Q2 2024 Halliburton Co Earnings Call
Good day and thank you for standing by. Welcome to the second quarter 2024 Halliburton earnings call. At this time, all participants are on a listen only mode. After the speaker's presentation, there will be a question and answer session.
Operator: 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 this session, you'll need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is ready.
Speaker Change: To ask a question during the session, you'll need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised.
Operator: To withdraw your question, please press star 1 1 again. Be advised that today's conference is being. I would now like to hand the conference over to Dave and your Director of Investor Relations. Please go ahead. Hello, and thank you for joining the Halliburton second quarter 2024 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.
Speaker Change: To withdraw your question, please press star 1 1 again.
Speaker Change: Please be advised that today's conference is being recorded.
Speaker Change: I would now like to hand the conference over to David Coleman, Senior Director, Investor Relations. Please go ahead.
David Coleman: Hello and thank you for joining the Halliburton second quarter 2024 conference call. We will make the recording of today's webcast available for seven days on Halliburton's website after this call.
Speaker Change: Joining me today are Jeff Miller, Chairman, President and CEO , and Eric Carre, Executive Vice President and CFO .
Operator: 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, 2023, Form 10-Q for the quarter ended March 31, 2024, recent 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.
Speaker Change: 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.
Speaker Change: These risks are discussed in Halliburton's Form 10-K for the year ended December 31, 2023, Form 10-Q for the quarter ended March 31, 2024, recent current reports on Form 8-K, and other Securities and Exchange Commission filings.
Speaker Change: 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 second quarter earnings release and in the quarterly results and presentation section of our website. Now I'll turn the call over to Jeff. Thank you, David, and good morning, everyone. Halliburton delivered solid second-quarter results that demonstrated the strength of our international business and the differentiation of our North America service offering. Here are the quarter highlights.
Speaker Change: Our comments today also include non-GAAP financial measures. Additional details and reconciliation to the most directly comparable GAAP financial measures are included in our second quarter earnings release and in the quarterly results and presentation section of our website. Now, I'll turn the call over to Jeff.
Jeffrey Allen Miller: We delivered total company revenue of $5.8 billion and an operating margin of 18%. International revenue was $3.4 billion and grew 8% year-over-year, led by Latin America, which delivered a 10% increase. North America revenue was $2.5 billion, an 8% decrease year over year compared to a 12% decline in rig count over the same period.
Jeffrey Allen Miller: Well, thank you, David, and good morning, everyone.
Jeffrey Allen Miller: Halliburton delivered solid second quarter results that demonstrated the strength of our international business and the differentiation of our North America service offerings.
Jeffrey Allen Miller: Here are the quarter highlights.
Jeffrey Allen Miller: We deliver total company revenue of 5.8 billion dollars and operating margin of 18 percent.
Jeffrey Allen Miller: International revenue was $3.4 billion and grew 8% year-over-year, led by Latin America, which delivered a 10% increase.
Jeffrey Allen Miller: North America revenue was $2.5 billion, an 8% decrease year-over-year compared to a 12% decline in rig count over the same period.
Jeffrey Allen Miller: Our Drilling and Evaluation Division and our Completion and Production Division both demonstrated margin improvement year-over-year.
Jeffrey Allen Miller: Finally, during the second quarter, we generated $1.1 billion of cash flow from operations and about $800 million of free cash flow and repurchased $250 million of our common stock.
Jeffrey Allen Miller: Our Drilling and Evaluation Division and our Completion and Production Division both demonstrated margin improvement year over year. Finally, during the second quarter, we generated $1.1 billion of cash flow from operations and about $800 million of free cash flow and repurchased $250 million of our common stock. I'll begin our discussion with the international markets, where Halliburton's strategy of profitable growth delivered another solid quarter. International revenue grew 8% year-over-year, with growth demonstrated by each region.
Jeffrey Allen Miller: I'll begin our discussion with the international markets, where Halliburton's strategy of profitable growth delivered another solid quarter.
Jeffrey Allen Miller: International revenue grew 8% year over year, with growth demonstrated by each region. This marks the 12th consecutive quarter of year-on-year growth in our international business.
Jeffrey Allen Miller: This marks the 12th consecutive quarter of year-on-year growth in our international business. As I look ahead for the remainder of this year, my outlook today is consistent with our expectations at the start of the year. I expect steady growth for Halliburton throughout the remainder of 2024. In our international markets, we see strong demand for Halliburton services, high activity levels, and equipment tightness across all major bases. We expect our international business to deliver about 10% revenue growth for the full year.
Jeffrey Allen Miller: As I look ahead for the remainder of this year, my outlook today is consistent with our expectations at the start of the year.
Jeffrey Allen Miller: I expect steady growth for Halliburton throughout the remainder of 2024.
Jeffrey Allen Miller: In our international markets, we see strong demand for Halliburton services, high activity levels and equipment tightness across all major basins.
Jeffrey Allen Miller: We expect our international business to deliver about 10% revenue growth for the full year.
Jeffrey Allen Miller: I am pleased with the profitable growth we are seeing across our product lines, and today I would like to highlight three specific ones in more detail. The first is our landmark software business. I recently attended our landmark forum, LIFE 2024, in Athens, Greece.
Jeffrey Allen Miller: I am pleased with the profitable growth we are seeing across our product lines and today I would like to highlight three specific ones in more detail.
Jeffrey Allen Miller: The first is our landmark software business.
Jeffrey Allen Miller: I recently attended our landmark forum, LIFE 2024 in Athens, Greece.
Jeffrey Allen Miller: It is an annual event where we share our latest software innovations, and our customers share their successes and future opportunities. While in Athens, I had the opportunity to meet with dozens of customers, and they told me how excited they were about our latest offerings like Unified Ensemble Modeling, Scalable Earth Model, and our latest developments in AI and machine learning. These tools change the way customers work by driving efficiencies from asset level planning through production. The conference included customer presentations that showcased their business transformation and their use of Halliburton Landmark's tools. Our customers tell us we create unique value with our iEnergy cloud platform, which seamlessly integrates into their workflow.
Jeffrey Allen Miller: It is an annual event where we share our latest software innovations and our customers share their successes and future opportunities.
Jeffrey Allen Miller: While in Athens, I had the opportunity to meet with dozens of customers and they told me how excited they were about our latest offerings like Unified Ensemble Modeling, Scalable Earth Model, and our latest developments in AI and machine learning.
Jeffrey Allen Miller: These tools change the way customers work by driving efficiencies from asset-level planning through production.
Jeffrey Allen Miller: The conference included customer presentations that showcased their business transformation and their use of Halliburton Landmark's tools.
Jeffrey Allen Miller: Our customers tell us we create unique value with our iEnergy cloud platform, which seamlessly integrates into their workflows.
Jeffrey Allen Miller: I am confident that Landmark's Decision Space 365 will expand and add to our customers' productivity and innovation journey. Next, Halliburton's artificial lift product line is growing in international markets at double the rate of our overall international business. It embodies our successful M&A strategy of bolt-on acquisitions that bring leading technology into our portfolio. We organically grow new technologies through our global footprint and through collaboration with our customers to engineer solutions that maximize their asset value. As one example, this quarter, we launched our GEO ESP line, which is engineered for the harsh geothermal environment. The GEO ESP line solves for extreme thermal cycling, scale development, abrasion, and corrosion.
Speaker Change: I am confident that Landmark's Decision Space 365 will expand and add to our customers' productivity and innovation journey.
Speaker Change: Next, Halliburton's artificial lift product line is growing in the international markets at double the rate of our overall international business.
Speaker Change: It embodies our successful M&A strategy of bolt-on acquisitions that bring leading technology into our portfolio.
Speaker Change: We organically grow new technologies through our global footprint and through collaboration with our customers to engineer solutions that maximize their assets value.
Speaker Change: As one example, this quarter we launched our GeoESP line, which is engineered for the harsh geothermal environment.
Speaker Change: The GEO ESP line solves for extreme thermal cycling, scale development, abrasion and corrosion.
Jeffrey Allen Miller: While geothermal ESP technology has applications across the globe, Halliburton sees substantial growth opportunities in Europe, where customers require advanced technology to bring geothermal energy to scale.
Speaker Change: While geothermal ESP technology has applications across the globe, Halliburton sees substantial growth opportunities in Europe , where customers require advanced technology to bring geothermal to scale.
Jeffrey Allen Miller: Halliburton's drilling services are key to our success in the international market. We had another strong quarter in unconventional drilling with our I-Cruise X rotary steerable system and our Logix autonomous drilling platform. We deployed advancements that improved drilling speed and reliability and set several interval records during the quarter.
Speaker Change: Finally, Halliburton's drilling services are key to our success in the international markets.
Speaker Change: We had another strong quarter in unconventional drilling with our I-Cruise X rotary steerable system and our Logix autonomous drilling platform.
Speaker Change: We deployed advancements that improved drilling speed and reliability and set several interval records during the quarter.
Jeffrey Allen Miller: We invest in differentiated drilling technology, and we expect our strong performance and reliable execution to drive above-market growth. For example, in the Middle East, our drilling services revenue grew about 30 percent year over year. I am pleased with our international business and look forward to deepening our strategy and delivering additional profitable growth. Turning to North America, Our second quarter revenue declined 3% compared to the first quarter. Halliburton's first half 2024 results were largely as we expected. However, as we have seen, Rick Counts and overall service activity declined through the quarter.
Speaker Change: We invest in differentiated drilling technology, and we expect our strong performance and reliable execution to drive above-market growth.
Speaker Change: For example, in the Middle East, our drilling services revenue grew about 30% year-over-year.
Speaker Change: I am pleased with our international business and look forward to deepening our strategy and delivering additional profitable growth.
Speaker Change: Turning to North America.
Speaker Change: Our second quarter revenue declined 3% compared to the first quarter.
Speaker Change: Halliburton's first half 2024 results were largely as we expected.
Speaker Change: However, as we have seen, Rick Counts and overall service activity declined through the quarter.
Jeffrey Allen Miller: As I look to the second half of 2024, I now expect full-year North American revenues to decline 6 to 8 percent versus last year, driven by lower activity. I expect that the second half of 2024 will be near the low point of activity levels this cycle, and while it's too early to give specific guidance for 2025 in North America, I expect activity to be directionally higher than the second half of 2024.
Speaker Change: As I look to the second half of 2024, I now expect full-year North America revenues to decline 6 to 8 percent versus last year, driven by lower activity.
Speaker Change: I expect that the second half of 2024 will be near the low point of activity levels this cycle, and while it's too early to give specific guidance for 2025 in North America, I expect activity to be directionally higher than the second half of 2024.
Jeffrey Allen Miller: Here's how I think about it. First, I expect an increase in activity after E&P companies complete their acquisitions and establish new development plans. Second, some of the merged assets will be divested to smaller operators who will put them to work.
Speaker Change: Here's how I think about this.
Speaker Change: First, I expect an increase in activity after E&P companies complete their acquisitions and establish new development plans.
Speaker Change: Second, some of the merged assets will be divested to smaller operators who will put them to work.
Speaker Change: Finally, I expect some recovery in natural gas activity.
Jeffrey Allen Miller: Finally, I expect some recovery in natural gas activity. Six years ago, we set our strategy to maximize value in North America. I understand that it may take a market like we see today, where North America activity declined by over 200 rigs in the last 18 months, to demonstrate the margin resilience and earnings power of our strategy. I am pleased that Halliburton delivered strong C&P margins through this period, and I am confident that our strategy will deliver strong results in the future.
Speaker Change: Six years ago, when we set our strategy to maximize value in North America, I understood it may take a market like we see today, where North America activity declined by over 200 rigs in the last 18 months.
Speaker Change: to demonstrate the margin resilience and earnings power of our strategy.
Speaker Change: I am pleased that Halliburton delivered strong C&P margins through this period and I am confident that our strategy will deliver strong results in the future.
Jeffrey Allen Miller: We're committed to our strategy to maximize value in North America because it delivers shareholder value, and it is the right strategy for this market. For Halliburton, we focus on return. We allocate capital to the markets and products that drive superior returns. We prioritized returns over market share, and to that end, we retired a few fleets this quarter. We develop differentiated technologies that solve for the unique requirements of the North American market. And lastly, we improve efficiency for our customers through these technologies, service quality, and execution.
Speaker Change: We're committed to our strategy to maximize value in North America because it delivers shareholder value, and it is the right strategy for this market.
Speaker Change: For Halliburton, we focus on returns. We allocate capital to the markets and products that drive superior returns and margins.
Speaker Change: We've prioritized returns over market share, and to that end, we retired a few fleets this quarter.
Speaker Change: We develop differentiated technologies that solve for the unique requirements of the North America market.
Speaker Change: And lastly, we improve efficiencies for our customers through those technologies, service quality, and execution.
Jeffrey Allen Miller: I expect this strategy will deliver leading performance for our customers and a structurally more resilient North America business for Halliburton. A key part of how we do this is our strategic investment in technology. One technology I'm excited about is the latest addition to Octave, a key component of the Zeus platform. Today, Octave is a cornerstone of how we deliver large multi-well pads with unmatched precision and consistency, as our customers execute completions with ever-increasing size and intensity.
Speaker Change: I expect this strategy will deliver leading performance for our customers and a structurally more resilient North America business for Halliburton.
Speaker Change: A key part of how we do this is our strategic investment in technology.
Speaker Change: One technology I'm excited about is the latest addition to Octave, a key component of the Zeus platform.
Speaker Change: Today, Octave is a cornerstone of how we deliver large multi-well pads with unmatched precision and consistency.
Speaker Change: As our customers execute completions with ever-increasing size and intensity, automation, as delivered by Octave, provides better control and more effective delivery for SimulFrac and TrimulFrac operations.
Jeffrey Allen Miller: Automation, as delivered by Octave, provides better control and more effective delivery for simulfrac and trimulfrac operations. During the second quarter, we completed field trials of the latest level of Octave automation called AutoFrag, which executes the entire frac job, from ramp up at the start to ramp down at the end, making autonomous fracturing a reality.
Dennis: Dennis. During the second quarter, we completed field trials of the latest level of octave automation called Auto-Fract, with the single click of a button. Auto-fract executes the entire frack job from ramp up at the start to ramp down at the end, making autonomous fracturing a reality.
Speaker Change: During the second quarter, we completed field trials of the latest level of octave automation called AutoFrac.
Speaker Change: with the single click of a button.
Speaker Change: AutoFrac executes the entire frac job from ramp up at the start to ramp down at the end, making autonomous fracturing a reality.
Jeffrey Allen Miller: This new level of automation gives customers control to execute the FRAC design exactly as they want it, without human intervention. Autofrac is ready to scale, and I'm excited about what this technology means for our customers and for Halliburton. Lastly, we see rapid adoption in North America of our I-Cruise rotary steerable system. We consistently reduce drilling times for our customers and create significant value. In the Permian Basin, the number of rigs running the system has increased by almost 45% since the start of this year.
Dennis: This new level of automation gives customers control to execute the frack design, exactly how they want it without human intervention. Following our commercial trials, Auto-fract is ready to scale, and I'm excited about what this technology means for our customers and for Haliburton.
Speaker Change: This new level of automation gives customers control to execute the frag design exactly how they want it, without human intervention.
Speaker Change: Following our commercial trials, AutoFrac is ready to scale, and I'm excited about what this technology means for our customers and for Halliburton.
Dennis: Lastly, we see rapid adoption in North America over our iCruise rotary steerable system. We consistently reduce drilling times for our customers and create significant value. In the Permian Basin, the number of rigs running the system has increased by almost 45% since the start of this year. We are on pace to triple our footage drilled in North America this year, and I'm excited about the market adoption of iCruise. North America is the largest oil field services market in the world. We are crystal clear on how we maximize value in North America. We have demonstrated that this strategy works, and that's why I am confident that we will continue to deliver strong returns through this cycle.
Speaker Change: Lastly, we see rapid adoption in North America of our I-Cruise rotary steerable system.
Speaker Change: We consistently reduce drilling times for our customers and create significant value.
Speaker Change: In the Permian Basin, the number of rigs running the system has increased by almost 45% since the start of this year. We are on pace to triple our footage drilled in North America this year, and I'm excited about the market adoption of I-Cruise.
Jeffrey Allen Miller: We are on pace to triple our footage drilled in North America this year, and I'm excited about the market adoption of I-Crew. North America is the largest oilfield services market in the world, and we are crystal clear on how we maximize value in North America.
Speaker Change: North America is the largest oilfield services market in the world.
Jeffrey Allen Miller: We have demonstrated that this strategy works, and that's why I am confident that we will continue to deliver strong returns through this cycle. Halliburton's returns and cash flows are strong, and I am pleased with our performance this quarter. I'm just back from a few weeks in Europe and Africa.
Speaker Change: We are crystal clear on how we maximize value in North America.
Speaker Change: We have demonstrated that this strategy works, and that's why I am confident that we will continue to deliver strong returns through this cycle.
Dennis: To step back, Haliburton's returns and cash flows are strong, and I am pleased with our performance this quarter. I'm just back from a few weeks in Europe, Africa, but I saw as a microcosm of Haliburton around the world. The quality of our people, the clarity of our strategy, our leading technologies, the depth of our pipeline of opportunities, and the competitiveness of our business segments all give me incredible confidence in Haliburton's future.
Speaker Change: to step back.
Speaker Change: Halliburton's returns and cash flows are strong, and I am pleased with our performance this quarter.
Jeffrey Allen Miller: What I saw is a microcosm of Halliburton around the world. The quality of our people, the clarity of our strategy, our leading technologies, the depth of our pipeline of opportunities, and the competitiveness of our business segment all give me incredible confidence in Halliburton's future. Now, I'll turn the call over to Eric to provide a few more details on our financial results. Thank you, Jeff, and good morning.
Speaker Change: I'm just back from a few weeks in Europe-Africa.
Speaker Change: What I saw is a microcosm of Halliburton around the world.
Speaker Change: The quality of our people, the clarity of our strategy, our leading technologies, the depth of our pipeline of opportunities, and the competitiveness of our business segments all give me incredible confidence in Halliburton's future.
Eric Carre: Now I'll turn the call over to Eric to provide a few more details on our financial results. Eric?
Speaker Change: Now I'll turn the call over to Eric to provide a few more details on our financial results. Eric?
Eric J. Carre: Our Q2 reported net income per diluted share was, Total company revenue for the second quarter of 2024 was $5.8 billion, flat sequence. Operating income was $1 billion, a sequential increase of 5%, and Operating Margin was 18%, a sequential increase of 69. Beginning with our Completion and Production Division, revenue in Q2 was $3.4 billion, sequentially flat. Operating income was $723 million, up 5% when compared to Q1 2024, and operating income margin was 21%. These results were primarily driven by strong international completion and production performance, offsetting softer results in North America. In our drilling and evaluation division, revenue in Q2 was $2.4 billion.
Eric Carre: Thank you, Jeff, and good morning. Our Q2 reported net income per diluted share was 80 cents. Total company revenue for the second quarter of 2024 was 5.8 billion dollars, flat sequentially. Operating income was $1 billion, the sequentially increase of 5%, and operating margin was 18%. The sequentially increase of 69 basis points.
Eric J. Carre: Thank you, Jeff, and good morning.
Eric J. Carre: Our Q2 reported net income per diluted share was $0.80.
Eric J. Carre: Total company revenue for the second quarter of 2024 was $5.8 billion, flat sequentially.
Eric J. Carre: Operating income was $1 billion, a sequential increase of 5%, and operating margin was 18%, a sequential increase of 69 basis points.
Eric Carre: Beginning with our completion and production division, revenue in Q2 was $3.4 billion, sequentially flat. Operating income was $723 million, a 5% when compared to Q1 2024; an operating income margin was 21%. These results were primarily driven by strong international completion and production performance of setting softer results in North America.
Eric J. Carre: Beginning with our completion and production division, revenue in Q2 was $3.4 billion, sequentially flat.
Eric J. Carre: Operating income was $723 million, up 5% when compared to Q1 2024, and operating income margin was 21%.
Eric J. Carre: These results were primarily driven by strong international completion and production performance, offsetting softer results in North America.
Eric Carre: In our drilling and evaluation division, revenue in Q2 was $2.4 billion, while operating income was $403 million, both sequentially flat from Q1 2020. 24. Operating margin was 17%, a sequential increase of 20 basis points. These results reflect the strength of our global de-any business despite the roll-off of seasonal software sales in Q2, which affected every region.
Eric J. Carre: In our Drilling and Evaluation Division, revenue in Q2 was $2.4 billion, while operating income was $403 million, both sequentially flat from Q1 2024.
Eric J. Carre: While operating income was $403 million, both sequentially flat from Q1 2020, operating margin was 17%, a sequential increase of 20. These results reflect the strength of our global D&E business, despite the roll-off of seasonal software sales in Q2, which affected every region. Now, let's move on to geographic, are due to an international revenue increase of 3% sequence. Europe-Africa revenue in the second quarter of 2024 was $757 million, an increase of 4% sequence. This increase was primarily driven by higher well construction activity and improved wireline activity in Norway, along with increased completion tool sales and higher stimulation activity in West Africa.
Eric J. Carre: Operating margin was 17%, a sequential increase of 20 basis points.
Eric J. Carre: These results reflect the strength of our global D&E business, despite the roll-off of seasonal software sales in Q2, which affected every region. Now let's move on to geographic results.
Eric Carre: Now let's move on to geographic results. Our Q2 international revenue increase 3% sequentially. Europe Africa revenue in the second quarter of 2024 was $757 million, an increase of 4% sequentially. This increase was primarily driven by higher-well construction activity and improved while an activity in Norway, along with increased completion tool sales and higher-stimulation activity in West Africa. Middle East Asia revenue in the second quarter of 2024 was $1.5 billion, an increase of 5% sequentially. This increase was primarily related to higher activity in the Middle East across multiple product lines and higher fluid services in Asia. Latin America revenue in the second quarter of 2024 was $1.1 billion, sequentially flat.
Speaker Change: Our Q2 international revenue increased 3% sequentially.
Speaker Change: Europe-Africa revenue in the second quarter of 2024 was $757 million, an increase of 4% sequentially.
Speaker Change: This increase was primarily driven by higher well construction activity and improved wireline activity in Norway, along with increased completion tool sales and higher stimulation activity in West Africa.
Eric J. Carre: Middle East and Africa revenue in the second quarter of 2024 was $1.5 billion, an increase of 5% sequentially. This increase was primarily related to higher activity in the Middle East across multiple product lines and higher fluid services in air. Latin America revenue in the second quarter of 2024 was $1.1 billion, sequentially flat; in North America, revenue was $2.5 billion, representing a 3% decrease sequentially. This decline was primarily driven by decreased pressure pumping services in U.S. land and decreased completion tool sales and testing services in the government.
Speaker Change: Middle East Asia revenue in the second quarter of 2024 was 1.5 billion dollars, an increase of 5% sequentially.
Speaker Change: This increase was primarily related to higher activity in the Middle East across multiple product lines and higher fluid services in Asia.
Speaker Change: Latin America revenue in the second quarter of 2024 was $1.1 billion, sequentially flat.
Eric J. Carre: In North America, revenue was $2.5 billion, representing a 3% decrease sequentially. This decline was primarily driven by decreased pressure pumping services in US land and decreased completion tool sales and testing services in the Gulf of Mexico.
Speaker Change: In North America...
Speaker Change: Revenue was $2.5 billion, representing a 3% decrease sequentially. This decline was primarily driven by decreased pressure pumping services in U.S. land and decreased completion tool sales and testing services in the Gulf of Mexico.
Eric Carre: Moving on to other items. In Q2, our corporate and other expense was $65 million. For the third quarter of 2024, we expect our corporate expenses to increase slightly. Our SAP deployment remains unbudget and is on schedule to conclude in 2025. In Q2, we spent $29 million, or about three cents per diluted share, on SAP S4 migration, which is included in our results. For the third quarter, we expect SAP expenses to increase slightly. Net interest expense for the quarter was $92 million for the third quarter 2024. We expect net interest expense to be roughly flat. Other net expense for Q2 was $20 million, which was lower than anticipated, driven by favorable effects movements.
Eric J. Carre: Moving on to other items, in Q2, our corporate and other expenses were $65 million. For the third quarter of 2024, we expect our corporate expenses to increase slightly. Our SAP deployment remains on budget and is on schedule to conclude in 2025. In Q2, we spent $29 million, or about $0.03 per diluted share on the SAP S4 migration, which is included in our For the third quarter, we expect SAP expenses to increase slightly. Net interest expense for the quarter was $92 million.
Speaker Change: Moving on to other items. In Q2, our corporate and other expense was $65 million. For the third quarter of 2024, we expect our corporate expenses to increase slightly.
Speaker Change: Our SAP deployment remains on budget and is on schedule to conclude in 2025. In Q2, we spend $29 million, or about $0.03 per diluted share, on SAP S4 migration, which is included in our results.
Speaker Change: For the third quarter, we expect SAP expenses to increase slightly.
Eric J. Carre: For the third quarter of 2024, we expect net interest expense to be roughly flat; other net expense for Q2 was $20 million, which was lowered and anticipated, driven by favorable effects. For the third quarter of 2024, we expect this expense to be approximately $35 million. Our effective tax rate for Q2 was $22.5, lower than expected due to discrete items.
Speaker Change: Net interest expense for the quarter was $92 million. For the third quarter 2024, we expect net interest expense to be roughly flat. Other net expense for Q2 was $20 million, which was lower than anticipated, driven by favorable FX movements.
Eric Carre: For the third quarter of 2024, we expect this expense to be approximately $35 million. Our effective tax rate for Q2 was 22.5%. Lower than expected due to discrete items. Based on our anticipated geographic earnings mix, we expect our third quarter of 2024 effective tax rate to increase approximately 1%.
Speaker Change: For the third quarter of 2024, we expect this expense to be approximately $35 million.
Speaker Change: Our effective tax rate for Q2 was 22.5%, lower than expected due to discrete items.
Eric J. Carre: Based on our anticipated geographic earnings mix, we expect our third quarter of 2020 effective tax rate to increase approximately 1%. Capital expenditures for Q2 were $347 million. For the full year of 2024, we expect capital expenditures to be approximately 6% of revenue. Our Q2 cash flow from operations was $1.1 billion, and free cash flow was $793 million. During the quarter, we repurchased $250 million of our common stock for the full year 2024.
Speaker Change: Based on our anticipated geographic earnings mix, we expect our third quarter of 2020 for effective tax rate to increase approximately 1%.
Eric J. Carre: Capital expenditures for Q2 were $347 million. For the full year of 2024, we expect capital expenditures to be approximately 6% of revenue.
Speaker Change: Capital expenditures for Q2 were $347 million. For the full year of 2024, we expect capital expenditures to be approximately 6% of revenue.
Eric Carre: Our Q2 cash flow from operations was $1.1 billion, and free cash flow was $793 million.
Speaker Change: Our Q2 cash flow from operations was $1.1 billion and free cash flow was $793 million. During the quarter, we repurchased $250 million of our common stock.
Speaker Change: for the full year 2024.
Speaker Change: We expect free cash flow to be at least 10% higher than in 2023.
Eric J. Carre: We expect free cash flow to be at least 10% higher than in 2020. Now, let me provide you with some comments on our expectations for the third quarter. In our Completion and Production Division, we anticipate sequential revenue to be down 1 to 3 percent and margins to decrease by 75 to 125 basis. In our Drilling and Evaluation Division, we expect sequential revenue to increase 2-4% and margins to increase by 25-75%. I will now turn the call back. Thanks, Eric.
Speaker Change: Now, let me provide you with some comments on our expectations for the third quarter.
Speaker Change: In our Completion and Production Division, we anticipate sequential revenue to be down 1 to 3 percent and margins to decrease by 75 to 125 basis points.
Speaker Change: In our drilling and evaluation division, we expect sequential revenue to increase 2 to 4 percent and margins to increase by 25 to 75 basis points.
Jeffrey Allen Miller: Here are a few key points I would like you to take away from our discussion today. I am pleased with our 18% margins and about $800 million of free cash flow in the second quarter. We are well on track to deliver over 10% free cash flow growth this year. I'm excited about our international business, where our technology portfolio has never been stronger. I am confident that our strategy to maximize value in North America is working, and I expect it to continue to deliver strong returns.
Speaker Change: I will now turn the call back to Jeff.
Jeffrey Allen Miller: Thanks, Eric. Here are a few key points I would like you to take away from our discussion today.
Jeffrey Allen Miller: I am pleased with our 18% margins and about $800 million of free cash flow in the second quarter.
Jeffrey Allen Miller: We are well on track to deliver over 10% free cash flow growth this year. I'm excited about our international business where our technology portfolio has never been stronger.
Jeffrey Allen Miller: I am confident that our strategy to maximize value in North America is working, and I expect it continues to deliver strong returns.
Jeffrey Allen Miller: Finally, I am convinced that our collaborative approach and value proposition differentiate us from our competitors and are directly aligned with how our customers expect to drive improved performance. And now, we open it up for questions. As a reminder, to ask a question, please press star 1 1 on your telephone and wait for your name to be called. To withdraw your question, please press star 1 1 again.
Jeffrey Allen Miller: Finally, I am convinced that our collaborative approach and value proposition differentiate us from our competitors and are directly aligned with how our customers expect to drive improved performance.
Speaker Change: And now, let's open it up for questions.
Speaker Change: 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.
Operator: Please stand by while we compile the Q&A. Our first question will come from the line of Dave Anderson with Barclays. Hi, good morning, Jeff. Good morning, Dave.
Speaker Change: Please stand by while we compile the Q&A roster.
Speaker Change: Our first question will come from the line of Dave Anderson with Barclays.
Dave Anderson: So North America's softening a little bit. Um, not, not a surprise. A lot of your fleet, though, is under contract with eFleet. I think it's around 40% or so, and you're continuing to roll out equipment. So I'm just wondering about the recontracting of those. I think you typically have, like, two to three-year contracts.
Dave Anderson: Hi, good morning, Jeff.
Jeffrey Allen Miller: Morning, Dave.
Speaker Change: So North America is softening a little bit, not a surprise.
Dave Anderson: A lot of your fleet, though, is under contract with E-Fleet. I think it's around 40% or so, and you're continuing to roll out equipment. So I'm just wondering about the recontracting of those. I think you typically have like two, three-year contracts. I would assume like maybe a third of that gets repriced each year or something like that.
Jeffrey Allen Miller: I would assume, like, maybe a third of that gets repriced each year or something like that. So what does that look like right now in terms of contracting? I think I'm assuming demand still outstrips supply here. So is pricing able to still move higher in there? Are you doing kind of blend and extend deals for some customers who want more? Just a little color around the repricing of that, of the eFle
Speaker Change: So what does that look like right now, in terms of contracting? I think...
Speaker Change: I'm assuming demand still outstrips supply here. So is pricing able to still move higher in there? Are you doing kind of blend and extend deals for some customers who want more? Just a little color around the repricing of that, of the e-commerce.
Jeffrey Allen Miller: Yeah, well, we'll still see a lot of demand, Dave, for eFleets. I mean, clearly, it's a leading technology, and we rolled out a couple this quarter and signed some more contracts. And so, you know, that's a runway through the end of this year and into the 25 that we see today. We don't have any contracts expiring really till next year. And so, you know, that's a process that we're working through. I'm not going to go through all that on this call.
Speaker Change: Yeah, well let's still see a lot of demand day for E-fleets, I mean clearly it's a leading technology and we
Speaker Change: rolled a couple out this quarter and signed some more contracts and so you know that's a runway through the end of this year and into 25 that we see today.
Speaker Change: We don't have any contracts expired really until next year, and so, you know, that's a process that we're working through. I'm not going to go through all that on this call, but, you know,
Jeffrey Allen Miller: But you know, we're signing up with repeat customers, which is a pretty good indicator of the value that they're creating. So, you know, feel confident about that process, but really don't want to go through it on the call. I totally understand, but would you expect that most of those fleets would stay with existing customers? Yeah, I feel, yes. Yes, Bill Cobb. I mean, these are the same customers, in some cases, that are signing up the second and even beyond that fleets, and so there is no reason to believe that they would not, and they were clearly on the path to 40% in 2024 and 2025 as well. I mean, I think that's just the trajectory getting clearer every day. Yeah, that makes a lot of sense.
Speaker Change: We're signing up with repeat customers, which is a pretty good indicator of the value that they're creating. So, you know, feel confident about that process, but really don't want to go through it on the call.
Unnamed: I totally understand, but would you expect that most of those cleats stay with existing customers? Yeah, I feel, yes. Yes, still comp. I mean, these are the same customers, in some cases, that are signing up the second and even beyond that fleet.
Speaker Change: I totally understand, but would you expect that most of those fleets stay with existing customers?
Speaker Change: Yeah, I feel, yes.
Speaker Change: Yes, Bill Cobb, I mean, these are the same customers in some cases that are signing up the second and even beyond that fleets and so no reason to believe that they would not and they were clearly on the path to the 40%.
Unnamed: So, the reason to believe that they would not, and they'll clearly on the path to the 40% in 2024 and 25 as well. I mean, I think that's just that trajectory gets clearer every day. Yeah, that makes a lot of sense.
Speaker Change: and 20, 24 and 25 as well. I mean I think that's just that trajectory gets clearer every day.
Jeffrey Allen Miller: And if I shift over to your international story here, and within the 10% revenue growth, you highlighted the Middle East up 5% this quarter, sequentially. Can you just talk about that part of the international story for you and kind of how you see that growth? Should growth start to accelerate here? There's a big unconventional play over there that I know you're involved in.
Unnamed: And if I shift over to your international story here. And within the 10% revenue growth, you highlight a Middle East up 5% this quarter. Can you just start about that part of the international story for you and kind of how you see that growth? Should growth start to accelerate here?
Speaker Change: Yeah, that makes a lot of sense. And if I shift over to your international story here, and within the 10% revenue growth, you highlighted Middle East up 5% this quarter.
Speaker Change: sequentially. Can you just talk about that part of the international story for you and kind of how you see that growth?
Unnamed: Is big on a conventional play over there, but I know you're involved in, I don't know if you can talk about any other contracting opportunities with that. But I would, in my wrong to think that that growth should start to accelerate in the Middle East, even within the 10% I know you, but really into next year as well. No, you're not wrong. Look, I'm very confident around our business in the Middle East, as you say.
Speaker Change: Should growth start to accelerate here? There's a big unconventional play over there that I know you're involved in.
Jeffrey Allen Miller: I don't know if you can talk about any other contracting opportunities with that. But I would, am I wrong to think that growth should start to accelerate in the Middle East, even, I mean, within the 10%, I know you, but really into next year as well? No, you're not wrong.
Speaker Change: I don't know if you can talk about any other contracting opportunities with that, but I would, am I wrong to think that that growth should start to accelerate in the Middle East, even, I mean, within the 10%, I know you, but really into next year as well? No, you're not wrong. Um, look, I'm
Jeffrey Allen Miller: Look, I'm very confident about our business in the Middle East. And as you say, I'm not going to talk about contracts, but you know, Aramco obviously is a fantastic operator. And we've got a lot of exposure to both the unconventional and gas work in Saudi Arabia. Yeah, I've got, you know, typical services, a lot of exposure, and even some creative sort of new things. So, I'm very optimistic, actually bullish on the Middle East. All right, it's good to hear. Thanks, Jeff. Thank you. Our next question will come from the line of Arun Jayaram. Good morning, Jeff. My first question is about North America.
Unnamed: I'm not going to talk about contracts with your Aramco obviously. They've been a fantastic operator. And we've got a lot of exposure to both the unconventional and the gas work in Saudi Arabia. Yeah, I've got, you know, our typical services, a lot of exposure, and even some creative sort of new things. So I'm very optimistic, actually bullish around the Middle East.
Speaker Change: Very confident around our business in the Middle East, and as you say, I'm not going to talk about contracts, but you know, Aramco obviously is a fantastic operator, and we've got a lot of exposure to both the unconventional and the gas work in Saudi Arabia.
Speaker Change: Yeah, I've got, you know.
Speaker Change: Our typical services, a lot of exposure, and even some creative sort of new things.
Unnamed: All right, let's go to here. Thank you.
Speaker Change: I'm very optimistic, actually bullish around the Middle East.
Speaker Change: All right, it's good to hear. Thanks, Jeff.
Arun Jayaram: Our next question will come from the line of Arun Jairam with JP Morgan. Good morning. Jeff, my first question is on North America. You now expect revenues down 6 to 8% year every year. How do you characterize the declines in terms of impacts from lower activity levels versus call it placing impacts? Look, it's primarily; this is activity based. You know, the fact that we retired a few things during the quarter as well. But this is activity, and that's, you know, as we look at activity, you know, for the year, gas market actually took a leg down.
Speaker Change: Thank you.
Speaker Change: Our next question will come from the line of Arun Jayaram.
Arun Jayaram: You now expect revenues down six to 8% year over year. How would you characterize the declines in terms of impact from lower activity levels versus, call it, pricing impact? Look, it's primarily this is activity-based, you know, the fact that we, and then we, you know, we retired a few fleets during the quarter as well, but this is activity, and as we look at activity, you know, for the year, the gas market actually took a leg down.
Arun Jayaram: with J.P. Morgan.
Arun Jayaram: Good morning. Jeff, my first question is on North America. You now expect revenues down 6% to 8% year-over-year. How would you characterize
Jeffrey Allen Miller: The declines in terms of impact from lower activity levels versus, call it pricing impacts.
Speaker Change: Look, it's primarily, this is, this is,
Speaker Change: activity-based. You know the fact that we, and then we, you know, we retired a few fleets during the quarter as well, but this is activity and that's, you know, as we look at activity.
Arun Jayaram: I didn't think it would come up, but I didn't really expect it to take a leg down either, so it's not flat, and I think M&A takes some time to digest, and so that has an impact on activity broadly and clearly efficiencies. I mean, we've got terrific technology, we talk about efficiencies all the time, but we also need to catch up on risk. Glad we're at the leading edge of that technology, and that performance makes Halliburton more valuable, but it really doesn't change the activity outlook.
Dennis: I didn't think it would come up, but I didn't really expect it to take a leg down either. So it's not flat. And I think emanate takes some time to digest. And so that has an impact on activity broadly. And clearly, efficiencies. I mean, we've got terrific technology. We talked about efficiencies all the time, but we also catch up the rates. Glad we're at the leading edge of that technology, and that performance makes caliber more value, but it really doesn't change the activity output. Understood, understood.
Speaker Change: you know, for the year.
Speaker Change: Gas market actually took a leg down. I didn't think it would come up, but I didn't really expect it to take a leg down either, so it's not flat.
Speaker Change: M&A takes some time to digest, and so that has an impact on activity, broadly, and clearly efficiencies. I mean, we've got terrific technology. We talk about efficiencies all the time, but we also catch up to rates.
Speaker Change: Glad we're at the leading edge of that technology, and that performance makes Halliburton more value, but it really doesn't change the activity outlook.
Jeffrey Allen Miller: Jeff, you've obviously been on the road quite a bit internationally; you expect 10% year-over-year growth this year. I was wondering if you could give us any, you know, qualitative or even quantitative thoughts on how you think international spending trends will affect industry in 2025 and how growth prospects will be internationally next year. Look, they look strong for next year internationally.
Dennis: Jeff, you've obviously been on the road quite a bit internationally. You expect 10% year over your growth this year. I was wondering if you could give us any, you know, qualitative or even quantitative thoughts on how you think. International spending trends in 2025 for industry and how is growth prospects internationally next year. Look, they look strong for next year internationally. We see a lot of projects that are either just now being pended or activity going into next year. In some cases, it takes a while to get the international up and going. And so, probably the activity that picks up the send us will be where it's sort of in O.C.
Speaker Change: Understood, understood.
Speaker Change: Jeff, you've obviously been on the road quite a bit internationally. You expect 10% year-over-year growth this year. I was wondering if you could give us any qualitative or even quantitative thoughts on how you think
Jeffrey Allen Miller: International spending trends in 2025 for industry and how the growth prospects internationally next year.
Jeffrey Allen Miller: I mean, we see a lot of projects that are either just now being tendered or activity going into next year, and in some cases, it takes a while to get the international up and going. And so probably the activity that picks up the soonest will be where it's sort of NOC-driven, which would, you know, look in some cases like, you know, obviously the Middle East. In others where the IOCs are engaged, it takes a lot of negotiation, contract extensions for them. And so I'm seeing, you know, meaningful work. I just talked about my trip to Europe and Africa, and I see, you know, meaningful stuff up there. I'm still excited about Latin America and what's possible there.
Speaker Change: Look, they look strong for next year internationally. I mean, we see...
Speaker Change: A lot of projects that are either just now being tendered or activity going into next year and in some cases that, you know, it takes a while to get the international up and going. And so probably the activity that picks up the send us will be where it's sort of NOC driven.
Dennis: driven, which would look in some cases like obviously the Middle East. Others where I O.C. are engaged that takes a lot of negotiation, contract extension for them. And so, I'm seeing, you know, meaningful work. I just talked about my trip to Europe, Africa, and I see, you know, meaningful stuff up there. Still excited about the Latin American, what's possible there. And so, no, I feel really confident both in Haliburton's outlook for 25 and the industries. Great, thanks a lot. Yeah, thank you.
Speaker Change: which would, you know, look in some cases like, you know, obviously the Middle East.
Speaker Change: others, where IOCs are engaged, it takes a lot of negotiation, contract extensions for them, and so I'm seeing, you know, meaningful work. I just talked about my trip to Europe-Africa, and I see, you know, meaningful stuff up there.
Jeffrey Allen Miller: And so, no, I feel really confident both in Halliburton's outlook for 25 and the industry. Great. Thanks a lot.
Speaker Change: I'm still excited about Latin America and what's possible there. And so, no, I feel really confident both in Halliburton's outlook for 25 and the industries.
Neil Mehta: Our next question comes from the line of Neil Mehta. With Goldman Sachs. Yeah, good morning team, Jeff. I guess the first question is building on North America. What do you think is going to be the driver that forms the bottom in activity? I think you alluded to some of those points around M&A and natural gas. But maybe you can unpack that more. Are you seeing any green shoots and customer conversations that would suggest that to a truly is the bottom? Yeah, look, I think that, you know, customers in a lot of cases are working through plans for 2025 now.
Neil Singhvi Mehta: Yeah, thank you. Our next question comes from the line of Neil Mehta with Goldman Sachs. Yeah, good morning, team. Jeff, I guess the first question, just building on North America, what do you think is going to be the driver that forms the bottom in activity? I think you alluded to some of those points around M&A and natural gas, but maybe you can unpack that more. And are you seeing any green shoots in customer conversations?
Speaker Change: Great. Thanks a lot.
Speaker Change: Yeah, thank you.
Speaker Change: Our next question comes from the line of Neil Mehta with Goldman Sachs.
Neil Singhvi Mehta: Yeah, good morning team. Jeff, I guess the first question, just building on North America, what do you think is going to be the driver that forms the bottom in activity?
Speaker Change: I think you alluded to some of those points around M&A and natural gas, but maybe you could unpack that more. Are you seeing any green shoots in customer conversations that would suggest that 2H really is the bottom?
Neil Singhvi Mehta: That would suggest that 2H really is the bottom. Yeah, look, I think that, customers in a lot of cases are working through plans for 2025 now, and you know, and let me maybe just step back and give you kind of where I see capacity and industry structure, because I think that's really important from a services standpoint. We've got, New equipment is not being built. The old equipment is attriting.
Dennis: And, you know, let me maybe just step back and give you kind of where I see the passivity and industry structure. Because I think that's really important from the service system point. You know, we've got new equipment that is not being built. The old equipment is a trading. And I think that, you know, I talked about retiring fleets as quarter. I mean, this is sort of shrinking of capacity availability. And it's happening pretty much in real time. I think across the board. And, you know, clearly as we look at next year, I say all that to say, you know, I do expect an increase in that activity around, you know, companies that get sort of new plans in place.
Jeffrey Allen Miller: Let me maybe just step back and give you kind of where I see capacity and industry structure because I think that's really important from a services standpoint. Thank God.
Jeffrey Allen Miller: And I think that, you know, I talked about retiring fleets this quarter. I mean, this is sort of a shrinking of capacity availability, and it's happening pretty much in real time, I think, across the board. And, you know, clearly, As we look at next year, I say all that to say, you know, I do expect an increase in activity around companies that get sort of new plans in place. I expect assets to end up in the hands of new teams, which is, you know, I never bet against North American entrepreneurs. That will happen.
Speaker Change: New equipment is not being built, the old equipment is attriting, and I think that, you know, I talked about retiring fleets this quarter, I mean, this is sort of shrinking of capacity availability, and it's happening pretty much in real time, I think, across the board, and, you know, clearly,
Speaker Change: As we look at next year, I say all that to say, you know, I do expect an increase in activity around, you know, companies that get sort of new plans in place, I expect.
Dennis: I expect assets end up in the hands of new teams, which is, you know, I never bet against North America entrepreneurs; that will happen. I do expect some pick up and gas. Next year, at least not a leg down from here. So clearly I would expect a leg up. And I don't think it takes a lot of activity to firm things up. I think it's the point I'm making here. Thanks, Jeff.
Speaker Change: Assets end up in the hands of new teams, which is, you know, I never bet against North America entrepreneurs. That will happen. I do expect some pickup in gas.
Jeffrey Allen Miller: I do expect some pickup in gas next year, at least not a leg down from here. So clearly, I would expect a leg up, and I don't think it takes a lot of activity to firm things up, which is the point I'm making here. Thanks, Jeff.
Speaker Change: Next year, at least not a leg down from here. So clearly I would expect a leg up. And I don't think it takes a lot of activity to firm things up, I think is the point I'm making here.
Neil Singhvi Mehta: And then just to follow up, this has been a very good quarter for free cash flow, and the company has been very consistent around $250 million of return on capital. So there are probably two parts to that question. One is, how should we think about working capital for the balance of the year? And how should we think about your commitment to returning capital? Yeah, Neil. It's Eric.
Dennis: And then just the file, there's a very good quarter for free cash flow. And the company has been very consistent around 250 million dollars of return of capital. So there's probably two parts of that question. One is, especially we think about working capital in the balance of the year. And, how should we think about your commitment to returning capital, returning capital to shareholders? You know, it's, it's our exercise we say in terms of the working capital. I mean, the working capital, we evolve in a way that is consistent with our overall guidance of free cash flow being up over 10% compared to last year.
Speaker Change: Thanks, Jeff. And then just to follow up, there's a very good quarter for free cash flow, and
Speaker Change: and the company has been.
Speaker Change: very consistent, around $250 million of return of capital. So there's probably two parts to that question. One is, how should we think about working capital in the balance of the year? And how should we think about your commitment to returning capital to shareholders?
Eric J. Carre: So as we said, in terms of working capital, I mean, working capital will evolve in a way that is consistent with our overall guidance of free cash flow being up over 10% compared to last year. We had more of a working capital headwind in 2023. So that's a significant delta between the two years, and as an organization, we continue to focus on the overall efficiency of working capital as a whole.
Eric J. Carre: Yeah Neil, it's Eric. So as we said in terms of the working capital, I mean the working capital will evolve in a way that is consistent with
Neil Singhvi Mehta: Our overall guidance of free cash flow being up over 10% compared to last year.
Dennis: We had more of the working capital had wins in 2023. So that's a significant delta between the two years. And as an organization, we continue to focus on the overall efficiency of working capital as a home. In terms of cash return, we bought back 250 million in Q1, 250 million in Q2. And I think generally speaking, it's a good, you know, kind of guiding point in terms of what we can kind of disstage to do for the remaining of 2024. Thank you.
Speaker Change: We had more of a working capital headwinds in 2023, so that's a significant delta between the two years, and as an organization, we continue to focus on the overall efficiency of working capital as a whole.
Eric J. Carre: In terms of cash return, we bought back $250 million in Q1, $250 million in Q2, and I think, generally speaking, it's a good, you know, kind of guiding point in terms of what we intend at this stage to do for the remaining of 2024. Thank you, Jeffrey. Our next question comes from the line of James West with Evercore. Hey, good morning, Jeff. Good morning, James.
Speaker Change: In terms of cash return, we bought back $250 million in Q1, $250 million in Q2.
Speaker Change: and I think generally speaking it's a good, you know, kind of guiding point in terms of what we intend at this stage to do for the remaining of 2024.
James West: Our next question comes from the line of James West with Evercore ISI. Hey, good morning, Jeff. Good morning, James.
Speaker Change: Thank you, guys.
Speaker Change: Our next question comes from the line of James West with Evercore ISI.
James Carlyle West: So, Jeff, as you think about, and I don't want to beat a dead horse too much, but if you think about North America going into next year, we're, I'm increasingly bullish on the outlook for 25 and certainly for 26, both with oil prices where they are and gas prices, which should rebound nicely. And we have this huge power demand pull coming from the tech industry, and I think the tech industry is more fully aligned with the oil and gas industry than it's probably ever been.
Dennis: Jeff, as you think about, and I don't want to be a dead horse too much, but if you think about North America going in the next year, I'm increasingly bullish on the outlook for 25 and certainly for 26. Both with all prices where they are and gas prices, which should rebound nicely, and we have this huge power demand poll coming from the tech industry. I think the tech industry is more fully aligned with the oil and gas industry than it's probably ever been. So I'm curious about your customer conversations, how they're thinking about, how do we get this gas to market?
James Carlyle West: Hey, good morning, Jeff.
James Carlyle West: Morning, James.
James Carlyle West: So Jeff as you think about, and I don't want to beat a dead horse too much, but if you think about North America going into next year, we're, I'm increasingly bullish on the outlook for 25 and certainly for 26.
James Carlyle West: Both with oil prices where they are and gas prices, which should rebound nicely. And we have this huge power demand pull coming from the tech industry, and I think the tech industry is
James Carlyle West: So, I'm curious about your customer conversations, how they're thinking about, how do we get this gas to market, how do we, you know, size up crews or size up equipment and get ready for what's going to be a surge in demand and kind of pair that with, you know, constructing more natural gas-fired power generation and things of that nature to meet data centers and AI demand. How are your conversations kind of evolving?
Speaker Change: more fully aligned with the oil and gas industry than it's probably ever been. So, I'm curious about your customer conversations, how they're thinking about, you know, how do we get this gas?
Dennis: How do we size up crews or size up equipment and get ready for what's going to be a surge in demand and kind of pair that with, you know, constructing more natural gas power generation and things of that nature to meet data centers and AI demand. How are your conversations kind of evolving there? Look, there's a lot of discussion around what to do with gas. I think your point around data centers and alignment, in my view, that will be take away for gas at some point seems easier to lay data lines and gas pipelines, and the gas is such a fantastic fuel and resource for this country that I think it's directionally absolutely correct in terms of timing.
Speaker Change: to market, how do we, you know, size up crews or size up equipment and get ready for what's going to be a surge in demand and kind of pair that with
Speaker Change: constructing more natural gas fire power generation and things of that nature to meet data centers and AI demand. How are your conversations kind of evolving there?
Jeffrey Allen Miller: Look, there's a lot of discussion around what to do with gas. You know, I think our, I think your point around data centers and alignment is just, you know, in my view, that will be the takeaway for gas at some point. It seems easier to lay data lines and gas pipelines. Gas is such a fantastic fuel and resource for this country that I think it's directionally absolutely correct. In terms of timing, you know, I think that will come along.
Speaker Change: Look, there's a lot of discussion around what to do with gas. I think your point around data centers and alignment, in my view, that will be take-away for gas at some point. It seems easier to lay data lines in gas pipelines.
Speaker Change: The
Speaker Change: Gas is such a fantastic fuel and resource for this country that I think it's
Dennis: You know, I think that will come on. I think it's early to work through the mechanics of what that means to plans, but I expect all that's coming together and the degree to which gas gets taken away that only creates more runway for oil in, you know, infirmary and basic. So I'm like, I'm share your excitement around what data centers and AI mean for our industry in terms of natural gas take away, and we've got a pretty good seat at that and get to watch it really closely and excited. Got it. Okay, that makes a lot of sense.
Speaker Change: Directionally absolutely correct in terms of timing.
Jeffrey Allen Miller: I think it's early to work through the mechanics of what that means to plans, but I expect all that's coming together. And the degree to which gas gets taken away, that only creates more runway for oil in, you know, the Permian Basin.
Speaker Change: You know, I
Speaker Change: I think that will come on. I think it's early to work through the mechanics of what that means to plans, but I expect all that's coming together, and the degree to which gas gets taken away, that only creates more runway for
Jeffrey Allen Miller: So I'm like, I share your excitement around what data centers and AI mean for our industry in terms of natural gas takeaway. And we've got a pretty good seat at that and get to watch it really closely and excited. Got it. Okay, that makes a lot of sense. And then iCruise, you mentioned adoption.
Speaker Change: oil in, you know, in the Permian Basin. So, I'm like, I'm, I'm...
Speaker Change: share your excitement around what data centers and AI mean for our industry in terms of natural gas takeaway and we've got a pretty good seat at that and get to watch it really closely and I'm excited.
James Carlyle West: Now, I mean, we had great adoption internationally, but it sounds like you're getting better adoption in the US as well. Could you maybe highlight kind of what you're seeing with the iCruise and technology and how that's unfolding? Yeah, thanks.
Dennis: And then I cruise, you mentioned adoption down. I mean, we had to get a great, great option internationally, but sounds like you're getting better adoption in the US as well. Could you maybe highlight kind of what you're seeing with the I cruise and technology and how that's unfolding? Yeah, thanks. Look, man, I'm really pleased with the technology in North America. And I really like the way we're going to market with it because we're going to market with full services, our own services. We're also selling direct sales and some rentals, and that tells me three things about the technology: it tells me it's in high demand.
Speaker Change: Got it. Okay, that makes a lot of sense. And then, iCruise, you mentioned adoption now. I mean, we had great adoption internationally, but it sounds like you're getting better adoption.
Speaker Change: in the U.S. as well. Could you maybe highlight kind of what you're what you're seeing with the iCruise and technology and how that's unfolding?
Jeffrey Allen Miller: Look, man, we're, I'm really pleased with the technology in North America, and I really like the way we're going to market it because, you know, we're going to market it with full services, our own services. We're also selling direct sales and some rentals. And that tells me three things about the technology.
Jeffrey Allen Miller: It tells me, A, it's in high demand. B, it tells me that it's very reliable, because we could sell it that way, and C, it's delivering performance. And I'm really pleased with the customers that are adopting it, because in my view, this kind of adoption is really, this is the gold standard of, in my view, drillers that, you know, good drilling organizations pick this tool up and say, wow, we really like it.
Speaker Change: Yeah, thanks. Look, man, we're... I'm...
Speaker Change: I'm really pleased with the technology in North America and I really like the way we're going to market with it because we're going to market with full services, our own services, we're also selling direct sales and some rentals.
Dennis: The it tells me that it's very reliable because we could sell it that way and see it's delivering performance. And I'm really pleased with the customers that are adopting it because, in my view, you know, this kind of adoption is really these are the gold standard of, in my view, you know, driller that, you know, good drilling organizations that picked this tool up and say, wow, we really like it. We want more of it.
Speaker Change: and that tells me three things about the technology. It tells me, A, it's in high demand.
Speaker Change: B, it tells me that it's very reliable, because we could sell it that way, and C, it's delivering performance. And I'm really pleased with the customers that are adopting it, because in my view,
Speaker Change: You know, this kind of adoption is really, these are the gold standard of, in my view, you know, drillers that, you know, good drilling organizations, they pick this tool up and say, wow, we really like it. We want more of it. And so,
Jeffrey Allen Miller: We want more of it. And so, Like I said, I think we've got a really good runway for drilling in North America. And it's all rooted in the sort of investments we've made over quite a few years, but I believe we're there today.
Dennis: And so, okay, okay, great, and then the other one I had, maybe this one's rare, but just looking at the third quarter guide for CMP, the margin reduction sequentially seems pretty steep for the revenue reduction we're getting. Could you talk about maybe some of the moving pieces there, what might be driving that margin weakness? Yes, I mean, there's the, the margin guidance is actually a combination of what we talked about for North America, but really two three margins in the international business are going to be lower than Q2 as well. So, they're just not too much to read into this except, you know, there's a lot of moving parts in the business. It's not just North America; it's multiple product lines as well, so it is not all related to North America.
Speaker Change: Like I said, I think we've got a really good runway around.
Speaker Change: Drilling in North America and it's all rooted in sort of investments we've made over quite a few years but I believe we're there today.
Jeffrey Allen Miller: North America's a nice cash flow machine for you guys. All right. Thanks, Jeff. Thank you. Our next question will come from the line of Luke Lemoine with Piper City. Hey, good morning.
Speaker Change: Got it. North America is a nice cash flow machine for you guys. Thanks, Jeff. Thank you.
Speaker Change: Our next question will come from the line of Luke Lemoine with Piper Sandler.
Luke Michael Lemoine: You revised the international outlook this morning. Jeff, you kind of revised the international outlook a little bit for this year. Could you walk us through some of the puts and takes that have unfolded, or is some of this just a push into 25?
Luke Michael Lemoine: Hey, good morning. You revised the International Outlook a little bit for this year. Could you walk us through some of the puts and takes that have unfolded, or is some of this just a push into 25 on the spend?
Jeffrey Allen Miller: Well, look, we're sort of halfway through the year, and we've got really good visibility of the balance of the year, and so I didn't think we'd hit the high end of the range, so wanted to tighten that up, you know, for you guys as we look out. You know, Q4 will be the highest international quarter we have, typically with software sales and tool sales. But day in and day out, we're continuing to grow, and we're very focused on profitable growth. And the oil price says that, our clients are saying that, my own project inventory is saying that. So, you know, if you describe it as a push, that's one way to think about it.
Speaker Change: Well, look, we're sort of halfway through the year, and we've got really good visibility of the balance of the year, and so I didn't think we'd hit the high end of the range, so wanted to tighten that up.
Speaker Change: You know, for you guys as we look out, you know, Q4 will be the highest international quarter we have typically with software sales and tool sales.
Speaker Change: But day in and day out, we're continuing to grow, and we're very focused on profitable growth. And as I think I alluded to earlier, you know, my expectation is that we see a continuing march internationally.
Speaker Change: of growth. And the oil price says that, our clients are saying that, my own project inventory is saying that. So, you know, if you describe it as a push, that's one way to think about it.
Jeffrey Allen Miller: But, you know, just from where we sit today, I know what we can get done, and I thought it would be worthwhile to narrow that a bit. Okay, and then you touched on it a little bit earlier, but could you walk through some of the various unconventional international opportunities you're seeing develop over the next two or three years? Certainly. Look, Saudi Arabia and Argentina today are meaningful markets that are, you know, really have heft and are executing.
Speaker Change: But, you know, just from where we sit today, I know what we can get done and I thought it would be worthwhile to...
Speaker Change: Narrow that a bit.
Speaker Change: Okay, and then you touched on it a little bit earlier, but could you walk through some of the various unconventional international opportunities you're seeing develop over the next two or three years?
Speaker Change: Certainly.
Speaker Change: Look I
Speaker Change: Saudi Arabia and Argentina today are meaningful markets that are
Jeffrey Allen Miller: And I think what has changed, and so the rest of the Middle East, I'm excited about it. The Middle East is a pretty big place if you think about it in terms of, sort of, from the Mediterranean all the way to, you know, back into Saudi.
Speaker Change: You know, really have heft and are executing. And I think what has changed, and so the rest of the Middle East I'm excited about, and the Middle East is a pretty big place if you think about it in terms of
Speaker Change: sort of from the Mediterranean all the way to, you know, back into Saudi. That's a long way, but there's a lot of activity being talked about, and I think we're right in the middle of those discussions. I know we're in the middle of those discussions. We've got a lot of experience.
Jeffrey Allen Miller: That's a long way, but there's a lot of activity being talked about, and I think we're right in the middle of those discussions. Don't think. I know we're in the middle of those discussions. We've got a lot of experience in this, and I think what's different today is the ability to, you know, accept sort of what the testing is, you know, the early days activity of this. I think there are a lot of starts and stops nationally, but now we have a proven model in two international markets where, you know, you get through the initial phase, and then it becomes a meaningful contributor to production. And I think that's being sort of seen by other places where they have good reservoirs, good rock, and are working through, I think, very carefully. Thoughtfully and pragmatically, what does it take to get from A to B?
Speaker Change: in this. And I think what's different today is the
Speaker Change: I think there's a sort of ability to, you know, accept sort of what the testing is, you know, the early days activity of this. I think there's a lot of
Speaker Change: Sort of, we've seen starts and stops internationally, but now we have a proven model.
Speaker Change: in two international markets where, you know, you get through the initial phase and then it becomes a meaningful contributor to production. And I think that's being sort of seen by other places where they have good reservoirs, good, good rock, and working through, I think, very
Jeffrey Allen Miller: And so from my perspective, that's a much better discussion than sort of a scramble, wildcat sort of move all over the world. These are very serious operators that, you know, are taking a long view. Okay, thanks, Jeff. Thank you. Our next question comes from the line of Saurabh Pant with Bank of America. Hi, good morning, Jeff and Eric. Good morning, sir. How are you?
Speaker Change: Thoughtfully and pragmatically, what's it take to get from A to B? And so from my perspective, that's a much better discussion than sort of a scramble, wildcat sort of move all over the world. These are very serious operators that, you know, are taking a long view.
Jeffrey Allen Miller: Okay. Thanks, Jeff.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Saurabh Pant with Bank of America.
Saurabh Pant: Hi, good morning, Jeff and Eric.
Saurabh Pant: Good, good, good. Thank you. Maybe, Jeff, I'll start with a question on the B&E margin. Obviously, Eric, you guided us to the third quarter.
Saurabh Pant: Morning, sir. How are you?
Saurabh Pant: Good, good, good. Thank you. Maybe, Jeff, I'll start with a question on BME margin. Obviously, Eric, you guided to the third quarter, but as we think beyond that, not just fourth quarter, but 25.
Jeffrey Allen Miller: But as we think beyond that, not just the fourth quarter, but 25, how should we think about margin expansion opportunities? Because this is a primarily international-driven business, right? How should we think about the impact of net pricing improvement and technology uptake? I know you talked about landmark, right?
Speaker Change: How should we think about margin expansion opportunity because this is a primarily international driven business, right? How should we think about the impact from...
Jeffrey Allen Miller: But just help us a little bit with the margin expansion opportunity in B&E. Yeah, I think the way to look at D&E margins is really the progression on a year-on-year basis. There tends to be quite a bit of difference between different quotas as, you know, we recognize revenue around software impacts, mostly Q1, Q4, etc.
Speaker Change: Net pricing improvement, technology uptake. I know you talked about landmark, right? But just help us a little bit with the margin expansion opportunity in D&E.
Speaker Change: Yeah, I think the way to look at D&E margins is really the progression on a year-on-year basis. There tends to be quite a bit of difference between different quotas.
Speaker Change: As you know, we recognize revenue around software impacts mostly Q1, Q4, etc. So it's really the year-on-year progression by quarter that you need to pay attention to. From that perspective, we continue to improve the margins in B&E.
Eric J. Carre: So it's really the year-on-year progression by quota that you need to pay attention to. From that perspective, we continue to improve the margins in D&E, and we firmly believe that it will continue as we get into next year. Jeff talked about the progression of the directional drilling business in North America. We continue to see progression and adoption of new drilling technologies in the international markets as well.
Speaker Change: We firmly believe that it continues as we get into next year. Jeff talked about the progression of the directional drilling business in
Jeffrey Allen Miller: North America, we continue to see progression and adoption of the new drilling technologies in the international markets as well. So, directionally, we continue to be very confident in the growth of our D&E margins as we go into 2025.
Eric J. Carre: Directionally, we continue to be very confident in the growth of our D&E margins as we go into 2025. Maybe a little more color on that, because when I think about our drilling business, we rolled out iCRUZ, which is the drilling tool, the BHA, and then that, Penetration has grown to where we're growing a lot more feet with our I-Crews than we are with our legacy tools. Probably, you know, 60, 70% of our fleet is that today.
Jeffrey Allen Miller: Maybe a little more color on that, because when I think about our drilling business, you know, we rolled out I-CRUISE, which is the drilling tool, the BHA, and then, you know, we're, that, that,
Jeffrey Allen Miller: Penetration has grown to where we're growing a lot more feet with our I-Crews than we are our legacy tools. Probably, you know,
Eric J. Carre: But what follows on that is an equal sort of step up in efficiency, performance, and actually margin for us around our iSTAR technology, which is basically the LWD technology that goes with it. And that adoption or actually implementation is, you know, much less, I want to say in the 20% range.
Jeffrey Allen Miller: Sixty, seventy percent of our fleet is that today, but what
Jeffrey Allen Miller: follows on that is an equal sort of step up in efficiency, performance, and
Jeffrey Allen Miller: Actually, margin for us.
Jeffrey Allen Miller: around our iSTAR technology, which is basically the LWD technology that goes with it. And that adoption, or actually implementation is, you know, much less, I want to say, in the 20% range. So we've got a very good glide path.
Jeffrey Allen Miller: So we've got a very good glide path of things that structurally improve margins for both Sperry and E. And, you know, so I see that as part of my confidence around, look, we just need to continue to retire the old as it's time and replace it with the new. And that is structurally improving our capital efficiency. Okay, fantastic. Now, that's helpful.
Jeffrey Allen Miller: of things that structurally improve margins for both Sperry and E. And, you know, so I see that as part of my confidence around, look, we just need to continue to retire the old as it's time and replace it with the new, and that is structurally improving our capital efficiency.
Saurabh Pant: And Jeff, on the production side of things, I know you talked about artificial lift in your prepared remarks. It's good to see international growth at a much faster pace than the overall international market for lift. But if we focus on the production chemical side of things, I know you acquired Athlon, and you've been investing time and money to expand that business, right? Maybe just update us on that, Jeff. Where does production chemicals fit, and what's the opportunity just on that side for Halliburton?
Speaker Change: Okay, fantastic. Now that's helpful. And just one on the production side of things, I know you talked about artificial lift in your prepared remarks. Good to see international growing at a much faster pace than the overall international market for lift. But if we focus on the production chemical side of things,
Speaker Change: I know you acquired Athlon. You've been investing time and money to expand that business, right? Maybe just update us on that. Just where does the production chemicals sit and what's the opportunity just on that side for Halliburton?
Saurabh Pant: Well, if we're in that business, it's clearly part of our portfolio, but it's also an inherently sort of lower-returning business in the balance of our business. So we know we run it like all of our businesses with a focus on profitability and returns. I'm pleased at the pace we're filling our plant in Saudi Arabia. And that business has a long sales cycle. But you know, we know a lot about chemicals and, you know, continue to, continue to do that. Okay, fantastic. Okay, Jeff, and Eric, thank you.
Speaker Change: Well, if we're in that business, it's clearly part of our portfolio, but it's also an inherently sort of lower returning business in the balance of our business. So we run it like all of our business with a focus on profitability and returns. I'm pleased at the pace we're filling our plant in Saudi Arabia, and that business has a long sales cycle.
Speaker Change: know a lot about chemicals and, you know, continue to continue to execute that.
Speaker Change: Okay, fantastic. Okay, Jeff, Eric, thank you. It's been a pleasure.
Saurabh Pant: Thank you. Our next question comes from Scott Gruber. Yes, good morning. Morning. Morning.
Jeffrey Allen Miller: Thank you.
Speaker Change: Our next question comes from Scott Gruber with Citi.
Scott Andrew Gruber: Yes, good morning. Morning. Morning.
Scott Andrew Gruber: I'm curious, you know, diesel prices have come up a little bit, and there's hopes for a natural gas price recovery next year. So, Jeffrey, I'm curious what gas price would close the cost of fuel delta between EFRAC when using CNG and traditional diesel? I don't think it's $4 or $5 gas.
Scott Andrew Gruber: I'm curious, you know, diesel prices have come up a little bit, and there's hopes for a natural gas price recovery next year. So, Jeffrey, I'm curious, you know, what gas price...
Scott Andrew Gruber: would close the cost of fuel delta between EFRAC when using CNG and traditional diesel. I don't think it's $4 or $5 gas. I want to check that with you. And just overall, how would you?
Jeffrey Allen Miller: I want to check that with you. And just overall, how would you describe EFRAC economics, even in an environment of healthier gas emissions? A couple things. It's a lot higher than that to start with. I mean, if we just use sort of BTU six times. Six times four. You know, at four.
Jeffrey Allen Miller: describe EFRAC economics even in an environment of...
Jeffrey Allen Miller: Oh, it's a couple things. It's a lot higher than that to start with. I mean, if we just use sort of BTU six times.
Jeffrey Allen Miller: You're still a long way from diesel prices. The other thing is the efficiency of the mousetrap. I mean, our E fleets are creating value well beyond the economic trade-off with gas. That's not to say there isn't a lot of runway around the economic trade-off with gas, but that platform, in and of itself, is just a better operating machine, and it provides technology for clients that they really can't get that's not available in another form.
Jeffrey Allen Miller: Six times four.
Jeffrey Allen Miller: You know, at four.
Speaker Change: You're still a long way from diesel prices. The other thing is the efficiency of the mousetrap. I mean, it's just our E-fleets are creating value well beyond the economic tradeoff with gas.
Speaker Change: That's not to say there isn't a lot of runway around economic tradeoff with gas, but that platform in and of itself is just a better operating machine and it provides
Speaker Change: technology for clients that
Jeffrey Allen Miller: And whether that's autofrack, octave, what we're doing with sensory in terms of understanding recovery, a lot of this. And so we're able to help solve for delivering what was planned with precision and then measuring performance of what was placed in the reservoir. That's a whole different kettle of fish, but it's all attached to the platform.
Speaker Change: Really, they can't get, it's not available in another form, whether that's AutoFrac, Optiv.
Speaker Change: What we're doing with sensory in terms of understanding recovery, a lot of this.
Speaker Change: And so, we're able to help solve for delivering what was planned with precision and in measuring performance of what was placed in the reservoir. That's a whole different kettle of fish, but it's all attached to
Jeffrey Allen Miller: And so all of that runs together. So when I think about eFleets, broadly, yes, there is gas arbitrage, which is happening all the time. And like I said, there is a long way to go on gas arbitrage before that ever comes up, but I think more importantly is what we're able to achieve with that technology for our customers. That makes a lot of sense, and ultimately, it sounds like Octave and Autotrack are going to help kind of further that, you know, penetration for EFRAC with your customers and kind of extend, you know, any type of saturation point that, ultimately, could be hit, you know, just as you think a few years out, you know, as you develop these softwares and develop a platform for, you know, more efficient operations.
Speaker Change: a ZEUS platform, and so all of that runs together. So when I think about...
Speaker Change: E-fleets, broadly, yes. There is the gas arbitrage, which is happening all the time, and like I said, long way to go on gas arbitrage before that ever comes up.
Speaker Change: But I think more importantly is what we're able to achieve with that technology for our customers.
Speaker Change: That makes a lot of sense. And ultimately, it sounds like Octave and Autofrack, you know, are going to help kind of further that
Speaker Change: Ultimately, penetration for EFRAC with your customers and kind of extend any type of saturation point that ultimately could be hit. As you think a few years out, as you develop these softwares and develop a platform, you
Jeffrey Allen Miller: Where do you think EFRAC goes as a percent of Halliburton's fleet and kind of when do you expect it when you get there? Well, look, I think we, you know, we talked about this will eclipse 40% this year. I expect we're 50%, you know, next year. And we continue to invest both in the, you know, once we're at scale today, and that allows us then to both improve or continue to extend the technology around the pump itself, and the power systems, and then also the software that we're talking about that really addresses, in my view, what operators are focused on, which is recovery and placement and a whole lot of things that affect, you know, productivity over time.
Speaker Change: for a more efficient operation. Where do you think EFRAC goes as a percent of Halliburton's fleet when you get there?
Speaker Change: Well, look, I think we, you know, we talked about this. Will eclipse 40% this year. I expect we're at 50%.
Speaker Change: [inaudible]
Speaker Change: and the power systems.
Speaker Change: And then also the software that we're talking about that really addresses, in my view, what operators are focused on, which is recovery and placement and a whole lot of things that affect
Jeffrey Allen Miller: And so we're extending that moat around that technology every day. And so I'm confident that as we continue into the future, you know, we've got quite a glide path of ideas and things that will make that yet again even more effective for customers over time. So pleased with where we are there. I appreciate the color, Jeff.
Speaker Change: We are extending that moat around that technology every day. I am confident that as we continue into the future, we have quite a
Speaker Change: GlidePath of ideas and things that will make that, yet again, even more effective for customers over time. So, pleased with where we are there.
Speaker Change: I appreciate the color, Jeff. Thank you.
Scott Andrew Gruber: Thank you. Thank you. Our next question comes from Doug Becker with Capital One. Hello, Doug.
Jeffrey Allen Miller: Thank you.
Speaker Change: Our next question comes from Doug Becker with Capital One.
Douglas Lee Becker: Yes, can you hear me? I can't. Good morning. Halliburton's North America revenue has regularly outperformed the North America RIG. I wonder if you could just highlight some of the key drivers of that outperformance that you expect going forward and really ask them to try and calibrate how Halliburton's North America revenue might outperform the red count next year. I think a lot of that means that it's, you know, fleets are contracted.
Speaker Change: [inaudible]
Speaker Change: Doug?
Douglas Lee Becker: Yes, can you hear me?
Speaker Change: I can't. Good morning.
Speaker Change: So, Halliburton's North America revenue has regularly outperformed the North America rig count.
Speaker Change: I just wondered if you could just highlight some of the key drivers of that outperformance that you expect going forward and really ask them to try and calibrate how Halliburton's North America revenue might outperform the red count next year.
Speaker Change: Well, I think a lot of it, I mean, it's, you know.
Douglas Lee Becker: That's a large part of our business; the performance is, you know, leading in terms of efficiency and technology. And we continue to invest in technology that differentiates Halliburton. And that's one of the key things. I mean, that's so it's consistent with our strategy. I'll pivot back to our strategy just for a minute, but we want to maximize value in North America means that we're very targeted about what we do, what we invest in, where we spend money, and on those things that we know will create differentiation. And clearly, technology is one of those key areas, not technology for the sake of technology, but targeted technology that can solve for automation that can solve for subsurface understanding and measurements, and direct measurements.
Speaker Change: The E-fleets are contracted, that's a large part of our business, the performance.
Speaker Change: You know is
Speaker Change: leading in terms of efficiency and technology and we continue to invest in technology that differentiates Halliburton and that's one of the key things I mean that's so it's consistent with our strategy I'll pivot back to our strategy just for a minute but we want to
Speaker Change: Maximizing value in North America means that we're very targeted about what we do, what we invest in, where we spend money, and on those things that we know will create differentiation, and clearly technology is one of those key areas.
Speaker Change: Not technology for the sake of technology, but targeted technology that can solve for automation, that can solve for subsurface understanding and measurements, direct measurements. And so.
Jeffrey Allen Miller: And so, that focus allows us to outperform on the revenue side of that. And the maximized value again, that strategy hasn't changed at all. And it gives me a lot of confidence into 25 and beyond in terms of where Halliburton is in the market. I mean, is it too aggressive to think about in a flat North American rig count environment? Halliburton's revenue is still growing by 5% next year in that type of environment. Yeah, I mean, it could be.
Speaker Change: That focus allows us to outperform on the revenue side of that, and the maximized value again, that strategy hasn't changed at all, and gives me a lot of confidence into 25 and beyond in terms of where Halliburton is in the market.
Speaker Change: I mean, is it too aggressive to think about in a flat North America rig count environment? Halliburton's revenue is still growing.
Speaker Change: 5% next year in that type of environment.
Jeffrey Allen Miller: I mean, I, you know, we need to watch it unfold next year. But look, I'll go back to our performance in the market. It's early on 25.
Speaker Change: Yeah, I mean, it could be. I mean, you know, we need to watch it unfold next year. But look, again, I'll go back to our performance in the market is going to outperform. It's early on 25, but I'm going to...
Jeffrey Allen Miller: But I'm confident in the technology and the solutions that we provide for our customers that are unique, and that puts us in the position to outperform. It completely makes sense. And then just a quick one on e-fleets. We've been hearing more talk about white space, even on dedicated or contract. I just wanted to get a little bit better sense of whether or not there is any risk of white space in your E-fleets.
Speaker Change: confidence in the technology and the solutions that we provide for our customers that are unique and that puts us in the position to outperform.
Speaker Change: And then just a quick one on the e-fleets, we've been hearing more talk about white space even on dedicated or contracted fleets, I just wanted to get a little bit better sense for what that might look like. So, we're going to go ahead and get started. So, we're going to go ahead and get started.
Jeffrey Allen Miller: I fully appreciate that they're long-term contracts and they justify the returns, but just thinking about any potential white space risk on those contracts. No, not the case. You know, our clients that contract again, these are contracted with customers on long programs, they're going to use these E-Fleets; it will always be the, you know, if there is white space, this is the fleet that they will keep working no matter what. It is, you know, when you're delivering. Lower cost of ownership and delivering the technology, and the client is committed to the fleet; that's the fleet that's always working.
Speaker Change: for your E-fleets, is there any risk of white space? And fully appreciate that they're long-term contracts and they justify the returns, but just thinking about any potential white space risk on those contracts.
Speaker Change: No, not the case. You know, our clients that contract, again, these are contracted with customers with
Speaker Change: Long programs, they're going to use these E-Fleets. It will be always, you know, if there were white space, this is the fleet that they will keep working no matter what. It is, you know, when you're delivering...
Speaker Change: lower cost of ownership you are and delivering the technology and the client is committed to the fleet that's the fleet that's always working and so no not worried about that
Speaker Change: That's what I wanted to hear. Thank you.
Jeffrey Allen Miller: And so, no, not worried about that. That's what I wanted to hear. Thank you. Yeah, thank you. Our last question today will come from Marc Bianchi with TD. Hey, thank you. The first one I had was on the activity outlook. Jeff, you mentioned that, you know, it could improve here from the second half of 24.
Speaker Change: Yeah, thank you.
Speaker Change: Our last question today will come from Marc Bianchi with TD Cowan.
Marc Gregory Bianchi: Hey, thank you. The first one I had was on the activity outlook. Jeff, you mentioned that, you know, it could improve here from the second half of 24, but it sounds like you're stopping short of talking about revenue and I guess maybe following on some of Doug's question. Like when you look at
Marc Gregory Bianchi: But it sounds like you're stopping short of talking about revenue. And I guess maybe following on some of Doug's questions, like when you look at how hard it is to call revenue. Is price uncertainty about price?
Speaker Change: how hard it is to call revenue. Is price, uncertainty about price, the main thing? Or maybe talk about, you know, the top one, two or three things that are uncertain around revenue versus activity.
Jeffrey Allen Miller: the main thing, or maybe talk about, you know, the top one, two, or three things that are uncertain around revenue versus equity. No, I think the uncertainty around activity is really the driver here. You know, and when we look at the second half of the year, we've had some customers that we caught up with, and they're still customers, and they plan to go to work again next year, and maybe even later this year.
Jeffrey Allen Miller: No, I think the uncertainty around activity is really the...
Speaker Change: The driver here
Speaker Change: You know, when we look at the second half of the year, we've had some customers that we caught up with them.
Speaker Change: and they're still customers and they plan to go to work again next year and maybe even later this year. So, no, that's not my concern. It is, you know, again, I'll pivot back to our strategy in terms of maximizing value. We've got a lot of tools.
Jeffrey Allen Miller: So, no, that's not my concern. It is, you know, again, I'll pivot back to our strategy in terms of maximizing value. We've got a lot of tools that allow us to do that technically, and, you know, I... Yeah, I think it's just a question of the pacing of things happening in, you know, whether it's setting plans or other things. But, you know, the 25 will be, in my view, clearly higher than the second half of 2024.
Speaker Change: that allow us to do that technically and, you know, I, I, I,
Speaker Change: You know, I think it's just a question of pacing, of things happening in...
Speaker Change: Yeah
Speaker Change: Whether it's setting plans or other things, but, you know, the 25 will be, in my view, clearly higher than the second half of 2024.
Marc Gregory Bianchi: Okay, okay, great. And then the other one I had, maybe this one's for Eric, but just looking at the third quarter guide for CMP, the margin reduction, sequentially, seems pretty steep for the revenue reduction we're getting. Could you talk about maybe some of the moving pieces there? What might be driving that margin? Yes, I mean, the margin guidance is actually a combination of what we talked about for North America, but really, Q3 margins in the international business are going to be lower than Q2 as well.
Speaker Change: Okay, okay, great. And then the other one I had, maybe this one's for Eric, but just looking at the third quarter guide for C&P, the margin reduction.
Speaker Change: sequentially seems pretty steep for the revenue reduction we're getting. Could you talk about maybe some of the the moving pieces there what might be driving that margin weakness?
Eric J. Carre: Yes, I mean, the margin guidance is actually a combination of what we talked about for North America, but really Q3 margins in the international business are going to be lower than Q2 as well. So there's just not too much to read into this, except there's a lot of moving parts in the business. It's not just North America, it's multiple product line as well. So it is not all related to North America.
Marc Gregory Bianchi: So there's just not too much to read into this, except, you know, there's a lot of moving parts in the business. It's not just North America; there are multiple product lines as well. So it is not all related to North America.
Unnamed: Yeah, great. Thank you, I'll turn it back.
Eric J. Carre: Great. Thank you. I'll turn it back. That concludes today's question. Thank you. Let's wrap up the call here. I know all of you have a very busy day ahead of you. And maybe I'll give you a few minutes back before your next call.
Unnamed: Okay, well, thank you. Let's wrap up the call here. I know all of you have a very busy day ahead of you. 90, I'll give you a few minutes back before your next call.
Jeffrey Allen Miller: But as we close out today's call, it's important to step back and remember that Halliburton delivered 18% margins and about $800 million in free cash flow in the second quarter. We're well on track to deliver 10% free cash flow growth this year. Our international business and its technology portfolio have never been stronger, and our strategy to maximize value in North America is working. We are committed to maximizing value, not market share, and I expect that strategy to continue to deliver strong returns.
Speaker Change: That concludes today's question.
Speaker Change: Thank you. Let's wrap up the call here. I know all of you have a very busy day ahead of you, and maybe I'll give you a few minutes back before your next call.
Dennis: But as we close out the day's call, it's important to step back and remember this: Halleberg delivered 18% margins in about $800 million a free cash flow in the second quarter. We're well, I'm attracted to deliver 10% free cash flow growth this year. Our international business and its technology portfolio have never been stronger. Our strategy to maximize value in North America is working. We're committed to maximizing value, not market share, and I expect that strategy continues to deliver strong returns.
Speaker Change: But as we close out today's call, it's important to step back and remember this. Halliburton delivered 18% margins and about $800 million of free cash flow in the second quarter. We're well on track to deliver 10% free cash flow growth this year.
Speaker Change: Our international business and its technology portfolio have never been stronger.
Speaker Change: Our strategy to maximize value in North America is working. We are committed to maximizing value, not market share, and I expect that strategy continues to deliver strong returns.
Operator: I look forward to speaking with you next quarter. This concludes today's conference call. Thank you for participating. You may now disconnect.
Unnamed: Look forward to speaking with you next quarter.
Unnamed: This concludes today's conference call. Thank you for participating; you may now disconnect. Thank you.
Speaker Change: Look forward to speaking with you next quarter.
Speaker Change #100: This concludes today's conference call. Thank you for participating. You may now disconnect.