Scott Gruber

Scott Gruber with Citi sought clarification on the specific amount of reactivation expense included in the fiscal first quarter international income and the sustainability of the projected cash tax rate, considering recent U.S. tax law changes.

Answer

CFO Kevin Vann explained that the exact reactivation expense was not quantified but noted that Q4 international margins were a trough, and improvement was expected absent these costs. He confirmed that the 2026 cash tax projection includes benefits from the 'one big beautiful bill,' with future benefits contingent on capital expenditures.

Scott Gruber of Siebert Williams Shank inquired whether the reactivation expense reflected in the fiscal first quarter international income had been quantified. He also asked about the impact of recent U.S. tax law changes on the projected cash tax step-down in fiscal 2026 and the sustainability of the cash tax rate in 2027.

Answer

CFO Kevin Vann confirmed that the reactivation expense was not quantified but reiterated that Q4 international margins were a trough, with anticipated improvement absent these costs. He explained that the 2026 cash tax number includes benefits from the 'one big beautiful bill,' with future benefits contingent on capital expenditures and international activity levels.

Scott Gruber inquired about the composition of H&P's stable domestic margins, asking about the contribution from performance-based contract bonuses versus base day rates, and the potential to expand this model.

Answer

Executive Dave Wilson explained that performance contracts have recently trended toward the higher end of their typical $1,000 to $2,000 per day margin uplift. President and CEO John Lindsay added that these contracts are a 'win-win,' as customers also benefit from faster, lower-cost wells. He expressed confidence in continued adoption across all customer types, including super majors, independents, and private companies.

Scott Gruber asked about the breakdown of benefits from Devon Energy's production optimization efforts, specifically how the gains split between production uplift and LOE (Lease Operating Expense) reductions, and what to expect for LOE costs in 2026. He also inquired about the well count embedded in the 2026 preliminary guide, asking if the 2025 well count, minus 20 wells, serves as a fair starting point for 2026.

Answer

CEO Clay Gaspar and SVP of Asset Management John Raines explained that production optimization benefits manifest in cost reductions (LOE), reduced maintenance capital (20 fewer wells drilled), and portfolio prolongation. John Raines clarified that the $150 million uplift is primarily from base production, with LOE showing a 6% improvement year-over-year (from $6.50/bbl in Q1 to $6.10/bbl in Q3), and further LOE reductions expected in 2026. Clay Gaspar advised using the 2025 guidance as a relative starting point for 2026 well count assumptions, noting the lower maintenance capital reflected in the $3.6 billion preliminary guide.

Scott Gruber asked about the split of benefits from production optimization between production uplift and LOE reduction, and how LOE costs should be viewed for 2026. He also inquired about the 'till count' (well count) embedded in the 2026 preliminary guide, asking if the 2025 well count minus 20 wells could serve as a starting point.

Answer

CEO Clay Gaspar explained that benefits manifest as LOE reductions, lower maintenance capital (drilling 20 fewer wells this year), and prolonged portfolio quality. SVP of Asset Management John Raines clarified that the $150 million uplift is primarily from production, but LOE has improved from $6.50 per barrel in Q1 to $6.10 per barrel in Q3, with further reductions expected in 2026. Clay Gaspar advised using the 2025 guidance as a relative starting point for 2026 well count assumptions, noting that the lower maintenance capital reflects D&C efficiency and effective completions, with no additional deflation baked into the preliminary guide.

Scott Gruber from Citigroup asked if the recent increase in full-year oil production guidance implies a higher maintenance production level for 2026 and beyond.

Answer

President & CEO Clay Gaspar clarified that the company is not resetting its long-term production outlook and is still targeting a mid-380s oil run rate. He stated that due to a well-supplied oil market, the company prefers a maintenance capital approach, with efficiency gains accruing to capital reduction rather than production growth. SVP John Raines added that recent rig count reductions reflect this strategy, and higher near-term guidance is a result of real-time operational wins, not a change in long-term strategy.

Scott Gruber from Citigroup asked if the recent outperformance in oil production would lead Devon to raise its maintenance production outlook for 2026 and beyond.

Answer

President & CEO Clay Gaspar stated that Devon is not resetting its long-term production outlook and is still targeting a mid-380s thousand barrels per day oil rate. He explained that the company prefers to use efficiency gains to lower maintenance capital requirements and extend its inventory runway rather than grow production in what they view as a well-supplied market. SVP John Raines added that the rig count reductions in Q1 reflect this disciplined approach.

Scott Gruber from Citi asked if the recent outperformance in oil production would lead Devon to raise its long-term maintenance production target for 2026 and beyond, questioning the rationale for holding it steady.

Answer

President & CEO Clay Gaspar and SVP John Raines clarified that Devon is not resetting its maintenance production level, continuing to target the mid-380s oil rate. They explained the strategy is to translate efficiency gains into lower capital requirements rather than higher production volumes in a well-supplied market, thereby extending the life of their premium inventory.

Scott Gruber asked for guidance on future Lease Operating Expense (LOE) and Gathering, Processing, and Transportation (GPT) costs, questioning if the Q4 guide is a good baseline for 2025. He also inquired about the next drivers for completion efficiency, including the company's stance on e-frac and thermal frac technologies.

Answer

Chief Operating Officer Clay Gaspar advised that the Q4 guide for operating costs is a "good starting point" for 2025, as it already accounts for seasonal variations. On completion tech, Gaspar stated that while all options like e-frac are evaluated, Devon's current dual-fuel fleets already achieve significant cost benefits by running on high percentages of natural gas without the need for long-term e-fleet contracts. He expressed confidence in continued innovation from internal teams and partners.

Scott Gruber inquired about Coterra Energy's strategy for blocking up positions in Lea and Eddy counties, the importance of this for compressing the cost structure in the Northern Delaware, and the expected trend in well costs for the 2026 budget.

Answer

Blake Sirgo, Executive Vice President of Business Units, explained that the Franklin Mountain and Avant acquisitions provided a strong footprint, enabling trades and small acquisitions to create larger DSUs, which drives efficiencies through more wells per section and longer laterals. Michael Deshazer, Executive Vice President of Operations, confirmed that teams continue to drive down capital costs in the Northern Delaware Basin through consistent drilling rigs, frac fleets, longer laterals, and blocking up acreage to leverage larger pads and facilities.

Scott Gruber inquired about Coterra's running room to block up positions in Lea and Eddy counties, the timing in a competitive market, and its importance for compressing the cost structure in the Northern Delaware. He also asked about the 2026 budget's reflection of well cost trends in the Northern Delaware and if the well mix would remain broadly the same.

Answer

Blake Sirgo, Executive Vice President of Business Units, stated that the Franklin Mountain Avant assets provided a great footprint for trades and small acquisitions, enabling the pursuit of larger DSUs for more wells per section and longer laterals to drive efficiencies. Michael DeShazer, Executive Vice President of Operations, confirmed continued efforts to drive down capital costs in the Northern Delaware Basin through consistent drilling rigs, frac fleets, and longer laterals, with larger pads helping reduce costs across production, capital, and midstream.

Scott Gruber from Citi questioned the company's oil strategy, asking if the nine Permian rigs would be maintained for operational consistency even if oil prices dipped significantly. He also asked about the cost of the new Harkey well design and if it would be applied across all of Culberson County as a precaution.

Answer

EVP of Operations Blake Sirgo affirmed the preference for maintaining operational cadence, noting projects are stress-tested to low prices and that lower service costs often accompany price dips. Regarding the Harkey, he explained the fix involved changes to cement and casing design to ensure mechanical isolation, a principle they apply everywhere, tailored to specific field geology.

Scott Gruber from Citi asked for a reasonable expectation on the timeline for the remediated Harkey production to come back online. He also inquired about early thoughts on the 2026 plan, including rig count and production, if oil prices were to remain in the high $50s.

Answer

Chairman, CEO and President Thomas Jorden explained that the remediation workover campaign will take months, not weeks, so there is no firm timeline yet. Regarding 2026, he stated that the company is being conservative and reacting to potential further weakening, but investment decisions depend more on the reasons for the price level than the number itself.

Scott Gruber asked how Coterra would allocate growth capital between the Marcellus and Anadarko in a $4 gas and $70 oil environment, and questioned the path to closing the development cost gap between Lea County and Culberson County.

Answer

Chairman, CEO and President Thomas Jorden responded that allocation is based strictly on return on investment, noting Marcellus dry gas competes well at those prices. SVP of Operations Blake Sirgo stated the goal is to apply the same economies of scale to Lea County as they have in Culberson by optimizing infrastructure, contracts, and power.

Scott Gruber from Citi asked for more color on the integration planning for the Chart Industries acquisition, specifically what Baker Hughes Company can do in the period leading up to the close to accelerate synergy capture and ensure full integration into the Industrial & Energy Technology (IET) segment.

Answer

Chairman and CEO Lorenzo Simonelli reiterated confidence in the strategic logic of the Chart acquisition, highlighting its alignment with the IET segment, expansion of capabilities in key growth markets, and potential for commercial, aftermarket, and digital synergies. He emphasized the combined portfolio's industrial and less cyclical nature, promising resilient long-term performance. CFO Ahmed Moghal detailed the integration progress, noting the formation of integration management offices with 14 dedicated work streams focused on systems, supply chain, commercial, and operations. He stressed the cultural alignment between the two companies and the goal to realize the full $325 million in anticipated cost synergies, with Jim Apostolides leading the integration efforts. The deal is expected to close in mid-2026, pending customary approvals.

Scott Gruber from Citigroup asked for more color on the integration planning for the Chart Industries acquisition, specifically what Baker Hughes can do between now and the early close period to accelerate full synergy capture and integration into the IET segment.

Answer

Chairman and CEO Lorenzo Simonelli first reiterated confidence in the strategic logic of the acquisition, emphasizing its enhancement of value for customers, alignment with IET, expansion into key growth markets, and potential for commercial synergies, aftermarket services, and digital opportunities. He highlighted the combined portfolio's industrial nature, promising more resilient long-term performance. CFO Ahmed Moghal then detailed the integration progress, noting the formation of integration management offices and 14 dedicated work streams focused on systems integration, supply chain, commercial, and operations. He mentioned the strong cultural alignment between the two companies and the goal to realize the full $325 million in anticipated cost synergies. Moghal also introduced Jim Apostolides, Chief Infrastructure and Performance Officer, as the leader of the integration, citing his extensive experience. The deal is still expected to close in mid-2026.

Scott Gruber from Citi asked about the drivers behind the impressive margin performance in both the OFSE and IET segments and inquired about the confidence level in reaching the 20% IET margin target by 2026, as well as the potential for OFSE margins to improve in a soft market.

Answer

EVP & CFO Ahmed Moghal attributed the strong margin performance to specific actions within each segment. He explained that OFSE's 90 basis point sequential margin expansion to 18.7% was driven by stronger revenue and cost efficiencies, including streamlining the cost structure and maintaining price discipline. For IET, he noted the 190 basis point year-over-year expansion to nearly 18% was due to record margins in Gas Tech Equipment and strong performance in Cordon Solutions, all underpinned by the company's business system. Chairman & CEO Lorenzo Simonelli added that margin accretion is the primary focus and they aim to continue this progression into 2026.

Scott Gruber of Citigroup asked about the drivers behind the impressive margin performance in both the OFSE and IET segments and inquired about the confidence level for hitting the 20% IET margin target and grinding OFSE margins higher in 2026.

Answer

EVP & CFO Ahmed Moghal attributed the margin strength to specific actions within each segment. For OFSE, he cited cost structure streamlining and disciplined pricing. For IET, he pointed to record margins in Gas Technology Equipment (GTE), strong performance from Cordon Solutions, and the successful implementation of the company's business system. Chairman & CEO Lorenzo Simonelli affirmed the company's commitment to continued margin progression into 2026.

Scott Gruber from Citigroup inquired about the key drivers behind the strong margin performance in both the OFSE and IET segments and sought clarity on the company's confidence in achieving its 20% margin target for IET by 2026.

Answer

EVP & CFO Ahmed Moghal attributed the 90 basis point sequential margin expansion in OFSE to cost efficiencies and disciplined pricing, while the 190 basis point year-over-year expansion in IET was driven by record margins in Gas Technology Equipment and strong performance from Cordon Solutions, underpinned by the company's business system. Chairman & CEO Lorenzo Simonelli affirmed that margin accretion remains a primary focus and expressed confidence in continuing this progression into 2026.

Scott Gruber of Citigroup requested more detail on the company's tariff mitigation strategies, asking how much mitigation is included in the $100-$200 million net impact estimate and if that figure could be reduced further.

Answer

CFO Ahmed Moghal explained that Baker Hughes' global footprint naturally limits exposure, with less than 2% of its $14 billion in annual material purchases coming from China into the U.S. He outlined a three-pronged mitigation strategy: leveraging its global manufacturing footprint, utilizing free trade agreements, and enforcing contractual price adjustments. Moghal confirmed the $100-$200 million figure is the net impact after these mitigation efforts are accounted for.

Scott Gruber asked for an update on the 45% to 50% free cash flow conversion target for the year, seeking more color on the puts and takes, including potential offsets from working capital.

Answer

CFO Nancy Buese expressed high confidence in achieving the 45-50% free cash flow conversion rate in 2025. She identified the primary drivers as continued improvements in working capital efficiency, better cash tax rate management, and the natural benefit from structurally higher operating margins flowing through to cash flow.

Scott Gruber from Citigroup praised the impressive margin performance and asked about the expected cadence of IET margin improvement toward the 20% target in 2026, questioning if it would be smooth or back-end loaded, and what the key drivers would be.

Answer

Nancy Buese, CFO, stated that over half of the year-over-year margin improvement came from internal 'self-help' initiatives. She detailed that IET's record 17.9% margin was driven by converting higher-margin backlog, cost efficiencies, and strong productivity. Lorenzo Simonelli, Chairman and CEO, emphasized that the 20% target is a 'milestone, not a destination,' signaling a commitment to continued margin accretion beyond 2026.

Scott Gruber asked for additional color on the expected cadence of AdTech growth embedded in the 2026 EBITDA guidance.

Answer

Alan Curtis, Senior Vice President and CFO, explained that growth will ramp up throughout 2026, building on the Q1 large-scale project and continued onboarding of subcontractors. Rod Larson, President and CEO, added that the program ramps through 2027, with additional new opportunities contributing to excitement.

Scott Gruber from Citigroup asked for clarification on the manufactured products segment's fourth-quarter outlook, specifically addressing the expectation of significantly improved operating income on lower revenue, its implications for margins, and the underlying drivers of the revenue decline. He also sought more color on the expected cadence of AdTech's growth embedded in the 2026 EBITDA guidance.

Answer

Senior Vice President and CFO Alan Curtis clarified that the improved operating income in manufactured products is driven by the quality of earnings from higher-priced backlog and operational excellence initiatives, rather than a significant revenue decline. President and CEO Rod Larson added that plants are booked with a strong runway through 2026, and the sales funnel looks good, with bookings into 2027. Regarding AdTech, Mr. Curtis explained that growth is expected to ramp up throughout 2026, building on the onboarding of personnel and subcontractors for large-scale projects initiated in Q1. Mr. Larson reiterated the excitement around AdTech, noting it's "firing on all three cylinders" with additional opportunities beyond the main program.

Scott Gruber (Citigroup Inc.) asked about Patterson-UTI Energy's potential to enter the power market within the oilfield, leveraging its microgrid expertise, especially given the increasing demand from data centers. He also sought more color on the expanding frac optimization software, EOS Completions platform, its deployment across fleets, and its contribution to segment performance.

Answer

President and CEO Andy Hendricks acknowledged Patterson-UTI's significant technical expertise in power and microgrids but noted that large-scale data center power solutions (200 MW+) resemble EPC contracts, which are not the company's focus. He stated that the company is open to providing power for customer operations if it yields good returns. Regarding frac optimization, Mr. Hendricks highlighted the EOS Completions platform, including Vertex Automation Controls, which is being deployed across all fleets by year-end, working on various power platforms. He expects it to improve equipment reliability, differentiate frac deployment, and generate new revenue streams.

Scott Gruber inquired about Patterson-UTI's potential opportunity to enter the broader power market within the oilfield, given its expertise in running microgrids for drilling and the growing data center market. He also asked for more color on the expanding frac optimization software, including how many fleets are deploying it and its contribution to segment performance.

Answer

Andy Hendricks, President and CEO, acknowledged Patterson-UTI's significant technical expertise in power generation (around 500 MW produced daily) but noted that large data center power demands (200 MW+) are more akin to EPC contracts, not mobile solutions. He stated they are open to providing power for customer production if it offers reasonable market returns and strong free cash flow, but it remains a competitive market. Regarding frac optimization, Mr. Hendricks highlighted the EOS Completions platform, including Vertex Automation Controls, which is being deployed across all fleets by year-end. This automation works across various fleet types and blended operations, expected to improve equipment reliability, differentiate frac deployment, and be monetized as a product, contributing to segment performance.

Scott Gruber of Citigroup inquired about the completions activity outlook for Q4 2025, asking whether to expect a steep year-end decline or a more normal seasonal pattern, and also questioned the potential for rig count stabilization in Q4.

Answer

President & CEO William Hendricks stated it was too early to definitively call Q4 but noted that based on customer conversations, he does not anticipate a steep decline for Patterson-UTI, suggesting a potential softening. He added that the drilling rig count has the potential to stabilize in Q4, similar to the prior year, contingent on commodity prices holding steady.

Scott Gruber questioned the Q2 2025 guidance for a slight profit decline in completions, which typically sees a seasonal ramp-up, and asked about the potential magnitude of an activity adjustment if oil prices remain in the low $60s.

Answer

CEO William Hendricks explained that Q1 activity ramped up faster than anticipated, setting a high baseline for Q2. The guidance reflects this high starting point and includes some conservatism for potential white space later in the quarter. He noted that if oil prices remain in the low $60s, it could cause some market 'softening,' but he does not expect a 'drastic response' from Patterson-UTI's customer base, which is heavily weighted toward large, stable operators with long-term plans.

Scott Gruber asked about the potential for Completion segment profit margins to recover to Q3 levels in early 2025 and requested more details on the Turnwell JV, including near-term participation and long-term asset contribution plans.

Answer

CEO William Hendricks stated that while Q4 is an anomaly, he expects Completion activity and profitability to ramp up in H1 2025, targeting margins similar to mid-2024. Regarding the Turnwell JV, Hendricks explained that initial participation is through expertise, and any future capital deployment, such as moving rigs, would be carefully weighed against shareholder return priorities and would not jeopardize them.

Scott Gruber asked about the increased share repurchase authorization, the strong free cash flow generation, and the company's framework for the level of cash return to shareholders anticipated for 2026.

Answer

Alf Melin, EVP and CFO, highlighted the strong free cash flow generation driven by commercial and operational execution, leading to consistent milestone achievements and cash collections. He noted that while 2025 saw exceptional working capital performance, normalized free cash flow conversion from EBITDA is now approaching 55%. He reaffirmed the commitment to return at least 70% of free cash flow to shareholders in 2026, consistent with 2025.

Scott Gruber asked about TechnipFMC's share repurchase authorization, strong free cash flow generation, and the company's framework for cash return to shareholders in 2026.

Answer

EVP and CFO Alf Melin explained the strong free cash flow generation, improved cash flow conversion from EBITDA (approaching 55% normalized), and recommitted to returning at least 70% of free cash flow to shareholders in 2026, consistent with 2025 levels.

Scott Gruber of Citigroup inquired about the timing of upcoming greenfield project announcements and sought commentary on the sustained appetite for both brownfield and large greenfield projects despite moderate crude prices.

Answer

CEO & Chair Douglas Pferdehirt stated that upcoming announcements would likely include details on both Q2 awards and new Q3 awards, with timing dependent on client approvals. He emphasized that operator commitment to greenfield projects remains robust for long-term supply, while brownfield activity is also very strong due to its attractive economics, with the unannounced award bucket approaching $1 billion.

Scott Gruber asked for clarification on the 'step-out' projects on the outlook list and inquired about efficiency gains from reconfiguring manufacturing flows for Subsea 2.0.

Answer

CEO Douglas Pferdehirt explained that the 'step-outs' relate to the advanced field development strategies of sophisticated clients like Petrobras and could involve new technologies. Regarding manufacturing, he confirmed that the shift to standardized Subsea 2.0 production has significantly increased cadence and efficiency, allowing for higher output with less capital and improving quality by eliminating re-tooling between products.

Scott Gruber of Citigroup asked about balance sheet strategy, specifically if the company would cap its net cash position to maximize shareholder returns, and also requested details on the 2025 revenue mix from Subsea 2.0 and Services.

Answer

CFO Alf Melin explained that while the company is not looking to build a large cash balance, a small net cash position is prudent. He reiterated the commitment to return at least 70% of free cash flow to shareholders in 2025. CEO Douglas Pferdehirt noted that Subsea 2.0 constitutes about one-third of current manufacturing activity and will grow. Alf Melin added that Subsea Services revenue is projected to be around $1.8 billion in 2025.

Scott Gruber asked for clarification on why four Petrobras projects on the Subsea opportunities list increased in scope and questioned if the 'white space' issue cited by some offshore drillers poses a risk to FTI's 2025 order cadence.

Answer

Chair and CEO Douglas Pferdehirt explained that the Petrobras project values increased due to scope changes in field infrastructure and layout identified during FEED work. He firmly dismissed the driller 'white space' concern as a company-specific issue, not an industry-wide problem, stating it has not been raised by clients and is not impacting FTI's project FID timing or execution cadence.

Scott Gruber inquired about the anticipated improvement in Saudi Arabia, specifically if the expected year-on-year growth in the second half of 2026 includes a recovery in oil activity alongside gas development.

Answer

Girish Saligram, President and CEO, confirmed that while improvements would be predominantly gas-driven, some oil activity recovery is also expected. He noted that the first half of 2026 would likely be down year-on-year due to prior declines, but a rebound is anticipated in the second half, reinforcing Saudi Arabia as a significant long-term growth opportunity.

Scott Gruber inquired about the outlook for Saudi Arabia, specifically regarding its potential bottoming, year-on-year growth in the second half of 2026, and the balance between gas and oil activity.

Answer

Girish Saligram, President and CEO, stated that Saudi Arabia's activity has trended down but is expected to rebound from Q4 levels in the first half of 2026, though still down year-on-year. He anticipates improvements driven predominantly by gas, with some oil activity, reiterating Saudi Arabia as a massive long-term growth opportunity for Weatherford International.

Scott Gruber inquired about the drivers behind the implied Q4 guidance, which suggests a sequential revenue increase and margin improvement, asking if this is due to typical year-end sales or specific project-driven growth.

Answer

President and CEO Girish Saligram clarified that the anticipated Q4 ramp is based on two factors: expected seasonality from year-end sales, which may be muted by tariffs, and more significantly, several major project start-ups for which the company has strong visibility and orders in hand.

Scott Gruber from Citigroup requested more detail on the revised 2025 guidance, asking about the financial impact of recent divestitures and which specific regions, besides Mexico, were risk-adjusted downwards. He also inquired about the size and intended use of proceeds from the Argentine asset sales.

Answer

President and CEO Girish Saligram explained the guidance reduction was driven by a larger-than-expected decline in Mexico, a more prudent view on North America, and slight degradations for other regions. He quantified the divestiture impact at roughly 100-300 bps of revenue reduction. Regarding proceeds, Saligram noted the sale improves cash conversion, with proceeds adding to overall liquidity for capital allocation priorities.

Scott Gruber of Citigroup inquired about Weatherford's margin enhancement drivers in a slower growth environment and whether the company is reassessing its strategy. He also asked about margin resiliency, questioning if the company's past pricing gains could introduce risk in a more competitive market.

Answer

Executive Girish Saligram outlined four consistent margin levers: targeted pricing in differentiated areas, new technology introduction, fulfillment network optimization, and internal cost efficiencies. He acknowledged that Weatherford likely benefited from strong pricing but does not see it as a risk, citing strong industry-wide discipline and the company's rigorous, value-based approach to pricing, which it will not sacrifice for revenue.

Scott Gruber asked for an update on Halliburton's frac crew idling process, including its weighting between Q3 and Q4, and the potential for accelerated attrition to improve North American supply/demand dynamics for 2026. He also questioned Halliburton's ability to continue strategic investments in D&E and C&P growth verticals within the reduced $1 billion 2026 CapEx budget.

Answer

Jeffrey Miller, Chairman, President, and CEO, indicated some crews were idled later in Q3, with potential impact in Q4, emphasizing that idled uneconomic equipment remains idle, contributing to 'attrition in motion' and suggesting North America pricing will tighten quickly with minimal market recovery. He unequivocally stated that Halliburton can deliver share gains in D&E and C&P with the $1 billion CapEx budget, as it aligns with investment cycles and allows for continued R&D and technology investment.

Scott Gruber asked about Halliburton's disciplined approach to idling frac crews, specifically the timing of these actions (Q3 vs. Q4) and how this impacts the North America market outlook of a 12-13% sequential decline. He also questioned whether the $1 billion CapEx budget for next year would still allow for strategic investments in the D&E toolkit and C&P growth verticals, given past share gains.

Answer

Jeffrey Miller, Chairman, President, and CEO, indicated that some crews were idled later in Q3, with potential impacts extending into Q4. He emphasized that idled crews will remain offline until margins improve, contributing to market tightness in North America even with minimal recovery. Regarding CapEx, Mr. Miller stated that the $1 billion budget is aligned with investment cycles, and Halliburton will continue to invest in R&D and differentiating technology within this budget. He unequivocally affirmed that the company can still achieve share gains in D&E and C&P with this capital allocation.

Scott Gruber from Citi followed up on the Drilling and Evaluation (D&E) margin outlook, asking if the Q4 improvement is purely seasonal or if Q2's mobilization costs are still a factor. He also questioned if Halliburton plans to pause its Zeus electric fleet expansion and what the corresponding CapEx impact would be.

Answer

EVP & CFO Eric Carre clarified that the Q3 D&E margin improvement is driven by better software sales, stronger directional drilling, and the elimination of Q2's mobilization costs. The Q4 improvement will be a continuation, with a material boost from seasonal software sales. Chairman, President & CEO Jeff Miller stated the Zeus build-out has always been demand-driven and will slow if new contracts are not secured. He expects overall CapEx to trend toward the lower end of the range in 2026.

Scott Gruber from Citigroup followed up on the expected Drilling and Evaluation (D&E) margin improvement, asking if it was purely seasonal or if other factors were at play. He also questioned if Halliburton planned to pause its Zeus e-fleet expansion and how that would affect CapEx.

Answer

EVP & CFO Eric Carre clarified that D&E margin improvement in Q3 and Q4 is driven by the elimination of prior mobilization costs, stronger directional drilling results, and a material increase in high-margin software sales. Chairman, President & CEO Jeff Miller stated the Zeus buildout has always been demand-driven and will slow if new orders wane, adding that he expects overall CapEx to trend toward the lower end of the guided range.

Scott Gruber questioned the need for capital expenditures to remain above DD&A at 6% of sales and asked about the long-term strategy or 'end game' for the VoltaGrid investment, including the possibility of majority ownership.

Answer

CFO Eric Carre noted that CapEx is somewhat self-regulating with revenue and that current spending reflects prior commitments, with adjustments now impacting 2026. CEO Jeffrey Miller added that capital is allocated to growth areas. Regarding VoltaGrid, Miller described the investment as 'optionality' with no predetermined direction, emphasizing that any larger strategic move would require a clear path to a sustainable competitive advantage.

Scott Gruber asked for more details on the 2026 CapEx buildup for additional megawatts, the expected EBITDA payback period for power contracts given the CapEx per megawatt, and if there's tension in reserving capacity for large data center contracts versus other markets.

Answer

CFO Michael Stock indicated that 2026 CapEx details would be provided in January, estimating installed generation at around $1.5M-$1.6M per megawatt. He clarified payback periods: 5+ years for 15+ year contracts with investment-grade clients (targeting high teens unlevered cash return) and 3+ years for shorter 5-10 year oil & gas contracts. He confirmed significant tension in reserving near-term generation capacity due to high demand and limited market availability.

Scott Gruber from Citigroup requested more color on the second-half outlook for the completions business, including the trajectory for revenue and EBITDA in Q3 and potential Q4 seasonality. He also asked if the OCLO alliance would target new customers or those with existing MOUs.

Answer

CEO Ron Gusek projected a mid-single-digit activity reduction and low-single-digit pricing headwinds in Q3, following a very strong Q2. He noted the company is repurposing horsepower for simul-frac work to enhance efficiency. CFO Michael Stock added that normal seasonality should be expected for Q4 but deferred a clearer outlook. Stock also confirmed the OCLO alliance will work with existing customer relationships to accelerate power development for large-load users like AI data centers.

Scott Gruber asked if Liberty would adjust its digiPrime fleet delivery schedule if second-half activity weakens and whether the company would use its revolver for share buybacks or let free cash flow govern the pace.

Answer

CEO Ron Gusek confirmed they have the flexibility to adjust fleet deliveries if necessary. Regarding capital allocation, he emphasized that protecting the balance sheet is the top priority amid uncertainty, stating that this would "certainly preclude using debt for buybacks."

Scott Gruber from Citigroup asked how Liberty plans to differentiate itself and outcompete others in the power generation space and requested more detail on the merchant power opportunity.

Answer

CEO Ron Gusek explained that Liberty's competitive advantage in power will mirror its success in frac services, focusing on a complete solution underpinned by superior technology, engineering, supply chain, and service delivery. CFO Michael Stock highlighted their modular, factory-built design for rapid and cost-effective deployment. They view merchant power as a durable, long-term opportunity driven by persistent grid congestion and instability.

Scott Gruber inquired about the 2025 capital expenditure outlook, including the number of potential e-frac fleet additions and investment in Liberty Power Innovations (LPI). He also asked about near-term financial dynamics, specifically the expected decrementals for the fourth quarter and the potential revenue and margin recovery in the first quarter of 2025.

Answer

CFO Michael Stock indicated that 2025 CapEx for the completions business would decline, targeting the addition of 4-5 Digi fleets, representing about a 10% replacement rate. He noted that LPI investment plans would be clarified on the January call but emphasized that the completions business would generate more free cash flow year-over-year. For Q4, Stock anticipates a revenue decline similar to the prior year but with higher decrementals due to pricing dynamics. He projects Q1 2025 activity will recover to a level between Q3 and Q4 2024, with standard incrementals.

Scott Gruber of Citigroup inquired about the benefits of the Bedrock acquisition, specifically asking how much it improves BKV's ability to lengthen laterals in the Barnett and the potential for further reductions in cost per lateral foot.

Answer

Eric Jacobsen, President of Upstream, explained that the Bedrock deal adds approximately 70 equivalent 10,000-foot laterals and 80 refrac locations, extending inventory by a couple of years. He noted that cost per foot has already decreased 11% to around $560 and expects further structural cost reductions from longer laterals, advanced completion designs, and data analytics, though U-turn wells will remain a small part of the program.

Scott Gruber inquired about the growing momentum for Carbon Capture, Utilization, and Storage (CCUS) projects, particularly for gas processing, and whether this trend accelerated the finalization of the joint venture with Copenhagen Infrastructure Partners (CIP). He also asked for the rationale behind excluding the Cotton Cove and Comstock projects from the initial JV.

Answer

CEO Christopher Kalnin affirmed the robustness of the 45Q tax credit and strong bipartisan support, highlighting the powerful momentum in CCUS driven by demand for decarbonized power from data centers. President of Upstream Eric Jacobsen added that the project funnel for natural gas processing plants remains strong. Regarding the project exclusions, Mr. Kalnin clarified that the decision was based purely on timing criteria within the deal structure.

Scott Gruber asked about BKV's strategy for its Texas power assets, inquiring about the maximum capacity the company would commit to a Power Purchase Agreement (PPA) for a data center, the progress of these discussions, and whether the focus is on existing plants or building new ones.

Answer

CEO Christopher Kalnin explained that BKV would be comfortable dedicating up to 750 megawatts from one of its two Temple, TX power plants to a PPA to ensure redundancy. He confirmed that discussions with prospective customers are active and that the company is pursuing opportunities for both its existing assets and for constructing new power plants to meet specific customer demands for new generation.

Scott Gruber asked about BKV's strategy for prioritizing its various growth initiatives, including carbon capture, power, and Barnett consolidation, and inquired about the expected cadence for reinvesting capital into its base gas production.

Answer

CEO Chris Kalnin explained that the immediate priority is the upstream business to ensure the company's 'cash engine is humming,' with a long-term vision for power and carbon capture to comprise up to half the business. COO Eric Jacobsen added that capital deployment is systematic, using a gas price of $3.00-$3.25/Mcf as a fulcrum for deciding between maintenance spending and growth, with prices above that range triggering accelerated investment.

Scott Gruber questioned if shale EOR is now economically viable and what the timeline for a commercial project might be. He also asked about the factors influencing the sanctioning of a second Direct Air Capture (DAC) facility in South Texas.

Answer

President & CEO Vicki Hollub stated that while shale EOR is economical, the primary constraint is CO2 availability, making DAC crucial. She anticipates a commercial project in the Delaware Basin within 1-2 years. Regarding the second DAC facility, she confirmed the intent to reach a final investment decision (FID), supported by a DOE grant and new technology, with plans to pre-sell the carbon credits.

Scott Gruber of Citi inquired about the development plan for secondary zones in the Permian, asking what percentage of the Delaware program they will comprise in 2025 and what the current and future percentage is for the newly acquired Midland Basin assets.

Answer

Richard Jackson, President of U.S. Onshore, stated that the overall Permian primary/secondary bench mix in 2025 should be similar to 2024 levels. For the CrownRock assets specifically, the 2025 plan is de-risked and focuses heavily on primary benches, which will constitute about 85% of the program, targeting well-understood Wolfcamp A and B zones.

Scott Gruber from Citigroup inquired if CRC has an appetite to recapture lost production volumes in an unconstrained permitting environment and asked about the potential to further increase reservoir recovery factors.

Answer

President & CEO Francisco Leon reiterated that the company's focus is on growing cash flow per share, not production volume for its own sake. He also stated there is 'massive running room' to improve recovery factors, noting other California fields have reached 70-75%, which represents decades of quality inventory and a significant competitive advantage for CRC.

Scott Gruber questioned whether big tech companies are interested in directly underwriting carbon capture on gas plants or if broader market incentives are the main driver. He also asked if interest in this solution would increase after the restart of nuclear plants.

Answer

Francisco Leon (Executive) responded that CRC is 'about to find out' regarding direct underwriting from big tech. He positioned CRC's integrated offering at Elk Hills (power, land, CCS) as a unique, first-mover solution for AI data centers, which allows the company to be selective with partners. He affirmed that capture on gas plants is a natural progression and a major opportunity that the company is actively pursuing.

Scott Gruber of Citi asked about the expected size of the excess DUC inventory at year-end and the strategy for it in 2026, as well as the outlook for the cash tax rate.

Answer

CEO Kaes Van't Hof explained that the DUC balance provides valuable flexibility; if the market is weak, they can slow down, and if strong, they can accelerate quickly. He noted they are comfortable with a balance in the high 100s to 200s. CFO Jere Thompson projected the 2026 cash tax rate to normalize at 18-20% of pre-tax income, following a lower 15-18% rate in 2025 due to one-time benefits from tax law changes.

Scott Gruber asked for more detail on the comment that geologic headwinds are outpacing efficiency gains and inquired about the ability to secure immediate cost savings from service providers.

Answer

Chairman and CEO Travis Stice explained this is a 'natural evolution' of a maturing basin where efficiency gains become smaller. Regarding costs, President Kaes Van’t Hof and COO Daniel Wesson noted that short-term contracts and constant negotiations with partners allow them to capture savings quickly as the service market softens.

Scott Gruber asked at what oil price level Diamondback would consider shifting its plan away from the current maintenance mode. He also questioned how much of the new $600 per foot well cost is due to service cost deflation versus internal efficiencies.

Answer

President and CFO Kaes Van't Hof corrected the 'maintenance mode' premise, noting the plan includes modest growth, and emphasized that the company's focus is on macro conditions and free cash flow generation, not a specific price trigger. He stated the $600 per foot cost is a real-time, mark-to-market number that already reflects current service pricing. He expects a flat rig count to keep service costs subdued, which would benefit shareholders.

Scott Gruber of Citigroup asked for confirmation that Pressure Control margins are expected to trough in the current cycle and inquired about the key drivers for margin improvement into 2026. He also asked for a timeline on when the Vietnam facility would be able to fully absorb the manufacturing load from China.

Answer

CEO Scott Bender affirmed that, all else being equal, it is fair to assume margins will trough in Q2/Q3. He identified three drivers for future improvement: more expansive cost recovery, the migration of manufacturing to the lower-tariff Vietnam facility, and the benefits from organizational rightsizing. Bender stated that the Vietnam facility is expected to be able to take on the full former Chinese load by the summer of 2026.

Scott Gruber requested a repeat of the Q2 Pressure Control revenue guidance, asked about the materiality of start-up costs in Vietnam, and questioned the ability to source components locally in Asia to move away from the Chinese supply chain.

Answer

Executive Alan Boyd reiterated the Q2 Pressure Control revenue guidance of down low-to-mid single digits. CEO Scott Bender described the Vietnam start-up costs as de minimis, with the facility already funded and operational. Bender also indicated that the company will be 'more fully integrated' in Vietnam than in China, suggesting a shift in component sourcing.

Scott Gruber of Citigroup asked about the market share evolution for the Spoolable Technologies segment in the U.S., its growth outlook for 2025, and the qualification timeline for the new H2S product in the Middle East.

Answer

Flex Steel CEO Steve Tadlock stated that the segment grew market share in 2024, evidenced by record revenue despite a decline in industry activity. He noted that while Q1 is seasonally the weakest quarter, activity is rebounding as expected. Regarding the H2S product, Tadlock confirmed that the qualification process for Middle East markets is underway and is expected to progress within the year, clarifying it is not a multi-year effort.

Scott Gruber questioned the strategy for the company's growing cash balance, asking if it will continue to accumulate for acquisitions or if there's a level at which more will be returned to shareholders. He also requested an update on the Middle East wellhead system qualification process.

Answer

Chairman and CEO Scott Bender acknowledged the company has 'too much cash' and is actively pursuing expansion opportunities. He indicated that if a transaction does not occur by the end of the upcoming year (2025), they would increase cash returns to shareholders. On the Middle East, Mr. Bender stated that progress is being made cautiously to ensure a responsible expansion and avoid future impairments, noting the key factor is the strategic decision, not technical testing.

Scott Gruber asked for clarification on the Q4 guidance, questioning if flat overall EBITDA implied a modest decline in the Logistics segment. He also sought color on the oil and gas microgrid market, including contract terms and appetite for growth.

Answer

CFO & President Kyle Ramachandran confirmed the guidance implies a conservative outlook for the Logistics segment but noted potential for share gains from increasing completion intensity. Chairman & CEO William Zartler added that they view oil and gas microgrid customers favorably, with credit quality and contract terms being comparable to data center projects, making it an attractive market where they have strong existing relationships.

Scott Gruber from Citigroup inquired about the medium-term growth outlook for SLB's expanded production business, including how revenue synergies and digital applications could enhance it. He also asked about the company's future capital intensity and potential for free cash flow conversion, particularly aiming for a sustained 60% level.

Answer

CEO Olivier Le Peuch stated that growth in the production business will be driven by integrated offerings that combine chemicals, intervention, surface equipment, and digital to improve recovery from aging assets, making the business less cyclical and poised to outpace global CapEx growth. CFO Stephane Biguet addressed the cash flow question, noting that while ChampionX lowers capital intensity, the primary goal is to maintain a free cash flow margin above 10% of revenue, which the company is currently exceeding.

Scott Gruber asked about the adjusted EBITDA margin level SLB can defend in a weaker market and whether the 25% target for the second half of the year is still achievable. He also questioned the resilience and growth cadence of the Digital business in the current environment.

Answer

CEO Olivier Le Peuch stated that while the ambition to reach approximately 25% adjusted EBITDA margin for the full year remains, it is contingent on oil prices remaining stable and no further escalation in trade tariffs, which represent a significant uncertainty. Regarding the Digital business, Le Peuch expressed confidence in maintaining mid-to-high teens growth, as the secular trend of customers adopting digital solutions for efficiency is accelerating and increasingly decoupling from short-term upstream spending cycles.

Scott Gruber inquired about the expected shape of revenue progression in 2025, asking if it would follow a normal seasonal pattern or be more weighted towards the second half. He also asked for an update on SLB's operations in Russia in light of new sanctions.

Answer

CEO Olivier Le Peuch confirmed expectations for a typical seasonal pattern, with a low first quarter followed by a rebound, and anticipates higher activity in the second half of the year. Regarding Russia, Le Peuch stated that revenue from the region declined to 4% of global revenue in 2024 and that the company's existing voluntary measures to curtail activity are believed to align with the new sanctions.

Scott Gruber questioned the potential rate of margin expansion achievable through cost optimization and digital growth if upstream spending were to remain flat, and asked for the financial impact of the Palliser asset sale.

Answer

CFO Stephane Biguet affirmed that SLB expects further margin expansion, driven by a favorable activity mix, technology adoption, and ongoing cost optimization programs. Regarding the Palliser sale, he stated it generated approximately $500 million in annual revenue with high 30s pretax margins and required about $150 million in annual CapEx. The sale also removes significant future abandonment liabilities.

Scott Gruber of Citigroup Inc. asked about the motivation for selling the New Mexico assets and whether positive performance in the rest of the Permian portfolio was a factor. He also requested more detail on the long-term initiatives planned to reduce Lease Operating Expenses (LOE).

Answer

CEO John Christmann explained the New Mexico sale was an opportunistic transaction driven by a highly competitive process and an attractive price, allowing for debt reduction. CFO Ben Rodgers noted the valuation was in the mid-to-high 5x EBITDA range. President and CFO Steve Riney added that the assets had not competed well for capital. Regarding LOE, Riney acknowledged challenges but stated meaningful savings will come from structural changes, operational optimizations, and commercial negotiations later in the year and beyond.

Scott Gruber asked about the potential for additional oil discoveries in Trinidad following the successful Barrel well. He also inquired about the drivers behind the first-quarter beat on operating expenses and whether there was room for further cost reductions.

Answer

COO Jeff Leitzel explained that while Trinidad has been primarily a gas play, they knew of oil potential at Barrel and will continue to explore for both oil and gas opportunities. He attributed the Q1 OpEx beat to lower workover expenses and noted that full-year costs are trending lower due to labor efficiencies and potential fuel savings, with continued focus on optimization.

Scott Gruber questioned if the current ~2% year-on-year oil volume growth is a reasonable expectation for 2025 and what macro conditions might cause EOG to reduce activity. He also asked about the company's interest in future carbon capture projects and whether they would be internal or for third parties.

Answer

Chairman and CEO Ezra Yacob responded that EOG's capital plan is an output of its returns-focused strategy, not a growth target, and pointed to the company's 3-year outlook showing strong results even at $65 oil. He highlighted that strong well performance allows for high cash returns to shareholders. Regarding carbon capture, Yacob stated the focus is on internal projects to leverage the technology developed from its successful pilot, as keeping it in-house provides the most value.

Scott Gruber asked for details on Chart's exposure to China, including key sales verticals and fabrication locations, and inquired about the company's ability to offset tariff impacts to maintain its full-year EBITDA guidance.

Answer

CEO Jillian Evanko explained that Chart primarily manufactures in China for the local market (industrial gas, power gen) with minimal U.S. imports, and that tariff exemptions have already reduced gross exposure. She expressed confidence in the full-year guidance, citing the strong new-build backlog, the significant aftermarket (RSL) business, tariff mitigation actions like in-region sourcing, and margin strength in the Specialty Products segment.

Scott Gruber questioned the 2025 growth outlook for the aftermarket (RSL) segment after recent flat performance and asked if Chart would consider shifting its IPSMR technology licensing to an ongoing fee model.

Answer

CEO Jillian Evanko reaffirmed confidence in the high single-digit to 10% growth target for RSL in 2025, citing strong project visibility and internal growth initiatives. Regarding IPSMR, she stated that while the current model involves an upfront technology fee, the company remains flexible on contract structures with customers, prioritizing positive working capital on all large projects.

Scott Gruber of Citigroup questioned whether tariff mitigation efforts would require additional CapEx and asked about the company's M&A strategy in a potentially softer economic environment.

Answer

President and COO Jose Bayardo clarified that tariff mitigation primarily involves supply chain adjustments, not significant CapEx. CFO Rodney Reed and CEO Clay Williams addressed M&A, stating that while they are always looking for opportunistic deals, they are pleased with the current portfolio and noted that volatile markets can sometimes make closing transactions more difficult.

Scott Gruber asked for details on the payout structure for the performance bonuses in the new contracts, specifically the frequency of payment. He also inquired about the expected downtime for the rig upgrades required by Shell and the prospects for securing interim work.

Answer

President and CEO Robert Eifler stated that the performance bonuses for both the Shell and TotalEnergies contracts are calculated and collected on a well-by-well basis. He also estimated that the rig upgrades would require a couple of months of downtime for final installation and confirmed that Noble is in active discussions for short-term work to fill the availability gap before the long-term contracts commence.

Scott Gruber asked about the potential for fixed-price sales agreements in deals with power producers and data centers, as opposed to contracts based on a premium to a regional hub. He inquired if interest in fixed-price deals is increasing and what price point would make such a structure attractive to EQT.

Answer

CFO Jeremy Knop acknowledged that each power deal is unique and requires a flexible approach. While open to various structures, he expressed a preference for index-plus style deals, similar to those signed with Southeastern utilities. He cautioned that a fixed-price deal that looks good today might become unfavorable over a 20-year term as the marginal cost of gas rises. The key is ensuring any fixed price adequately compensates for the long-term upside asymmetry in gas prices.

Scott Gruber of Citigroup inquired about the components of the 2025 breakeven free cash flow guidance, specifically asking about assumptions for working capital, cash taxes, and collections from Mexico, as well as the improving business climate in Argentina.

Answer

CFO William Restrepo stated that delayed payments from Mexico are expected to be collected in the first half of 2025, working capital growth is not expected to be significant, and cash taxes should be around $50 million. Regarding Argentina, executive William Conroy and CEO Anthony Petrello explained that a new operating model and favorable government rule changes now allow for more efficient cash extraction in U.S. dollars, de-risking their expansion in the country.

Scott Gruber from Citigroup Inc. inquired about the level of underlying cost inflation embedded in the 2025 O&M expense guidance. He also asked what type of rigs customers are considering for development projects offshore Namibia.

Answer

CFO Thad Vayda explained that while 2024 inflation was around 5-6%, the 2025 guidance assumes a more moderate 3% on average, noting that most inflation in long-term contracts is passed through to customers. On Namibia, President & COO Keelan Adamson and CEO Jeremy Thigpen detailed that the choice between a drillship and a harsh-environment semi-submersible depends on the specific location and work scope. Drillships offer drilling efficiency, while semis provide better station-keeping in extreme weather, making them potentially preferable for completion phases.

Scott Gruber asked about the future trajectory of frac maintenance expenses as the fleet transitions to electric and how to think about an all-in maintenance CapEx number for 2025.

Answer

CEO Sam Sledge and CFO David Schorlemer explained that maintenance expense is trending down significantly, with e-fleets requiring minimal shop time. Sledge highlighted a 25% to 40% improvement for new fleets and noted that internal optimization has also extended the life of conventional components. While they declined to provide a specific 2025 figure pending budget finalization, they pointed to current financial statements as a good guide and reiterated the strong downward trend in capital intensity.

Asked about concerns regarding the shrinking M&A opportunity set due to widespread industry consolidation and whether this situation necessitates a change in the company's disciplined M&A strategy.

Answer

The company is not changing its disciplined M&A strategy despite the consolidation wave. They believe their strong inventory position allows them to be patient and that compromising their strict criteria would not benefit shareholders. They are comfortable with their multi-pronged approach to long-term resource addition.

Inquired about the drivers for margin expansion in 2024 after a flat Q4, and the medium-term margin potential for the Drilling Technologies segment.

Answer

The company expects continued margin expansion in 2024, driven by overall growth, productivity efforts, and a favorable mix shift towards digital and emissions solutions. The Drilling Technologies business is considered a solid 25% margin business, with a return to the high-20s or 30% being dependent on volume growth, which is challenged by drilling efficiencies.