Doug Becker

Doug Becker asked about the early customer response to the Valaris acquisition. He also inquired about what would constitute a win-win situation for both Transocean and Petrobras in the ongoing blend-and-extend negotiations.

Answer

Keelan Adamson, President and CEO of Transocean, reported overwhelmingly positive feedback from customers who understand the need for consolidation and improved service. Roddie Mackenzie, Chief Commercial Officer, and Mr. Adamson explained that a win-win with Petrobras involves cost reductions, optimization, improved terms and conditions, and securing significant extensions for the core sixth-generation fleet, ensuring continuity and efficiency.

Doug Becker (Capital One) sought clarification on what a 'win-win' scenario would entail for the Petrobras blend-and-extend negotiations, balancing rate relief for Petrobras with a successful outcome for Transocean.

Answer

Roddie Mackenzie (Chief Commercial Officer, Transocean) explained that Petrobras seeks cost reductions and optimization, including improved terms and conditions to reduce 'mutual waste' and increase revenue efficiency. For Transocean, it means significant extensions for their core sixth-gen fleet, ensuring long-term utilization and cash flow generation. Keelan Adamson (President and CEO, Transocean) added that continuity is crucial for performance and driving efficiencies.

Doug Becker of Capital One inquired about Weatherford's offshore outlook, given early signs of improvement in deepwater activity and the significant offshore applications of its key product lines like TRS, MPD, and completions.

Answer

President and CEO Girish Saligram expressed excitement about the offshore market, particularly for Managed Pressure Drilling (MPD), which he sees expanding to more rigs and diverse applications beyond drilling. For Tubular Running Services (TRS), the focus is on driving margin and efficiency. He highlighted tremendous improvements and advancements in completions, citing a broader portfolio and recent awards like the Petrobras Cycle Ten work. Mr. Saligram also noted interventions as a significant focus area, positioning Weatherford well for the market rebound.

Doug Becker from Capital One requested an expanded outlook on Weatherford's offshore business, particularly in deepwater activity, and the role of key product lines like TRS, MPD, and completions.

Answer

Girish Saligram, President and CEO, expressed excitement for MPD, focusing on enabling more rigs with MPD packages and exploring multiple opportunities. For TRS, the focus is on driving margins through efficiency and automation. Saligram highlighted significant improvements in completions, citing the Petrobras Cycle Ten award, and noted interventions as another key offshore focus area, anticipating strong positioning as the market fully rebounds.

Doug Becker inquired about the impact of intelligent completions and Weatherford Intelligence on the company's financial results over the next couple of years.

Answer

Girish Saligram, President and CEO, expressed excitement about the innovation engine, noting over 20 new product launches. He expects these technologies, especially intelligent completions and digital launches, to drive margin accretion (higher price, lower cost), reduce capital intensity (capital-light businesses), and improve working capital (less inventory for software), ultimately leading to higher margin growth and improved free cash flow conversion.

Doug Becker inquired about the anticipated financial impact of Weatherford's intelligent completions and Weatherford Intelligence technologies over the next couple of years.

Answer

Girish Saligram, President and CEO, highlighted three key financial impacts: margin accretion through higher pricing and lower costs, a capital-light business model reducing capital intensity, and improved working capital, particularly inventory reduction due to the digital nature of these offerings. These factors are expected to drive higher margin growth and free cash flow conversion.

Doug Becker from Capital One questioned what parts of the portfolio are left to optimize following the Argentina divestiture and whether more sales are on the horizon. He also asked about the company's appetite for acquisitions in the current uncertain market.

Answer

President and CEO Girish Saligram stated that they generally like the current portfolio and are not targeting specific product lines for divestment. Regarding acquisitions, Saligram confirmed it's an ongoing process and emphasized that unlike in past downturns, Weatherford is now in a position to 'play offense' with a strong balance sheet, creating optionality for strategic moves.

Doug Becker of Capital One asked for an update on Weatherford's three-year financial targets, specifically for EBITDA margins and free cash flow conversion, in light of the current market headwinds. He also requested more detail on the products and services driving the growth in the well services business.

Answer

CEO Girish Saligram acknowledged that near-term margin targets are impacted by the revenue decline but reiterated confidence in achieving high 20s EBITDA margins over the next three years, though the timeline might be pushed out by 6-9 months. He also reaffirmed the goal of 50% free cash flow conversion. Saligram explained that the well services business growth is driven by a combination of reservoir engineering, digital surveillance capabilities like fiber optics, and through-tubing rigless intervention, which offers customers a capital-light way to enhance production.

Doug Becker from Capital One requested an outlook for Latin America, given the dynamic backdrop in Mexico with a new president and reports of Pemex budget management. He also asked about the growth opportunity for Weatherford's digital offerings related to the production phase of the well life cycle.

Answer

Executive Girish Saligram described Latin America as the 'wildcard' for next year, likely flat to slightly down, with Mexico's situation being closely monitored. He identified digital production offerings as one of the company's most significant growth opportunities, leveraging its comprehensive artificial lift portfolio, unique Signet SCADA platform, and new Datagration capabilities to help customers rejuvenate mature fields and optimize production.

Doug Becker from Capital One asked about the resilience of North America Solutions' revenue per day despite industry headwinds, the expected decline in daily margin for fiscal Q1, and the outlook for daily revenue and operating expenses. He also sought insight into when daily margins might trough given a stable rig count.

Answer

Executive VP of Western Hemisphere Mike Lennox stated that the NAS market is expected to remain consistent, highlighting H&P's ability to work for 19 new customers in the last year and expand Permian market share from 33% to 37%. He emphasized investments in rig fleet and technology, and the company's leading position in revenue and lowest OPEX. CEO John Lindsay added that higher rig utilization drives increased costs.

Doug Becker from Capital One asked about the outlook for North America Solutions' daily revenue and operating expenses, seeking insight into when daily margins might trough given a stable rig count.

Answer

EVP of Western Hemisphere Mike Lennox stated that the NAS market remains consistent, with rig churn providing opportunities for new customers. He emphasized investments in rig fleet and technology, and the company's leading position in revenue and low operating expenses. CEO John Lindsay added that higher rig performance also drives costs.

Doug Becker of Capital One inquired about the feasibility of relocating suspended land rigs from Saudi Arabia to other markets in the Middle East and asked if the proportion of performance-based contracts in the U.S. could rise in the current environment.

Answer

President and CEO John Lindsay confirmed that relocating rigs to neighboring countries like Oman or Kuwait is a long-term possibility if they don't return to work in Saudi Arabia, though it's not being actively planned. On performance contracts, he noted they have been stable in the 50-60% range and while H&P always pushes for them, there's no clear near-term outlook for a significant increase. SVP and CFO Kevin Vann added that H&P's multi-year experience with these complex contracts is a key differentiator.

Doug Becker inquired about the business trajectory in Oman and Kuwait and asked for clarification on the moving parts driving the lower direct margin outlook for North America Solutions, questioning the role of performance contracts versus rig churn.

Answer

President and CEO John Lindsay reported positive customer feedback and growth opportunities in Oman and Kuwait. Regarding North America, both Lindsay and SVP and CFO Kevin Vann attributed the lower margin guidance to fewer calendar days in the quarter, normal rig churn, and quarter-to-quarter variability in performance contract revenue, emphasizing that base day rates remain firm.

Doug Becker asked for details on the components of the flat U.S. margin guidance, specifically revenue versus cost per day, and requested market intelligence on potential further rig suspensions in Saudi Arabia.

Answer

President and CEO John Lindsay and SVP and CFO J. Vann stated they are modeling both revenue and cost per day to remain stable, consistent with the $19,000 to $20,000 per day direct margin seen in recent quarters. Regarding Saudi Arabia, Lindsay noted that while H&P sees the same industry rumors as everyone else, it is not in a position to comment further but confirmed that H&P's own FlexRigs have not received any suspension notifications.

Doug Becker of Capital One asked about the outlook for CapEx and free cash flow in the fourth quarter of 2025, and whether recent structural changes in working capital management would lead to an upside bias in free cash flow conversion for 2026 and 2027. He also questioned if the widely anticipated offshore drilling pickup in late 2026 or early 2027 would result in NOV consistently achieving a book-to-bill ratio above one.

Answer

Rodney Reid, Senior VP and CFO, attributed the strong 95% free cash flow conversion in Q3 2025 to strong project execution, good contractual terms, and improvements in DSO and inventory turns. He projected working capital as a percentage of revenue to remain around 27-28% in Q4, with 2025 free cash flow conversion around 55%, and a sustainable 50% conversion for 2026. Clay Williams, Chairman and CEO, confirmed that the return of offshore drilling demand in late 2026 would be additive to existing production equipment demand, likely leading to a consistently above one book-to-bill, especially with a more constructive commodity price outlook.

Doug Becker asked about the outlook for CapEx and free cash flow in Q4, and whether structural changes in working capital management would lead to an upside bias in free cash flow conversion for 2026 and 2027. He also questioned if the expected offshore drilling pickup in late 2026/early 2027 would result in consistently above-one book-to-bill ratios.

Answer

Rodney Reed (Senior VP and CFO, NOV) attributed the strong 95% free cash flow conversion to project execution and improvements in DSO and inventory turns, projecting working capital as a percentage of revenue to slightly improve in Q4 and a sustainable 50% conversion for 2026. Clay Williams (Chairman and CEO, NOV) agreed that an offshore drilling pickup would be additive to existing demand for production equipment, potentially leading to consistently above-one book-to-bill ratios, especially with a clearer commodity price outlook post-OPEC overhang.

Doug Becker asked for an update on Halliburton's progress towards its international growth engines target of $2.5-$3 billion in annual revenue within three to five years, and whether the company is on track to outgrow the industry internationally. He also inquired about the outlook for Brazil, including a recent completion and stimulation contract, and any discussions with Petrobras regarding cost reduction.

Answer

Jeffrey Miller, Chairman, President, and CEO, confirmed that the international growth engines are 'on track.' He provided examples of progress, including a five-year contract with ConocoPhillips in the North Sea (production services), ESP contracts with Kuwait Oil Company and Ecopetrol (artificial lift), a continuous pumping record in Vaca Muerta (unconventionals), and the introduction of iCruise Force in the UAE and Qatar (drilling). Mr. Miller expressed strong positivity about Brazil, highlighting Halliburton's robust position with IOCs and Petrobras, ongoing technology development for the market, and expected growth in execution and technology uptake due given the complexity of deepwater operations.

Doug Becker sought clarification on the D&E margin outlook, noting the guidance implied a significant 300 basis point improvement in the second half. He also asked about the margin benefits from the recent severance charges.

Answer

CFO Eric Carre confirmed the margin outlook, explaining that significant Q2 mobilization costs for new contracts will abate in the second half, while the revenue from that new work will be realized, driving the improvement. He also stated that the benefits from the severance charge, which has a payback of less than one year, are already included in the company's overall financial guidance.

Doug Becker asked for more color on the drivers behind the sharper-than-usual Q1 revenue decline guidance and the expected revenue progression for the rest of the year. He also questioned the operating margin outlook for the Drilling and Evaluation (D&E) division, asking if margin improvement was expected in 2025 given recent product introductions.

Answer

EVP and CFO Eric Carre explained the Q1 C&P revenue decline is driven by the rollout of strong Q4 completion tool sales, while the D&E decline is primarily due to lower activity in Mexico and strong Q4 direct product sales. For the full year, Carre stated that they expect D&E margins in 2025 to be 'in the relative same ZIP code' as 2024, implying a fairly flat outlook.

Doug Becker of Capital One asked for an update on the status of private investment projects in Mexico and whether the company was in direct discussions regarding the payment of outstanding Pemex accounts receivable.

Answer

Incoming CEO Bruno Marsan confirmed that private investment in Mexico is a reality, citing one of Boar's rigs currently operating on such a project. He highlighted the government's goal for these projects to constitute a quarter of the country's production by 2033. CFO Magnus Fowler added that while there are no direct conversations, the Mexican government's public announcements of a $13 billion financing program to pay suppliers are a clear positive signal that payments will pick up.

Doug Becker from Capital One asked for an assessment of the risk of a third wave of rig suspensions from Saudi Aramco and inquired about the specific contract prospects for the 'Thor' and 'Ran' rigs later in the year.

Answer

Executive Patrick Arnold Schorn stated that while the magnitude of the Aramco suspensions was surprising, he believes the work is delayed, not canceled, and that further suspensions could become counterproductive for Aramco. Chief Commercial Officer Bruno Morand addressed the rig prospects, highlighting new operating models in Mexico as opportunities for the 'Ran' and a buoyant tender market in Asia for the 'Thor', while emphasizing the fleet's mobility to pursue the best economic opportunities globally.

Asked about the potential risk of further contract suspensions in Saudi Arabia and inquired about the re-contracting prospects for the Thor and Ran rigs, specifically asking if the Ran would remain in Mexico.

Answer

Patrick Schorn expressed surprise at the scale of the previous Saudi suspensions but believes the work will eventually return. While he cannot rule out further changes, he thinks the industry can handle it and that Borr's direct exposure is limited to two rigs. Bruno Morand addressed the rig prospects, stating that new operating models in Mexico could create opportunities for the Ran, and they are also looking at work with IOCs and in other American regions. For the Thor in Asia, despite a competitive landscape, its high capabilities make it a sought-after asset with several tender opportunities.

Doug Becker asked about the risk of a third wave of rig suspensions from Saudi Aramco and also sought an update on the contracting prospects for the 'Thor' and 'Ran' rigs later in the year.

Answer

Executive Patrick Arnold Schorn stated that while he was surprised by the magnitude of the previous Saudi suspensions, he believes the work is merely delayed and cannot rule out further changes, though it may become counterproductive for Aramco. Chief Commercial Officer Bruno Morand addressed rig prospects, noting new operating models in Mexico could benefit the 'Ran', while the 'Thor' has many opportunities in a buoyant but competitive Asian market. He emphasized that Borr's rigs are mobile and will be placed where they can generate the most value.

Doug Becker asked for the expected 2025 revenue conversion rate from the year-end 2024 backlog and how it compares to the prior year. He also sought justification for the CTS segment's growth outlook despite a declining backlog.

Answer

CEO Jillian Evanko projected a 60% backlog conversion rate for 2025, slightly higher than the prior year's estimated 55-60%, attributing the improvement to throughput initiatives and project visibility. For the CTS segment, she explained the growth outlook is supported by broad global demand, visibility into specific H1 2025 projects, and a strong start to the year, not just one LTA. CFO Joseph Brinkman added that industrial gas capex cycles can be lumpy.

Doug Becker asked what factors might prevent the first quarter from being the margin trough for the U.S. drilling business, considering stable pricing, technology deployment, and cost-saving initiatives.

Answer

CEO William Hendricks responded that while the outlook is positive, the pace of margin improvement depends on the successful execution of technology deployments and cost streamlining. He emphasized the need to manage these initiatives carefully to protect operational performance, suggesting the timing of margin benefits will play out over the course of the year rather than being fully realized immediately.