SLB Limited: Form 10-Q for the period ended Mar 31, 2025

First Quarter 2025 Compared to First Quarter 2024

(Stated in millions)

(1) Comprised principally of certain corporate expenses not allocated to the segments, stock-based compensation costs, amortization expense associated with certain intangible assets, certain centrally managed initiatives and other nonoperating items.

(2) Interest income excludes amounts that are included in the segments’ income ($- million in 2025; $4 million in 2024).

(3) Interest expense excludes amounts that are included in the segments’ income ($3 million in 2025; $3 million in 2024).

(4) Charges and credits are described in detail in Note 2 to the Consolidated Financial Statements.

First-quarter 2025 revenue of $8.5 billion decreased 3% year on year as it was a subdued start to the year. North America revenue grew by 8% year on year to $1.7 billion, partially compensating for softer international revenue which declined 5% to $6.7 billion.

The year-on-year growth in North America revenue was primarily driven by higher digital sales and sales of production systems in US offshore, and strong growth in data center infrastructure solutions.

Internationally, Latin America led the year on year decline as revenue of $1.5 billion declined 10% year on year primarily due to a significant reduction in drilling activity in Mexico. Europe & Africa revenue of $2.2 billion decreased 4% due to reduced activity in offshore Africa and in Russia. Revenue in the Middle East & Asia of $3.0 billion declined 3% year on year largely due to reduced drilling and stimulation activity in Saudi Arabia as well as lower activity in Egypt, Australia and India. These declines were partially offset by higher revenue in the United Arab Emirates and Kuwait.

The industry may experience a potential shift of priorities driven by changes in the global economy, fluctuating commodity prices and evolving tariffs — all of which could impact upstream oil and gas investment and, in turn, affect demand for our products and services. In this uncertain environment, SLB remains committed to protecting its margins, generating strong cash flow and delivering consistent value to its customers and shareholders in 2025.

Digital & Integration

Digital & Integration revenue of $1.0 billion increased 6% year on year driven by 17% growth in digital revenue, supported by greater adoption of digital technologies and higher sales of exploration data. This increase was partially offset by lower APS revenue due to a temporary pipeline disruption on an Asset Performance Solutions (“APS”) project in Ecuador.

Digital & Integration pretax operating margin of 30% expanded 380 basis points (“bps”) year on year, mostly due to improved profitability in digital, following higher uptake of digital technologies and higher sales of exploration data.

Reservoir Performance

Reservoir Performance revenue of $1.7 billion declined 1% year on year with strong unconventional stimulation and intervention activity offset by lower evaluation and exploration activity across the international markets.

Reservoir Performance pretax operating margin of 17% decreased 311 bps year on year due to reduced profitability from lower evaluation activity and project startup costs.

Well Construction

Well Construction revenue of $3.0 billion declined 12% year on year reflecting lower drilling activity in Mexico, Saudi Arabia, U.S. land, India and offshore West Africa.

Well Construction pretax operating margin of 20% declined 71 bps year on year driven by the reduced activity across North America and the international markets.

Production Systems

Production Systems revenue of $2.9 billion increased 4% year on year due to strong demand in North America for surface production systems, completions, artificial lift, and data center infrastructure solutions.

Production Systems pretax operating margin of 16% increased 197 bps year on year due to improved profitability across a number of business lines driven by activity mix, execution efficiency and conversion of improved-price backlog.

First Quarter 2025 Compared to Fourth Quarter 2024

(Stated in millions)

(1) Comprised principally of certain corporate expenses not allocated to the segments, stock-based compensation costs, amortization expense associated with certain intangible assets, certain centrally managed initiatives and other nonoperating items.

(2) Interest income excludes amounts that are included in the segments’ income ($- million in the first quarter of 2025; $9 million in the fourth quarter of 2024).

(3) Interest expense excludes amounts that are included in the segments’ income ($3 million in the first quarter of 2025; $2 million in the fourth quarter of 2024).

(4) Charges and credits are described in detail in Note 2 to the Consolidated Financial Statements.

First-quarter 2025 revenue of $8.5 billion decreased 9% sequentially as revenue declined 10% in the international markets and 2% in North America primarily due to seasonal effects.

Revenue in North America declined 2% sequentially due to lower drilling activity both on land and offshore partially offset by higher revenue from data center infrastructure solutions.

Internationally, revenue decreased 11% on a sequential basis in the Middle East & Asia and 10% in Europe & Africa following strong year-end product and digital sales across these areas in the fourth quarter of 2024. Revenue in Latin America decreased 9% sequentially driven by lower drilling activity in Mexico. Reduced APS revenue in Ecuador and seasonally lower revenue in Brazil following strong year-end production systems sales last quarter also contributed to the revenue decline in Latin America.

Digital & Integration

Digital & Integration revenue of $1.0 billion declined 13% sequentially following seasonally strong year-end digital sales in the fourth quarter of 2024 while APS revenue was lower due to a temporary pipeline disruption on an APS project in Ecuador.

Digital & Integration pretax operating margin of 30% decreased 784 bps sequentially due to seasonally lower sales of digital and exploration data as well as lower APS revenue.

Reservoir Performance

Reservoir Performance revenue of $1.7 billion declined 6% sequentially primarily due to seasonal activity reductions in Europe & Africa and the Middle East & Asia.

Reservoir Performance pretax operating margin of 17% decreased 391 bps sequentially due to reduced profitability from lower evaluation activity and project startup costs.

Well Construction

Well Construction revenue of $3.0 billion decreased 9% sequentially due to seasonal activity reductions across all areas.

Well Construction pretax operating margin of 20% declined 106 bps sequentially driven by the reduced activity across North America and the international markets.

Production Systems

Production Systems revenue of $2.9 billion declined 8% sequentially driven by seasonally lower sales of artificial lift, midstream and surface production systems and completions.

Production Systems pretax operating margin of 16% increased by 34 bps sequentially primarily due to cost efficiencies despite seasonally lower sales.

Interest and Other Income

Interest & other income consisted of the following:

(Stated in millions)

Other

Research & engineering and General & administrative expenses, as a percentage of Revenue, for the first quarter ended March 31, 2025 and 2024 were as follows:

The effective tax rate was 22% for the first quarter of 2025 as compared to 19% for the same period of 2024. The increase in the effective tax rate year on year was primarily due to the charges and credits described in Note 2 to the Consolidated Financial Statements. The charges and credits increased the effective tax rate by three percentage points as a significant portion of these charges do not result in a tax benefit.

Charges and Credits

SLB recorded charges and credits during the first quarters of 2025 and 2024. These charges and credits, which are summarized below, are more fully described in Note 2 to the Consolidated Financial Statements.

2025:

(Stated in millions)

2024:

(Stated in millions)

Liquidity and Capital Resources

Details of the components of liquidity as well as changes in liquidity are as follows:

(Stated in millions)

18

(1) “Net debt” represents gross debt less cash and short-term investments. Management believes that Net debt provides useful information to investors and management regarding the level of SLB’s indebtedness by reflecting cash and investments that could be used to repay debt. Net debt is a non-GAAP financial measure that should be considered in addition to, not as a substitute for or superior to, total debt.

(2) Includes depreciation of fixed assets and amortization of intangible assets, exploration data costs, and APS investments.

(3) “Free cash flow” represents cash flow from operations less capital expenditures, APS investments and exploration data costs capitalized. Management believes that free cash flow is an important liquidity measure for the company and that it is useful to investors and management as a measure of our ability to generate cash. Once business needs and obligations are met, this cash can be used to reinvest in the company for future growth or to return to shareholders through dividend payments or share repurchases. Free cash flow does not represent the residual cash flow available for discretionary expenditures. Free cash flow is a non-GAAP financial measure that should be considered in addition to, not as a substitute for or superior to, cash flow from operations.

Key liquidity events during the first three months of 2025 and 2024 included:

• Capital investments (consisting of capital expenditures, APS investments and exploration data capitalized) were $0.6 billion during the first three months of 2025 compared to $0.5 million during the first three months of 2024. Capital investments for the full year 2025 are expected to be approximately $2.3 billion.
• In January 2025, SLB announced a 3.6% increase to its quarterly cash dividend from $0.275 per share of outstanding common stock to $0.285 per share, beginning with the dividend payable in April 2025. Dividends paid during the first three months of 2025 and 2024 were $386 million and $357 million, respectively.
• SLB entered into accelerated share repurchase ("ASR") agreements to repurchase $2.3 billion of its common stock commencing on January 13, 2025, and ending no later than May 31, 2025. The ASR was completed on April 7, 2025, and SLB received 56.8 million shares of its common stock, of which 47.6 million were received in January 2025 and the remaining 9.2 million shares were received in April 2025. These shares were repurchased by SLB at an average price of $40.51, representing the volume-weighted average price of SLB's common stock during this period less a discount.
• During the first quarter of 2024, SLB repurchased 5.4 million shares of its common stock at an average price of $50.13 per share for a total purchase price of $270 million.

As of March 31, 2025, SLB had $3.9 billion of cash and short-term investments on hand and committed debt facility agreements with commercial banks aggregating $5.0 billion, all of which was available. SLB believes these amounts are sufficient to meet future business requirements for at least the next 12 months and beyond.

SLB has a global footprint in more than 100 countries. As of March 31, 2025, only three of those countries individually accounted for greater than 5% of SLB’s net receivable balance. Only one of these countries, the United States, represented greater than 10% of such receivables. As of March 31, 2025, Mexico represented 7% of SLB's net accounts receivable balance. (See Note 8 to the Consolidated Financial Statements). SLB’s receivables from its primary customer in Mexico are not in dispute and SLB has not historically had any material write-offs due to uncollectible accounts receivable relating to this customer.

On October 17, 2024, SLB entered into a definitive agreement to sell its interest in the Palliser APS project in Canada. Under the terms of the agreement, SLB will receive cash proceeds of approximately $430 million, subject to closing adjustments that are typical for such a transaction. The transaction, which is subject to regulatory approval and other customary closing conditions, is expected to close in the second quarter of 2025. SLB recorded revenue of approximately $0.1 billion during the first quarter of 2025 relating to this project.

FORWARD-LOOKING STATEMENTS

This first-quarter 2025 Form 10-Q, as well as other statements we make, contain “forward-looking statements” within the meaning of the federal securities laws, which include any statements that are not historical facts. Such statements often contain words such as “expect,” “may,” “can,” “believe,” “predict,” “plan,” “potential,” “projected,” “projections,” “precursor,” “forecast,” “outlook,” “expectations,” “estimate,” “intend,” “anticipate,” “ambition,” “goal,” “target,” “scheduled,” “think,” “should,” “could,” “would,” “will,” “see,” “likely,” and other similar words. Forward-looking statements address matters that are, to varying degrees, uncertain, such as statements about SLB’s financial and performance targets and other forecasts or expectations regarding, or dependent on, its business outlook; growth for SLB as a whole and for each of its Divisions (and for specified business lines, geographic areas, or technologies within each Division); oil and natural gas demand and production growth; oil and natural gas prices; forecasts or expectations regarding energy transition and global climate change; improvements in operating procedures and technology; capital expenditures by SLB and the oil and gas industry; the business strategies of SLB, including digital and “fit for basin,” as well as the strategies of SLB’s customers; SLB’s capital allocation plans, including dividend plans and share repurchase programs; SLB’s APS projects, joint ventures, and other alliances; the impact of the ongoing conflict in Ukraine on global energy supply; access to raw materials; future global economic and geopolitical conditions; future liquidity, including free cash flow; and future results of operations, such as margin levels. These statements are subject to risks and uncertainties, including, but not limited to, changing global economic and geopolitical conditions; changes in exploration and production spending by SLB’s customers, and changes in the level of oil and natural gas exploration and development; the results of operations and financial condition of SLB’s customers and suppliers; SLB’s inability to achieve its financial and performance targets and other forecasts and expectations; SLB’s inability to achieve net-zero carbon emissions goals or interim emissions reduction goals; general economic, geopolitical and business conditions in key regions of the world; the ongoing conflict in Ukraine; foreign currency risk; inflation; changes in monetary policy by governments; tariffs; pricing pressure; weather and seasonal factors; unfavorable effects of health pandemics; availability and cost of raw materials; operational modifications, delays or cancellations; challenges in SLB’s supply chain; production declines; the extent of future charges; SLB’s inability to recognize efficiencies and other intended benefits from its business strategies and initiatives, such as digital or new energy, as well as its cost reduction strategies; changes in government regulations and regulatory requirements, including those related to offshore oil and gas exploration, radioactive sources, explosives, chemicals, and climate-related initiatives; the inability of technology to meet new challenges in exploration; the competitiveness of alternative energy sources or product substitutes; and other risks and uncertainties detailed in this Form 10-Q and our most recent Form 10-K and Forms 8-K filed with or furnished to the SEC.

This Form 10-Q also includes forward-looking statements relating to the proposed transaction between SLB and ChampionX, including statements regarding the benefits of the transaction and the anticipated timing of the transaction. Factors and risks that may impact future results and performance include, but are not limited to, and in each case as a possible result of the proposed transaction on each of SLB and ChampionX: the ultimate outcome of the proposed transaction between SLB and ChampionX; the ability to operate the SLB and ChampionX respective businesses, including business disruptions; difficulties in retaining and hiring key personnel and employees; the ability to maintain favorable business relationships with customers, suppliers and other business partners; the terms and timing of the proposed transaction; the occurrence of any event, change or other circumstance that could give rise to the termination of the proposed transaction; the anticipated or actual tax treatment of the proposed transaction; the ability to satisfy closing conditions to the completion of the proposed transaction; other risks related to the completion of the proposed transaction and actions related thereto; the ability of SLB and ChampionX to integrate the business successfully and to achieve anticipated synergies and value creation from the proposed transaction; the ability to secure government regulatory approvals on the terms expected, at all or in a timely manner; litigation and regulatory proceedings, including any proceedings that may be instituted against SLB or ChampionX related to the proposed transaction, as well as the risk factors discussed in SLB’s and ChampionX’s most recent Forms 10-K, 10-Q, and 8-K filed with or furnished to the SEC.

If one or more of these or other risks or uncertainties materialize (or the consequences of any such development changes), or should our underlying assumptions prove incorrect, actual results or outcomes may vary materially from those reflected in our forward-looking statements. Forward-looking and other statements in this Form 10-Q regarding our environmental, social, and other sustainability plans and goals are not an indication that these statements are necessarily material to investors or required to be disclosed in our filings with the SEC. In addition, historical, current, and forward-looking environmental, social, and sustainability-related statements may be based on standards for measuring progress that are still developing, internal controls and processes that continue to evolve, and assumptions that are subject to change in the future. Statements in this Form 10-Q are made as of April 25, 2025, and SLB disclaims any intention or obligation to update publicly or revise such statements, whether as a result of new information, future events, or otherwise.

For quantitative and qualitative disclosures about market risk affecting SLB, see Item 7A, “Quantitative and Qualitative Disclosures about Market Risk,” of the SLB Annual Report on Form 10-K for the fiscal year ended December 31, 2024. SLB’s exposure to market risk has not changed materially since December 31, 2024.

SLB has carried out an evaluation under the supervision and with the participation of SLB’s management, including the Chief Executive Officer (“CEO”) and the Chief Financial Officer (“CFO”), of the effectiveness of SLB’s “disclosure controls and procedures” (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)) as of the end of the period covered by this report. Based on this evaluation, the CEO and the CFO have concluded that, as of the end of the period covered by this report, SLB’s disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in the reports that SLB files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. SLB’s disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is accumulated and communicated to its management, including the CEO and the CFO, as appropriate, to allow timely decisions regarding required disclosure. There was no change in SLB’s internal control over financial reporting during the quarter to which this report relates that has materially affected, or is reasonably likely to materially affect, SLB’s internal control over financial reporting.

As of the date of this filing, there have been no material changes from the risk factors disclosed in Part 1, Item 1A, of SLB’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024.