Q1 2026 Earnings Call Transcript

Good morning. My name is Megan, and I will be your conference operator today and would like to welcome everyone to the First Quarter SLB N.V. Earnings Call. At this time, all participants are in a listen-only mode.

After the speakers' remarks, there will be a Q&A session. If you would like to ask a question during this time, please press star followed by the number one on your telephone keypad. You may remove yourself from the queue by pressing star two. As a reminder, this call is being recorded.

I will now turn the call over to James McDonald, senior vice president of investor relations and Industry Affairs. Please go ahead. Thank you, Megan. Good morning.

And welcome to the SLB N.V. First Quarter 2026 Earnings Conference Call. Today’s call is being hosted from Houston, following our board meeting held earlier this week in Midland, Texas. 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 first quarter earnings press release, which is on our website. With that, I will turn the call over to Olivier.

Thank you, James. Ladies and gentlemen, thank you for joining us. Before we begin, I would like to acknowledge our people, customers, and partners in the Middle East as they navigate this challenging and uncertain time. Our strong presence in the region dates back more than 85 years, and I am proud of the resilience and unity demonstrated by our people as they work in lockstep with customers to safeguard our teams and assets, preparing for an eventual resumption of operations.

I want to commend the entire SLB N.V. team for their continued care, commitment, and support for one another and for our customers. Turning to today’s call, I will start with our first quarter performance, followed by an update on the evolving situation in the Middle East, and our outlook in the mid to long term. I will then cover our strategic initiatives including production recovery, digital, and data centers, and provide our outlook for the second quarter. Stephane will then take you through the financials and we will open the line for your questions.

Let us begin. It was a challenging start to the year, marked by severe disruption in the Middle East that impacted our first quarter revenue and earnings. At the onset of the conflict, customer decisions to safeguard personnel and assets led to an initial wave of operational shutdowns. As the conflict persisted, further activity curtailments followed as a result of production shut-ins.

The impact of these actions was most pronounced in Qatar due to force majeure and the suspension of offshore operations, and in Iraq due to the security conditions. We also experienced a more gradual impact from offshore shutdowns in other countries in the region, driven by a combination of security concerns and export capacity disruptions. In addition to the situation in the Middle East, unfavorable activity mix and higher costs further weighed on the quarter, most notably in OneSubsea. Looking across the divisions, Production Systems and Digital grew year on year, while Reservoir Performance and Well Construction declined mostly due to the impact of the conflict.

Production Systems year-on-year revenue increased 23% due to the acquisition of ChampionX, which continued to deliver accretive growth. Additionally, we are on track to achieve our synergy targets. On a pro forma basis, ChampionX also grew year on year, demonstrating the increasing demand in the production market. Turning to Digital, we increased 9% year on year driven by strong uptake in digital operations.

Of note, automated footage reading increased by 145% year on year as customers continue to adopt digital and AI-powered solutions to boost operational performance and efficiency. Also, data center solutions remain a bright spot, with 45% growth year on year. The momentum in this area continues, as you saw our recent announcement to serve as a modular design partner for NVIDIA DSX AI factories. With our growing backlog, we remain on track to exit the year at a $1 billion run rate and expect the growth rate to accelerate in 2027. Overall, despite the challenges of the quarter, I am pleased that the strategic decisions and portfolio actions that we are taking in digital, data center solutions, and production recovery are delivering results.

I would like to express a big thank you to our teams in the Middle East and across the world who continue to deliver each day for our customers in this very dynamic environment. Now let me turn to how we expect the market to evolve as the conflict in the Middle East is resolved. Firstly, we anticipate that oil prices will set at levels above the pre-conflict baseline. This reflects the new balance of liquid supply and demand which has been significantly altered by more than 500 million [inaudible] lost production impact thus far.

In this environment, energy security remains at the forefront. We expect many countries to accelerate efforts to diversify supply, strengthen domestic resource development, and rebuild strategic and commercial inventories that have been drawn down during the conflict. In short, the fragility of the global energy complex we are witnessing today demonstrates the strategic importance and long-term value of oil and gas. Together, these dynamics are expected to support a constructive macro environment for upstream investment over the coming years.

In the near term, activity would be led by the restoration of capacity across the Middle East for both oil and gas. While some countries that executed orderly shut-ins should be able to resume production within days or weeks, other areas—particularly where disruptions were more abrupt—may require more value ramp-up including additional waiting time and maintenance. As a result, while the near-term recovery will be gradual and differ across countries, we see an upside in the outlook beyond demand restriction from the prolonged conflict. We are committed and ready to support our customers across the region.

Beyond the region, we expect a broad-based response across both short and long cycle investments. Short-cycle activity is likely to strengthen first, particularly in North America and parts of Latin America, where operators can respond quickly to higher prices. In addition, well intervention activities that can lead to additional production will get a natural boost across all basins. At the same time, we expect renewed momentum in long-cycle developments, especially in offshore and deepwater markets, as customers look to secure durable, large-scale sources of supply.

This is also likely to improve certainty of offshore FID approvals while also supporting increased exploration activity. As we can read in third-party reports, the FID pipeline in 2026 is strengthening and directionally adding over $100 billion of total investment approval, visibly ahead of the last two years, and with another step up expected in 2027, with deepwater resources getting a large portion of these investments. Regionally, this presents opportunities in Africa, Asia, and Latin America. Africa is one of the most compelling long-term opportunities, with a significant base of underdeveloped oil and gas resources.

We expect portfolio allocation to shift more favorably towards this region over time. In Asia, we continue to see prioritization of access to gas, both onshore and offshore, as it works to diversify supply through development of national resources. And across Latin America, from Guyana to Brazil to Suriname, we see continued strength in deepwater developments, complemented by short-cycle growth in unconventional Argentina. Separately, Venezuela continues to represent an exciting growth opportunity where we can expand on our existing operations in-country.

To conclude this section, in the context of energy security and the rebalancing of supply and demand, we see three primary drivers of increased investment over the coming years. First, the replenishment of depleted commercial inventories and strategic reserves. Second, diversification of supply including greater redundancy sourcing. And third, increased emphasis on developing local resources to enhance long-term resilience.

Our core business will benefit from these dynamics, supporting the positive outlook for SLB N.V. into 2027 and 2028. Let me now describe the additional strategic growth levers for SLB N.V.: production recovery, digital, and data centers. Starting with production recovery, this is becoming increasingly critical as the industry faces structural challenges in replacing reserves and sustaining production from existing assets. In this context, technology that enhances recovery and extends the life of mature fields is no longer optional—they are essential. Against the macro we just discussed, this is a defining moment for production recovery.

These technologies have the potential to shape the next stage of recovery in unconventional assets and create a step change in quality and enhancement in every basin and play, from deepwater to conventional, and from gas to oil. With ChampionX, we are uniquely positioned to lead in this space by combining production chemistry, artificial lift, digital capability, and subsurface domain expertise while helping customers unlock additional barrels from existing reservoirs in a capital-efficient manner. This is particularly relevant as operators look to maximize recovery, improve returns, and bring incremental supply to market in support of energy security.

We also held our first production recovery summit in Houston a couple of weeks ago, and we are very pleased with the engagement from our customers from every region across the world. They increasingly recognize the potential of this domain and the opportunities it presents to underpin growth for the industry. Turning to digital, this business continues to build strong momentum and is a key driver of both differentiation and long-term value creation for SLB N.V. While still a relatively small portion of our revenue today, its impact extends well beyond its size.

Our approach is grounded in domain expertise, where AI, data, and software are integrated into our platform and workflows to deliver measurable performance outcomes. This is not about standalone tools; it is about embedding intelligence across the full life cycle of whatever developments and production. Our teams continue to make exciting developments, particularly in the urgent adoption of AI. As the number of use cases increases and the value of these technologies is proven in the field, we anticipate increased adoption.

Over time, we expect digital to become an increasingly important lever for growth, both as a standalone business and as an enabler across our broader portfolio. We are excited to share more about this business during our Digital Investor Day later in June. Finally, data centers represent a new and rapidly expanding opportunity for SLB N.V., leveraging our core strengths in engineering, manufacturing, and project execution, while extending our scope of modular infrastructure solutions to support the accelerating demand for AI and digital capacity. In less than two years, we have established our right to play in this industry, proven by our manufacturing know-how and supply chain capabilities.

We are building on this expertise to support design engineering and performance optimization of the data center build-out. And we are currently scaling the business by expanding capacity, deepening partnerships, and selective international growth. While still at an early stage, this business is already demonstrating the characteristics we are looking for: capital-light growth, strong demand visibility, and a clear path to becoming a meaningful contributor to earnings over time. Looking ahead, we see additional upside to opportunities such as thermal management, decarbonized power, and scaling as a systems integrator.

These are areas where our capabilities can further differentiate our offering and expand our addressable market. We also continue to assess potential opportunities to accelerate this trajectory through targeted M&A. Taken together, these three areas—production recovery, digital, and data center solutions—reflect how we are evolving our portfolio toward higher-return, technology-driven, and less cyclical growth. They are complementary, scalable, and aligned with the long-term trends shaping both the energy system and digital infrastructure.

Let me now share our view on how the second quarter may unfold. First, it is uncertain how long geopolitical disruption will last and how the recovery in the Middle East will unfold. At the same time, we are facing higher procurement and logistics costs driven by the conflict. As a result, it is challenging to provide precise guidance for this quarter.

However, there is a scenario where our portion of disruption in the region persists through the middle of the second quarter and then begins to gradually ease. Under this assumption, we estimate that the sequential revenue and earnings decline in the Middle East will be fully offset by all of our international markets combined, where we anticipate mid- to high-single-digit revenue growth with improved margins. Meanwhile, North America revenue is expected to be flat sequentially. By division, under the business scenario just highlighted, Digital and Production Systems will grow globally, while Reservoir Performance and Well Construction will decline globally.

I will now turn the call over to Stephane to discuss our financial results in more detail.

Thank you, Olivier, and good morning, ladies and gentlemen. First quarter earnings per share, excluding charges and credits, was $0.52. This represents a decrease of $0.20 when compared to the first quarter of last year. During the quarter, we recorded $0.02 of merger and integration charges, primarily related to the ChampionX transaction. Overall, our first quarter global revenue of $8.7 billion increased 3% year on year.

Excluding the impact of the ChampionX acquisition in the third quarter last year, revenue declined by $607 million, or 7% year on year. When compared to the fourth quarter of last year, revenue fell by just over $1 billion, or 10.5%. This decline was approximately 200 basis points, or about $200 million, higher than what we expected at the time of our last earnings call in January. This was primarily due to the impact of the conflict in the Middle East as we experienced operational disruptions throughout the month of March.

Company-wide adjusted EBITDA margin for the first quarter was 20.3%, down 346 basis points year on year. Margins were negatively affected by high decrementals on the Middle East revenue impact. We did not make any material adjustments to our cost base during the quarter, as our immediate focus was the protection of our people and preserving operational capacity for the expected future rebound in activity. We also incurred additional logistics and materials costs as a result of supply chain disruptions due to the conflict.

Beyond the effect of the Middle East conflict, first quarter margins were impacted year on year by increased tariffs, project mix, and higher costs in OneSubsea, as well as pricing headwinds in select markets, particularly in Well Construction. Let me now go through the first quarter results for each division. First quarter Digital revenue of $640 million increased 9% year on year, primarily driven by 87% growth in digital operations. This was supported by increased digital services adoption and new technology introduction, as well as the acquisition of ChampionX.

Notably, annual recurring revenue for the division stood at $1.02 billion at the end of the first quarter, representing year-on-year growth of 15%. Digital pretax operating margin of 20.9% was essentially flat year on year. However, adjusted EBITDA margin of 26.1% declined 473 basis points due to lower amortization relating to exploration data as a result of the mix of surveys sold during the quarter. As you know, Digital margins are historically lowest in the first quarter due to seasonality and steadily increase throughout the year, reaching the highest level in the fourth quarter, as evidenced by last quarter’s results.

This trend will continue, and consequently, we expect to achieve full-year Digital adjusted EBITDA margin that is at least equivalent to last year’s level of 35%. Reservoir Performance revenue of $1.6 billion decreased 6% year on year, while pretax operating margin of 16.1% decreased 47 basis points. These decreases were due to lower stimulation and intervention activity, primarily as a result of the disruptions in the Middle East. Well Construction revenue of $2.8 billion decreased 6% year on year, primarily from lower activity due to the disruption in the Middle East, partially offset by higher offshore drilling activity in Europe and Africa, Latin America, and North America.

Pretax operating margin of 15.2% contracted 463 basis points year on year due to lower profitability on account of the Middle East conflict, as well as pricing headwinds in select markets. Finally, Production Systems revenue of $3.5 billion increased 23% year on year. Excluding the impact of the ChampionX acquisition, first quarter revenue decreased 6% year on year. On a pro forma basis, revenue from the ChampionX production chemicals and artificial lift businesses grew 2% compared to 2025. This strong ChampionX performance was offset by the impact of the Middle East conflict, lower OneSubsea revenue, and, independent of the conflict, lower product deliveries in Saudi Arabia.

Production Systems pretax operating margin of 14.2% declined 240 basis points year on year due to lower profitability in Surface Production Systems, Completions, and OneSubsea. As it specifically relates to OneSubsea, pretax margin in the first quarter was 14.4%, compared to 18.1% in 2025. Margins were affected by the concurrent wind-down of several large programs and the initiation of new projects with high start-up costs. OneSubsea margins are expected to increase over the remainder of the year. ChampionX partially offset those effects as we continue to make progress with our synergy realization.

As a result, ChampionX margins this quarter were higher than in both Q4 and Q1 of last year and were accretive to both Production Systems and total SLB N.V. margins. Now turning to our liquidity. Our net debt increased $797 million sequentially to $8.2 billion. During the quarter, we generated $487 million of cash flow from operations.

Free cash flow was slightly negative at $23 million on account of the payment of annual employee incentives and the seasonal increase in working capital that we typically experience in the first quarter. This was compounded by delayed collections in the Middle East stemming from the conflict. We expect our cash flow generation to follow our historical pattern, with free cash flow gradually increasing throughout the year, with the majority coming in the second half. Capital investments, inclusive of CapEx and investments in ATS projects and exploration data, were $510 million in the first quarter.

For the full year, we are still expecting capital investments to be approximately $2.5 billion. During the quarter, we repurchased $451 million of our stock, and we still expect to repurchase a minimum of $2.4 billion for the full year, in line with 2025. As a reminder, we are targeting to return more than $4 billion to our shareholders in 2026, through a combination of dividends and stock buybacks. Before I wrap up, let me come back to our second quarter outlook and more specifically to the Middle East. I would first like to clarify that the Middle East represented approximately 70% of our Middle East and Asia business in the first quarter.

Under the specific scenario that Olivier highlighted earlier, where operational disruption in the region persists until the middle of the quarter, and then starts to alleviate, we estimate that it would negatively impact our second quarter earnings per share by an incremental $0.06 to $0.08 when compared to the first quarter. This is the result of lost revenue as well as higher procurement and logistics costs associated with the conflict. I will now turn the conference call back to Olivier.

Thank you, Stephane. I believe we are now ready to take your questions.

We will now open the call for questions. We will now begin the Q&A session. If you would like to ask a question, please press star followed by one. Your first question comes from the line of David Anderson with Barclays. Your line is open.

Hi. Good morning, Olivier. How are you? I am good.

Morning, Olivier. So looking past some of the near-term disruptions, I was wondering if you could expand a bit more on your views on how the investment cycle has changed. You mentioned a broad-based recovery in 2027 and 2028. Is that predicated on oil prices being structurally higher now? And can you also comment on which end markets you see the most upside in as you sit here today?

I think there are multiple reasons why I think we will initially benefit from an uptick in investment. First, indeed, we are projecting that the commodity price will be higher after this than they were before. But more importantly, the significant impairment of the supply-demand balance has created the need for replenishing inventories, replenishing the strategic reserves, and also has heightened the risk around energy security. As a consequence, there will be multiple factors that will play into an increased investment outlook.

Firstly, replacing inventories and strategic reserves will supplement the natural demand in oil and gas. Secondly, the energy security imperative will drive national decisions to invest into local resources and to diversify sources of supply, including creating some redundancy if and as necessary, and clearly maintaining in the future higher inventory stockspares to prevent future shocks of supply. This aligns with trends that were already in play that were indicating offshore was set for a rebound as we exit 2026 into 2027. We believe that this combination will affect both the short cycle in the near term and the long cycle at scale into 2027 and 2028. So, in our opinion, we are set for an uptick into a cycle of strength going forward.

So, Olivier, you had talked about deepwater looking particularly attractive in that outlook. Obviously, that is part of the long-cycle story. Can you talk about where you see the most upside in terms of SLB N.V.’s business? Is it more on the Well Construction and Reservoir analysis side? Could OneSubsea be a big driver? Just trying to think through the businesses that would be most impacted.

First, we are confident that offshore has been very attractive economically now and is the last large resource asset for operators to unlock and develop going forward. That is the reason why we are seeing this uptick in the FID pipeline and the projections by many reports saying that this will at scale exceed what we have seen in the last couple of years. The macro is very positive for deepwater, and this is true across Africa, Asia—East Asia—and the Americas, for different reasons. Africa, as I stated in my remarks, is set to be one of the main beneficiaries.

It has vast undeveloped resources—both oil and gas—on the West and the East coasts, and is clearly set to be developed. This is where we see potential acceleration of FIDs in the coming quarters. The Americas are very strong, from Brazil to the Gulf of Mexico, and I believe this will continue, including plays in Central America. In Asia, because of gas, we see a doubling down on the development of gas and deepwater resources, with a lot of developments happening these days in Indonesia.

You have seen some of the announcements we made earlier today in the earnings press release, with OneSubsea being awarded in Malaysia and in the South China Sea—a critical award. I believe that our core at large would benefit from this rebound; we have strong market positions across the divisions. But yes, indeed, OneSubsea is expected to benefit at scale and, as guided previously, we expect OneSubsea bookings this year to be visibly higher than last year and to then have a growth trajectory in 2026 and into 2027 and 2028 as we see the scale of this offshore cycle developing.

Thank you. Your next question comes from the line of James West with Melius Research. Your line is open.

Hey. Good morning, Olivier and Stephane.

Good morning, James.

The Middle East is your backyard. You have owned that market for a century or more. You do not leave conflict zones, but when conflicts happen you are always there for the recovery. As you think about the recovery and how it could unfold—I know you made some comments in your prepared remarks about this—but as you talk to the customers, what do they want to do?

What do they need you for initially, and how do you think the momentum builds assuming that the conflict resolves in the timeline that you and others laid out?

First, to be clear, we are working in lockstep with customers every day and every week. We continue to work closely with them to understand as they are contemplating all options for recovery while observing the geopolitical developments. We stand ready, so we are more in standby as we speak. Multiple scenarios are being considered, and there are some countries where the resumption of operations will be relatively fast and could turn into days and weeks.

There are other countries and facilities and fields that have been shut in abruptly where we will need to intervene. Hence, there will be an initial phase of assessment and an initial phase of intervention before production can come back to full capacity. There are zones in the region where security will remain a concern and will delay further the recovery. So it is a gradual recovery, but yes, we are working very closely with customers both to mobilize equipment and resources and also to anticipate the reservoir consequences and the type of services that we will need to provide as the conflict stabilizes and as customers have the confidence to remobilize.

We see clear long-term upside in the region, and we see that some countries will actually use this to catch up and maybe expand their capacity to recover market share and production lost during this period.

Got it. Very helpful. And then maybe a quick follow-up. Understanding that most geographies and, of course, companies and countries want to diversify supplies, do you see more of your customers that are Middle East-based stepping outside of the region? They have already started to do that a little bit, but stepping outside more post conflict?

Generally, operators will continue to diversify across the entire world, and there are plenty of basins that still stand undeveloped. I highlighted Africa. There is a lot of oil and gas resource that is set to be developed, and I think the fiscal terms and the security conditions have improved in the region and will make it critical. But the Middle East remains a low-cost barrel and low-cost gas region at scale, and hence it will continue to attract investment as well.

The national resource holders in the region will continue to develop at scale their resources. So we see a mix, and I think beneficiaries will include Africa, the Americas—offshore—and Asia deepwater, and production recovery across all regions, because this is where the fastest incremental barrels can come from.

Thank you. Your next question comes from the line of Steve Richardson with Evercore ISI. Your line is open.

Good morning. I was wondering if we could talk a little bit about Digital. You made this acquisition with S&P. What we understand is this is a largely U.S.-centric software suite and dataset. Can you talk about what the longer-term vision is there, and be sure to hit on how and if that is an enabler of some of the other things you are doing in the broader business outside of Digital?

Absolutely. As described in our press release this morning, we have come to an agreement with S&P Global Commodity Insights to acquire the upstream petrotechnical software suite—not their data—and this is mostly deployed in North America with independents and is quite specific to the unconventional market. This is highly complementary to the offering we have. As we go forward, this will complement our offering in North America, give us support to expand the reach of these petrotechnical workflow solutions internationally for hybrid markets, and also help us to expand and address the next challenges in unconventional development and recovery.

We will use this new software suite to complement what we have, add domain depth, and unlock new unconventional workflows. It gives us broader market access and a tool that is fit for the unconventional market where we did not have the same offering today. Separately, as you may have seen in the earnings press release, we have entered an agreement to pursue a strategic partnership with S&P Global Commodity Insights around AI, giving us the opportunity to use the power of large language models and domain-specific foundation models using the global datasets of S&P Global Commodity Insights. Together, we will provide our customers with unique insights by applying AI capability and our domain foundation models on the full datasets of S&P Global Commodity Insights.

That is unique and will be very appreciated by customers.

That is great. And I suspect we will hear much more about that at the Analyst Day in June. I am wondering if you could give us a brief update on the data center business and your outlook there in terms of securing additional customers, your commercial approaches, and expectations for the balance of the year relative to what you talked about a quarter ago?

We continue to reiterate our ambition and our goal that we will reach or exceed a $1 billion run rate as we close this year. We have made great progress this quarter to secure additional customers that give us further visibility into demand for our capacity in 2027 and 2028, and we are developing more growth and scaling beyond the exit-rate guidance going forward. You have seen one announcement with NVIDIA that shows they have selected us as their modular design partner for the DSX AI factory. It means a lot—it means we have been selected as a trusted partner to develop modular infrastructure solutions for the DSX centers, large-scale future builds that need to be scaled fast.

We will add capability to build sites and manufacture equipment off-site and bring this modular infrastructure to NVIDIA’s customers in the future. You will see additional announcements coming that will show the breadth of our customer reach and the scale of our operations going forward. We are very pleased with the progress, and this will continue in 2026 and clearly at scale in 2027.

Thank you. Your next question comes from the line of Arun Jayaram with JPMorgan. Your line is open.

Yes. Good morning. Olivier, production recovery seems to be an important theme this morning. I was wondering if you could highlight some of the industrial and technical challenges in restoring production that is offline in the Middle East, and do you think that, assuming we get to an improvement in the situation in the Middle East in 2Q, this could be a driver of SLB N.V.’s second half 2026 results?

Firstly, we will not be commenting on behalf of our customers in the Middle East as they go through the assessment of their facilities—some of them, as you know, have been damaged by this crisis. I will comment on the engagement, collaboration, and close partnership we have with our customers to prepare for remobilization as security concerns abate. Some shut-ins were done orderly and will just require a resumption of operations with remobilization of resources with no significant short-term impact. Others will need well intervention activity, and that is where we have upside.

We will work with our customers to help restore production and use the production recovery technology set to help regain pre-conflict capacity. Long term, as resumption of operations gradually occurs throughout the following months and possibly quarters for some countries, we see upside in the desire for some countries to uplift their capacity and to participate in the replenishment of depleted inventories and strategic reserves. We see a sequence of intervention first, production recovery focus next, and then large-scale development and expansion of capacity for some countries.

Great. I have a follow-up to Steve’s question on Digital. If I look at year-over-year trends, your revenue was up 9% but your margins fell by 473 basis points. Can you talk about what you saw on the margin front and perhaps the recovery potential for Digital margins over the balance of the year?

I will take this question, Arun. As you know, we closed last year in Digital with full-year EBITDA margin of 35% and pretax operating margins of 28%. There is a bit of a distinction between pretax margin and EBITDA here. We started 2026 with pretax margin of just about 21%, which is essentially in line with where we started in 2025. EBITDA margins, however, were indeed lower, and this is exclusively due to lower amortization from the mix of exploration data that we sold during the quarter.

Stepping back, as I said earlier, the first quarter of the year is typically the lowest for Digital margins. We fully expect to see the same pattern we have seen over the years, reaching the highest margins in the fourth quarter. It is our ambition to deliver total EBITDA margins from Digital of at least 35% this year as well. The quarterly choppiness is not a concern to us.

Thank you. Next question comes from the line of Scott Gruber with Citi Research. Your line is open.

Yes. Good morning, Olivier and Stephane.

Good morning.

In a world where code writing becomes easier and more commoditized, can you speak to the resilience of the value-add of your Digital portfolio? And as you take moves to shape the portfolio like you have done with the S&P acquisition, how do you think about expanding that value-add and enhancing that resilience?

Customers are accelerating the adoption of digital because they believe that no matter where the cycle is—whether it is a high or challenging cycle—they need to differentiate and extract efficiency and productivity in geoscience and planning workflows, operational performance and efficiency in drilling, and in production and recovery. They have seen that digital capability is delivering, and you can see it by the adoption of digital operations growing nicely year on year, driven by drilling and production operations where customers are adopting AI and software solutions that can transform the performance of drilling operations—like drilling automation—and transform production workflows to render ESPs autonomous.

These capabilities will be sought by every customer. Every use case we see is resonating across customers in every basin. We see not only resilience but a long-term tailwind in any cycle, and digital will continue to have a tailwind in our industry because we have data like no other industry, we have scientists and engineers who love to work with data, and we have AI that is becoming a catalyst and x-factor to unlock productivity. We are unique in our capability; we have deep domain knowledge and a platform that can help scale AI capability.

It is the right time for the industry to adopt AI at scale. We will show more during our Digital Investor Forum.

I look forward to it. And a follow-up: with an outlook for higher oil prices, at least over the medium term, how does that impact the Digital business? I assume your seismic sales could improve. How meaningful could that be?

And more importantly, would you anticipate customers taking some of this excess cash and spending it on more software and applications to get a bigger boost for their own internal efficiency?

When commodity prices are high and customers have more optionality in discretionary spend, they invest in domain and in digital, and they accelerate exploration. We foresee that, and we are seeing signals that exploration is coming back. We have seen announcements of companies reinvesting in exploration at scale because they want to secure reserves to participate in long-term energy security. At the same time, yes, they use discretionary spend to buy datasets to accelerate exploration, which we will benefit from, and they also participate in more pilots and make decisions faster to accelerate platform and software deployment in their organizations.

Thank you. Your next question will go to the line of Sebastian Erskine with Rothschild & Co Redburn. Sebastian, your line is open.

Hi. Good morning, gentlemen. Thanks for taking my questions. I just want to start on SLB N.V.

OneSubsea. It is really one of the jewels in the SLB N.V. crown. You guided that full-year 2025 results to $9 billion in order intake over the next two years. I wonder if you could give an outlook on the margin expansion within the OneSubsea business, particularly with comparisons to the broader offshore E&C universe?

Is there more room for integration with the rest of your portfolio or further efficiencies related to your existing subsea business? Any color on the margin outlook for OneSubsea?

Sure, Sebastian. You have noticed that for the first time we gave you our margins for OneSubsea for the first quarter. Unfortunately, they were not as strong this quarter, but these are temporary effects due to the timing of project completions and start-ups. You have seen where the margins were in the same quarter of last year—pretax margins of 18%—which means EBITDA margins are very close to 20%.

This is what we expect from this business over the cycle at the minimum. Even though we started on a rough note in the first quarter, we expect the margins to normalize in the coming quarters. On the back of a backlog that is increasing year on year—we are up 5% year on year on the backlog—we have better visibility on the growth going forward and on potential margins.

I will add a couple of things. In production recovery, subsea as a domain of deepwater is essential for our customers, and production recovery plays a great role. We have a unique subsea processing portfolio. You have seen another announcement that we are continuing to innovate and enhance the project we have with Equinor in Norway, and we made an acquisition that complements our offering to better participate in the intervention world of deepwater subsea.

The production recovery strategy and the connection with our overall core capability is essential going forward. It will help customers leverage OneSubsea to enhance production of existing fields and provide more life-of-field services, including digital capability, to subsea installations. So it is both on the EPCI cycle and then on the long-term life-of-field services that we will benefit.

I really appreciate the color there. And then just a follow-up. I think, in prepared remarks, you mentioned toward the end of the data center solutions section that you were considering potential further M&A following the announcement of the S&P Global deal. What areas are you seeking to add in terms of your portfolio?

We are looking at opportunities where we can build a portfolio with more technology anchors across modular infrastructure—for example, thermal management comes to mind. We are looking at opportunities that could complement the offering we have and the go-to-market motion we have carried into the space.

Thank you. Next question will go to the line of Mark Bianchi with TD Cowen. Your line is open.

Hi. Thank you very much. I just first wanted to quickly clarify the outlook for the second quarter. You are essentially saying that results will be the same as the first quarter, and there is a $0.06 to $0.08 incremental hit from the Middle East that is being offset elsewhere. Is that the message you are trying to deliver here?

Yes, that is a good summary, Mark. Just to be clear, this is under the specific scenario that we highlighted, where the operational disruptions start to ease more or less at the middle of the quarter and then gradually recover. In this scenario, we can offset the negative impact of the $0.06 to $0.08 incremental effect of the Middle East with the rest of the international operations.

Great. Thanks for that, Stephane. The other question I had, going back to OneSubsea and the $9 billion of awards over 2026–2027: given the outlook here, do you see upside to that now? And how are you thinking about your competitive positioning? We hear a lot from your competitor about their capabilities. Can you talk about how you see OneSubsea positioned from a competitive perspective?

First, commenting on the cycle, the more these dynamics play out as the conflict ends, the more we believe that investment will be attractive in the deepwater market, which is the majority of what we foresee as FIDs in 2027 and 2028. The more it will expand the size of the addressable market. Hence, if FIDs firm up, if not accelerate, in 2027 or even in 2026, this will give us potential to outperform the guidance we have given. On positioning, we feel extremely good. We have partnered with Subsea7, which gives us, when customers ask for integrated offerings, the integrated capability to deliver—and we have done this at scale with many customers.

We have developed partnerships and collaborative engagements with several customers that have led us to work jointly to improve the design of subsea architectures and unlock FIDs—this is true with Equinor and BP. We also believe we have a unique portfolio in subsea processing with no match in the market. You have seen announcements today and will continue to see a pipeline of projects that make it unique. You have seen the Åsgard-type subsea gas compression unlocking a new level of recovery in Norway, and the additional announcement we made today on the Gullfaks project where we will rework with our customer to extend life and improve performance of subsea processing to unlock the next level of recovery.

We feel good about our integration capability, the pipeline—you have seen awards in Malaysia, in the South China Sea, in Suriname, and in Norway announced today—and we will continue to have a pipeline of exciting projects across the Americas, Asia, and Africa. We are pleased with OneSubsea’s progress and continue to support them fully.

Thank you. Your last question comes from the line of Neil Mehta with Goldman Sachs. Your line is open.

Thanks so much. Morning, my friends. You talked a lot about some of the cost impacts that you are seeing in the Middle East and how that is impacting margins, and I think we all understand that at a conceptual level, like freight. But can you give us some of the line items that are causing the pressure points and help us understand the specific items?

Clearly, the situation in the Middle East introduced strain on supply chain networks locally, with ripple effects elsewhere. The line item most impacted is logistics and transportation costs. Coming next are raw materials—those derived from petroleum products, and that includes chemicals. So it is raw materials and logistics mostly.

This impacted margins in the first quarter and it will linger for a while. We are not going to just let that hit our costs—we have mobilized our commercial organization to recover some of these increased costs, and we are activating inflation pass-through clauses in our contracts. Where we do not have those, we are in direct negotiations with both our suppliers and our customers to offset these effects. We are used to these spikes from inflation, and we try to recover as much as we can.

And my last question: it has been a couple months now that ChampionX has officially been in the SLB N.V. portfolio. Any observations about what it is bringing to the table and how you have been able to integrate the system into the broader company?

First, I will reiterate the results part of the ChampionX addition to our portfolio. As Stephane highlighted, ChampionX has been accretive to the company in the first quarter, growing year on year and expanding margins year on year. Second, I will come back to the three days we spent with our board in Midland. It was a pleasure to see in action our former ChampionX employees integrating fully in a customer-centric, opportunity-to-outcome pipeline demonstration with our board, showcasing our fit-for-purpose technology—highly integrated and already getting pull-through and synergy, both revenue and technology, that customers appreciate.

We also met many customers with our board in Midland and received very direct and transparent feedback—they were very pleased with the integration progress and see the potential that ChampionX, together with SLB N.V., can bring to operations in the Permian. We are seeing the benefits in financial results, we are seeing an exciting opportunity for production recovery—as we commented at the summit we hosted—and we see the enthusiasm of our teams and customers. This is a unique combination that can unlock the potential of production recovery, particularly in unconventionals, but also across all our basins worldwide.

Thank you. I will now turn the call over to SLB N.V. for closing comments.

Thank you very much. Ladies and gentlemen, as we conclude today’s call, I would like to leave you with the following reflection. First, while recent events have created near-term disruption, they have also reinforced the need for secure and reliable energy, which will support oil prices above pre-conflict levels and create an ongoing backdrop for oil and gas investment. Second, production recovery, digital, and data center solutions are creating the foundation for accelerated growth.

And finally, I want to recognize that this year marks 100 years of SLB N.V. As we celebrate this milestone, I am proud that we are not only honoring an extraordinary legacy but also building the foundation for the next century of innovation, performance, and leadership. With this, I will conclude today’s call. Thank you all for your time.

This concludes today’s conference call. You may now disconnect.