Stephen Gengaro

Stephen Gengaro (Stifel) asked about NOV's aftermarket business, specifically the extent to which it serves its installed base and whether third-party service capabilities have dwindled competitively. He also inquired about the market opportunity for reactivations of stacked idle deepwater assets.

Answer

Jose Bayardo (CEO, NOV) stated that while customers sometimes seek third-party options, they often return to the OEM due to complexity and reliability needs, expressing confidence in NOV's market position. He indicated that the opportunity for deepwater drillship reactivations is "pretty limited," likely a "handful" of higher-spec rigs, which would involve significant costs but present a good opportunity for NOV as the market tightens.

Stephen Gengaro inquired about NOV's aftermarket business, specifically the extent to which it serves its installed base and if third-party competition for servicing existing assets has dwindled over the past couple of years.

Answer

CEO Jose Bayardo explained that while customers sometimes explore third-party options for efficiency, they often return to the OEM due to the complexity and critical importance of reliable operation, affirming NOV's strong market position. He stated that NOV continuously focuses on improving service and value. Regarding stacked idle deepwater assets, Jose Bayardo indicated that the opportunity for reactivating deepwater drillships is limited to a 'handful' of higher-spec rigs that meet current market demands. He noted that these would require significant investment to bring back online due to long stacking periods, presenting a good opportunity for NOV as the market tightens.

Stephen Gengaro of Stifel inquired about the margin impact of NOV's current backlog and recent orders for 2026 and beyond, referencing previous discussions about improved pricing. He also asked for NOV's perspective on whether the observed plateauing of U.S. production signals a critical turning point for stabilization and recovery in the U.S. land market.

Answer

Rodney Reid, Senior VP and CFO, stated that strong technological advantages and operational efficiencies in offshore production bookings have driven revenue and margins up, offsetting declines in aftermarket business. He expects the strong backlog to be positive for 2026 margins, with rig aftermarket recovery likely in the second half of 2026. Jose Bayardo, President and COO, emphasized the high quality of the backlog due to improved processes, controls, and clear contract provisions. Clay Williams, Chairman and CEO, acknowledged the deceleration of U.S. production growth, noting that Tier 1 locations are being exhausted, and this signals an inevitable shift of shale technology to other international basins.

Stephen Gengaro inquired about the impact of NOV's current backlog and recent orders on the margin profile for 2026 and beyond, specifically regarding 'better price backlog,' and whether the plateauing of U.S. production signals a critical turning point for stabilization and recovery in U.S. land activity.

Answer

Rodney Reed (Senior VP and CFO, NOV) and Jose Bayardo (President and COO, NOV) affirmed that strong technological advantages and high barriers to entry in offshore production, combined with the high quality of the current backlog and clear contract provisions, are driving improved margins in the Energy Equipment segment. Jose Bayardo, while hesitant to call a definitive U.S. production peak, noted decelerating growth, shrinking activity, and the exhaustion of Tier 1 locations, suggesting that U.S. shale is 'approaching the twilight' and driving the industry to pursue unconventional opportunities globally.

Stephen Gengaro with Stifel inquired about the potential for further consolidation in the frac business and the behavior of industry peers regarding pricing. He also asked if pricing in the North American rig market has stabilized.

Answer

Andy Hendricks, President and CEO, stated that the frac market is evolving with technology, leading to differentiation among the top three or four players. He highlighted investments in 100% natural gas Emerald fleets and the new eos Digital Completions Platform as key differentiators. For the rig market, Mr. Hendricks believes pricing remains relatively stable if commodity prices stay in the upper $50s-$60s, despite a competitive environment in West Texas.

Stephen Gengaro with Stifel inquired about the evolving mix of power generation technology (recips vs. turbines) for the 3 GW expansion and customer preferences.

Answer

CEO Ron Gusek and CFO Michael Stock confirmed that the 3 GW target can be achieved entirely with recip engines, highlighting their capital efficiency, high heat rate, and competitive power pricing. They noted customer recognition of these benefits and Liberty's technology-agnostic approach to finding the optimal solution.

Stephen Gengaro asked about the strengthening pipeline of opportunities for Liberty Energy's LPI power infrastructure business, specifically regarding the expansion to 3 gigawatts, and customer preferences for power generation technology (recips vs. turbines).

Answer

CEO Ron Gusek and CFO Michael Stock explained that the trend towards co-located behind-the-meter power as a long-term solution for data centers has gained momentum, leading to urgency in securing power supply. They confirmed the 3 GW target is achievable with recip technology, highlighting its capital efficiency, high heat rate, and competitive power pricing. They also noted customer recognition of recip benefits and Liberty's technology-agnostic approach.

Stephen Gengaro asked about Liberty Energy's visibility on demand for its planned power generation assets over the next 24 months, including contract status and target customer segments like data centers.

Answer

CEO Ron Gusek and CFO Michael Stock explained that the sales pipeline for power has more than doubled in 90 days with increased urgency. They have LOIs and contract terms for multiple gigawatts of capacity, expressing confidence in converting these to long-term (15+ years) contracts. They anticipate a higher percentage of capacity will be with data center customers than initially expected.

Stephen Gengaro asked why Q4 2025 activity was stronger than expected with less downtime, inquiring if it indicated a shift in E&P thinking or was primarily weather-related. He also questioned Halliburton's expectations for completion efficiency, its impact on U.S. production, and whether current activity levels are sufficient to sustain production.

Answer

Jeff Miller, Chairman, President, and CEO, attributed the stronger Q4 to a combination of factors, including weather and solid customer engagement from operators taking a long-term view of unconventionals and technology. He believes the U.S. is likely at or below maintenance production levels, with technology driving better recovery being the key going forward, rather than just faster pumping. Miller highlighted the increasing demand for larger frac fleets, more horsepower, and advanced technology for continuous pumping and sand placement, noting the strengthening of their drilling services business due to LOGIX automation and iCruise rotary steerable systems for longer, more complex wells.

Stephen Gengaro asked for reasons behind the stronger-than-expected fourth-quarter performance, particularly less downtime and white space, and what this indicates about E&P operator sentiment. He also inquired about expectations for completion efficiency, its impact on U.S. production, and whether current activity levels are sufficient to sustain production.

Answer

Jeff Miller, Chairman, President, and CEO, attributed the stronger Q4 to weather and operators taking a long-term view on unconventionals and technology. He believes U.S. production is currently at or below maintenance levels. He highlighted technology, such as Zeus IQ, LOGIX, and iCruise, as crucial for improving recovery, handling larger and more complex frac jobs, and drilling longer, more precise wells, driving growth across both divisions.

Stephen David Gengaro asked for Halliburton's views on 2026, specifically regarding frac activity being below levels needed to sustain U.S. production and how E&Ps might react. He also inquired about changes in the competitive landscape for growth areas like artificial lift and chemicals, and how these changes aid Halliburton's ability to gain market share.

Answer

Jeffrey Miller, Chairman, President, and CEO, projected North America to be 'flattish to down a little bit next year' in terms of activity and capital spend, with E&Ps conserving capital. He explained that in artificial lift, Halliburton's performance and technology, including IntelliVate software and AI, provide differentiation, driving outsized growth. He noted that ESP has become a more critical tool for maximizing oil production from existing assets, giving Halliburton a unique position for secular growth.

Steven Gengaro from Stifel asked about the significance of an early December date for the first contract conversion from LOI, questioning if it's a magical date or tied to projected timelines. He also inquired about potential customers' preferences for gas versus nuclear power, specifically if they desire nuclear as a long-term baseload given government support, or if they are power agnostic.

Answer

CFO Miles Everson explained that the early December target date (originally December 9th) was driven by the need to meet the customer's ambitious 2026 delivery schedule and secure financing, noting a three-week delay in the $150 million interim financing structure. CEO Toby Neugebauer added that Fermi is aggressively working to claw back this delay through intensive negotiations, tackling tough questions first. Regarding power preferences, Everson stated it's customer-specific, but larger companies show more interest in carbon-free nuclear. Neugebauer emphasized that Fermi aims to make nuclear competitive with natural gas by avoiding inflated construction costs, believing it won't be a major decision-maker if priced reasonably.

Stephen Gengaro from Stifel inquired about the comprehensive evaluation of capital allocation, business cost structure, and operations that Baker Hughes announced in early October, particularly what this entails and what investors should expect to hear from the company in the coming quarters.

Answer

Chairman and CEO Lorenzo Simonelli explained that the evaluation is a natural progression of the company's consistent actions to enhance shareholder value and accelerate its transformation into an energy and industrial technology company, especially following the Chart Industries shareholder approval. He reiterated the company's track record of driving value, citing over 300 basis points increase in EBITDA margins and approximately 60% EBITDA growth during Horizon 1. Simonelli stated that the company and its board would continue to explore all paths to drive shareholder value and would not speculate on specific outcomes but assured investors of ongoing efforts to unlock additional value creation opportunities.

Stephen Gengaro from Stifel inquired about the comprehensive evaluation of capital allocation, business cost structure, and operations that Baker Hughes Company is undertaking in connection with the pending Chart Industries acquisition, asking what shareholders should expect in the coming quarters.

Answer

Chairman and CEO Lorenzo Simonelli explained that the evaluation is a natural progression of Baker Hughes Company's disciplined approach to enhancing shareholder value and accelerating its transformation into a differentiated energy and industrial technology company. He emphasized that this strategy is not new, citing Horizon 1's tangible results with over 300 basis points of EBITDA margin expansion and 60% EBITDA growth. Simonelli stated that the company, in conjunction with its board, will continue to explore all paths to drive shareholder value, assuring investors of substantial value recognition in the near, intermediate, and long term, while refraining from speculating on specific outcomes at this time.

Inquired about the implementation of the tariff surcharge for the Dyna business, pricing in the perforating gun market, the expected performance of Dyna in a potentially weaker second half, and the status of the Steel Connect situation.

Answer

The company has had partial success with the tariff surcharge, which is reflected in the guidance. Dyna's performance will depend on market conditions, with current expectations for flat to modestly down results. They provided no new information on Steel Connect, stating they are the largest shareholder and communications are periodic.

Inquired about the frac supply-demand balance for 2025, including the impact of asset attrition. Also asked for a sense of the magnitude of pricing changes over the last year and whether there was concern about rising electricity costs for e-frac due to competition from other industries like data centers.

Answer

Management sees the frac market as tight due to accelerated equipment attrition, which could become more acute with a recovery in natural gas markets. They declined to provide specific pricing data, emphasizing their strategy of securing long-term partnerships. They view potential competition for power as a 'high-class problem' and an opportunity, given their vertical integration and focus on allocating resources for the best returns.

Inquired about the Q3 active fleet count, the balance between pricing and deployments, Q4 revenue and decremental margin expectations, the potential impact of Dune Express on the Proppant business, and the strategy for the power generation segment.

Answer

The company confirmed the fleet count estimate was reasonable and that Q4 expectations are in line with seasonal trends. They do not expect a material impact from Dune Express and see upside in their Proppant business. The power generation business is currently focused on servicing internal e-fleet needs with potential for future expansion.

Stephen Gengaro inquired about ProFrac's perspective on the 2025 frac supply-demand balance, including the attrition rate of older assets, the magnitude of pricing changes over the last year, and potential risks from rising electricity costs due to demand from other industries like data centers.

Answer

Executive Chairman Matt Wilks described the frac market as 'pretty tight,' noting that high utilization is accelerating the attrition of legacy equipment, which he believes will become a major theme in 2025. He declined to quantify pricing changes but reiterated a focus on long-term partnerships over maximizing short-term pricing. CEO Ladd Wilks addressed the electricity cost question, calling it a 'high-class problem' and stating that while Livewire will prioritize internal needs, they will allocate capital to the best return opportunities while honoring customer commitments.

Gengaro sought clarity on the delivery ramp for the year, asking for visibility on the timing and volume of vehicle deliveries to align with the annual guidance.

Answer

Aquila explained that they are currently allocating limited production among major customers and are focused on long-term strategies rather than short-term delivery numbers. He declined to give specific quarterly guidance but reiterated the goal of reaching a 20,000-unit run rate by year-end and delivering a few thousand vehicles in 2024, emphasizing a focus on methodical execution and securing non-dilutive financing.

Asked for clarification on how acquired assets impact production capacity, the plan to address the funding gap given cash outflow guidance, and the expected revenue cadence for 2024.

Answer

The acquired assets are for increasing efficiency and automation within the 20,000-unit run rate, not for adding incremental capacity. The company will raise capital based on milestones to avoid waste. The revenue cadence will be a consistent step-up, but the primary focus is on achieving correct economics before scaling, rather than hitting specific quarterly targets.

Asked about the impact of natural gas prices on 2024 guidance, the mix of contracted versus spot volumes, the company's perspective on recent M&A and valuations in the sand market, total nameplate capacity, and the evolution and pricing of the Canadian market.

Answer

The company acknowledged that low natural gas prices are a variable for H2 2024 guidance but expect it to be offset by oil-driven basins. About 50% of their volume is contracted with stable pricing. They believe Northern White sand is undervalued compared to in-basin sand and that their markets will remain strong. Total capacity is 10 million tons. They are optimistic about growth in the Canadian market, which has complementary product needs and similar pricing to the U.S., albeit with more seasonality.