Olivier Le Peuch
Chief Executive Officer at Schlumberger
Thank you, ND. Ladies and gentlemen, thank you for joining us on the call today. In my prepared remarks I will cover three topics. I will begin with an update on our first quarter results. Then I will share our latest view on the macro and our positioning for long-term success. And finally, I will close with our outlook for the second quarter and full year. Stephane will then provide more details on our financial results, and we will open for your questions. It has been a great start of the year as we have achieved results that sets us on a solid footing for our full year financial ambitions. On a year-on-year basis, our financial and operational results were strong across all geographies and divisions.
Following the remarks that I shared in our earnings release this morning, I would like to emphasize a few key highlights from the quarter. First, we delivered very solid year-on-year growth at the magnitude last seen more than a decade ago. Geographically, year-on-year growth rates in North America and internationally were comparable. More importantly, the rate of change is tilting more in favor of the international markets where sequentially we experienced a smallest decline -- seasonal decline in recent times.
Collectively, our core divisions grew year-on-year by more than 30% and expanded operating margins by more than 300 basis points. We continue to position the core for long-term success with significant contract wins and technology innovations that improve efficiency and lower carbon emissions. A great example is EcoShield, a geopolymer-based cement-free well integrating system and one of our latest transition technologies launched earlier this quarter. You will find many examples of this contract wins and the performance impact of our new technologies in today's press release.
In digital, we maintained strong growth momentum and also secured more contract wins. At the division levels, the amount of year-on-year revenue growth in digital was somewhat masked by significantly lower APS revenue due to production interruption in Ecuador and lower project revenue in the Palliser asset in Canada. Additionally, digital continues to help us elevate our efficiency and margin performance in the Core as we deploy these solutions at scale in our global operations.
And in new energy, we continued to make progress across our portfolio, notably with new carbon capture and sequestration activities that raise our involvement to around 30 projects globally. CCS is organized as one of the fastest-growing opportunities to reduce carbon emissions. And with the tailwinds from the U.S. Inflation Reduction Act and other initiatives around the world, we expect more project to move forward to final investment decisions in the next two years.
Finally, we are delivering on our commitment to increase returns to shareholders. During the quarter, we relaunched our share buyback program with repurchases totaling more than $200 million worth of shares. I would like to really thank the entire SLB team for their hard work and for delivering yet another successful quarter.
Moving to the macro. We maintained a constructive multi-year growth outlook. Through the first quarter, the resilience, breadth and durability of the upcycle have only become more evident. I would like to take a few minutes to describe these factors. To begin, the underlying demand, investments and activity during this cycle are resilient despite short-term economic and demand uncertainties. The combination of energy security, the initiation of long-cycle projects and OPEC's policy sets the condition for a decoupling of the activity outlook for short-term demand uncertainties.
Indeed, energy security remains a top priority for most countries and is driving structural investments that are governed primarily by national interest. The extent of these investments is resulting into a broad ranging growth outlook, comprised predominantly of resilient long-cycle projects in the Middle East, the international offshore basins and in gas projects. Collectively, we expect these market segments to reach or exceed more than two-third of the total global upstream spends and support long-tail of resilient activity over the next few years.
In parallel, the North America market characterized by higher short-cycle exposure is also set to benefit from positive demand outlook and supportive commodity pricing. However, this will be impacted by an anticipated activity plateau in the short-term, which will subsequently be affected in production volumes.
Moving to the dimension of breadth and duration. These are also best emphasized by the latest activity outlook for the Middle East and offshore market segments. Fundamentally, the pivot to both segments as anchors of supply growth is a defining attribute of this cycle. This is providing an unprecedented level of investment, visibility and the scale that is setting many records.
In the Middle East, the largest-ever investment cycle has now commenced. This will support ongoing capacity expansion project over the next four years in both oil and gas. Consequently, this year, we expect to post the highest revenue ever in the Middle East, putting us on track to achieve our multi-year growth aspiration.
Simultaneously, we are witnessing further activity expansion in the offshore markets. Offshore activity continues to surprise to the upside with breadth and the diversity of opportunities across all major basins. In addition, the latest FID projection and industry reports indicate that the offshore sector is set for its highest growth in a decade with more than $200 billion in new projects through the next two years.
This growth will be supported by three layers of activity. First, the resumption of infill and tieback activity in major basins, which was very visible across Africa in 2022. This will continue to strengthen in multiple geographies from this year onwards. Second, ongoing large development projects in both oil and gas that are ramping up and starting to scale. This is evident in Latin America such as Guyana and Brazil; and in the Middle East, such as in Saudi Arabia, UAE and Qatar. And third, the resurgence of exploration and appraisal activity, which is starting to gather strong momentum in the existing basins and new frontiers. From West and South Africa to the East Mediterranean, we're starting to see exploration appraisal at the pace that was unforeseen just a few months ago. Additionally, the activity pipeline continues to elongate with new licensing rounds and new blocks awarded. As a result, we believe that we will continue to witness durable offshore investments for many years to come.
Let me spend a couple of minutes highlighting what this means for SLB. As this cycle unfolds, the characteristics I've described continue to align with major strengths in our Core. This will support additional activity intensity for well construction, accelerated growth opportunities in reservoir performance through the return of exploration and appraisal activity and further long-term growth potential for Production Systems. One such example is the TPAO Sakarya project in Southern Black Sea offshore, Turkey. This project evolve all our Core Divisions to putting the development of the challenging subsea gas asset and the simultaneous construction of a gas production facility, demonstrating SLB's unique ability to integrate at-scale from pour [Phonetic] to process.
Looking more in the -- our Production Systems division is in a unique position as the long-cycle level of growth was with quarterly year-on-year results demonstrating our ability to fully harness its potential. We believe momentum is set to continue, benefiting from our strong market presence in the Middle East and in offshore basins. In this division, we anticipate cumulative bookings in the range of $10 billion to $12 billion in 2023, up significantly from 2022. We have taken a strong step forward towards this ambition with more than $3 billion bookings in the first quarter and the outlook supports continued strong bookings through at least 2025. Overall, this will provide durable revenue growth and a significant installed base for services in the years to come.
In this context, our exposure to the deepwater subsea market remains an essential component of our growth opportunity and we continue to strengthen this part of our portfolio with much success. In subsea, we have grown 20% over the last two years and are already generating EBITDA margins in the high-teens, bidding in our technology, performance and execution and the depth of our processing portfolio. We expect strong momentum for this part of our business to be sustained through 2025 and beyond.
To conclude, we are in the midst of a unique cycle with qualities that enhance the long-term outlook for our industry; resilience, breadth and durability, all reinforced by pivot to the Middle East, offshore, gas and return of E&A. We could not ask for a better backdrop to execute our returns-focused strategy. During the early phase of this cycle, led by North America, our results have already demonstrated our ability to capture growth ahead of activity and expand margins visibly beyond pre-pandemic levels.
Looking forward, we are positioned to fully harness the international and offshore momentum that is now underway and to further our margins expansion journey. In the quarters ahead, we'll continue to demonstrate our returns-focused, capital-disciplined and commitment to shareholders' returns. I am truly excited about the outlook for SLB.
Next, I would like to comment on our progress over the shorter term. For the full year, our strong first quarter give us renewed confidence in our financial ambitions for 2023. We are primed for revenue growth and margin expansion for the year, underpinned by very solid international outlook. In North America, we still expect tangible market growth, but at a lower rate than originally anticipated at the start of the year, mainly as a result of ongoing weakness in gas prices. Taken together, we expect the strong international growth to offset any weakness in North America, keeping our full year ambitions intact. With year-on-year growth in excess of 15%, we should see both adjusted EBITDA growth in the mid-20s, more specific to the second quarter.
Directionally, we expect revenue to grow about mid-to-high single-digits with operating margins expanding by 50 to 100 basis points, driven by seasonal rebound in the international markets. Growth would be laid by Middle East and Asia area and continued momentum in the offshore markets. Building on this, we expect our second quarter adjusted EBITDA to reach new highs in this cycle, further expanding the earnings growth journey we initiated 11 quarters ago and taking another positive step towards achieving our full year ambitions.
I will now turn the call over to Stephane.
