Le Peuch Speaks at Cowen 2020 Energy Conference | SLB

Le Peuch Speaks at Cowen 2020 Energy Conference

Published: 12/03/2020

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Ladies and gentlemen, good morning. Thanks to Marc Bianchi and Cowen & Company for the opportunity to join you today. Before we begin the dialogue, I would like to share a quick summary of how, in a year of intense industry evolution, we have positioned the company for growth.

But first, let me remind you that some of the statements I will be making are forward looking and are subject to risks and uncertainties that could cause our results to materially differ from those projected in these statements. I therefore refer you to our latest 10-K and other SEC filings.

Now let me give you my perspective of where we stand, prepared for a new cycle in a rapidly changing industry.

We continue to execute our strategy and are ready for the beginning of a new cycle in a new industry landscape. We high graded our portfolio and restructured the company. These actions have resulted in a material and permanent reduction in our fixed structural costs, while also significantly improving our operating leverage—these tailwinds will greatly benefit us as the market rebounds.

As a result, we believe Schlumberger can achieve EBITDA equal to what it generated in 2019 if it is able to recover just half of the revenue decline, we experienced in 2020 compared to 2019.

The new organization structure comprising Divisions and Basins will capitalize on the new industry landscape that will also constitute a favorable mix for Schlumberger.

Regardless of when the industry rebound takes shape, our new structure is designed to promote growth by aligning with the new industry imperatives. I’d like to briefly share the Divisions and some of their growth opportunities.

To execute our performance strategy, we organized the company into four Divisions adapted for the new industry landscape. Deployed around a geographical structure of five Basins that share similar drivers, activity patterns, and technology needs, the Divisions have enhanced portfolios of capabilities aligned with customers’ workflows. Each Division has exciting growth opportunities driven by customer shifts towards capital efficiency, improved production and recovery, and reducing carbon footprint.

The Digital & Integration Division, which includes digital technologies and the integration of data, technology, and processes to improve asset and enterprise-wide performance, has high growth potential from the ongoing digital transformation. This supports the fast adoption of cloud computing and the growth of edge computing and automation in the energy industry. We anticipate the CAGR of the digital opportunity arising from these factors will generally outpace OFS over the next few years.

Our Production Systems Division will drive technology innovation and total system integration from the reservoir-to-wellbore interface through to midstream. In anticipation of industry needs, we have made significant technology advances in completions, artificial lift, surface equipment, processing, and subsea. During the third quarter, we highlighted several Production Systems awards that will form the basis of growth in the coming years for this Division.

Our Well Construction Division combines the full portfolio of products and services to maximize drilling efficiency and reservoir contact. As customers strive for improved asset returns, Well Construction will benefit from scale, market exposure, and holistic approach to well construction. We will apply our suite of new technologies to increase lateral lengths, maximize reservoir contact, and deliver the efficiencies of factory drilling.

And finally, the Reservoir Performance Division, which consists of reservoir-centric technologies and services that are critical to optimizing reservoir productivity and performance, will capitalize on the growth of nearfield exploration, brownfield redevelopment, and recovery enhancement initiatives in tight or mature wells. This is an area well-suited for our leadership in technologies focused on efficiency of reserve assessment and recovery, which will benefit from the growing focus on short-cycle barrels and maximizing production from existing assets.

With our new structure in place, we can maximize the value of our leading position in international markets, which will increasingly differentiate our performance as the regionalization of oil and gas markets becomes more entrenched.

Our international exposure, depth, and diversity are core strengths of Schlumberger. Our diversified customer base spans more than 100 countries, giving us a broad and balanced portfolio. This diversification will become increasingly important as the capital allocation dynamic intensifies across the industry and international markets recover at different pace in the coming years.

Upon the close of our two recently announced North America transactions, we expect more than 80% of our consolidated revenue to come from international markets, where our earnings power and ability to generate cash flow are strong and our margins are quite accretive.

The continued regionalization of demand and supply will generate growth beyond just a few countries as the cycle evolves. Growth will develop regionally across many players. I would also point out that international activity has a substantial volume of short-cycle opportunities that will translate into firm activity during 2021, prior to long-cycle impact. Our broad portfolio of activity exposure around the globe will benefit us as growth develops regionally.

In conclusion, Schlumberger continues to execute its strategy and is ready for the beginning of an upcycle in a new industry landscape.

The new organization structure, comprising Divisions and Basins, will capitalize on industry drivers and provide the platform for accretive growth in this new cycle.

Our international market exposure will magnify our differentiated returns performance, as we benefit from our restructuring actions and operating leverage.

Finally, we are also creating a long-term portfolio that participates at scale in the energy mix of the future.

Thank you, and I look forward to taking your questions.