SLB N.V. (SLB) Earnings Call Transcript & Summary

Good afternoon. Thanks for joining us at the Fifth Annual JPMorgan Energy Conference, the first in a virtual format. I'm Sean Meakim, JPM's oil services and equipment analyst, and we're very happy to have a keynote address here and fireside chat with Schlumberger's CEO, Olivier Le Peuch. Olivier is a more than 25-year veteran of Schlumberger who transitioned into the CEO role over the past year. And in doing so, he's initiated a significant strategic pivot for the company towards a more capital-light model, refocusing on the company's core competencies, taking costs out, all to boost margins and returns and at the same time, leading the industry into the next age of digital. So a full plate for sure. Olivier, welcome.

Thank you. Thank you, Sean. So ladies and gentlemen, good morning. I'm very happy to be here today, and I would like to thank you, Sean and JPMorgan, for the invitation to present at this conference. So last fall, I introduced a vision for evolving Schlumberger for a resilient future. Since then the world has changed, reinforcing my conviction about the new industry landscape and the need to build the Schlumberger of the future. I shared my view that Schlumberger of tomorrow will not be the Schlumberger of today. This is now certain, and the company has already evolved significantly. We have accelerated the restructuring of the company to execute on our strategy, which is centered around driving our customer performance, as performance clearly matters in this new normal. Next slide, please. Today, I will update you on our view of the short- and mid-term industry outlook and our response to the new industry normal. I will also give you an update on our digital strategy, reiterate our sustainability ambitions, followed by an introduction of a completely new business, Schlumberger New Energy, which represents a new element of our corporate strategy, specifically in the New Horizons of Growth theme. Next slide, please. Before I go any further, let me remind you that some of the statements I will be making today are forward-looking. These statements are subject to risks and uncertainty that could cause our results to materially differ from those projected in these statements. So therefore, I refer you to our latest 10-K filing and other SEC filings. Let's begin by considering the magnitude and speed of change we are witnessing. Next slide, please. At the end of March, global oil demand and supply were at a historical imbalance. Demand destruction resulting from coronavirus containment efforts magnified the effect of the existing oversupply conditions. Two months into the most challenging quarter in our history, it is clear that the extent to which oil demand returns and how quickly it grows will determine industry activity and investment for the next 2 years and beyond. North America land activity during the second quarter, as represented by rig count, stage count or competed wells, is declining sequentially to the upper end of our expected range of 40% to 60%. U.S. land activity has dropped more than expected, particularly frac activity, falling in excess of 60%. Drilling in U.S. land has fared marginally better, though the rig count has fallen slightly more than half. Internationally, Latin America, Africa and Europe have experienced the largest activity declines in the quarter. These markets have endured more COVID-related restrictions, while deepwater activity has also fallen more sharply than anticipated. Meanwhile, the activity of low-cost producers, such as those in the Middle East and Russia basins, is proving more resilient. In aggregate, the second quarter international rig activity is expected to decline by about 20% sequentially, excluding Russia land and China. Although we forewarned that Q2 will decline severely, the drop has been sharper than expected, due not only to the severe decline in North America land activity, but also due to the COVID-related disruption in the international markets. In addition, there was more than a month's disruption in our APS production project in Ecuador caused by a major landslide leading to the rupture of the main pipeline. In this difficult environment, we are staying closer to our customers, working collaboratively with them to eliminate costs as opposed to responding with pricing concession. We continue to focus on resilience and performance. The feedback from our customers is very positive and will favor us when activity levels rebound. Looking to the second half of the year, we expect production curtailment and the gradual resumption of demand to hold supply and demand in relative balance while maintaining a floor on oil price. As a consequence, in North America, the conditions are set for a temporary, albeit modest, activity increase in DUC completions, though from a very low base. By contrast, risk of further decline persists in the international markets due to continued disruption of rig operation as a result of the pandemic and the impact of the OPEC+ supply cuts. These declines will be partially offset by the seasonal activity rebound in some basins. Hence, directionally, international activity is likely still looking for the bottom during the second half. Before we look into some strategic investment for the future industry landscape, let me reiterate the actions we have taken to manage the crisis and position the company to be more resilient in the future. Next slide, please. As the magnitude of the crisis became apparent, we reacted swiftly. We reduced operational capacity to meet the lower activity level and took exceptional measure to preserve liquidity, made the prudent decision to reduce our dividend and alter our capital investment plan by cutting 2020 CapEx, including APS and multiclients, by 40% from $2.7 billion in 2019 to $1.6 billion in 2020, and lowering our research and engineering spend by 25% from $717 million to an annualized run rate of $540 million. However, as we looked beyond the downturn, we realized that we had to transform Schlumberger to a leaner, more responsive company, quickening the strategic exchange already underway, particularly those relating to our capital structure and our fit-for-basin approach. To construct the platform from which we will execute our new strategy, major changes to our organizational structure were accelerated. With the ambition of a more agile organization fully aligned with our customer workflow, we are moving to 4 divisions from 17 product lines and are structuring our geographic organization around 5 key basins of activity. The impact of this reorganization, and other actions we have taken, will permanently remove over $1.5 billion of structural costs on an annual basis. We will incur cash costs of approximately $1.2 billion to $1.4 billion as a result of both restructuring and reducing our variable headcount. The payback period for these cash costs will be less than 1 year. Additionally, the rationalization of our asset base is ongoing and will result in additional noncash charges. While we are confident that the outcome of these restructuring efforts will materialize in our Q2 results, greater impact will be realized during the second half of the year. We are indeed on plan to fare significantly better than in previous down cycles, as measured by margin decrementals, but also expect this new structure to support improved incremental margins, as we progress through this downturn and activity firms up. These are changes that will have a lasting impact. Schlumberger will be a new company for a new era that will reward the best operational performers, the most disciplined allocators of capital and the most responsive with digital technology, and we intend to be the leader in all of these. With that in mind, I would like to discuss part of our strategy that will drive our performance partnership with our customers. These include digital, sustainability and New Energy. Next slide, please. Today, I would like to share with you 2 perspectives on digital: first, the impact of digital on our own operations; and second, the acceleration of digital adoption among our customers and across their workflows and operations. Several years ago, we redesigned our wellsite operating model leveraging digital technologies and processes that enable remote work, resulting in 60% of our current drilling operations being run remotely with real-time control. The recent crisis accelerated customer acceptance of remote drilling operations, which for Schlumberger have increased 30% over Q1 thus far. Moreover, we are using remote capability in over 80 countries and workflow beyond drilling. For instance, we are using digital inspection in manufacturing centers across 13 different countries. I'm convinced that massive adoption of digital technology will help us reset our operating model and dramatically reduce our operating cost base. Today, we routinely reduce our operational headcount by 25% when operating remotely, and soon we will reach or exceed 50% on certain wellsite operations. At the same time, we'll increase our performance differentiation using data science and automation to optimize equipment and operating procedures with greater efficiency and lower cost. Digitalization of our own operation will significantly impact incremental margins when activity rebounds. Next slide, please. Last fall, I declared the future is digital. Actually, that was misleading, the present is digital. Our customer recognize the potential value of digital transformation and are evolving the methods of finding, developing and producing hydrocarbons. They will rely on increased volume of data captured and consumed through integrated and reengineered workflows, allowing them to make faster and better decisions. Foreseeing the value that cloud capabilities and data in an open architecture would produce, we created a digital environment, DELFI. Here, customers can innovate and integrate workflows, supported by powerful yet accessible AI capabilities. Last year, we contributed our data ecosystem to the Open Subsurface Data Universe Forum, an open industry consortium. The OSDU, as it is called, now has over 140 member E&P companies, 5 global cloud providers and multiple system integrators who are jointly working to standardize on this open data ecosystem for the industry. This has really created the digital foundation for industry, ready for scale and adoption. In this context, the collaboration with Chevron and Microsoft announced last fall is progressing very well and is a prime example of digital transformation. As customers worked through their digital strategy, we have significant acceleration of customer engagement and DELFI adoption. In the last 12 months alone, DELFI user growth has exceeded 300%. Let me now share 3 examples of our digital offerings -- how our digital offerings are creating value for our customers. Increasingly, customers seeking to accelerate field development are electing to adopt our comprehensive digital solutions for their subsurface workflows. Woodside, a leading Australian gas producer, has chosen an enterprise-wide deployment of the DELFI environment and subsurface workflows to reduce time to FID and to lower technical unit costs. During the COVID pandemic, Woodside did accelerate the deployment of DELFI to enable remote working for one of their international asset teams with much success. Beyond subsurface, customer realized that significant value can be unlocked in their drilling operations. We have developed a digital drilling planning solution, DrillPlan, that uniquely brings together all participants into the well delivery process, increasing efficiency and consistency while reducing costs. ExxonMobil, one of the early adopters, is using the DrillPlan solution in their unconventional operation. We are very pleased to share a common view of digital drilling solution with such an industry leader. Finally, we have an opportunity to create data business models, leveraging our unique digital capability. GAIA, our digital subsurface platform, is enabling some of these new business models, for example, the National Upstream Gateway solution. It digitalizes a country's subsurface information and allows us to enrich, develop and better market the resource holder's asset to a global audience. We recently announced the Egypt Upstream Gateway, where we are working closely with Egypt's Ministry of Petroleum and its affiliates to promote Egypt's exploration and production potential worldwide through this digital platform. We are very proud to be trusted by the Egyptian government to support their E&P vision and believe the success of this model will support further adoption in other countries. These different application will generate new revenue streams not previously touched by Schlumberger. Indeed, we are not relying solely on application software sales, but are combining enterprise deployment digital services, software-as-a-service, cloud operation and data transactions. We have been bold -- I have been bold, on the promise of digital in the future. Today, we see the industry adopting digital technology at scale, and we believe that our early digital investment has positioned us very well to benefit from this acceleration. Just as leading in digital is critical in this new landscape, so is sustainability, both in the oil and gas space and in the context of the energy transition. Next slide, please. Stewardship is part of our culture, and we have a number of programs and initiatives that impact sustainability, some of which we have been actively engaged for decades. More recently, I updated the vision and purpose of the company to more explicitly articulate our sustainability commitment. In our most recent proxy, we outlined our current ESG priorities and goals, some of which are incorporated in my cash compensation objective and those of my executive team. To address Schlumberger's emission footprint, last December we committed to set a science-based target, making Schlumberger the first company -- service company in upstream oil and gas to do so. Unlike setting a net-zero target for some distant future date, we are committed to setting a science-based target by 2021, which we are on track to do, with results to be completed within a 5- to 15-year period. These targets will cover both our direct emissions and those of our key suppliers, including end product and services. Our target will be validated externally by the Science-Based Target initiative. Meanwhile, we have set an initial target to reduce GHG emission intensity from Scope 1 and 2 source by 30% by 2025. We are seeing significant progress with strong examples across organization. For example, our Egypt operations base, shown here, has reduced electricity consumption by 26% by integration of solar into power generation and will reach up to 50% of the completion of Solar Energy Phase 2 by year-end. To help our customers achieve their sustainability goal, we currently have around 100 technologies or solutions that reduce emissions or negative impacts to the local biodiversity. For instance, Schlumberger developed a fit-for-basin solution for BP in Oman to achieve a significant reduction of CO2 emissions to clean up and produce gas from the Khazzan Field after fracturing. In 2019, this technique was applied to 10 wells and resulted in 80,000 tons of CO2 emission reduction. Engagement with customers for collaboration on new decarbonization solution is increasing. We reiterate our commitment to be a more sustainable industry participant and are developing a number of technologies to support that commitment. Finally, I want to give you an introduction into Schlumberger New Energy, the division we launched early this year to explore new business opportunity in low-carbon or carbon-neutral energy technology. Next slide, please. I'm sharing this new element of our corporate strategy with you for the first time. As we recognize the future of Schlumberger will expand beyond oil and gas with the energy transition and consequently are positioning the company for significant growth opportunity for the long term. I will give you 2 examples within the Schlumberger New Energy portfolio that show our differentiated approach to participating into the low-carbon economy. Our business venture approach will focus on energy efficiency and energy storage as a priority, aimed at creating unique position in adjacent market and introducing breakthrough technology in energy verticals beyond oil and gas. One example highlights how we will use our domain expertise in areas adjacent to our existing activity, where we can deliver at scale using our global footprint and execution platform. The other illustrates how we use the new partnership models combined with our experience in technology industrialization to develop a new market for Schlumberger. The first example is in the domain where Schlumberger has a long track record: geothermal. Here, we can create access to the most valuable and continuous form of low-carbon energy resource. Last year, we began work on the low-heat geothermal as a source of heat for buildings and campuses, which led to a start-up called Celsius Energy in France. Today, 25% of greenhouse gas emissions stem from the heating and cooling of buildings. Celsius Energy aspires to plug buildings into the Earth's continuous and resilient energy resource to meet heating and cooling needs, reducing the associated CO2 emission by as much as 90%. Celsius Energy combines in-house technology, proprietary design optimization and modern digital control system to offer a fit-for-purpose solution for either existing or new construction buildings. Our solution integrates a subsurface multi-well heat exchange system with a surface heat pump exchange technology, operated by an automated digital platform. The result is a simple and smart solution for both heating and cooling, optimized for the local weather profile. The technology can reduce overall building energy consumption from conventional source by 60%, along with associated carbon emissions. Celsius Energy is installing its technical demonstration in our own Schlumberger Riboud Product Center in Clamart, France. For this innovative solution, Celsius Energy received the Solar Impulse label of sustainable solution and was recognized by the United Nations and the Bloomberg 50 Climate Leaders' Program. We have also attracted significant commercial interest from city councils, industrial site operators and building developers. The second example illustrates an area that not only leverage our technology industrialization know-how, but also a new partnership model. Hydrogen is a very versatile energy carrier and a key component of the energy transition for all countries that have set carbon neutrality targets by 2050. Both low-carbon or blue hydrogen and zero-emission or clean hydrogen -- or green hydrogen are critical to achieve worldwide emission reduction objectives. We will pursue both emerging markets for carbon-neutral hydrogen production: the first by combining carbon capture and storage, CCS, with hydrogen production using natural gas as a feedstock, and the second, through water electrolysis powered by renewable electricity. In clean hydrogen or green hydrogen, Schlumberger New Energy is launching Genvia, a hydrogen-production technology venture in partnership with the French Alternative Energies and Atomic Energy Commission, called CEA, and with Vinci Construction. This new venture will accelerate the development and first industrial deployment of the CEA, high-temperature reversible solid oxide electrolyzer technology. SOE can potentially be a game-changing technology in the medium term because it offers unique and efficient method to produce clean hydrogen by water electrolysis using a renewable source of electricity. Genvia's mission is to deliver differentiated system efficiency when producing hydrogen from water, compared to current commercial electrolyzer technology, and as such, enabling clean hydrogen production at highly competitive price. Low-carbon hydrogen could reach volume greater than 10 megatons by 2035, representing a significant growth opportunity for Genvia and for partnerships in CCS hydrogen production. As you have seen from this venture, New Energy opens a new exciting chapter for the company, a chapter with diversified growth in new market vertical, yet building on the Schlumberger intellectual capital and unique international franchise. Final slide, please. Ladies and gentlemen, I want to leave you with 4 key takeaways. First, we believe that the decisive and comprehensive measure taken in recent months to face the reality of our industry will protect our liquidity and cash position and sustain more resilient margins with lower decrementals compared to the last downturn. Second, we have taken a long-view approach to restructuring our company, not only to align with our customer workflows to empower a lean and agile organization, but also to accelerate the realization of our performance strategy, with capital stewardship, fit-for-basin and digital as key attribute of success. We are building Schlumberger for the new industry landscape. Third, we are accelerating our own digital transformation for operation, with a significant efficiency prize to be captured. We are also convinced that our DELFI environment will be the industry foundation for the future of both subsurface workflows and data value services. We are positioning for greatest benefit to -- for the greatest benefit in this new age, as leading digital partners and customer continue to adopt our platform, allowing us to expand into new revenue stream and business models. Finally, we are making a step change in our commitment to sustainability, and to the decarbonization of oil and gas operations, including our own operations. At the same time, we are accelerating the introduction of low-carbon technology solution for our customers. The launch of our New Energy business represents a key milestone in our sustainability journey. It holds the promise of diversification of -- and new horizon of growth beyond oil and gas, building on our own domain knowledge and technology expertise. Our venture approach will allow us to hedge our investments across several technologies and market sectors. While the path to activity recovery will remain uncertain, I'm extremely optimistic about the potential of Schlumberger as a new company in the future industry landscape. Thank you. Back to you, Sean.

Olivier, thanks for that presentation and the update on the strategy. So we have time for some questions. Starting out, can we talk about the reorganization? This will be the second major change you're reporting in 4 years. And it's a big change in terms of how investors will need to think about the business geographically, 5 basins, 4 divisions. Can you talk about the imperative here in terms of how the business is going to run and why that is a major driver of the rationale for the change?

Yes. I think the rationale of the change was twofold: first, I think, aligning the organization to the strategy; and second, I would say that the -- not wasting a crisis and using this opportunity to align the structure to the new normal. So we are trying to achieve 3 goals with this new strategy. First and foremost, alignment for customer workflow and strategic initiative. That's the reason why we have got a division to integrate our product line around key core workflow production system, reservoir performance, well construction as well as putting aside digital integration that compress all of this workflow and support all of this across the organization. Secondly, establishing the basins. We focus to enable the go-to-market or fit-for-basin element of our strategy, which is very critical for the future landscape of our industry, in my opinion. As every region, we have to be finding a new competitive scape -- landscape and to find its new economics through performance and through specifics in every basin. So we believe that combining the division of customer workflow for technology integration and basin approach will help us to combine the best. The third reason with this was to establish a new lean and agile organization and with more empowerment into what we call the geo units. So we have 4 divisions, 5 basins, but where the rubber hits the road, as what we say, is in the 30 geo units. We have 30 geo units that are empowered to take decision and to work with each of the 4 divisions to make the best aligned with the fit-for-basin for every customer in these geo units. So that's the second aspect is lean, agile and powered organization for every division in the geo units. Finally, I think this restructuring gave us an opportunity to realign and simplify the organization, and as a consequence, eliminate one management position out of 3 -- one structure support position out of 3. Hence, the significant savings that we are seeing, and we'll start to hit our margins positively from this quarter, to some extent, and mostly in the second half, as I explained in the introduction remark. So position for the future, align with our strategy, realign with customer workflow, agile and lean, I think we are -- it was necessary to do this. It was the right time.

And so that leads to, I think, another critical question, which is around measuring results, something that investors are increasingly focused on given all the change. A lot's happened in the world since you put out those long-term financial targets back in the fall. But by the time -- reclaiming prior peak international margins, doubling them in North America and getting free cash flow on a margin basis back to double digits. So you haven't stepped away from those. They're likely further out of reach than you would have anticipated back in the fall. But as we trough in this downturn here, I guess, how should investors think about the type of transparency that Schlumberger is going to offer around those targets? And just what's the broad road map from here to there?

Okay. So first, let me comment and reiterate that, indeed, these targets that are set have not changed, and we still have the ambition indeed to return to a big margin. So the gap during this downturn will be a little bit more than 500 bps for international, but I think we believe we have the path first to return to the base of where we were and next to expand. And the same for North America using different strategy, as we already explained, asset-light and fit-for-basin technology-access strategy and similar for free cash flow. So we will provide as we are transitioning to this new structure organization. Between now and the end of the year, we will obviously have to transition into new reporting -- financial reporting that will report on a quarterly basis, the performance of each division. And we will intend, on a yearly basis, to provide and disclose our international and our North America margins. So I think the investor will see the progress, and obviously, we'll be able to reconcile from the past on international margins, on North America margins as well as on free cash flow, and we'll be able, on a quarterly basis, to follow our progress in each of the divisions that we have set for the future. So I'm feeling confident that within the next 2 years, we'll be in a position to restore our margins where we left them when we're initiating this strategy in 2019 and build from there to then energize our strategy, I would say, or execute on our performance strategy to using the fit-for-basin, the digital, the technology access and the new horizon of growth to realize the upside in international market as well as executing on our scale to fit technology access, fit-for-basin in North America to uplift the margin to be back on double digits. So yes, we have taken a setback in terms of delay, but I think that the strategic reorganization and restructuring we are doing will actually help us catch up very, very fast on our original path forward as we'll be able to execute in a more agile way our strategy with better margins going forward.

That's very helpful. And then digital strategy, there's a clear competitive advantage for Schlumberger tied with the reservoir, but as you know, one of the key themes of the cycle has been secular deflation, and it's been driven by technology, digital being just one lever. Can you talk us through how you expect Schlumberger to capture the value that it can create through digital? And do you expect potential deflationary effects to impact the core OFS portfolio? How do we think about the interplay?

I think the way we see it is twofold. First, the way we see it is that our strategy is a performance strategy, and we achieve performance by using our process, our competencies, our technology and digital in the field operation. And this benefits, obviously, our customers. The economics -- we are challenged when the -- on the other side of this downturn, the industry will be challenged to readjust to new economics. And we believe that technology, performance focus and digital would be key enablers of unlocking these new economics. We will innovate our way through these new economics, no doubt about it. We have done it as an industry, and we are positioned to do this. This, we believe, will create the condition for not only an acceleration of digital, but also consolidation of market position we have in the market where we have a performance differentiation, be it in well construction, in production or reservoir performance. So we believe that the strategy we have will protect our market position, and digital will augment this. So now the secular nature of compression of margin or transitional value, I believe we can offset this in 2 ways for digital: first, by executing our own operational digital transformation with -- which we have started, and we are, I would say, in the fifth or sixth innings and very well progress. So we'll accelerate the remote operations, we'll accelerate the automation of some of our operation, we'll accelerate the back-office automation and use of digital tools to help and to achieve productivity and efficiency gains in our operation as well as maintaining the performance because we monitor operations. Hence, we are sure, the advanced performance, and we do this for our customers. Secondly, and this, obviously, over time, the competitive nature of our business will make everybody try to catch up. We believe we have an edge, and we'll maintain this edge over time. Secondly, we have taken a different approach than some of our competitors, and we are willing to establish new revenue stream on digital. We used to only have some data processing and/or software sales as part of our digital portfolio. Now we will have cloud operations. So we are regaining access to the infrastructure IT cost of our operator by running the operation on their behalf. We are obviously, through this transition to cloud operation to new -- digital transformation, being involved and as such, providing consulting and transformation services, which for every account, for every customer for which we deploy this, we have associated the revenue services that is new. And finally, we have data, be it the AI capability to provide data license and/or the data transaction that we provide with platform like exploration platform, the GAIA exploration platform, for which we collect data transaction on behalf of the hosting country where we host these all partners that are willing to post their complementary data on our site and hence, giving assess to marketing fees. So we have new revenue stream that are being deployed in addition to the historical digital revenue stream that we have, then augmenting and diversifying our digital streams going forward. So this combination, we believe, will help us offset some of the competitive pressure on digital and also offset some of the value transfer. But yes, I'm looking forward to the operator, transforming themselves through digital and gaining -- economics gain to do this. But I believe by doing this journey and being at the forefront of this journey and being the platform in the industry, OSDU adoption is amazing. We have 5 cloud companies working in this office, okay? So I don't want to name them. You can guess who they are. Global technology, they're working with us permanently to work to import our DELFI into their cloud environment so that they can offer DELFI to our customers for every cloud platform that exists out of the market in the public space. So that's amazing. So we believe that having access to this and being the platform of the industry will help us create this revenue stream that will offset some of the risks that you are highlighting.

Very good. And of course we want to touch on New Energy. It was a big part of the discussion in the presentation earlier. It didn't go unnoticed here that Ashok Belani, your Key Technology Officer, is going to be heading up New Energy. Can we just talk about -- you gave some really great examples here. Can you talk about not just the ability to take your current core competencies and apply them into these new markets, how can investors try to size or assess the impact of this business on a medium- or long-term basis? I think that's the challenge for folks is going to be seeing these technologies, but then how do we scale them to a point where it has meaningful impact on the financials?

No, it's a very good question. I think our ambition first in the short term is to establish ourself into several verticals, that in the New Energy market, using different approach than some of our competitors have. I will not use capital investments, large capital investment. I will not go into wind or sun or solar. That's not the intent at this point. The intent at this point is to use our strength. Our strength is subsurface. So the geothermal, the CCS and technology industrialization and deployment. We have done this with success historically. We are still deploying instrumentation and sensor into the march-forward. So if we can do this for [ renaissance ], we can do a lot for the industry. So that's the reason why we are pursuing venture -- technology venture in the New Energy domain, and we believe that hydrogen, both the green hydrogen or the blue hydrogen, as it is called, as I mentioned, a unique opportunity for us to deploy technology at scale into this and participate in the production of clean hydrogen for the future. So one would be more as a service, designing and cooperating with -- and partnering with some owners of hydrogen production plants and then providing them the CCS and the CO2 capture. The third one will be more on the technology. So we believe that this period will last a few years when we will do this investment. Obviously, we'll have the maturity in 2 years to make larger investment and scale this and provide the investor the path to a significant growth opportunity into this energy storage, energy efficiency, be it CCS, geothermal or be it a more diversified avenue of growth in technology as exemplified here.

And so we're kind of coming up on time, but I'd be remiss if I didn't ask about the balance sheet and cash flow. You reduced CapEx. Again, we've resized the dividend here. We've got some noncore asset sales. Those will help, but some others may be stalled. It's a difficult environment. There'll be some drag on the cost-out program, but working capital will also help. So a lot of moving parts in 2020. Could you just talk about your confidence in terms of free cash generation in '20 and '21 as it pertains to dividend coverage, and ultimately, the ability to delever the balance sheet over a longer-term basis?

So I think 2020 is, as I said, a difficult and a challenging year, yet I believe that, as you said, the cost-out program that we are executing, the favorable working capital, in fact, will somehow partially offset the significant decline of the net dollar operating margins and free cash flow we generate. Our ambition will still be to generate positive free cash flow every quarter going forward, starting this quarter, and to have the ambition to cover dividend as soon as we can in a given quarter with the new dividend. I feel more confident, and I feel quite confident that in 2021, we will indeed cover our dividend from free cash flow, and we will be in a position in 2021 to reduce debt. And that will be our intent. So we believe this because we believe that the measures we have taken, the structural costs we have eliminated, the market position we have in international and the execution of our NAV strategy will all combine to give us a very good footing as we start 2021, albeit not assuming any rebound in 2021, but a flat outlook from the exit rate of 2020 -- of this year and producing from this, the cash flow, we believe that we'll largely exceed our dividend commitments and as such be in a position to produce debt deleveraging in 2021. So that's our confidence going forward.

Well, it was a good point to leave it. So Olivier, once again, thanks very much for this presentation and spending time with us today at JPMorgan Energy Conference.

No, thank you, Sean. Thanks a lot, and I hope that I will have engagement with some of the investors this afternoon and we'll be able to answer more questions. So thanks a lot for the invitation, and thank you for the nice conversation. Thank you, Sean.

Thanks, Olivier.