SLB (SLB) — Q4 2024 Earnings Call Transcript

Thank you, Kate. Good morning, and welcome to the SLB fourth quarter and full year 2024 earnings conference call. Today's call is being hosted from Houston, 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 fourth quarter and full year earnings press release, which is on our website. Finally, in conjunction with our proposed acquisition, SLB and ChampionX have filed materials with the SEC, including a registration statement with a proxy statement and prospectuses. These materials can be found on the SEC's website or from the parties' websites. With that, I will turn the call over to Olivier.

Thank you, James. Ladies and gentlemen, thank you for joining us on the call. This morning, I will begin by discussing our fourth quarter and full year results. Then, I will provide an update on the evolving macro environment and our early activity outlook for the first quarter and the full year. Finally, I will describe how SLB's diverse portfolio is uniquely positioned to continue delivering strong financial results in 2025 and beyond. Stephane will then provide more details on our financial performance, and we will open the line for questions. Let's begin. We concluded the year with solid earnings and free cash flow, growing revenue both sequentially and year-on-year, and maintaining our cycle-high margins. Although the rate of upstream investment growth continued to moderate during the quarter, SLB benefited from a broad exposure to global markets, the diversity of our portfolio across the upstream oil and gas lifecycle, and from our differentiated digital offerings. Notably, we saw strong growth in the Middle East, where once again, we achieved a new quarterly revenue high, with contributions from the UAE, Iraq, Kuwait, and Qatar. We also performed very well in North America, benefiting from higher activity in U.S. land, along with increased digital sales in the U.S. Gulf of Mexico. Despite the well-known declines in Saudi Arabia and in Mexico, our fourth quarter financial performance remained consistent and resilient. This demonstrates the strength of SLB’s diversified portfolio. Overall, we closed the year with fourth quarter international revenue reaching a new cycle high, generating strong free cash flow of $1.63 billion for the quarter. Turning now to the full year. We achieved our full year adjusted EBITDA margin target of 25%, generated robust free cash flow of $4 billion, and returned $3.3 billion to shareholders. Across the Core divisions, we grew by 9% compared to the previous year. Production Systems led the way, growing by 24% and expanding margin by almost 300 basis points for the full year. This performance was supported by double-digit revenue increases in surface systems, completions, and artificial lift, leading to 9% organic growth for the division that was complemented by the Aker subsea acquisition. Reservoir Performance also continued its momentum, growing by 9% year-on-year and expanding margin by approximately 100 basis points with strong stimulation and intervention activity. In Well Construction, while revenue was flat year-on-year, it continues to lead margins in the Core. Overall, across our Core divisions, our technology leadership, domain expertise, and scale are enabling us to continue innovating tailored solutions for our customers in every region. I'm proud to share that our fit-for-basin revenue crossed $1 billion for the first time in 2024. This was also a very exciting year for Digital, as demand for our products and services continued to accelerate and we formed strategic partnerships with industry leaders, including NVIDIA, Amazon Web Services, and Palo Alto Networks. Our customers continue to embrace the power of cloud computing, AI, and digital operations to shorten cycle times and improve operating efficiencies. This led to Digital revenue growing 20% for the full year, exceeding our targets of high-teens growth. Lastly, we continue to increase our exposure beyond oil and gas. There is significant growth momentum in the low-carbon markets where we have a strong position through our portfolio of technologies for carbon capture and sequestration, geothermal, and critical minerals. We are complementing this with a growing exposure to data center infrastructure solutions, responding to hyperscalers to deliver solutions meeting the demands of a rapidly evolving digital landscape. Combined, revenue from these activities exceeded $850 million in 2024, and we expect this to increase significantly in 2025. As you see, we are pursuing a wide range of opportunities within and beyond oil and gas, positioning us to benefit from a diverse mix of new and existing customer spend. I want to thank the SLB team for delivering this progress. We should all be proud. I'm impressed by our team's innovative spirit, customer centricity, and performance mindset, and I look forward to building on our successes in the year ahead. Let me now discuss the evolving macro environment. Over the back half of 2024, customers adopted a more cautious approach to near-term activity and discretionary spending, driven by concerns of an oversupplied oil market. Although these concerns persist, we anticipate the oil supply imbalance will gradually abate. Global economic growth and a heightened focus on energy security, coupled with rising energy demand from AI and data centers, will support the investment outlook for the oil and gas industry throughout the rest of the decade. Looking at the global oil supply, we expect that OPEC+ will maintain its focus on commodity price stability throughout 2025. In the U.S., ongoing capital discipline by operators will limit near-term supply growth in the region. In this environment, the current level of global upstream investment appears to be keeping the market balanced, barring any further geopolitical disruptions. Overall, we expect global upstream investment to be steady in 2025 compared to 2024, with the deceleration in some resource plays offset by resilient growth across select countries and customers. Let me provide you with more detail on our 2025 activity outlook. In international markets, certain countries will continue to experience strong growth, balanced by reduced spending in others. For instance, in the Middle East and Asia, increases in the United Arab Emirates, Kuwait, Iraq, China, and India will be offset by declines in Saudi Arabia, Egypt, and Australia. In Latin America, growth in Argentina and Brazil will be tempered by decreased spending in Mexico and Guyana. In Europe and Africa, growth in North Africa, Nigeria, Azerbaijan, and Kazakhstan will be more than offset by declines in Scandinavia and West Africa. Turning to North America, oil and gas activity is expected to decline due to lower publicly announced capital expenditures in U.S. lands, higher drilling efficiency, and a slow recovery in gas until LNG capacity expansions are resolved. However, our data center infrastructure solutions revenue is growing rapidly in this region, supporting growth outside our Core business. Specifically, in the offshore markets, we expect a muted environment in 2025 attributed to white space in deepwater activity, particularly in the North Sea, Australia, and Angola, Central and East Africa. Looking ahead, we anticipate this white space in deepwater will start improving as the year progresses, in preparation for the significant number of FIDs ramping up in 2026 across several deepwater basins. Turning to how these activity dynamics will unfold across our divisions. In Digital & Integration, we expect revenue to remain steady year-on-year, with growth in Digital offset by a decline in APS due to the Palliser divestiture. Digital will maintain strong growth momentum with full-year revenue growth in the high teens, supported by Digital operations and data and AI solutions. In the Core, we expect revenue to be flat year-over-year, with modest growth in Production Systems and Reservoir Performance offsetting a decline in Well Construction across regions. In Production Systems, growth will be driven by artificial lift, completions, valves, and midstream production systems, while Reservoir Performance will be supported by intervention and unconventional activity growth in international markets. Overall, excluding the impact of ChampionX, we expect the mix of geographies and divisions I just described to yield a steady revenue outlook for 2025, translating into adjusted EBITDA dollars and margins at or above 2024 levels. Now turning to the first quarter, we expect revenue and adjusted EBITDA to be at similar levels as last year, in line with our full-year guidance. This will be followed by an activity rebound in the second quarter, particularly in international markets. Finally, I would like to discuss why I believe SLB is the best-positioned company to navigate the evolving market dynamics that I just discussed. In looking at the market evolution in 2025 and beyond, SLB’s size, digital leadership, integration capabilities, and performance advantage are key differentiators. Our diversified portfolio across global operating areas and business lines, and our combined exposure to short- and long-cycle projects bring resilience, enabling us to navigate regional and market fluctuations. Our Digital business is growing with accretive margins at an elevated rate as customers embrace the power of data and AI to drive performance and efficiency across their workflows and producing assets. Our integration capabilities are reshaping our engagement with customers beyond NOCs, allowing us to add further resiliency and diversity against the industry's backdrop. Moreover, production and recovery are becoming a larger part of our business as customers work to maximize their producing assets, further enhanced by contributions from ChampionX. Additionally, as illustrated in our success in 2024 across low-carbon and digital infrastructure, we are developing new growth pathways beyond oil and gas in fast-growing markets decoupled from upstream. As you can see, we are operating from a very strong position. By remaining focused on cost optimization and process enhancements, leveraging digital transformation to become a more efficient organization, we will support our margin expansion journey. The combination of strengths I have described, along with our continued business performance, provide us with confidence in our ability to continue delivering strong cash flows and increasing returns to shareholders. As you've seen in our earnings release today, we increased our dividend and accelerated share repurchases to start the year. I will now turn the call over to Stephane to discuss these announcements and our financial results in more detail.

Thank you, Olivier, and good morning, ladies and gentlemen. I will start by providing an overview of our full year results before getting into the specifics of our fourth quarter performance. Full year 2024 revenue of $36.3 billion grew 10% year-on-year, with the acquired Aker Subsea business accounting for half of the growth. Organic revenue grew 5%, driven entirely by international markets. This was led by the Middle East, which grew 19% year-on-year to reach a record high, despite the well-publicized headwinds in the second half of the year. International pretax segment operating margins of 21.4% improved 44 basis points year-on-year, with more than two-thirds of our international GeoUnits experiencing both top-line growth and margin expansion year-on-year. In North America, full year 2024 revenue declined 1% compared to the previous year. However, pretax segment operating margins of 17% only dropped by 23 basis points, with pricing pressure mostly offset by a favorable technology mix, cost efficiencies, and higher digital revenues. From a division standpoint, organic growth was led by Digital & Integration, which grew 10% year-on-year, driven entirely by our Digital business. On a full year basis, Digital revenue of $2.44 billion grew 20% year-on-year, supported by close to 35% growth from Cloud, AI, and Edge technology. Our Digital business was accretive to both SLB's overall revenue growth and its global margins. Finally, our full year adjusted EBITDA margin of 25% increased by 52 basis points year-on-year, reaching the highest levels since 2015. Turning to the fourth quarter results, fourth quarter revenue of $9.3 billion increased 1% sequentially, driven by record-high Digital revenue. From a geographical perspective, the Middle East led the way, with 5% sequential revenue growth driven by the startup of unconventional gas activities in the United Arab Emirates, as well as strong performance in Egypt and Qatar. Adjusted EBITDA margin for the fourth quarter reached a cycle high of 25.7%, which is 33 basis points higher than the same period of last year. Fourth quarter earnings per share, excluding charges and credits, was $0.92. This represents an increase of $0.03 sequentially and $0.06 when compared to the same period of last year. We recorded $0.15 of net charges during the fourth quarter, which included $0.10 of impairment relating to certain equity investments and fixed assets, $0.04 in connection with our ongoing cost-out program, $0.03 of merger and integration charges relating to the Aker Subsea and ChampionX transactions, and a $0.02 gain on the sale of an equity investment. Let me go through the fourth quarter results for each division. Fourth quarter Digital & Integration revenue of $1.2 billion increased 6% sequentially, driven by 10% growth in Digital, while APS revenue was essentially flat. Pretax operating margin expanded 274 basis points to 38.3% due to higher digital sales and cost efficiencies. Reservoir Performance revenue of $1.8 billion declined 1% sequentially on reduced intervention and stimulation activity. Margins increased 35 basis points to 20.5% due to improved profitability in evaluation services. Well Construction revenue of $3.3 billion decreased 1% sequentially, and margins contracted 70 basis points, primarily due to lower drilling activity in Mexico and Saudi Arabia. Finally, Production Systems revenue of $3.2 billion increased 3% sequentially on higher international sales of artificial lift, midstream production systems, and completions. Pretax operating margins decreased 93 basis points to 15.8% due to lower profitability in subsea, partially offset by improved profitability in artificial lift and midstream production systems. Now turning to our liquidity, we generated $2.4 billion of cash flow from operations and $1.6 billion of free cash flow during the fourth quarter. This strong performance resulted in full-year free cash flow of $4 billion. As a result, we reduced our net debt by $1.1 billion during the quarter to $7.4 billion, representing our lowest net debt level since the first quarter of 2016. Capital investments, including CapEx and investments in APS projects and exploration data, were $759 million in the fourth quarter and $2.6 billion for the full year. Looking ahead, we will continue to be disciplined regarding our capital investments. In 2025, we expect to reduce capital investments, excluding the impact of ChampionX, to approximately $2.3 billion, with the CapEx portion at the low end of our previously shared guidance of 5% to 7% of revenue. During the fourth quarter, we repurchased 11.8 million shares of our common stock for a total purchase price of $501 million. For the full year, we returned a total of $3.3 billion to our shareholders in dividends and stock repurchases. With continued focus on capital discipline and clear visibility into strong cash flow generation in 2025, we are committed to increasing returns to shareholders once again this year. When combining the increased quarterly dividend that was announced today with increased share repurchases, we are targeting a minimum return of $4 billion to our shareholders in 2025. Notably, as you saw in our earnings announcement this morning, we entered into accelerated share repurchase transactions to repurchase $2.3 billion of our company's common stock. These transactions reflect our confidence in our continued financial performance and our belief that our stock is undervalued relative to our business strength. Furthermore, this will accelerate the repurchasing of shares that will be issued in connection with the pending ChampionX transaction. The ChampionX transaction received CFIUS clearance in December, and engagement with other regulatory authorities is progressing well. We continue to work towards closing the transaction before the end of the first quarter. With respect to our other pending transaction, we expect to close the divestiture of our interest in the Palliser APS project in Canada in the next few months. I will now turn the conference call back to Olivier.

Thank you, Stephane. Kate, I believe we are ready to open the floor to the questions.

Hi. Good morning, Olivier. In your outlook, talking about the outlook for international upstream spending, sort of a flat outlook overall, but a lot of puts and takes in there, as you were highlighting. I was wondering if you could simplify a little bit in terms of Schlumberger's exposure, where are the two or three regions or countries that have the most upside for you, and maybe where are the kind of two or three regions that could potentially get worse? Like, where is the sort of the upside and the downside scenarios in your international outlook?

Yes. I think I will start with the Middle East at large. The Middle East continues to be a very bright spot, with multiple countries and commitments from customers having ongoing commitments to either expand capacity in oil or capacity for the future, such as the UAE, Iraq, and Kuwait. Gas, both unconventional and conventional, across the region is becoming a theme that will lead to significant expansions from 2020 to 2040 of gas production. These resilient commitments and budgets are causing growth that offsets the decline we are seeing particularly in Saudi Arabia and to a lesser extent in Egypt. So globally, the Middle East remains a long-term resilient region for us. Also, despite the commentary I provided about deepwater still having quite a lot of white space, I believe that this is setting the stage for rigs to be picked up in anticipation of the FIDs that are ramping up in 2026 and 2027. You are fully aware of the exploration activities in Suriname, Namibia, Indonesia, Southeast China, and other regions that will transition into appraisal and FID in the coming months. Therefore, I remain optimistic long-term about deepwater despite this year's gaps in activity. Finally, the international gas market will support long-term investments and unconventional activity due to security demand in Asia and regional demand in the Middle East.

Thank you. And perhaps we can shift the focus a little bit on the production side of the business. This area is becoming a bigger part of your mix as you add Aker and ChampionX. You highlighted pro forma growth of about 9% year-on-year in overall Production Systems. Looking forward, how do you view the growth trajectory of the overall production-driven business? Should we consider starting from 9% as a base, or do you see it going higher or lower? Do you have enough visibility to help us understand that? Because this needs to be a part of your business that exhibits greater growth in the next few years.

Yes. As you have seen from our commentary, Production Systems will show positive growth driven by production recovery. We see that Reservoir Performance is driven by intervention and production recovery activity. Therefore, these trends will remain present. The investments we're making in technology and our portfolio are creating integration opportunities, resulting in visible growth pull in the Middle East across wider basins. So, we are very positive about the long-term earnings potential of Production and Recovery, and it will increasingly contribute to our backlog driven mix, either related to OpEx or long-cycle CapEx. Our strategic investments in technology and our focus on increasing recovery rates are fundamental to this ambition. Our Digital business, Reservoir Performance, and Production Systems will grow at a faster rate than exploration development in 2025, and we expect this to continue going forward.

Great. Thank you very much.

Thank you, Dave.

Yes. Good morning.

Good morning, Scott.

The outlook for international activities and revenues shows expectations for a typical sequential improvement in the second quarter. Is it anticipated that the second half of the year will be somewhat more weighted than the first half? How do you envision the progression of the year? Will it follow the usual pattern or will it lean more towards the second half?

I think it is fair to assume that we see the typical pattern of a low first quarter followed by a rebound in the second half of the year, with particularly strong activity in select resource plays, and there will be upside from deepwater later in the year. So, yes, a higher activity and demand is expected in the second half, following a low in the first quarter resulting from seasonal effects and some sequential decline from the highs observed in the fourth quarter.

Got it. Are you able, at this juncture, to comment on Russia and the continuity of your operations there? Have you had a chance to digest the latest sanctions’ language and can you provide an update on the overall contribution of that business?

Yes. Our revenue in Russia continues to decline and accounted for 4% of our global revenue in 2024, down from 5% in the previous year. Since the start of the conflict, we have voluntarily curtailed our Russian activities, including halting shipments of products and technology into Russia from all SLB facilities worldwide in 2023. We are currently reviewing the new U.S. sanctions and believe that our voluntary measures align with the new sanctions.

Great. I appreciate the color. I'll turn it back. Thank you.

Thank you.

Yeah. Good morning. Olivier, I wanted to see if you could provide clarity around the updated outlook for 2025. Is it fair to say you expect flat revenue on a standalone basis and adjusted EBITDA at or above 2024 levels? Is that correct?

Yes, you have correctly captured our prepared remarks. We foresee that the mixed activity, both in Russia and in the U.S., will keep our global revenue outlook flat and allow us to deliver EBITDA dollars at or above 2024 levels, excluding ChampionX.

Okay. Got it. Can you clarify and elaborate on your non-oil and gas segments, such as low carbon solutions and data center solutions? What kind of growth could we see off the $850 million level you cited for 2024?

I'll take this. Yes, the more than $850 million includes low carbon activities, for example, carbon sequestration, geothermal, and new data center infrastructure solutions we started in 2024. Importantly, some of these activities are recorded as part of our Core business, like carbon sequestration and geothermal, where we provide reservoir characterization, drilling services, and digital solutions. So some are under relevant Core divisions or in Digital. Going forward, this sector is growing much faster than our Core business, offsetting headwinds there. It's particularly advancing in CCS, geothermal, and data center infrastructure solutions.

Okay. Thanks a lot.

Thank you.

Thank you.

Hi, Olivier, Stephane. I just wanted to discuss the share repurchase program. You indicated you wanted to accelerate this authorization. How are you thinking about taking advantage of some of the volatility in the stock? You said at least $4 billion total returns. How do you view capturing upside, given the free cash flow materializes?

Sure, Neil. Our goal with the accelerated share transaction is to take advantage of what we believe is a low valuation for our stock, especially as we start the year. We paid $2.3 billion upfront to the banks assisting us with this program. We paid that $2.3 billion a week ago, and we received delivery on January 13 of approximately 48 million shares. This represents about 80% of the total shares to be bought under the program. Those shares were delivered to us and have been removed from our outstanding share count. A true-up will occur in the next few months before the end of May; the banks proceed at their own pace, but the deadline is end of May. We will receive the remaining shares. This $2.3 billion covers most of what we planned for the total of $4 billion returns to shareholders. We mentioned $4 billion is a minimum and we can increase the amount we return to shareholders as the year unfolds based on our cash flow performance and any potential M&A opportunities. So, there is clearly an option to increase total returns above $4 billion.

Okay. That's very helpful. Can you talk about where we stand in helping the market better isolate the value of the Digital business? I know Canada was an important piece, and post-ChampionX, there could be some re-segmenting. How do we think about that $3 billion number and when we can get more clarity about the multi-year outlook for it on a standalone basis?

We are confident that the dynamic we are witnessing in growing our Digital business will continue through the rest of the decade. We will continue to provide additional disclosures so that everyone can understand its performance, growth trajectory, and the factors driving its growth that are independent from the upstream market spend. We believe the market leadership we have taken, our platform approach, and our first-mover advantage in Cloud and AI will enable robust growth in the years to come, outpacing overall industry growth.

Thanks, Olivier.

Thank you, Neil.

Thank you. Good morning, Olivier and Stephane. To start with a clarification, the 2025 guide includes the Palliser asset in Canada, correct, since that sale has not closed yet?

Yes, the transaction hasn't closed, so our guide includes the divestiture of Canada after the few months we still need to close the deal.

Right. I got that. Okay. Perfect. Now, Olivier, I want to touch a little bit on pricing. You mentioned across your portfolio that some markets are going up, some are going down. In light of the flat outlook for '25, what does that mean for pricing? The industry has been capital disciplined, but are there any areas where pricing is likely to soften as we move through '25? Should investors be worried?

The market remains capital disciplined, and internationally, we are at a cycle high in terms of activity despite a competitive landscape. Pricing remains resilient. While we will continue to monitor conditions, I trust the pricing trend will not inflect negatively given that the market maintains high activity levels. We have the advantage of performance technology and integration capabilities that allow us to defend our pricing going forward.

Okay. Fantastic. If I can sneak one more in—since the cycle is maturing, this presents a good opportunity for the industry to reassess its cost structure. Olivier, do you see an opportunity to adjust your cost structure over the next year that could help margins?

We have made significant progress in executing our cost reduction program initiated mid-last year, which included adjusting operational resources and optimizing our support structure. This program has contributed to our margin expansion in recent quarters, particularly in Digital, where margins reached 38% in Q4. We will continue to monitor the operational and support resources against our required activity levels, and this may lead to further adjustments to enhance margins. We have additional efficiencies to extract from digital tools in our support structure.

Okay. Fantastic. Thanks, Olivier and Stephane.

Thank you.

Thank you.

Yeah. Thank you, and good morning. Congrats on the quarter and glad to see the accelerated share repurchase. I would like to dig deeper into the digital side, as you've answered a few questions on it. As you look at this business, what growth opportunities should we focus on? You highlighted several contracts or collaborations in Q4, but is growth limited by internal resources or capital, or is it customer hesitancy affecting their spending on digital?

Let me clarify the vectors of growth in our Digital offerings in three buckets. First, digital operations provide products and services that help our customers gain efficiency in drilling, production, and workflow. This can be in the form of products that automate operations or services such as our Neuro™ autonomous geosteering. Our success will drive adoption from our customers, contingent on the value we demonstrate. Second is the cloud transition, where we are offering our Delfi™ platform that allows customers to leverage cloud computing and create new workflows. Adoption is currently ongoing. Finally, we are unlocking a new market with our Lumi™ platform connecting unstructured data and datasets from exploration and production workflows, which supports customer access to AI capabilities. Each of these growth areas is independent and runs alongside the customers' CapEx and OpEx spending. We continue to see strong prospects for growth across these areas, separate from traditional expense concerns.

I appreciate that. Great description. I'll turn it back.

Hey. Good morning, everybody.

Hey, Kurt.

Good morning.

Hey, Olivier. I would like to follow up on Roger's question about Digital and provide an update on Lumi's adoption rate. If you have any early success stories, that would be great. When discussed last September, it was indicated that growth opportunities in your customer base would go from approximately 300 to 1,500 customers. Can you provide an update?

We are very excited about Lumi. We launched it less than four months ago, so it’s early days. However, the interest and pilot programs have been strong. Customers are keen to connect their datasets and unlock data insights using our AI platform. While it’s too early to disclose specific revenue figures, we have noted a positive trend in adoption, with many pilots across various customers worldwide. These are focused on using AI for operational optimization, and we anticipate more success stories while customer interest continues to grow.

Great. Appreciate that. Lastly, regarding the macro outlook. We talked through the dynamics for this year and the potential rebalance in the oil market in the near future, which could bode well for investment toward the end of the year. How do you think it might play out? Are customers becoming more cautious about project economics, or is it just a matter of taking a breather before jogging ahead in 2026?

I believe that the adjustments we've seen over the past six months have been driven by the oversupply concerns in the market, which prompted caution regarding spending and project timelines a result of the oil oversupply. That said, the long-term outlook remains positive, driven by increasing demand in the natural gas market, evolving energy security requirements, and prospects for deepwater projects moving into 2026. Some growth may manifest as early as the latter half of this year, while we anticipate solid upticks in various resource plays as conditions stabilize.

That's awesome. Thank you so much. Really appreciate it.

Thank you.

Hi. Thanks and good morning, everybody.

Good morning.

Good morning.

Two things for me. First, when considering the margin profile of the different segments in 2025, can you provide flavor for how you see the bottom line being impacted?

We typically do not guide, but as the mix shifts, the growth in Core, particularly in Production Systems and Reservoir Performance, will be somewhat offset by a decline in Well Construction. You can infer from here how the segments' margins will be impacted. Digital will continue to grow, which will also enhance margins. To maintain our earnings at or above last year's levels, we must remain disciplined in pricing.

Great. That’s very helpful. Secondly, could you share your perspective on Mexico and its recovery prospects for 2026 and beyond?

It’s too early to call the recovery in Mexico. The government and leadership change at PEMEX is still in transition. Mexico’s activity will continue to decline, but we are diversified across Latin America, balancing this with growth in Argentina and Brazil. This strength allows us to leverage resilience in select countries as offsets against declines we anticipate in Mexico, but the outcome remains uncertain until the government’s priorities for PEMEX are clarified.

Okay. Great. Thank you for the color.

Thank you.

Thank you, Kate. Ladies and gentlemen, as we conclude today's call, I would like to leave you with the following takeaways. First, our 2024 results underscore the strength of SLB's diverse portfolio in navigating evolving market dynamics. Moving forward, we will harness our unique market exposure and performance advantage to further our margin expansion journey, deliver strong cash flows, and increase returns to shareholders. Second, we remain focused on expanding the value we create for our customers through our technology leadership, integration capabilities, offshore exposure, and an expanded production and recovery portfolio through the announced acquisition of ChampionX. Finally, I'm confident in our strategy, inclusive of the progress we're making going beyond oil and gas, and our ability to continue creating value for our customers, partners, and shareholders. With this, I will conclude today's call. I look forward to sharing our progress with you throughout the year. Thank you.