Slb N.V. (SLB) Q3 2026 Earnings Call Transcript

Operator: Good morning. My name is Sarah, and I will be your conference operator today. I would like to welcome everyone to the Third Quarter SLB Earnings Call. At this time, all participants are in a listen-only mode. After the speakers' remarks, there will be a Q&A session. Followed by the number 1 on your telephone keypad. You may remove yourself from the queue by pressing star 1 again. As a reminder, this call is being recorded. I will now turn the call over to James R. McDonald, Senior Vice President of Investor Relations and Industry Affairs. Please go ahead.

James R. McDonald: Thank you, Sarah. Good morning, and welcome to the SLB Third Quarter 2026 Earnings Conference Call. Today's call is being hosted from New York City following our 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 will 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. For more information, please refer to our latest 10-K filing and other SEC filings, which can be found on our website. Our comments today also include non-GAAP financial measures. Additional details and reconciliations to the most directly comparable GAAP financial measures can be found in our third quarter earnings press release which is on our website. With that, I will turn the call over to Olivier.

Olivier Le Peuch: Thank you, James. Good morning, ladies and gentlemen. Thank you for joining us. Today, I will begin with our first quarter performance. I will then discuss the evolving macro environment and a fundamental supporting outlook as we approach 2027. And finally, I will share our expectations for the fourth quarter. Stephane will then provide additional details on our financial results. And after that, we will open the line for your questions. Let's begin. The first quarter was marked by broad based sequential revenue growth across each of our geographic areas, and core divisions. With pretax segments operating margins expanding across all 4 divisions. This was driven by the gradual recovery in The Middle East, solid growth in North America, and continued momentum across the international offshore basins, including Latin America, Europe and Africa, and Asia. Within the core divisions, production systems led the way, supported by higher 3D and revenue and strong sales of production chemicals and artificial lift in North America and The Middle East. Notably, ChampionX delivered its highest quarterly revenue since the acquisition. With margins expanding sequentially for the fourth consecutive quarter. Well construction growth was driven by double digit increases across Argentina, Guyana, Brazil and US land along with the seasonal recovery in Canada. Complemented by strong offshore drilling in Asia. Sequential growth was also driven by higher drilling activity and frac and cementing in The Middle East. While the near term pace of recovery in The Middle East remains uncertain, the longer-term outlook continues to strengthen. This is reflected by Saudi Aramco's recent award of 4 integrated well construction contracts to SLB covering more than 450 wells over an initial 3-year term. These multiyear awards significantly improved our revenue visibility, and expand our participation in development activity across the kingdom. By bringing together our digital training workflows automated technologies, integrated well construction portfolio. Reservoir Performance also delivered strong sequential growth, led by increased stimulation and intervention activity, alongside an uptick in evaluation. This demonstrates that customers are investing in both restoration and production optimization of existing assets, and the evaluation of reservoirs to support new development. Results this quarter continue to demonstrate the benefits of our strategic focus on production recovery. Our production business encompassing all production systems and some of the offerings in Reservoir Performance now represents more than 50% of our portfolio, a leading position across every major basin and advanced mix of short, and long cycle activity including exposure to resilient OpEx spend. This provides a durable foundation with greater revenue visibility and a return on performance across market cycles. Taken together, growth across all core divisions affect the characteristics of an inflecting up-cycle. With broad expansion of activity across exploration, development, and intervention as operators ramp up efforts to restore production and bring new capacity online. In digital, third quarter revenue was steady sequentially, and margins remained strong. Despite digital exploration sales declining following exceptional sales in the second quarter. Customers continue to recognize the benefit of AI and digital operations, And we deliver more than 750 thousand ft of automated drilling this quarter, an increase of nearly 50% year-on-year. Additionally, the Helots predictive analytics are intelligent real time monitoring and advisory system, is now monitoring >20% of active international rigs representing year on year growth of >60%. As you can see, adoption continues to accelerate and we are very pleased with the progress of our digital business. Digital has grown 11% year-to-date, and we have clear visibility into higher sales in the fourth quarter. As a result, we anticipate finishing the year with double digit year on year growth and adjusted EBITA margins >35%. Finally, data center solutions continued its strong growth trajectory, supported by the progression of existing projects and geographic expansion into Asia. During the quarter, we continued to invest in facilities and talent to expand our execution capacity. Including a new manufacturing center in Canada to support the meta data center project. That are essential to meet surging customer demand. Upon closing of our previously announced acquisition of Kelvion, the Kelvion portfolio will also benefit greatly from this momentum and will accelerate our ambition to become a leading industrial partner in future AI infrastructure. In summary, I am extremely proud of our third quarter performance and I want to thank the entire SLB team for delivering these results. They are focused on execution, innovation, and our customer centricity continues to make the difference. Let me now turn to the macro environment and the fundamentals supporting our outlook as we approach 2027. Ongoing disruptions continue to reinforce the importance of energy security and the need for reliable geographically diverse sources of supply. At the same time, the industry continues to face structural challenge of offsetting natural decline and replacing reserves following several years of limited exploration. Collectively, these conditions are supporting a broader and increasingly diversified international opportunity. In the near term, this will support production intervention and other short-cycle activity. Longer term, this is providing a strong foundation for the progression of offshore developments renewed exploration, and new areas of investment emerging across several markets. Let me briefly discuss how this long cycle dynamics are evolving. Deepwater represents 1 of the industry's most advantage source of new supply. Combining attractive project economics, material resource developments, and long duration production. We continue to see this opportunity broadened across Latin America, Africa, Eastern Mediterranean, and Asia. With third-party FIDs expected to increase more than 30% year-on-year in 2026, and many projects advancing from function into execution. For SLB, this momentum is reflected in the continued flow of OneSubsea awards, further strengthening our backlog and increasing visibility into 2027 and beyond. 1 example is our recent award in Mozambique where OneSubsea was selected to deliver subsea production systems for the first phase of deepwater Rovuma energy development. This project will contribute to an important new source of global supply, global gas supply, and further demonstrate the progression of large long cycle deepwater development into execution. In addition, fundamentals for exploration are improving. As operators seek to replace reserves and diversify supply, following several years of restrained investment. We see this materializing through new licensing activity in Brazil, the Eastern Mediterranean and West Africa. Growing interest in frontier basins such as Namibia, and preparations for future campaigns across deepwater markets, including Guyana, and Suriname. As exploration assumes a greater role in our customer portfolio, SLB's leading position across exploration data subsurface modeling, and evaluation technologies, position us to capture this growing opportunity. So far this year, SLB has participated in the evaluation of approximately 80% of completed high impact exploration wells globally. Many of which are concentrated in frontier and deepwater basins. Beyond deepwater and exploration, international market are offering new pathways for growth. With opportunities broadening across conventional and non-commercial resource in The Middle East, as well as key emerging markets. In this context, Venezuela represents a particularly significant growth driver for SLB. Following more than a decade of limited investments, activity in the country is accelerating. Led by international oil companies. For SLB, this is already translating to revenue growth. Our revenue in Venezuela is on track to more than double. this year, with strong momentum among US and European E and Ps, supporting the potential for multifold growth in 2027. At the same time, major US shale operators are expanding internationally. Entering new countries and partnering with NOCs. This trend further broaden the addressable market particularly in exploration, deep water development across Africa, Latin America, and Asia, as well as unconventional and unconventional resources in The Middle East. Looking across these dynamics, long cycle offshore developments, renewed exploration, digital adoption, and US operators expanding globally. All confirm durable multiyear international investment cycle with clear visibility into 2027 and beyond. With a market-leading position across our core divisions, an essentially established leadership position in global production, differentiated digital capabilities and unmatched global footprint. SLB is uniquely positioned to capture this upside. Now let me conclude with our expectations for the fourth quarter and our first view of the 2027 market outlook. Over the past several weeks, the Middle East has continued to experience heightened tensions. Given the ongoing uncertainty our fourth quarter outlook assumes Middle East revenue remains flat sequentially at approximately $1.9 billion representing about 83% of revenue generated in the fourth quarter of 25. Based on this assumption, and supported by continued deepwater momentum, as well as the typical year end strength in digital and product sales. We expect overall fourth quarter revenue to reach approximately $10 billion. Representing an increase of 5% to 7% sequentially. As a result, when excluding The Middle East, global fourth quarter revenue is expected to grow in the high single digits year on year. We also expect adjusted EBITA margins to expand 100 to 150 bps. At the division level. We anticipate combined revenue from the core division to sequentially increase by low single digits. Led by high single digit growth in Production Systems and with well construction and Reservoir Performance essentially flat. In digital, revenue is expected to increase in line with fourth quarter historical trends led by a significant uptake in typical year-end digital exploration sales. This outlook provides clear evidence that the next phase of the up-cycle is underway. While near-term performance is dependent on geopolitical developments and a show of resolution of regional disruption in the Middle East could unlock deferred activity and serve as a powerful catalyst for accelerated growth in 2027. Looking ahead to 2027, assuming Middle East activity remains at second half 26 levels, and that the conflict does not materially escalate. We expect global OFS market activity to grow in the mid single digits with normalization of activity in The Middle East providing further upside. Against this backdrop, we expect our core divisions to visibly outperform the market. Reflecting our differentiated exposure to the strongest areas of activity including long cycle offshore developments, renewed exploration activity, production recovery investments, and the activation of Venezuela. Beyond the core, we expect digital to continue its established growth trajectory. While our data center solutions business will continue to accelerate as a meaningful growth engine for the company. I will now turn the call over to Stephane to discuss our financial results in more detail.

Stephane Biguet: Thank you, Olivier, and good morning, ladies and gentlemen. Third quarter earnings per share excluding charges and credits, was $0.64. This represents an increase of $0.09 sequentially and a decrease of $0.05 when compared to the third quarter of last year. During the quarter, we recorded $0.03 of merger and integration charges related to the ChampionX transaction, as well as a $0.12 or $187 million noncash pension settlement charge. This was the result of offering a lump sum payment to certain former employees in 1 of our pension plans. This transaction which was funded directly by assets of the plan, allowed us to derisk our largest pension plan by reducing both our pension obligations and plan assets by almost $900 million. This will help us lower potential volatility as well as manage future pension costs. Importantly, the plan remains very well funded. Overall, our third quarter revenue of $9.45 billion increased 5% sequentially. This performance was driven by the Middle East, growth in North America, and strong international deepwater activity including upside in OneSubsea. In The Middle East, we experienced a gradual recovery as third quarter revenue of $1.9 billion increased 13% from the previous quarter. Sequentially, our pre tax segment operating margin increased 104 basis points with margin expansion across all 4 divisions. Companywide adjusted EBITDA margin for the third quarter was 21.9%. Representing a sequential increase of 71 basis points. Let me now go through the third quarter results for each division. Third quarter digital revenue of $693 million was essentially flat sequentially, as strong platforms and application sales. And higher revenue from digital operations and professional services were offset by lower digital exploration revenue following a very strong second quarter. Digital pretax operating margin of 28% increased 27 basis points as improved profitability in digital operations and platforms and applications, more than offset the effects of lower sales of exploration data licenses and transfer fees. We expect digital exploration revenue to increase significantly in the fourth quarter. Which will result in strong year on year growth for the Digital division, and adjusted EBITDA margin >35% for the full year. Reservoir performance revenue of $1.6 billion increased 5% sequentially. While pre tax operating margin of 16.3% increased 140 basis points. These increases were primarily driven by the gradual recovery in The Middle East. Well construction revenue of $2.9 billion increased 5% sequentially primarily driven by higher drilling activity in The Middle East. Pre tax operating margin of 16.4% improved 122 basis points mostly due to The Middle East activity rebound. Production systems revenue of $4 billion increased 6% sequentially. Driven by the recovery of Middle East activity, increased sales in North America, and strong OneSubsea activity. OneSubsea also recorded a steady flow of new contract awards, increasing backlog and further enhancing Subsea revenue visibility into 2027. Production Systems pretax operating margin of 16.1% increased 60 basis points. With broad based growth in OneSubsea artificial lift, completions, and production chemicals. Notably, the acquired ChampionX businesses delivered their highest quarterly revenue and margin, since joining SLB. Finally, in the all other category, revenue increased 8% sequentially. Driven by strong growth in data center solutions, while pretax operating income decreased slightly as a result of ramp-up costs associated with new data center projects. With regard to our previously announced agreement to acquire Kelvion, things are progressing quite well. A dedicated integration team has been put in place that has kicked off its various work streams, and we are in the process of making all necessary filings in the relevant jurisdictions. We are very excited about the opportunities that this transaction will bring, and we remain on track for closing in the first half of 2027. Now turning to our liquidity. We ended the quarter with net debt of $9.2 billion, the same level as the first quarter of last year. We generated $1.5 billion of cash flow from operations, and $828 million of free cash flow. Looking ahead, consistent with our historical pattern, we expect a meaningful step up in free cash flow in the fourth quarter. Supported by lower inventory following year end product sales, and higher customer collections. The magnitude of the sequential increase in free cash flow will largely depend on the timing of collections in certain countries. Capital investments, inclusive of CapEx and investments in APS projects and exploration data, were $682 million in the third quarter. For the full year, we still expect capital investments to be approximately $2.5 billion During the quarter, we repurchased $656 million of our stock, and are on track to repurchase approximately $2.4 billion for the full year, in line with 2025 levels. This will bring our total returns to shareholders for 2026 slightly above $4 billion in line with the commitment we made earlier this year. I will now turn the call back to Olivier.

Olivier Le Peuch: Thank you, Stephane. I believe, Sarah, that we are ready for taking questions.

Operator: Thank you. We will now begin the q and a session. Your first question comes from the line of James West with Melius Research. Your line is open.

James West: Hey. Good morning, Olivier. Stephane.

Olivier Le Peuch: Morning.

Stephane Biguet: Morning.

James West: So, Olivier, I think in your prepared remarks, I mean, it seems like almost every part of your business, whether product line or region, ex-The Middle East, of course, which is. Still has uncertainty. Is inflecting higher. And I am curious if you could parse that out a little bit further and let us know kind of which areas or maybe which products product lines or service lines, you think will grow faster than others?

Olivier Le Peuch: No. Thank you, James. We believe indeed that the cycle has started. And I think, it has the characteristics that are favorable Probable to our footprint and to the composition of our business line. Indeed, I think we are seeing that combination of deepwater exploration rebounds a long cycle, We see the investment flowing to production recovery. To improve the production on our existing assets. And we see the development of new areas geographical areas that are attracting investments such as Venezuela. Argentina, and all this without the catalyst of resolution in the Middle East that will add growth. So I believe that, indeed, we are set for all division and all basin. To benefit from growth in 2027 and beyond. And we believe that, again, it goes from digital to your production recovery from deepwater to unconventional. And with exploration being certainly an uptick that will match very well our footprint and match very well our portfolio of technology. So, yes, it is, I would say, broadly, an inflection that is characteristic of an up cycle with long duration. Great. that is very helpful. And then on the expiration side, I happen to speak to a group of explorationists recently and spent some time with the heads at many of the major oil companies, and then, of course, with 1 of your senior people as well. Capital's definitely flowing there. For the first time in maybe a decade, they were happy. About capital. Where are you seeing the most, exciting in exploration at this point? I think we see several, what is very good in this exploration cycle, I think it is a mix of infrastructure led exploration in very well known natural basins that see pockets of oil our gas to be unlocked and to be connected to and with opportunity for sizable development in those. And I think that relates to the West Africa, mature basins as well as North Sea on both side of the sector, and then obviously the Gulf of Mexico. Now there is a lot of frontier basins and all of that are expanding, and I think this is partly between Americas and Brazil. I think the Polotas Basin is attracting lot of attention as well as the Atlantic margin on the Equatorial Margin, I think, which is along with continued investment into Suriname and Guyana. I think are clearly a spotlight for this. The same as in Namibia and further in the Namib Basin in Angola. as another part of Africa and the East Med. And then I could keep going east to the. to East India and Indonesia that has attracted a lot of investment due to gas reserves and potential there and to large discoveries have been made and are now entering subsea development going forward. So it all combined is an exciting cycle for exploration. I think the combination of energy security heightened priority as well as depleting reserves and the pressure of declining production, adding and fueling this investment in exploration. Great. Thanks, Olivier.

Stephane Biguet: Thank you, James.

Operator: Your next question comes from Scott Gruber with Citigroup. Your line is open.

Scott Gruber: Thanks, and good morning, Olivier and Stephane.

Olivier Le Peuch: Morning, Scott.

Stephane Biguet: Morning.

Scott Gruber: So a number of growth drivers, you know, into 2027 as you outlined and but I am curious because this is a question we often get from investors. Is should we see resolution in The Middle East in the not too distant future and crude moderates back to $65 or $70 you know, similar to what we saw back in June. how resilient do you think the growth drivers would prove to be? Obviously, The Middle East you know, would improve. But do you see much risk to the mid single digit growth outlook, you know, excluding The Middle East at more mid cycle crude prices? Or would the secular elements at play here sustain a healthy growth rate?

Olivier Le Peuch: No, Scott. I believe that we should keep in mind that a lot of barrels have been lost. To this crisis. A lot of pull on the subject reserves and commercial inventories and strategic inventories. The point that I think it is clear that seeing additional barrels need to be brought through activity into supply in the future. Additionally, I think the realization that energy security is vital to the future of economic growth. it is also adding diversity of supply. So, this reinforces the conditions that I commented on I made earlier on exploration. To create the condition that are not here for 1 year or for 6 months. But the up cycle is having strong legs both on long cycle, including exploration deepwater, on short cycle, including a production recovery activity, that is materializing across the board and that is very well illustrated into the growth. That we are enjoying. And that will be the base for the 2027 outlook. So we believe that we will. We are set. The market is set for mid single digits global activity growth, assuming Middle East being flat on the 2026. But this means that we will visibly outperform this and the Middle East catalyst, will become a catalyst upon a peace deal going forward. No. I appreciate that. And I wanted to turn to Venezuela The opportunity here certainly appears to be materializing more quickly than any anticipated initially. Can you provide some more color on what you are seeing in the market? And you mentioned that Venezuela, you know, could double this year with multi-fold growth in 2027. How large could Venezuela become for SLB in 2 to 3 years' time? I know you guys said, you know, a billion dollars back at peak. I am curious kind of, you know, ballpark where you think the market could grow to here in the next 2 to 3 years? No. We remain very excited about Venezuela. Every time we look into it, I think we are realizing that the activity is set to increase further. And I think, we are getting several catalysts for this. We are getting a first and foremost, in lockstep with our customer that we have been working with for the last 2 years. We are seeing activity increase currently. In the near future, and they have made announcement for further increment of CapEx into the region. So we will be fully part of bringing this upside. But additionally, several of our international operators have committed have come to agreements in country. And we have benefited from this and by signing contracts. And we have already started with another large contractor execution. This quarter. So we expect this to only continue going forward. So how big can it become? I think we have we have mentioned that the potential is for a multi-fold next year, and I think we see this trajectory to certainly continue going forward. And, I think we have mentioned before the historical level of $1 billion of goal in the long term. So we do not see why not this as a ceiling-- or there is no ceiling-- why not as a target, as an ambition going forward? So we are well prepared. We are adding resources, adding equipment, and getting the trust because we have a unique capacity on the ground and ability to deliver. Well, great. I appreciate the color. Thank you. Thank you.

Operator: Your next question comes from Saurabh Pant with Bank of America. Your line is open.

Saurabh Pant: Hi. Good morning, Olivier and Stephane.

Olivier Le Peuch: Morning, Saurabh. Olivier, maybe I want to dig in on the Middle East topic a little bit. More because we saw you delivered strong 13% increase in the Middle East revenue, and that was despite some late quarter disruption. Right? So that kind of implies where you were running ahead of expectations perhaps before the disruption hit. Can you maybe share some more color on the disruption? And if these disruptions are continuing right now? And then what was driving this, I guess, stronger than maybe anticipated recovery before these disruptions hit. I know you talked about already some contracts and leading those integrated drilling contracts. Maybe some color on all of that. Yes. But first, I think, indeed, several countries did participate to the pickup of activity in the third quarter as the security situation started to ease off in several countries, and I think this included The UAE Kuwait, to a lesser extent, Qatar, and to a lesser extent, Saudi, that the beginning of the quarter clearly had a. Had an increase of activity, and this was consolidated on the on some of the intervention activity stimulation and drilling activity across the region, Iraq, by contrast, was not necessarily getting the same the same uplift of activity and. But Oman was steady. And that is the situation that turned out to be slightly ahead of expectation indeed at the run rate as of mid-quarter. Now at the end of the quarter, some adjustment of activity were done, and I think this has been fairly precise. I do not want to come back on this. We see things stabilizing, though. Hence, our expectation is that the fourth quarter will be at current at current level of disruption, I would say, and without further escalation of conflict going into worst case scenario, we are seeing that the fourth quarter will be in line with the third quarter, and that is our assumption. And this is the hypothesis we have made on our guidance for 2027 market outlook as well. So that is that is in essence where we stand. Now we have all 18 to in relation with the integrated contracts, very pleased with these awards that touch both gas and oil assets. And this is an activity that is definitively going forward. And for which we are mobilizing in the fourth quarter, and will come to full capacity in 2027 going forward. And I think that is not. that is untouched and certainly committed contract for which we are indeed getting resource. And getting increased activity going forward. Got it. No. Thank you. that is very useful color, Olivier.

Saurabh Pant: And then for my follow-up, maybe I will stick to the Middle East. And focus on the margin side of things a little bit. I know there are lots of crosscurrents a lot of uncertainty, but just given everything that we have heard about, disruptions and cost inflation and then some pricing pressure on larger tenders. how should we think about where margins can go in maybe 2027? But I am just thinking more broadly, If revenue is normalized in The Middle East to, let's say, the pre conflict level, can margins normalize to that level immediately, or would it take more time because everything that is going on the pricing and cost side?

Stephane Biguet: So, Saurabh, Stephane here. Yes, I mean, you are using the Middle East as a swing to margins, and it is clearly it is clearly a significant dilutive effect this year. You look at the year on year performance, as we have indicated earlier, we have actually decided intentionally to address only partially the resources in The Middle East not to hamper our capacity to address the activity rebound. So we are keeping some resources in place. When the conflict is resolved, and activity rebounds. As a result, we will have very strong operating leverage, very few additional cost to bring in. So that will increase margin. Now the overall level of margins of the company it is not just The Middle East that will be a booster. We will have likely less inflation effects going into 2027 because this is already kind of baked in, if you want. We also hope that pricing pressure we have experienced in some of our core divisions will also abate and are also baked into the current margins. But then you have all the mix of the divisions. Digital is a booster. Obviously, on margins. Data center on its own as it grows very fast, is, as you know, not accretive to the overall SLB margin. So it is a big equation, which we are not going to give you the answer today. We will we will provide more color on our 2027 margins in January. But overall, yes, The Middle East will be a catalyst for margin expansion for SLB. Right. No. Thanks, Stephane. And that equation is on us to solve in the interim. But thank you.

Olivier Le Peuch: Thanks for all the moving pieces, Olivier. Thank you. I will turn it back. Thank you.

Operator: Your next question comes from Arun Jayaram with JPMorgan. Your line is open.

Arun Jayaram: Olivier, was wondering if you could comment on some of the trends you are seeing at ChampionX On a year over year basis, you know, obviously, the quarter data from last year, but looks like revenues were up in the mid teens, and margins are now pushing in the mid-20s. Just wanted to talk a little bit about some of the trends here. And how is the ability of SLB to scale that business, internationally? Versus when you bought it?

Olivier Le Peuch: No. As you have seen, we are very, very pleased with the performance of ChampionX. I think the result of the success of the integration team having landed this business to be a very resilient and as well as very successful in innovation and customer centricity which are attributes of ChampionX in North America. You have seen that the quarter was remarkable in terms of top-line growth and further margin expansion for the fourth consecutive quarter based on the. Both on production chemical success and growth And also and artificial lift both in North America and with more potential internationally. I think internationally, we mentioned into prepared remark, I think it would have been even better without the Middle East as we have a optionality for expanding the ChampionX portfolio internationally, particularly in The Middle East and across several offshore basins. So this is progressing I think this will be certainly an upside into the ChampionX group trajectory in 2027. Both internationally offshore And as the conflict is getting to an end, have a further catalyst for the ChampionX success. But, yes, we are very pleased. I think it reflects again the ability we have to integrate and to leverage their technology and to leverage our global footprint and our customer engagements to make it a success. We are, I think, very pleased with the performance. Congratulations to all the ChampionX employees and to the integration team into the production system portfolio. I think the combination is attracting attractive for our customers and all the feedback we are receiving from customers both in North America and abroad is that they like the combination. They like the power of production recovery. They like the potential of unlocking significant further recovery and production performance for both production chemicals and lift technology, including digital. So very, very, very pleased with the performance so far.

Stephane Biguet: And as to the margins level, Arun, yes, you are right. We are ChampionX touched now the mid-20s on EBITDA, which is clearly accretive to the overall company. And this is despite inflation pressures, particularly on chemicals. So the synergies, including in G&A, have been higher than we expected. And have mostly offset with inflationary pressure to the point margin continues to expand quarter after quarter. So clearly, we are going to achieve our initial synergy target of about $200 million after 18 months post acquisition, which is basically the end of this year, and we are not going to stop there and we are quite happy with the margins these businesses are generating.

Arun Jayaram: Okay. And then my follow-up, I was wondering if you could just elaborate on OneSubsea visibility as we think about 2027 Obviously, you announced the Exxon Rovuma LNG award in Mozambique. But are you seeing 2027 as a year where there is going to be a lot of greenfield activity in terms of larger awards and maybe just speak to the visibility you are seeing as we extend into this deepwater cycle.

Olivier Le Peuch: No. Thank you, Arun. I think I will not restrict this to 2027. OneSubsea awards typically are multiple. Multi year revenue generation. So I mean, whatever is earned in bookings in 2025 and 2026 reaches out to 20. 2027 to 2029 typically. So I think directionally, I think, the success we have had in the in the recent months and the booking that we are anticipating, I think we believe that we will surpass the $9 billion target booking that we have set across the 2 years. I believe this should translate into visible growth on revenue in 2027 and 2028 and beyond. And as we believe that the technology portfolio we have, the deliverability of our capacity to the to the market. The multiple allowance we have created with joint feed study with customers to secure FID and to participate to the best economics and best recovery solution for the customer, all combining to make it very attractive. Including the processing subsea processing technology where we are uniquely positioned to unlock recovery solutions for mature basins. So all in, we are quite confident into the outlook for subsea that is aligned with the deepwater cycle that has started. And we believe that we will benefit from it and OneSubsea will be a growth driver for the company going forward. Great. Thank you.

Stephane Biguet: Thank you, Arun.

Operator: Your next question comes from Sebastian Erskine with Rothschild and Co. Redburn. Your line is open.

Sebastian Erskine: Good morning, Olivier and Stephane.

Olivier Le Peuch: Good morning. Congratulations on a strong North America quarter, obviously 7% sequential growth. I mean, maybe you can talk about some of the building blocks of that performance. Much of it came from that production linked revenues, obviously, the ChampionX side and artificial lift? rather than sort of activity-linked work? What are your expectations for North America next year outside of Data Center Solutions in the core business? No. We are indeed very pleased with the North America sequential growth. I think beat sequentially and year-on-year. I think, we believe we have been ahead of the market. And we believe that the factor that support this is a combination of market position in North American lands not only ChampionX and a production recovery portfolio we have there, a combination of production chemicals and artificial lift solutions, but also our drilling technology and our digital portfolio that includes now the S&P energy. I think all factor that will continue to support our performance in North America. Including Canada and US. And conversely, North America offshore and some of the activity we have in Alaska or in North America offshore in the Gulf of Mexico. We will continue to also support North American growth and performance, with digital exploration, and contracts across drilling and reservoir that will continue to give us give us growth. And finally, as you know, data center solution will serve as a new leg of growth in North America going at the rate you have seen. Very impressive. And we are well on track for surpassing $1 billion by the end of this year as a run rate. And we are still on track and very well on track to surpass $2 billion in its run-rate for 2027. So you combine all of this, differentiated portfolio and technology in North America land, continued differentiation in North America offshore, including Alaska. And digital. And then an uptick and the new growth vector of growth in with data center solution, and you get the North America market that is poised to grow for despite the market condition that would qualify as a low growth environment going forward.

Sebastian Erskine: Appreciate the color, Olivier. And just turning to data center solutions. I noticed in the release you have expanded into Asia this quarter. I am curious how large could the opportunity outside The U. S. Become for your business? And also, how is customer base kind of broadening beyond your sort of initial hyperscaler contacts?

Olivier Le Peuch: I think we have potential to grow and replicate the setup we have put in Americas internationally. Now it is early days. I think we are leveraging the hyperscale contract we have and delivering for end use, I would say, for data center construction or data center development into Asia at this point, and then replicating some extent of the capability we have developed with our manufacturing hub in Louisiana. And expanding it with some satellite capability of manufacturing integration that we have deported into Asia. And then delivering to our end customer into Asia market. So this we believe, will continue to happen. But I think the potential we see as we. You have heard from the Meta contract in Canada And as we develop further hyperscaler contracting in North America, will still be centered in the in the short term with North America growth. And we continue to diversify our customer base, and I think we will be in a position next year to develop and deploy and inform you about this, but this is certainly a multiple customer contract that are being deployed and being logged in our backlog. And that will give us the support to go And, additionally, obviously, the acquisition announcement we made on Kelvion will only add to this and the feedback we are getting from existing and prospective customer in this domain, is that they love the combination of manufacturing engineering technology capability and the Kelvion technology portfolio. That supports thermal management and heat management in the in the data center space. That is an equation that is difficult to resolve. Where a lot of efficiency, a lot of upside exists, hence, a pool of technology, the pool of integration in which we will play as a as a partner for this infrastructure build out. Thank you very much, Olivier. I will turn the call back over now. Thank you.

Stephane Biguet: Thank you.

Operator: Your next question comes from Neil Mehta with Goldman Sachs. Your line is open.

Analyst: Good morning, team, and thanks for taking our question. I would love to dig into the 2027 commentary a little more. Can you provide some color on the outlook there from a regional perspective? And then as you look across your global footprint, where are you seeing meaningful trends in customer spending?

Olivier Le Peuch: I think I would not go into detail on the guidance for 2027. We provided color on the directional trends. And. But yet, I will reaffirm that we see the market giving us opportunity to grow in every basin. Across every division in 2027. Based on, I think, the combination of the portfolio we have the contracts we have put in our backlog, and the differentiated technology portfolio give us an upside in each of the basins. And each of the basins has a combination of deepwater for Latin America, for North America, for Europe and Africa, and for Asia. it is a combination of conventional and unconventional for the Middle East and Latin America. And all of these basins also have a need and an increased investment in production recovery across all basins. So now directionally, I believe that, as we commented earlier, exploration will be very visible in Africa and Americas. Deepwater will be very visible in Americas, including North And Latin America, Africa, and Asia. And unconventional will happen internationally in Argentina and the Middle East and the Middle East region. And the conventional part cost. They have controlled development or production recovery will occur in every basin. So, again, we believe that this provides a tailwind across the entire portfolio. And across all division as we expect every basin to benefit. Thank you. I really appreciate that color. And then maybe just a follow-up. Can you talk a little about the digital offering and some of the opportunity set there from a customer perspective? Yes. I think we are very pleased with progress we are making in digital. I think as we commented earlier, I think digital operation, particularly, and data and AI are the 2 vectors of growth that I think we are the most excited about. Additionally, I think digital exploration is, is about to benefit from a secular trend coming into exploration market. So I think these are the 3 vectors of growth that we see that will certainly support our growth ambition for the next few years. Digital operations, as we commented before, relates to both drilling and production operation. it is combination of platform applications and edge application that allow us to provide automated solutions for our customers. We have been commenting on the success we are getting into drilling automation and drilling optimization. The same, I think, applies to production optimization. So digital operation clearly will continue to be a factor of growth going forward. Now adding to it, digital exploration, as we have seen, it is benefiting from a secular trend or new up cycle in exploration. And every new frontier basin is getting the benefit of digital exploration to derisk the development, to derisk the exploration campaign, and I think we are seeing increased interest from our customers to invest into data, to invest into reprocessing. And to invest into digital AI capability to improve the imaging and improve the capability that we can provide to derisk this exploration and accelerate the success. And finally, data and AI as a as a new vector of growth, as a new disruptor for the industry, We believe with offering, with our Lumi offering, with our AI teller offering, we are seeing early adoption that I think indicates that this has a potential to disrupt. And become a new vector of growth for digital in our company. Thank you very much for the color. We will turn it back. Thank you very much, Arun.

Operator: Your next question comes from Marc Bianchi with TD Cowen. Your line is open.

Marc Bianchi: Hey. Thank you very much. I guess following up on the digital, I know you did not want to get into too many specifics on the drivers for 2027. But just given the strong year that seems to be unfolding for that business, Do you anticipate that it can continue at double digit growth in 2027 just given all exploration visibility that seems to be coming in?

Olivier Le Peuch: Are you talking about digital exploration or digital at large? Digital at large. Yes. I think digital at large, the ambition we have is to continue to operate at the level of double-digit or about or higher. And I think we have the attributes. As I said, the combination of digital exploration cycle that is favorable in. As we turn into 2027. Digital operation that has started as you have seen last year or this year, continue to be on a high growth trajectory, and we believe that we continue to make progress as you have seen the number of automated feet drilled this year to date and the production. I think production digital in the production domain is where there is the most upside in our opinion. As the most the most attractive opportunity that we have going forward. So we believe this will play out in 2027 and beyond. And, and finally, as I said, AI as a disruptor, and I think will play and support as a leg of growth going forward. So I believe these 3 in addition to our resilient platform portfolio, I think should combine to the exploration data, the digital operation, and data and AI, should combine to provide us with the legs of growth that we look for, double-digit, again in 2027 and beyond. Yeah. Very, very good. Thank you, Olivier.

Marc Bianchi: The other question was on data center, the data center business. And, you know, with Kelvion, you increase your content opportunity I am curious what your appetite is for further M&A to continue to increase the content opportunity, or is it more likely what we will see here is you increase that on an organic basis?

Olivier Le Peuch: We are very pleased what we have managed to get as an acquisition. And I think we will concentrate on closing this. We will concentrate on fulfilling I think, the ambition and the strategic the strategic opportunity that we have unlocked with this I think this indeed will give us an opportunity to increase our share of the wallet per gigawatt. And I think we have a significant backlog with a large number of an increasing number of customers, including hyperscalers. That will give us an opportunity to put it to work. And to participate into optimizing the thermal efficiency and hence to increase the share of the wallet, increase our participation to this market, and to provide not only fit-for-purpose modular manufactured solutions but also integrate more and more into the engineered thermal and manufacturing solutions for the for the market. So I think this is where we would focus in the foreseeable future. And then depending as the market develops, we will see what could come next. But this is where we are putting our focus going forward. Yep. Very good. Thank you. I will turn it back. Thank you.

Operator: Your last question will come from Derek Podhaizer with Piper Sandler. Your line is open.

Derek Podhaizer: Hey. Good morning. I just wanted to ask about production systems. Morning. You guided production systems up, I think it was high single digits for the fourth quarter. Mentioned throughout the call, production chemicals, artificial lift, the geography ties into the ChampionX acquisition completions. We have talked to Venezuela, OneSubsea, a lot of the visibility there. Maybe if you could just talk through the different levers for just fourth quarter specifically seeing that high single digit outperformance and how we should maybe be thinking about this directionally as we work into 2027? I know we will hear more in January, but just kind of early thoughts on these different lines within your production systems, is obviously gaining some momentum here.

Olivier Le Peuch: Yes. I think we have a pretty good performance in Production Systems. We are very pleased at large of our strategy on production recovery Taking shape, and I think that reflects into Production Systems' backlog and into the Production Systems potential going forward. Now the fourth quarter has an effect of end of year product sales. And includes OneSubsea out of it. I think as we come out every year, the product. The year end product sales is a is a factor that shapes the sequential performance of production system no different than any of our I think in a year that is indicative or characteristic of that cycle, this is magnified. But now going forward in 2027, we will not comment at this point directionally. But as I commented earlier, we anticipate every division to be experiencing growth in 2027. And this 1 will be led by the combination of the portfolio that you mentioned: ChampionX, subsea, completions, OneSubsea, I think, clearly, a portfolio that will benefit going forward from the deepwater. From the short and long cycle. Activity outlook that we believe we will participate fully and outperform going forward. So I think production system is resilient short cycle and long cycle. And has a durable backlog characterized particularly well with subsea, that will give us legs of growth going forward. In 2027 and beyond.

Derek Podhaizer: Great. that is helpful. Maybe just to wrap up again, addressing the 2027 I know it assumes the Middle East stays flat from the second half of 2026. You are calling for market growth in the mid-single digit range. Can you guys help us walk through or frame the magnitude of the upside in this market here? If we do see a Middle East recovery, I do not know if you want to talk through a country by country level, but just help us understand where that mid single digit can really ultimately go to if we do see some form of resolution and recovery.

Olivier Le Peuch: I think first, I think to clarify, I think we have been commenting on the market outlook that we see at this point. And based on our early engagement of customers, also based on them reflecting on some third party analysis on the 2027 outlook. That the combination of North America international including and assuming a flat Middle East activity is set to be in the mid-single-digit growth year on year. We believe that we are set to visibly outperform this, And, obviously, the Middle East resolution would only be a catalyst for additional growth into this. Now I will come short of giving you exact guidance on this, Okay? I think it will be an international-led up-cycle going forward. But you have seen the commentary that I have provided earlier that we are very pleased with our market position and performance in North America. So, again, we have multiple legs of growth ahead of us in this cycle. You should only consider The Middle East depending on the resolution of the conflict. Has a potential to come back, if not to exceed, previous activity pre-conflict. As some of the some of the country in the region will not only have to mobilize activity to restore the production capacity, but we will also continue to accelerate on their capacity commitments, be it on unconventional gas, gas, or oil in the region. So going forward, I think this is only serving as a catalyst going forward. But again, 2027 at this point, will witness international growth despite Middle East, and Middle East being only a catalyst going forward on top of it. Right. Very encouraging. Thank you, Olivier. I will turn it back. Thank you.

Operator: I will now turn the call over to SLP for closing comments.

Olivier Le Peuch: Thank you, ladies and gentlemen, as we conclude today's call, would like to leave you with the following reflections. First, our third quarter performance demonstrates that momentum is broadening across SLB. Each geography and core division goes sequentially. With a gradual recovery in The Middle East complemented by solid growth in North America and continued strength across the international offshore markets. Second, our core portfolio is benefiting from increasing activity across development and production. The strength and resilience of our expanded production portfolio together with growth in well construction and Reservoir Performance position us to participate as customers optimize existing assets and develop future activity. And third, the international outlook continues to strengthen. Long cycle offshore projects are progressing, the foundation for renewed exploration is taking shape. And new opportunities are emerging across several markets. Combined with the continued progress in digital, accelerating momentum in data center solutions, which will be further expanded through the acquisition of Kelvion, we are well positioned to capture a broader growth opportunity across both energy and industrial markets. These dynamics reinforce the confidence in delivering differentiated growth and outperformance as we move into 2027. With this, will conclude today's call. Thank you all for joining.

Operator: This concludes today's conference call. Thank you for joining. You may now disconnect.