SLB Third-Quarter Earnings Call - SLB LIMITED

Good morning. My name is Sarah, and I will be your conference operator today. I would like to welcome everyone to the third quarter SLB earnings call. At this time, all participants are in a listen-only mode. After the speaker's remarks, there will be a Q&A session. If you would like to ask a question during this time simply press star followed by the number one on your telephone keypad. You may remove yourself from the queue by pressing star one again. As a reminder, this call is being recorded. I will now turn the call over to James R. McDonald, Senior Vice President of Investor Relations and Industry Affairs. Please go ahead. Thank you, Sarah. Good morning, and welcome to the SLB Third Quarter 2026 Earnings Conference Call. Today's call is Being Hosted from New York City, following our board meeting held earlier this week. Joining us on the call are Olivier Lepouche, Chief Executive Officer, and Stéphane 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 find in our third quarter earnings press release, which is on our website. With that, I will turn the call over to Olivier. Thank you, James. and good morning ladies and gentlemen. Thank you for joining us. Today, I will begin with our third quarter performance. I will then discuss the evolving macro environment and the fundamentals supporting Outlook as we approach 2027. And finally, I would share our expectations for the fourth quarter. Stéphane will then provide additional details on our financial results, and after that, we'll open the line for your questions. Let's begin. The third quarter was marked by broad-based sequential revenue growth across each of our geographical areas and core divisions, with pre-tax segment operating margins expanding across all four divisions. This was driven by the gradual recovery in the Middle East, solid growth in North America, and continued momentum across the international offshore basins, including Latin America, Europe and Africa, and Asia. Within the core divisions, production systems led the way, supported by higher 130 revenue and strong sales of production chemicals and actual lift in North America and the Middle East. Notably, Champonnex delivered its highest quarterly revenue since the acquisition, with margins expanding sequentially for the fourth consecutive quarter. Well construction, growth was driven by double digit increases across Argentina, Guyana, Brazil, and U.S. land, along with a seasonal recovery in Canada, complemented by strong offshore drilling in Asia. Sequential growth was also driven by higher drilling activity and fluid demand in the Middle East. While the near-term pace of recovery in the middle East remains uncertain, the longer-term outlook continues to strengthen. This is reflected by Salyu Zaramco's recent award of four integrated well construction contracts to SLB, covering more than 450 wells over an initial three-year term. These multi-year awards significantly improve our revenue visibility and expand our participation in development activity across the kingdom, by bringing together our digital drilling workflows, automated technologies, and integrated well construction portfolio. Our performance also delivered strong sequential growth, led by increased stimulation and intervention activity alongside an uptick in evaluation. This demonstrates that customers are investing in both restoration and production optimization of existing assets and evaluation of reservoirs to support new developments. Our results this quarter continue to demonstrate the benefits of our strategic focus on production and recovery. Our production business, encompassing all production systems and some of the offerings in reserve performance, now represents more than 50% of our portfolio, leading position across every major basin and a balanced mix of short and long cycle activity, including exposure to resilient OPEX spend. This provides a durable foundation with greater revenue visibility and a resilient performance across market cycles. Put together, growth across all core divisions reflect the characteristics of an inflecting upcycle, with broad expansion of activity across exploration, development, and intervention as operators ramp up efforts to restore production and bring new capacity online. In digital, third quarter revenue was steady sequentially and margins remained strong despite digital exploration sales declining, following exceptional sales in the second quarter. continue to recognize the benefit of AI and digital operations, and we deliver more than 750,000 feet of automated drilling this quarter, an increase of nearly 50% year-on-year. Additionally, the Hillops predictive analytics, our intelligent real-time monitoring and advisory system, is now monitoring more than 20% of active international rigs, representing year- on-year growth of more than 60 percent as you can see adoption continues to accelerate and we are very pleased with the progress of our digital business profino has grown 11 year to date and we have clear visibility into higher sales in the fourth quarter as a result we anticipate finishing the year with double digits year-on-year growth and adjusted data margins exceeding 35 percent finally data center solutions continue this strong growth trajectory, supported by the progression of existing projects and geographic expansion into Asia. During the quarter, we continue to invest in facilities and talents to expand our execution capacity, including a new manufacturing center in Canada to support the Meta data center project that are essential to meet surging customer demands. Upon closing of our essential announced acquisition of Calvion, the Kelvion portfolio will also benefit greatly from this momentum and would accelerate our ambition to become a leading industrial partner into the AI infrastructure build-out. In summary, I'm extremely proud of our first quarter performance, and I want to thank the entire SLB team for delivering these results. Their focus on execution, innovation, and our customer centricity continues to make the difference. Let me now turn to the Macron environment and a fundamental supporting outlook as we approach 2027. Ongoing disruptions continue to reinforce the importance of energy security and the need of a reliable, geographically diverse source of supply. At the same time, the industry continues to face the structural challenge of offsetting natural decline and replacing reserves following several years of limited exploration. Collectively, these conditions are supporting a broader and increasingly diversified international opportunity. In the near term, this will support production, intervention, and other short-cycle activity. Longer term, it is providing a strong foundation for the progression of offshore developments, renewed exploration, and new areas of investment emerging across several markets. Let me briefly discuss how these long-cycle dynamics are evolving. Deepwater represents one of the industry's most advantaged sources of new supply, combining attractive project economics, material resource development, and long-duration production. We continue to see this opportunity broaden across Latin America, Africa, the Eastern Mediterranean, and Asia, with FIDs expected to increase more than 30% year-on-year in 2026 and many projects advancing from sanctions into execution. For SLB, this momentum is reflected into a continued flow of One Subsea awards, further strengthening our backlog and increasing visibility into 2027 and beyond. One example is our recent award in Mozambique, where One Sub Sea was selected to deliver Subsea production systems for the first phase of ExxonMobil Deepwater Rovima energy development. This project will contribute to an important new source of global gas supply and further demonstrates the progression of large, long-cycle deepwater development into execution. In addition, fundamentals for exploration are improving, as operators seek to reserve, to replace reserves and diversify supply following several years of restrained investment. We see this materializing through new licensing activity in Brazil, the eastern Mediterranean, and West Africa. Growing interest in frontier basins such as Namibia and preparations for future campaigns across deep-water markets, including Vienna and Suriname. As exploration assumes a greater role in our customer portfolio, SLB's leading position across exploration data, subsurface modeling, and evaluation technologies positioned us to capture this growing opportunity. So far this year, SLB has participated in the evaluation of approximately 80% of completed high-impact exploration waste globally, many of which are concentrated in frontier and deepwater basins. Beyond deepwater and exploration, international markets are offering new pathways for growth, with opportunities broadening across conventional and non-conventional resource in the Middle East, as well as key emerging markets. In this context, Venezuela represents a particularly significant growth driver for SLB. Following more than a decade of limited investment, activity in the country is accelerating, led by international oil companies. For SLB, it is already translating into revenue growth. Our revenue in Venezuela is on track to more than double this year, with strong momentum among U.S. and European EMPs, supporting the potential for multifold growth in 2027. At the same time, major U.N. share operators are expanding internationally, entering new countries and partnering with NOCs. These trends have broadened the addressable market, particularly in exploration and deep water development across Africa, Latin America and Asia, as well as in conventional and unconventional resources in the Middle East. Looking across these dynamics, long cycle offshore development, renewed exploration, digital adoption, and U.S. operators expanding globally all confirm a durable multi-year international investment cycle with clear visibility into 2027. With market leading position across our core divisions, we recently established leadership positions in global production, differentiated digital capabilities, and an unmatched global footprint. SLB is uniquely positioned to capture this upside. Now let me conclude with our expectations for the fourth quarter and our first view of the 2027 market outlook. Over the past several weeks, the Middle East has continued to experience heightened tensions. Given the ongoing uncertainty, our fourth quarter outlook assumes Middle East revenue remains flat, sequentially at approximately $1.9 billion, representing about 83% of revenue generated in the fourth quarter of 2025. Based on this assumption, and supported by continued deployable momentum, as well as the typical year-end strength in digital and product sales, we expect overall fourth quarter revenue to reach approximately 10 billion dollars, representing an increase of 5% to 7% sequentially. As a result, when excluding the Middle East, global fourth quarter revenues expected to grow in the high single digits year on year. We also expect adjusted EBITDA margins to expand 100 to 150 BPS. at the division level we anticipate combined revenue from the core division to sequentially increase by low single digits led by high signal digit growth in production systems and with well construction however for performance essentially flat in digital revenue is expected to increase in line with fourth quarter historical trends led by significant uptake in typical year and digital exploration says this outlook provides clear evidence that the next phase of that cycle is underway while our near-term outlook remains dependent on geopolitical developments eventual an eventual resolution of regional disruption in the list would unlock deferred activity and serve as a powerful catalyst for our selected world in 2027. looking ahead to 2027 Assuming Middle East activity remains at second-half 2036 levels and that the conflict doesn't naturally escalate, we expect global OFSC market activity to grow in the mid-single digits, with normalization of activity in the Middle East providing further upside. Against this backdrop, we expect our core divisions to visibly outperform the market, reflecting our differentiated exposure to the strongest area of activities, including long cycle offshore development, renewed exploration activity, production recovery investment, and the activation of Venezuela. Beyond the core, we expect digital to continue its established growth trajectory, while our data center solutions business will continue to accelerate as a meaningful growth engine for the company. I will now turn the call over to Stéphane to discuss our financial results in more detail. Thank you Olivier, and good morning ladies and gentlemen third quarter earnings per share excluding charges and credit was 64 cents this represents an increase of nine cents sequentially and a decrease of five cents when compared to the third quarter of last year during the quarter we recorded three cents of merger and integration charges related to the champion x transaction as well as a 12 cent or 187 million non-cash pension settlement charge. This was the result of offering a lump sum payment to certain former employees in one of our pension plans. This transaction, which was funded directly by assets of the plan, allowed us to de-risk our largest pension plan by reducing both our pension obligations and plan assets by almost 900 million. This will help us lower potential volatility as well as manage future pension costs. Importantly, the plan remains very well funded. Overall, our third quarter revenue of $9.45 billion increased 5% sequentially. This performance was driven by the Middle East, growth in North America land, and strong international deepwater activity, including upside in 1.7C. In the Middle East, we experienced a gradual recovery as first quarter revenue of $1.9 billion increased 13% from the previous quarter. Sequentially, our pre-tax segment operating margin increased 104 basis points, with margin expansion across all four divisions company-wide adjusted the beta margin for the third quarter was 21.9 percent representing a sequential increase of 71 basis points let me now go through the third-quarter results for each division fourth quarter digital revenue of 693 million was essentially flat sequentially As strong platforms and application sales and higher revenue from digital operations and professional services was offset by lower digital exploration revenue following a very strong second quarter. Digital pre-tax operating margin of 28% increased 27 basis points as improved profitability in digital operations and platforms and applications, more than offset the effects of lower sales of exploration data licenses and transfer fees. We expect digital exploration revenue to increase significantly in the fourth quarter, which will result in strong year-on-year growth for the digital division and adjusted EBITDA margin exceeding 35% for the full year. Reservoir performance revenue of $1.6 billion increased 5% sequentially, while pre-tax operating margin of 16.3% increased 140 basis points. These increases were primarily driven by the gradual recovery in the Middle East. Well construction revenue of $2.9 billion increased 5% sequentially, primarily driven by higher drilling activity in the Middle East. Pre-tax operating margin of 16.4% improved 122 basis points, mostly due to the Middle-East activity rebound. Production Systems' revenue of $4 billion increased 6% sequentially, driven by the recovery of Middle East activity, increased sales in North America, and strong One Subsea activity. One Sub Sea also recorded a steady flow of new contract awards, increasing backlog, and further enhancing subsea revenue visibility into 2027. Production systems' pre-tax operating margin of 16.1% increased 60 basis points. We brought base growth in one subsea, artificial lift, completions, and production chemicals. Notably, the acquired ChampionX businesses delivered their highest quarterly revenue and margin since joining SLB. Finally, in the all-over category, revenue increased 8% sequentially, driven by strong growth in data center solutions, while pre-tax operating income decreased slightly as a result of ramp-up costs associated with new data center projects. With regard to our previously announced agreement to acquire Calvion, things are progressing quite well. A dedicated integration team has been put in place that has kicked off its various work streams, and we are in the process of making all necessary filings in the relevant jurisdictions. We are very excited about the opportunities that this transaction will bring and we remain on track for closing in the first half of 2027. Now turning to our liquidity. We ended the quarter with net debt of $9.2 billion, the same level as the first quarter of last year. We generated $1.5 billion of cash flow from operations and $828 million of free cash flow. Looking ahead, consistent with our historical pattern, we expect a meaningful step-up in free cash flows in the fourth quarter, supported by lower inventory following year-end product sales and higher customer collections. The magnitude of the sequential increase in free cash flow will largely depend on the timing of collections in certain countries. Capital investments, including of CAPEX and investments in APS projects and exploration data, were $682 million in the third quarter. For the full year, we still expect capital investments to be approximately $2.5 billion. During the quarter, we repurchased $656 million of our stock and are on track to repurchase approximately $2.4 billion for the full year, in line with 2025 levels. This will bring our total returns to shareholders for 2026 slightly above $4 billion, inline with the commitment we made earlier this year. I will now turn the call back to Olivier. Thank you, Stéphane. I believe, Sarah, that you are ready for taking questions. Thank you. We will now begin the Q&A session. If you would like to ask a question, please press star followed by the number 1 on your telephone keypad. Your first question comes from the line of James West with Meliott Research. Your line is open. Hey, good morning, Olivier, Stépane. Morning. So, Olivier, I think in your prepared remarks, I mean, it seems like almost every part of your business, whether product line or region, you know, X, the Middle East, of course, which is still has uncertainty, is inflecting higher. And I'm curious if you could parse that out a little bit further and let us know kind of which areas or maybe which products, product lines or service lines you think will grow faster than others. No, thank you, James. We believe indeed that the cycle has started. And I think it has the characteristics that are very probable to our footprint and to the composition of our business line. Indeed, I think we are seeing that the combination of deep water exploration rebounds for a long cycle. We see the investment flowing into production recovery to improve the production or improve the recovery of the assets. And we see the development of new areas, geographical areas that are attracting investments, such as Venezuela, Argentina. and all this without the catalyst of a resolution in the list that will add growth. So I believe that indeed we are set for all divisions and all basins to benefit for growth in 2027 and beyond. And we believe that, again, it goes from digital to production recovery, from deepwater to unconventional, and with exploration being certainly an optic that will match very well our footprint and match very well our portfolio of technology. So yes, it is, I would say, broadly an infection that is characteristic of an upcycle with long duration. Great. That's very helpful. And then on the exploration side, I happened to speak to a group of explorationists recently and spent some time with the heads at many of the major oil companies, and then, of course, one of your senior people as well. Capital is definitely flowing there. For the first time in maybe a decade, they were happy about capital. Where are you seeing the most exciting exploration at this point? I think we see several. What is very good in this exploration circle, I think, is a mix of infrastructure-led exploration in very well-known natural basins that still have pockets of oil or gas to be unlocked and to be connected to and with opportunity for sustainable development in those. And I think that relates to the West Africa metro basin as well as North Sea on both sides of the sector and then, obviously, Gulf of America. Now, there is a lot of frontier basins and a lot that are expanding, and I think this is partly true in the Americas. And Brazil, I think the Pelotas Basin is attracting a lot of attention, as well as the Atlantic Margin or the Marginal North, I thing which is along with continued investment into Suriname and Guyana, I thin are clearly a spotlight for this. The same as in Namibia, in further the Namib Basin in Angola, as a part of Africa and East Med. Then I could keep going east to East India, Indonesia, that has attracted a lot of investment due to gas reserves and potential there. And through large discovery has been made and entering subsidy development going forward. So it all combined, it's an exciting cycle for exploration. I think the combination of energy security heightened priority, priority, as well as depleting reserves and the pressure of declining production are adding and fueling this investment in exploration. Great. Thanks, Olivier. Thank you, James. Your next question comes from Scott Gruber with Citigroup. Your line is open. Thanks, and good morning, Olivier and Stéphane. Good morning, Scott. Good morning. Good morning. So, a number of growth drivers, you know, into 27, as you outlined. But I'm curious, because this is a question we often get from investors, you should we see resolution in the Middle East in the not-too-distant future and crude moderates back to $65 or $70, you know, similar to what we saw back in June. How resilient do you think the growth drivers would prove to be, obviously the Middle East would improve, but do you see much risk to the mid-single-digit growth outlook, excluding the Middle Eastern, at more mid-cycle crude prices, or would the secular elements at play here sustain a healthy growth rate? No, Scott, I believe that we should keep in mind that a lot of biles have been lost to this crisis, A lot of pull on the strategy reserves and commercial inventory, exhibited inventory, to the point that I think it is clear that additional investment needs to be thrown through activity into supply in the future. Additionally, I think the realization that energy security is vital to the future of economic growth is also adding a diversity of supply. so this week is carrying the condition that the commander made early on exploration to create the conditions that are not here for one year for six months but the up cycle is adding some legs both from the on long cycle including exploration deporter on short cycle including a production recovery activity that is materializing across and that is very well illustrated into growth that we are enjoying and that and that will uh be the base for the 2027 outlook so we believe that uh uh we will we are set the market is set for uh mid single digits global uh activity growth uh assuming middle east uh being flat on the 2026 but this means that uh we'll visibly perform this and the Middle East catalyst will become a catalyst on the peace deal going forward. I appreciate that. And I wanted to turn to Venezuela. The opportunity here certainly appears to be materializing more quickly than many anticipated initially. Can you provide some more color on what you're seeing in the market? And you mentioned that Venezuela could double this year with multiple growth in 27. Kevin, how large could Venezuela become for SLB in two to three years' time? I know you guys said, you know, a billion dollars back at peak. I'm curious, kind of in a ballpark, where do you think the market could grow to here in the next two to three years? No, we remain very excited about Venezuela. Every time we look into it, I think we are realizing that the activity is set to increase further. And I think, you are getting several catalysts for this. We are getting first and foremost in lockstep with our customer that we have been working on with for the last two years. We are seeing activity increase currently and in the near future. And they have made an announcement for further increment of capex into the region. So we'll be fully participating to this upside. But additionally, several of our international operators have committed, have come to agreements in the country. And we have benefited from this and by signing contracts. And we are already started with another large contract execution this quarter. So we expect this to only continue going forward. So how big it can become, I think we have mentioned that the potential is for multiple fold next year. And I think it is trajectory to certainly continue going forth. And I think we have mentioned before the historical level of $1 billion or both in the long term. So we don't see why not this as a ceiling or there is no ceiling. Why not as a target, as an ambition going forward? So we are well prepared. We are adding resources, adding equipment, and we are getting the trust because we have a unique capacity on the ground and ability to deliver. Great. I appreciate the color. Thank you. Thank you, sir. Your next question comes from Sara Pant with Bank of America. Your line is open. Hi, good morning, Olivia and Stefan. Good morning, Saab. Olivia, maybe I want to dig in on the Middle East topic a little bit more because we saw you deliver a strong 13% increase in the Middle East revenue, and that was despite some late quarter disruptions, right? So that kind of tells me you were running ahead of expectations, perhaps, before the disruptions hit. Can you maybe share some more color on the disruptations and if these disruptions are continuing right now? And then what was driving this, I guess, stronger than maybe anticipated recovery before these disruptations hit? I know you talked about winning some contracts and clearing those integrated running contracts. Maybe some color on all of that. Yeah, first, I think, indeed, several countries did participate to the brief of activities in the third quarter as the security situation started to ease off in several countries. And I think this included the UAE, Kuwait, to a lesser extent Qatar, and to a less extent Saudi, that at the beginning of the quarter clearly had an increase of activity. And this was concentrated on some intervention activities, stimulation, and drilling activity across the region. Iraq, by contrast, was not necessarily getting the same uplift of activity, but Oman was steady. And that's the situation that turned out to be slightly ahead of our expectation indeed at the run rate as we were at mid-quarter. Now, at the end of the quarter, some adjustment of activity were done, and I think this has been fairly publicized. I don't want to go back on this. We see things stabilizing, though, and our expectation is that the fourth quarter will be at current level of disruption, I would say, and without further escalation of the conflict going into a worst-case scenario, we are seeing that the first quarter will in line with the third quarter, and that's our assumption. And this is the hypothesis we have made in our guidance for 2027 market outlook as well. So that's, in essence, where we stand. Now in relation with the integrated contract, we are very pleased with this award that touched both gas and oil assets. And this is an activity that is definitely going forward and for which we are mobilizing in the fourth quarter and will come to full capacity in 2027 going forward. And I think that's untouched and certainly a committed contract for which they are getting resource and they're getting increased activity going forward got it no thank you that's very useful color olivia and then for my follow-up maybe i stick to the middle east and focus on the margin side of things a little bit i know there are lots of cross currents lots of uncertainty but just given everything that we have heard about uh disruptions and cost inflation and then some pricing pressure on larger tenders how should how should we think about where margins can go in maybe 27, but I'm just thinking more broadly, if revenues normalize in the Middle East to, let's say, the pre-conflict level, can margins normalize to that level immediately, or would it take more time because of everything that's going on on the pricing and cost-safety? Sorry, Stefan, here. Yes, I mean, you are using the Middle Eastern as a swing factor to margins, and it's clearly a significant negative effect This year, if you look at the year-on-year performance, as we have indicated earlier, we have actually decided intentionally to address only partially the resources in the Middle East, not to hamper our capacity to address the activity rebound. So we are keeping some resources in place. when the conflict is resolved and activity rebounds. As a result, we'll have very strong operating leverage, very few additional costs to bring in. So that will increase margin. Now the overall level of margins of the company, it's not just the Middle East, that will be a booster. We will have likely less inflation effects going into 27 because this is already kind of baked in, if you want. We also hope that pricing pressure we have experienced in some of our core divisions will also abate and are also backed into the current margins. But then you have all the mix of the divisions, you know, digital is a booster, obviously on margins, data center on its own, as it grows very fast, is, as you know not accretive to the overall SLB margin. So it's a big equation, which we are not going to give you the answer today. We will provide more color on our 27 margins in January. But overall, yes, the Middle East will be a catalyst for margin expansion for sure. Right. No, thanks, Stéphane. And that equation is not up to solve in the meantime. But thank you. Thanks for all the moving pieces. Olivier, thank you, and I'll turn it back. Thank you. Your next question comes from Arun Jayaram with JPMorgan. Your line is open. Arun Jayaaram, JPM. Yeah, good morning. Olivia, I was wondering if you could comment on some of the trends you're seeing at ChampionX. On a year-over-year basis, obviously partial quarter data from last year, but it looks like revenues were up in the mid-teens and margins are now pushing in the mid-20s. So I just wanted to talk a little bit about some of the trends here and how is the ability of SLB to scale that business internationally versus when you bought it? No, as you have seen, we are very, very pleased with the performance of Champenex. I think the result of the success of the integration team having landed this business to be very resilient and as well as very successful in innovation and customer centricity. which were attributes of champagnex in north america so you have seen that uh the quarter was uh was remarkable in terms of uh top-line growth and further margin expansion for the fourth consecutive quarter based on the both pollution chemical success and and and uh and engulfed and uh also that should lift uh both in north american and uh with more potential internationally so i think internationally as we mentioned through the prepared remark i think it it would have been even better without the conflict in the Middle East as we have an optionality for expanding the ChampagneX portfolio internationally, particularly in the Middle East and across several offshore basins. So this is progressing and I think this will be certainly an upside into the ChampaignX growth trajectory in 2027, both internationally offshore and as the conflict is getting to an end, we'll have a further catalyst for the ChampagnX success. But yes, we are very pleased the thing reflects again the ability we have to integrate and to leverage their technology and to leverage our global footprint and our customer engagement to make it successful. And I'm very pleased with the performance. Congratulations to all the Champonnex employees and to the integration team into the production system portfolio. I think the combination is attractive for our customers and all the feedback we're receiving from customers both in North America and abroad is that they like the combination, they like the power of production recovery, they lack the potential of unlocking further recovery and production performance through both production chemicals and lift technology including digital. So very, very, pleased with the performance so far. And as to the margins level, Arun, yes, you are right. We are ChampionX touched now the mid-20s on EBITDA, which is clearly accretive to the overall company. And this is despite inflation pressures, particularly on chemicals. So the synergies, including in GNA, have been higher than we expected and have mostly offset those inflationary pressures to the point where margin continues to expand quarter after quarter. So clearly, we are going to achieve our interim synergy target of about $200 million after 18 months post-acquisition, which is basically the end of this year. And we are not going to stop there, and we are quite happy with the margins the businesses are generating. Okay. And then my follow-up, I was wondering if you could just elaborate on 1-sub-C visibility as we think about 2027. Obviously, you announced the Exxon Rovuma LNG Award in Mozambique, but are you seeing 2027 as a year where there's going to be a lot of greenfield activity in terms of larger awards and maybe just speak to the visibility you're seeing as we extend into this deep water cycle? No, thank you, Arun. I think I will not restrict this to 27. One subsea award typically are multiple multi-year revenue generation. So, I mean, whatever is earned in bookings in 25 and 26 reach out to 27 to 29 typically. So I think directionally, I think the success we have had in recent months and the booking projection that we are anticipating, I think we believe that we will surpass the 9 billion target booking that we have set across the two years. I believe this will translate into visible growth on revenue in 27 and 28 and beyond. And as we believe that the technology portfolio we have, the deliverability of our capacity to the market, the multiple alliance we have created with joint field study with customers to secure FID and to participate in the best economics and best recovery solution for the customer, are all combining to make it very attractive, including the subsea processing technology where we are uniquely positioned to unlock recovery solutions for metro basins. So all in, we are quite confident into the outlook for subsea that is aligned with the deepwater cycle that has started, and we believe that we'll benefit from it and one subsea will be a growth driver for the company going forward. Great, thank you. Your next question comes from Sebastian Erskine with Rothschild & Co. Redburn. Your line is open. Good morning, Olivier and Stephan. Good morning. Good morning! Congratulations on a strong North America quarter, obviously 7% sequential growth. Maybe you can talk about some of the building blocks of that performance, how much of it It came from that production-linked revenues, obviously the Champion Exide and Artificial Lift, rather than the sort of activity-linkged work. And what are your expectations for North America next year outside of data center solutions in the core business? No, we are indeed very pleased with the North America sequential goals. I think beat sequentially on year-on-year. I think we believe we have been ahead of the market, And we believe that the factor that supports this is the combination of our market position in North American lands, not only Champagnex and the production recovery portfolio we have there, a combination of production chemicals and absolute lift solution, but also our drilling technology and our digital portfolio that includes now the S&P Energy. I think all factors that will continue to support our performance in North America lands, including Canada and the U.S. And conversely, North America offshore and some of the activity we have in Alaska or in North America offshore in the Gulf of America will continue to also support North America growth and with performance with digital exploration and contracts across trading and result performance that will continue give us growth. And finally, as you know, data center solution will serve as a new leg of growth in North America, going at the rate that you have seen, very impressive. And we are well on track for surpassing $1 billion by the end of this year as a run rate. And we're still on track and very well on tack to surpass $2 billion as an exit rate for 2027. So you combine all of this, differentiated portfolio and technology in North America lands, continued differentiation in North American offshore, including Alaska, and digital, and then an uptick and a new growth vector of growth with data sensor solution, and you get the North America market that is poised to future growth despite the market condition that will qualify it as a logo for environment going forward. I appreciate the color, Olivier. And just turning to data center solutions, I noticed in the release you've expanded into Asia this quarter. I'm curious, how large could the opportunity outside the U.S. become for your business? And also, how is the customer base kind of broadening beyond your sort of initial hyperscaler contacts? I think we have potential to grow and replicate the setup we have put in America internationally. Now it's early days, and I think we are leveraging the hyperscaler contract we have and delivering for end use, we say, for data center construction or data center development into Asia at this point, and then replicating to some extent some of the capability we have developed with our manufacturing hub in Louisiana and expanding it with some satellite capability of manufacturing integration that we have deported into Asia and then delivering our end customer into Asia market. So this, we believe, will continue to happen. But I think the potential we see, as you have heard from the META contract in Canada, and as we develop further hyperscalar contract in North America, will still be centered in the short term with North America growth. And we continue to diversify our customer base. And I think we'll be in a position next year to more develop and deploy and inform you about this. But this is certainly a multiple customer contract that are being deployed and being logged in our backlog. And that will give us the support to growth. And additionally, obviously, the acquisition announcement we have made on Kelvion will only add to this, and the feedback we are getting from our existing and prospective customers in this domain is that they love the combination of our manufacturing engineering technology capability and the Kelvon technology portfolio that supports thermal management and heat management in the data center space. that is an equation that is difficult to resolve where a lot of efficiency, a lot of upside exists, and a pool of technology, the pool of integration in which we will play as a partner for this infrastructure build-out. Thank you very much, Olivier. I'll turn the call back over now. Thank you. Thank you Your next question comes from Alexa Brino with Goldman Sachs. Your line is open Good morning, team, and thanks for taking our question. I'd love to dig into the 27 commentary a little more. Can you provide some color on the outlook there from a regional perspective? And then as you look across your global footprint, where are you seeing meaningful trends in customer spending? I think I will not go into detail on the guidance for 2027. We provided color and directional trends, and yet I will reaffirm that we see the market giving us the opportunity to grow in every basin, across every division in 2027, based on, I think, the combination of the portfolio we have, the compact we have put in our backlog, and the differentiated technology portfolio that give us an upside in each of the basins. And each of the basins has a combination of deep water for Latin America, for North America, for Europe and Africa, and for Asia. It's a combination and unconventional for Middle East and Latin America. And all of these basins also have a need and an increased investment in pollution recovery across all basins. So, now, directionally, I believe that, as we commented earlier, exploration will be very visible in Africa and the Americas. Deep water will be visible in the Americas, including North and Latin America, Africa, and Asia. And conventional will happen internationally in Argentina and the Middle East region. and the conventional cost of development or production recovery will occur in every basin. So again, we believe that all of this provides a tailwind across the entire portfolio and across all divisions, as we expect every basin to benefit. Thank you. I really appreciate that, Kolar. And then maybe just a follow-up, can you talk a little about the digital offering and some of the opportunities set there from a customer perspective? Yeah, I think we are very pleased with the progress we are making in digital. I think as we commented earlier, I think digital operation, particularly, and data and AI are the two vectors of growth that I think are the most excited about. Additionally, I don't think digital exploration is about to benefit from a secular trend coming into exploration markets. So I think these are the three vectors of growth that we see that will certainly support our growth ambition for the next few years. Digital operation, as we commented before, relates to both training and production operation. It's a combination of platform application and edge application that allow us to provide automated solutions for our customers. We have been commenting on the success we are getting into drilling automation and drilling optimization. The same, I think, applies to production optimization. So digital exploration clearly will continue to be a factor of growth going forward. Now, adding to it, digital exploration, as we have seen, is benefiting from a circular trend or a new upcycle in exploration. and every new frontier basin is getting the benefit of digital exploration to de-risk the development, to de-'risk the exploration campaign. And I think we are seeing increased interest from our customers to invest into data, to invest in reprocessing, and to invest to digital AI capability to improve the imaging and improve the capability that we can provide to de'risk this exploration and accelerate the success. And finally, data and AI as a new vector of growth, as a disruptor for the industry. We believe with our offering, with our Lumi offering, AI Tela offering, we are seeing early adoption that I think indicates that this has the potential to disrupt and become a new factor of growth for digital in our company. Thank you very much for the call, or we'll turn it back. Thank you very much. I think so. Your next question comes from Mark Bianchi with TD Cowan. Your line is open. Hey. Thank you, very much, I guess, following up on the digital, I know you didn't want to get into too many specifics on the drivers for 27, but just given the strong year that seems to be unfolding for that business, do you anticipate that it can continue a double-digit growth in 27 just given all the exploration visibility that you that seems to be coming in i think are you talking about digital exploration specifically or digital at large digital at life yeah i think digital at-large the ambition we have is to continue to operate at the level of these uh double digits uh or about or higher and i think uh we have the attributes as i said combination of digital exploration cycle there is several bowling as we turn into 27. uh digital operation that has started as you have seen last year this year continue to be on a high growth rate record and we believe that we continue to make progress as you are seeing the number of automated the uh uh fit uh drilled uh this uh this year to date and the production i think production digital version and the pollution domain is where there is the most upside in our opinion as the most uh the most attractive uh uh opportunity that we have going forward so we we believe this will play out in in 2027 and beyond and um and finally as i said ai is a disruptor that i think will play and support as a leg of growth going forward serving these three uh in addition to our resilient platform uh uh portfolio i think should uh should combine to the exploration data, the digital operation, and the data and AI should combine to provide us with the leg of growth that we look for, the budget again in 27 and beyond. Very good. Thank you, Olivier. The other question was on data center, the data center business, and with Calvion, you increased your content opportunity. I'm curious what your appetite is for further M&A to continue to increase the content opportunity, or is it more likely what we'll see here is you increase that on an organic basis? We are very pleased with what we have managed to get as an acquisition, and I think we'll be concentrated on closing this. We'll concentrate on fulfilling, I think, the ambition and the strategic opportunity that we have unlocked with this. I think this indeed will give us an opportunity to increase our share of the wallet per gigawatt. And I think we have a significant backlog with a large number of, an increasing number of customers, including IPR scalers, that will give a support to put it to work and to participate in optimizing the thermal efficiency and hence to increase the share of wallet to increase our participation into this market and to provide not only a fit modular manufactured solution but also integrate more and more into the engineered thermal and manufactured solution for the market. So I think this is where we will focus in the foreseeable future and then depending on how the market develops we will see what could come next but this is where we're putting our focus going forward yep very good thank you i'll turn it back thank you your last question will come from derek pothiser with piper sandler your line is open hey good morning i just wanted to ask about production systems yeah morning you guided our production systems up i think it was high single digits for the fourth quarter you mentioned throughout the call production chemicals artificial lift which obviously ties into the champion x acquisition completions we've talked venezuela one sub c a lot of the visibility there maybe if you could just talk to the different levers for just fourth quarter specifically seeing that high single digit outperformance and how we should maybe thinking about this directionally as we work into 2027 i know we'll hear more uh in january but just kind of early thoughts uh just these different lines within your production systems which is obviously gaining some momentum here yeah i think uh we are very pleased with the performance position system we're very pleased at large of our strategy uh production recovery is taking taking shape and i think reflects into uh into the position system backlog and into the portion stem potential going forward now the fourth quarter has an effect of uh uh end of year uh uh product sales uh and includes one sub-sear part of it. So, I think as we comment every year, the product, the year-end product sales is a factor that shapes the sequential performance of production system no different than any other year. I think in a year that is indicative or characteristic of the cycle, this is magnified. But now going forward in 2027, we will not comment at this point directionally, but as I commented earlier, we anticipate every division to be experiencing growth in 2027, and this one will be led by the combination of the portfolio that you mentioned, Champagnex, obviously, the completion, the one subsidy, I think clearly a portfolio that will benefit going forward from the deep water, from the short and long cycle activity outlook that we believe we will participate fully and outperform going forward so i think production system is a resilient uh short cycle and long cycle and has a durable backlog characterized particularly that will give us legs of growth going forward in 27 and beyond great that's helpful maybe just to wrap up again addressing the 2027 outlook i know it assumes the middle east stays flat from the second half of 26 you're calling for market growth in the up mid single digit range i guess help us walk through or frame the magnitude of the upside in this market here um if we do see a middle east recovery i don't know if you want to talk through on a country by country level but just help us understand where that mid single-digit can can really ultimately go to if we see some form of resolution and recovery i think first i think to to clarify i think we have been commenting on the on the market outlook that we see at this point and based on our early engagement of customers also based on and reflecting on some third-party analysis on the 2027 outlook that the combination of um north american international including and assuming a flat middle east activity is said to be in the mid single digit growth year-on-year. We believe that we are set to visibly outperform this, and obviously the Middle East resolution will only give a catalyst for additional growth into this. Now, I will come short of giving you exact guidance on this, okay? I think it will be an internationally-led upcycle going forward, but you have seen the commentary that I provided earlier that we're very pleased with market position and performance in North America. So again, we have multiple leg of growth ahead of us in this cycle. You should only consider the Middle East, depending on the resolution of the conflict, as a potential to come back, if not to exceed previous activity pre-conflict, as some of the countries in the region will not only have to mobilize activity to restore the production capacity, but we'll also continue to accelerate on their capacity commitments, be it on commercial gas or oil in the region. So going forward, I think this is only serving as a catalyst going forward. But again, 2027 at this point will witness international growth despite Middle East, and Middle East being only a catalyst going forward on top of it. Great. Very encouraging. Thank you, Olivier. I'll turn it back. Thank you. I will now turn the call over to SLB for closing comments. Thank you, ladies and gentlemen. As we conclude today's call, I would like to leave you with the following reflections. First, our third quarter performance demonstrates that momentum is broadening across SLB. Its geography and core division grew sequentially, with a gradual recovery in the Middle East complemented by solid growth in North America and continued strength across the international offshore markets. Second, our core portfolio is benefiting from increasing activity across development and production. The strengths and originals of our expanded production portfolio, together with growth in well construction and reserve performance, position us to participate as customers optimize existing assets and develop future activities. And third, the international outlook continues to strengthen. long cycle offshore projects are progressing the foundation for renewed exploration are taking shape and new opportunities are emerging across several markets combined with the continued progress in digital and accelerating momentum in data center solutions where our reach will be further expanded through the acquisition of calvium we are well positioned to capture attractive growth opportunity across both energy and industrial markets these dynamics reinforce our confidence in delivering differential growth and outperformance as we move into 2027. With this, I will conclude today's call. Thank you all for joining. This concludes today's conference call. Thank you for joining, you may now disconnect.