Q2 2024 Summary
Published Jan 10, 2025, 5:10 PM UTC- Halliburton expects strong growth in the Middle East market, with significant exposure to both unconventional and gas projects, including in Saudi Arabia, and is "optimistic, actually bullish, around Middle East".
- The company continues to invest in differentiated technologies that allow them to outperform in revenue even in a flat rig count environment, giving confidence in their ability to outperform in '25 and beyond.
- Halliburton anticipates continuing international growth, particularly in unconventional plays in regions like Saudi Arabia and Argentina, and sees a "continuing march internationally of growth", supported by oil prices and client demand.
- Halliburton expects a 6% to 8% year-over-year decline in North America revenues for 2024, primarily due to lower activity levels and an unexpected downturn in the gas market.
- The company anticipates a steep margin reduction in its Completion and Production division for Q3 2024, both in North America and international markets, indicating challenges across multiple product lines.
- Halliburton revised its international growth outlook, acknowledging it won't reach the high end of the expected range, suggesting potential delays or lower-than-expected spending in international markets.
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North America Revenue Outlook
Q: What drives declines in North America revenue, activity or pricing?
A: The decline in North America revenue, expected to be down 6–8% year-over-year, is primarily driven by reduced activity levels rather than pricing impacts. This includes factors such as retiring a few fleets during the quarter, a downturn in the gas market, and the time it takes to digest mergers and acquisitions. -
International Growth Prospects
Q: How strong is international spending and growth outlook for 2025?
A: The international growth prospects for 2025 are strong, with many projects being tendered and activities planned for next year. Expectations include meaningful work in Europe, Africa, and Latin America, with notable optimism around the Middle East due to National Oil Companies driving activity. Halliburton is confident in both its own outlook and the industry's growth internationally. -
E-Fleets Recontracting and Demand
Q: Will most e-fleets stay with existing customers upon recontracting?
A: Yes, Halliburton expects most of its e-fleets to remain with existing customers. Demand for e-fleets remains strong, as they are leading technology platforms. Contracts for e-fleets do not expire until next year, and the company is signing up repeat customers, indicating the value being created. -
Capital Return Plans
Q: How should we think about cash returns to shareholders?
A: Halliburton generated about $800 million of free cash flow in the second quarter and remains committed to returning capital to shareholders. The company bought back $250 million in shares in both Q1 and Q2, with a general intention to continue similar repurchases throughout the remainder of 2024. The focus remains on delivering over 10% free cash flow growth compared to last year. -
D&E Margin Expansion
Q: What's the margin expansion opportunity in D&E segment?
A: Halliburton expects continued margin improvement in the Drilling and Evaluation (D&E) segment, driven by technology uptake and the rollout of new drilling technologies like iCruise and iStar. The company is confident in the growth of D&E margins as it moves into 2025, focusing on year-on-year progression enabled by increased adoption of advanced drilling technologies internationally. -
E-Fleets and White Space Risk
Q: Is there any risk of white space on e-fleet contracts?
A: No, Halliburton does not anticipate any white space risk on its e-fleet contracts. Clients have contracted these fleets with long-term programs, and e-fleets are expected to remain continuously operational due to their efficiency, technology advantages, and lower cost of ownership. -
Natural Gas Demand from AI/Data Centers
Q: How are customer conversations evolving regarding gas demand from tech industry?
A: There is increasing discussion around the utilization of natural gas to meet the power demand from data centers and AI. Halliburton acknowledges that gas is a fantastic fuel resource, and while the timing is still developing, the company is excited about the potential demand pull and the alignment with the tech industry, which could translate into greater gas takeaway and a positive impact on the Permian Basin. -
C&P Margin Outlook
Q: What's driving the steep margin reduction in C&P segment guidance?
A: The margin reduction in the Completion and Production (C&P) segment for the third quarter is due to a combination of factors affecting both North America and international operations. Specifically, Q3 margins in the international business are expected to be lower than Q2. There are multiple moving parts across various product lines, and it's not solely related to North America. -
iCruise Technology Adoption
Q: How is iCruise technology adoption progressing in North America?
A: The adoption of iCruise technology in North America is progressing well, with high demand and positive customer reception. Halliburton is going to market with full services, and the technology is delivering performance, reliability, and value. Customers adopting iCruise are among the leading drillers, indicating strong market acceptance. -
Unconventional International Opportunities
Q: What are the unconventional international opportunities over next 2-3 years?
A: Halliburton sees significant unconventional opportunities internationally, particularly in Saudi Arabia and Argentina, which are meaningful markets currently executing. The rest of the Middle East is also exciting, with discussions focused on pragmatic approaches to develop good reservoirs. Serious operators are taking a long-term view, learning from successful models to create meaningful contributions to production.