assets in the Palliser block, reduced drilling, and lower exploration

data sales in offshore accounted for much of the North American underperformance. Internationally, the Q2 growth stemmed primarily from higher sales of artificial lift in North Africa, subsea production systems in Nigeria, and increased sales of production systems in Europe.

Cash Flows and Sale of Palliser Block : SLB's cash flow from operations was steady in Q2 2025 compared to a year ago, despite revenues dropping by 5% during this period. Its FCF, however, increased by 15% due to lower capex. Due to the lower shareholders’ equity, debt-to-equity increased (0.64x) compared to 0.54x in FY2024. In June, SLB sold its working interest in the Palliser Block in Canada.

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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