Q3 2024 Halliburton Co Earnings Call
for Q3 was $52 million, which was higher than anticipated, driven by unfavorable foreign exchange movements in multiple currencies. For Q4, we expect this expense to be approximately $35 million.
Our effective tax rate for Q3 was 21% and our normalized effective tax rates was 23.5%.
Based on our anticipated geographic earnings mix, we expect our Q4 effective tax rate to be approximately 23.5 percent.
Capital expenditures for Q3 were $339 million. For the full year of 2024, we expect capital expenditures to be approximately 6.4% of revenue.
For the full year 2024, we expect free cash flow to be at least 10% higher than 2023.
Speaker Change: Now let me provide you with comments on our expectations for Q4.
In our Completion and Production Division, we anticipate sequential revenue to decline 1-3% and margins to decline 75-125 basis points.
In our drilling and evaluation division, we expect sequential revenue to be flat to up 2% and margins to be flat to up 50 basis points.
I will now turn the call back to Jeff.
Thanks, Eric.
Jeff: Here are the key points I would like you to take away from our discussion today.
I am confident in our international business.
Jeff: I believe the strength of our technology portfolio, unique value proposition, and clear strategy will continue to deliver growth and returns.
Jeff: I'm excited about the emerging trends in the international market where I believe Halliburton will demonstrate unique growth.
And in North America, we are widening the moat around our Zeus platform and expect to keep growing our drilling business.
And now, let's open it up for questions.
Speaker Change: Thank you and as a reminder to ask the question press star 1-1 on your telephone and wait for your name to be announced. To remove yourself press star 1-1 again. Please stand by for our first question.
Speaker Change: and is from the line of Dave Anderson with Barclays. Please proceed.
Great. Good morning, Jeff. How are you?
Morning, Dave.
Speaker Change: So maybe let's just start with the obvious and how you think the election might impact your business. There's a thesis out there, obviously the market sort of buying first, asking questions later, but that reduced regulation, faster permitting is going to result in higher onshore activity kind of going forward.
Speaker Change: Is that a valid assumption? I mean, is that the way you're thinking about the market in the next couple of years? I could certainly see how it can improve the Gulf of Mexico, which seems to be mired in red tape. But how do you think this impacts your North America onshore business?
Speaker Change: incredibly important in this country. And then more importantly, it's the way it was rolled out. I mean, it reflects a majority of
Speaker Change: people that have a rational view about how important energy is to our country and so you know when I think about that I think every dollar that is you have not spent
Speaker Change: defending and debating the industry but rather being invested in this industry are absolutely good for Halliburton's business.
Speaker Change: And what about the Gulf of Mexico? Do you think you could start to see a pickup in activity out there? I mean, I know there's been some issues kind of getting permits and things like that. Do you think they could potentially free that up?
Speaker Change: Yeah, I think, I mean, look, look, Dave, I, yes, I mean, I think that
Speaker Change: There's a lot of risk that's been painted over this industry, particularly regulatory risk. It's probably even more acute in the Gulf of Mexico, given the significance of the investments and the types of decisions that get made, you know, that are long-term in nature by operators. And I think the more that...
Speaker Change: You know, those are de-risks, either through regulation or legislation, creates an even better runway. I mean, operators don't operate in a vacuum. I mean, they are digesting risk every day, and I think what we saw was...
Speaker Change: directionally, hey, energy is extremely important. There's absolutely no reason we should be, you know, anyway, I think that we're in a good place with energy development in this country.
Speaker Change: Understood. And if I could maybe shift to this more specifically, kind of the here and now on U.S. onshore. It's clearly slowing as we approach year-end. We've all been sort of seeing this.
the conventional diesel, Tier 4, and E-Fractor. Are you seeing...
Speaker Change: that kind of spread happening here? And if so, does this kind of, are you thinking about accelerating your Zeus fleet? You talked about this for Zeus platform, which it really does sound very differentiated. I'm just wondering, do you accelerate that program because that should therefore kind of drive into higher pricing going forward?
Speaker Change: Well, we still see demand for our Zeus platform, a growing demand for that Zeus platform. So we'll be consistent with in terms of, you know, acceleration is more a matter of
Speaker Change: just by virtue of making that available in the market and having more opportunities to put it to work as opposed to when you think acceleration that means we
Speaker Change: Push to Pedal and Spend and Do, I really think we're going to stick with our maximized value approach.
Speaker Change: and, you know, let the diesel retire or move outside the country, that'll be replaced with electric and also more, you know, as important as the electric is, quite frankly, that entire platform that is creating an outsized value for customers.
Speaker Change: Certainly is. Great. Thank you very much Jeff. Appreciate it. Thank you.
Speaker Change: Thank you. Our next question comes from the line of Arun Yaram with JP Morgan Securities. Please proceed.
Good morning, Jeff and Eric.
Speaker Change: I want to get Aaron yeah good morning general I want to get your thoughts
Speaker Change: So it sounds like you've kind of navigated through the RP season and got a lot of equipment kind of committed.
Speaker Change: announced some extensions on some Zeus fleets, which may be a little bit earlier than we're thinking. So I was just wondering, you know, given that amount of capacity that's been committed, what's your just outlook for NAMFRAC next year and trying to think about how margins could play out over the next 12 months?
Speaker Change: Well, look, I feel good about 2025, and I talk to customers every day, and they are clearly planning to work, but they're also planning to be more efficient and improve recovery at the same time.
Speaker Change: plays directly into our strengths, whether it's more simulfrac, longer laterals, faster wells, and obviously the Zeus platform.
Speaker Change: So when I think about 2025, I think about maximizing value.
Speaker Change: And that means solving the hardest problems and unconventionals with better recovery, widening the moat around our ZEUS platform, the drilling performance that I described in the outsized adoption that we're seeing for our drilling solution.
Speaker Change: And yes, you know, having 90 fleets committed, or 90% of our fleets committed today.
Speaker Change: does form a view about 2025, and I've described, you know, those things that we're going to be doing in the market that are consistent with the performance that you've seen till now. So, I think about the market today, I mean, we've arguably been, arguably have been in a downturn.
Speaker Change: for 18 months, and the tools and the approach that we've taken are the tools and approach that we will take.
Fair enough, Jeff. That helps.
Speaker Change: It does help us think about 25. This is kind of a consistent by side question that we've gotten Jeff
is the dynamic in North American frack.
Speaker Change: is the fact that companies like Halliburton are pumping more hours per day, doing more completion footage completed per day.
Speaker Change: And so a lot of my E&P coverage now is highlighting the ability, for example, one operator mentioned that they could do...
Speaker Change: you know, in 25, they could use four frack fleets to do.
Speaker Change: what five frack fleets did in 24. Does that make sense? So you're using less equipment
Speaker Change: And the question we're asking ourselves is, how does this impact your profitability?
Speaker Change: If these four frack fleets are, you know, doing a similar amount of footage...
Speaker Change: How does that impact Halliburton? We're thinking maybe you lose some margins or some revenues through pass-through, but how does that impact your base track business using that example?
Speaker Change: Well look, number one we're at the leading edge of that efficiency which means that we're getting more reps and in most cases based on sort of our equipment we get more reps on less capital.
Speaker Change: So, from a maximized value standpoint, it doesn't take 2x the equipment to do a simulfrac. In fact, it takes less than half more. And so, generating the same or more revenue with less equipment
Speaker Change: is positive and strategically why we build the equipment the way that we do. Um, you know, at the same time, you know, the
Speaker Change: Creating more value by pumping which takes me to the Zeus solution and the platform.
Speaker Change: That's also part of how do operators get better. And I'll tell you, I would much rather be on the front end of this than somewhere else. So leading this charge is where we want to be. It keeps us busy and creating opportunities to create more value. So,
Speaker Change: You're thinking about it the right way. Yes, this industry gets more efficient. I think it gets harder to get more efficient from here.
Speaker Change: But I expect Tyler Burton plays at the front end of that and is a leader.
Speaker Change: Okay great Jeff, I'll turn it over. So in some ways it's capital efficiency I mean we're driving capital efficiency which ultimately does support margins and look there's a
Speaker Change: You know, we are where we are today, you know, if I look forward into the future.
Jeff: You know, we know how to operate in that environment, and we're doing it, and we're successful at it, but I also think it's unreasonable to ignore future catalysts, whether Tier 1 rock becomes Tier 2 becomes Tier 3. You know, there are...
Jeff: and other things that happened that I think would be positive.
Okay, great, Jeff.
Thank you.
Speaker Change: Thank you. Our next question comes from the line of James West with Evercore ISI. Please proceed.
Hey, good morning, Jeff, Eric.
Morning James. Morning James.
So
Speaker Change: You highlighted a lot on interventions this quarter, and I think maybe
You know
Speaker Change: investors that aren't following you as closely as myself or Dave or Arun wouldn't know about the tremendous amount of, not capital, but just R&D and work you guys have done and building that business out as a big strength of yours.
Speaker Change: Could you maybe talk through, kind of, you know, I guess, why Highlight now, I guess, first, and then, kind of, where you were, where you've been, where you are today, and how you view that as one of the, kind of, the key strengths of the company?
Thanks, James.
Speaker Change: It's always been an important business for Halliburton Intervention, whether it's stimulation, it's entering wellbores, and...
Speaker Change: You know, those are the markets that maintain the baseload of oil and gas production around the world. And so, we've been in that business.
Speaker Change: But I'm highlighting it partly because I don't want anyone to forget how important predicting that baseload is and how much work that generates.
Speaker Change: But I also would like to characterize that in terms of the R&D effort that we're putting in around that. And so, you know, if I go sort of contextually over, you know, look over some history, you know, with Halliburton, when we invest in a direction, you know,
Speaker Change: It's important for it. So I think unconventionals, if you go back a number of years, then we've talked about what we've done around Sperry drilling from an R&D and creating critical mass in a bigger business, doing the same thing with
Speaker Change: intervention, and we've done it for a number of years. However, you're going to see us developing things like we described on the call today, riserless intervention is an incredible step forward in terms of making wells economic. We've talked about it for
Speaker Change: a decade probably, worked hard on it with Technipe FMC for five years, and now we're here.
Speaker Change: But those are the kind of things I expect to see us do more of.
Speaker Change: and create a bigger growing market for us. And so from my perspective, this is where we will see outsized growth internationally.
Speaker Change: Okay, very good, very good to hear. And then, Jeff, does the growth of the internet and the interventions part of the business make earnings a little bit less cyclical than perhaps they've been previously and therefore higher multiple?
Jeff: I think so. I mean these are completely agree with you and it's part of the reason we want to continue to
Speaker Change: invest and generate that outsized growth. But it's the kind of growth that decline curves never go away. And so everything is always declining, therefore there is always demand.
for intervention as we described.
All right, got it. Thanks, Jeff.
Yeah, thank you, James.
Thank you.
Speaker Change: Our next question comes from the line of Roger Reed with Wells Fargo Securities. Please proceed.
Yeah, thank you. Good morning.
Roger
Jeff: Jeff, can I get your take, you know, you talk a lot here about the opportunities international and obviously everybody talks about productivity and efficiency that's going on in North America. Could you give us a little bit of a
of a contrast of what you see happening globally. I mean, not just your products and services that improve it, but, you know, if you were to just say what you think your customers are getting right now in terms of productivity and efficiency, how that's affecting.
You know, your business question asked earlier, I think, Byron, right, five prop crews goes to four, you know, what the impacts are. So, as you think about the opportunity internationally, you know, how, how does that compare? What kind of headwinds are you facing on a productivity front there?
Jeff: has worked to a point, but I think that the opportunity, we'll actually see growth in terms of consumption of equipment well before we see efficiency cresting, just because there's so much work to do. And I think what those markets get the benefit of, particularly with Halliburton,
Jeff: is a lot of the technology that creates better wells. I mean, if you go back in time in the U.S.,
Well design, there are a lot of wells that we would like to go back and refract, but today armed with
Jeff: The technology that we have, I believe, will make better wells, but to say that, but to get specifically to your question,
Jeff: We're not even close to that point of efficiency reducing demand internationally. In fact, we're at the opposite end of that. We're back like it looked in the U.S. early days where add, add, let's do more.
I hope that helps, Roger.
Roger: Yeah, it does. I'd say kind of what we look at the evidence seems somewhere that way, but I just wanted to
Speaker Change: Talk to the experts about it. The other question I had, one of the things we hear about as a way to potentially accelerate drilling speeds going forward in the U.S. might be a greater expansion of rotary steerable type and other types of advanced drilling devices. You mentioned that in your presentation.
introductory part of the call as something to roll out to Latin America but I was just curious how that's how do you see that in North America in terms of additional penetration over the coming years?
Speaker Change: Yeah, thanks. Look, I'm crystal clear that this is a market that continues to grow in rotary steerables, just the efficiency, precision, the types of wells that are being drilled in terms of length, tortuosity. Everything I see in North America says over time,
Roger: The trend is that rotary steerables are a bigger and bigger part of this market.
Roger: Both from the ability to execute the drilling in terms of the complexity and length, but also the speed in terms of curve lateral. And that's really where we're getting so much traction with.
Roger: Our iCruise tools in North America has been the reliability around drilling that curved lateral. And I see the exact same thing internationally, in fact we're already...
Roger: Terrific tool. I mean, it's the performance is what's causing the growth in
and share.
It's a very pleased with where we are, but I also think we're in the right spot from a secular growth standpoint, in the sense that that is directionally where the market has to go in order to continue to get better both in time, but also in terms of the types of wells and the lengths that are being drilled.
Thank you.
Thank you.
Speaker Change: Thank you. Our next question comes from the line of Neil Mehta with Goldman Sachs. Please proceed.
Neil Mehta: Thanks for all the color on U.S. land. A couple of company-specific items here, which is around the cybersecurity incident. You know, what are, Jeff, lessons learned around that? Certainly something that...
Speaker Change: All Fortune 500 companies are having to contend with, but how do you ensure protection of this going forward and and help us understand? It sounds like some of the it could have create some delays to
Speaker Change: and the ERP system rollout. Can you talk a little bit about what those impacts were?
Speaker Change: Over-emphasized the importance of preparedness in terms of desktop drills, contracting with the absolute best professionals in the industry, and I am.
Speaker Change: I'm so appreciative of the companies that supported us, Mandy and others, but I would say that is probably one of the most important things any company can do is be absolutely prepared in advance for that.
Speaker Change: So in terms of the SAP ERP rollout, Neil, there's really a couple of things. So the first one is what relates directly to the cyber incidents.
Speaker Change: And there, obviously, once the incident started, most of our IT folks went on to, you know, helping fix the problem, restore the systems and everything. They weren't unavailable, obviously, to continue to participate.
Speaker Change: in the rollout and when that was done and the systems were restored, what you had is the finance and procurement organization went into a catch-up mode, basically restoring in the system all of the transactions that
Speaker Change: were made when we were operating in a manual mode. The second impact from the incident was the fact that as we roll out a big system like this, we do what's called localization events, which when we go and roll out
Speaker Change: Statutories, differences, tax differences and everything so that we get ready for any particular specifics of a given country. And then in parallel to that...
Speaker Change: We had the rollout in our first country. We rolled out the system in Canada that was successful. We closed the quarter on S4. We closed October on S4. But as we did all of that, we learned a few things around the structure of our training, around what it meant to manage processes in two different systems and everything. All of that resulted in a re-planning of the rollout, which we think now is going to be about three to six months.
over the initial plan so we get into H1 2026.
Speaker Change: March and then 250 in June and this quarter it was closer to 200 million
Speaker Change: and he explained why. But is 250 the right run rate, all else equal as we think about 2025? And given the pullback in the share price, given the macro environment,
Speaker Change: Is there an argument to really lean into the share repurchase and take it to another level and really drive that free cash flow per share?
I'll turn it over to you guys on that.
Speaker Change: Yeah, so to address the first part of your question, that's what we kind of had guided to an average $250 per quarter that would lead to something around a billion for the year, significantly up from 2023. So what happened in Q3 is, I mean, the mechanism that we used to go and buy back share, we do it in two parallel ways. So one, we filed a 10-B-5-1 plan, and two, we do open purchase in the market.
Speaker Change: the investigation would lead to the discovery of, you know, MMPI. So we post that.
Speaker Change: continued with the 10B5 plan, so all of that landed in a number that was below what we were targeted initially, and as we said in the remark, the intent is to you know, catch up a bit on that in Q4.
Speaker Change: Directionally, on the second part of your question, we really view buybacks as a
Speaker Change: you know, systematic mechanism to return cash to shareholder, we look at it through cycles, while there might be some short-term opportunities to your point around the current share prices, we try not to, you know, be
Speaker Change: We want to be fairly steady, and as we look into next year, while we haven't worked our plan through, the general view would be to up what we've done so far in 2024.
Okay, all right, that's helpful. Thank you.
Hi, good morning Jeff and Eric.
Good morning.
Speaker Change: Jeff, maybe I have a couple of questions, one on offshore, one on North America. Let me just start on the offshore side of things because...
Speaker Change: That's one place where there is a lot of optimism and structural optimism, not just short-term optimism. I want to just come back to that. I know in the past you have talked about upside in 25, particularly in West Africa and Norway and obviously offshore in general, but
Speaker Change: Amongst the conversation from the offshore drillers and delay in contracting, maybe some projects being delayed due to the macro, supply chain delays, given all of those headlines on the offshore driller side of things, is there anything we should be mindful of for the offshore side of your business as we think about 2025?
Speaker Change: No, look, we see stability in our biggest markets, whether it's Mexico, Brazil, Guyana, Norway. In fact, see, you know, as we described this morning, you know, positive elements of those.
And from our perspective, we move the equipment between rigs.
Speaker Change: contracted status of rigs is not really as is not really impactful to us.
Speaker Change: The key is operators focus on continuing to drill and develop offshore resources, which we see a lot of strength around that, whether it's
Speaker Change: 20k in the Gulf of Mexico. I mean, there's just a lot of foot
Speaker Change: And so, you know, there's a lot of probably back and forth in the rig business in terms of contracting and gaps and managing timing, but that doesn't impact us. You know, we're working with clients. They have rigs available, and they are.
Speaker Change: You know either executing work or planning work and really quite a bit of exciting work around the world
and in the Gulf of Mexico.
Speaker Change: Q&A ask, but my follow-up is, do we know at least roughly what the pricing on those fleets are going to look like, right? So basically, do we have line of sight on the profitability as well versus just activity on those fleets?
Speaker Change: Yes, we do have some of that, but we obviously work through that as well. What I would say about
Speaker Change: Without getting into details, because I won't. We're sticking with our strategy, which is to
Speaker Change: stay out of the spot market, size the fleet to the market that we see as we've described and we've been successful in getting things to work.
Speaker Change: You know, we obviously don't exist in a vacuum, but at the same time I do believe Halliburton and I know Halliburton reflects the performance and the technology that we bring to the market which
Speaker Change: puts us at the high end of the range, and I get told that every single day, so I'm well aware of where we are from that perspective, but
Speaker Change: confident that our strategies in place and we're executing on the strategy that's gotten us to here.
Speaker Change: Okay, no, fantastic. As a market leader, what do you do in that industry? Obviously, Jeff decides where the market goes, so it's good to hear that. And if I may, Eric, very quick one. I know you're not guiding 225 CapEx yet, but broad strokes, can we still think about 6% of revenue for next year?
yes
Speaker Change: Okay, perfect. Okay, Jeff, Eric, thank you. I'll turn it back.
Thank you. Thank you.
Speaker Change: Thank you. Our next question comes from the line of Kurt Hallyday with Benchmark. Please proceed.
Hey, good morning, everybody.
Morning, Courtney.
Speaker Change: You know, there's been a lot of noise, right, concerns about, you know, oil demand growth, concerns about excess OPEC capacity.
Speaker Change: and obviously in the broader markets, you know, that's weighed on the price of crude, right? So in the conversations that you've had of late, right, it sounds like there's a bit more optimism.
Speaker Change: the commodity market or the equity market. So I was hoping you'd give us some insights on how you're assessing those conversations, what you've seen that changed to give them that sense of optimism and what you could potentially help translate to the people on this call.
certainly look I think that
Speaker Change: Some of this is around the types of players in the market today, and I mean, these are very serious, large, well-capitalized operators, and so...
Speaker Change: As part of the E&P consolidation, it's gone sort of as expected in the sense that
Speaker Change: Customers clearly want technology and efficiency. These large players have a larger base load of work. They're stable. They plan to work through the cycle. It does create more contractable opportunities for us in terms of Zeus Fleet and Zeus Platform.
Speaker Change: But I think some of the optimism that you hear is, um, you know, hey, these aren't customers that ever react to.
Speaker Change: short swings in commodity pricing. These are operators that build a plan, execute a plan, and I'm so pleased to work with these customers because that kind of clarity helps us run our business.
Speaker Change: I think probably some of that optimism you hear is we are getting better at what we do. They see paths to be more productive and they've got capital to go do it.
Speaker Change: The commodity price today is clearly well within a range that drives consistent activity. And so, and I think that, you know, there'll be a lot of interest in keeping oil and gas in a range that
Speaker Change: creates profitability for our clients and profitability for us and that this industry continues to grow and just becoming more and more effective, productive, profitable industry.
Speaker Change: Great, I always appreciate the color, Jeff. Now maybe follow up for Eric, just on that CapEx question, right? So in the fourth quarter.
Speaker Change: You know, if the math maps out correctly, it looks like you're going to be about 450 million in CapEx, which is about 100 million higher than what you had been for a quarterly run rate. You mentioned a couple of new e-fleets, so can we connect the dots and suggest that the incremental CapEx is...
Both of that is going to go toward
Speaker Change: toward E-Fleet, the E-Fleet rollout. And then just as an extension to that, you referenced 6% of cap-backs for next year, and that 6% of cap-back of revenue for next year. How many E-Fleets, or are you assuming any additional E-Fleet additions?
Speaker Change: Yeah, I'll take that. Let me take that in terms of...
and David Coleman.
Speaker Change: E-Fleets going forward, E-Fleets again, we look at that from a pull standpoint, not a push standpoint. So, we do expect deliveries in 2025. We've got some of those already planned and expect to do that.
and we've also...
Speaker Change: Anyway, so that's where we are. I think the CapEx, I'm gonna hand the forecasting to Eric.
Speaker Change: You know, as we, as I mentioned earlier, the CAPEX still intended to be 6%.
Speaker Change: Look, it's going to be a little higher than 6% this year as, you know, we revised revenue compared to the projection we had at the beginning of the year.
Speaker Change: a lot of equipment in flight. I mean, we're still dealing with lead time on big pieces of capital equipment between six months and over a year. But as we look into next year at 6%.
Speaker Change: It's a balance between C and P, D and E balance between the projection that we have for revenue in North America and international and the overall ratios continue to evolve as our business evolves and becomes more and more internationally weighted.
Speaker Change: Okay, that's great. Appreciate that color. Thank you. Thank you. And that is all the time we have for Q&A today. I will turn the call back to Jeff Miller for his final comments.
Yeah, Carmen, thank you.
Jeff Miller: As we close out today's call, I just want to leave you with this, I see solid growth opportunities for Halliburton across our business lines and geographies, and I'm confident in our international business and its strong technology portfolio, unique value proposition and clear strategy.
Speaker Change: In North America, we're widening the moat around our Zeus platform, and we expect to keep growing our drilling business services in North America. So, I look forward to speaking with you next quarter. Thank you.
Speaker Change: Thank you and with that we close today's conference. Thank you all for participating. You may now disconnect.