Olivier Le Peuch
CEO & Director at Schlumberger
Thank you, James. Ladies and gentlemen, thank you for joining us on the call. This was a very strong second quarter for SLB, showcasing our ability to harness the ongoing growth cycle while driving efficiencies throughout our business. During today's call, I will cover three topics. First, I will review our second quarter results. Then I will describe the dynamics of the cycle and how we are positioning our business for further growth and margin expansion. And finally, I will share our updated outlook for the full year and discuss our ongoing commitment to returns to shareholders. Stephane will then provide additional details on our financial results, and we will open the line for your questions.
Let's begin. I'm very pleased with our strong second quarter performance. Sequentially, revenue increased 5%, adjusted EBITDA grew 11%, adjusted EBITDA margin expanded 142 basis points and we generated $776 million of free cash flow. These results were driven by continued growth momentum in international markets, with more than half of our international offshore units posting the highest revenue quarter of the cycle.
Overall, international revenue grew 6% sequentially, led by the Middle East and Asia, which continued to set new records with two-thirds, eight out of 12 of the offshoring units in the area posting record high quarterly revenue. This was fueled by capacity expansion projects, new gas developments and production recovery investments across the region. Additionally, the ongoing strengths of the offshore markets supported further growth in Europe and Africa as well as Latin America. This was particularly pronounced in deepwater basins including Brazil, West Africa and Norway, where we continued to benefit from strong backlog conversion in OneSubsea. We also benefited from new projects on land, notably in Argentina and North Africa.
Meanwhile, in North America, revenue increased 3% sequentially. This was led by the Gulf of Mexico, where we saw increased drilling and higher digital revenue from sales of exploration data licenses. However, this sequential growth was partially offset by lower drilling in U.S. land as the market continues to be constrained by weaker gas prices, capital discipline and ongoing market consolidation.
Next, let me describe how this growth played out across the divisions. In our core divisions, we continue to harness this cycle, with revenue growing 4% sequentially and pretax segment operating margins expanding by 120 basis points. Growth was led by our production systems and reservoir performance divisions, which visibly expanded margins due to the probable conversion of backlog as well as mini business line operating at record activity levels. Demand for services and equipment is being further reinforced by the combination of long cycle development activity and the acceleration of production recovery investments, particularly in the Middle East and Asia and Latin America.
Well construction also grew sequentially supported by offshore developments, although this was partially offset by weaker land activity in North America. Overall, the core divisions continue to deliver margin expansion, combining to post their 14th consecutive quarter of year-on-year pretax segment operating margin expansion.
Meanwhile, in digital integration, I was very pleased to see highly accretive sequential growth, highlighted by our digital business reaching a new quarterly high and supporting visible sequential margin expansion. This puts us on track to achieve our full-year ambition of digital revenue growth in the high teens. We have opportunities to build on this momentum as customers are increasingly choosing to partner with SLB to modernize their digital infrastructure, as you have seen in a number of announcements included in today's release.
At the end of the second quarter, we had 6,900 users on the DELFI platform, an increase of 28% year-on-year. Additionally, the number of connected assets increased by 57% and trading 12 months compute hours increased by 43%. Combined with our first quarter results, SAB first half adjusted EBITDA grew in the mid-teens compared to the same period last year, in line with our full year ambition. Moving forward, we will remain focused on driving quality revenue growth and leveraging operational efficiency to grow EBITDA, expand operating margins, generate robust cash flows and meet our commitment to return to shareholders. I'm here to clearly express my full gratitude to the entire SLB team for delivering such a strong second quarter and first half results.
Next, let me describe how the market is evolving and the steps we are taking to capture profitable growth across the business. As the cycle continues, investments will increasingly be targeted to in the most resilient area of the market, including key international markets such as the Middle East and Asia, and in offshore globally. In these areas, we are seeing long cycle gas and deepwater projects, production recovery activity to address natural decline, and increase digital adoption to drive efficiency and performance. This is an optimal environment for our business, and we are seizing each of these opportunities.
In the Middle East, in addition to the exposure to the oil capacity expansion program across the region, we continue to benefit from the acceleration and scale of investments in gas development, both conventional and unconventional, leveraging our fit-for-basin technology and differentiated integration capability. Offshore, we see the benefits of our OneSubsea JV, as highlighted by the number of high value contracts award and partnership included in today's release.
For OneSubsea, we're helping customers unlock reserves and reduce cycle times through an extensive subsea production processing technology portfolio, and we're increasingly being offered opportunity to partner with customers in early engineering phases to unlock the economics of the assets.
In production and recovery, we are seeing customers embrace our offerings as they work to offset natural decline, extend performance and maximize the value of their producing assets. We have many solutions to help customers access resource to our production system and reserve our performance division, and this is showing up in the strong results these divisions are achieving. As this market continues to evolve, we expect to strengthen our portfolio to fully capture this growing opportunity to obtain the acquisition of ChampionX.
Finally, underpinning nearly everything we do is the power of digital and AI. In today's market, accelerating the time to returns and extracting new level of efficiency are top of mind for our customers, and they are increasingly recognizing that upscaling their digital infrastructures is a key enabler in these areas, presenting us with significant opportunities for high-margin growth.
In summary, SLB is well positioned across key resilient markets. We remain focused on expanding margins through quality revenue growth, and this is complemented by heightened focus on operating efficiency, support structure optimization and strategic resource allocation in certain markets to align with expected levels of activity going forward. To support these ongoing cost efficiency actions, we recorded a charge this quarter, and Stephane will share additional details on this topic later in the call.
Overall, the positive market dynamics and our continued focus on operating efficiency present a strong backlog for continued outperformance. We look forward to enhancing these dynamics to deliver further growth and margin expansion in the second half of 2024 and in 2025.
On that note, let me conclude my opening remarks by showing our updated outlook for the year. Based on our strong second quarter and first half results, we expect full year adjusted EBITDA growth in the range of 14% to 15%, and full year adjusted EBITDA margins at or above 25%. Specific to the third quarter, we expect sequential revenue growth in the low single digits enhanced by further margin expansion. This will accelerate as we move towards the end of the year with visible increase in top line growth and an uptick in margin expansion during the fourth quarter due to seasonally higher year-end digital and product sales.
Lastly, we returned $1.5 billion to shareholders over the first quarter through the combination of stock repurchase and dividends. In the second half of the year, we expect to generate higher EBITDA and strong cash flows supporting our full year commitments. Directionally, we expect a strong exit of the year to position us for continued revenue growth, margin expansion and cash generation, reinforcing our commitment to continue returns to shareholders in 2025. I will now turn the call over to Stephane.
