Schlumberger Q2 2025 Earnings Report

Schlumberger EPS Results

• Actual EPS: $0.74
• Consensus EPS: $0.73
• Beat/Miss: Beat by +$0.01
• One Year Ago EPS: $0.85

Schlumberger Revenue Results

• Actual Revenue: $8.55 billion
• Expected Revenue: $8.51 billion
• Beat/Miss: Beat by +$34.53 million
• YoY Revenue Growth: -6.50%

Schlumberger Announcement Details

• Quarter: Q2 2025
• Date: 7/18/2025
• Time: Before Market Opens
• Conference Call Date: Friday, July 18, 2025
• Conference Call Time: 9:30AM ET

Schlumberger (NYSE:SLB) engages in the provision of technology for the energy industry worldwide. The company operates through four divisions: Digital & Integration, Reservoir Performance, Well Construction, and Production Systems. The company provides field development and hydrocarbon production, carbon management, and integration of adjacent energy systems; reservoir interpretation and data processing services for exploration data; and well construction and production improvement services and products. It also offers subsurface geology and fluids evaluation information; open and cased hole services; exploration and production pressure, and flow-rate measurement services; and pressure pumping, well stimulation, and coiled tubing equipment solutions. In addition, the company offers mud logging, directional drilling, measurement-while-drilling, and logging-while-drilling services, as well as engineering support services; supplies drilling fluid systems; designs, manufactures, and markets roller cone and fixed cutter drill bits; bottom-hole-assembly and borehole enlargement technologies; well cementing products and services; well planning, well drilling, engineering, supervision, logistics, procurement, and contracting of third parties, as well as drilling rig management solutions; and drilling equipment and services, as well as land drilling rigs and related services. Further, it provides artificial lift production equipment and optimization services; supplies packers, safety valves, sand control technology, and various intelligent well completions technology and equipment; designs and manufactures valves, chokes, actuators, and surface trees; and OneSubsea, an integrated solutions, products, systems, and services, including wellheads, subsea trees, manifolds and flowline connectors, control systems, connectors, and services. The company was formerly known as Socie´te´ de Prospection E´lectrique. Schlumberger Limited was founded in 1926 and is based in Houston, Texas.

Schlumberger Q2 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Q2 revenue rose 1% sequentially to $8.5 billion, while adjusted EBITDA margin expanded 21 bps to 24% and free cash flow jumped to $622 million on seasonal working capital improvements.
• Neutral Sentiment: International segment revenue grew 2% led by the Middle East, Asia and North Africa, fully offsetting North America headwinds from seasonal spring breakup and non-repeat offshore data sales.
• Neutral Sentiment: Second-half guidance calls for CHF 18.2–18.8 billion in revenue with EBITA margins flat to Q2, driven by five months of ChampionX contributions and back-loaded Q4 digital and product sales.
• Negative Sentiment: OPEC+ supply releases into an already well-supplied market risk near-term commodity price pressure, with short-cycle land activity in North and Latin America most exposed despite resilience in Middle East and Asia.
• Positive Sentiment: ChampionX acquisition closed and will be consolidated from August, targeting $400 million of annual pre-tax cost synergies and $100 million of revenue synergies within three years and expected to be accretive to margins and EPS by 2026.

Presentation

[Operator]

Good morning. My name is Megan, and I'll be your conference operator today and would like to welcome everyone to the Second Quarter SLB Earnings Call. At this time, all participants are in a listen only mode. After the speakers' remarks, there will be a Q and A session. As a reminder, this call is being recorded.

[Operator]

I would now turn the call over to James R. McDonald, Senior Vice President of Investor Relations and Industry Affairs. Please go ahead.

[James McDonald, SVP - IR & Industry Affairs at Schlumberger]

Thank you, Megan. Good morning, and welcome to the SLB second quarter twenty twenty five earnings conference call. Today's call is being hosted from Paris following our Board meeting held earlier this week. Joining us on the call are Olivier Lapouche, Chief Executive Officer and Stephane Biguet, Chief Financial Officer. Before we begin, I would like to remind all participants that some of the statements we will be making today are forward looking.

[James McDonald, SVP - IR & Industry Affairs at Schlumberger]

These matters involve risks and uncertainties that could cause our results to differ materially from those projected in these statements. For more information, please refer to our latest 10 ks filing and other SEC filings, which can be found on our website. 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 Circuit second quarter earnings press release, which is on our website. With that, I will turn the call over to Olivier.

[Olivier Le Peuch, CEO & Director at Schlumberger]

Thank you, gents. Ladies and gentlemen, thank you for joining us on the call. Before we begin, I would like to officially welcome the Champagne X team to SLB. Earlier this week, we shared the news that our transaction is now complete, and this is the start of an exciting new chapter for our company. I could not be prouder to lead the company at this juncture, building on an unmatched talent pool and portfolio of technologies to serve our customer and create value for our shareholders.

[Olivier Le Peuch, CEO & Director at Schlumberger]

Now as we move into this call, I would like to start by walking you through our second quarter performance. Then I will share how we see the broader macro environment evolving, come out on our new chapter with Champagne X and what that means for our business in the second half of the year. After that, Stephane will provide more details on our financial performance and then we will open the line for your questions. Let's begin. This was a solid quarter for SLB, and as we delivered steady revenue and slight EBITDA margins expansion despite the considerable macro headwinds and market volatility over the past few months.

[Olivier Le Peuch, CEO & Director at Schlumberger]

These results are a clear reflection of our broad operating footprint, our technology leadership and our strong execution. In International Markets, revenue grew by 2%, benefiting from pocket of growth in Middle East, Asia and North Africa, fully offsetting sequential headwinds in Saudi Arabia and certain offshore markets. Specific to The Middle East and Asia, long term fundamentals for oil remains strong and both conventional and non commercial gas are providing an additional tailwind for activity across the region. During the quarter, we experienced strong growth in Iraq, The UAE, Kuwait, East Asia, China and Australia. Meanwhile, in North America, although revenue declined sequentially, we continue to outpace the market led by increased sales across most of our business lines in Production Systems and higher digital sales in U.

[Olivier Le Peuch, CEO & Director at Schlumberger]

S. Land. The revenue decline stands mostly from the seasonal spring breakup in Canada and non repeat of exploration data sales in U. S. Offshore.

[Olivier Le Peuch, CEO & Director at Schlumberger]

In the Offshore market, certain projects have pushed to the right, most notably in Sub Saharan Africa. However, we continue to maintain a steady backlog in OneSubsea and there's a significant number of offshore projects preparing for FID. Altogether, these dynamics reinforce our confidence in the long term growth for this market. Next, let me discuss the performance of our divisions. In the core, Production Systems led the way again this quarter, benefiting from increased sales of artificial lift and midstream production systems.

[Olivier Le Peuch, CEO & Director at Schlumberger]

Overall, our service quality and reliability continue to differentiate our offering in this space, and we have been awarded several new projects during this quarter. Meanwhile, in Well Construction, revenue was flattish sequentially with growth in Iraq, The UAE, North Africa and Nigeria, offset by lower activity in Namibia and North America. In reservoir performance, revenue declined slightly due to lower evaluation and stimulation activity, partially offset by solid international work. Turning to Digital and Integration, our digital revenue remained steady with double digit growth across the combination of our platforms, application and digital operations, offset by lower exploration data this quarter. We now have more than 7,800 users across the Delphi platform, representing double digit growth year on year.

[Olivier Le Peuch, CEO & Director at Schlumberger]

This is a continued reflection of our customers' focus on unlocking through digital, higher level of performance and efficiency in the assets. Finally, we continued to exhibit growth in CCS, where we successfully executed several large scale projects in the carbon market this quarter. We are now participating in the entire value chain from point of capture with the SAB CapturI to permanent storage with SAB Secestri. This combined offering is being successfully utilized at the Longship CCS project in Norway and believe this will continue to present new opportunities for our Carbon Solutions business. All in all, this quarter was challenging with lots of moving parts, yet we produced solid results.

[Olivier Le Peuch, CEO & Director at Schlumberger]

Considering the uncertainty and market volatility, the entire SAP team has delivered remarkably well. And having met with many customers during the quarter, I'm assured of our differentiated performance and the trust that our customers continue to place in us. Next, I will discuss what we are seeing in the macro environment, how we expect this to evolve over the second half of the year. During the first half of the year, the oil and gas industry demonstrated its strength and resilience, proving that it can operate through uncertainty without a significant drop in Upstream Spain, highlighting the different attributes of this cycle. As we look to the second half of the year, the macro environment continues to be uncertain, particularly with the announcement of the OPEC plus supply releases into well supplied market.

[Olivier Le Peuch, CEO & Director at Schlumberger]

For the moment, incremental barrels are being absorbed by peak summer demand, China restocking and the replenishment of global crude inventories that are sitting below five years historical average. All in, while sustained release could exert pressure on commodity price in the near term, the removal of the overhang of OPEC plus volatile cuts will allow for market stabilization over time. While it is difficult to predict the outcome from the combination of further super release, their system geopolitical risk and lingering tariff negotiations, it is fair to assume sustained resilience in the market outlook, absent of a dramatic shift in commodity price. Regionally, The Middle East and Asia will continue to display the most resilience in the short term, driven by lower breakeven and a sustained focus on energy security. Meanwhile, advantage offshore projects will lend support to the steady market across Europe, Africa and Americas.

[Olivier Le Peuch, CEO & Director at Schlumberger]

In contrast, land activity across North America and Latin America have the greatest downside risk due to short cycle spend. Globally, we expect operators to remain focused on critical in flight development projects and an acceleration of efficiency gains with a heavier focus on pollution recovery and continued investments in digital and AI. Next, let me describe this growing market and opportunity that we see with Champagne X. Today, customers are on a quest to unlock and optimize the full production potential of the assets, while improving efficiency in the reservoir recovery phase of their operations. This is creating a less cyclical and growing market opportunity that is more OpEx driven and is less sensitive to short term commodity cycles.

[Olivier Le Peuch, CEO & Director at Schlumberger]

The addition of Champagne X enhance our portfolio by providing the capability we need to lead this effort. Champagne X strengths in Producing Chemicals and Naturalist enhance our portfolio in two essential and fast growing segments that are critical to long term asset performance. In Pollution Chemicals, Champlain X adds scales, vertical integration and a strong global manufacturing footprint to deliver solutions to address the rising demand from aging infrastructure and complex webs. Now combine our Shell lease portfolio as a breadth to optimize pollution across the full life cycle of the well. Additionally, Chopenex brings a unique digital pollution technology portfolio that will expand into new markets and new applications.

[Olivier Le Peuch, CEO & Director at Schlumberger]

Integrating these capabilities in the SLB existing portfolio will allow for greater innovation and customer value creation, as we take a further step toward delivering a fully integrated service offering anywhere in the world from reservoir to surface facility from completion to decommissioning. Geographically, this acquisition also expands our broad global reach. Champennix deep presence in North America pairs well with SFB's international leadership, enabling us to bring their technologies to new markets while also deepening our capabilities in The U. S. Taken together, this is a highly complementary fit, one that strengthens our portfolio, accelerates our growth in regional markets and reinforce our ability to deliver value at every stage of the pollution lifecycle.

[Olivier Le Peuch, CEO & Director at Schlumberger]

And just as important, we are combining two organizations that share a strong culture of innovation, operational excellence and customer focus. Overall, this would enable us to integrate the full production landscape with the best people, the deepest domain expertise and most innovative technology solutions, guided by our shared passion for innovation and a commitment delivering for customers in every basin around the world. I'm truly excited to welcome the Champoll X team to SMB and look forward to what we will achieve together. Now before I hand over to Stephane, let me quickly share our guidance for the second half of the year. Starting August 2025, we will begin consolidating Champagne X into our results.

[Olivier Le Peuch, CEO & Director at Schlumberger]

Therefore, we expect second half revenue to be between CHF 18,200,000,000.0 and CHF 18,800,000,000.0 for the second half. This second half increase will be a result of the five months contribution of Champagne X combined with steady revenue in our legacy SLB business compared to the first half, driven by growth in Collision Systems and Digital, fully offsetting the anticipated activity decline in The U. S. And certain deepwater markets. Moreover, revenue would be back loaded in the fourth quarter, reflecting a full quarter of Champagne X as well as a seasonal uplift from year end digital and product sales.

[Olivier Le Peuch, CEO & Director at Schlumberger]

We also expect second half EBITA margins to be flat compared to the second quarter, inclusive of the Champagnex contribution and inclusive of about 20 to 40 basis points for Thais impact. I will now turn the call over to Stephane to discuss our financial results and the plan for Champagne's financial integration in more details.

[Stephane Biguet, EVP & CFO at Schlumberger]

Thank you, Olivier, and good morning, ladies and gentlemen. Second quarter earnings per share, excluding charges and credits, was $0.74 This represents an increase of $02 sequentially and a decrease of $0.11 when compared to the second quarter of last year. While the net amount of charges and credits recorded during the quarter had no impact on our EPS, we did incur $09 of charges relating to headcount reductions and the impairment of an equity method investment as well as $02 of merger and integration charges related to the ChampionX and OneSubsea transactions. These charges were offset by an $0.11 gain relating to the sale of our interest in the Palliser APS project in Canada. Overall, our second quarter revenue of $8,500,000,000 increased 1% sequentially, driven by 2% growth in the international markets.

[Stephane Biguet, EVP & CFO at Schlumberger]

Our Pretax segment operating margins increased 20 basis points sequentially to 18.5% as margins increased in three of our four divisions. Company wide adjusted EBITDA margin for the second quarter was 24%, representing a sequential increase of 21 basis points. Let me now provide you with more details for each division. Second quarter Digital and Integration revenue of 1,000,000,000 decreased 1% sequentially. Digital revenue was flat as double digit sequential growth from the combined effects of platforms, applications and digital operations was offset by lower Exploration Data sales following a strong first quarter.

[Stephane Biguet, EVP & CFO at Schlumberger]

Lower APS revenue in Canada drove the overall 1% revenue decrease for the division. Digital and Integration margins expanded two forty basis points to 32.8, driven by greater digital adoption and efficiency gains. We expect digital revenue growth and margin expansion to continue in the second half of the year with a significant uptick in the fourth quarter benefiting from year end sales. In order to provide you with increased visibility into this business as it continues to grow, I am pleased to announce that we will start reporting the results of our digital business as a separate segment beginning in the third quarter. Turning to our Reservoir Performance division.

[Stephane Biguet, EVP & CFO at Schlumberger]

Revenue of $1,700,000,000 declined 1% sequentially due to a slowdown in evaluation and stimulation activity across international markets, partially offset by strong intervention activity. Margins improved two zero three basis points to 18.6% as a result of the higher intervention activity and the absence of start up costs that impacted the first quarter. Well Construction revenue of $3,000,000,000 was essentially flat sequentially, while margins of 18.6% decreased 119 basis points, primarily due to an unfavorable technology and geography mix internationally. Finally, Production Systems revenue of $3,000,000,000 increased 3% sequentially, driven by strong sales in artificial lift, midstream production systems and valves, as well as increased data center infrastructure solutions revenue. Margins increased 28 basis points to 16.4%, primarily due to continued growth and a favorable activity mix.

[Stephane Biguet, EVP & CFO at Schlumberger]

Now turning to our liquidity. We generated $1,100,000,000 of cash flow from operations and free cash flow of $622,000,000 during the quarter. This represents a $519,000,000 increase in free cash flow compared to last quarter, which is largely due to seasonal improvements in working capital. Consistent with our historical trends, we expect our free cash flow in the second half of this year to be materially higher than in the first half on improved earnings, higher customer collections and lower inventories. Capital investments, inclusive of CapEx and investments in APS projects and exploration data were $520,000,000 in the second quarter.

[Stephane Biguet, EVP & CFO at Schlumberger]

For the full year, we now expect capital investments to be approximately $2,400,000,000 reflecting the impact of the ChampionX acquisition. Regarding our M and A activity, as I mentioned earlier, we completed the sale of our Alacer asset in Canada near the end of the second quarter. As a result, we received $316,000,000 of net cash proceeds in the second quarter and an additional $22,000,000 in the third quarter. For reference, we generated $215,000,000 of revenue in the first half of the year from the Palliser assets, with EBITDA margin in the low 50s and pretax margin in the low 30s. Let me now turn to the ChampionX acquisition and what it means for SLB's future financial performance.

[Stephane Biguet, EVP & CFO at Schlumberger]

First, from a financial reporting perspective, we will begin consolidating ChampionX effective 08/01/2025. This means we will consolidate two months of ChampionX results in the third quarter of twenty twenty five. The ChampionX activities will be reported under our Production Systems division, which is where SLB's legacy production chemicals and artificial leaf businesses currently sits. The only exception to this relates to ChampionX's digital activities, which will be reported under our new Digital division. It is worth mentioning that we will be aligning ChampionX with SLB's definition of digital.

[Stephane Biguet, EVP & CFO at Schlumberger]

As a result, the digital revenue that we will report coming from the ChampionX business will be lower than what was previously disclosed by ChampionX. We will provide you with pro form a historical financial information to assist with modeling the combined businesses together with the additional granularity into our digital business in our third quarter earnings release. As it relates to synergies, we spent the past twelve months refining our preliminary estimates and developing actionable plans. We are now even more comfortable with our initial assessment that we will be able to generate $400,000,000 of annual pre tax synergies within the first three years after closing. The largest portion will come from cost synergies, which represent approximately 75% of the $400,000,000 Roughly half of this cost synergies will come from supply chain savings, which will be generated not only from ChampionX operations, but also from SLB's existing cost base, including the chemical spend in our legacy businesses.

[Stephane Biguet, EVP & CFO at Schlumberger]

The over half of the cost synergies will come from operating costs and G and A savings. With regard to the expected annual revenue synergies of approximately $100,000,000 when translated into incremental pretax income, we have only included opportunities with the highest probability of realization. These have been identified at the country and customer level. Let me now conclude with the direct impact of the acquisition on our financial metrics. As it relates to margins, we have demonstrated this quarter the resiliency of SLB's margin despite a challenging macro environment.

[Stephane Biguet, EVP & CFO at Schlumberger]

This resilience will be reinforced by the addition of ChampionX, which has delivered continuous margin expansion over the last few quarters. For that matter, when excluding the Drilling Technologies business that was disposed of concurrently with the closing of the SLB transaction, ChampionX finished the 2025 with revenue of approximately $850,000,000 and adjusted EBITDA of approximately 190,000,000 delivering visible margin expansion both sequentially and year over year. We expect both the legacy SLB businesses and ChampionX to continue delivering strong margin performance in the second half of this year. This will however be partially offset by the impact of tariffs. Assuming no changes to the tariffs that are currently in place, we estimate that this will cost us between twenty and forty basis points of margin in the second half.

[Stephane Biguet, EVP & CFO at Schlumberger]

Altogether, this will result in our company wide adjusted EBITDA margin in the second half of the year being essentially flat when compared to the second quarter of the year. Said another way, our adjusted EBITDA margins including the contribution of ChampionX would have expanded by about 20 to 40 basis points in the second half, if not for the impact of the tariffs. Looking forward, our margins will be further enhanced by the $400,000,000 in synergies that I previously discussed. With the detailed plans our integration teams have developed, we believe that we will be able to realize at least half of the synergies within the first eighteen months of the transaction. As a result, we expect the transaction will be accretive to both margins and earnings per share on a full year basis in 2026.

[Stephane Biguet, EVP & CFO at Schlumberger]

This reflects certain assumptions regarding the purchase accounting, which will be finalized in the coming months. Based on these assumptions, we have estimated the incremental annual recurring pretax intangible asset amortization expense to be approximately $80,000,000 over and above ChampionX historical annual intangible asset amortization expense of approximately $50,000,000 This incremental amortization expense equates to approximately $04 of EPS on an after tax basis. The calculation also reflects the fact that we issued 141,000,000 shares of SLB stock in connection with this transaction. It is worth mentioning that since the announcement of the ChampionX transaction in April 2024, we have been accelerating the repurchasing of our shares. To that end, since the announcement, we have reduced our total shares outstanding by $78,000,000 This represents 55% of the shares we just issued in this transaction.

[Stephane Biguet, EVP & CFO at Schlumberger]

Finally, I wanted to briefly come back to the second half guidance that Olivier shared earlier, where we expect second half revenue to be between $18,200,000,000 to $18,800,000,000 If we are to compare this H2 outlook to H1 by including ChampionX and excluding Palisir in H1 and considering ChampionX on a full six month basis in H2. This would result in second half revenue growth from flat to low single digit when compared to the first half, driven by both our legacy portfolio and ChampionX. I will now turn the call back to Olivier.

[Olivier Le Peuch, CEO & Director at Schlumberger]

Thank you, Stephane. I believe we are ready for your questions.

[Operator]

We will now begin the Q and A session. Your first question comes from the line of David Anderson with Barclays. Your line is open.

[J. David Anderson, Managing Director at Barclays]

Thanks and good morning. Thanks and thank you for the details, Stephane. I was rapidly doing the math here. Thanks for taking care of that. So kind of essentially two two half is second half is flat with first half. I was just wondering, Olivia, if you could provide a little bit more detail, kind of behind this.

[J. David Anderson, Managing Director at Barclays]

You had mentioned customers selectively adjusting activity. I was curious if this is primarily just related to the shorter cycle programs in The U. S. Land and Saudi slowing But more broadly, I'm curious if you've seen a noticeable change in customer behavior since OPEC started bringing barrels back. It feels like we're a bit of a wait and see mode with respect to oil and customer spending.

[J. David Anderson, Managing Director at Barclays]

Just hoping you could provide some insight into how you see this energy macro developing over the next few quarters?

[Olivier Le Peuch, CEO & Director at Schlumberger]

Yes. Thank you, Dave. So first, to be coming back to the guidance, I think the guidance reflects from the low to the high guidance flat to LSV with potential to go even beyond this. So we have definitely growth. We project growth in the second half compared to the first half when accounting for the moving parts in and out of our portfolio clearly, okay.

[Olivier Le Peuch, CEO & Director at Schlumberger]

And driven as we said, driven by the production system Champagne X combination getting an uplift in the second half of the year, in the third, fourth quarter and also for digital year end sales. This combination more than offsetting, if you like, some of the headwinds that are in selective markets still affecting the Drain activity and to the same extent the lower performance portfolio. So all of this to coming back to your question about selective customer adjustment, I believe that the major adjustments in international markets are largely behind us and people have been prepared and adjusting their spending rates and their activity outlook to account for the uncertainty and somehow the declining commodity price that they have seen in H1. However, as we have seen more recently, the short cycle markets have been more reactive to the persistent slightly lower commodity price anticipated. Yet, all in, we are seeing this as a resilient market going forward, assuming that the price will stay hinge bound to what we have seen between '60 65 or 60 and high 60s.

[Olivier Le Peuch, CEO & Director at Schlumberger]

And I think we believe that there are a few things at play that could change this. But most of the cuts and most of the adjustment in selective market and selective country have been done with exception as I said of the low cycle of the short cycle, partially in North America and some market internationally that are short cycle. So hence we are that's the reason why we guided the way we guided the second half.

[J. David Anderson, Managing Director at Barclays]

And then in your release and also in your commentary, had noted a few things going on in deepwater. You had called out

[J. David Anderson, Managing Director at Barclays]

Namibia for some slowing. But I was just wondering, broadly speaking, in deepwater, are you concerned about just kind of near term activity just slowing here? Is Namibia sort of a one off? Or are you worried that you're starting to see some of these projects pushing to the right? Because if you look at kind of rigs and rig schedules, subsea deliveries, pipe orders, it looks like deepwater is sort of poised for a pretty good uptick in kind of by mid-twenty six.

[J. David Anderson, Managing Director at Barclays]

I'm just wondering if that's if you agree with that or things are sort of sliding to the right a little bit.

[Olivier Le Peuch, CEO & Director at Schlumberger]

Yes. First, to comment on what we have seen for the last twelve to eighteen months, we have seen a white space developing and indeed the least critical project to shift to the right. But we still have seen the rich pipeline of advantage project that are key for the portfolio of international operators, partly the IOCs to be going forward with anticipated FID and you see it in Suriname. Then an EBITDA effect is an effect of a long period of appraisal exploration success that is now going into a deep, I would say, and decision for the way forward. So I will not try to overreact onto the Namibia temporary effect, but I'm more excited about what I see in Americas at large for oil, be it on some of the Africa assets that are going in Phase three or that are reaching FID.

[Olivier Le Peuch, CEO & Director at Schlumberger]

Obviously, in Central America, the Suriname assets, the Brazil very sustained activity and Guyana, actually some activity as well as Gulf Of Mexico combined. I think it is a market that has only upside going forward. And by contrast, in the Eastern Hemisphere, driven by gas markets from Indonesia big discovery to Mozambique soon be relaunched and still it made as a very prolific and exciting basin. I think I see the condition that are set for indeed a rebound directionally in the years to come. And certainly, I think the hypothesis of 2026, I think is a valid hypothesis that I think we'll have to look forward to see unfolding.

[J. David Anderson, Managing Director at Barclays]

Thank you very much. Appreciate it. Thank you.

[Operator]

Thank you. Your next question comes from the line of Scott Gruber with Citigroup. Your line is open.

[Scott Gruber, Director - Oilfield Services & Equipment Research at Citi]

Yes, thank you. I'm curious about how you view the growth outlook for your now larger production business. How would you dimension both the underlying growth for the production market and then how you can enhance that growth with revenue synergies, especially as you apply your digital applications? When you put those two factors together, what's a medium term reasonable growth outlook for the production business?

[Olivier Le Peuch, CEO & Director at Schlumberger]

I think I will not try to comment on because the definition of a production market is something that I think we'd have to come back and give you a little bit more detail on our combined portfolio. But I would say there are three elements that we drive synergy that we drive this market to grow in our mind. First and foremost, I think the customers our customers have told us, our customers and operators are focused on trying to extract more value from production recovery phase of the asset to contrast with early and completion of development phase of the asset that's trying to get the most of the existing hedging assets to make sure that they extend the plateau. They improve the performance and they improve the recovery to extract more from the hedging asset. So the unique combination that we have access to with the addition of the Champon X give us an unmatched portfolio.

[Olivier Le Peuch, CEO & Director at Schlumberger]

When I think I'm not talking about only Pollution System, actually, the Pollution Chemistry, I'm talking about intervention, I'm talking about the surface equipments, I'm talking about the ability that we have to integrate, innovate and add digital. So what would drive growth in this is our ability to partner with our customers to provide integrated offering beyond the specific of this actual lift pollution chemistry and add digital capability to it and offer end to end solution that includes well services, well intervention and includes equipment at the surface that can help enhance the pollution capability. So we see this as a market that will have more resilience, less cyclicality, because it's inclusive of OpEx expense and the long term resilience and long term growth that will certainly outpace the global CapEx market for the decade to come. That's what we see and we see this as a white space, as an innovation space and as a space where customer are very pleased to see in the feedback we have got, the engagement we had, they look forward to see what we can put together by innovation, by integration and with digital in this market. So we're quite excited.

[Scott Gruber, Director - Oilfield Services & Equipment Research at Citi]

That's great color. Then your portfolio changes, they're pushing the company to become less capital intensive, more free cash generative. How do you think about kind of where you can take CapEx to sales, free cash conversion in '26 and beyond, especially as you realize the synergies? For instance, can you push that free cash conversion rate toward something like a 60% level on a sustained basis? How do we think about those capital intensity and free cash metrics over time now?

[Stephane Biguet, EVP & CFO at Schlumberger]

So Scott, first maybe on 2025 as a reference, we kind of anticipated the soft activity and brought down the total capital investment 10% lower compared to last year. So we are basically at maintenance CapEx level this year and at the very low end of our 5% to 7% CapEx as a percentage of revenue range. So going forward, if we see growth, we will certainly add growth CapEx to that. We have that agility. And ChampionX clearly brings down that percentage a bit more, but we are already very low.

[Stephane Biguet, EVP & CFO at Schlumberger]

We may or may not change the range, but ChampionX is clearly helping with the low capital intensity. Regarding EBITDA to free cash flow conversion, we don't really track it that way. We prefer looking at free cash flow margin. You know that we are looking on a full cycle basis to be above 10% of revenue in terms of free cash flow margin, and we are exceeding this now as we speak and intend to do the same going into the following years, partially because of the positive contribution from ChampionX.

[Scott Gruber, Director - Oilfield Services & Equipment Research at Citi]

All right. I appreciate it. Thank you. Thank you. Thank you.

[Operator]

Thank you. Your next question comes from the line of Arun Jayaram with JPMorgan. Your line is open.

[Arun Jayaram, Vice President at JP Morgan Chase & Co]

Good morning, gentlemen. Question, global upstream spending is on track to decline in 2025 versus 2024. I was wondering if you could share with us your views on how you see this playing out for SLB across different regions internationally? So if you can comment on Mexico and Saudi and North America and perhaps the timing of a potential inflection point in spending trends.

[Olivier Le Peuch, CEO & Director at Schlumberger]

Okay. Quite a lot packed into the question here. The first indeed I think it is clear now that the market is in the total market is in slight decline in 2025 compared to 2024. We see it both more in North America than we see it internationally. There is more resilience in Middle East and Asia market due to the both the commitment to oil capacity expansion, the development of unconventional and commercial gas across the region and the focus on energy security in Asia.

[Olivier Le Peuch, CEO & Director at Schlumberger]

So that provides a bit of a buffer and I think that's very visible. As we have counted before internationally, the other international market I think is impacted by two aspects this year, the white space in deepwater market, the Mexico that has been reducing significant activity based on restructuring and reaching a new bottom in term of activity. And some of the, I would say, short cycle activity in the rest of partially in Latin America. North America, I think there is no secret that the short cycle has been declining in the last couple of months more deeply than everyone will anticipate. So it will represent certainly the highest, I would say, drag on to the total CapEx for the year.

[Olivier Le Peuch, CEO & Director at Schlumberger]

Now, before we talk about the inflection, I would like to talk about resilience. Now that this adjustment have been done in the first half, I believe as we have demonstrated into our second half outlook when correcting for the in and out, we are anticipating growth. And this is because we believe that there is resilience on some part of the international market. There is still appetite for executing the most advantaged project with some unconventional development or some large gas or oil development that are underplay. And we believe that our market position that we have, which is hedged across different business line across different geography give us the resilience that I think you see in our numbers in the second half.

[Olivier Le Peuch, CEO & Director at Schlumberger]

So I think now inflection, if we look at trying to look ahead and directionally, I think looking beyond 2025, we believe that continue to see that a bit of a cycle rebound, okay? That will be driven by several by first the fundamental of energy market and the reaffirmation that I could use of the critical of oil and gas supply. So specifically, if I like to look directionally ahead and beyond 2025, we're anticipating that a combination of the liquid market rebalancing, the continued investment in oil capacity expansion in The Middle East, the accelerating global gas supply both conventional and commercial and international oil in North America and the robust pipeline that I commented before in offshore deepwater project. And finally, the increase of production recovery focus for the customer, we combined with digital and AI trend to land support to gold investments going forward. We see that this is directionally shaping up.

[Olivier Le Peuch, CEO & Director at Schlumberger]

I will not comment on exact timing, but I think I will first remind everybody that there is a resilience in this market despite this mild uncertainty. And the future is still rich with a lot of projects internationally, rich with gas driving back activity in many part of the world and rich with long term deepwater project that will add really intensity going forward.

[Arun Jayaram, Vice President at JP Morgan Chase & Co]

Great. Thanks. And my follow-up question, appreciate the comments around your expectations around the second half outlook plus some of the outlook comments on ChampionX. But Olivier, Stephane, could you help us maybe break down your expectations for how you see things playing out in 3Q versus 4Q?

[Olivier Le Peuch, CEO & Director at Schlumberger]

Richard, I think let us give you a bit more colors onto this guide that we could give and share in Q3 versus Q4. So first, at very high level, we have gathered that the second half will be back end loaded. And now more specifically to the first quarter, we expect first this first quarter will impact at first, but addition of two months of Champagne X, that's a positive addition by negative addition of the full quarter absence of Palisur following its divestiture by also the impact negative, I would say, of activity decline in The U. S. And certain offshore markets And finally, and more recently by an incident that we have had on Ecuador pipeline disruption.

[Olivier Le Peuch, CEO & Director at Schlumberger]

This would translate all in into a slightly higher revenue sequentially from Q2 to Now trying to contrast this with Q4, with respect to the fourth quarter, we see revenue to be higher by high single digits versus the third quarter as an uptick, reflecting first a full quarter of Champagne X And secondly, the seasonal uplift we'll see from year end digital and product sales. I hope I gave you a bit more color on the top line and Q3 and uptick in Q4 that will help circle back the relative revenue in Q3 and Q4.

[Stephane Biguet, EVP & CFO at Schlumberger]

Yes. Let me just start Olivier. Okay. Yeah. I just wanted to add yeah, sorry for that.

[Stephane Biguet, EVP & CFO at Schlumberger]

What Olivier described that Q3 and Q4 directional split is what leads us to say that when you exclude the Palliser operations from H1, reinstate ChampionX in H1 and have ChampionX for six months in the second half, this is where you see growth and there's a range where this is the range of flat to low single digit between H1 and H2 when you compare like for like. I hope it's a lot of moving pieces, but I hope it's clear.

[Arun Jayaram, Vice President at JP Morgan Chase & Co]

That's clear. Thank you.

[Olivier Le Peuch, CEO & Director at Schlumberger]

Thank you.

[Operator]

Thank you. Our next question goes to the line of Neil Mehta with Goldman Sachs. Your line is open.

[Neil Mehta, Head - Equity Research at Goldman Sachs]

Hey guys. Thank you, Olivia, Stephane. A of questions. First on ChampionX, appreciate all the comments around synergies, but maybe you can unpack as you spend more time on ChampionX assets as part of this integration process and talking to customers about the application of some of their products. Any incremental thoughts, particularly on leveraging, the platform leveraging the products into your international platform?

[Olivier Le Peuch, CEO & Director at Schlumberger]

No, absolutely. I think we are very blessed to have two very highly complementary portfolio both technically and geographically. And I think the strength of Champagne in The U. S, the ability to innovate locally with their customers. I think it's something that we want to expand, apply to some of the other business we are running into North America to also have better impact, more focus impact and more fit technology to our customer base in The U.

[Olivier Le Peuch, CEO & Director at Schlumberger]

S. And hence benefit as an element of site synergy if you like from our porting model and engagement with our customers in North America. But secondly and critically, I think using the both portfolio both of Absolift and obviously of chemical production of and the ability to innovate of Champagne X into the international market, where we have established go to market access and established customer relationships. So yes, we will expect this first from a complementary portfolio and from a market access. But secondly, as I mentioned before, I think the customer feedback we got beyond access to certain technologies exist today.

[Olivier Le Peuch, CEO & Director at Schlumberger]

They believe that by combining our domain subsurface recovery capability, including performance intervention, digital and our integration track record, they believe that I think we can help them unlock value of some assets internationally. And they are very much interested to see what is next in our value proposition beyond just an expansion of our product portfolio into international markets. So integration, digital, domain, subsurface integration, I think will be what will drive the synergy going forward beyond the geographical expansion as I mentioned.

[Neil Mehta, Head - Equity Research at Goldman Sachs]

All right. Thank you so much. And we appreciate the color around margins being relatively flattish in the back half. Can you provide any segment level perspective on the margins? Where do you see things trending better?

[Neil Mehta, Head - Equity Research at Goldman Sachs]

Where do you think it's trending softer? Just so we can get a little more granularity for the model.

[Stephane Biguet, EVP & CFO at Schlumberger]

So in the second half, will directionally, you will clearly see digital and integration, but you will see it's actually digital. In the second half, the margins will continue to increase. That's really on the back of the year end sales, including exploration data sales. Production Systems, we are quite happy with the margin journey so far. So we will probably at least maintain that level.

[Stephane Biguet, EVP & CFO at Schlumberger]

With Champions, the Production Systems EBITDA margins will actually increase. Champions will be accretive to Production Systems. And the other two core divisions, Reservoir Performance and Well Construction, we are expecting to be relatively flat with the second quarter in line with the overall guidance for the company.

[Neil Mehta, Head - Equity Research at Goldman Sachs]

Perfect. Thanks, team.

[Olivier Le Peuch, CEO & Director at Schlumberger]

Thank you.

[Scott Gruber, Director - Oilfield Services & Equipment Research at Citi]

Thank you.

[Operator]

Thank you. Your next question comes from the line of Roger Read with Wells Fargo. Your line is open.

[Roger Read, Senior Energy Analyst at Wells Fargo Securities]

Yes. Thank you. Good morning. And thanks again for the help on all the outlook. I guess, two two questions I'd like to come at.

[Roger Read, Senior Energy Analyst at Wells Fargo Securities]

In terms of the pace of synergies with ChampionX, you've had a lot more time, obviously, from the when the deal was announced to closing here. What, what might look different or or more accelerated on synergies, and what might look better in terms of the integration process as, we look at what you may do with the top line of this business over the next, say, eighteen months?

[Stephane Biguet, EVP & CFO at Schlumberger]

So as we discussed on the prepared remarks, first, the majority of synergies is cost, right? And the bulk is both supply chain savings. This is the compared to our initial estimates, it has they are more or less in terms of overall envelope the same as what we had initially. And the base can be a bit faster actually, because now we have done the homework. It is literally by product code and supplier and geography.

[Stephane Biguet, EVP & CFO at Schlumberger]

So we can execute those supply chain synergies faster. So this is why initially, if you recall, it's one of the reasons why we had said at the time that the transaction will be accretive in the second year following the transaction. And now we think within the first eighteen months, so on a full year basis for 2026, the transaction will be accretive. And this requires about half of the total €400,000,000 synergies to be achieved in 2026, we think is realistic based on our plans. On the integration itself, I'll leave it to Olivier.

[Olivier Le Peuch, CEO & Director at Schlumberger]

No. Integration, I think the team has worked hard for the last twelve months to do integration planning. I think we were very pleased to launch it yesterday live with all our Champagneux employees. I And think the reception is very strong. I think we have a very strong workbook and playbook for integration that we touch all aspect of organization process and onboarding.

[Olivier Le Peuch, CEO & Director at Schlumberger]

But obviously, much more importantly, I think the way we face together the customers and trying to create this revenue synergy, this white space with the combined portfolio. So is really an effort that has been made to prepare this from day one. And I think we will be in the next few weeks and months holding out this integration playbook and be in a position to start to capture revenue synergy clearly very soon and add to these established cost synergy that have that will be executed from immediately. So I would say very pleased with the progress, very pleased with the reception of Champagne ux team and also very pleased, extremely pleased with the feedback that we're receiving when engaging with customers that want to preserve the Champagneux strengths, but at the same time I'm excited to see the innovation, to see the expansion. As I said, the integration digital capability that we can add and subsurface domain that could unlock some more value both in North America and internationally.

[Olivier Le Peuch, CEO & Director at Schlumberger]

So good progress, strong team, fully aligned and quite an exciting start.

[Roger Read, Senior Energy Analyst at Wells Fargo Securities]

Very helpful. Thanks. Follow-up question is Mexico has been a big topic over the last several quarters. The most recent comments from the the president of Mexico, she indicated they would like to grow gas supply out to 2030. Doesn't look like what they've been doing recently would would lead to that.

[Roger Read, Senior Energy Analyst at Wells Fargo Securities]

So any insights in terms of what you're seeing out of the political leadership of Mexico, Pemex itself, and then what's been the, you know, obviously, the issue in in terms of getting accounts receivable and all that in?

[Olivier Le Peuch, CEO & Director at Schlumberger]

No, I'm not here and I will not want to come out on behalf of the decision that the government and OpenX will do. I think they need to go through the motion of restructuring and or addressing the critical issue there, whatever are facing and finding a bottom and then rebounding. We believe we are there. We are just waiting now to see what are the next steps that could help unlock the value of obviously the assets in Mexico and the dynamic of Pemex to rebound from this. We stand ready.

[Olivier Le Peuch, CEO & Director at Schlumberger]

We have been in the country for decades. And we are ready to respond a bit on the gas development or other developments. We are not only working for Pemex in Mexico, we are working with independents, local independents that have been pretty active. And we have a very exciting project for Woodside, Deepwater Mexico, starting early next year that we are all prepared for both subsea and well construction that I think we're excited about that is adding dimension to the Mexico rebound. So difficult to predict what is next.

[Olivier Le Peuch, CEO & Director at Schlumberger]

We continue to work very closely with partnership with Pemex and trying to get some more diligence from the government. But I don't want to be commenting more on this. And again, we remain focused on doing the best and adapting to the market activity there.

[Roger Read, Senior Energy Analyst at Wells Fargo Securities]

Great. Thank you.

[Stephane Biguet, EVP & CFO at Schlumberger]

Thank you.

[Olivier Le Peuch, CEO & Director at Schlumberger]

Thank

[Operator]

you. Your last question comes from the line of Josh Silverstein with UBS. Your line is open.

[Josh Silverstein, Managing Director at UBS Group]

Yeah. Hi. Hi, everyone. Appreciate you stripping out the business the digital business, sorry, as a standalone unit to highlight the value here. You had previously talked about top line standalone digital growth kind of in the mid to high teens this year.

[Josh Silverstein, Managing Director at UBS Group]

I wanna see if you're still on track for that level. And then if you could provide any details around the the growth contributions from Delphi cloud and the AI platforms within that outlook.

[Olivier Le Peuch, CEO & Director at Schlumberger]

Yeah. We don't we don't split we don't split typically. I think we have been commenting just this quarter that I think the combination of cloud legacy application that is desktop and digital operation is going up double digit. We have a significant uptick in the second half of the year. We said mid to high teens in the past.

[Olivier Le Peuch, CEO & Director at Schlumberger]

I think we are continuing to your ambition to be as committed to grow and certainly to outpace significantly that what matters is to outpace significantly the rest of the market and be it in mid teens or by contrast with the much lower and declining CapEx. So the couple of the activity, the couple of the investment profile is what we are accessing. And yes, I think it's a long as I say, it's a long digital transformation. It's a long journey we have started with the industry. And I think our leadership between cloud, between digital operation, between legacy desktop or in exploration data.

[Olivier Le Peuch, CEO & Director at Schlumberger]

As a combination, we continue to do everything to make sure that it's highly differentiated in terms of growth rates compared to the and we expect this to be the case for the foreseeable future. And as you have seen, the market the margin has improved. We expect the margin to further improve in the second half, the back end of the year, partly in the fourth quarter, hence becoming accretive and remaining accretive highly in terms of margins and continuing to be accretive in terms of supplying cost. So I think we commented on some users' characteristics that are linked to the cloud adoption. We have seen this quarter to just give you a data point, 40,000,000 CPU hours being consumed, 50% more than Q2 last year at the same time.

[Olivier Le Peuch, CEO & Director at Schlumberger]

We have seen also almost 1,000 of wells being drilled using drill plan, one of our planning cloud application that we use and with our customers. So I think we continue to see momentum and we are confident that I think it will be for sure much higher growth than the rest and one of the highest growth business line we have in SLB. And you will from Q3 get more details and we will disclose this transparency so that the value that we can extract from this will be recognized by investors.

[Josh Silverstein, Managing Director at UBS Group]

Got it. Thanks for that. And maybe just a follow-up and I know there's more detail to come on the third quarter, but are there any additional types of disclosures you might be able to provide here on these kind of key AI and SaaS driven products towards companies that are more specifically focused on this as well? Thanks.

[Olivier Le Peuch, CEO & Director at Schlumberger]

No, obviously we have as you know, decided to establish a new platform like Lumi for data and AI adoption across our customers. And I think we are very pleased with the early impact this had, lot of POV as we call it, a lot of early, early tests and adoption across really all the segment of our customer base attracted by the ability to connect and to integrate data and to have a toolbox of AI capability that we offer from our partners, so that AI workflows can be enabled through our platform by customers and letting the customer play with their data and using our toolbox to then do use Gen AI or to use AI capability on top. That's what is exciting. That's what customers are coming to our platform for. And that's what the early success of Lumi is giving us.

[Olivier Le Peuch, CEO & Director at Schlumberger]

So yes, I think continued momentum there. And this is only the early, early steps of that adoption.

[Operator]

Thank you. I will now turn the call over to SLB for closing remarks.

[Olivier Le Peuch, CEO & Director at Schlumberger]

Thank you, Megan. Ladies and gentlemen, as we conclude today's call, I would like to leave you with the following takeaways. First, SLB diverse portfolio on board operating footprint enable us to overcome regional headwinds and evolving macro dynamics to deliver solid results as we demonstrated in this quarter. Second, we're increasing our exposure to the growing poultry and recovery market with the addition of Champon X. Our combined portfolio, technology capability and digital leadership will position SLB to unlock value for our customers, while delivering best in class workflow integration across production, chemicals and our chill lift.

[Olivier Le Peuch, CEO & Director at Schlumberger]

And finally, global oil and gas market have thus far proven resilient, and we are optimistic about the opportunities ahead and our ability to deliver steady growth in the second half of the year. With this, I conclude today's call. Thank you all for joining.

[Operator]

This concludes today's conference call. You may now disconnect.

Participants

Executives

• James McDonald, SVP - IR & Industry Affairs
• Olivier Le Peuch, CEO & Director
• Stephane Biguet, EVP & CFO

Analysts

• J. David Anderson, Managing Director at Barclays
• Scott Gruber, Director - Oilfield Services & Equipment Research at Citi
• Arun Jayaram, Vice President at JP Morgan Chase & Co
• Neil Mehta, Head - Equity Research at Goldman Sachs
• Roger Read, Senior Energy Analyst at Wells Fargo Securities
• Josh Silverstein, Managing Director at UBS Group