Despite reduced drilling activity in the U.S., SLB built off a positive first half of the year in third quarter 2023 with total revenue—carried by international and offshore operations—increasing 3% from the second quarter.

“Overall, our third quarter revenue of $8.3 billion increased 3% sequentially. International sequential revenue growth of 5% was led by the Middle East and Asia—which increased 8%—while North America revenue decreased 6%,” Stephane Biguet, executive vice president and CFO of SLB, said during the company’s Oct. 20 earnings call.

North America’s revenue of $1.64 billion decreased 6% sequentially due to reduced drilling activity in onshore U.S. and in the Gulf of Mexico (GoM). Offshore revenue declined as a result of lower subsea sales and decreased drilling activity. Despite this, North America’s revenue has grown 6% from last year, led by strong land and offshore sales of production systems.

The real driver of SLB’s total revenue was its offshore business. Offshore operations grew in the third quarter due to increased supply, accelerated cycle times and increased asset productivity—evidenced by growth in offshore Africa, Brazil and Scandinavia. The Middle East also contributed heavily to the company’s international growth.

“We achieved our highest international revenue quarter since 2015 by growing revenue in this market for the ninth consecutive quarter year-on-year,” Olivier Le Peuch, CEO of SLB, said during the earnings call. “This was particularly visible in the Middle East and Asia, where we posted 22% year-on-year revenue growth, led by significant growth in Saudi Arabia, the United Arab Emirates, Kuwait and Egypt.”

Three engines, three sources of revenue

SLB also received promising results from what Le Peuch calls the company’s “three engines of growth”—core, digital and new energy.

SLB’s core business is its work in the oil and gas sector, including reservoir performance, production systems and well construction. This division of the company has grown 22% since third quarter 2022 and expanded its margins.

“Reservoir performance achieved exceptional results with stronger evaluation activity. Production systems achieved its highest level of margins on the cycle… and well construction maintained impressive results through new technology innovations and differentiated performance,” Le Peuch said. “All in all, this was a very strong quarter across our core divisions.”

The growth in SLB’s digital division was driven by Delfi, the company’s digital E&P platform. Delfi’s AI capabilities serve as the foundation of SLB customers’ planning and operations.

“Today we are seeing increased digital adoption across the industry. Delfi continued its year-over-year growth momentum with a 49% increase in users and an 86% increase in compute hours compared to the third quarter last year,” Le Peuch said. “Additionally, our customers are embracing our connected and autonomous drilling solutions, with 1.9 million feet of automated drilling completed in the third quarter.”

Digital and integration revenue for the third quarter increased 4% from the previous quarter, reaching $982 million.

SLB’s new energy division is also involved in over 20 carbon capture, utilization and storage projects globally and has invested heavily in technology to reduce methane emissions.

SLB is also undertaking a joint venture with Aker and Subsea7 known as OneSubsea. OneSubsea now comprises SLB and Aker Solutions’ subsea businesses, which includes complementary subsea production and processing technology portfolio, manufacturing scale and capacity, access to reservoir and digital domain expertise, pore-to-process integration capabilities and R&D capabilities. This venture is expected to contribute approximately $400 million to $500 million of incremental revenue in the fourth quarter, with pretax operating margins in the low teens.

“We are very excited about the prospects of this venture, which strengthens our offshore portfolio and has the potential to deliver more than $100 million of net annual synergies starting year three after closing,” said Biguet.

Cash flow from operations for SLB was $1.68 billion, up from last quarter’s $1.61 billion, and free cash flow was $1.04 billion, up from $986 million compared to last quarter.

Adjusted EBITDA increased 6% from last quarter, reaching $2.08 billion. Adjusted third-quarter net income was $1.12 billion, up 8% from the second quarter and 24% from last year. For the full year, SLB is expecting capital investments between $2.5 billion and $2.6 billion.

Offshore