Q1 2024 Halliburton Co Earnings Call
Good day, and thank you for standing by and welcome to Q1 2020 for Halliburton Company Earnings Conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question.
During the session you will need to press star one one on your telephone.
Dan here and message advice senior Handpiece raced to withdraw your question Press Star. One again, please be advised that today's conference is being recorded I would now.
Now like to hand, the conference over to Dave Coleman Senior director of Investor Relations. Please go ahead.
David Coleman: Hello, and thank you for joining the Halliburton first quarter 2024 conference call we.
David Coleman: 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 Kirsch.
Executive Vice President and CFO.
Some of today's comments may include forward looking statements, reflecting halliburton's views about future events.
David Coleman: 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 2023.
Current reports on form 8-K, and other Securities and Exchange Commission filings.
We undertake no obligation to revise or update publicly any forward looking statements for any reason.
Our comments today also include non-GAAP financial measures additional.
He tells and reconciliation to the most directly comparable GAAP financial measures are included in our first quarter earnings release and in our quarterly results and presentation section of our website now I'll turn the call over to Jeff.
Thank you David and good morning, everyone.
Halliburton delivered solid first quarter results that again demonstrated the power of our strategy and the strength of our execution.
Jeff: North America revenue was $2 5, billion% to 5% increase over the fourth quarter of 2023.
Finally during the first quarter, we generated $487 million of cash flow from operations $206 million of free cash flow and repurchased $250 million of our common stock.
Let me begin today's discussion with my views on the strength of the oilfield services market.
Jeff: Global energy users on the rise, but crude oil demand projected to grow between one point to 2.3 million barrels per day in 2024.
This demand growth is greatest in non OECD countries, where we expect more per capita energy consumption not less as they develop their economies and improve their quality of life.
Jeff: Globally secure reliable hydrocarbon production powers industries moves people and advances economies.
In the U S. After stable electricity demand for nearly two decades, we now expect it to grow more than 15% by 2030 today.
Today over 40% of United States electricity supplied by natural gas and we expect strong demand for natural gas as a base steel well into the future.
The world requires more energy not less.
I'm more convinced than ever that oil and gas will fill a critical role in the global energy mix for decades to come.
My outlook is confirmed by our customers' multi year activity plans across multiple markets and asset types.
Everything I see points towards long term growth for Halliburton's services.
My outlook for the industry is not new and it drives our focus on oilfield services and sets. Our strategy. This focus is the basis for our technology investment capital allocation and culture.
This multiyear upcycle together with our successful strategy execution make this a great time for Halliburton.
Now, let's turn to international markets, where halliburton strategy of profitable growth delivered another solid quarter.
International revenue grew 12% year over year with growth demonstrated by each region.
This marks the 11th consecutive quarter of year on year growth in our international business.
'twenty 'twenty four I expect full year revenue growth in the low double digits equally important the international market remains tight for equipment and people and therefore, we expect to see margin expansion over last year.
One of the many things that excites me about our international business as our technology that creates meaningful value for our customers and drives above market growth for Halliburton.
And the drilling and evaluation division, our leading formation evaluation tools, such as the earthstar ex logging, while drilling system and our reservoir examiner formation sampling service, both see strong adoption and increasing levels of demand.
The advanced measurements. These systems provide create unique insights for our customers and drive profitable growth for Halliburton.
Jeff: And the completion and production division, our artificial lift technology continues to generate profitable growth throughout each of our international regions.
Jeff: Our electric submersible pump portfolio proved to be a market leader and the competitive North American market and we expect to deliver similar results over time in the international markets.
Our complete solution, which includes downhole motors pumps and surface systems with remote monitoring and automation provides an end to end solution and the ability to operate at scale.
A great example, zain Kuwait or in less than three years, we captured a nearly 20% market share with over 700 ESP installs.
Before we move on.
I want to share an observation.
Jeff: I'm consistently saying more global interest in unconventional.
I can recall over a decade ago, the global scramble to find unconventional with limited success.
Today, two significant markets outside of North America achieve scale, which serves as a proof point for what is possible and drives interest by others.
As global markets grow the technologies and processes Halliburton develop as the leader in North America over the last three decades have broad applications to unconventional reservoirs throughout the world, which makes this a fantastic long term opportunity for Halliburton.
I am confident in the duration of this international upcycle in 'twenty 'twenty four and beyond.
Jeff: Turning to North America.
Our first quarter revenue grew 5% over last quarter as.
As expected North America land completion activity bottomed in the fourth quarter of last year and rebounded in the first quarter as our customers quickly resumed operations after the holidays.
Looking ahead for the rest of 2020 for North America, we expect steady activity levels for Halliburton or.
Our customers are planning for the long term and I expect they will execute work throughout the year as planned.
This is consistent with a more industrialized approach to asset development in North America.
And while we expect an eventual recovery in natural gas activity driven by demand from LNG expansions.
Our 2024 plan does not anticipate this recovery.
Overall, we expect that full year, North America revenue and margins will be flattish compared with 2023 levels.
Clearly our strategy is to maximize value in North America, we do it in multiple ways today I want to talk about two of them the.
The first is the Zeus platform and the second is our new North America focused directional drilling system.
Does this platform, it's electrification automation and subsurface diagnostics continue to advance.
This quarter, we introduced sensory which is the latest generation of our subsurface measurement technology.
Sensory provides an easy to deploy cost effective and automated system for real time subsurface measurement of fracturing operations.
Additionally, our automation technologies are at the heart of our highly efficient simultaneous and travel frac operations and they continue to expand their capabilities, creating value for halliburton and our customers.
The Zeus platform demonstrates its uniqueness everyday.
Jeff: And importantly, it's deployed at scale.
Our scale allows for rapid technology innovation each.
Each technology improvement to the Zeus platform widens the moat around our leading position in the fracturing market.
This creates outsized value for Halliburton and our customers.
I am pleased with the results we see in North America from our drilling services product line, which late last year launched a new version of our I cruise rotary Shareable system, specifically engineered for the North America unconventional market.
The new I cruise CX system is designed for the challenging curve and lateral applications in North America.
The systems performance is driving strong uptake and this quarter, our I cruise footage drilled in North America more than doubled over last year.
We also coupled this high performing system with an asset light sales and rental model that increases the addressable market when compared to a full service model.
Jeff: This is how I cruise CX, both participates in new market segments and increases the speed of market penetration.
The key trend that I see in North America drilling is the move to longer laterals and more complex wells, which customers drill to improve economics.
I cruise CX is specifically designed for these applications and its performance is why I am excited about halliburton's growth in the North America drilling market.
To close out I'd like to thank our employees.
I regularly hear from our customers about the work you do how.
How much it means to them and how your execution of our value proposition differentiates halliburton from our competitors well done.
I'm excited about the business outlook for Halliburton.
Energy demand growth is strong and so as demand for our services I expect that our focus on oil field services and execution of our strategy will generate strong free cash flow and shareholder returns.
This quarter Halliburton repurchased $250 million of our common stock a solid start to the year and a good benchmark for our expectations going forward.
Now I'll turn the call over to Eric to provide more details on our financial results Eric.
Thank you, Jeff and good morning all.
Our Q1 reported net income per diluted share was <unk> 68 cents adjusted net income per diluted share was <unk> 76.
Total company revenue for the first quarter of 'twenty 'twenty four was $5 $8 billion operating income was $987 million and the operating margin was 17% flat compared to Q1 2023.
Beginning with our completion and production Division revenue in Q1 was $3 $4 billion down slightly from Q1 2023.
Operating income was $688 million up 3% when compared to Q1 2023.
And the operating income margin was 20%.
Compared to Q1 of last year. These results were primarily driven by reduced pressure pumping services in U S land, partially offset by higher activity in <unk>.
International markets.
In our drilling and evaluation Division revenue in Q1 was $2 $4 billion, an increase of 7% compared to Q1 2023.
Operating income was $398 million up 8% and operating margin was 16% an increase of 10 basis points over Q1 last year.
These results were primarily driven by higher drilling related services in the middle East and North America, as well as improvements across multiple product lines in Latin America.
Now, let's move on to geographic results.
Our Q1 international revenue increased 12% year over year.
Europe Africa revenue in the first quarter of 2024 was $729 million, an increase of 10% year over year. This increase was primarily driven by higher completion tool sales in the region and fluid services in Norway and the Caspian area.
Middle East Asia revenue in the first quarter of 'twenty 'twenty four was $1 4 billion.
An increase of 6% year over year.
This increase was primarily related to improved activity in multiple product service lines in Kuwait, Saudi Arabia and Oman.
Jeff: Latin America revenue in the first quarter of 'twenty 'twenty, four was $1 $1 billion, an increase of 21% year over year.
This improvement was primarily related to higher drilling related services and increased software sales in Mexico improved pressure pumping service and fluid services in Argentina and increased activity in multiple product service lines in Brazil and Ecuador.
In North America revenue was $2 $5 billion.
Representing an 8% decrease year over year, but a 5% increase from the last quarter.
This year over year decline was primarily driven by lower pressure pumping services in U S land as well as lower wireline activity.
Speaker Change: Moving on to other items.
In Q1, our corporate and other expense was $65 million for the second quarter of 'twenty 'twenty four we expect our corporate expenses to be approximately flat.
Our S. P deployment remains on budget and is on schedule to conclude in 2025.
Speaker Change: In Q1, we spent $34 million or about four cents per diluted share on S. Aps for migration, which is included in our results for the second quarter, we expect <unk> expenses to be approximately flat.
Speaker Change: Net interest expense for the quarter was $92 million for the second quarter 'twenty 'twenty four we expect net interest expense to be roughly flat.
Other net expense for Q1 was $108 million higher than expected, primarily due to impairment of an investment in Argentina and currency devaluation in Egypt for the second quarter 'twenty 'twenty four we expect this expense to be approximately $35 million.
Our adjusted effective tax rate for Q1 was 21, 5% based.
Based on our anticipated geographic earnings mix, we expect our second quarter 'twenty 'twenty four effective tax rate to increase approximately 75 basis points.
Capital expenditures for Q1 were $330 million for the full year of 'twenty 'twenty four we expect capital expenditures to remain approximately 6% of revenue.
Our Q1 cash flow from operations was $487 million and free cash flow was $206 million during the quarter, we repurchased $250 million of our common stock.
For the full year 'twenty 'twenty four we expect free cash flow to be at least 10% higher than 2023.
Now let me provide you with some comments on our expectations for the second quarter.
In our completion and production division, we anticipate sequential revenue to be up 2% to 4% and margins to increase by 25 to 75 basis points.
Speaker Change: In our drilling and evaluation division, we expect sequential revenue to increase 1% to 3% and margins to increase by 25 to 75 basis points I will now turn the call back to Jeff.
Thanks, Eric.
Me summarize our discussion today.
Halliburton delivered solid first quarter results.
I am confident in the strength and duration of this up cycle.
We expect our North America business to deliver flattish revenues and margins year on year, despite lower activity levels.
We also expect our international business revenue to grow at low double digits year on year.
I'm excited about the outlook for Halliburton and expect Halliburton to deliver strong free cash flow and shareholder returns.
And now let's open it up for questions.
Thank you and as a reminder to our audience Crestar one one to get in the queue and wait for your name until we announce and to remove your question simply press Star One again, one moment for our first question.
And he comes from the line of David Anderson with Barclays. Please proceed.
Thanks, Good morning, Jeff I wanted to ask you about a couple of things that you had talked about in your.
In your prepared remarks in the first is on the Zeus fleet and an impressive 5% sequential increase in North America. This quarter, despite the flat rig count.
It's partly attributed to these fleets being rolled out it's pretty clear, there's a big step change in efficiency for your customer demand exceeding supply at least for the next couple of years, but I guess the question what prevents the industry from building out.
Can you talk about your competitive advantage today and how you maintain that you were first to market established leadership, but is there a differentiator technology. It's all about relationships. Just the question is really on the boat on this business as you see it over the next few years.
Yes, Thank you Dave.
Uh huh.
The most important point is this is a comprehensive platform.
<unk> as a platform.
Clearly its electric yes, it drives efficiency.
But the embedded automation actually really changes the dynamics of how it performs.
And then also the subsurface measurements with sensory that are embedded in the system.
And uniquely embedded.
And so that that widens the moat and I think equally important is being at scale. So it's one thing too.
Speaker Change: Yes.
Speaker Change: To do a research project around thing, but when we're working at scale. These are solutions that can be pushed to the platform at any point in time. So it's really the ability to grow the mode on existing equipment as well as any new turns on.
Speaker Change: The science as it goes forward so.
Super excited about it yeah, obviously lowest T CEO.
Speaker Change: But its the technology differentiation as well that widens the moat.
Speaker Change: And then just to touch on something that you had talked about the unconventional field that international markets are clearly one of the big stores they share it when the Saudi shifting capex.
Some offshore towards unconventional specifically on Q4, you have a toehold in that field with the liquid mud plant facility, but that's just starting to development. My understanding if there is a bunch of tenders underway more coming can you talk about sort of the opportunity set for Halliburton. This feel that in the near term maybe incremental growth you see in 'twenty, five and and how do you support do you feel about your spend.
Right.
Thank you, David and I'm really excited about it and Theres a lot of opportunity for Halliburton around unconventional is as you know the how we address that we've got a lot of ways to address that including some of the technology, we've talked about today.
Yes, we've got a good position in there, but I think what's even more opportunity to grow, particularly with drilling technology that continues to advance.
You mentioned, but also other aspects of that will be very competitive so I think thats a.
A big move forward and I think more broadly so good for Halliburton.
That more broadly.
The discussion around.
Unconventional internationally.
What can you say today are two markets at least outside the us.
Speaker Change: <unk> that are currently at scale and I think that serves as a bit of a template for how that can be done because it was really unclear a decade ago as you recall, but I think we're in a different place with unconventional today and so we didn't hear mark discussion around Hey, this is possible and how halliburton will play a more meaningful.
All of that.
An additional market so super encouraged.
Great. Thank you Jeff.
Thank you.
Thank you one moment for our next question. Please.
Speaker Change: Well mainly comes from the line of Neil Mehta with Goldman Sachs. Please proceed.
Good morning, Jeff and team, Jeff you've talked about wanting to drive your free cash flow per share higher and so it's great to see the share repurchases for a couple of quarters run rating at this $250 million Mark can you talk about why you think that's the right number to use going forward and how to share repurchases.
Speaker Change: And the CRE Adams capital or capital allocation.
Speaker Change: Yes.
So the baseline that we use is the.
The framework that we announced several quarters ago to return.
Speaker Change: 50% of free cash flow to shareholders.
Actually returned over that at just about 60% in 2023, so when we look at the improvements in free cash flow year over year, which we mentioned to be about 10%. So.
Speaker Change: Uh huh.
Speaker Change: We think through that we think that the $250 million of mirrors, a buyback is a good base for us to be repurchasing shares so.
Expect more buybacks in dollars expect more overall return to shareholder dollar wise now, we kind of see where the overall percentage lens, but it should be pretty close to what we did last year.
Okay. That's really helpful. And then the follow up because we are seeing signs of industry consolidation, certainly moorhead E&P and services, but we start to see some services as well.
Halliburton is always struck us as more organically driven business, but be curious on how you're thinking about M&A as you plan to go forward for the business.
Look Neil no change to our strategy Youre correct, we like bolt on M&A.
Technology acquisitions, we think about.
M&A in terms really of research and development is something that advances research does it move it more quickly so that we get to market more quickly.
But we see significant organic growth in the businesses that we're in and so we like where we are and we see plenty of growth.
And we also.
I believe that organic growth generates more value for shareholders and.
We've seen that with other things that we've done in the past in terms of small acquisitions that were able to then grow and push through our channel.
But we like the space, where we compete and we liked the technology and how we develop that and so you shouldnt expect any change from Halliburton.
Alright, Thanks, Steve.
Thank you.
Thank you one moment for our next question. Please.
Jeff I wanted to see if you could characterize your thoughts on the future prospects of the Opex versus the D&C cycle on a go forward basis can you talk about your current leverage to Opex.
And production and is this an area strategically you'd like to grow either organically or inorganically over time.
Yes, Hello, I wanted to.
Speaker Change: To answer the second part of that first in terms of organically yes.
So we don't see a change to our strategy or approach to markets.
So, yes, we do see quite a bit of organic growth for us and.
The opex part of the market we're in that business today, we've got strong gorilla remains strong.
Lyft business today, we're in the chemicals business today.
And we're in the intervention business today in a pretty big way and.
We continue to develop technology similar to as we've done in the past and so is my outlook for.
Opex cycle.
We've got plenty of exposure to that and have had now I want to be careful in say the D&C.
Cyclists.
Yes.
It is very strong and continues to grow and I suspect that it continues to grow also so I think were well balanced across really all elements of this whether its exploration and development drilling and opex today and that's some of the things we've done in the past again, we bought smaller businesses that we've grown into bigger businesses.
And so again a strategy that works for us and it delivers the organic growth that we believe is really good for our shareholders.
Great Jeff.
Question is I wanted to see if you could give us your perspective on any potential impacts to how from the changing mix of activity in Saudi Arabia, which looks to be a little bit more onshore versus shallow water.
And maybe you could just talk about the year over growth in Mena whats at 6% seemed a little bit lower than we were expecting.
Let me take the first part of that in terms of Saudi.
Speaker Change: Grow 24 is still growing by the way.
Growth in Saudi endpoint for.
And the rebalancing the gas nonconventional as is very good for Halliburton, We've got a very strong onshore business in Saudi Arabia would participate in all aspects of that market.
Speaker Change: And that market remains tight for equipment. So I feel good about that market and I'm very confident in the long term growth of that market.
Speaker Change: The rebalancing again to gas is.
Speaker Change: Meaningful players in that part of the market and expect that will only be good for halliburton.
The pivot to growth look a couple of things number one international business grew 12% overall, so I want to start there.
Clearly I would expect more growth in the region.
But here's what we're doing I don't want to be really clear that profitable growth has been our primary focus we see a good pipeline of opportunities we expect to continue to see growth.
And Nina.
But at the same time, we want to make certain we are building a foundation for growth that means that we are delivering the technology, we're making the investment while expanding margins and growing and that's been sort of our mantra. Our strategy is profitable international growth and that's what we saw this quarter.
Thanks, Jeff.
Thank you.
Thank you one moment for our next question. Please.
How much of this would you describe as due to new products or products and services or new markets and how much of it to just underlying expansion I wanted to get kind of you talked about a lot of the new stuff youre putting in <unk>.
How effective that is driving some of this growth.
Yeah, Thanks, Doug I think the.
Yes, the growth is broad based.
With the technology matters, it's not necessarily new products, it's actually an expanding market a couple of things are happening at one time, yes activity is growing.
But we are participating in a larger share of that growth that maybe in the past based on some of the technology I described.
So we're competing differently.
Technically and so we get a bigger part of that growth.
We've added some things, yes, like Lyft internationally, that's a new product for growth, a new product thats, a whole business, but its growth.
Speaker Change: End markets and we're really pleased with the progress that that's making.
And then obviously pricing in a tight market internationally helps as well.
That's helping.
Growth all around.
It would not overlook the importance of that.
Improvement in drilling technology, particularly just because it's.
More access to a larger market and at a much better rate of return for us given the.
Improvement over legacy technology.
Okay.
<unk> of the new technology is probably is right about 40% more capital efficient than legacy tools, so getting sort of.
Improvement along several dimensions, there growing market bigger share better pricing and better capital efficiency.
Thanks for that and then just to pivot back real quick to North America.
You mentioned, not really anticipating or certainly not built into the expectations for recovery in gas. This year presuming that that's kind of a well completions way you're thinking about it at what point of the year would you have to see an increase maybe in an activity spending rig count.
In gas to think that there was a chance that you could outperform I would say you, but the market outperformed your expectation.
If we get to.
The third quarter, and we haven't seen an improvement.
Speaker Change: We should close the books on 2004, having any improvements would take about 25.
Speaker Change: Yes look thanks I think.
Yes, that's the next big leg of growth in North America. It's a question of timing, but it is no question.
Going to drive a lot of growth in North America, and I expect.
It will drive market growth 25 and beyond.
And I think what's overloads look through the current.
Timing and look forward to what's coming.
Krishnan has really shrunk the fleet.
Fleet for the market is shrinking to meet the demand that's there today.
Happens every day.
Equipment is not being built.
New equipment, so when we get to that point in time, it will be an incredibly tight market and.
Speaker Change: Yes.
I'm actually quite excited and confident about what gas means to the north American market.
Speaker Change: Just saying, yes, the leading indicators are that will be well construction it'll be offtake contracts for LNG there'll be a number of things that sort of happened.
But it will happen just given the capital has been invested on the export side. There is no question that the gas will be.
Be developed to meet that.
Great. Thank you.
Thank you. Thank you one moment for our next question. Please.
And he is from the line of James West with Evercore ISI. Please proceed.
Hey, good morning, Jeff.
Good morning, James Good morning, James.
So.
Jeff one of the areas that we haven't discussed in detail yet the Q&A is really deepwater where you guys have an advantaged position. This cycle I think relative to prior cycles, even though you've been strong there for a while.
But.
The technology enhancements that have happened at Halliburton puts you in a unique position to.
Have more share better profitability and I'm curious kind of where youre seeing right now the biggest growth and I think we know kind of Brazil.
Brazil, and some other places, but where do you think we're going to be surprised as we go into kind of probably 25 and 26.
Look I think the surprise will be West Africa, and North Sea.
Speaker Change: In terms of 25 and beyond I think really we're planning work now.
They are great opportunities today.
That are being planned by clients.
Full expectation that we see.
A meaningful step up as we go into 'twenty five and beyond and these are all long term type projects that will.
Extend into the end of the decade.
So, but I do think that's where we'll see a lot of activity.
Okay. Okay that makes sense and then maybe just back to North America.
Again, I don't want to beat a dead horse, but you.
Guys are dramatically outperforming.
Some of the peers in North America.
Where do you hope one I guess on kind of pricing and where do you sacrifice utilization in a market that may be down a little bit.
We just will give up the utilization to keep our pricing or do you are you willing to give some discounts.
Sure.
Speaker Change: Keep your bullish not.
Yes look James.
There, we see some pressure, yes does that affect our strategy absolutely not.
Okay got it okay.
Speaker Change: Value North America.
40% of our equipment is contracted under long term contracts and we're not terribly exposed where we do see that.
Pressure and I think.
Maybe more answer than you want but I think it's important that we keep central is our strategy is delivering unique technologies that create real value for customers and so thats, what lowest tcl looks like and that's why we're also work solving for recovery with this platform and sensory we think those two.
Things, along and create significant value for customers and so we keep that central.
Alright, alright.
Thanks, Jeff.
Thank you James.
Speaker Change: Thank you one moment for our next question. Please.
And it comes from the line of Scott Gruber with Citigroup. Please proceed.
Yes, good morning.
Good morning, Scott learning Scott.
Well, it's getting later in the call. So I will give you a chance to mentioned a few times not that it's needed.
But our global customers.
Scott Andrew Gruber: Starting to discuss additional demand from power for data centers.
I think this has the potential to pull forward additional gas developments over the next few years around the world or is this still after horizon.
I would say gases.
Critical fuel and look yes, I think we mentioned in the prepared remarks the growth in demand for.
Gas or gas and electricity and that being the most effective way to deliver power.
Certainly today and the most reliable so I think that.
This is almost.
Becoming.
It's one of those things that you don't see it until it's on top of you and I think that right now that demand is on top of us and so I think that can only be additive.
Two demand I have no question that will be additive.
I mean clearly AI.
Consumes more power than traditional data centers, so I think all of that combined.
There is almost as if not almost it is a secular trend towards demanding more power and that can only be good for.
Our industry and for Halliburton.
Yes, it will be interesting to watch.
Just turning back to the near term Latin America was the big Outperformer versus our expectation can you just provide some more color on the details of what drove the.
The outperformance in Latin America, and overall what type of growth.
Would you anticipate from the Geo market this year.
Look Latin America.
Performed very well, it's broad based growth in Latin America, so really at several geographies and types of markets, whether Argentina, Mexico Caribbean, Ecuador. So we saw strong growth all over and important to say our team in Latin America has done an exceptional job very appreciate it.
And I am pleased with the work that team does.
It also demonstrates our oil and gas is critical to economies.
Those are.
Economies that require oil and gas they view oil and gas is critical to both security and economic growth things that are important in Latin America.
So I expect there is more to come.
Got it appreciate it Jeff Thank you.
Thank you.
One moment for our next question please.
And he comes from the line of Luke Lemoine with Piper Sandler. Please proceed.
Hey, good morning.
Jeff you reiterated your full year international ramp up low double digits with margins expanding this year, but.
And then also as we kind of look over the next couple of years as.
International continues unfold, you rollout new products and services like ice storm crews.
What are kind of the aspirational targets here and BD.
Yes look at.
I like the trajectory that we're seeing in the DNA.
And then I say that because we're growing the business.
We're growing the business at a pace thats profitable and building the foundation.
We can use the technology.
In markets, where we know we've got solid growth and profitability and then be able to reach out from there.
But clearly it is a balance of growing margins while opening for example, new businesses. So we've opened a few new markets.
While growing profitably and I think that's sort of the.
Scott Andrew Gruber: Foundational.
Heart of our DNA trajectory, so I expect to continue to see it aspirational and continue to expect it to go up and expand that.
Quarter over quarter year on year and.
Yes in the first quarter, we actually saw.
Flooding in blood flooding in some markets, we saw weather and some other maybe more than we would've expected, though I expect that we continue on the trajectory in spite of all of the things that sort of come along in businesses that are open so.
You should expect to continue to see that moving.
Okay. Thanks, Jeff.
Thank you.
Thanks, and one moment for our next question.
And it comes from the line of Stephen <unk> with Stifel. Please proceed.
Thanks, Good morning, everybody.
Oh I'm sorry.
Two from me. The first you mentioned you mentioned the strength in I crews in North America, I think you said more than double a year ago footage drilled is that.
Displacing <unk>.
Competitors is that.
Organic growth is that replacing all technology that youre offering can you give some color around that.
Well look it's performing very well.
And the uptake has been strong.
Scott Andrew Gruber: And so.
It is different technology than what we've ever had in the past. It's designed for this market is built on the <unk> platform. So.
How it gets to market is really customer driven and it's.
There has been.
Just more uptake on the technology itself, yes, it's all organic.
In terms of its.
We developed the technology ourselves we've worked on it for some time, we built a platform that has been very effective internationally and.
Now we've gotten to the North America part of it. So it's early days, but stay tuned I mean, we're really pleased with the advancement that its making but it's really customers.
We will drive the uptake for that so.
The increase in foot footage drilled.
As indicative of customers gaining confidence in the performance of that technology.
Particularly in the curve laterally.
Great. Thank you.
Just maybe a little harder for you to answer directly but when we think about the CHS <unk> deal and what's going on in production chemicals.
I would imagine it's an area that would have interest to you.
Question is really you have a great amount of success with summit and what you bought and built over the last I guess five years six years, plus and the strength of that business is that something that you can replicate in production chemicals. If you went down that road.
Okay. Thanks.
Ill revert back to strategically we like to grow things organically.
We own the kernel of the business. There we continue to make progress we've got the plant capacity is filling up in the middle East So.
Yeah.
Yes.
Scott Andrew Gruber: The trade off is speed.
But I think also the trade off from our perspective anyway has been we know how to do this and we believe it generates a lot of value for our shareholders. When we go about it this way and so.
We're going to continue to grow our chemicals business around the world on the back of some assets that we built ourselves.
And so I'm pleased and I think there is opportunities.
Organic growth in chemicals organic growth and strong growth in <unk>.
Intervention.
A whole lot of different areas.
Speaker Change: Okay, great. Thank you for the color out there yes.
Speaker Change: Yes. Thanks.
Thank you one moment for our next question.
Speaker Change: Yeah.
And it comes from the line of Marc Bianchi with TV Cowen. Please proceed.
Hi.
Wanted to just circle back to the.
Discussion on pricing for North America, just because you made the comment that you have seen some softening, but you're not changing your strategy.
Could you just comment on how sort of.
The market has evolved over the last 90 days if anything has changed we've had.
That competitor out there, saying that theyre going to go after after share at the expense of price.
Okay.
Don't comment on competitors, but from a strategic perspective, we havent changed.
What we're doing.
And.
I like where we are and a big part of our fleet is contracted today.
Our focus on delivering.
Speaker Change: Topnotch efficiency sort of record setting efficiency and also lowest tcl and so that's where our primary focus is in.
We plan to stay with that.
Okay, great. Thanks for that Jeff and then on the on the second quarter outlook, you gave the CMP and Danny.
Should we assume that Thats, a similar profile for international and North America or.
Anything that we should be contemplating there.
In terms of.
So look I think I don't see that Amit.
Go ahead, Jeff.
Look in terms of margin growth I think.
The margin growth I expect will continue I mean, I think that were talked about expanding margin and.
DNA and also CND is.
Continuing to grow and I think we're solid and we're in a number of very good businesses around.
CMP.
Okay.
Yes.
Maybe just to clarify the question was more on revenue. So I guess, what I'm wondering is to get to the low double digits for international it would seem that you need a pretty healthy growth in the remaining all three remaining quarters of the year sequentially. Yes, sorry could you just talk about where that's where that's coming from.
Yes, so thats a pretty broad based.
So for <unk>, that's completion tools around the world.
Production enhancement around the world So.
And a very strong position and we see a number of things growing up.
To which would be lift for example, and some things like that.
Yes.
Heavy lift I don't see it as I see it as a very middle of the fairway very doable.
From where we sit today and again equipments tight I think that.
Yes, we will continue to see strengthening there as well expanding margins and pricing.
Very good thank you.
Thank you.
Speaker Change: One moment for our next question.
And it comes from the line of Kurt <unk> with benchmark. Please proceed.
Hey, good morning, good morning, everybody. Thanks for thanks for slipping me in here.
So Jeff.
You've been at this a long time you referenced.
Our more than one occasion, not just today, but in other calls about increasing the level of visibility.
Especially on the international front.
Talking about opportunities that could extend out to a decade.
And a decade I think a lot of investors are wanting to kind of get inside the room with you. If you will and try to get the same sort of conviction you have with respect to that that duration. So just kind of curious if you could give us some perspectives and insights on how you or what.
How those conversations are taking place how much lead time your customers are asking for.
And effectively what two or three things are you seeing that continue to underpin.
This confidence and conviction that this cycle is going to extend through the end of the decade.
Speaker Change: Yeah. Thanks look has some of its work that will begin in 2005 that is planned to go through the end of the decade, So I feel very confident about that.
Others are work that we're working on planning with clients that again are the types of projects that extend that far.
I think the.
Just the price of the commodity and the.
The tightness in the rising demand for oil and gas gives us confidence and it gives our clients confidence in <unk>.
Clearly we've seen.
A bit of a return to oil and gas and its importance.
And a lot of places, but the type of work that we're starting the type of offshore work that we're starting.
It takes time to get started and it takes a long time to do so very confident about that.
Broadly and I would include.
Anyway, the outlook for North America is similar in terms of duration I mean, this is the kind of investments that we've seen in North America.
<unk>.
That are not for a quarter or two these are decade long investment so we've seen happen and.
The next leg on gas and the demand for gas it's already been talked about on this call.
Speaker Change: I feel.
Very confident in the resilience of the cycle.
That's great I appreciate that.
The other dynamic you reference was improving margins right. So you've booked contracts that tend to last I don't know two to three years on average and the international market. So those will roll through this year into next year and so on.
Im just curious in the context of that margin improvement from here right.
If you were to try to.
Yes, we kind of rank order it.
Is how much of it is the pricing how much is it.
Volume how much is that.
The technology value proposition.
Can you give us some additional sense on how you see that what's driving that margin improvement.
Look I think it's a combination of those some of it is certainly tightness in the market and pricing.
But at the same time, we've talked about our R&D investment over the last eight years has all been directed at better capital efficiency.
And that drives margin also and that drives margins in our drilling business that drives margin in our frac business.
But these are deliberate choices that we've made to drive down our to improve capital efficiency and return and I think that's evident.
Probably most evident in our drilling technology and <unk> technology.
But at the same time thats been our practice in all of our businesses. So anything that we're producing today.
One of his first criteria has to be improved.
Capital efficiency and better returns out of R&D and so I'm really pleased with the success. We've had there and so I would say all are contributing today.
<unk>.
In addition to having sort of more market access or.
More opportunity to compete on the back of improved technology.
Okay.
Appreciate that thanks, Steve.
Thank you.
Thank you one moment for our next question.
And it comes from the line of Doug Becker with capital one. Please proceed.
Look I think that's again back to the foundation and building that I described so we've got a better foundation broader based work.
And so I expect to continue to see expansion.
Certainly year over year, and then also is that foundation get stronger that gives us more ability to grow the business.
Profitably, but from a sound base.
It's Eric here typically drop in margin.
Q2 happens with the.
The reduction in our software business the way, we recognize revenue in our software business means that it has essentially taken in Q4 and in Q1, so we see a bit of a drop there.
You see that being more muted this year, because as Jeff mentioned, the Dnb margins were softer than we were expecting in Q1, as we had much more significant weather issues in the north Sea and Norway.
In the last scan then the flooding over in Indonesia. So.
The combination of that you did effect.
The tradition.
We're impact moving from Q1 to Q2 results and margins going up here.
Got it all makes sense.
May be switching to North America U S. More specifically last quarter you were talking about.
E fleets would represent about 40%.
End of the year going to maybe 50% in 2025 is there a reasonable or realistic or probable scenario would accelerate.
This deployment the.
The results certainly suggests that the outperformance in.
There might be a case for that.
No look this is a market post the.
The whole strategy behind.
<unk> for us has been.
Bill the best technologies, and clients' demand it and.
We built is the demand that we see in hand, and therefore, they are not built on spec, they're built for customers that plan to use them.
And we don't plan to change that and so in some ways that is.
Central to maximizing value in North America, we maximize value in North America, we're not going to build things that don't have a home.
And so.
So I expect.
We continue.
To see market demand for this equipment.
2024 is actually already in hand, it's just delivering the units themselves. They already have homes and then 25, we actually have some deliveries and I expect that we'll see more as.
As we go forward, but I think that.
Important to remember that Thats our approach.
Is the <unk> contract.
That makes sense. Thank you.
Thank you. Thank you.
Thank you and with that we conclude our Q&A session for today I will pass it back to management for final comments.
Okay. Thank you Carmen, let me close out the call with this I am excited about the outlook for Halliburton and I expect Halliburton to deliver strong free cash flow and shareholder returns look forward to speaking with you next quarter, let's close out the call.
Thank you everyone for participating you may now disconnect.
Okay.
[music].
Okay.
Speaker Change: Okay.
[music].
Okay.