SLB Q4 2021 Earnings Report

SLB EPS Results

• Actual EPS: $0.41
• Consensus EPS: $0.39
• Beat/Miss: Beat by +$0.02
• One Year Ago EPS: $0.22

SLB Revenue Results

• Actual Revenue: $6.23 billion
• Expected Revenue: $6.09 billion
• Beat/Miss: Beat by +$138.78 million
• YoY Revenue Growth: +12.50%

SLB Announcement Details

• Quarter: Q4 2021
• Date: 1/21/2022
• Time: Before Market Opens
• Conference Call Date: Thursday, January 20, 2022
• Conference Call Time: 7:00PM ET

SLB (NYSE:SLB) (NYSE: SLB), historically known as Schlumberger, is a leading global provider of technology, integrated project management and information solutions for the energy industry. Founded by Conrad and Marcel Schlumberger in 1926, the company develops and supplies products and services used across the exploration, drilling, completion and production phases of oil and gas development. Its offerings are intended to help operators characterize reservoirs, drill and complete wells, optimize production and manage field operations throughout the asset lifecycle.

SLB’s product and service portfolio spans reservoir characterization and well testing, wireline and logging services, directional drilling and drilling tools, well construction and completion technologies, production systems, and subsea equipment. The company also emphasizes digital solutions and data analytics for subsurface and production optimization, providing software platforms and engineering consulting to support decision making and operational efficiency. SLB combines equipment, software and field expertise to deliver integrated projects and field development programs for national oil companies, international majors and independent operators.

SLB operates on a global scale, serving customers in more than 100 countries and participating in projects across the major hydrocarbon basins. The company is publicly listed on the New York Stock Exchange under the ticker SLB and is led at the executive level by Chief Executive Officer Olivier Le Peuch. SLB’s long history in domain-specific technologies and continued investment in digital and engineering capabilities position it as a prominent service provider to the broader energy industry.

SLB Q4 2021 Earnings Call Transcript

Key Takeaways

• Schlumberger posted Q4 revenue up 6% sequentially with all four divisions growing, marking its sixth consecutive quarter of margin expansion and generating $1.9 billion in operating cash flow.
• Full‐year 2021 delivered the highest global operating margins in six years, underpinned by a 160 % increase in Delphi digital users, 240 commercial Delphi customers, and progress in new energy ventures such as hydrogen, CCUS and stationary storage.
• For 2022 the company sees mid‐teens revenue growth—driven by at least +20 % North America capex and low‐to‐mid‐teens international spending—with a goal to expand EBITDA margins by 200 bps versus Q4 2021 and reach ≥25 % in H2 2023.
• Strong cash generation in 2021 ($3 billion free cash flow) drove net debt down by $2.8 billion to a five-year low; 2022 CapEx and APS investments are guided at $1.9–2.0 billion while targeting “triple-double” returns (double-digit free cash flow margin, return on sales and ROCE).
• The company’s strategy centers on three growth engines—core services, digital integration and new energy—supported by its returns-oriented basin/division model, capital stewardship program and commitment to decarbonization.

Presentation

[Operator]

Ladies and gentlemen, thank you for standing by. Welcome to the Schlumberger earnings conference call. At this time, all participant lines are in a listen-only mode. Later, there will be an opportunity for your questions. Instructions will be given at that time. If you should require assistance, please press star, then zero, and we will assist you offline. As a reminder, today's conference call is being recorded. I would now like to turn the conference over to ND Maduemezia, the Vice President of Investor Relations. Please go ahead.

[ND Maduemezia, VP of Investor Relations at SLB]

Thank you, Lea. Good morning, and welcome to the Schlumberger Limited fourth quarter and full year 2021 earnings conference call. Today's call is being hosted from Houston following the Schlumberger Limited board meeting held earlier this week. Joining us on the call are Olivier Le Peuch, 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'll be making today are forward-looking. These matters involve risks and uncertainties that could cause our results to differ materially from those projected in these statements. I therefore refer you to our latest 10-K filing and our other SEC filings. Our comments today may also include non-GAAP financial measures. Additional details and reconciliation to the most directly comparable GAAP financial measures can be found in our fourth quarter press release, which is on our website.

[ND Maduemezia, VP of Investor Relations at SLB]

With that, I'll turn the call over to Olivier.

[Olivier Le Peuch, CEO at SLB]

Thank you, ND. Ladies and gentlemen, thank you for joining us on the call today. In my prepared remarks, I will cover our Q4 results and full year 2021 achievements. Thereafter, I will follow with our view of the 2022 outlook and some insight into our near-term financial ambitions. Stephane will then give more detail on our financial results, and we will open for your questions. The fourth quarter was characterized by broad-based activity growth with continued momentum in North America, activity acceleration in international markets, and an accretive offshore market contribution upon which we delivered strong sequential revenue growth, our sixth consecutive quarter of margin expansion, and outstanding double-digit free cash flow generation. These financial results conclude an exceptional year of financial performance for Schlumberger at a pivotal time for the company and in our industry at large.

[Olivier Le Peuch, CEO at SLB]

Underlying these results are the following highlights from the quarter. Geographically, sequential growth in North America exceeded rig activity growing in excess of 20% offshore and international revenue growth accelerated, closing the second half of 2021 up 12% versus the prior year. All international areas posted growth driven by gains in more than 75% of our international business units. By division, revenue in all four divisions grew sequentially and when compared to the same period last year. Digital & Integration led growth, posting double-digit sequential growth and record high margins. Well Construction and Reservoir Performance are predominantly service-oriented divisions, outperformed expectations with strong sequential growth and approximately 30% growth year-over-year on a pro forma basis. Production Systems recorded year-end sales which drove mid-single digit growth, though partially impacted by logistics challenge.

[Olivier Le Peuch, CEO at SLB]

Operating margins expanded in spite of seasonality effects, improving further beyond pre-pandemic levels. Finally, we generate outstanding cash flow from operation exceeding $1.9 billion in the quarter. All in all, I am very pleased with our operational execution, our safety performance, and our financial results through the fourth quarter. Now, let me briefly reflect on what we achieved in 2021. In our core, we fully operationalize our returns-focused strategy, leveraging our new division and basin organization to seize the start of the upcycle. In North America, this resulted in full-year top-line revenue growth, excluding the effects of divestitures and significantly expanded margins, achieving double digits, one of the financial targets we laid out in 2019. Internationally, we also grew the top line and expanded margins significantly as international activity strengthened in the second half of the year.

[Olivier Le Peuch, CEO at SLB]

This also resulted in full-year international margins that exceeded 2019 levels. Taken together, these margins result in the highest global operating margins of the last six years, setting an excellent foundation for further expansion as activity accelerates and market conditions further support pricing improvement. In Digital, our second engine of growth, I'm very proud of the momentum we established during the year. We advanced on our goals to expand market access and accelerate adoption of our platform, AI capabilities, and powerful digital tools to reduce cycle time, improve performance, and lower carbon intensity. We built partnerships to achieve comprehensive cloud access globally, collaborated with AI innovators to deploy machine learning and AI solutions, and enabled digital operations through the automation of key workflows in Well Construction and production operation.

[Olivier Le Peuch, CEO at SLB]

At the end of 2021, we have more than 240 commercial DELFI customers, recorded more than 160% DELFI user growth year-over-year, and saw a more than tenfold increase in compute cycle intensity on our DELFI cloud platform. We also made significant progress in our data, business streaming, and digital operation, advancing our OSDU commercial offerings, autonomous drilling, and the adoption of Agora Edge AI and IOT solutions with great success. The Q4 results, including significant uptake in digital sales and sizable incremental margin, are a clear testament of this success. In Schlumberger New Energy, we will continue to advance the development of clean energy technologies and low carbon projects.

[Olivier Le Peuch, CEO at SLB]

In 2021, we took a position in stationary energy storage, expanding our total addressable market, and advanced all of our venture in hydrogen, lithium, geoenergy, and a suite of CCUS opportunities, including our bioenergy CCS project. Some notable milestones achieved include the signature of pilot agreements with Genvia, our hydrogen venture with ArcelorMittal, Ugitech, Vicat, and Hynamics, leading company in steel and cement. In Celsius, our geoenergy venture, we secured five commercial contracts in Europe and one in North America for a prestigious university campus. This was also pivotal year for us in terms of our commitment to sustainability. We announced our comprehensive 2050 net zero commitment, inclusive of Scope 3 emissions, and launched the transition technology portfolio to focus on the decarbonization of oil and gas operations with much success.

[Olivier Le Peuch, CEO at SLB]

In addition, Schlumberger earned a AA rating by MSCI and won an ESG Top Performer Award by Hart Energy, recognizing our sustainability efforts, our enhanced disclosure, and a commitment to apply our technology and capabilities towards helping the world meet future energy demand. In summary, 2021 was a great year for Schlumberger. Beyond these operational and financial results and our ESG accomplishments, we made excellent progress in our core, digital and new energy, the three engines of growth that support our success now and well into the future. Above all, I'm most proud of our people, their unique ability to execute, remobilizing operation across the world through numerous pandemic constraints, adapting the logistics and supply chain dynamics and setting new performance benchmarks, all of which earn the recognition of our customers. I would like to thank the entire team for delivering a year of outperformance on every metric.

[Olivier Le Peuch, CEO at SLB]

They surpassed all of our target this year and created excellent momentum as we enter 2022, for which I would like now to share our outlook. Looking ahead, we have increased confidence in our view of robust multiyear market growth. Tight oil supply and demand growth beyond the pre-pandemic peak are projected to result in a substantial step-up in capital spending amid shrinking spare capacity, declining inventory balance, and supportive oil price. In addition, we expect more pervasive service pricing improvements in response to market conditions as technology adoption increases while service capacity tightens. In essence, 2022 will be a period of stronger short-cycle activity resurgence, driven by improved visibility in the demand recovery and greater confidence in the oil price environment.

[Olivier Le Peuch, CEO at SLB]

As oil demand exceeds pre-pandemic levels in 2023 and beyond, long-cycle development will augment capital spending growth in response to the demand-supply. This demand-led capital spending growth sets the foundation for a strong multi-year upcycle. Indeed, this scenario has already been established as the number of FID increases, service pricing has begun to improve, and multi-year long-cycle capacity expansion plans have started, particularly internationally and offshore, as seen during the last quarter. Turning to 2022, more specifically, we expect an increase in capital spending of at least 20% in North America, impacting both the onshore and offshore markets, while internationally, capital spending is projected to increase in the low- to mid-teens, building momentum from a very strong exit in the second half of 2021.

[Olivier Le Peuch, CEO at SLB]

All area and operating environments, short and long cycle, including deepwater, are expected to post strong growth, with upside potential as Omicron disruptions dissipate as the year advance. In this scenario, increased activity and pricing will drive simultaneous double-digit growth, both internationally and in North America. That will lead our overall 2022 revenue growth to reach mid-teens. Our ambition is to once again expand operating and EBITDA margin on a full year basis, exiting the year of EBITDA margins at least 200 basis points higher than the fourth quarter of 2021. In this context, let me share how we see the year unfolding. Directionally, while we are still experiencing COVID-related disruptions, we anticipate typical seasonality in the first quarter with revenue and margin progression similar to historical sequential trends, which will be seen most prominently in Digital & Integration.

[Olivier Le Peuch, CEO at SLB]

This will be followed by a strong seasonal uptick in the second quarter across all divisions, with growth further strengthening through the second half of the year, supporting our full year mid-teens revenue growth ambition and EBITDA margin expansion. This growth and margin expansion trajectory give us further confidence that we will reach or exceed our mid-cycle ambition of 25% adjusted EBITDA margin before the end of 2023, leading to adjusted EBITDA that should visibly exceed 2019 levels in dollar terms. With this, I will now turn the call over to Stephane.

[Stephane Biguet, CFO at SLB]

Thank you, Olivier, and good morning, ladies and gentlemen. Fourth quarter earnings per share, excluding charges and credit, was $0.41. This represents an increase of $0.05 compared to the third quarter of this year, and of $0.19 when compared to the same period of last year. In addition, we recorded a net credit of $0.01, bringing GAAP EPS to $0.42. This consisted of a $0.02 gain relating to the sale of a portion of our shares in Liberty Oilfield Services, offset by a $0.01 loss relating to the early repayment of $1 billion of notes. Overall, our fourth quarter revenue of $6.2 billion increased 6% sequentially. All divisions posted sequential growth led by Digital & Integration. From a geographical perspective, international revenue grew 5%, while North America grew 13%.

[Stephane Biguet, CFO at SLB]

Pre-tax operating margins improved 31 basis points sequentially to 15.8% and have increased for six quarters in a row. This sequential margin improvement was driven by very strong digital sales, which helped sustain overall margins, despite seasonality effects in the Northern Hemisphere. Company-wide, EBITDA margin remained strong at 22.2%, which was essentially flat sequentially. Let me now go through the fourth quarter results for each division. Fourth quarter Digital & Integration revenue of $889 million increased 10% sequentially, with margins growing by 268 basis points to 37.7%. These increases were driven by significantly higher digital and exploration data licensing sales, which were partly offset by the effects of a pipeline disruption in Ecuador that impacted our APS projects.

[Stephane Biguet, CFO at SLB]

Reservoir Performance growth further accelerated in the fourth quarter, with revenue increasing 8% sequentially to $1.3 billion. This growth was primarily due to higher intervention and stimulation activity in the international offshore markets. Margins were essentially flat at 15.5% as a result of seasonality effects and technology mix, largely driven by the end of summer exploration campaigns in the Northern Hemisphere. Well Construction revenue of $2.4 billion increased 5% sequentially due to higher land and offshore drilling, both in North America and internationally. Margins of 15.4% were essentially flat sequentially as the favorable combination of increased activity and pricing gains was offset by seasonal effects. Finally, Production Systems revenue of $1.8 billion was up 5% sequentially, largely from new offshore projects and year-end sales.

[Stephane Biguet, CFO at SLB]

However, margins decreased 85 basis points to 9%, largely as a result of the impact of delayed deliveries due to global supply and logistic constraints. Now turning to our liquidity. Our cash flow generation during the fourth quarter was outstanding. We delivered $1.9 billion of cash flow from operations and free cash flow of $1.3 billion during the quarter. This was the result of a very strong working capital performance, driven by exceptional cash collections and customer advances. Cash flows were further enhanced by the sale of a portion of our shares in Liberty, generating net proceeds of $109 million during the quarter. Following this transaction, we hold a 31% interest in Liberty. On a full year basis, we generated $4.7 billion of cash flow from operations and $3 billion of free cash flow.

[Stephane Biguet, CFO at SLB]

We generated more free cash in 2021 than in 2019, despite our revenue being 30% lower. This is largely attributable to our efforts of the last two years relating to the implementation of our capital stewardship program and the high grading of our portfolio. As a result of all of this, we ended the year with net debt of $11.1 billion. This represents an improvement of $2.8 billion compared to the end of 2020. We are proud to say that net debt is now at its lowest level of the last five years. During the year, we also continued to reduce gross debt by repaying $1 billion of notes that were coming due in May of this year. In total, our gross debt reduced by $2.7 billion in the last 12 months, thereby significantly increasing our financial flexibility.

[Stephane Biguet, CFO at SLB]

Now, looking ahead to 2022. We expect total capital investments consisting of CapEx and investments in APS and exploration data to be approximately $1.9 billion-$2 billion as compared to just under $1.7 billion in 2021. This increase will allow us to fully seize the multi-year growth opportunity ahead of us while still achieving our double-digit free cash flow margin objective. We are entering this growth cycle with a business that is much less capital intensive as compared to previous cycles. As a reminder, during the last growth cycle of 2009-2014, our total capital investment as a percentage of revenue was approximately 12%. We are therefore well positioned to fully reap the benefits of this growth cycle with the potential for enhanced free cash flow margins and return on capital employed.

[Stephane Biguet, CFO at SLB]

With this backdrop, I would like to emphasize that based on the industry fundamentals and positioning of the company that Olivier highlighted earlier, our financial outlook for 2022 is very strong. We have high expectations, and in 2022, we expect a triple double consisting of double-digit return on capital employed, double-digit return on sales, and double-digit free cash flow margin. It is worth noting that we have not experienced this combination in a single year since 2015. Finally, I am pleased to announce that we will hold a Capital Markets Day in the second half of the year. This event will allow us the opportunity to provide you with additional details relating to Schlumberger's strategy and financial objectives. Further information regarding this event will be forthcoming shortly. I will now turn the conference call back to Olivier.

[Olivier Le Peuch, CEO at SLB]

Thank you, Stephane. I believe that we are ready to turn the call to you for the questions. Thank you.

[Operator]

Thank you. Ladies and gentlemen, if you would like to ask a question, please press one then zero on your telephone keypad. You will hear acknowledgement that your line has been placed in queue. You may remove yourself by pressing one then zero again. One moment please for the first question. Our first question is from James West with Evercore ISI. Please go ahead.

[James West, Senior Managing Director at Evercore ISI]

Hey, good morning, Olivier.

[Olivier Le Peuch, CEO at SLB]

Good morning, James.

[James West, Senior Managing Director at Evercore ISI]

Olivier, I liked your increased confidence in achieving mid-cycle margins sooner rather than later. I wanted to dig in a bit on why that confidence has increased. Obviously, we're starting at a bit higher level, but the target is a pretty solid target. I'm curious, you know, what are the key drivers around that confidence increase?

[Olivier Le Peuch, CEO at SLB]

No, thank you, James. Let me explain why we have increased confidence. I think some part of the answer on this question is in the quality of the results we have delivered in 2021 as a foundation. Next, I believe that the current market conditions are clearly supporting our thesis for double-digit CAGR growth over a few years. In this backdrop, I think we believe three or four factors that will help us continue to guide upwards our margin expansion. Firstly, the foundation we have put in place in the last 18 months, the operating leverage reset, the integration performance execution, and the portfolio grading are here to stay.

[Olivier Le Peuch, CEO at SLB]

This was already very visibly impacting the service-oriented division Well Construction and Reservoir Performance as you have seen throughout the year and partially the second half of last year. We saw where this already surpassed the 2018 margins performance. Secondly, I think the market mix is set to improve and resonate to our portfolio strength. Increased offshore activity mix has already started to happen, and we expect this to only accelerate as the year unfolds and further into 2022. The adoption of technology also is accelerating, as you have seen, including digital, but our fit for basin, our transition technology, and all the technology that extract performance for our operation are making an impact today and are getting further adoption by our customer and giving us a premium. Finally, pricing.

[Olivier Le Peuch, CEO at SLB]

Where a year ago, we were talking about green shoots pricing in North America, today we are seeing and we are already recording sign of pricing improvements on a broad market condition, both in North America and also internationally, when we are getting awarded new contract, as well as when we have to mobilize and deliver unique technology to our customer. As the year developed, we believe that these attributes, our foundation, operating leverage, our performance that differentiate on execution give us a premium, our market mix, our technology adoption, success with customer, and finally pricing, giving a tailwind to this, will drive and further expand our margin to the 25% margin expansion. It's not about if, but it's about when.

[James West, Senior Managing Director at Evercore ISI]

Right.

[Olivier Le Peuch, CEO at SLB]

We have gained confidence, and we have moved forward our confidence on to this into 2023.

[James West, Senior Managing Director at Evercore ISI]

Okay, great. That's very clear, Olivier. Maybe a second question from me. As we think about the cycle is really starting to take hold here, how should we think about the cadence of growth? You've given obviously numbers for 2022, but if we think about it by both geography and by division, where do you see, I guess, the biggest growth? Where could there be some lagging areas? I'd like just a little more color on that cadence would be very helpful.

[Olivier Le Peuch, CEO at SLB]

Maybe in one world, growth will be very broad across all geography, across all division, first as a backdrop. I think that's what we are realizing, and that's quite unique. I think if I had to characterize first geographically or very high level, I think it's possibly a tale of two halves, with North America leading the uptick of growth, activity growth in the first half, international further accelerating in the second half. Where we did end on the H2 over H2 of 12%, we expect this to be the base in the first half and accelerate further in the second half internationally, so that we are even accelerating into 2023 for international activity.

[James West, Senior Managing Director at Evercore ISI]

Okay.

[Olivier Le Peuch, CEO at SLB]

Secondly, I believe that if I had to characterize what will lead and be accretive to growth, I would say Americas land because of activity uptick, but I will also put offshore environment and Middle East. These are the three engines of growth that will pull this year growth to the target ambition we have put at mid-teens. Now per division, I think the service-oriented divisions of Reservoir Performance and Well Construction will be accretive to this, we expect. Followed by because they are benefiting from this offshore environment, they are benefiting from the pricing, and they have strong both NAM and international presence. They are benefiting from long cycle exposure and technology mix favorable.

[Olivier Le Peuch, CEO at SLB]

In addition, the Production Systems will also see growth building on the short-cycle exposure to North America and the backlog of contracts that we have won in the last few quarters that will execute towards 2022. Finally, on Digital & Integration, it's a two-phase of a division here. We expect the Digital to be accretive to our growth while it will be visibly moderated by a flat-ish environment for APS production going forward. That gives you the mix across the division and across geographies.

[James West, Senior Managing Director at Evercore ISI]

That's perfect. Thanks, Olivier.

[Olivier Le Peuch, CEO at SLB]

You're welcome.

[Operator]

Our next question is from David Anderson with Barclays. Please go ahead.

[David Anderson, Director at Barclays]

Hi, good morning, Olivier. So you laid out the margin expansion and kind of how you're gonna see that. I guess I have a question on the other side of that, just thinking about mobilization of large tenders. You start up on the Jafurah contract in the Middle East, but you know, I guess typically what we've seen in the past is in these mobilization periods, there's these kind of extra costs that get weighed in. I'm just thinking about how that's looking in 2022. I mean, is that something that you think you're gonna have to absorb in 2022 and that therefore kind of 2023 is sort of another margin uplift there? Or has that improved pricing in some of these contracts kind of countered some of those mobilization?

[David Anderson, Director at Barclays]

I think you had said something about getting better pricing for mobilization. If you could just comment on that.

[Olivier Le Peuch, CEO at SLB]

Yeah. I think, Dave, I think it's part of the mix of execution that we have. I think we always mobilize for a new project somewhere in the world.

[David Anderson, Director at Barclays]

Mm-hmm.

[Olivier Le Peuch, CEO at SLB]

We are committing to international growth and margin expansion this year. The last quarter was already having witnessed significant new project starts, yet we have marginally improved our margins last quarter, and we have seen the results of the core division. We did it already. I think as we accelerate deployments, yes, we are very critically assessing the cost of this startup. We are working with customers to minimize. We are using digital operations to remotely and optimize our deployment of resources. We believe that what we have done in the last quarter, we'll continue to do in 2022.

[Olivier Le Peuch, CEO at SLB]

I think directionally, we are still set to improve our margin internationally in 2022, despite and building on this new project. We are very, very keen to start all these new projects. We are very proud of the different contract award that we won last year. I think this is part of the mix that we're executing. The more activity and the more growth, we will respond and continue to use efficiency and leverage our operating practice to minimize impact and engage with the customer to get full recognition of our investment.

[David Anderson, Director at Barclays]

Understood. Okay. On the Digital & Integration side, it grew really nice in the top line this quarter. I was just curious, is that related to more new sales of customers, or is it more about the adoption pace of your current customers into the workflow? I was just wondering a second here if you could just tell us how much that digital portion grew this year. I'm assuming it outgrew the 8% overall top line, but if you could provide any color on that'd be really appreciated.

[Olivier Le Peuch, CEO at SLB]

Yeah. Let me give you a little bit of color into this. First, I think if I had to characterize, I think the uptick we've seen in digital sales at the end of the year is not a pure year-end sales effect on one or two large contract and one or two application and software sales. It's broad, it's very diverse. It touches and expands upon the platform strategy that developed different revenue streams. It's about new DELFI Cloud customer. And you have seen, we have announced, and we have progressed one more time in last quarter. It's about new revenue monetization in digital operation, including Agora, including drilling, remote operation, and automation.

[Olivier Le Peuch, CEO at SLB]

It's about new data business stream where we have been securing contract for OSDU foundation, where we are the first to commercialize enterprise data management solution on this OSDU. It's the follow through on the enterprise contract that we have won in 2021 or in 2020 on DELFI adoption. It relates to the progress we have made in our platform. It relates to the acceleration of digital adoption by our customer and this pursuit of digital transformation by customer. It translate into an uptick in each and every of the digital revenue stream we have created and the success from data to workflow and to operation. It's diverse, it's broad, and it's here, too, is multifaceted. It's here to continue to expand.

[Olivier Le Peuch, CEO at SLB]

I'm positive on this because it's not a one-off. Obviously, there is a year-end sales effect there that will not repeat in the first quarter. At the same time, it's something that I see expanding as a platform going forward. We are in the early innings of this adoption. As we mentioned a quarter ago, we have 1,700 digital customers. We are in the early innings of deploying and pursuing this large installed base with a digital transformation. It was the first cycle of this digital expansion and digital adoption. I trust this will continue in 2022 and accelerate beyond.

[David Anderson, Director at Barclays]

Thank you.

[Operator]

Our next question is from Chase Mulvehill with Bank of America. Please go ahead.

[Chase Mulvehill, Director and Oilfield Service Analyst at Bank of America]

Hey, good morning, everybody.

[Olivier Le Peuch, CEO at SLB]

Good morning, Chase.

[Chase Mulvehill, Director and Oilfield Service Analyst at Bank of America]

Hey, good morning, Olivier. I guess first question is just kind of around, you know, this looming investment cycle that you and I and hopefully investors are starting to realize needs to happen. You know, you had mentioned that you expect a substantial increase in spending, you know, this cycle. Maybe you framed it a little bit, but could you kinda add a little bit of context about how you see this cycle shaking out? What gives you confidence in it? And then what it means for pricing for OFS? You know, the competitive dynamics have obviously changed, especially, you know, in international, where it feels like you've got more discipline, less players.

[Chase Mulvehill, Director and Oilfield Service Analyst at Bank of America]

Just kind of frame the cycle and activity and where you see the most opportunity for growth, and then ultimately what this could mean for pricing this cycle for OFS companies.

[Olivier Le Peuch, CEO at SLB]

No, thank you. A great question. I think the fundamentals as we see them have not changed, and actually some characteristics of the cycle have accelerated, have been accentuated in the recent months. The first attribute that we put first is the outlook of economic GDP growth that considering the oil intensity and energy intensity will still and will drive the oil demand as a key attribute beyond the previous peak no later than the end of this year, according to the latest projection, and is set to expand visibly beyond not only in 2023 but in a few years beyond this. The first is the macro demand situation is set to be favorable for the next few years.

[Olivier Le Peuch, CEO at SLB]

Secondly, I think the supply demand imbalance and the supply I almost call it tardiness that we are facing is prompting not only an uplift in the commodity price, but also is prompting the investment return to investment across the broad portfolio of our customers. You have seen it in North America, no surprise. North America is still and will remain structurally smaller than previous cycle due to the capital discipline, but also due to the crunch of supply, including on the service side.

[Olivier Le Peuch, CEO at SLB]

Secondly, I think the international underinvestment for the last few years, actually the last down cycle, combined with the dip in the last two years, is creating conditions for a necessary injection of short cycle capital and then long cycle capital investment to respond to the supply. We are seeing growth in North America, albeit a cut. We are seeing a rebound, a visible rebound in short and long cycle investment internationally. I will insist on the long cycle because I believe that both oil capacity is being looked upon and by some OPEC member to secure future supply market share, but also the international NOCs are investing into their advantaged offshore basins. We are seeing not only infill drilling, but we are seeing FID for offshore that are accelerating going forward.

[Olivier Le Peuch, CEO at SLB]

It's a mix of offshore rebounds, solid, including deepwater, international short cycle and oil capacity onshore, and finally, solid growth in North America. These are unique conditions that are tightening the capacity and that are creating the underlying pricing improvement condition.

[Chase Mulvehill, Director and Oilfield Service Analyst at Bank of America]

Okay, perfect. Appreciate the color. A follow-up to that would be, you know, obviously with this constructive backdrop for Schlumberger and the OFS industry, you've got a wall of free cash flow coming to you. When we look at this, obviously you did $3 billion of free cash flow last year. You know, it looks like over the next two years, you know, that should be growing. How should we think about, you know, returning cash, how Schlumberger is gonna return cash to shareholders? Then how does M&A, you know, fit into this capital allocation strategy? Because obviously you're trying to reshape the company for, you know, new energy ventures and things like that as well.

[Stephane Biguet, CFO at SLB]

Hey, Chase, it's Stephane. Look, yeah, I like your expression on free cash flow. It was indeed quite strong last year with $3 billion. Now, indeed, we visibly accelerated the deleveraging of our balance sheet, but we are not quite there yet at the leverage ratio we committed to. We have a clear line of sight now to achieving the target leverage we announced earlier, even though there's still some uncertainty remaining at the start of the year. Nevertheless, with the market fundamentals consolidating, particularly in the second half of the year and into 2023, we have even more confidence indeed now in generating significant excess cash this year and beyond.

[Stephane Biguet, CFO at SLB]

We will be able to maintain quite a healthy balance sheet, and it will give us the flexibility to increase returns to shareholder, as well as fund the new growth opportunities. We will certainly provide a comprehensive framework for future capital allocation as part of the Capital Markets Day that we announced earlier. Returns to shareholders are obviously important, and increased dividends and buybacks will definitely be part of this equation.

[Chase Mulvehill, Director and Oilfield Service Analyst at Bank of America]

Okay, Perfect.

[Stephane Biguet, CFO at SLB]

As it relates to M&A, sorry, I didn't answer on M&A. It's also part of what it's of course part of the toolbox, and you'll get more details when we give you that more comprehensive framework again.

[Chase Mulvehill, Director and Oilfield Service Analyst at Bank of America]

Okay. Look forward to it. Appreciate the color. I'll turn it back over.

[Olivier Le Peuch, CEO at SLB]

Thank you.

[Stephane Biguet, CFO at SLB]

Thank you.

[Operator]

Next we go to the line of Arun Jayaram with JPMorgan. Please go ahead.

[Arun Jayaram, Research Analyst at JPMorgan]

Yeah, good morning. With the marginal supply source now moving from U.S. shale to OPEC, I wanted to see if you could frame what kind of changes in spending patterns are you seeing from the NOCs versus, call it, maintenance work versus FIDs and things to increase productive capacity.

[Olivier Le Peuch, CEO at SLB]

I think what we have seen and we are already witnessing today, I think, and it's visible in Middle East, but beyond, is the short cycle, the return of short cycle activity, to assure, as you said, maintenance of production and with a small but visible increment of output supply. What we are seeing is also a commitment and some FID in the pipeline to increase oil capacity, sustain oil capacity with a few countries committing to participate fully and are laying out the foundation this year and next year into expanding the supply.

[Olivier Le Peuch, CEO at SLB]

What we should not forget about, and it's particularly true for Middle East, is there's also a gas market that is being very sustained that has seen reinvestment, and it's part of the regional dynamic and that is already seeing, is continuing to see double-digit growth. I think it's a combination of gas market being sustained and having had less setback than than oil in the recent time. Short cycle expansion and long cycle acceleration with a new FID capacity, and this is true from deepwater Brazil to the future investment in and the current and future investment in Middle East and FID that are in the pipeline in Russia.

[Olivier Le Peuch, CEO at SLB]

That's again very broad and that combines short and long cycle. If you were to project, I think 2022 is a supply-led activity rebound, and 2023 will be a demand-led activity growth. The capacity expansion, the long cycle will further contribute going forward into 2023.

[Arun Jayaram, Research Analyst at JPMorgan]

Great. My follow-up is your outlook on 2022 embeds 200 basis points of year-over-year margin expansions in the fourth quarter. That would, if I did my math right, put your EBITDA margins based on the outlook slightly above 24%. I wanted to talk a little bit.

[Olivier Le Peuch, CEO at SLB]

As we-

[Arun Jayaram, Research Analyst at JPMorgan]

Go ahead.

[Olivier Le Peuch, CEO at SLB]

Yeah. As we exit, it's an exit rate. We made a comparison 200 bps or higher as we exit 2022 when compared to the second half or Q4 of 2021.

[Arun Jayaram, Research Analyst at JPMorgan]

Exactly.

[Olivier Le Peuch, CEO at SLB]

Just to be clear.

[Arun Jayaram, Research Analyst at JPMorgan]

Exactly. Okay. Got it. That's exactly right. So as we think about 2023, your outlook is that you could, you know, reach or exceed a mid-cycle EBITDA margin of 25%.

[Olivier Le Peuch, CEO at SLB]

Second half.

[Arun Jayaram, Research Analyst at JPMorgan]

Second half.

[Olivier Le Peuch, CEO at SLB]

Yeah. In the second half.

[Arun Jayaram, Research Analyst at JPMorgan]

Great.

[Olivier Le Peuch, CEO at SLB]

We expect in the second half to reach or exceed indeed.

[Arun Jayaram, Research Analyst at JPMorgan]

Great. I just wanted to comment on, you know, the drivers of that would be just mix and just further pricing improvement.

[Olivier Le Peuch, CEO at SLB]

I think, again, as I commented in a previous question, I think operating leverage will continue to give us a fall through as we continue to leverage the structure change we have done and digital operation in particular. The mix will be with long cycle and offshore will continue to be digital. Part of the technology adoption across the different basin will also contribute to the mix further. Finally, pricing will expand. I think this is the combination that give us more confidence that we reach this mid-cycle prior to previous anticipation.

[Arun Jayaram, Research Analyst at JPMorgan]

Great. Thanks a lot.

[Olivier Le Peuch, CEO at SLB]

Thank you.

[Operator]

Our next question is from Scott Gruber with Citigroup. Please go ahead.

[Scott Gruber, Senior Analyst at Citigroup]

Yes, good morning.

[Stephane Biguet, CFO at SLB]

Morning, Scott.

[Scott Gruber, Senior Analyst at Citigroup]

Morning. It's clear that your capital intensity is gonna be down, you know, versus last cycle. Just given the potential growth rates that we're seeing, coupled with you and peers keeping a lid on CapEx, it appears that the market could be quite tight exiting this year. My question is, can you keep CapEx at a similar level to 2022, you know, as a percentage of sales into 2023 and into 2024, you know, while still riding the multiyear growth cycle that we all hope unfolds?

[Stephane Biguet, CFO at SLB]

Look, Scott, our capital intensity has indeed reduced quite a bit and quickly just because we high-graded our portfolio, we extracted more operational efficiencies, and we had our capital stewardship program as well that where we deploy assets only to the best returns countries and contracts. Now for 2022, we are looking at spending total capital investments including APS between $1.9 billion and $2 billion. That's just a relatively small increase compared to 2021. As to whether we can keep this going into the future? It's a bit too soon to say, but we definitely whatever increment we make, it's geared towards technology. It will be on the most accretive contracts.

[Stephane Biguet, CFO at SLB]

We want that incremental technology investment to be priced appropriately. For that matter, we already have a strong pipeline of contracts that allow us to do that at favorable commercial conditions. We'll see how the year progress. For the moment, we're quite confident that the envelope we gave you allow us to fully seize the growth in 2022 and prepare for 2023. We'll see how we set the envelope in 2023. It cannot be a huge increase for sure.

[Olivier Le Peuch, CEO at SLB]

We'll keep the capital intensity of our business going forward in check. I think the capital stewardship part of our returns-focused strategy is clearly giving us a level of a new dynamic and a new mindset in our commercial and contractual engagement with customer. We have the whole organization focused on effectively and efficiently using the CapEx, the equipment pool that we have to deploy to the most accretive contract and the most accretive engagement we have. We'll continue to use this discipline to make sure that we keep in check broadly the capital intensity in this cycle.

[Scott Gruber, Senior Analyst at Citigroup]

Got it. Of the $1.9 billion-$2 billion budget this year, are you able to state how much is APS? If you do end up selling the Canadian project this year, you know, how much, you know, could the APS portion step down on an annualized basis?

[Stephane Biguet, CFO at SLB]

Look, you know, we don't disclose the split of the guidance. There is a small increase in APS investment, but it's matched with increased cash flow. As you know, the way we look at APS investment is really based on the cash flow of the individual projects. As an aside, we are generating very good cash flows in our APS project. Overall, as Olivier mentioned, the business of APS because it's just a handful of projects is going to be pretty flat this year, and the investment level is definitely not going to increase in the future, in future years.

[Scott Gruber, Senior Analyst at Citigroup]

Got it. Appreciate the knowledge. Thank you.

[Stephane Biguet, CFO at SLB]

Thank you.

[Operator]

Our next question is from Connor Lynagh with Morgan Stanley. Please go ahead.

[Connor Lynagh, Executive Director at Morgan Stanley]

Yeah, thanks. I was wondering if we could go back to pricing for a minute here, and I'm curious if you could maybe characterize it certainly sounds like pricing's become more broad-based, but are there specific areas globally or specific divisions in which you're realizing more pricing? And I guess the question is when do we see this in the results? I mean, is this broad-based and you're going to be seeing it in 2022, or is this, you know, sort of early signs and it's more of a 2023 dynamic?

[Olivier Le Peuch, CEO at SLB]

I think it's broad-based, but let me maybe underline what, where, and how we see pricing conditions getting developed. We see it in three ways. First, we believe that pricing conditions and favorable commercial terms are linked to performance. Performance in execution, performance contracts are differentiated in the impact we provide customers give us the opportunity to negotiate favorable commercial terms and keep or expand our market position with key customers. I think this has started, and this is, depending on region, something that impacts our service division, I would say, Reservoir Performance and Well Construction particularly.

[Olivier Le Peuch, CEO at SLB]

The second one is linked to, I think, capacity, and I think, capacity on unique technology, capacity on the, on equipment that is tight, be it for offshore deployments or be it for high volume intensity basin like North America. This we have seen when the conditions are set and we are getting an opportunity to expand from green shoots to broad pricing improvement condition. This we have seen happening for the last year in North America, and we see this starting to happen in offshore deployments, where our unique equipment have to be mobilized, have to be secured, and they are done at pricing conditions that have improved over the last few months. Finally, inflation. Inflation is something that exists. It's related to market condition.

[Olivier Le Peuch, CEO at SLB]

Inflation is something that we always deal with, and today we are seeing more into the OECD and North America, but we are dealing with inflation every day in every GeoUnit, as we call it, over the years, and we know how to manage it through engagement of customer. It's more acute and it's more pronounced in some part, in some basin, and we're responding it with engagement of our customer and using the contract term we have to offset the inflation pressure we're getting. It's all about performance, including our technology. It's all about capacity tightening, and it's about responding to the inflation pressure. These three things are the lever we are using and that are starting to be more broad, each of them across the different basin.

[Olivier Le Peuch, CEO at SLB]

Hence, it's progressive and it's touching, and addressing different basin and all division throughout 2022 and further into 2023.

[Connor Lynagh, Executive Director at Morgan Stanley]

Thank you. That's all helpful context. The inflation topic obviously is one we haven't really talked about extensively. It hasn't seemed to prevent you guys from expanding margins significantly. You know, as we look into 2022, I'd say, you know, the market expectation seems to be that commodity deflation could occur, but labor inflation could increase. I'm curious what you're seeing on that front, and should we think about either of those having a meaningful impact on your margins, either positively or negatively?

[Olivier Le Peuch, CEO at SLB]

I think first, as you mentioned, I think inflation is nothing new, and that happened last year. I think the performance of our supply organization, the way we are dealing with it, I think has helped us to mitigate and shift to the right, if I may, some of these. Secondly, I think we have been able to engage commercially to offset and create net pricing condition. I think we see this happening forward. When it comes to resource versus equipment, I think resource is always a hot topic in our organization.

[Olivier Le Peuch, CEO at SLB]

I think we respond to this by further improving, accelerating our digital operation adoption so that we offset some of the pressure on our resource as much as we can and can offset this pressure as well. I think it's part of a toolbox that we use and that we'll continue to tune as the cycle unfolds.

[Connor Lynagh, Executive Director at Morgan Stanley]

Great. Thanks very much.

[Olivier Le Peuch, CEO at SLB]

Thank you, Connor.

[Operator]

Our next question is from Roger Read with Wells Fargo. Please go ahead.

[Roger Read, Senior Energy Analyst at Wells Fargo]

Yeah, thank you, and good morning.

[Olivier Le Peuch, CEO at SLB]

Good morning.

[Roger Read, Senior Energy Analyst at Wells Fargo]

Certainly good to see things turning around here. I just had a couple questions to follow up on some of the discussions about the expectations on EBITDA margins, the mix that you expect to see. I was curious what you would anticipate or what is embedded in the forecast in terms of a recovery in E&A spending, within the overall spending increase, and if that's gonna be less. The reason I say that is we know several companies have essentially eliminated their E&A departments, how that might affect, you know, the EBITDA expansion that you anticipate 2022 and on into 2023.

[Olivier Le Peuch, CEO at SLB]

No, I think it's a valid question, but I think if you were to notice some of the highlights that we have released in the fourth quarter, we had a rebound of E&A data exploration sales as part of the... The E&A is, albeit very compressed compared to the peak of the last cycle. I think it is seeing a resurgence for two reasons. First, customers are trying to assess and reassert their reserves near around their hubs, be it on land that they own, or be it on the key offshore hubs that they have developed to make sure they can fast track in filtering and develop near- field exploration.

[Olivier Le Peuch, CEO at SLB]

We see a lot of infrastructure-led exploration, not necessarily large greenfield, new, and we don't expect this to be the trend going forward. We see that exploration is a much more surgical exploration, if I may use that word, to be near-field, backyard exploration, as we call it, around near infrastructure, so that the operator, partly offshore, get to accelerate the return on the existing infrastructure and get a fast track, short cycle return on existing offshore. We see that in Latin America. We see that in Gulf of Mexico, in Europe, in West Africa. This is very broad. We are benefiting from it in our Reservoir Performance.

[Olivier Le Peuch, CEO at SLB]

We are benefiting from it in some of the key technology that we provide, including in digital. I think while it has been a step down compared to previous cycle, there is a keen interest and investment resurgence in E&A for this reason. I think we see that as a backup of FID, and it's through partly offshore.

[Roger Read, Senior Energy Analyst at Wells Fargo]

I appreciate that. Thanks. Just looking at the Digital & Integration segment, it's obviously one a lot of us are focused on, and I know you've got a lot of expectations embedded in it as well. I was just curious if you look back over the last 12 months and forward over the next 12 months, kinda what's been a positive surprise? What's been maybe a little bit of a headwind there? If there's been a headwind, maybe how you would anticipate that, you know, reversing as we look into 2022 and 2023. Probably more from the customer side, but if there's anything internal as well.

[Olivier Le Peuch, CEO at SLB]

No, internally, I think we are very pleased with the progress of deploying and continue to build the digital foundation and digital platform foundation that support our strategy. Every customer has their own pace of adoption, their own internal digital infrastructure they choose to deploy in which we need to plug. Our choice two years ago to go with open data ecosystem foundation, the choice we have made to go in partnership with different cloud provider, different industry partner to expand our market reach, has unlocked some of these customers to come and join us in our digital journey with our platform. It's we continue to work on it. The last two years could have been better and larger adoption possibly, but I think we have the foundation in place.

[Olivier Le Peuch, CEO at SLB]

We are in the early innings, as I said, of full adoption, considering the size, the oversized scale of our customer base. I remain confident that this is just the first step, and this will only accelerate. We have the right foundation. Digital is here to stay, and digital transformation is here to accelerate across the industry. I think we are taking it one customer at a time, and this is what is happening. We are positive.

[Roger Read, Senior Energy Analyst at Wells Fargo]

Great. Thank you.

[Olivier Le Peuch, CEO at SLB]

Thank you.

[Operator]

Our next question is from Neil Mehta with Goldman Sachs. Please go ahead.

[Neil Mehta, Head of Americas Natural Resources Equity Research at Goldman Sachs]

Good morning, team.

[Stephane Biguet, CFO at SLB]

Morning.

[Olivier Le Peuch, CEO at SLB]

Morning, Neil.

[Neil Mehta, Head of Americas Natural Resources Equity Research at Goldman Sachs]

Morning. The first question is a modeling specific one, working capital obviously a big positive item this quarter. Can you talk about do you see it unwinding over the course of the year, and any just thoughts on trajectory there? As it relates to that, Liberty, it looks like you sold $109 million shares in the quarter. As it relates to that, should we think of that as a ratable exit and at this run rate in the open market, or are you gonna be opportunistic around share price? Thank you.

[Stephane Biguet, CFO at SLB]

Thank you, Neil. Working capital indeed was significantly lower in the second half, especially Q4. Again, this was very strong customer collections and customer advances. Looking at 2022, we expect the same pattern, very seasonality in working capital. Usually it increases in the first quarter. We have payment of annual incentives to employees, and then gradually it improves in the subsequent quarters, mostly on cash collection. We'll see the same in 2022. We will likely be higher levels in general of working capital consumption as activity accelerates, particularly considering the exit rates we are looking at. We'll strive to maintain this to a minimum.

[Stephane Biguet, CFO at SLB]

In any case, we still want to generate double-digit free cash flow margins, and that's inclusive of any working capital movement. That helps us manage with this boundary. As to Liberty, yes, we are quite happy with our equity stake has actually improved quite a bit since the transaction was announced. We did decide to monetize part of the investment following the expiration of the lock-up period. We still hold a significant share of the equity, as I highlighted, about 31% after the transaction. We'll continue to monitor the value of the investment going forward, and we'll decide on further monetization based on market conditions.

[Neil Mehta, Head of Americas Natural Resources Equity Research at Goldman Sachs]

Thanks, Olivier. The follow-up is, you announced a Capital Markets Day on this call, earlier in the call, sometime in the second half. Can you just talk about what you wanna achieve out of that day from a financial perspective? What type of framework?

[Olivier Le Peuch, CEO at SLB]

I think we are willing to re-engage with all of you in a live session, first and foremost. We'll want to lay out clearly our strategic framework going forward in the cycle and beyond, including our three engines of growth, Core, Digital and New Energy. We will support it by laying out our financial framework for returning capital, including capital allocation and returns to shareholders. That's what we aim at doing at that time. We'll be clearly expressing in that setting the long-term target that we set.

[Neil Mehta, Head of Americas Natural Resources Equity Research at Goldman Sachs]

Perfect. Looking forward to seeing you live.

[Olivier Le Peuch, CEO at SLB]

Indeed. Thank you. I believe we have time for one last question, operator.

[Operator]

Very good. That last question is from Keith Mackey with RBC Capital Markets. Please go ahead.

[Keith Mackey, Oil and Gas Services Analyst at RBC Capital Markets]

Hi, good morning.

[Olivier Le Peuch, CEO at SLB]

Morning, Keith.

[Keith Mackey, Oil and Gas Services Analyst at RBC Capital Markets]

Yeah, I just wanted to maybe ask you to dig into your North American outlook for the 20% increase in spending this year. Can you maybe just sort of break that out in terms of what you might expect for drilling versus completion versus price inflation in general?

[Olivier Le Peuch, CEO at SLB]

Yeah, good question. I think first, the North America outlook we are providing is inclusive of offshore and onshore, and onshore inclusive of U.S. and Canada. I think it's a mix that is a bit not difficult, but it's a bit, a lot of variables at play to decipher here. To your specific question, we foresee indeed that the U.S. land, which is a big portion of this activity outlook, will be having a bias towards well construction as the market is rotating from depleting the DUCs to replenishing the DUCs. Hence, the well construction rig-based activity will be the lead in a 20%+.

[Olivier Le Peuch, CEO at SLB]

I think we are set to respond to this with our Well Construction portfolio in that environment, and this will be very favorable to us. The offshore environment is broad, and I think offshore environment will be execution of Well Construction and also Reservoir Performance. When you put all this and you put a more modest and more moderate Canadian environment, you have a mix that is favorable to our Well Construction and Production Systems in U.S. lands and favorable to our Reservoir Performance and Well Construction in offshore environment, all of which combine to give us this ambition about 20%.

[Keith Mackey, Oil and Gas Services Analyst at RBC Capital Markets]

Perfect. Thanks for that. Maybe one quick follow-up just on the Canadian APS. I know there was a sales process outstanding. Just curious if you can give any update on your thinking there currently.

[Stephane Biguet, CFO at SLB]

We have received several offers for APS asset in Canada as part of the process we launched last year. While we were assessing those proposals, the market conditions actually continued to improve and the value of the asset increased as a result. We actually took the decision that the offers we had received were no longer reflective of the economic value and the cash flow potential of the asset. We are not entertaining those offers at the moment. The asset is now generating very strong cash flows, but we remain open to all options.

[Keith Mackey, Oil and Gas Services Analyst at RBC Capital Markets]

Perfect. Thanks very much.

[Olivier Le Peuch, CEO at SLB]

Thank you.

[Stephane Biguet, CFO at SLB]

Thank you.

[Olivier Le Peuch, CEO at SLB]

I believe we need to close the call. Before we close the call, I would like to leave you a few takeaways. Firstly, the quality of our results during the fourth quarter, particularly the cash flow generation and our digital sales, have helped us close a remarkable year with financial outperformance during 2021, supporting significant EBITDA margin expansion and very sizable reduction of our net debt. Credit to the entire Schlumberger team for outstanding execution across all basins and divisions. Secondly, our performance strategy execution has resulted in significant progress in the adoption of our digital platform, the deployment of our fit for basin and transition technology, and the successful acceleration of our new energy venture, each developing towards a sizable addressable market.

[Olivier Le Peuch, CEO at SLB]

Thirdly, during 2021, we have enhanced our market position with key customers ahead of the significant upcycle and will fully benefit from the scale and breadth of the favorable activity mix unfolding across all basins during 2022 and beyond. This will result in significant growth and further margin expansion and will support our double-digit free cash flow ambition. Finally, the macro environment is increasingly supportive of a potential super cycle. As this favorable market conditions extend both onshore and offshore, well beyond 2022, we have increased confidence in reaching our mid-cycle EBITDA margin ambition of 25% in the second half of 2023. Ladies and gentlemen, 2021 was a defining and transformative year for Schlumberger, and 2022 presents the unique environment to substantially build upon our success and accelerate our growth into the future. Thank you very much.

[Operator]

Ladies and gentlemen, that does conclude your conference for today. Thank you for your participation and for using AT&T teleconference service. You may now disconnect.

Participants

Executives

• ND Maduemezia, VP of Investor Relations
• Olivier Le Peuch, CEO
• Stephane Biguet, CFO

Analysts

• Arun Jayaram, Research Analyst at JPMorgan
• Chase Mulvehill, Director and Oilfield Service Analyst at Bank of America
• Connor Lynagh, Executive Director at Morgan Stanley
• David Anderson, Director at Barclays
• James West, Senior Managing Director at Evercore ISI
• Keith Mackey, Oil and Gas Services Analyst at RBC Capital Markets
• Neil Mehta, Head of Americas Natural Resources Equity Research at Goldman Sachs
• Roger Read, Senior Energy Analyst at Wells Fargo
• Scott Gruber, Senior Analyst at Citigroup