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    Halliburton Co (HAL)

    Q3 2024 Summary

    Published Jan 6, 2025, 8:15 PM UTC
    Initial Price$33.96July 1, 2024
    Final Price$29.93October 1, 2024
    Price Change$-4.03
    % Change-11.87%

    What went well

    • Halliburton has 90% of its fracturing fleet committed for 2025, indicating strong demand and future revenue visibility. The company stays out of the spot market, sizes the fleet appropriately, and leverages its high-performance technology to command premium pricing.
    • Significant R&D investment in intervention technologies, such as the riserless intervention service developed with TechnipFMC, positions Halliburton for outsized international growth. These advancements open new markets and make wells economically viable that previously were not.
    • Leading edge in fracking efficiency and technology, exemplified by the Zeus platform, allows Halliburton to achieve more with less equipment, driving capital efficiency and supporting margins. The company is at the forefront of industry efficiency gains, helping customers be more productive while maintaining profitability.

    What went wrong

    • Uncertainty in Fleet Pricing for 2025: Despite having 90% of their fleet committed for 2025, Halliburton has not provided details on the pricing of these contracts, raising concerns about the profitability of their operations in a potentially challenging market.
    • Increased Efficiency Reducing Demand: Operators are becoming more efficient, with the ability to use four frac fleets in 2025 to perform the work of five fleets in 2024, which could lead to reduced demand for Halliburton's services and impact their revenues and margins.
    • Limited Room for Further Efficiency Gains: Halliburton acknowledges that the industry has become so efficient that it may be harder to achieve additional efficiency improvements from here, potentially limiting future growth and margin expansion.

    Q&A Summary

    1. North America Fleet Commitments
      Q: Do you have 90% of your frac fleets committed for 2025?
      A: Yes, 90% of our frac fleets are committed for 2025, with up to 50% potentially being Zeus fleets. This strong commitment gives us confidence about 2025, and we're focused on maximizing value by solving the hardest problems in unconventionals and leveraging our Zeus platform.

    2. Impact of Efficiency on Profitability
      Q: How does increased efficiency impact your profitability in North American frac?
      A: We're at the leading edge of efficiency, getting more reps with less capital. Generating the same or more revenue with less equipment is positive and strategically aligns with why we build equipment the way we do. Our Zeus platform creates outsized value for customers, and leading this efficiency keeps us busy and creates more opportunities.

    3. 2025 CapEx Guidance
      Q: Will CapEx remain at 6% of revenue for next year?
      A: Yes, we expect CapEx to be 6% of revenue in 2025. This will be balanced between Completion & Production, Drilling & Evaluation, and between North America and international markets.

    4. Stock Buybacks
      Q: Is $250 million per quarter the right run rate for stock buybacks in 2025?
      A: We plan to average $250 million per quarter in stock buybacks, leading to around $1 billion for the year, significantly up from 2023. We view buybacks as a systematic mechanism to return cash to shareholders through cycles.

    5. International Growth Opportunities
      Q: How does international opportunity compare to North America, particularly regarding productivity?
      A: Internationally, we're much further behind in technology application compared to North America. We're not yet at the point where efficiency reduces demand internationally; in fact, demand is increasing. We see solid growth opportunities across business lines and geographies, especially in intervention services where we're investing in R&D and developing technologies like riserless intervention.

    6. Cybersecurity Incident Impact
      Q: What lessons were learned from the cybersecurity incident, and how does it affect the ERP rollout?
      A: The importance of preparedness and partnering with top professionals cannot be overemphasized. The incident caused our IT team to focus on restoration, delaying the ERP system rollout by 3 to 6 months, pushing completion into H1 2026.

    7. Offshore Business Outlook
      Q: Is there anything to be mindful of for your offshore business in 2025?
      A: We see stability in our biggest offshore markets like the Gulf of Mexico, Brazil, Guyana, Norway, and West Africa. We expect customers to continue drilling and developing offshore resources, and we're equipped to support them.

    8. Growth in Intervention Services
      Q: Does growth in intervention services make earnings less cyclical?
      A: Yes, we believe that growth in our intervention business makes earnings less cyclical, and it's part of the reason we want to continue investing to generate outsized growth.

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