Q2 2023 Halliburton Co Earnings Call
Okay.
Good day and thank you for standing by welcome to the Halliburton Company second quarter 2023 earnings Conference call.
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Please be advised that today's conference is being recorded.
I would now like to hand, the conference over to your Speaker today, David Corbin Senior director of Investor Relations.
Hello, and thank you for joining the Halliburton second quarter 2023 conference call, we will make a recording of today's webcast available for seven days on Halliburton's website. After this call.
Turning me today are Jeff Miller, Chairman, President and CEO , and Eric Correct Executive Vice President and CFO .
Some of today's comments may include forward looking statements, reflecting halliburton's views about future events.
These matters involve risks and uncertainties that could cause our actual results to materially differ from our forward looking statements.
These risks are discussed in halliburton's Form 10-K for the year ended December 31, 2022 Form 10-Q for the quarter ended March 31 2023.
<unk> current reports on form 8-K, and other Securities and Exchange Commission filings.
We undertake no obligation to revise or update publicly any forward looking statements for any reason.
Our comments today also include non-GAAP financial measures additional details and reconciliation to the most directly comparable GAAP financial measures are included in our second quarter earnings release and in the quarterly results and presentation section of our website now I'll turn the call over to Jeff.
Thank you David and good morning, everyone.
In the second quarter, Halliburton, who once again delivered strong results driven by service quality outstanding execution and strong global demand for high quality and high performance oilfield services.
Let's get right to the highlights total company revenue increased 14% year over year operating income grew 41% compared to second quarter of 2022 adjusted operating income.
International revenue grew 17% year over year with strong activity in all markets.
North America revenue grew 11% year over year.
Our completion and production division revenue grew 19% year over year, while margins expanded by 320 basis points.
Our drilling and evaluation division revenue grew 7% year over year, while margins expanded nearly 300 basis points.
Finally, we generated $1.1 billion of cash from operations $798 million of free cash flow and repurchased approximately $250 million worth of shares during the quarter.
Halliburton delivered an impressive first half of 2023 I'd like to thank our employees for these outstanding results.
You for executing on our mainstays and strategy delivery.
Now, let's turn to what I see in the markets and what I believe is driving this multiyear up cycles duration.
Demand for oil and gas is strong as demonstrated by demand growth of 2 million barrels per day in the first half of the year compared to the same period last year.
Oil and gas continues to demonstrate its critical role in the global economy and meeting long term demand requires sustained capital investment.
Commodity prices remain attractive.
I talk to customers they expect to work more not less and many of their activity plans extend into the next decade.
Customers are settling in for a long duration up cycle.
Overall, I expect upstream spending to grow in 2023 and beyond.
For this year I expect international and North America customer spending growth in the high teens and around 10%, respectively compared to last year, despite reduced rig count and completion activity in the U S.
Now, let's start with our performance in the international markets.
Revenue in the second quarter grew 17% compared to the same period of last year with strong activity across both divisions.
Today more than 20% of our tender pipeline represents incremental activity, which is as high as I can recall.
Equally important in addition to strong growth in the Middle East and Latin America, we see steady growth in activity across the globe.
In this environment, I expect quality services and equipment to remain tight and pricing to continue to improve.
Halliburton strategy is to deliver profitable international growth.
We are clear on how we do this through differentiated technology offerings selective contract wins and a unique collaborative approach to working with our customers.
Our differentiated technology and digital portfolio deliver high quality and high performance to our customers in all markets.
Here are some examples.
Our drilling and L. W. D technology platforms deliver better reliability data capture and efficiency for our customers, while structurally expanding our margins.
We built and deployed leading edge drilling equipment that requires less capital to build and operate compared to the prior generation of equipment.
One example for a customer in the Middle East Halliburton achieved a world record for the longest well ever drilled with a measured depth of over 51000 feet using halliburton's I cruise I star and logics technologies.
Our leading position in completions technology is unlocking production for customers.
We recently set another world record with the successful installation of the first 12 zone intelligent completion for a middle east offshore customer using Halliburton smartwatch technology on our E completions platform.
In our digital business.
Manure joined several other customers in selecting landmarks decision space 365, as their standard subsurface data interpretation tool during the second quarter. Our landmark software business closed on the acquisition of Ras Optima, a leader in advanced ensemble modeling at the reservoir level I'm.
Excited about Ras Optimus technology, both Standalone and how it accelerates landmarks roadmap for next generation reservoir modeling technology.
Now turning to collaboration.
Our value proposition to collaborate and engineer solutions to maximize asset value for our customers and our mainstay processes define how we consistently differentiate our services. This is the source of our competitive advantage our value proposition creates an environment, where our customers and halliburton can.
<unk> performed better.
A recent example of this is halliburton and bar Energy's announcement of a long term strategic relationship for drilling services.
I expect we will demonstrate with bar as we have with other customers that are collaborative approach create significantly better operational and financial performance for both the customer and Halliburton.
Our international strategy works are differentiated cost effective technologies and collaborative approach with customers empower us to strategically target work, where we see a competitive advantage and a clear path to outperform financially.
Turning to North America, we delivered a solid quarter North America revenue grew 11% versus the same period last year and margins were sequentially flat versus the last quarter.
Looking ahead into the second half I expect overall market activity in North America will be slightly lower than in the first half.
More importantly, I expect Halliburton's, North America margins to remain strong for the balance of the year.
Our results in North America, clearly demonstrate the success of our strategy.
To maximize value.
We do this through capital efficiency differentiated technology and alignment with high quality customers.
During our last call I outlined the steps, we took in North America land to maintain pricing and deploy service capacity to attractive return opportunities.
Or retire old equipment to further accelerate halliburton's transition to our electric fleets.
Executing on our strategy during the second quarter, we deployed additional Zeus fleets on multi year contracts, while retiring additional diesel equipment.
Demand for our Zeus E fleets is strong in fact during the second quarter, we signed more multi year Zeus contracts than in any prior quarter.
The multiyear duration of these contracts provides both stability and secure economic returns, which furthers my confidence in the strength of our margins.
I continue to be impressed by the performance of our Zeus E fleets and the optimization and efficiencies that come with scale.
Our current system is the result of multiple iterations over several years and our continuous improvement processes.
Every element of the value chain from design and manufacturing to operations and maintenance is continuously improved.
Our advances in pump technology and system design result in higher horsepower density and pump efficiency.
With octave, we are automating equipment operation for consistency and reliability, we worked to be the best at getting better today Zeus is a fully integrated system, we deliver new equipment on time that works right out of the box and on average this year our E fleets pumped over 10% more hours then.
Our high performance diesel fleets.
For our customers these improvements mean better performance and even lower total cost of ownership.
For Halliburton. These improvements mean, we further widen the moat around our growing E fleet business.
And all markets International and North America, I believe our strategies yield improved financial results.
Let's look at the steady growth and margin expansion in DNA. This is the result of a structural change and technology overhaul that began several years ago.
Our leading drilling platforms are lower cost and higher performance than the prior generation, which drives higher asset velocity and higher returns.
And our testing business our flow connect surface well testing service provides a safe efficient and automated platform to our customers, while lowering our overall operating costs.
In our wireline business, our examiner platform provides high quality reservoir data reduces subsurface uncertainty and allows us to win high value exploration work.
Finally across all product lines automation and remote operations are beginning to transform service delivery driving higher quality and reliability, while lowering total cost of service delivery.
Looking through any quarterly fluctuations and seasonality I fully expect <unk> margins will continue to expand over time.
Our strategy also generates strong free cash flow and our capital return framework returns cash to our shareholders.
I expect over 50% of free cash flow will be returned to shareholders. This year.
I am pleased with where we are today.
In the last 18 months, we retired $1.2 billion of debt strengthening our balance sheet twice.
Twice increased our quarterly dividend, which forms the stable foundation of our capital return framework.
And finally repurchased approximately $600 million worth of shares including approximately $250 million this quarter.
I fully expect that the execution of our strategy in this long duration up cycle will deliver better returns and more free cash flow and more cash back to shareholders now.
Now I'll turn the call over to Eric to provide more details on our financial results.
Eric.
Thank you, Jeff and good morning, before I begin the financial review I'd like to discuss one item in.
In the second quarter, we kicked off our S. E. P. S. Four upgrade and recorded a $13 million expense or about one penny per diluted share in our Q2 operating results future expenses will be both included in our operating results and in our quarterly guidance.
Here are a few more details on the upgrade this upgrade will take place over the next two and a half years, concluding around Q4 2025.
We expect it to provide efficiencies cost savings and advanced analytics that will benefit halliburton and our customers.
The total project investment should be approximately $250 million $50 million this year and $100 million in each of the next two years. Upon completion, we expect significant ongoing savings, which will pay back the investment in about three years.
Now, let me move on to our quarterly results. Our second quarter reported net income per diluted share was 68 cents. Excluding the effect of the transaction in Argentina. Our adjusted net income per diluted share was <unk> 77 cents.
Total company revenue for the quarter was $5 $8 billion, a 2% sequential increase while operating income was $1 billion, a sequential increase of 4%.
Operating margin for the company was 17.4% in the second quarter, a 329 basis points increase over second quarter of 2022 adjusted operating margin.
These results were primarily driven by strong international activity across both divisions, along with improved pricing.
Beginning with our completion and production division revenue in the second quarter was $3 $5 billion, a 2% sequential increase while operating income was $707 million an increase of 6% sequentially.
C N P delivered an operating income margin of 20%. These results were due to increased activity from multiple product lines in international markets and higher artificial lift activity in North America.
In our drilling and evaluation division revenue in the second quarter was $2 $3 billion, a sequential increase of 2% while operating income was $376 million a sequential increase of 2%.
<unk> delivered an operating income margin of 16%. These results were driven by higher drilling activity and increased fluid services in key regions, including Middle East and Latin America, partially offset by seasonal roll off of software sales across multiple regions.
Now, let's move on to geographic results.
Our second quarter International revenue increased 7% sequentially due to solid product sales activity increases and pricing gains across multiple product lines.
These results were impacted by lower software sales in the eastern hemisphere.
In North America revenue in the second quarter was $2 $7 billion, a 2% decrease sequentially. This decline was primarily driven by decrease stimulation activity in U S land, partially offset by increased artificial lift activity in U S land and higher activity or cross.
Multiple product service lines in the Gulf of Mexico.
Latin America revenue in the second quarter was $994 million, a 9% increase sequentially, resulting from higher completion tool sales in Brazil, and improved activity across multiple product service lines in Mexico and Argentina.
Partially offsetting this increase is reduced activity in the Caribbean across multiple product service lines.
Europe Africa revenue in the second quarter were $698 million, a 5% increase sequentially.
This improvement was primarily driven by increased fluid services across the region and higher completion tool sales in Angola and Norway.
Middle East Asia revenue in the second quarter was $1.4 billion, a 6% increase sequentially largely resulting from higher completion tool sales in Saudi Arabia, and higher wireline activity drilling services and stimulation activity in the region.
This improvement was partially offset by decreased project management activity in Saudi Arabia.
Moving on to other items in the second quarter, our corporate and other expenses was $59 million for the third quarter, we expect our corporate expenses to increase by about $5 million to $10 million.
As noted earlier in the second quarter, we spent $13 million or about one penny per diluted share on S. E. P. S. Four migration, which is included in our operating results for the third quarter. We expect these expenses to be approximately $20 million or about.
Two pennies per diluted share.
Net interest expense for the quarter was $92 million. The increase this quarter was primarily related to the reduction of interest income as a result of the Argentina transaction for the third quarter. We expect this expense to remain approximately flat.
Other net expense for the quarter was $32 million for the third quarter. We expect this expense to remain approximately flat.
Our effective tax rate for the second quarter came in at approximately 21, 3% based on our anticipated geographic earnings mix, we expect our third quarter effective tax rate to increase by approximately 50 basis points.
Capital expenditures for the second quarter were $303 million, we anticipate that for the full year capital expenditure will be approximately 6% of our revenue.
Our second quarter cash flow from operations was $1 $1 billion and free cash flow was $798 million, we expect to generate free cash flow for the full year 2023 that is 30% to 40% higher than last year.
Finally, we repurchased $248 million of our common stock during the second quarter.
Now turning to our near term operational outlook, let me provide you with some comments on how we see the third quarter unfolding.
In our completion and production division, we anticipate sequential revenue to be essentially flat with the second quarter and margins to remain approximately flat.
In our drilling and evaluation division, we anticipate sequential revenue to increase in the low single digits and margins to increase 25 to 75 basis points I will now turn the call back to Jeff.
Thanks, Eric.
Summarize our discussion today are.
Our international business is growing at a strong pace across all regions I expect our differentiated technology offerings selective contract wins and our unique collaborative approach to working with our customers to deliver higher international margins and growth for Halliburton.
Our strategy to maximize value in North America is driven by capital efficiency.
<unk> technology and alignment with high quality customers I expect this will allow us to generate solid financial performance.
I expect that the execution of our strategy in this long duration up cycle will deliver better returns and more free cash flow and more cash back to shareholders.
And now let's open it up for questions.
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In the interest of time, we ask that you limit yourself to one question and one follow up.
Okay.
Our first question will come from the line of David Anderson with Barclays.
Alright, good morning, Jeff.
So north America slowing down a bit international started accelerated to be expected, but I was wondering if you could perhaps take a bit of a step back and talk about how you see the primary market is trending and what kind of.
12 to 24 months in terms of land Middle East and offshore maybe set Atlanta, Latam aside Ritchie and a steady growth market.
Question is in terms of the cadence how do you see the trajectory of each of these markets playing out.
Lower land spend I think you were saying, 10% up from down from 15%. So is that kind of flattish in the second half of the year and then how do you see the ramp up in the Middle East and then the timing of offshore I know, it's a lot, but maybe kind of just bigger picture, how you see those markets trending.
Certainly and look I'm as confident as I have ever been and the duration the long duration.
This cycle.
Yeah rooted in attractive commodity price and really the growth in demand for oil so I'll start there.
I think the offshore piece of this we're super excited about it.
No.
Gulf of Mexico, where eclipsing 50% of our revenues internationally are.
Our offshore and so all of our service lines are represented there I think the cadence as I look over the next years year lets say year or so.
It just takes time to get this work underway and I'm just back from a trip and we were looking at projects that.
They have to get rigs get planned get agreement from governments, but it's starting and <unk>.
Expect that continues to build.
And the 24 and beyond I mean, these are the kind of projects that.
A decade to do so.
Middle East I see the same thing the number of rigs being mobilized in the middle East that takes some time to do but we are beginning to see it we are seeing it but my view is that we'll continue to build over the next 12 or 24 months.
Coming back to North America.
Yes, I gave you the.
Yes.
The outlook on the second half of the year, but I think what's most important is when I look into 'twenty four.
Commodity markets are getting more constructive oil prices firming up gas seems to have found its footing.
You don't expect that ramps.
They had some consolidation with customers and that means that bigger customers do more planning through the cycle. They are committed to executing plans over a longer term.
And service intensity in North American never let the fact, it only gets harder you cant you got it yes.
You got to work harder just to stand still so all of this is constructive for halliburton's business as I look out into 'twenty four and beyond.
And you know and some of that in North America comment. It's just it's backed up by the pace of easily contracts that we're seeing.
Yes, we've had more contracts last quarter, we'd even signed another one this quarter.
And that's really for work that starts in 'twenty four and goes 'twenty four 'twenty five 'twenty six so there are a lot of reasons that I see.
24, looking super strong for us.
And then Jeff maybe you can kind of get into the heart of kind of where all the a lot of the chatter has been during the quarter, obviously rig count's been following we've been hearing about pricing and pumping getting softer of course, a lot of it coming from your competitors, who would love to pay less for the services can you give us some insight into kind of what youre seeing on the pricing trend is the stock.
This kind of really stuck on the tier two side.
In your comments you talked about about your Zeus fleets holding up is the tier four holding up what do you see on the competitive pricing side.
If you could kind of give us some more context here because we just kind of hear that kind of generalized comment then I have a feeling there's more to it I was wondering if you could provide some more context. Please.
It tells you what we're doing which is retiring.
Older equipment, and transitioning to electric and so.
I think thats, an important factor we really.
Don't see.
We will participate in the bottom part of that market, particularly at all really with that said spot type market.
Most of our work I would say over 70% of our works with large privates or publics and so these are customers that execute their plans and they do execute their plans and.
From our perspective.
The performance, we continue to see our performance improving okay.
Even as we add electric but also he has been on our diesel fleets.
And differentiated service performance.
The technology is getting better I mean, those are things that drive that.
Not only margins, but they're also part of the dialogue around.
What's it take to actually run.
High performing business and that requires engines transmissions and people.
We really haven't seen.
Yes.
Any deflation in those things.
Our next question comes from the line of Arun Jairam with J P. Morgan.
Hey, Jeff maybe just a follow up to David's question.
One question, we get is how do softer conditions called in the spot market.
Influence pricing on your dedicated fleets or as you start some of your price negotiations on 2024 and North America.
Well look I think that.
Again, we've got a little exposure to the spot as I've described I would say broadly yes.
Look ahead high performance high quality services really matter and we see a lot of bifurcation there.
And we're going to continue with their easily rollout, which is sort of a whole different.
Category of service, it's actually lower cost or better performance for our clients, but also lower there.
Ownership and so.
I would say we are.
Planning to do.
Deliver high quality service and we really don't see any point in burning up equipment with no margins.
That's not a good direction actually has longer lasting impacts.
Surface equipment isn't taking Kara.
Okay fair enough and Jeff wanted to get your thoughts on offshore obviously, one of the trends of the market doesn't been observing is just strengthen offshore markets but.
Could you talk about how Hal is positioned.
From a product line perspective offshore.
And what Youre seeing in that perhaps in the Gulf of Mexico to mitigate maybe some of the the risk of lower activity in North America.
Well look we're heavily levered towards the offshore.
Thanks to all of our service lines participate in our offshore business and.
We've got leading positions in.
And cementing and HCP.
Our drilling business, we've talked a lot about where we're going with drilling and wireline.
And so yes.
That's an important business for us.
It is higher service intensity, which means that it takes more equipment to do.
And so we really like that I expect Gulf of Mexico continues to strengthen.
And as again, we talked about last quarter sort of the percentage of our offshore.
International business anyway, as a percentage.
Continues to grow and so I think that.
The offshore business is going to be very important for halliburton in the Gulf of Mexico, and all around the world.
Our next question comes from the line of James West with Evercore ISI.
Hey, good morning, Jeff Good morning, Eric.
Good morning, James.
So Jeff with your Zeus rollout you're easily rollout here you talked about the visibility or good visibility into 2014 and 25 at this point.
As these spreads.
Spreads come to the market or are you kind of one for one retiring the tier four assets that you have or do those continue to.
To work and so it's a net increase in horsepower.
Look it's not a perfect science.
In terms of one in one out but it is generally one in one out over over time.
And so the type of equipment for example that we would retire is typically higher cost to maintain and so when we retire our fleet.
We sort of blow the parts back into the.
Our current fleet and that lowers the cost or improve the margins of the existing fleet.
We are replacing.
Let's say, replacing we're adding equipment only as demanded by clients. So that's the difference we're not building it to.
We're building it for contracts, where there is commit.
Commitment to.
Return the capital and also the return on capital inside of the contract and so that's what's driving the pace of replacement.
Okay, Okay that makes sense and then on the international and particularly offshore.
As these rigs are mobilizing and getting set up government signing contracts et cetera.
And the companies your customers are sourcing the service.
Shipment and service.
<unk>, what's the conversation like with them around pricing and kind of.
Or is there even really much of a concern about pricing because they just need to get the equipment.
Well I think that we're seeing pricing moving up whether it comes in the form of a tender or a dialogue and a lot of that is around tightness. It's also around efficiency and performance of our equipment.
Yes.
<unk> done a lot to structurally overhaul and technically overhaul a lot of our drilling business and I talked a bit about some of the wireline things that we're doing so.
The dialogue is.
Certainly prices up.
And then it comes in a few forms whether it's a negotiation or discussion or in some cases, we call and say, we just don't have it.
Which is.
Again driving prices up.
Our next question comes from the line of Neil Mehta with Goldman Sachs.
Yes, thanks, so much.
Jeff maybe I start with you to talk a little bit about return of capital to shareholders and I'll, let I'll. Let you go anywhere you want with this you did buy back $250 million worth of stock in the quarter and you've been pretty steady in terms of that dividend coming back to shareholders as well.
You'd think about.
The repurchase program, how aggressive do you do it.
Tend to be do you view this as more of a ratable program versus or an opportunistic one.
Sure.
Hey, look I think that.
Yes.
We've committed to return at least 50% free cash flow back to shareholders.
Is this going to be more than that.
I think what we do is we build the base case around what we returned to shareholders and then we're able to flex up from that and I think thats.
Some of what Youre, saying, Eric do you want to add to that.
I think it's.
Yeah.
Well I think the I mean, the main focus in the organization right now is to continue to generate free cash flow.
That's really the first priority and ensure that we have enough and actually were generating in our free cash flow right now to continue to buy back shares but also to continue to work and further strengthen our balance sheet. So.
If we look forward, we intend to do both.
Even though the bias right now is clearly on continuing to buyback more shares.
Thanks, Eric and then a follow up follow up is for you is just you made some comments around this in the script, but any Q3 considerations you on us as a market.
Keep in mind as we think about building the sequential model into next quarter.
No I think I think we covered it in the.
Our prepared remark.
And Jeff mentioned it is what as you look throughout the remainder of the year.
There are a lot of question on North America, So maybe I'll repeat what.
We indicated which is H two is going to be a little lower than H. One for North America Q3 years, a bit down compared to Q2, and we're expecting Q4 to be flat relative to Q3, considering doing some holidays and seasonality as well. So you combine that with the guidance by division and I think it gives you.
Really good perspective on how we see the second half of the year unfolding.
Our next question comes from the line of Scott Gruber with Citigroup.
Okay.
Yes.
On the second half outlook.
Yes, typically frac activity does slow down and into the holiday season.
But the gas forward curve is actually quite encouraging today, Jeff you.
You mentioned in your conversation.
Earlier.
The conversations with clients today are they suggesting that.
Yes, theyre going to bring back some gas completion activity.
Later, this year or is that more likely to wait until next year after the budget reset process.
Look I think that I'm, not going to try to call tops and bottoms I'll, let others do that.
But I think that.
The outlook I described for 2024 is consistent with what you just described and so when we see that.
I don't have precision around the date, but there is no question that gas is firming up and that there'll be LNG takeaway and that the gas market will be busy.
Question of the day, but I expect that.
Build in 24 could it come sooner obviously it could.
And I would say oil prices quite constructive today, as well, which may bring some smaller players back into the market.
But all of these things structurally from a cycle standpoint are very very positive and as I look at 'twenty four sometime between now and there we see.
Improving activity.
Got it got it makes sense, yes, they wanted to touch on the oil side as well.
Obviously.
Last year, well productivity was down and that was starting the conversation around.
I need just to drill more wells to kind of offset that productivity loss.
This year, we do seem to be at maybe a localized plateau on low productivity on the oil side in the U S. But that's.
Part of the conversation here with customers that.
Theyre going to has to be well drilling more wells in the U S. Given that productivity has declined is that kind of top of mind as they kind of start to think about 'twenty four needs are together.
Kind of on the horizon.
No I mean, let me frame it differently I think that this is my point around service intensity, meaning it takes more work to produce the same over time.
Unless there are step changes in terms of either efficiency or insight and so yeah. We talk about our smart fleet offering quite often but the reality is thats part of our technology.
Portfolio to help customers better understand productivity, Iraq, and where are the frac is going and how and how how does.
Design Fracs.
They can be more productive over time, so I think thats an important step.
But there is no question when we think about North America, and we even saw that during the COVID-19, but the pace at which North American decline following sort of the near slowdown or near stoppage in North America and so.
Those are.
Those are well understood by the market and our clients and so when I think about the way forward in North America that features in it and it is clearly part of our view as to why.
There'll be more activity over time.
Even the standstill and further Y E fleets in our case are so valuable because they really do help clients achieve better productivity and lower costs. So I think that that's one of the reasons. We're so focused on that and I think thats how it plays out.
Our next question comes from the line of Luke Lemoine with Piper Sandler.
Hey, good morning, Jeff Eric.
Morning, Jeff Good morning, Jeff Nice job on North American margins in <unk>.
I mean is flat and you talked about those remaining strong for the balance of the year.
It kind of sounded like youre not expecting these to be materially different from the first half is that correct. That's correct.
Okay.
And then Eric.
<unk> margins were better than your guide can you maybe walk us through what changed relative to your expectations.
Yes, I think I mean, there is always a lot of moving parts.
In the <unk> margins I think we just delivered better across the board in most product lines and in all of the regions. There is really.
Not a lot more to say about that solid execution from all product lines.
Across the globe.
Okay got it thanks a bunch.
Okay.
Our.
Next question comes from the line of Stephen <unk> with Stifel.
Hi can you hear me.
Yes, yes, sorry, Eric Thanks, Good morning, everybody.
Two things from me the first one.
We've written.
We've heard from others that the consolidation in the U S Frac business and just a better behavior by you and many others as has led to a different dynamic in the business and just curious as you.
Seeing a little bit of obviously rig count softness in frac spreads have come off a bit.
Are you seeing can you visibly see any different approach to pricing across the industry. Yet is it too early to tell just curious if theres any proof of concept here yet.
Look I think there is quite different.
And I think it's different along a couple of dimensions number one quite different in the sense of the type of equipment that we are.
Putting into the market with <unk>, so that's a very different dynamic.
Then we have seen in the past and I think that the.
Paul for those from customers is meaningful and so that's one key difference.
From the other perspective, the bifurcation in performance is an important point and I think that.
We've seen.
Quite a difference in our performance and that's still matters.
That matters a lot.
And I think that sort of the overall, we've always replaced our equipment and invested in our equipment.
Technology.
But I think that the.
Yeah that equipment runs in perpetuity or they can be run into the ground and then somehow rebuilt is not realistic and so I think theres some understanding around that today that there probably wasn't before.
Thank you and when you you.
You touched on this a little bit earlier, but when we hear from E&ps and just industry data in general that we're all quality curating a bit.
Is that a net positive you think for the completion side of your business or how do you think about the impact that has or is it kind of too gradual to really jump out.
Yes look I mean, what that drives is more technology and.
And more service intensity.
The upshot of what you just described for our customers and.
We see that and so where are.
Like I said I am quite confident about I'm confident in north Americas contribution to the overall oil and gas supply for the world It's important.
And sustaining that's going to require investment and.
And a lot of technology.
A lot of just repetitions.
So I think it is setting up very well for Halliburton.
Our next question comes from the line of Marc Bianchi with Cowen.
Hi.
Just I wanted to ask one more on sort of the North America outlook for the back half I know, it's been asked several times, but just because so many people seem to be focused on that.
I think people are surprised by fourth quarter being flat.
Quarter over quarter.
Margins seemingly holding in would you anticipate that overall the profit for halliburton or the EPS should be flat to up in the fourth quarter versus the third quarter.
Yes, I mean.
Yes.
We're not going to guide Q4.
But directionally everything is intact.
Yeah, Okay, great. Thanks for that Jeff.
The other one I had is just a bit of a modeling question on the corporate line for you Eric because we've got this new software element that we need to include so if I take those two together the corporate plus the software it looks like we should be something in the mid eighties.
A negative number and then that should be sort of on a $20 million to $25 million.
Run rate beyond our beyond third quarter is that right way to think about that software impact.
Yes, I mean, we guide to two separately so as to give you clarity as to what they are so we guided corporate going into Q3 to be $5 million to $10 million up from Q2 that is essentially a timing issue.
We're a bit under guidance in Q2, so that gives you the corporate number and then in terms of ACP, which we guide as a separate line.
Got it to $20 million of about two pennies and what we'll do on that one we gave you the yearly numbers, who 50. This year 100 next year 100. The following year. So you can kind of run your models on a yearly basis and then we will give you more color quarter to quarter, because some of it depends on how the rollout.
Is happening right. So we wanted to do that on a quarter to quarter basis.
Our next question comes from the line of Kurt <unk> with benchmark.
Yes.
Hey, good morning.
Jeff and everybody.
<unk>.
Hey, Jeff I'm kind of curious.
On the international front right.
Are you seeing the prospect of.
Maybe an acceleration in activity whether that be in the middle East or Latin America.
Maybe relative to the beginning part of the year I know there've been some questions about the OPEC production cuts.
And that may be having a negative impact on activity, but I'm kind of curious as to whether or not.
There is a situation.
In the Middle East, where there's a greater sense of urgency and maybe it pushed to the moon.
Some projects a little more quickly.
OPEC cuts cuts absolutely do not have an impact on activity crystal clear around that.
Yeah. These are.
Customers with plans that are meeting global demand and it is unrelated cuts in OPEC.
I would say that the growth I wouldn't describe it as an acceleration I would describe it is continued growth.
And Thats very positive that's a good thing because that's consistent with the long duration nature of this cycle. So it's not a <unk>.
Spike to come at some point in time in the future to then level out I think what we're going to continue to see steady growth in activity kind of like we've seen although does the pace pick up at my thumb.
In fits and starts as big projects get started but I think overall there.
This is a great setup for Halliburton in terms of timing and pacing and absolutely consistent with how we see the length of the cycle, meaning it's going to take quite a period of time.
As barrels are invested in and reinvestment is made.
Okay.
Great I appreciate that color.
Now maybe then.
Focusing again on on the North American market, North American market, you've given some some clear expectations on what you see there.
With the fact that you guys are.
Getting rid of older equipment, focusing on equally you mentioned a couple of long term contracts.
How do you see the prospects for Halliburton to continue to outpace.
The market if the market is going to be flat.
Well I think I've described what we're going to do and I think that sort of the.
<unk>.
We're focused on what we're doing in terms of.
You mentioned the fleet, but thats an important thing.
That's an important.
Opportunity for Halliburton and somewhat unique for Halliburton.
I also believe that.
As I look out into the future.
As I said I see we talked extensively about service intensity and technology and I think both of those are going to be very high demand as we get into 'twenty, four and I would say for what we do it's in high demand now and so.
I think the.
Long term for North America clearly points towards.
What we do uniquely at Halliburton and so.
Feel pretty confident about that.
That concludes today's question and answer session I would like to turn the call back to Jeff Miller for closing remarks.
Yes. Thank you and thank you all for participating in today's call, let me close out the call with this.
Oliver and delivered an impressive first half of 2023 and I fully expect that the execution of our strategy in this long duration up cycle will deliver better returns more free cash flow and more cash to shareholders. We look forward to speaking with you next quarter. Please close out the call.
This concludes today's conference call. Thank you for participating you may now disconnect.
Okay.
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Okay.
Good.
Yes.
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