Q4 2023 Halliburton Co Earnings Call

Operator: Good day and thank you for standing by. Welcome to the Halliburton Company 4th quarter, 2023 earnings conference call.

Operator: At this time, all participants are in a listen only mode. After this presentation, there will be a question and answer session to ask a question during the session. Please press star 1, 1 on your telephone and wait for your name to be announced to withdraw your question. Please press star 1, 1 again. Please be advised that today's conference is being recorded.

David Coleman: I would not like to hand the conference over to your speaker today. David Coleman, Senior Director of Investor Relations. Hello and thank you for joining the Halliburton 4th quarter, 2023 conference call. We will make the recording of today's webcast available for seven days on Halliburton's website after this call. Joining me today are Jeff Miller, Chairman, President and CEO and Eric Carre, Executive Vice President and CFO.

David Coleman: 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 materially differ from our forward looking statements. These risks are discussed in Halliburton's form 10K for the year into December 31st, 2022, form 10Q for the quarter ended September 30th, 2023, recent current reports on form 8K and other securities and exchange commission filings. We undertake no obligation to revise or update publicly any forward looking statements for any reason.

David Coleman: Our comments today also include non-gap financial measures. Additional details and reconciliation to the most directly comparable gap financial measures are included in our 4th quarter earnings release and in the quarterly results and presentation section of our website.

Jeffrey Miller: Now I'll turn the call over to Jeff. Thank you, David. Good morning, everyone.

Jeffrey Miller: 2023 was a great year for Halliburton. Both of our divisions achieved their highest operating margins in over a decade. And we returned $1.4 billion to shareholders. Here are the highlights.

Jeffrey Miller: We delivered full year total company revenue of $23 billion and increase of 13% year over year and operating income of $4.1 billion and increase of 33% compared to 2022 adjusted operating income. Our international business demonstrated strong growth with our revenue up 17% year over year despite our exit from Russia in August of 2022, completing two consecutive years of high teens growth. Our North America business showed strength with revenue up 9% year over year despite rig count declines. Completion and production revenue grew 18% year over year and margins expanded 312 basis points. Drilling and evaluation grew 7% year over year and margins expanded 171 basis points.

Jeffrey Miller: Turning now to Q4, where Halliburton delivered exceptional margin performance supported by better than anticipated completion tool sales globally, strong performance across multiple high margin product lines and favorable weather in North America. Completion and production margins finished the year almost 100 basis points higher than Q4 of 2022. International revenue grew 12% year over year led by the Europe Africa region which grew revenue 17%. Finally, during the fourth quarter we generated $1.4 billion of cash from operations, $1.1 billion of free cash flow, and repurchased approximately $250 million of common stock, and $150 million of debt.

Jeffrey Miller: Before we continue, I want to take a moment and thank the Halliburton employees around the world who made these results possible. Our success last quarter and throughout 2023 was a direct result of your hard work and dedication. Thank you for your relentless focus on safety, operational execution, customer collaboration, and service quality performance. Let me begin with my views on the strength of the oil field services market. As we look past the news cycle and near-term commodity price volatility, the fundamentals for oil field services remain strong. Here are two reasons why.

Jeffrey Miller: I expect oil and gas remains a critical component of the global energy mix, with demand growth well into the future. With this positive macro outlook, I believe Halliburton's strong execution, leading technology, and collaborative approach will drive demand for Halliburton's products and services around the world. Now, let's turn to international markets where Halliburton's performance delivered another year of profitable growth. Halliburton's full-year international revenue grew 17% year on year, and our quarterly revenue grew 12% compared to the same quarter of last year.

Jeffrey Miller: Each region delivered year on year revenue growth throughout 2023, and both divisions delivered improved international margins year on year. Our results in 2023 demonstrate the effectiveness of Halliburton's profitable international growth strategy, the strength of our global competitiveness across product lines, and the power of our value proposition with customers. In 2024, we expect international ENP spending to grow at a low double-digit pace and for the multiple years of sustained activity growth. Although we anticipate regional differences in growth rates for 2024, we believe the Middle East Asia region will likely experience the greatest increases in activity, with other regions closely behind. As we look out to 2025, we expect Africa and Europe, among others, to demonstrate above-average growth.

Jeffrey Miller: Beyond 2025, we see an active tender pipeline with workscopes extending through the end of the decade, which gives me confidence in the duration of this multi-year obstacle. While we expect overall activity growth, we also see above market growth within our well-construction product lines, where customers choose Halliburton to improve the reliability, consistency, and efficiency of their drilling operations. One such technology is our Logic's Autonomous Drilling Platform, which is now used on 90% of our I-CREWS runs worldwide.

Jeffrey Miller: Customers also rely on Halliburton's surface expertise to develop today's most complex reservoirs. This requires technologies to reduce uncertainties such as our decision space 365 unified ensemble modeling and advanced formation evaluation systems like our I-Star logging while drilling platform and reservoir examiner formation testing service. These technologies enable customers to target smaller reservoirs identified by past reserves and gather reservoir properties in real time.

Jeffrey Miller: We see reservoir complexity increasing worldwide and I expect the capabilities of these systems will continue to deliver customer value and lead and overall growth within our formation evaluation portfolio. For completion and production, we also expect increased adoption of our technologies like intelligent completions, multilateral solutions, and artificial lift. Our intelligent multilateral completions enable customers to produce, inject, and control multiple zones in a well-bore, which is critical for offshore developments. A segment we expect to outpace the overall market.

Jeffrey Miller: In artificial lift, our strategy targets markets like the Middle East and Latin America where our differentiated performance and existing footprint create a solid foundation for profitable growth. We also expect strong demand for our services and carbon capture and storage where Halliburton's leading capabilities to design, deliver, and validate reliable barriers play a crucial role. As our customers invest in carbon storage, our tailored cement designs and casing equipment technology enable them to address the unique challenges of long-term carbon sequestration.

Jeffrey Miller: With this activity growth, the availability of equipment and experience personnel remains tight. We expect acid-intensive offshore activity to increase, which will further tighten the market. As offshore represents over half of our business outside North America land, we expect this activity to drive improved pricing and higher margins for our business. I am confident in Halliburton's strategy for profitable international growth, and I am excited about our performance in 2024 and well into the future.

Jeffrey Miller: Turning to North America, Halliburton's strategy yielded strong results in 2023. Our full-year North America revenue of $10.5 billion was a 9% increase when compared to 2022, despite sequentially lower rig count. Fourth quarter margins in North America land were relatively flat quarter over quarter, despite lower revenue.

Jeffrey Miller: Our full-year and fourth quarter results demonstrated the strength of our differentiated business and the successful execution of our strategy to maximize value. The dynamic North America market continues to evolve. With larger customers and stable programs, elevated quality expectations, and greater demand for technology to improve recovery and well productivity. This evolution fits perfectly with Halliburton's value proposition. Our Zeus Electric Tractoring Solution is highly sought after in this market, where its seamless combination of electric track, automation, and real-time subsurface measurements uniquely address customer requirements. Thomas.

Jeffrey Miller: We believe customers demand Zeus because it provides the lowest total cost of ownership and it's shown to be the most proven and reliable solution in the market. The market pull for this technology has been strong. The combination of Zeus fleets working in the field today, and Zeus fleets contracted for 2024 delivery represent over 40% of our fracturing fleet. I expect well over half of our fleets will be electric in 2025, but all of these E-fleets on multi-year contracts generating full return of and return on capital during their initial contract terms.

Jeffrey Miller: Consistent with our strategy from the beginning, we plan for our Zeus deliveries in 2024 to replace existing fleets rather than add incremental fleet capacity. This is how we maximize value in North America. The growth of Zeus and our commercial approach has transformed the North America completion services market. Technology is only transformative when adopted and it's only adopted at the rate of Zeus when it works and creates meaningful value for our customers.

Jeffrey Miller: Zeus's rapid adoption, both by new and repeat customers, tells us our solution is the right one for North America. Turning to our 2024 North America outlook, we expect a continued strong business with the combination of stable levels of activity in the market and the contracted nature of Haliburton's portfolio. We expect this results in a flatish revenue and margin environment for Haliburton. To close out, I am confident in our strategies to maximize value in North America and for profitable growth internationally.

Jeffrey Miller: In 2023, Haliburton demonstrated the power of these strategies, the consistency of our execution and the value of our differentiated technology. We generated about 2.3 billion of free cash flow during the year, retired approximately $300 million of debt and returned $1.4 billion of cash to shareholders through stock repurchases and dividends, which represents over 60% of our free cash flow.

Jeffrey Miller: Today, I am pleased to announce that our Board of Directors approved an increase of our quarterly dividend to $0.17 per share. Our outlook for all field services remains strong, and I expect we will deepen and strengthen our value proposition and generate significant free cash flow.

Eric Carre: Now, I'll turn the call over to Eric to provide more details on our financial results. Eric, thank you, Jeff, and good morning.

Eric Carre: 2023 was a strong year for Haliburton. Multiple financial and operational metrics showed the best business performance in recent memory, anyone of which are worthy of a highlighting. More important than any single metric, however, the overall business performance demonstrated the effectiveness of our strategy. Here are a few highlights.

Eric Carre: In our C&P division, our 2023 margins of 20.7 percent were the highest since 2011. In our DNA division, 2023 margins of 16.5 percent were the highest since 2008. In North America, our strategy to maximize value is about structurally changing the risk and return profile of our business. We delivered steady margins through the year, despite lower activity, driven by the rollout of our Zeus fleet and their associated contract terms, and the strength of our well-construction business.

Eric Carre: Internationally, our profitable growth strategy drove revenue and margin improvement across all of our geographies. Revenue was the highest in the last eight years, and profit margins were the highest in over a decade. Beyond pricing and activity, this is the result of the multi-year investment in our drilling business and technology differentiation across multiple product lines.

Eric Carre: Our focus on capital efficiency allowed this revenue growth and structural margin improvement, while capital spending remained within our target range of five to six percent of revenue. Collectively, these results generated about $2.3 billion of free cash flow, the highest cash generation in the last 15 years. Let's turn now to our fourth-quarter results. Our Q4 reported net income per diluted share was 74 cents. Net income per diluted share, adjusted for losses in Argentina, primarily due to the currency evaluation, was 86 cents.

Eric Carre: Total company revenue for the fourth quarter of 2023 was $5.7 billion. Operating income was $1.1 billion, and operating margin was 18.4%, a 95 basis point increase over Q4 2022. Beginning with our completion and production division, revenue in Q4 was $3.3 billion. Operating income was $716 million, and operating income margin was 22%.

Eric Carre: Our better than anticipated results were driven by the best fourth quarter of completion tools saves in nine years, strong performance across multiple product lines, and favorable weather in North America. In our drilling and evaluation division, revenue in Q4 was $2.4 billion. Operating income was $420 million, and operating income margin was 17%, an increase of 122 basis point over Q4 last year. These results were in line with our expectation, and driven by international software sales, higher project management activity in the Eastern hemisphere, and increased fluid services in the Western hemisphere. Now let's move on to geographic results.

Eric Carre: Our Q4 international revenue increased 4% sequentially, which was our highest international revenue quarter since 2016 and 10th consecutive quarter of year on year revenue growth. Q4 sequentially growth was led by the Middle East region, driven by improved activity across multiple product lines, and strong year-end completion tools. Sales. Europe Africa demonstrated sequential growth consistent with the overall international market with higher activity in Africa of setting lower product sales in Europe.

Eric Carre: Latin America revenue declined slightly in the fourth quarter, where reduced completion related activity following a very strong third quarter outweighed activity improvements in the Caribbean. In North America, revenue in Q4 decreased 7% sequentially, driven primarily by a decline in US land activity as a result of typical holiday-related slowdowns. However, we experienced fewer weather-related events than expected.

Eric Carre: As weather-related downtime is more expensive than planned downtime, this means our Q4 North America and margins were higher than anticipated. Additionally, completion tools says in the Gulf of Mexico delivered the strongest quarter in three years. Moving on to other items, in Q4, our corporate and other expense was 63 million dollars. For the first quarter of 2024, we expect our corporate expenses to be flat. Our FAP deployment remains on budget and on schedule to conclude in 2025.

Eric Carre: In Q4, we spent 15 million dollars or about two cents per diluted share on SAPS for migration, which is included in our results. For the first quarter 2024, we expect these expenses to be approximately 30 million dollars or three cents per share due to the timing associated with accelerated phases of the rollout. In 2024, we expect to spend $120 million and $80 million in 2025. Net interest expense for the quarter was $98 million, slightly higher than expected, primarily due to premiums associated with debt buybacks.

Eric Carre: For the first quarter 2024, we expect net interest expense to be roughly $85 million. Other net expense for Q4 was $16 million lower than our prior guidance due to the non-gap treatment of the Argentinian peso evaluation. For the first quarter 2024, we expect this expense to be about $35 million. Our adjusted effective tax rate for Q4 was 17.9%. Lower than expected due to discrete items. Based on our anticipated geographic earnings mix, we expect our first quarter 2024 effective tax rate to be approximately 21%.

Eric Carre: Slightly lower than our anticipated full year effective tax rate. [inaudible] capital capital capital capital capital capital[inaudible] For the year of 2024, we expect capital expenditures to remain approximately 6% of revenue. Our Q4 cash flow from operations was $1.4 billion, and free cash flow was $1.1 billion, bringing our full year free cash flow to about $2.3 billion. For 2024, we expect free cash flow to be directionally higher. Now, let me provide you with some comments on our expectations for the first quarter.

Eric Carre: As a typical, our results will be subject to weather-related seasonality and the roll-off of significant year-end product sales. As a result, in our completion and production division, we anticipate sequential revenue to be flat to down 2%, and margins lower by 125 to 175 basis points. In our drilling and evaluation division, we expect sequential revenue to decline between 1% to 3% and margins to be lower by 25 to 75 basis points.

Jeffrey Miller: I will now turn the call back to Jeff. Thanks, Eric. Let me summarize our discussion today.

Jeffrey Miller: 2023 was a great year for Halliburton. We generated about $2.3 billion of free cash flow and returned over 60% of free cash flow to shareholders, through dividends and stock repurchases. We're committed to return over 50% of our free cash flow to shareholders in 2024. For our international business, we expect low double-digit growth driven by the power of our value proposition, global competitiveness across all product lines, and our profitable growth strategy. In North America, we expect a continued strong business driven by spable activity, our differentiated technical position with our Zeus Electric Frax solution and the increasingly contracted nature of our business.

Operator: And now, let's open it up for questions. Thank you. As a reminder, to ask a question, please press star-1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star-1-1 again. One moment for questions.

David Anderson: Our first question comes from David Anderson with Barclays. You may proceed. Great. Thanks. Good morning, Jeff. How are you?

Jeffrey Miller: Good morning, David. So, a question on the C&P margins that helped flat during the quarter, and you said US land was holding flat. I was hoping you could talk a little bit about the influence of your growing e-fract fleet on the bottom line. We know the operational advantages, but I was wondering if you could talk about how it impacts financially. How does e-fract say, compared to say, you're two or four dual fuel, the diesel fleet, just in terms of pricing and operating costs, trying to get a sense of how creative the new equipment is, and sort of secondarily on that, with E&P consolidation well underway, and we look at, say, 12 to 24 months, would you expect the majority of your e-fract fleet to be with these larger operators under multi-year contracts? Yeah, well thanks, David.

Jeffrey Miller: E-flates are creative. They're creative for a couple of reasons. Number one, highly efficient to operate from our standpoint, and so that makes them more creative. Clearly, they are bringing a lot of value to clients, and therefore, they're priced and thought about differently in the marketplace. And so, look, I expect that that will continue in the future. I think what's most important is the contracted nature of the fleet, which mean a couple of things also. Number one, that the pricing is sticky, but it's sticky because it's contracted over time, and the value is thought about.

Jeffrey Miller: And so, sophisticated procureurs can look at that and model that, and we can model it as well and comfortable with the value created. But I think the Second thing is we think about what types of customers look at leaflets. These aren't a spot market solution. I mean the companies that are interested in leaflets are those that have steady programs, work through cycles, have a clear vision of where their business needs to go and are willing to commit to the technology to deliver that over the long term.

Jeffrey Miller: And so it really is an entire system. If we think about electrically it's obviously it's an efficient, lowest TCO electric solution, but it's also automated, which drives the level of precision around fracking that I've never seen before. And so the clients know that they're delivering what they expected to deliver and then finally the subsurface measurement, but I bring all of that up because that's part of what drives it being accreted. It creates a lot more value, therefore is more accreted than it here for decals leak, clearly. And then also a different set of conditions, which also changes the return profile of these assets as they go into the market. Hope that helps then.

Jeffrey Miller: Oh, it does a clear differentiation there. Separate question here. I know senior release you announced two new collaborations with other service companies, one in reservoir analysis, the other MPD. It sort of effectively fills a few of your weaker spots of your portfolio. And if I just think back to last cycle, we saw a number of acquisitions, but I don't recall too many collaborations out there. I mean, on the one hand, I guess from my point of view on the one hand, maybe you're testing the waters a bit, but on the other, seems like it's a pretty good way to fill product lines that I spent a lot of capital.

Jeffrey Miller: I was wondering if you could talk about this strategy and why it's different during the current cycle and would you expect to enter more collaborations in the coming years. Well, look, I think it's more a function of technology that we have.

Jeffrey Miller: And when we see, you know, we developed some things around. You know, digital cores and the ability to evaluate individually, for example, but trying to buy our way into the entire core space, we'd rather partner with who we think the premier core analysis company is. And so we're able to bring our technology to that. And effectively, it's a complimentary strategy where we make better returns doing the things that we've developed and know how to do.

Jeffrey Miller: And obviously, we believe core labs is a fantastic company. And so we're able to bring something to that that we believe creates more value rather than trying to, you know, enter into a different type of arrangement. You mentioned the other one oil states filler kind of thing got terrific technology, but we don't know that we want to try to plow that much capital into the rest of their business. But we do know where we can generate outsized returns for Haliburton.

Jeffrey Miller: Yeah, I would throw in another, you know, similar type thing is a subsea with technique FMC who I really believe technique FMC is the absolute premier subsea company in the world. And we work closely with them developing joint IT, delivering on electric completions, all electric completions. And so there are a lot of things we're able to do, where we can mine what I think is our core competency or competitive advantage along with others without trying to broaden our way into things that aren't really strategically fits.

David Anderson: Hope that helps Dave. Very helpful. Thank you very much, Jeff. Certainly. Thank you. One moment for questions.

Neil Mehta: Our next question comes from Neil Mehta with Goldman Sachs, he may proceed. Yeah, good morning, Jeff, team, appreciate the time. The first question is around a more macro question, which is one of the things that surprised us last year was the exit to exit a US oil production, which came in above, I think, where consensus expectations were, you know, you have unique visibility into the US completion and volumes. What do you think happened there?

Jeffrey Miller: And as we think about 2024, how do you think about exit rate of US growth, maybe talk about the moving pieces, including ducks? Yeah, look, think about production growth in 24. You know, production is a function of service intensity, so simply put more fan more barrels. And, you know, we saw peak levels of service intensity throughout last really in the first half of last year, and a lot of that comes on in the latter half. And I think, you know, some of this is efficiency in the sense that we are delivering more fan to the reservoir.

Jeffrey Miller: And that comes in a lot of forms, the e-fleets are part of that, and some of the technology that we brought to market. But I also think that the market that we see for next year, you know, hard for me to forecast at this point exactly what operators are due, because every operator plays their own game. But at the same time, you know, I would probably take the over on rigs, because I think that, you know, we'll run out of ducks at some point.

Jeffrey Miller: I think I would take the under on production only because whatever you think it is, I'll take the under only because, you know, what we see are stable customers delivering to their plans, but what we don't see is a lot of the, you know, smaller companies coming into the market in an effort to really hamper production. So I think, you know, from our perspective at Haliburton, very stable market, from a production standpoint, you know, as we watch it unfold, it'll be a matter of, you know, how much incremental fan gets pumped to overcome what is clearly going to be a decline rate that comes with, when we add barrels rapidly, obviously, they fall off rapidly. Thanks, Jeff. Good color there.

Jeffrey Miller: And then you made a comment that you feel like you have international visibility through the end of the decade. Can you expand there and help give the market a little more confidence about what the post 2024 or 2025 profile looks like? Well, look, I mean, we are working on tenders today for work all of next year and the following year. I mean, when we talk with customers about what's going to happen, really, I don't think the North Sea and West Africa even really wake up until 2025.

Jeffrey Miller: We've seen strong growth in those markets. However, the real growth that we're working on planning today doesn't even start until 25. And all of these things are three and four year type efforts. I mean, these aren't individual wells in places like that. These are programs.

Jeffrey Miller: And so we spent, we're actually on contract with a working on just the planning of logistics for 25, 26 and beyond. And so I've just got a lot of confidence in terms of what we see in hand, the tender pipeline, and then the pipeline of work that we are planning with customers that may or may not even be tender. It's just more a matter of it will be done. And we've got clarity on that in 25 and beyond. Thanks, Jeff. Yes, sir. Thank you.

Arun Jayaram: One moment for questions. Our next question comes from Arun Jayaram with JP Morgan, you may proceed. Good morning Jeff, you mentioned that 40% of your contracted fleets this year will be Zeus going to 50% or more in 25. I was wondering if you could give us a sense of how your commercial model for Zeus has evolved. And one of the things we get questions on is just the significant amount of completion efficiency gains that the industry is generating. And what is the sharing of that between E&P and service company?

Jeffrey Miller: Well look, I think number one, it's the value created by Zeus is what drives the contracting nature a couple of things. You know, when we started to develop Zeus, started like so quite a while back. You know, our view was we want to maximize value in North America number one. And in order to do that, we just had to, we believe that the technology created enough value, so much value that we aren't going to build it unless it's demonstrated for customers. And I think the contracting nature of the longer term contracts, three year type contracts, is because we let the market pull rather than trying to push something into the market.

Jeffrey Miller: It is that different and special and has that system continues to develop and evolve, meaning automation, measurement, all of these things that drive really meaningful value. That is what's creating, I think, the different dialogue around Zeus with our customers because it will become more and more integral to how they create value as well. And then from an efficiency standpoint or like volume standpoint, you know, our equipment is very efficient. So as we go from zipper, fracked, if I'm a fracked, in this case, a primal fracked with a customer, you know, that is not a one to one increase in horsepower requirements. So we become more efficient as those volumes go up. But that is also a unique feature though of Zeus and its ability to scale up, but it's not one for one.

Jeffrey Miller: And so, you know, from a halibut perspective, we do create outsized value for halibut and also for our clients because we're using less equipment than we would had we gone at it traditional fashion. So I think that, you know, the combination of reliability, but also automation because it's those fracks is fracks get larger. The precision gets more important.

Jeffrey Miller: There are a whole lot of things to start to happen. And so, very collaborative efforts with our clients to utilize that technology in the case of the primal fracked really groundbreaking type work. Super excited to do it with this customer.

Arun Jayaram: Great. Jeff, my follow up natural gases on people's minds in North America just given the contango in the market, you know, 2024 is just about 250. I was wondering if you could give us a sense of how much of your activity is levered just to dry gas and what are some of the risks to the earnings picture from a from a soft market for gas this year. We've got very little gas exposure in our business today.

Arun Jayaram: The exposure that we do have is contracted under the sort of the zoo solution somewhat. And then we've got, I guess, a little bit of other things. But look, the gas work that we have is not a significant part of our overall portfolio. And so we plan for what we can see. I think legitimately there could be equal upside on gas as LNG comes on. But we haven't baked it into our outlook today, but I would say that's clearly one of the upsides to North America, maybe more so than a downside to North America. Karen, thanks, Jeff. Thank you.

Roger Read: One moment for questions. Our next question comes from Roger Read with Wells Fargo. You may proceed. Yeah, thank you. Good morning.

Jeffrey Miller: And actually, the last week to visit the Tramble Fracks site and saw the E-fleet. So pretty impressive setup. One of the things the customer mentioned was a slightly different, I guess, sort of price-to-value contract structure. Looks like from a margin standpoint, you're doing fine on that. But is there anything you can kind of enlighten us on on maybe how we thought about traditional pressure pumping contracting and a lot of spot exposure versus kind of how this is going through? What does it mean in terms of sharing gains with the customer? What's the right way for us to think about that on kind of a price?

Jeffrey Miller: From our standpointer, Roger, thank you. You know, we want to create value for our customers. You have to create meaningful value for customers in order to be a long-term supplier and partner to a customer. So we start from that position. And as you said, solid contract for us over the very long term. We went into this focused on maximize value, which in our view means maximize returns, which we're able to do under these types of environments.

Jeffrey Miller: And so rather than play, we don't intend to play the spot game. That spot game is kind of at the when lose on either side of the market really when the market's getting tight, probably operators are losing when it's going the other direction, service companies lose a lot.

Jeffrey Miller: And our strategy is to stay out of that. And so to strike contracts with customers that our view or fair and deliver a lot of value, both in terms of pumping value and also recovery value. And I think that we're uniquely positioned to do that. And so improving recovery for food, production for food is a long-term game. And we want to play that long-term game with customers that are working on that long-term game.

Jeffrey Miller: And we're ecstatic about the customers we have and who we get to work with to try to solve. What we think are the real pressing issues of the future in North America fracking. So we don't get to play that game. That game doesn't get played successfully if it's, you know, the fracked viewer we need to part of that process and our clients allow us to do that.

Eric Carre: I appreciate that. The follow-up question I have, it's unrelated, but I think kind of critical to the announcement this morning raising the dividend. What is the right way for us to think about your uses of free cash flow between, you know, as you did in the fourth quarter, sort of elective repurchases of debt as opposed to, you know, maturities. But as we're thinking debt dividends pretty fixed here and then share repurchases, what way do you want us to think about the return of free cash flow? Yes, thanks, Roger. It's, it's Eric.

Eric Carre: So think about it in a fairly similar way as what we did in 2023, except higher. So we've increased the dividend. Six percent were now back to about 95 percent where we were pre-COVID.

Eric Carre: In terms of buyback, we intend to continue buying back share. Our intention today is to buy back more share in dollar terms in 2024 than we did in 2023. At the same time, as we did also in 2023, we intend to continue to retire debt and continue to strengthen the balance sheet. So overall, it's fairly similar structure in 24 as what we did in 23, but kind of bump everything a bit higher. Great. Thank you.

Operator: One moment for questions.

James West: Our next question comes from James West with Evercore ISI. You may proceed. Hey, good morning, Jeff and Eric. Good morning, James.

James West: So Jeff, you talked about West Africa and we're seeing not waking in until 25. You know, a lot of pinnering or just conversations about 25, 26. I know some of the, your partners like FTI are bidding for deliveries that wouldn't happen until 29 and 30. The offshore rig companies are getting locked up into 26, 27. I mean, the visibility this cycle seems to me to be somewhat unprecedented.

Jeffrey Miller: And I'm curious if that's consistent with your view of how things are playing out, how customers are behaving and how your conversations are going because it seems like the industry is on board with this is going to be a long cycle. We recognize, of course, Mac, economic events could be real things, but at least for now with this oil price range that we're in, it's kind of also some scope for a long time.

Jeffrey Miller: Look, I'm careful speaking for the entire industry, but I would say I have this including Haliburton very focused on running businesses for strong returns over the long term, which is precisely what we all do. And I think that's good for our clients and it's good for us as well. And so that level of visibility is not inconsistent with companies planning a future around how to make money for shareholders. And that's what we're doing as well.

Jeffrey Miller: And so I think it's, it's a very good setup for the rest of this decade, frankly, just because we know there's demand. We are able to, you know, our whole value proposition around is how we collaborate and engineer solutions to maximize asset value for our customers. And this type of...

Jeffrey Miller: Setup allows us to do that. The other thing that happens though when we run a business for returns is we don't over invest in the business. And so we've told you kind of where our CapEx will ball and level the growth that we're looking at. So we're very thoughtful about the growth because we are keeping profitable international growth firmly in hand. And so I think assets are tied and they'll remain tight. For those very reasons, very natural economic reasons for an industry. That's running their businesses for return, which is clearly what we're doing.

Jeffrey Miller: And I think our level of CapEx, the way that structure drives that level of some awful investment and manages the contracts that we win indirectly. And it also maximizes returning cash to shareholders. So it's a very good environment in my view. Okay, that's we certainly agree with that.

Eric Carre: And then maybe a follow up for me and particularly I don't know if they don't take this one, but the D&E margins, which I know more leverage towards international where a lot of the volume growth is certainly going to come from and you're going to have natural operating leverage from that and inflation seems to be cooling somewhat these incremental should improve here. You know, where are you anticipate? I know you gave the first quarter guidance, but that seasonal where do you anticipate margins?

Eric Carre: Or maybe if you want to talk about incremental, however, you want to discuss it for D&E going forward as we go through 24 and into 25. Yeah, Jim, so to your point, if you just look at Q1, obviously get seasonal effect, so but more importantly looking at the year on year and the general front of the D&E margins. So first, I think it's worth noting as Jeff mentioned in the script that we had our best D&E margins in 15 years.

Eric Carre: So it means that a lot of the investment we have done in the last few years are paying off. So what to watch really is the general trajectory of margins and the business. And for us, it's a matter of balancing revenue, growth, improvements in margin, improvements in returns that we continue to invest in the D&E business. So all of that to say that expect margins to continue to firm up as we get into 24 and we're expecting a margins to be materially higher in D&E in 2024 than they were in 2023.

Eric Carre: Now, they might be some bumps along the road from one quarter to the next, et cetera, as it's a business that typically, you know, tends to have a lot of moving parts, but directionally margins will be higher in 2024 than they were in 2023.

Eric Carre: Okay, thanks, Eric. Thanks, Jeff. Thank you.

Scott Gruber: One moment for questions. Our next question comes from Scott Gruber with City Group. You may proceed. Yes, good morning. Sorry, Scott. Morning, Scott.

Jeffrey Miller: So Jeff, you know, as I step back and think about the Alex for your US business, it appears that you're in a pathway to establishing a business that will deliver more consistent and better free cash flow. So, you know, in the years ahead, you know, then we then we've seen historically, in part that's given the EFRAC investment investment across the portfolio. So what if you just, you know, give some color kind of around that and we're seeing the consistency now.

Jeffrey Miller: So, you know, if I heard correctly that the cap X color doesn't suggest, you know, a material reduction in domestic cap X into 24 securious, you know, kind of your thoughts around kind of sending that curve lower and just kind of overall, you know, developing this business model. So, you know, that's much more consistent and less capital in terms of all. Absolutely. Yeah, thanks.

Jeffrey Miller: And that is precisely what we set out to do, and that's what's playing out now. And so in terms of a consistent business that generates strong free cash flow through the cycle, and that's been our intent all along with the way we bring zoosleep to market the way we invested in North America broadly. We are very deliberate about how we maximize value over the long term in North America. And I think you saw that play out the last two quarters.

Jeffrey Miller: As we've seen the market moving around, but nevertheless steady drum beat of execution and cash flow delivery by Halliburton. And I expect to continue that because that is precisely our strategy. It's so when it comes to cash flow or capital allocation of our capital budget, and we're going to allocate it to those things where we see that opportunity, which we certainly see that with zoosleeps. But remember, that's a demand pull not a push strategy. So we don't build fleets until we have contracts for fleets. And so that's a different completely different environment than maybe we would have seen in prior cycles from Halliburton.

Jeffrey Miller: Anything else we do in North America like we've developed some very good in my view fit for purpose drilling technology for North America. But we're not going to over build it. We're selling it into the market that the market will take it. It's a lot of excitement about it, but our approach is still going to be consistent delivery of margins and pre cash flow in North America. And so I think you'll see us continue to do that. And that means it would put e fleets in the market. We retire sort of the fleets that are at the bottom of the stack and continue that march forward. Yeah, I appreciate the color.

Scott Gruber: Thank you. I'm going to follow up your leverage. You know, it's down to about one time now, which is good to see.

Eric Carre: And it sounds like, you know, the cash return, you know, could step up a bit. Can you just kind of walk us through your thoughts as you move forward in time, the cycle continues, you'll generate more pre cash flow leverage continues to come down. You know, outside of any M&A, should we think about that shareholder return as a percentage of free cash flow moving higher, you know, given that, you know, you're going to be trending, you know, sub one on leverage, I'm going to go forward basis.

Eric Carre: Yeah, just starting with free cash flow, I think that you can expect 24, 2024 free cash flow to be at least 10% over 23. So that is going to basically help us return increase returns on a dollar basis. Now in terms of the percentage, we're still guided by overall 50% return to shareholder. But directionally, you know, it would make sense to believe that we'll do at least what we did in 2023 in terms of the percentage return. That's it. Thank you.

Operator: One moment for questions.

Luke Lemoine: Our next question goes from Luke Lemoine with Byber Sandler, you may proceed. Any good morning, Jeff Eric. Um, Jeff, are you running Luke?

Jeffrey Miller: Any morning, Jeff, you're in North America, we have significantly outperformed the U.S. Land Reaccounted 24, and I would guess some of the factors are reduced fleet service quality, more stable customer base, and I'll pick up in the Gulf of Mexico. But could you talk about any other factors that trove this? And then what the U.S. Land Reaccount, most likely down again in 24, do you think North America reps could be up in 24 for you?

Jeffrey Miller: Yeah, look, um, yeah, performance is just the stability of the business as I described it. And so, a big part of that is having 40% of our fleet, you know, by the end of 24, under long-term contracts, that creates a steady environment so the rig counts are going to move around and do what it does. But our largest part of our business is very stable. In their reality as the North America business is very big, we saw a growth Gulf of Mexico and other offshore environments.

Jeffrey Miller: However, you know, a very large stable North America business, land business, is going to mute some of that. And as we go into 25, I expect the same kind of performance out of our North America business, sort of in spite of what rigs do. Now, I do believe we've reached a point where ducks are drawn down, they're largely drawn down, and I think that we'll see rig count increase only because it's supplying the inventory, but that's required to run a very smooth, stable, tight business.

Jeffrey Miller: And I would say our customers largely plan their business around turning wells into production, more than they do, numbers of rigs in the air. And so I think there's a lot of planning that goes on to deliver a very stable business of completing wells. And so I think, yeah, one of the reasons I would say I take the over on rig count, I don't think, yeah, I won't try to forecast rig count at this point, but I do think there's upside in North America.

Jeffrey Miller: We plan the business for what we can see, and we expect it to be stable. That being said, I think there are obviously factors that could push that up, like gas activity is clearly out there, and I would not control the pace at which LNG plants come online, but we know that they will, as at a 24 event or 25, I think we'll get to that point and see that Aliburton participates in that upside, and that could happen this year.

Jeffrey Miller: But at this point, we're planning the business around the times. Okay, and I guess the public up with this more stable North American business, you know, you talk about your North American land margins, you're describing flight and 4Q. Could you loosely talk about how you see these progressing in 24 kind of with this stable business? Well, look, let's just believe it is steady and stable moving forward. I think that we've got a very strong international business as well that contributes, and I think that continues to grow and expand margins, but you know, we're really pleased with where we are.

Jeffrey Miller: But U.S, revenue and margins, you know, flashed through any cycle I think is, you know, where we wanted to get this business clearly there's upside and I do expect from a C&P standpoint we're going to see the benefit of our market leadership positions and P.E, submitting Beroid and other things that we do around the world so I think that we're going to continue to participate in that meaningfully, particularly from the margins standpoint but again, our key in North America is stability through cycles and I think we're demonstrating and I don't think I know we're demonstrating it now.

Jeffrey Miller: Very great. Thanks, Josh Jeff. Thank you.

Stephen Gengaro: One moment for questions. Our next question goes from Stephen Gengaro with people you may proceed. Thanks. Good morning, gentlemen. Good morning, Stephen.

Stephen Gengaro: Two for me. One, just a follow up on the prior question around margins and C&P and the Zeus fleets. When you talk about these assets being contracted, is there any difference in sort of the pricing dynamic versus sort of prior cycles and price openers quarterly and how should we just think about the pricing for those assets in an environment where maybe there's a little excess capacity in your term from some, you know, quite honestly, maybe not as competitive assets but older assets in the market. Does it matter?

Jeffrey Miller: Is pricing pretty stable? Can you talk about that a bit? Look, these are long term deals that we go into knowing the cost of the asset and knowing what the return needs to be. So now it just becomes a bit of a math problem around duration. And so, you know, there are variable costs in the market that we don't control and we don't try to own. We just pass through to customers whether it's paying cost and many other things. But for, or we create competitive management for our equipment as we go into these long term deals. We don't need price openers and all of that sort of jazz. There's no reason for it.

Eric Carre: We literally sit down and work through what is this return for client, return for how a burden. And then we fix that and move forward. That doesn't change over time. And so, you know, I won't comment, you know, that the rest of the market, the spot type market, all of that is going to do what it's going to do. But I think that's when we take a long view of the market and value creation.

Eric Carre: That's math that both clients and how a burden can do. And I think that's what makes it so very different our approach to North America. You know, it's not particularly differentiated if at all in the spot market and as a result. It's just kind of does what it does. It's a bit of a free fall, but I would say in the market where we want to play, which is technology driven. And low as total cost of ownership. And working on what I think is most important, which is productivity per foot. That's a different game that's a long term game. Great. Thanks for the color.

Eric Carre: And then just one quick one probably for Eric on the casual statement. Anything we should know about working capital parameters in 24 versus 23. That would be much different as we kind of build out the models, whether DSOs or payables, etc. No, I think what's important around free cash flow for 24 is, as I mentioned earlier, is we're expecting the free cash flow to be at least 10% over 23.

Eric Carre: That's going to be on the back of improved income. It's going to be on the back also of improved efficiency around working capital, so we spend a lot of time working on improving DSOs, working on improving DIOs. When I speak like this, I don't mean just pushing the organization, I mean implementing different initiatives. For example, I give you a couple of examples on DSOs, we spend a lot of time on automating the invoicing process on integrated services.

Eric Carre: For example, invoicing on integrated services is extremely complicated. We have multiple product line, multiple parts of organization, customer organization, so it takes a lot of time, and to the extent that you can automate that and then reduce cycle time, then you improve DSO. We just rolled out 18 months ago, a company-wide demand planning software, which when combined with the rollout of DSO, in the future, is going to give us totally different capabilities to plan our business and reduce inventory, why not increasing the risk from an operation perspective.

Eric Carre: These are the things where we're spending a lot of our time to basically structurally improve the efficiency of working capital. That's going to be the other component of why we're expecting a free gas flow to improve next year.

Operator: Excellent, thank you for the call. Thank you. One moment for questions.

Mark Bianchi: Our next question goes from Mark Bianchi with TD Cowan, you may proceed. I just wanted to first clarify on the North America outlook that you provided for it to be flat. That's a comment for the full year. Is that correct or was that a comment from where we're going to start today?

Jeffrey Miller: Look, we think that Q1 is up from Q4, so there's activity that comes back that was seasonal in Q4. As we look at the balance of the year, I think that there are, as we plan the business for what we got visibility of and we can see our fleets are largely contracted for 24. That's what we know. Are there factors that may add to that? I think you can do that.

Eric Carre: I think production levels are low, clients may speed up. There's a lot of variables that could happen that I think are too positive, but nevertheless, as we look out to 24 and we plan a business that generates the kind of returns we expect to generate, that's what we see. Okay, thanks, Jeff.

Eric Carre: The other question I had was on D&E in the first quarter here. I think historically there have been some one-time sales that continue for D&E in the first quarter, and then margin could be down in the second quarter. Is that sort of the base case outlook here, is there something unusual going on this year versus the partners? James West.

Eric Carre: No, there's nothing unusual I think if you actually if you were to go back and look at the Q1 24 over Q4 23 guidance that we just gave, it is very much in line with the typical Q4 to Q1 seasonality that we so prior to go back to 2020, 2019, 2018. So what we're seeing here is really a business that's fully in line with historical brand, what's happening on the DNA side, the influence of software says in Q4 typically is maintained in Q1, but we're having a lot of weather related issues in the Eastern atmosphere and the North Sea, et cetera, that is influencing or DNA margins. But again, very much in line in terms of culture, on culture, guidance as we have had historically in our business, nothing unusual. Thank you very much. I'll turn it back. Thank you. One moment for questions.

Kurt Hallead: And as a reminder to ask a question, please press star 1-1 on your telephone and wait for your name to be announced. Our next question comes from Kurt Hallead with benchmark, you may proceed.

Kurt Hallead: Hey, good morning, everybody. Good morning, Kurt. Hey, a lot of good stuff to digest here today. Just appreciate all that color.

Jeffrey Miller: I think my question here, kind of what peak my curiosity was, again, a couple of things that you, one of which you put in the press release, which was a kind of AI driven dynamics that you have going on with add knock and maybe start with that one. And in the context of how you are seeing AI evolving as a tool for the customer base, as a tool for your company, you know, the, how do you see the adoption of that and how do you see the financial impact of that evolving over the course of the next couple of years. Yeah, thanks, Kurt.

Jeffrey Miller: Look, I think software and automation, and I say it that way because software business is strong and focused on enterprise solution, which will adopt all sorts of AI and generative AI as we continue to move forward. And that will create efficiency and closeness in a lot of ways for our customers. Internally, as we adopt automation and AI into our tools and service delivery, I expect that it will have a meaningful impact probably over the next two, three to five years, just as those things are adopted.

Jeffrey Miller: It's going to reduce service cost is going to drive demanding and it's also going to improve service quality. And I think we'll actually improve, you know, the capability of tools, which I think is so fundamental to how we generate long term returns. Appreciate that color.

Jeffrey Miller: Also noticed that Halbert lab entered into a venture to some direct lithium extraction. Sure, it says to how you might see Halbert and get involved in that process, as well. Well, look, that's one of our Hal Labs companies. We're excited to have them here.

Jeffrey Miller: We make a very, very small investment in companies that join Hal Labs, but it's very small around $100,000. So it's, we're a tiny piece of their series B, which we're excited for them. But Hal Labs continues to attract, in my view, more quality, quality, investable companies over time. We're watching them in our series days.

Jeffrey Miller: And in this, in some cases, series B. And so it's a journey. We're learning a lot about different industries, but we're careful. This is clearly not corporate venture capital. We are not investing in the companies that join Hal Labs, other than a small 3 to 5% stake that we get from them generally for the services that we provide to them as a member of Halibur in Hal Labs.

Operator: So super excited about where that's going. But we just need to let that continue to progress on it. Thank you.

Jeffrey Miller: I would not like to turn the call back over to Jeff for any closing remarks.

Jeffrey Miller: Yeah, thank you, Josh. Let me close the call with this. I'm excited about 2024. I mean, our outlook for all field services is strong. And I expect Halibur will generate significant free cash flow for shareholders in 2024.

Operator: Look forward to speaking with you next quarter. Let's close out the call. Thank you for your participation. You may not disconnect. Thank you very much.

Yeah.

Good day and thank you for standing by welcome to the Halliburton Company fourth quarter 2023 earnings Conference call. At this time all participants are in a listen only mode. After the presentation there'll be a question and answer session to ask a question. During this session. Please press star one one on your telephone.

And wait for your name to be announced to withdraw your question. Please press star. One again, please be advised that today's conference is being recorded I would now like to hand, the conference over to your speaker today, David Coleman Senior director of Investor Relations.

David Coleman: Hello, and thank you for joining the Halliburton fourth quarter 2023 conference call. We will make the recording of today's webcast available for seven days on Halliburton's website. After this call.

David Coleman: Joining me today are Jeff Miller, Chairman, President and CEO, and Eric Correct Executive Vice President and CFO.

David Coleman: 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.

David Coleman: These risks are discussed in halliburton's Form 10-K for the year ended December 31, 2022 Form 10-Q for the quarter ended September 32023.

David Coleman: Recent current reports on form 8-K, and other Securities and Exchange Commission filings.

David Coleman: We undertake no obligation to revise or update publicly any forward looking statements for any reason.

David Coleman: 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 fourth quarter earnings release and in our quarterly results and presentation section of our website now I'll turn the call over to Jeff.

Jeffrey Allen Miller: Thank you David and good morning, everyone.

Jeffrey Allen Miller: 2023 was a great year for Halliburton, both of our divisions achieved their highest operating margins in over a decade now.

Jeffrey Allen Miller: We returned $1 $4 billion to shareholders.

Jeffrey Allen Miller: Here are the highlights.

Jeffrey Allen Miller: We delivered full year total company revenue of $23 billion, an increase of 13% year over year and operating income of $4 1 billion, an increase of 33% compared to 2022 adjusted operating income.

Jeffrey Allen Miller: Our international business demonstrated strong growth with revenue up 17% year over year. Despite our exit from Russia in August of 2022, completing two consecutive years of high teens growth.

Jeffrey Allen Miller: North America business showed strength with revenue up 9% year over year, despite rig count declines.

Jeffrey Allen Miller: Completion and production revenue grew 18% year over year and margins expanded 312 basis points.

Jeffrey Allen Miller: Drilling and evaluation grew 7% year over year and margins expanded 171 basis points.

Jeffrey Allen Miller: Turning now to Q4, where halliburton delivered exceptional margin performance supported by better than anticipated completion tool sales globally.

Jeffrey Allen Miller: <unk> performance across multiple high margin product lines and favorable weather in North America.

Jeffrey Allen Miller: Completion and production margins finished the year, almost 100 basis points higher than Q4 of 2022.

Jeffrey Allen Miller: International revenue grew 12% year over year led by the Europe Africa region, which grew revenue 17%.

Jeffrey Allen Miller: Finally during the fourth quarter, we generated $1 $4 billion of cash from operations $1 $1 billion of free cash flow and repurchased approximately $250 million of common stock and $150 million of debt.

Speaker Change: Before we continue I want to take a moment and thank the halliburton employees around the world who made these results possible our success last quarter and throughout 2023 was a direct result of your hard work and dedication.

Speaker Change: Thank you for your relentless focus on safety operational execution customer collaboration and service quality performance.

Speaker Change: Let me begin with my views on the strength of the oilfield services market as we look past the news cycle and near term commodity price volatility the fundamentals for oilfield services remains strong.

Speaker Change: Here are two reasons why.

Speaker Change: First we see an increase in service intensity everywhere we operate.

Speaker Change: Whether it's longer laterals in North America, smaller and more complex reservoirs in mature fields or offshore deepwater customers require more services to develop their resources not fewer.

Speaker Change: Second long term expansion of the global economy will continue to create enormous demands on all forms of energy.

I expect oil and gas remains a critical component of the global energy mix with demand growth well into the future.

With this positive macro outlook I believe halliburton's strong execution, leading technology and collaborative approach will drive demand for halliburton's products and services around the world.

Speaker Change: Now, let's turn to international markets, where halliburton's performance delivered another year of profitable growth.

Speaker Change: Halliburton's full year International revenue grew 17% year on year, and our quarterly revenue grew 12% compared to the same quarter of last year.

Speaker Change: Each region delivered year on year revenue growth throughout 2023, and both divisions delivered improved international margins year on year.

Speaker Change: Our results in 2023 demonstrate the effectiveness of halliburton's profitable international growth strategy.

Speaker Change: Strength of our global competitiveness across product lines, and the power of our value proposition with customers.

Speaker Change: In 2024.

Speaker Change: We expect international E&P spending to grow at a low double digit pace and foresee multiple years of sustained activity growth.

Speaker Change: Although we anticipate regional differences in growth rates for 2024, we believe the Middle East Asia region will likely experienced the greatest increases in activity with other regions closely behind.

Speaker Change: As we look out to 2025, we expect Africa, and Europe, among others to demonstrate above average growth.

Speaker Change: Beyond 2025, we see an active tender pipeline with work scopes extending through the end of the decade, which gives me confidence and the duration of this multi year up cycle.

Speaker Change: While we expect overall activity growth, we also see above market growth within our well construction product lines or customers choose halliburton to improve the reliability consistency and efficiency of their drilling operations.

Speaker Change: One such technology is our logics autonomous drilling platform, which is now used on 90% of our I cruise runs worldwide.

Speaker Change: Customers also rely on halliburton's subsurface expertise to develop todays most complex reservoirs.

Speaker Change: This requires technologies to reduce uncertainties, such as our decision space 365 unified ensemble modeling and advanced formation evaluation systems like our I star logging, while drilling platform and reservoir examiner formation testing service.

Speaker Change: These technologies enable customers to target smaller reservoirs identify bypassed reserves and gather reservoir properties in real time.

Speaker Change: We see reservoir complexity, increasing worldwide and I expect the capabilities of these systems will continue to deliver customer value and lead in overall growth within our formation evaluation portfolio.

Speaker Change: For our completion and production. We also expect increased adoption of our technologies like intelligent completions multilateral solutions and artificial lift or.

Speaker Change: Our intelligent and multilateral completions enabled customers to produce inject and control multiple zones in a wellbore, which is critical for offshore developments.

Speaker Change: Segment, we expect to outpace the overall market.

Speaker Change: Artificial lift our strategy targets markets like the Middle East and Latin America, where our differentiated performance and existing footprint create a solid foundation for profitable growth.

Speaker Change: We also expect strong demand for our services and carbon capture and storage, where halliburton's, leading capabilities to design deliver and validate reliable barriers.

Speaker Change: A crucial role.

Speaker Change: As our customers invest in carbon storage are tailored cement designs and casing equipment technology enabled them to address the unique challenges of long term carbon sequestration.

Speaker Change: But this activity growth the availability of equipment and experienced personnel remains tight.

Speaker Change: We expect asset intensive offshore activity to increase which will further tighten the market.

Speaker Change: As offshore represents over half of our business outside North America land, we expect this activity to drive improved pricing and higher margins for our business.

Speaker Change: I am confident in halliburton's strategy for profitable international growth and I am excited about our performance in 'twenty, 'twenty, four and well into the future.

Turning to North America.

Speaker Change: Halliburton strategy yielded strong results in 2023.

Speaker Change: Our full year North America revenue of 10.5 billion was a 9% increase when compared to 2022, despite sequentially lower rig count.

Speaker Change: Fourth quarter margins in North America land were relatively flat quarter over quarter, despite lower revenue.

Speaker Change: Our full year and fourth quarter results demonstrated the strength of our differentiated business and the successful execution of our strategy to maximize value.

Speaker Change: The dynamic North American market continues to evolve with larger customers and stable programs elevated quality expectations and greater demand for technology to improve recovery and well productivity.

Speaker Change: This evolution fits perfectly with halliburton's value proposition.

Speaker Change: Our Zeus electric fracturing solution is highly sought after in this market, where it's seamless combination of electric Frac automation and real time subsurface measurements uniquely address customer requirements.

Speaker Change: We believe customers demand Zeus because it provides the lowest total cost of ownership and it's shown to be the most proven and reliable solution in the market.

Speaker Change: The market pull for this technology has been strong.

Speaker Change: The combination of Zeus fleets working in the field today, and Zeus fleets contracted for 'twenty 'twenty four delivery represent over 40% of our fracturing fleet.

Speaker Change: I expect well over half of our fleets will be electric in 2025, but all of these E fleets on multi year contracts generating full return of and return on capital during their initial contract terms.

Speaker Change: Consistent with our strategy from the beginning.

Speaker Change: We plan for our Zeus deliveries in 'twenty 'twenty four to replace existing fleets rather than add incremental fleet capacity. This is how we maximize value in North America.

Speaker Change: The growth of Zeus and our commercial approach is transform the North America completion services market.

Technology is the only transformative when adopted and is only adopted at the rate of Zeus when it works and creates meaningful value for our customers.

Speaker Change: Zeus is rapid adoption, both by new and repeat customers tells us our solution is the right one for North America.

Speaker Change: Turning to our 'twenty 'twenty four North America outlook.

Speaker Change: We expect a continued strong business with the combination of stable levels of activity in the market and the contracted nature of halliburton's portfolio. We.

Speaker Change: We expect this results in a flattish revenue and margin environment for Halliburton.

To close out.

Speaker Change: I am confident in our strategies to maximize value in North America and for profitable growth internationally in 'twenty twenty-three Halliburton demonstrated the power of these strategies the consistency of our execution and the value of our differentiated technology.

Speaker Change: We generated about 2.3 billion of free cash flow during the year retired approximately $300 million of debt and returned $1 $4 billion of cash to shareholders through stock repurchases and dividends, which represents over 60% of our free cash flow.

Speaker Change: Today I am pleased to announce that our board of directors approved an increase of our quarterly dividend to <unk> 17 cents per share our outlook for oilfield services remains strong and I expect we will deepen and strengthen our value proposition and generate significant free cash flow.

Speaker Change: Now I'll turn the call over to Eric to provide more details on our financial results Eric.

Eric Correct: Thank you, Jeff and good morning.

Eric Correct: 2023 was a strong year for Halliburton.

Eric Correct: Multiple financial and operational metrics showed the best business performance in recent memory anyone of which are worthy of highlighting.

Operator: And now... Good day, and thank you for standing by. Welcome to the Halliburton Company fourth quarter 2023 earnings conference call. At this time, all participants are in a listen-only mode.

Eric Correct: More important than any single metric. However, the overall business performance demonstrated the effectiveness of our strategy.

Eric Correct: Here are a few highlights in our CMP division, our 'twenty to 'twenty three margins of 27% were the highest since 2011.

Operator: After this presentation, there will be a question and answer session. To ask a question during the session, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, David Coleman, Senior Vice President for Business, Senior Director of Investor Relations. Hello, and thank you for joining the Halliburton Fourth Quarter 2023 conference call. We will make the recording of today's webcast available for seven days on Halliburton's website after this call.

Eric Correct: In our DSD Division 2023 margins of 16, 5% were the highest since 2008.

Eric Correct: In North America, our strategy to maximize value is about structurally changing the risk and return profile of our business, we delivered steady margins through the year, despite lower activity driven by the rollout of our Zeus fleet and their associated contract terms and the strength of our world.

David Coleman: Joining me today are Jeff Miller, Chairman, President, and CEO, and Eric Caray, 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, and Form 10-Q for the quarter ended September 30, 2023. Recent current reports on Form 8K and other Securities and Exchange Commission filings. We undertake no obligation to revise or update publicly any forward-looking statements for any reason.

Eric Correct: Construction business.

Eric Correct: Internationally, our profitable growth strategy drove revenue and margin improvement across all of our geographies.

Eric Correct: Revenue was the highest in the last eight years and profit margins were the highest in over a decade.

Eric Correct: Beyond pricing and activity. This is the result of the multi year investment in our drilling business and technology differentiation across multiple product lines.

Eric Correct: Our focus on capital efficiency below does revenue growth and structure and margin improvement while capital spending remained within our target range of 5% to 6% of revenue.

David Coleman: 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 fourth 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.

Eric Correct: Collectively these results generated about $2 $3 billion of free cash flow.

Eric Correct: The highest cash generation in the last 15 years.

Eric Correct: Let's turn now to our fourth quarter results.

Eric Correct: Our Q4 reported net income per diluted share with 74 cents.

Jeff: 2023 was a great year for Halliburton. Both of our divisions achieved their highest operating margins in over a decade, and we returned $1.4 billion to shareholders. Here are the highlights.

Eric Correct: Net income per diluted share adjusted for losses in Argentina, primarily due to the currency devaluation was 86 cents.

Eric Correct: Total company revenue for the fourth quarter of 2023 was $5 7 billion operating income was $1 $1 billion and the operating margin was 18, 4% a 95 basis point increase over Q4 2022.

Jeff: We delivered full year total company revenue of $23 billion, an increase of 13% year over year, and operating income of $4.1 billion, an increase of 33% compared to 2022 adjusted operating income. Our international business demonstrated strong growth, with our revenue up 17% year over year despite our exit from Russia in August of 2022, completing two consecutive years of high teens growth. Our North America business showed strength, with revenue up 9% year-over-year despite a rig count decline. Completion and production revenue grew 18% year over year, and margins expanded 312 basis points. Drilling and evaluation grew 7% year-over-year, and margins expanded 171 basis points.

Eric Correct: Beginning with our completion and production Division revenue in Q4 was $3 $3 billion operating income was $716 million and the operating income margin was 22%.

Eric Correct: Our better than anticipated results were driven by the best fourth quarter of completion tools sales in nine years strong performance across multiple product lines and favorable weather in North America.

Eric Correct: In our drilling and evaluation Division revenue in Q4 was $2 $4 billion operating income was $420 million and the operating income margin was 17% an increase of 122 basis points over Q4 last year.

Jeff: Turning now to Q4, where Halliburton delivered exceptional margin performance, supported by better than anticipated completion tool sales globally, strong performance across multiple high-margin product lines, and favorable weather in North America. Completion and production margins finished the year almost 100 basis points higher than Q4 of 2022. International revenue grew 12% year-over-year, led by the Europe-Africa region, which grew revenue 17%. Finally, during the fourth quarter, we generated $1.4 billion of cash from operations, $1.1 billion of free cash flow, and repurchased approximately $250 million of common stock and $150 million of debt.

Eric Correct: These results were in line with our expectation and driven by international software sales higher project management activity in the eastern Hemisphere and increased fluid services in the western hemisphere.

Eric Correct: Now, let's move on to geographic results.

Eric Correct: Our Q4 international revenue increased 4% sequentially.

For us our highest international revenue quarter, since 2015, and 10th consecutive quarter of year on year revenue growth.

Eric Correct: Q4 sequential growth was led by the Middle East region, driven by improved activity across multiple product lines and strong year end completion tool sales.

Jeff: Before we continue, I want to take a moment and thank the Halliburton employees around the world who made these results possible. Our success last quarter and throughout 2023 was a direct result of your hard work and dedication. Thank you for your relentless focus on safety, operational execution, customer collaboration, and service quality performance. Let me begin with my views on the strength of the oil field services market. As we look past the news cycle and near-term commodity price volatility, the fundamentals for oilfield services remain strong. Here are two reasons why.

Eric Correct: Europe Africa demonstrated sequential growth consistent with the overall international market with higher activity Nephric gap of setting lower product sales in Europe.

Eric Correct: Latin America revenue declined slightly in the fourth quarter were reduced completion related activity. Following a very strong third quarter outweighed activity improvements in the Caribbean.

Eric Correct: In North America revenue in Q4 decreased 7% sequentially.

Jeff: First, we see an increase in service intensity everywhere we operate. Whether it's longer laterals in North America, smaller and more complex reservoirs in mature fields, or offshore deep water, customers require more services to develop their resources, not fewer. Second, the long-term expansion of the global economy will continue to create enormous demands for all forms of energy.

Eric Correct: <unk>, primarily by a decline in U S land activity as a result of typical holiday related slowdowns.

Eric Correct: However, we experienced fewer weather related events than expected.

As weather related downtime is more expensive than planned downtime. This means our Q4 North America land margins were higher than anticipated.

Jeff: I expect oil and gas to remain a critical component of the global energy mix with demand growth well into the future. With this positive macro outlook, I believe Halliburton's strong execution, leading technology, and collaborative approach will drive demand for Halliburton's products and services around the world. Now, let's turn to international markets, where Halliburton's performance delivered another year of profitable growth. Halliburton's full-year international revenue grew 17 percent year-on-year, and our quarterly revenue grew 12 percent compared to the same quarter of last year.

Eric Correct: Additionally, completion tool sales in the Gulf of Mexico delivered the strongest quarter in three years.

Eric Correct: Moving on to other items in Q4, our corporate and other expense was $63 million for the first quarter of 2024, we expect our corporate expenses to be flat.

Eric Correct: Our SAP deployment remains on budget and on schedule to conclude in 2025.

Eric Correct: In Q4, we spent $15 million or about <unk> <unk> per diluted share.

Jeff: Each region delivered year-on-year revenue growth throughout 2023, and both divisions delivered improved international margins year-on-year. Our results in 2023 demonstrate the effectiveness of Halliburton's profitable international growth strategy, the strength of our global competitiveness across product lines, and the power of our value proposition with customers. In 2024, we expect international E&P spending to grow at a low double-digit pace and foresee multiple years of sustained activity growth. Although we anticipate regional differences in growth rates for 2024, we believe the Middle East Asia region will likely experience the greatest increases in activity, with other regions closely behind.

Eric Correct: On a safety S. Four migration, which is included in our results for the first quarter 2024, we expect these expenses to be approximately $30 million or three cents per share due to the timing associated with accelerated phases of the rollout in 2024.

Eric Correct: We expect to spend $120 million and $80 million in 2025.

Eric Correct: Net interest expense for the quarter was $98 million slightly higher than expected, primarily due to premiums associated with debt buybacks for the first quarter 'twenty 'twenty four we expect net interest expense to be roughly $85 million.

Jeff: As we look out to 2025, we expect Africa and Europe, among others, to demonstrate above-average growth. Beyond 2025, we see an active tender pipeline with work scopes extending through the end of the decade, which gives me confidence in the duration of this multi-year upside. While we expect overall activity growth, we also see above-market growth within our well construction product lines, where customers choose Halliburton to improve the reliability, consistency, and efficiency of their drilling operations. One such technology is our Logix Autonomous Drilling Platform, which is now used on 90% of our iCruise runs worldwide. Customers also rely on Halliburton's subsurface expertise to develop today's most complex reservoirs. This requires technologies to reduce uncertainties, such as Decision Space 365 and Unified Ensemble Modeling, and advanced formation evaluation systems like our iSTAR Logging While Drilling Platform and Reservoir Examiner Formation Testing Service. These technologies enable customers to target smaller reservoirs, identify bypassed reserves, and gather reservoir properties in real time.

Eric Correct: Other net expense for Q4 was $16 million lower than our prior guidance due to the non-GAAP treatment of the Argentinian peso devaluation.

Eric Correct: For the first quarter 'twenty 'twenty four we expect this expense to be about $35 million.

Eric Correct: Our adjusted effective tax rate for Q4 was 17, 9% lower than expected due to discrete items based on our anticipated geographic earnings mix, we expect our first quarter of 2024 effective tax rate to be approximately 21% slightly.

Eric Correct: Lower than our anticipated full year effective tax rate.

Eric Correct: Capital expenditure for Q4 were $399 million, which brought our full year capex totaled to one $4 billion approximately 60% of our Capex was deployed to international and offshore markets in 2023, and we expect this ratio.

Eric Correct: To remain similar in 2024.

Eric Correct: For the full year of 2024, we expect capital expenditures to remain approximately 6% of revenue.

Eric Correct: Our Q4 cash flow from operations was $1 $4 billion and free cash flow was $1 $1 billion, bringing our full year free cash flow to about $2 3 billion for 'twenty 'twenty four we expect free cash flow to be Directionally higher.

Jeff: We see reservoir complexity increasing worldwide, and I expect the capabilities of these systems will continue to deliver customer value and lead to overall growth within our formation evaluation portfolio. For completion and production, we also expect increased adoption of our technologies like intelligent completions, multilateral solutions, and artificial lifts. Our intelligent and multilateral completions enable customers to produce, inject, and control multiple zones in a wellbore, which is critical for offshore development, a segment we expect to outpace the overall market. And Artificial Lift, our strategy targets markets like the Middle East and Latin America, where our differentiated performance and existing footprint create a solid foundation for profitable growth. We also expect strong demand for our services in carbon capture and storage, where Halliburton's leading As our customers invest in carbon storage, our tailored cement designs and casing equipment technology enable them to address the unique challenges of long-term carbon sequestration.

Eric Correct: Now let me provide you with some comments on our expectations for the first quarter.

Eric Correct: As is typical our results will be subject to weather related seasonality and neurolife of significant year end product sales as a result in our completion and production division, we anticipate sequential revenue to be flat to down 2% and margins lower by 125 to one <unk>.

Eric Correct: <unk> hundred 75 basis points.

Eric Correct: In our drilling and evaluation division, we expect sequential revenue to decline between 1% to 3% and margins to be lower by 25 to 75 basis points.

Eric Correct: I will now turn the call back to Jeff.

Jeffrey Allen Miller: Thanks, Eric.

Let me summarize our discussion today 2023 was a great year for Halliburton, we generated about $2.3 billion of free cash flow and returned over 60% of free cash flow to shareholders through dividends and stock repurchases. We are committed to return over 50% of our free cash flow to shareholders in 2024.

Jeff: With this activity growth, the availability of equipment and experienced personnel remains tight. We expect acid-intensive offshore activity to increase, which will further tighten the market. As offshore represents over half of our business outside North America land, we expect this activity to drive improved pricing and higher margins for our business. I am confident in Halliburton's strategy for profitable international growth, and I am excited about our performance in 2024 and well into the future. Turning to North America,

Jeffrey Allen Miller: For our international business, we expect low double digit growth driven by the power of our value proposition.

Jeffrey Allen Miller: Global competitiveness across all product lines, and our profitable growth strategy.

Jeffrey Allen Miller: In North America, we expect a continued strong business driven by stable activity, our differentiated technical position with our Zeus electric Frac solution and the increasingly contracted nature of our business.

Jeffrey Allen Miller: And now let's open it up for questions.

Jeff: Halliburton's strategy yielded strong results in 2023. Our full-year North America revenue of $10.5 billion was a 9% increase when compared to 2022, despite sequentially lower rig counts. Fourth quarter margins in North America land were relatively flat quarter over quarter, despite lower revenue.

Speaker Change: Thank you as a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, one moment for questions.

Speaker Change: Our first question comes from David I understand with Barclays. You May proceed.

Jeff: Our full year and fourth quarter results demonstrated the strength of our differentiated business and the successful execution of our strategy to maximize value. The dynamic North American market continues to evolve, with larger customers and stable programs, elevated quality expectations, and greater demand for technology to improve recovery and well productivity. This evolution fits perfectly with Halliburton's value proposition. Our Zeus Electric Fracturing Solution is highly sought after in this market, where its seamless combination of electric frac, automation, and real-time subsurface measurements uniquely address customer requirements.

David Coleman: Great. Thanks, Good morning, Jeff how are you.

David Coleman: Good morning, David.

Speaker Change: So a question on the CMP margins that help flat during the quarter.

Speaker Change: U S land was holding flat.

Speaker Change: When you could talk a little bit about the influence of your growing a frac fleet on the bottom line. We know the operational advantages, but I was wondering if you could talk about how it impacts financially.

Speaker Change: How does it your frac say compared to say your tier four dual fuel the diesel fleets just in terms of pricing and operating cost trying to get a sense of how accretive as new equipment is and sort of secondarily on that with E&P consolidation well underway and we look out say 12 to 24 months would you expect the majority of your Frac fleets to be with these larger operators under multi.

Speaker Change: Your contracts.

Speaker Change: Yeah, well thanks, David.

Jeff: We believe customers demand Zeus because it provides the lowest total cost of ownership and it's shown to be the most proven and reliable solution in the market. The market pull for this technology has been strong. The combination of Zeus Fleets working in the field today and Zeus Fleets contracted for 2024 delivery represents over 40% of our fracturing fleet. I expect well over half of our fleets will be electric in 2025, with all of these e-fleets on multi-year contracts generating full return on and return on capital during their initial contract term, consistent with our strategy from the beginning. We plan for our Zeus deliveries in 2024 to replace existing fleets rather than add incremental fleet capacity.

Okay fleets are accretive they are accretive.

Speaker Change: For a couple of reasons number one.

Speaker Change: Highly efficient to operate from our standpoint, and so that makes them.

Speaker Change: More accretive clearly they are bringing a lot of value to clients and therefore there.

Speaker Change: They are priced.

Speaker Change: Priced and thought about differently in the marketplace.

And so look I expect that that will continue.

And in the future, but I think what's most important is the contracted nature of the fleet switch.

Speaker Change: A couple of things also number one debt.

Speaker Change: The pricing is sticky, but it's sticky because it's contracted over time and the value is thought about and so.

Speaker Change: Yes, it's sophisticated procurers can look at that and model that and we can model it as well and comfortable with the value created.

Jeff: This is how we maximize value in North America. The growth of Zeus and our commercial approach has transformed the North American Completion Services market. Technology is only transformative when it is adopted, and it is only adopted at the rate of Zeus when it works and creates meaningful value for our customers. Zeus's rapid adoption, both by new and repeat customers, tells us our solution is the right one for North America.

Speaker Change: But I think the.

Speaker Change: Second thing as we think about what types of customers look at eight fleets these or not.

Speaker Change: Okay.

Speaker Change: These arent as spot market solution I mean, the companies that are interested any fleets are those that have steady programs work through cycles and have a clear vision of where their business needs to go and are willing to commit to the technology to deliver that over the long term and so it really it's an entire.

Jeff: Turning to our 2024 North America Outlook, we expect continued strong business with the combination of stable levels of activity in the market and the contracted nature of Halliburton's portfolio. We expect this to result in a flattish revenue and margin environment for Halliburton.

Speaker Change: Our system, if we think about <unk>.

Speaker Change: Electric fleet.

Speaker Change: Obviously, it's an efficient lowest.

Speaker Change: Lowest tcl electric solution, but it's also automated.

Speaker Change: Which drives the level of precision around fracking that I've never seen before.

Jeff: To close out, I am confident in our strategies to maximize value in North America and for profitable growth internationally. In 2023, Halliburton demonstrated the power of these strategies, the consistency of our execution, and the value of our differentiated technology. We generated about $2.3 billion of free cash flow during the year, retired approximately $300 million of debt, and returned $1.4 billion of cash to shareholders through stock repurchases and dividends, which represents over 60% of our free cash flow. Today, I am pleased to announce that our Board of Directors approved an increase in our quarterly dividend to $0.17 per share.

Speaker Change: So that clients know that they are delivering what they expect to deliver and then finally, the subsurface measurement, but I bring all of that up because that's part of what drives it being accretive a creates a lot more value. Therefore is more accretive than a tier four diesel fleet clearly.

Speaker Change: And then also a different set of conditions, which also changes the return profile of these assets as they go into the market I hope that helps that.

Speaker Change: It does clear differentiation there.

Speaker Change: Separate question here I noticed in your release, you announced two new collaborations with other service companies. One in reservoir analysis. The other MPD is sort of effectively fills a few of your weaker spots are for your portfolio.

Speaker Change: Just thinking back to last cycle, we saw a number of acquisitions, but I don't recall too many collaborations out there.

Eric: Our outlook for oilfield services remains strong, and I expect we will deepen and strengthen our value proposition and generate significant free cash flow. Now, I'll turn the call over to Eric to provide more details on our financial results. Thank you, Jeff, and good morning.

On the one hand, I guess from my point of view on the one hand, maybe you are testing the waters a bit but on the other it seems like it's a pretty good way to fill product lines to us spending a lot of capital I was wondering if you could talk about the strategy and why it's different during the current cycle and would you expect to enter more collaborations in the coming years.

Eric: 2023 was a strong year for Halliburton. Multiple financial and operational metrics showed the best business performance in recent memory, any one of which is worthy of a highlight. More important than any single metric, however, the overall business performance demonstrated the effectiveness of our strategy. Here are a few highlights.

Well look I think it's more a function of the technology that we have and when we see develop some things around.

Speaker Change: Digital cores and the ability to evaluate and digitally for example.

Speaker Change: But trying to buy our way into the entire core space. So we'd rather partner with whom we think that premier core analysis kind of company is and so we're able to bring our technology to that and effectively it's a complement our strategy, where we make better returns.

Eric: In our C&P division, our 2023 margins of 20.7% were the highest since 2011. In our DNA division, our 2023 margins of 16.5% were the highest since 2008. In North America, our strategy to maximize value is about structurally changing the risk and return profile of our business. We delivered steady margins through the year, despite lower activity, driven by the rollout of our Zeus fleet and their associated contract terms, and the strength of our well construction business. Internationally, our profitable growth strategy drove revenue and margin improvement across all of our geographies. Revenue was the highest in the last eight years, and profit margins were the highest in over a decade.

Speaker Change: Doing the things that we've developed and know how to do and obviously, we believe core labs is a fantastic company and so we're able to bring something to that that we believe creates more value rather than trying to.

Speaker Change: Enter into a different type of arrangement.

Speaker Change: The other one oil states similar kind of thing got terrific technology, but we don't know that we want to try to plow that much capital into the rest of their business, but.

Speaker Change: But we do know where we can generate outsized returns for halliburton.

Speaker Change: I would throw in another similar type thing as subsea with.

Technique, FMC, who I really believe technique FMC is the absolute premier subsea company in the World and.

Speaker Change: And we work closely with them developing joined IP.

Speaker Change: Delivering on electric completions, all electric completions and so there are a lot of things, we're able to do where we can mine what I think is our core competency or competitive advantage along with others without trying to Rob.

Eric: Beyond pricing and activity, this is the result of the multi-year investment in our drilling business and technology differentiation across multiple products. Our focus on capital efficiency allowed this revenue growth and structural margin improvement while capital spending remained within our target range of 5 to 6% of revenue. Collectively, these results generated about $2.3 billion of free cash, the highest cash generation in the last 15 years. Now, let's turn to our fourth quota result. Our Q4 reported net income per diluted share was 74 cents. However, net income per diluted share, adjusted for losses in Argentina primarily due to the currency devaluation, was $0.86.

Speaker Change: Broaden our way into things that arent really strategically fits hope that helps David.

Very helpful. Thank you very much Jeff.

Speaker Change: Certainly.

Speaker Change: Thank you.

Speaker Change: One moment for questions.

Speaker Change: Our next question comes from Neil Mehta with Goldman Sachs. You May proceed.

Neil Singhvi Mehta: Yes, good morning, Jeff team.

Neil Singhvi Mehta: At the time the first question is around.

It's more of a macro question, which is one of the things that surprised us last year was the exit to exit if U S oil production, which came in above I think where consensus XP Spectation ware.

Neil Singhvi Mehta: You have unique visibility into the U S.

Eric: Total company revenue for the fourth quarter of 2023 was $5.7 billion, and operating income was $1.1 billion. And the operating margin was 18.4%, a 95 basis point increase over Q4 2020. Beginning with our Completion and Production Division, revenue in Q4 was $3.3 billion, operating income was $716 million, and the operating income margin was 22%.

Neil Singhvi Mehta: Completion and volumes what do you think happened there and as we think about 2024, how do you think about.

Neil Singhvi Mehta: Exit rate of U S growth.

Neil Singhvi Mehta: Maybe talk about the moving pieces, including docs.

Neil Singhvi Mehta: Yes.

Thinking about production growth in 'twenty four.

Neil Singhvi Mehta: But production is a function of service intensity, so simply put more sand more barrels and we saw peak levels of service intensity throughout last really in the first half of last year.

Neil Singhvi Mehta: And a lot of that comes on in the latter half and I think some of this is efficiency in the sense that we are delivering more.

Eric: Our better-than-anticipated results were driven by the best fourth quarter of completion tool sales in nine years, strong performance across multiple product lines, and favorable weather in North America. In our drilling and evaluation division, revenue in Q4 was $2.4 billion, operating income was $420 million, and the operating income margin was 17%.

Neil Singhvi Mehta: Sand to the reservoir.

Neil Singhvi Mehta: And that comes in a lot of forms the fleets are part of that and some of the technology that we brought to market.

Neil Singhvi Mehta: But I also think that the market that we see for next year.

Neil Singhvi Mehta: Yes.

Neil Singhvi Mehta: It's hard for me to forecast at this point exactly what operators are doing because every operator plays their own game.

Neil Singhvi Mehta: But at the same time.

Neil Singhvi Mehta: I would probably take the over on rigs.

Eric: An increase of 122 basis points over Q4 last year. These results were in line with our expectations and driven by international software sales, higher project management activity in the Eastern Hemisphere, and increased fluid services in the Western Hemisphere. Now let's move on to geographic results. Our Q4 international revenue increased 4% sequentially, which was our highest international revenue quarter since 2015 and the 10th consecutive quarter of year-on-year revenue growth. Q4 sequential growth was led by the Middle East region, driven by improved activity across multiple product lines and strong year-end completion tools. Europe-Africa demonstrated sequential growth consistent with the overall international market, with higher activity in Africa setting lower product sales in Europe. Latin America revenue declined slightly in the fourth quarter, where reduced completion-related activity following a very strong third quarter outweighed activity improvements in the Caribbean.

Neil Singhvi Mehta: Because I think that will run out of docs at some point I think I would take the underground production only because.

Neil Singhvi Mehta: Whatever you think it is I will take the under only because.

Neil Singhvi Mehta: What we see are stable customers delivering through their plans, but what we don't see as a lot of the smaller companies coming into the market and in an effort to really amp up production.

Neil Singhvi Mehta: So I think from our perspective at Halliburton very stable market.

But from a production standpoint as we.

Neil Singhvi Mehta: Watch it unfold it'll be a matter of how much.

Neil Singhvi Mehta: Incremental sand gets pop to overcome what is clearly going to be a decline rate that comes with adding barrels rapidly obviously, they fall off rapidly.

Speaker Change: Thanks, Jeff Good color there and then you made a comment that you feel like you have international visibility through the end of the decade can you expand there and help give the market a little more confidence about with the post 2020 for 2025 profile looks like.

Speaker Change: Well look I mean, we.

Speaker Change: We are working on tenders today for work all of next year and the following year I mean, when we talked with customers about what's going to happen really the I don't think the north sea.

Eric: In North America, revenue in Q4 decreased 7% sequentially, driven primarily by a decline in US land activity as a result of typical holiday-related slowdowns. However, we experienced fewer weather-related events than expected. As weather-related downtime is more expensive than planned downtime, this means our Q4 North America land margins were higher than anticipated. Additionally, completion tool sales in the Gulf of Mexico delivered the strongest quarter in three. Moving on to other items, in Q4, our corporate and other expenses were $63 million.

Speaker Change: <unk> in West Africa, even really wake up until 2025, we've seen strong growth in those markets. However, the real growth that we're working on planning today doesn't even start until 'twenty five and all of these things are three and four year type efforts.

Speaker Change: Alright individual wells and places like that these are programs and so we spent we are actually on contract with a client working on just the planning of logistics for 'twenty five 'twenty six and beyond so.

Speaker Change: I've just got a lot of confidence in terms of what we see.

Eric: For the first quarter of 2024, we expect our corporate expenses to be flat. Our SAP deployment remains on budget and on schedule to conclude in 2025. In Q4, we spent $15 million, or about $0.02 per diluted share, on the SAP S4 Migration, which is included in our results. For the first quarter of 2024, we expect these expenses to be approximately $30 million, or three cents per share, due to the timing associated with accelerated phases of the rollout. In 2024, we expect to spend $120 million and $80 million in 2020. Net interest expense for the quarter was $98 million, slightly higher than expected, primarily due to premiums associated with that buyback.

Speaker Change: In hand.

Speaker Change: Tender pipeline and then the pipeline of work that we are planning with customers.

Speaker Change: May or may not even be tendered, it's just more a matter of it will be done and we.

Speaker Change: We've got clarity on that in 'twenty five and beyond.

Speaker Change: Thanks, Jeff.

Jeffrey Allen Miller: Yes, Sir.

Thank you.

Jeffrey Allen Miller: One moment for questions.

Jeffrey Allen Miller: Our next question comes from Arun Jairam with Jpmorgan you May proceed.

Arun Jairam: Yes. Good morning, Jeff you mentioned that 40% of your contracted fleets this year will be Zeus going to 50%.

Arun Jairam: More than 25.

Arun Jairam: I was wondering if you could give us a sense of how your commercial model for this has evolved.

Eric: For the first quarter of 2024, we expect net interest expense to be roughly $85 million. Other net expense for Q4 was $16 million, lower than our prior guidance due to the non-gap treatment of the Argentinian peso devaluation. For the first quarter 2024, we expect this expense to be about $35 million. Our adjusted effective tax rate for Q4 was 17.9%, lower than expected due to discrete IT. Based on our anticipated geographic earnings mix, we expect our first quarter 2020 effective tax rate to be approximately 21%, slightly lower than our anticipated full-year effective tax rate. Capital expenditures for Q4 were $399 million, which brought a full year capex total to $1.4 billion.

Arun Jairam: And one of the things that we get questions on is just a significant amount of completion efficiency gains.

Arun Jairam: The industry has generated and what is the sharing of that between E&P and service company.

Speaker Change: Well look I think.

Speaker Change: Number one it's the value created by.

Speaker Change: This is what drives the contracting nature of couple of things.

Speaker Change: Yes.

Speaker Change: Started to develop Zeus started quite a while back.

Speaker Change: Our view was we want to maximize value in North America number one.

And in order to do that.

Speaker Change: We just had we believe that the technology created enough value.

Speaker Change: So much value that we arent going to build it unless it's demonstrated for customers and I think the contracting nature of the longer term contracts three year type contracts.

Eric: Approximately 60% of our CapEx was deployed to international and offshore markets in 2023, and we expect this ratio to remain similar in 2024. For the full year of 2024, we expect capital expenditures to remain approximately 6% of revenue. Our Q4 cash flow from operations was $1.4 billion, and free cash flow was $1.1 billion, bringing our full year free cash flow to about $2.3 billion.

Speaker Change: Because we led the market pull rather than trying to push something into the market. It is that different and special in as that system continues to develop and evolve meaning automation measurement. All of these things that drive really meaningful value that is what's creating I think the different dialogue around.

Speaker Change: Zeus with our customers because it will become more and more integral to how they create value as well.

Speaker Change: And then from an efficiency stand point or like volume standpoint.

Speaker Change: Equipment is very efficient so as we go from zipper Frac Saima frac that in this case Cromwell frac with the customer.

Eric: For 2024, we expect free cash flow to be directionally higher. Now, let me provide you with some comments on our expectations for the first quarter. As is typical, our results will be subject to weather-related seasonality and the roll-off of significant year-end products. As a result, in our Completion and Production Division, we anticipate sequential revenue to be flat to down 2% and margins to be lower by 125 to 175 basis points. In our drilling and evaluation division, we expect sequential revenue to decline between 1-3% and margins to be lowered by 25-75%. I will now turn the call back to Jeff.

Speaker Change: That is not a one to one increase in horsepower requirements. So we can become more efficient as those volumes go up that.

Speaker Change: That is also a unique feature though.

<unk> and its ability to scale up but it's not one for one and so from Halliburton perspective, we did create outsized value for Halliburton and also for our clients because we are using less equipment than we would had we've gone at it.

Fashion, so I think that the.

Speaker Change: The combination of reliability.

Speaker Change: But also automation because it's.

Speaker Change: As those Fracs is fracs get larger that precision gets more important there are a whole lot of things that start to happen and so very collaborative efforts with our clients to utilize that technology in the case of the triangle Frac really groundbreaking type work.

Speaker Change: Super excited to do it with this customer.

Speaker Change: Great.

Speaker Change: Jeff My follow up natural gas is on People's minds in North America, just given the contango.

Jeff: Thanks, Eric. Let me summarize our discussion today. 2023 was a great year for Halliburton. We generated about $2.3 billion of free cash flow and returned over 60% of free cash flow to shareholders through dividends and stock repurchase.

Speaker Change: And the market in 2024 is just above $2 50, I was wondering if you could give us a sense of how much of your activity is levered just to dry gas and what are some of the risks to the earnings picture.

Speaker Change: From a soft market for gas this year.

Speaker Change: Alright.

Jeff: We're committed to returning over 50% of our free cash flow to shareholders in 2024. For our international business, we expect low double-digit growth, driven by the power of our value proposition, global competitiveness across all product lines, and our profitable growth strategy. In North America, we expect continued strong business, driven by stable activity, our differentiated technical position with our Zeus electric frac solution, and the increasingly contracted nature of our business. Now, let's open it up to questions. Thank you. As a reminder, to ask a question, please press Star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again.

We've got very little gas exposure in our business today, the ones that exposure that we do have is.

Speaker Change: Contracted under that sort of the Zeus solution somewhat and then we've got I guess, a little bit of other things.

Speaker Change: But look the gas work that we have is not a significant part of our overall portfolio.

And so we plan for what we can see I think.

Speaker Change: There could be equal upside on gas as LNG comes on.

Speaker Change: We haven't baked it into our outlook today, but I would say that's clearly one of the.

Speaker Change: <unk> to North America, and maybe more so than a downside to North America.

Speaker Change: Fair enough thanks, Jeff.

Okay.

Speaker Change: Thank you.

Speaker Change: One moment for questions.

Speaker Change: Our next question comes from Roger read with Wells Fargo. You May proceed.

Operator: One moment for questions. Our first question comes from David Anderson with Barclays. Thanks. Good morning, Jeff. How are you?

Roger: Yes. Thank you good morning, and actually even Rob Committee last week to visit a triangle Frac site and saw the easily so pretty impressive setup.

David Anderson: Good morning, David. So a question on the C&P margins that held flat during the quarter, and you said U.S. land was holding flat. I was hoping you could talk a little bit about the influence of your growing EFRAC fleet on the bottom line. We know the operational advantages, but I was wondering if you could talk about how it affects you financially. How does EFRAC, say, compare to, say, your Tier 4 dual fuel diesel fleet, just in terms of pricing and operating costs, trying to get a sense of how accretive the new equipment is?

Roger: One of the things the customer mentioned was a slightly different.

Roger: <unk>.

Roger: I guess sort of price to value contract structure.

Roger: It looks like from a margin standpoint, youre doing fine on that but is there anything you can count on.

Roger: Enlighten us on maybe how we thought about traditional pressure pumping contracting and a lot of spot exposure versus.

Roger: Kind of how this is going through what does it mean in terms of sharing gains with the customer what's the right way for us to think about that on kind of a price.

Jeff: And sort of secondarily on that, with E&P consolidation well underway, and we look at, say, 12 to 24 months, would you expect the majority of your EFRAC fleets to be with these larger operators under multiyear contracts? Yeah, well, David. Look, e-fleets are accretive. They're accretive for a couple of reasons.

Speaker Change: From our standpoint, our Roger Thank you.

Roger: Yes, we want to create value for our customers I think you have to create meaningful value for customers in order to be a long term.

Roger: Supplier and partner to our customers. So we start from that position and as you said.

Roger: Solid contract for us over the very long term.

Roger: We went into this focused on maximize value, which in our view means maximize returns which were able to do.

Jeff: Number one, highly efficient to operate from our standpoint. And so that makes them more accretive. Clearly, they are bringing a lot of value to clients, and therefore, they're, you know, they're priced and thought about differently in the marketplace. And so, look, I expect that that will continue into the future. But I think what's most important is the contracted nature of the fleets, which means a couple of things. Also, number one, that the pricing is sticky, but it's sticky because it's contracted over time and the value is thought about. And so, you know, sophisticated, you know, procurers can look at that and model that, and we can model it as well, and be comfortable with the value created.

Roger: Under these types of environments, and so rather than play sort of the spot we don't.

Roger: We intend to play the spot game.

Roger: Yes, that's spot game is kind of a.

Roger: It's a win lose on either side of the market really when the market is getting tight probably operators are losing when it's going the other direction service companies lose a lot and our strategy is to stay out of that and so to strike contracts with customers that in our view are fair.

Roger: And deliver a lot of value both in terms of pumping value and also recovery value and I think.

Roger: We're uniquely positioned to do that.

Roger: So.

Roger: Improving recovery per foot of production per foot as a long term game and we want to play that long term gain with customers that are working on that long term gain.

Roger: We're ecstatic about the customers we have and then we get to work with to try to solve what we think.

Jeff: But I think the second thing, as we think about what types of customers look at eFleets, these aren't, These aren't a spot market solution. I mean, the companies that are interested in eFleets are those that have steady programs, work through cycles, have a clear vision of where their business needs to go and are willing to commit to the technology to deliver that over the long term. And so it really is an entire system if we think about electrically. It's, obviously, it's an efficient, lowest TCO electric solution.

Are there real pressing issues of the future.

Roger: In North America, Frac, and so we don't get to play that game that game doesn't get played successfully if it's.

Roger: The frac tissue or we need to need part of that process and our clients allow us to do that.

Speaker Change: I appreciate that.

Speaker Change: Follow up question unrelated, but I think kind of critical to the announcement. This morning, raising the dividend what is the right way for us to think about your uses of free cash flow between.

Jeff: But it's also automated, which drives a level of precision around fracking that I've never seen before. And so that, you know, clients know that they're delivering what they expect to deliver. And then finally, subsurface measurement.

Speaker Change: As you did in the fourth quarter as sort of a.

Speaker Change: Elective repurchases of debt as opposed to maturities, but as we're thinking that dividends pretty fixed here and then share repurchases what way do you want us to think about the return of free cash flow.

Jeff: But I bring all of that up because that's part of what drives it being accretive. A EV creates a lot more value and therefore is more accretive than a Tier 4 diesel fleet, clearly. And then also a different set of conditions, which also changes the return profile of these assets as they go into the market. Hope that helps, Ben. Oh, it does.

Speaker Change: Thanks Roger.

Speaker Change: So.

Speaker Change: Think about it in a fairly similar way is what we did in 2023, except higher.

Jeff: A clear differentiation there. So a separate question here. I noticed in your release that you announced two new collaborations with other service companies, one in reservoir analysis and the other in MPD. It sort of effectively fills a few of your weaker spots in your portfolio. If I just think back to the last cycle, we saw a number of acquisitions, but I don't recall too many collaborations out there. I mean, on the one hand, I guess from my point of view, on the one hand, maybe you're testing the waters a bit, but on the other, it seems like it's a pretty good way to fill product lines without spending a lot of capital. I was wondering if you could talk about this strategy and why it's different during the current cycle, and would you expect to see more collaboration? Well, look, I think it's more a function of the technology that we have.

Speaker Change: So we increased the dividend, 6%, we're now back to about 95% of where we were.

Pre COVID-19.

Speaker Change: In terms of buyback, we intend to continue buying back share our intention today is to buyback more share in dollar terms in 2024 than we did in 2023.

Speaker Change: At the same time as we did also in 2023, we intend to continue to retire.

Speaker Change: Our debt and continued to strengthen the balance sheet. So overall fairly similar structure in 'twenty four as what we did in 2003, what kind of bump everything but a bit higher.

Speaker Change: Great. Thank you.

Speaker Change: Thank you.

Speaker Change: One moment for questions.

Jeff: And when we see, you know, we've developed some things around digital cores and the ability to evaluate them digitally, for example, but trying to buy our way into the entire core space, we'd rather partner with who we think the premier Core Analysis Company is. And so we're able to bring our technology to that. And effectively, it's a complementary strategy where we make better returns doing the things that we've developed and know how to do. And obviously, we believe Core Labs is a fantastic company. And so we're able to bring something to that that we believe creates more value rather than trying to, you know, enter into a different type of arrangement. You mentioned the other one with oil states, a similar kind of thing.

Speaker Change: Our next question comes from James West with Evercore ISI you May proceed.

James Carlyle West: Hey, good morning, Jeff and Eric.

Speaker Change: Good morning, Jay Good morning, James.

So just suggested.

Speaker Change: You talked about West Africa.

Speaker Change: North sea not waiting until 'twenty five.

Speaker Change: A lot of tendering or just conversations about 'twenty five 'twenty six I know some of the your partners like FDI or.

Speaker Change: Our bidding for deliveries that wouldn't happen until 29 and 30, the offshore rig companies are getting locked up.

26, 27, I mean the visibility.

Jeff: They have terrific technology, but we don't know that we want to try to plow that much capital into the rest of their business. But we do know where we can generate outsized returns for Halliburton. Yeah, I would throw in another, you know, similar type thing: Subsea with Technipe FMC, which I really believe is the absolute premier Subsea company in the world.

Michael seems to me to be somewhat unprecedented.

Speaker Change: I'm curious if that's if that's consistent.

With your view of how things are playing out and how customers are behaving.

Speaker Change: Behaving.

Speaker Change: How are your conversations are going because it seems like the industry is onboard with this is going to be a long cycle. We recognize of course macroeconomic events could derail things, but at least for now with this oil price range that we're in it's.

Jeff: And we work closely with them, developing joint IP, delivering on electric completions, all electric completions. And so there are a lot of things we're able to do where we can mine what I think is our core competency or competitive advantage along with others without trying to broaden our way into things that aren't really strategic fits. Hope that helps, David. Very helpful.

Speaker Change: It's kind of all systems go for for a long time.

Look I'm careful speaking for the entire industry, but I would say I have this and.

Speaker Change: Putting halliburton.

Speaker Change: Very focused on running return businesses for strong returns over the long term, which is precisely what we all do and I think thats good for our clients and it's good for us as well and so that level of visibility is not inconsistent with companies.

David Anderson: Thank you very much, Jeff. Certainly. Thank you. One moment for questions. Thank you. Thank you. Our next question comes from Neil Mehta with Goldman Sachs; you may proceed. Yeah, good morning, Jeff team. Appreciate the time.

Speaker Change: Planning of future around how to make money for shareholders and that's what we're doing as well and so I think it's it's a very good setup for the rest of this decade quite frankly.

Speaker Change: Just because we know there is demand.

Speaker Change: We are able to.

Neil Singhvi Mehta: The first question is around more macro, prize this last was the exit to exit if U.S. oil. Do you have unique visibility? Captain there, and as we think about, or how do you think about it? Yeah, look, if I think about production growth in 24, you know, production is a function of service intensity. So simply put, more sand, more barrels. And, you know, we saw peak levels of service intensity throughout last year, really in the first half of last year. And a lot of that comes on in the latter half.

Speaker Change: Our whole value proposition around is how we collaborate and engineer solutions to maximize asset value for our customers and this type of <unk>.

Speaker Change: Setup allows us to do that the.

Speaker Change: The other thing that happens when we run our business for our returns as we don't Overinvest in the business and so we've told you kind of where our Capex will fall in the level of growth that we're looking at so we're very thoughtful about the growth because we are keeping profitable international growth firmly in hand, and so I think assets are tied and they will remain tight.

Speaker Change: Yes.

Speaker Change: For those very reasons very natural economic reasons for an industry that's running their businesses for a return which is clearly what we're doing.

Jeff: And I think, you know, some of this is efficiency in the sense that we are delivering more sand to the reservoir. And that comes in a lot of forms. E-fleets are part of that, and some of the technology that we brought to market. But I also think that the market that we see for next year, it's hard for me to forecast at this point exactly what operators are due because every operator plays their own game. But at the same time, you know, I would probably take the over on rigs because I think that, you know, we'll run out of ducks at some point. I think I would take the under on production only because, whatever you think it is, I'll take the under only because, you know, what we see are stable customers delivering on their plans.

Speaker Change: And I think our.

Speaker Change: Level of Capex, the way that structure drives that level of smart thoughtful investment and manages the contracts that we win indirectly.

Speaker Change: And it also maximizes returning cash to shareholders. So it's a very good environment in my view.

Speaker Change: Okay. That's we certainly agree with that and then maybe a follow up for me and potentially.

Speaker Change: Don't take this one but the.

Speaker Change: <unk> margins, which I know more levered towards international where a lot of the volume growth.

Speaker Change: Certainly going to come from if youre going to have natural operating leverage from that and inflation seems to be cooling somewhat incrementals should improve here.

Jeff: But what we don't see is a lot of smaller companies coming into the market in an effort to really ramp up production. So I think, you know, from our perspective at Halliburton, a very stable market, um, but from a production standpoint, you know, as we watch it unfold, it'll be a matter of how much Incremental sand gets pumped to overcome what is clearly going to be a decline rate that comes with when we add barrels rapidly, obviously, they fall off rapidly. Jeff, good color there, and then you made a comment that you feel like you have international visibility at the end of the decade. Can you expand on that?

Where are you anticipate I know you gave the first quarter guidance, but.

Speaker Change: Thats seasonal where do you anticipate margins.

Speaker Change: Or maybe if you want talk about Incrementals. However, you want to discuss it for <unk> going forward as we go through 'twenty four 'twenty five.

Speaker Change: Yeah, Jim so.

Speaker Change: Your point, if you just look at Q1.

Speaker Change: So you get seasonal effect, so, but more importantly, looking at the year on year and the general trend of good margins. So first I think it's worth noting as Jeff mentioned in the script that we had our best <unk> margins in 2015 years. So it means that a lot of the investment we have done in the last few years.

Jeff: Well, look, I mean, we are working on tenders today for work all of next year and the following year. I mean, when we talk with customers about what's going to happen, really, I don't think the North Sea and West Africa will even wake up until 2025. We've seen strong growth in those markets. However, the real growth that we're working on planning today doesn't even start until 25. And all of these things are three and four-year type efforts. I mean, these aren't individual wells and places like that. These are the programs.

Speaker Change: Ours are paying off so what towards really the general trajectory.

Speaker Change: Margins in the business.

Speaker Change: For us, it's a matter of balancing revenue grow improve.

Speaker Change: Improvements in margin improvements and returns as we continue to invest into the business. So.

Speaker Change: All of that to say that expect margins to continue to firm up as we get into 2004, and we're expecting our margins to be materially higher in <unk> in 2024 than they were in 2023 and are they might be some bumps along the road from one quarter to the mix et cetera is it's a business that.

Speaker Change: Typically tends to have a lot of moving parts, but directionally margins will be higher in 2024 than they were in 2023.

Jeff: And so we spent, we're actually on contract with a client working on just the planning of logistics for 25, 26, and beyond. And so I've just got a lot of confidence in terms of what we see in hand, the tender pipeline, and then the pipeline of work that we are planning with customers that may or may not even be tender. It's just more a matter of when it will be done, and we've got clarity on that in 25 and beyond. Chess.

Speaker Change: Got it okay. Thanks, Eric Thanks, Jeff.

Speaker Change: Thank you.

Thank you one moment for questions.

Speaker Change: Our next question comes from Scott Gruber with Citigroup you May proceed.

Scott A. Gruber: Yes, good morning.

Scott A. Gruber: Good morning, Scott morning, Scott.

Scott A. Gruber: Hey, Jeff.

Scott A. Gruber: As I step back and think about the outlook for your U S business.

Jeff: Yes, sir. Thank you. One moment for questions. Our next question comes from Arun Jayaram with J.P. Morgan. Good morning, Jeff. You mentioned that 40% of your contracted fleets this year will be Zeus, going to 50% or more in 25. I was wondering if you could give us a sense of how your commercial model for Zeus has evolved.

Scott A. Gruber: It appears that you are in a pathway to establishing a business that will deliver more consistent and better free cash flow.

Scott A. Gruber: In the years ahead.

Scott A. Gruber: Than we've seen historically in part that is getting the <unk> investment, but investment across the portfolio.

Scott A. Gruber: So I'm wondering if you could just.

Scott A. Gruber: Just some color kind of around that and we're seeing the consistency now.

Arun Jayaram: And one of the things we get questions on is just the significant amount of completion efficiency gains that the industry has generated. And what is the sharing of that between E&P and service companies? Well, look, I think, um...

Speaker Change: Yes, if I heard correctly, the capex color doesn't suggest.

Speaker Change: A material reduction of domestic capex in 'twenty four so curious.

Speaker Change: Thoughts around kind of bending that curve lower and just kind of overall developing this business model.

Speaker Change: Much more consistent.

Jeff: Number one, it's the value created by this that drives the contracting nature of the relationship. A couple things. Yeah, when we started to develop Zeus, we started it quite a while ago. You know, our view was we wanted to maximize value in North America, number one. And in order to do that, we just had to. We believe that the technology creates enough value, so much value that we aren't going to build it unless it's demonstrated for customers. And I think the contracting nature of the longer-term contracts, the three-year type contracts, is because we let the market pull rather than try to push something into the market. It is that different and special, and as that system continues to develop and evolve, meaning automation, measurement, all of these things that drive really meaningful value, that is what's creating, I think, the different dialogue around Zeus with our customers, because it will become more and more integral to how they create value as well. And then from an efficiency standpoint, or like volume standpoint, you know, our equipment is very efficient, so as we go from zipper frack to thymo frack to, in this case, a primary frack with a customer, that is not a one-to-one increase in horsepower requirements, so we become more efficient as those volumes go up.

Speaker Change: Capital intensity ultimately.

Speaker Change: Yes, thanks, and that is precisely what we set out to do and that's what's playing out now and so in terms of a consistent business to generate strong free cash flow.

Speaker Change: Through the cycle.

And thats been our intent all along.

Speaker Change: With the way, we bring Zeus fleets to market the way, we invest in North America broadly.

Speaker Change: We are very.

Speaker Change: Deliberate about how we maximize value over the long term in North America, and I think you saw that play out in the last two quarters.

Speaker Change: As we've seen the market moving around but nevertheless, steady drumbeat of execution.

Speaker Change: Cash flow delivery by Halliburton, and I expect to continue that because that is precisely our strategy.

Speaker Change: And so when it comes to cash flow our capital allocation of our capital budget I mean, we're going to allocate it to those things, where we see that opportunity, which we certainly see that with Zeus fleets, but remember that's a demand pull or not.

Speaker Change: Push strategy. So we don't build fleets until we have contracts for fleets.

Speaker Change: And so that's a different completely different environment than maybe we would've seen in prior cycles from.

Jeff: But that is also a unique feature, though, of Zeus and its ability to scale up, but it's not one-for-one, and so, you know, from a Halliburton perspective, we do create outsized value for Halliburton and also for our clients because we're using less equipment than we would have had we gone at it in a traditional fashion. So I think that, you know, the combination of reliability and automation, because as those fracks get larger, the precision gets more important, there are a whole lot of things that start to happen, and so very collaborative efforts with our clients to utilize that technology. In the case of the thymo frack, really groundbreaking-type work; I'm super excited to do it with this customer. Great

Speaker Change: From Halliburton.

Speaker Change: Anything else, we do in North America like we've developed some very good in my view fit for purpose drilling technology for North America.

Speaker Change: But we're not going to overbuild it we're selling it into the market as the market will take it there's a lot of excitement about it but our approach is still going to be.

Speaker Change: Consistent delivery.

Speaker Change: Margins and free cash flow in North America and so.

Speaker Change: I think youll see us continue to do that and that and that means.

Speaker Change: We're putting fleets in the market that we retire sort of the fleets that are at the bottom of the stack.

Speaker Change: And continue that March forward.

Speaker Change: Got it appreciate the color.

Speaker Change: Thank you.

Speaker Change: Unrelated follow up your leverage is down to about one times now.

Jeff: Jeff, my follow-up question, natural gas is on people's minds in North America, just given the contango in the market, you know, 2024 is just about 250. I was wondering if you could give us a sense of how much of your activity is leveraged just to dry gas and what are some of the risks to the earnings picture from a soft market for gas this year? Well, we've got very little gas exposure in our business today.

Speaker Change: Good to see.

Speaker Change: And it sounds like the cash return could step up a bit.

Speaker Change: Can you just kind of walk us through your thoughts as you move forward in time the cycle continues you'll generate more free cash flow leverage continues to come down.

Speaker Change: Outside of any M&A should we think about that shareholder return.

As a percentage of free cash flow moving higher given that you'll be trending sub one.

Speaker Change: Leverage.

Jeff: The ones that we do have exposure to, contracted under, it's sort of the Zeus solution somewhat, and then we've got, I guess, a little bit of other things. But look, the gas work that we have is not a significant part of our overall portfolio. And you know, and so we plan for what we can see. Legitimately, there could be equal upside on gas as LNG comes on, but we haven't baked it Thanks, Jeff. Thank you. One moment for questions. Our next question comes from Roger Reed with Wells Fargo. Yeah, thank you. Good morning. And I actually had the opportunity last week to visit a trimal frac site and saw the E-Fleet. So it is a pretty impressive setup.

Speaker Change: On a go forward basis.

Speaker Change: Yes.

Speaker Change: Starting with free cash flow I think that.

You can expect 24 2020 full free cash flow to be at least.

Speaker Change: 10% over 23 years, so that is going to basically help us return increase returns on a dollar basis now in terms of the percentage were still guided by overall, 50%.

Speaker Change: Return to shareholder but directionally.

Speaker Change: It makes sense to believe that we'll do at least what we did in 2023 in terms of the percentage return.

Got you. Thank you.

Speaker Change: Thank you.

Speaker Change: <unk>.

Speaker Change: One moment for questions.

Speaker Change: Our next question goes from Luke Lemoine with Piper Sandler you May proceed.

Luke Lemoine: Hey, good morning, Jeff Eric.

Roger Reed: One of the things the customer mentioned was a slightly different... I guess the sort of price to value contract structure looks like from a margin standpoint, you're doing fine on that. But is there anything you can kind of enlighten us on maybe how we thought about traditional pressure pumping contracting and a lot of spot exposure for, you know, kind of how this is going through what it means in terms of sharing gains with the customer, what's the right way for us to think about that on you know, kind of a price look? From our standpoint, our Roger, thank you. We want to create value for our customers. You have They were all decided by a thesis agreement with the this is a bigger decision-making agreement with each supplier and partner to a customer.

Luke Lemoine: Alright.

Luke Lemoine: Hey, good morning.

In North America significantly outperformed the U S land rig count at 24.

Luke Lemoine: Some of the factors to reduce fleet service quality more stable customer base and a pickup in the.

Luke Lemoine: Gulf of Mexico, but could you talk about any other factors that drove this and then with the U S land rig count most likely down again at 24 do you think North America reps to be up in 'twenty four for you.

Speaker Change: Yes look.

Speaker Change: The outperformance is just the stability of the business as I've described it and so.

Speaker Change: Part of that is having 40% of our fleet by the end of 'twenty four under long term contracts that creates a steady environment. So the rig count is going to move around and do what it does but our largest part of our business very stable.

Speaker Change: And the reality is the North America business is very big we saw growth Gulf of Mexico, and other offshore environments.

Jeff: So we start from that position, and as you said, a solid contract for us over the very long term. We went into this focused on maximizing value, which in our view means maximize returns, which we're able to do under these types of environments, and so rather than play sort of the spot we don't, Thank You, and deliver a lot of value, both in terms of pumping value and also recovery value.

Speaker Change: However, a very large stable North America business land business is going to mute some of that.

Speaker Change: And as we go into 'twenty five I expect the same kind of performance out of our North America business.

Speaker Change: In spite of what rigs do now I do believe we've reached a point where docs are drawn down there largely drawn down and I think that we will see rig count increase only because it's supplying the inventory that's required to run a very smooth stable type business I would say our customers largely planning their business around.

Jeff: And I think that we're uniquely positioned to do that. And so improving recovery per foot or production per foot is a long-term game. And we want to play that long-term game with customers that are working on that long-term game. And, you know, we're ecstatic about the customers we have and who we get to work with to try to solve what we think are the real pressing issues of the future in North America frack. And so we don't get to play that game. That game doesn't get played successfully.

Speaker Change: Turning wells into production more than they do numbers of rigs in the air and so I think there is a lot of planning that goes on to deliver a very stable business of completing wells and so.

Speaker Change: Yes, one of the reasons I would say I'd take the over on rig count I don't think yes, I wont try to forecast rig count at this point, but I do think there's upside in North America, We plan the business for what we can see and we expect it to be stable, but that being said I think there are obviously factors that could push that up like gas Act.

Jeff: If it's, you know, the frack du jour, we need to be part of that process, and our clients allow us to do that. We appreciate that. The follow-up question I have, it's unrelated, but I think kind of critical to the announcement this morning, raising the dividend, what is the right way for us to think about your uses of free cash flow between, you know, as you did in the fourth quarter, sort of elective repurchases of debt as opposed to, you know, maturities, but as we're thinking debt, dividends pretty fixed here, and then share repurchases It's Eric.

<unk> is clearly out there and we don't control the pace at which LNG plants come online, but we know that they will as at a 24 event or 25 I think.

Speaker Change: We'll get to that point and see that Albert and participates in that upside and it could happen this year.

Speaker Change: But at this point, we're planning the business around returns.

Speaker Change: Okay, and I guess, a follow up with this more stable North American business you talked about.

Eric: So think about it in a fairly similar way to what we did in 2023, except higher. So we increased the dividend 6%. We're now back to about 95% of where we were pre-COVID.

Speaker Change: American way margins, you're describing slide in <unk> could you loosely talking about how you see this progressing in 'twenty four kind of within a single business.

Speaker Change: Well look, let's just leave it at steady and stable moving forward I think that we've got a very strong.

Eric: In terms of buyback, we intend to continue buying back share. Our intention today is to buy back more share in dollar terms in 2024 than we did in 2023. At the same time as we did in 2023, we intend to continue to retire debt and continue to strengthen the balance sheet. So overall, a fairly similar structure in 2024 as what we did in 2023, but kind of bump everything up a bit higher. Great, thank you.

Speaker Change: International business as well that contributed some I think that continues to grow and expand margins but.

Speaker Change: We're really.

Speaker Change: Pleased with where we are.

Speaker Change: But U S revenue and margins.

Flattish through any cycle I think is.

Speaker Change: Where we wanted to get this business clearly there is upside and I do expect from S&P standpoint, we're going to see.

Speaker Change: The benefit of our market leadership positions in P/e cementing.

Roger Reed: Thank you. One moment for questions. Our next question comes from James West with Evercore ISI. You may proceed. Hey, good morning, Jeff and Eric. Good morning, James.

Speaker Change: Yes, payroll and other things that we do around the world. So I think that we're going to continue to participate in that meaningfully, particularly from a margin standpoint.

Speaker Change: But again, our key is North America is stability through cycles, and I think we're demonstrating that I don't think I know, we're demonstrating that now.

James Carlyle West: So Jeff, you know, you talked about West Africa and the North Sea not awakening until 25. You know, a lot of networking or just conversations about 25, 26, I know some of your partners like FTI are bidding for deliveries that wouldn't happen until, you know, 29 and 30, the offshore rig companies are getting locked up into, you know, 26, 27, I mean, the visibility, this cycle seems to me to be somewhat unprecedented. And I'm curious if that's consistent with your view of how things are playing out, how customers are behaving, and how your conversations are going, because it seems like the industry's on board with this being going to be a long cycle. We recognize, of course, macroeconomic events could derail things, but at least for now, with this oil price range that we're in, it's kind of all systems go for a long time Look, I'm careful speaking for the entire industry.

Okay, great. Thanks, a lot Jeff.

Speaker Change: Thank you.

Thank you one moment for questions.

Speaker Change: Our next question comes from Stephen <unk> with Stifel. You May proceed.

Stephen: Thanks, Good morning, gentlemen.

Good morning, Steven.

Stephen: Just two from me wondering just to follow up on the prior question around around sort of margins in CMP and the Zeus fleets. When you talk about these assets being contracted.

Is there any difference in sort of the pricing dynamic versus sort of.

Stephen: Prior cycles and price openers quarterly how should we just think about that.

Stephen: The pricing for those assets in an environment, where maybe theres, a little excess capacity near term from some.

Stephen: Quite honestly, maybe not as competitive assets, but all their assets and the market does it matter is pricing pretty stable can you talk about that a bit.

Speaker Change: Look at it.

Speaker Change: Yes. These are long term deals that we'd go into not only the cost of the asset and knowing what the return needs debate. So now it just becomes a bit of a math problem around duration and so.

Jeff: But I would say I have this in putting Halliburton very focused on running return businesses for strong returns over the long term, which is precisely what we all do. And I think that's good for our clients, and it's good for us as well.

Speaker Change: There are variable costs and the markets that we don't control and we don't try to own we just passed through to customers, whether it's sand cost and many other things.

Jeff: And so that level of visibility is not inconsistent with companies planning their future around how to make money for shareholders. And that's what we're doing as well. And so I think it's a very good setup for the rest of this decade, quite frankly, just because A, we know there's demand B, we are able to, you know, our whole value proposition is how we collaborate and engineer solutions to maximize asset value for our customers, and this type of set up allows us to do that. The other thing that happens, though, when we run a business for returns is that we don't overinvest in the business.

Speaker Change: Before we create competitive advantage for our equipment as we go into these long term deals.

Speaker Change: We don't need price openers and all of that sort of jazz Theres no reason for it.

Speaker Change: Iteratively sit down and work through what is this.

Speaker Change: Return per client returns for Halliburton, and then we fixed that and move forward that doesn't change over time and so.

Speaker Change: Hi.

Speaker Change: While.

Speaker Change: The rest of the market the spot type market all of that is going to do what it's going to do.

Speaker Change: But I think thats, when we take a long view of the market and value creation. That's.

Jeff: And so we've told you kind of where our capex will fall and the level of growth that we're looking at. And so we're very thoughtful about growth because we are keeping profitable international growth firmly in hand. And so I think assets are tight, and they'll remain tight for those very reasons, very natural economic reasons for an industry that's running its businesses for a return, which is clearly what we're doing. The level of capex, the way that structure drives that level of thoughtful investment; it manages the contracts that we win indirectly, and it also maximizes returning cash to shareholders, so it's a very good environment, in my view. Okay, that's what we certainly agree with that.

Speaker Change: Matt that both clients and Halliburton can do and I think that's what makes it so very different.

Speaker Change: The North America.

Speaker Change: It's.

Speaker Change: Not particularly differentiated if at all in the spot market and as a result, it's just does what it does it's bit of a free for all but I would say in the market, where we want to play which is technology driven.

Speaker Change: The lowest total cost of ownership.

Speaker Change: And working on what I think most important which is productivity per foot.

Speaker Change: That's a different game, that's a long term game.

Speaker Change: Great. Thanks for the color and then just just one quick one probably for Eric on the cash flow statement.

James Carlyle West: And then maybe a follow up for me and, potentially, I know, Eric, you don't take this one, but the D&E margins, which I know are more levered towards international where a lot of the volume growth is certainly going to come from and you're going to have natural operating leverage from that, and inflation seems to be, you know, cooling somewhat. So you should gradually improve here. You know, where are you anticipating? I know you gave the first quarter guidance, but that's seasonal. Where do you anticipate March? Or maybe if you want to talk about incrementals, however you want to discuss it for D&E, you know, going forward as we go through 24 and into 25. Yeah, Jim.

Speaker Change: Anything we should know about.

Eric Correct: Working capital parameters in 24 versus 23 that would be much different as we kind of build out the models, whether dsos or payables et cetera.

Speaker Change: I think what.

Speaker Change: Sure.

Speaker Change: Important around free cash flow for 24 as I mentioned earlier is we're expecting the free cash flow to be at least 10% over 23.

Speaker Change: That's going to be on the back of improved income it's going to be on the backbone. So improved efficiencies in working capital. So we spend a lot of time working on improving dsos working on improving <unk> and when I speak like this I don't mean just.

Eric: So, to your point, if you just look at Q1, obviously, you get seasonal effects. But more importantly, looking at the year on year and the general trend of the D&E margin. So first, I think it's worth noting, as Jeff mentioned in the script, that we had our best D&E margins in 15 years. So it means that a lot of the investment we have made in the last few years is paying off. So what to watch really is the general trajectory of margins in the business. And for us, it's a matter of balancing revenue growth, improvements in margin, and improvements in returns as we continue to invest in the D&E business. So all of that to say that we expect margins to continue to firm up as we get into 2024.

Speaker Change: Pushing the organization I mean implementing.

Speaker Change: Different initiatives for example, I'd give you a couple of examples zone DSO. We spent a lot of time on both to maintain the invoicing process on integrated services. For example, invoicing them integrated services is extremely complicated we have multiple product lines multiple parts of our.

Speaker Change: Musician customer organization. So it takes a lot of time and to the extent that you can automate and remove reduce cycle time that you improve DSO, we just rolled out 18 months ago.

Speaker Change: Company wide demand planning software, which when combined with the rollout of this for in the future is going to give us totally different capabilities to plan, our business and reduce inventory.

Eric: And we're expecting our margins to be materially higher in D&E in 2024 than they were in 2023. Now, there might be some bumps along the road from one quarter to the next, et cetera, as it's a business that typically tends to have a lot of moving parts. But, directionally, margins will be higher in 2024 than they were in 2023. Got it, okay, thanks Eric, thanks Jeff. Thank you. Thank you.

Speaker Change: Why not increasing the risk from an operation perspective. So these are the things where we're spending a lot of our time to basically structurally.

Speaker Change: Improve the efficiency of working capital so that's going to be the other component of why we're expecting a free cash flow to improve next year.

Speaker Change: Excellent. Thank you for the color.

Speaker Change: Thank you.

Speaker Change: One moment for questions.

Speaker Change: Our next question comes from Marc Bianchi with TD Cowen You May proceed.

Marc Bianchi: Hi, Thanks.

Scott A. Gruber: One moment for questions. Our next question comes from Scott Gruber with Citigroup. Yes, good morning.

Marc Bianchi: I just wanted to first clarify on the North America outlook that you provided for it to be flat.

Marc Bianchi: Comment for the full year is that correct or was that a comment from what run rates are today.

Jeff: Morning, Scott. Good morning, Scott. Jeff, you know, as I step back and think about the outlook for your U.S. business, it appears that you're on a pathway to establishing a business that will deliver more consistent and better free cash flow in the years ahead than we've seen historically, in part because of the EFRAC investment, the investment across the portfolio. So I'm wondering if you could just, you know, give some color kind of around that, you know, You know, if I understand correctly, the CapEx color doesn't suggest, you know, a material reduction of domestic CapEx into 24. So curious, you know, kind of your thoughts around kind of bending that curve lower and just kind of overall, you know, developing this business model that's much more consistent and less capital intensive. Yeah, thanks.

Speaker Change: Look we think fit.

Speaker Change: Q1 is up from Q4. So there is activity that comes back that the seasonal in Q4 as well.

Speaker Change: We look at the balance of the year I think that there are.

Speaker Change: We plan the business for what we got visibility of and we can see our fleets are largely contracted for 24. That's what we know are there factors that may <unk>.

Speaker Change: Add to that I think <unk> could do that I think production levels are low clients may speed up there's a lot of variables that could happen I think or to the positive, but nevertheless, as we look out to 'twenty four and we plan a business that generates the kind of returns we expect to generate.

Speaker Change: That's what we see.

Speaker Change: Okay. Thanks, Jeff.

Other question I had was on on DNA in the first quarter here I think historically.

Speaker Change: There have been some one time sales that continue for DNA in the first quarter and then <unk>.

Speaker Change: Margin could be down in the second quarter.

Speaker Change: Is that sort of the base case outlook here or is there something unusual going on this year versus the prior years.

Speaker Change: No Theres nothing unusual I think if you actually if you were to go back and look at the Q1 'twenty four over Q4.

Jeff: And that is precisely what we set out to do, and that's what's playing out now. And so, in terms of a consistent business to generate strong free cash flow through the cycle. And that's been our intent all along, with the way we bring ZooSleep to market, and the way we invest in North America broadly. Yeah, we are very deliberate about how we maximize value over the long term in North America, and I think you saw that play out in the last two quarters.

Speaker Change: 'twenty three guidance that we just gave it is very much in line with the typical Q4 to Q1 seasonality that we saw prior to go away. So you go back to 2000 22019 2018. So what we're seeing here is really a business that's fully in line with historical trend.

Speaker Change: Is happening on the <unk> side.

Jeff: As we've seen the market moving around, but nevertheless, a steady drumbeat of execution and Cash Flow Delivery by Halliburton, and I expect that because that is precisely our strategy. So when it comes to capital allocation in our capital budget, we're going to allocate it to those things where we see that opportunity, which we certainly see with Zeus Fleets. But remember, that's a demand-pull strategy, not a push strategy. So we don't build fleets until we have contracts for fleets. And so that's a different, completely different environment than maybe we would have seen in prior cycles.

Speaker Change: The influence of software sales in Q4 typically is maintained in Q1, but we're having a lot of weather related issues in the eastern hemisphere in the North sea et cetera that is influencing our DNA margins, but again very much in line in terms of quarter on quarter guidance.

Speaker Change: As we have had historically in our business nothing unusual.

Speaker Change: Got it. Thank you very much I'll turn it back.

Speaker Change: Thank you.

Speaker Change: One moment for questions.

Jeff: From Halliburton, you know, anything else we do in North America, like we've developed some very good, in my view, fit-for-purpose drilling technology for North America. But we're not going to overbuild it; we're selling it into the market where the market will take it. There's a lot of excitement about it, but our approach is still going to be consistent delivery of margins and free cash flow in North America. And so I think you'll see us continue to do that. And that means, you know, we put eFleets in the market, we retire sort of the fleets that are at the bottom of the stack, and we continue that march forward. You have got to appreciate the color.

Speaker Change: And as a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced our next question comes from Kurt Hollywood Benchmark you May proceed.

Speaker Change: Hey, good morning, everybody.

Kurt Hallead: Good morning, Kurt.

Kurt Hallead: A lot of a lot of good stuff to digest here, Jeff I.

Speaker Change: I appreciate all that color.

Speaker Change:

Speaker Change: I think by my question here kind of what piqued my curiosity.

Speaker Change: That's again, a couple a couple of things.

Speaker Change: One of which you put in the press release, which was.

Speaker Change: It kind of AI driven dynamic that you have going on with AD market and maybe start with that wondering in the context of how you.

Speaker Change: Yes.

Scott A. Gruber: Unrelated follow-up here, leverage is down to about one times now, which is good to see, and it sounds like, you know, the cash return could step up a bit. Can you just kind of walk us through your thoughts as you move forward in time, the cycle continues, you'll generate more free cash flow, leverage continues to come down, you know, outside of any M&A, should we think about that shareholder return as a percentage of free cash flow moving higher, you know, given that, you know, you'll be trending, you know, sub one on leverage, on a go-forward basis? Yeah, just starting with free cash flow, I think that you can expect 2024 free cash flow to be at least 10% over 23.

<unk> AI evolving as a tool for the customer base as a tool for your company.

Speaker Change: No.

Speaker Change: Have.

Speaker Change: How do you see the adoption of that and how do you see the financial impact of that evolving over the course of the next couple of years.

Speaker Change: Sure.

Yeah, Thanks, Kurt look I think.

Speaker Change: Software and automation and I'll say it that way because sophomore software business is strong and focused on enterprise solution, which will adopt.

Speaker Change: All sorts of AI and generative AI as we continue to move forward and that will create efficiency.

Speaker Change: And a lot of ways for our customers internally as we adopt automation and AI into our tools and service delivery I expect it will have a meaningful impact probably over the next two to three to five years just as those things are adopted it's going to.

Eric: So that is going to basically help us increase returns on a dollar basis. Now, in terms of the percentage, we're still guided by our overall 50% return to shareholders, but directionally, you know, it would make sense to believe that we'll do at least what we did in 2023 in terms of the percentage return. That's it.

Speaker Change: Reduced service cost is going to drive demand and it's also going to improve service quality and I think will actually improve.

The capability of tools, which I think is so fundamental to how we generate long term returns.

Luke Lemoine: Thank you, Eric. Thanks, Jeff. Thank you. Thank you. One moment for questions. Our next question comes from Luke Lemoine with Piper Sandler. You may proceed.

Speaker Change: Appreciate that color also noticed that however labs entered into.

Speaker Change: Venture.

Speaker Change: For some direct lithium extraction.

Speaker Change: So curious as to how you might see halliburton.

Jeff: Hey, good morning, Jeff, Eric, and welcome to the morning news. Good morning. Jeff, your North America refs significantly. U.S. Flame Regiment, and I would guess some of the factors were Zeus fleet, service quality, more stable. Gulf of Mexico, but could you talk about any other factors?

Speaker Change: Get involved in that process as well.

Speaker Change: Well look that's one of our how labs companies. We're excited to have them here, we make a very very small investment in companies that join our labs, but it's very small.

Speaker Change: It's around $100000. So we are a tiny piece of their series B, which we're excited for them.

Jeff: And then, with the U.S. land grid count most likely down again at 24, do you think North America... Yeah, look, um... The outperformance is just the stability of the business as I've described it, and so, a big part of that is having 40% of our fleet, you know, by the end of 24, under long-term contracts. That creates a steady environment. So the rig count is going to move around and do what it does, but our largest part of our business is very stable. And the reality is that the North American business is very big. We saw growth in the Gulf of Mexico and other offshore environments.

Speaker Change: But how labs continues to attract in my view more quality investable companies over time, we're watching them and our series as and in some cases series B and so.

Speaker Change: It's a journey.

Speaker Change: A lot of different industries, but we're careful this is clearly not corporate venture capital we are not investing in the companies that join how labs.

Speaker Change: Other than <unk>.

Speaker Change: Small, 3% to 5% stake that we get from them generally for the services that we provide to them as a member of Halliburton lap So super excited about where thats going.

Jeff: However, you know, a very large, stable North America business, the land business, is going to mute some of that. And as we go into 25, I expect the same kind of performance out of our North America business, sort of in spite of what rigs do. Now, I do believe we've reached a point where ducks are drawn down. They're largely drawn down.

Speaker Change: But.

Speaker Change: Just need to let that continue to progress on its own.

Speaker Change: Okay fair enough. Thanks, Jeff I appreciate it.

Thank you.

Speaker Change: Thank you I would now like to turn the call back over to Jeff for any closing remarks.

Jeff: Yes. Thank you Josh let me close the call with this.

Jeff: I'm excited about 2024, and our outlook for oilfield services is strong and I expect Halliburton will generate significant free cash flow for shareholders. In 2024 look forward to speaking with you next quarter, let's close out the call.

Jeff: And I think that we'll see the rig count increase only because it's supplying the inventory of ducks required to run a very smooth, stable type business. And I would say our customers largely plan their business around turning wells into production more than they do numbers of rigs in the air. And so I think there's a lot of planning that goes on to deliver a very stable business of completing wells. And so, you know, one of the reasons I would say I'd take the over on rig count. I don't think, you know, I won't try to forecast rig count at this point. But I do think there's upside in North America. We plan the business for what we can see, and we expect it to be stable. But that being said, I think there are obviously factors that could push that up, like gas activity is clearly out there.

Jeff: Okay.

Speaker Change: Thank you for your participation you may now disconnect.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: [music].

Jeff: And I don't control the pace at which LNG plants come online, but we know that they will. As a 24 event or 25, I think, you know, we'll get to that point and see that Halliburton participates in that upside, and that could happen this year. But at this point, you know, we're planning the business around return, and I guess to follow up with this more stable North America, talk, your North American landmark on this year's scribbling slide. Could you loosely talk about how... Well, look, let's just leave it at steady and stable moving forward.

Speaker Change: Yeah.

Speaker Change: Okay.

Speaker Change: Okay.

Yes.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: [music].

Speaker Change: Okay.

Jeff: I think that we've got a very strong International Business as well that contributes, and I think that continues to grow and expand margins. But, you know, we're really pleased with where we are. But, you know, U.S. revenue and margins, flattish through any cycle, I think, is where we wanted to get this business. Clearly, there's upside, and I do expect from a C&P standpoint we're going to see the benefit of our market leadership positions and PE cementing. Yeah, Bayreuth, and other things that we do around the world.

Speaker Change:

Speaker Change: [music].

Jeff: So I think that we're going to continue to participate in that meaningfully, particularly from a margins standpoint. But again, our key in North America is stability through cycles. And I think that we're demonstrating, but I don't think I know we're demonstrating that now.

Luke Lemoine: Thank you. Thank you. One moment for questions. Our next question comes from Stephen Gangaro on behalf of Stiefel. You may proceed.

Stephen Gangaro: Thanks. Good morning, gentlemen. Morning, Chief. Good morning. Good morning.

Jeff: Two for me, one just to follow up on the prior question around sort of margins and C&P and the Zeus fleets. When you talk about these assets being contracted, is there any difference in sort of the pricing dynamic versus sort of prior cycles and price openers quarterly? And how should we just think about the pricing for those assets in an environment where maybe there's a little excess capacity near term from some, maybe not as competitive assets, but all their assets in the market? Does it matter?

Jeff: Is pricing pretty stable? Can you talk about that a bit? Look at, Yeah, these are long-term deals that we go into, knowing the cost of the asset and knowing what the return needs to be. So now it just becomes a bit of a math problem around duration. And so, you know, there are variable costs in the market that we don't control and we don't try to own, we just pass through to customers, whether it's fan costs and many other things. But for where we create a competitive advantage and for our equipment, as we go into these long-term deals, we don't need price openers and all of that sort of jazz. There's no reason for it.

Jeff: We literally sit down and work through what this return is for client return for Halliburton, and then we fix that and move forward. That doesn't change over time. And so you know, won't comment, you know, the rest of the market, the spot-type market, all of that is going to do what it's going to do. But I think that when we take a long view of the market and value creation, that's Matt that both clients and Halliburton can do, and I think that's what makes our approach to North America so very different. You know, it's not particularly differentiated, if at all, in the spot market. And as a result, it just kind of does what it does. It's a bit of a free for all. But I would say, in the market where we want to play, which is technology-driven, the lowest total cost of ownership, and working on what I think is most important, which is productivity per foot. That's a different ball game.

Eric: It's a long-term game. Great. Thanks for the call. And then just just one quick question, probably for Eric on the cash flow statement. Anything we should know about working capital parameters in 24 versus 23, that would be much different as we kind of build out the models, whether DSOs or payables, etc. I think what's important around free cash flow for 24 is, as I mentioned earlier, we're expecting the free cash flow to be at least 10% over 23.

Eric: That's going to be on the back of improved income. It's also going to be on the back of improved efficiencies around working capital. So we spend a lot of time working on improving DSOs, working on improving DIOs. And when I speak like this, I don't mean just pushing the organization. I mean implementing different initiatives. For example, I'll give you a couple of examples of DSOs.

Eric: We spend a lot of time automating the invoicing process for integrated services. For example, invoicing for integrated services is extremely complicated. We have multiple product lines, multiple parts of our organization, and customer organizations, so it takes a lot of time. And to the extent that you can automate that and then reduce cycle time, then you improve DSO. We just rolled out 18 months ago a company-wide demand planning software that, when combined with the rollout of S4 in the future, is going to give us totally different capabilities to plan our business and reduce inventory while not increasing the risk from an operational perspective. So these are the things we're spending a lot of our time to basically structurally improve the efficiency of working capital. So that's going to be the other component of why we're expecting our free cash flow to improve next year. Thank you for the call.

Eric: Thank you. One moment for questions. Our next question comes from Marc Bianchi with TD Cowen. You may proceed. Hey, thanks. I just wanted to first clarify on the North America outlook that you provided for it to be flat, that's a comment for the full year. Is that correct?

Marc Bianchi: Or was that a comment from where the run rates are? Look, we think that Q1 is up from Q4. So there's activity that comes back that was seasonal in Q4. You know, as we look at the balance of the year, I think that there are, you know, as we plan the business for what we have visibility of, and we can see our fleets are largely contracted for 24. That's what we know. Are there factors that may add to that? I think GAAP could do that.

Eric: I think, you know, production levels are low, clients may speed up, you know, there's a lot of variables that could happen that are for the positive. But nevertheless, as we look out to 24, and we plan a business that generates the kind of returns we expect to generate, you know, that's what we see. Okay, thanks, Jeff. Um, the other question I had was about D&E in the first quarter here. I think historically, there have been some one-time sales that continue for D&E in the first quarter, and then margin could be down in the second quarter. Is that sort of the base case outlook here? Or is there something unusual going on this year compared to the prior year? No, there's nothing unusual about it.

Marc Bianchi: I think if you actually were to go back and look at the Q1-24 over Q4-23 guidance that we just gave, it is very much in line with a typical Q4 to Q1 seasonality that we saw prior to COVID. So, you go back to 2020, 2019, 2018. So, what we're seeing here is really a business that's fully in line with historical trends. What's happening on the D&E side, the influence of software sales in Q4 typically is maintained in Q1, but we're having a lot of weather-related issues in the eastern hemisphere and the North Sea, etc., that are affecting our D&E margins.

Eric: But again, very much in line in terms of quarter-on-quarter guidance as we have had historically in our business, nothing unusual. Got it. Thank you very much. I'll turn it back.

Kurt Hallead: Thank you. One moment for questions. And as a reminder, to ask a question, please press star 1-1 on your telephone and wait for your name to be announced. Our next question comes from Kurt Hallead with Benchmark.

Jeff: Hey, good morning, everybody. Good morning, Kurt. Hey, a lot of good stuff to digest. Jeff, appreciate all that color. I think my question here is kind of what piqued my curiosity.

Kurt Hallead: There are again a couple of things that you, one of which you put in the press release which was a kind of AI-driven dynamic that you have going on with AdNoc. Maybe start with that one. In the context of how you, you know, are seeing AI evolving as a tool for the customer base, as a tool for your company, you know, how do you see the adoption of that? And how do you see the financial impact of that evolving over the course of the next couple of years? Yeah, thanks, Kurt. Look, I think.

Jeff: And I say it that way because the software business is strong and focused on enterprise solutions, which will adopt, you know, all sorts of AI and generative AI as we continue to move forward, and that'll create efficiency in a lot of ways for our customers. Internally, as we adopt automation and AI into our tools and service delivery, I expect that it will have a meaningful impact, probably over the next two, three to five years, just as those things are adopted. It's going to reduce service costs, it's going to drive demand, and it's also going to improve service quality. And I think we'll actually improve the capability of tools, which I think is so fundamental to how we generate long-term return I appreciate that color.

Jeff: Also, notice that Haliburton Labs entered into a venture to, This is a direct lithium extraction, curious as to how you might see halibut, and get involved in that process. Well, look, that's one of our Howlabs companies. We're excited to have them here. We make a very, very small investment in companies that join Howlabs, but it's very small. It's around $100,000.

Jeff: So we're a tiny piece of their Series B, which we're excited about for them. But Howlabs continues to attract, in my view, more quality, investable companies over time. We're watching them enter Series A, and in some cases, Series B.

Jeff: And so it's a journey. We're learning a lot about different industries, but we're careful. This is clearly not corporate venture capital. We are not investing in the companies that join Howlabs, other than a small 3% to 5% stake that we get from them, generally for the services that we provide to them as a member of Howlabird Labs.

Jeff: So, I'm super excited about where that's going, but, you know, we just need to let that continue to progress on its own. All right. Fair enough.

Jeff: Thanks, Jeff. I appreciate it. Thank you. Thank you. I would now like to turn the call back over to Jeff for any closing remarks. Yeah, thank you, Josh.

Jeff: Let me close the call with this. I'm excited about 2024. I mean, our outlook for oilfield services is strong, and I expect Halliburton will generate significant free cash flow for shareholders in 2024.

Jeff: I look forward to speaking with you next quarter. Let's close out the call. Thank you for your participation; you may now disconnect.