Olivier Le Peuch
Chief Executive Officer at Schlumberger
Thank you, ND. Good morning, ladies and gentlemen, thank you for joining us on the call today. In my remarks I will cover our first quarter results and achievements, followed by our latest view of the market environment and our outlook for the second quarter and the rest of the year, particularly internationally. Stephane will then give more detail on our financial results. And we will open the floor for your questions.
Considering the global context during the first quarter, I'm very pleased with our start of the year. Sequentially, the quarter broadly reflected typical seasonal patterns, except for additional effects of the Russian ruble devaluation and a more pronounced sequential decline in Production Systems. Year-on-year, we delivered a strong increase in earnings and revenue growth along with operating margins expansion. Our assets were particularly strong in Well Construction and Reservoir Performance, where we are maximizing a leading market positions, our top-tier technology performance, and enhanced operating leverage to fully effect both internationally and in North America.
All divisions and area grew year-on-year, resulting in 14% overall growth. This was achieved through double-digit revenue growth internationally and by fully capitalizing on our North America exposure with 32% revenue growth. Operating margins expanded in both North America and in the International markets, and we started the year with the highest first quarter margins since 2015. This establishes an excellent foundation for our full year margin expansion ambition.
Well Construction and Reservoir Performance. Our core service divisions had very strong momentum to start the year. In addition, we secured several new multi-year contracts and improving commercial condition in the number of geographies and services. Digital & Integration also posted double-digit growth compared to the same period last year with new critical commercial contracts and significant advance of our digital platform strategy with the launch of our first innovation factory in North America. In Production System, our core equipment division year-on-year growth was muted by the impact of supply chain bottlenecks, which have pushed deliveries into subsequent quarters. Despite these transitory challenges, I'm very pleased with the quality and size of the backlog and orders secured in the past 12 months.
With improving supply conditions, I'm confident that the execution of our response plan will significantly improve backlog conversion resulting into an accelerated revenue growth dynamic in the coming quarters. In Russia, the onset of the tragic conflict in Ukraine and corresponding sanction impacted the later part of the quarter. We swiftly initiated a series of actions to ensure the safety of our people and implemented restrictive measures considering new investments and technology deployment to our Russia operation. We continue to closely monitor this dynamic situation and remain hopeful for a quick cessation of cities.
Overall, and despite unique challenges, I'm very pleased with the results of the quarter. I would like to extend my thanks to the entire Schlumberger team for successfully navigating this developments and delivering an excellent start to what promise to be a year of solid growth and achievement.
Turning now to the macro environment. The energy landscape has evolved significantly over the past few months. Recent events have on one hand, resulted into a change in the pace of demand recovery, while energy security and supply diversification have also emerged as preeminent global drivers that would shape the future of our industry, in addition to decarbonization, capital discipline and digital transformation.
This new dimension will have long lasting positive implications for energy investments over the next few years. I would like to share how we see these dynamics developing over the short and long-term horizons, and more importantly, how this condition will play to Schlumberger's differentiated strength. First, in the short-term, commodity prices are elevated as supply conditions continue to tighten due to the impact of capital discipline, consistent OPEC+ policy implementation and the potential impact of supply dislocation from Russia. The industry is responding to this new -- to this high commodity price environment with accelerated short cycle investment in North America, led by the product producers, and the gradual increase in investment by the pubic operators albeit compared by capital discipline and bottlenecks in capacity and supply chain.
Internationally, short cycle investment are set to accelerate through the seasonal rebound in the second quarter or more strongly in the second half of the year, led by the Middle East and the key international offshore basin. Second, the elevation of energy security as a priority, we drive further capacity expansion and optionality to deliver more diverse oil and gas supply, this will support additional long cycle development projects, exploration activity and brownfield regulation programs. Third, favorable condition for products and services net pricing improvement have clearly emerged and are expanding across both North America and the international markets. This will be a defining characteristic of this up cycle.
Considering the service sector new fund capital discipline and commitment to margin expansion. This improvement is absolutely critical to support returns and investment in capacity, that would be needed to deliver on both the short and long-term oil and gas supply the world needs. The combination of these effects creates an exceptional sequence for our sector, likely resulting in a cycle of higher magnitude and duration than previously anticipated. Schlumberger has led the sector in reinventing itself over the past few years, aligning closely with industry shifts, customer needs and increased shareholder value. Since launching our performance strategy, we've targeted trends that are manifesting today by focusing on the development of fit-for-basin technologies, some of which are now unlocking much needed energy supplies, and by reducing or eliminating GHG emission with our transition technology portfolio and our new end-to-end Emissions Solutions.
We have also expanded manufacturing capacity in key basins, such as in North America and in the Kingdom of Saudi Arabia to tail our fit-for-basin technology delivery. In Digital, we are enabling transformation in the sector, establishing the industry digital platform, DELFI, creating more powerful AI solutions and leading innovation in autonomy. This advance in digital enablement are improving both customer operations and our own efficiency as we evolve workflows and improve execution with insights from data.
Today, Schlumberger is best positioned to capture the benefits of this unique upcycle, given the steady execution of our strategy, breadth of our market presence, leading technology portfolio and our ability to derive premium pricing for performance execution and value creation for our customers.
Now I would like to share with you our outlook for the second quarter and the second half of the year. Sequentially, we expect a solid quarter of growth in both North America and the international market. Growth in North America will be led by continued short-cycle activity offset by Canadian spring breakup. Internationally, growth will be driven by a seasonal rebound, albeit moderated by the absence of the usual second quarter uptick in Russia, owing to the uncertainty around the ruble depreciation, impact of sanctions and customer activity decline.
Taken together, this will result in global revenue growth around mid-single-digits for the second quarter. We anticipate the operating margins to expand 50 to 100 basis points, driven by further operating leverage and the positive conditions I have outlined. In that context, our sequential margin expansion trajectory is set to resume and subsequently strengthen in the second half of the year, in line with our full year guidance.
Looking further ahead, the second half of the year is shaping up to be particularly strong, based on our view of a significant pipeline of customer activity, upcoming product backlog conversion and the growing impact of net pricing. This period of the year is typically the strongest half, and 2022 looks to be no exception. While the dynamic situation in Russia and the potential reduction in pace of the demand recovery near-term concerns, we believe the continued tightness in supply, elevated commodity price and supplemental investment intended to diversify oil and gas supply should represent a positive offset for 2022 and beyond.
Accordingly, second half growth will be driven primarily by the international markets, led by the Middle East and key offshore basin. Indeed, the offshore activity already is growing sequentially and visible year-on-year, will benefit some secular growth in both shallow and deepwater environment, as the acceleration of infill drilling and tieback developments will combine with the resurgence of exploration drilling during the summer and with an acceleration of long cycle development projects ahead of 2023.
Similarly, the Middle East region will benefit from the combination of reinvestment in short-cycle barrels as we approach the end of current OPEC+ agreements and from the commitment to capacity expansion in both oil production and gas development. Additionally, 2022 is set to benefit from higher discretionary spending and higher product sales and year-end deliveries as customers secure the necessary capacity for their 2023 growth plans.
Finally, and critically, we anticipate that net pricing impact will further expand in breadth and scale as the year progresses to benefit margin expansion during the second half and become a unique attribute of this up-cycle. With this backdrop and despite uncertainty linked to Russia, we believe that the favorable market condition outlined should allow us to maintain our full year ambition of year-on-year revenue growth in the mid-teens and adjusted EBITDA margin exiting the year at least 200 basis points higher than the fourth quarter of 2021.
I will now turn the call over to Stephane.