Q1 2025 Halliburton Co Earnings Call
Speaker Change: Good day, ladies and gentlemen, and thank you for standing by. Welcome to the first quarter 2025 Howard Burton Company earnings conference call.
Speaker Change: At this time, all participants are not listening only mode. After the speaker's presentation, there will be a question and answer session. To ask a question, you will need to press star 1-1 on your telephone keypad. At this point, I would like to turn the conference over to Mr. David Coleman. Sir, please begin.
David Coleman: Hello, and thank you for joining the Halliburton First Quarter 2025 conference call.
David Coleman: 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 .
Speaker Change: Some of today's comments may include forward-looking statements reflecting Halliburton's views about future events.
Speaker Change: These matters involve risks and uncertainties that could cause our actual results to materially differ from our forward-looking statements.
Speaker Change: We undertake no obligation to revise or update publicly any forward-looking statements for any reason.
Our comments today also include non-GAAP financial measures.
Speaker Change: Additional details and reconciliation to the most directly comparable GAAP financial measures are included in our first quarter earnings release and in the quarterly results and presentation section of our website. Now, I'll turn the call over to Jeff. Well, thank you, David, a good morning, everyone.
Jeff Miller: I'll begin today's discussion with our highlights from the first quarter. We delivered total company revenue of $5.4 billion and adjusted operating margin of 14.5%.
Jeff Miller: International revenue was $3.2 billion, a decrease of 2% year-over-year due to lower activity in Mexico, excluding Mexico, international revenues grew by mid-single digits.
Jeff Miller: North America revenue was $2.2 billion, 12% lower than the first quarter of 2024.
Jeff Miller: Finally, during the first quarter we generated $377 million of cash flow from operations, $124 million of free cash flow, and repurchased approximately $250 million of our common stock.
Jeff Miller: Before we take a closer look at our geographic results, I'd like to take a moment and talk about the macro environment for oil and gas.
Jeff Miller: The last three weeks have been highly dynamic as the trade environment injected uncertainty in the markets.
Jeff Miller: raised broad economic concerns, and along with faster than expected return of OPEC production weighed on commodity prices.
Jeff Miller: These market forces impact us all, but here's what I know to be true. First, oil and gas will play a fundamental role in global economic growth and prosperity.
Jeff Miller: Second, the world is consuming more oil and gas than ever before.
Jeff Miller: and finally, the Klein curves are real and in many basins significant. And adequate supplies today did not guarantee adequate supplies tomorrow without ongoing investment.
David. Given these realities.
Jeff Miller: I know that our technology will continue to transform the industry and it will unlock new sources of value for us and our customers.
Jeff Miller: I know our unique collaborative approach improves outcomes and deepens customer relationships.
Jeff Miller: And finally, I know that safety and service quality form the cultural bedrock of Halliburton and they are key differentiators to our customers.
Jeff Miller: On that note, I would like to take a moment to thank the Halliburton employees for their outstanding safety and service quality performance last quarter.
Jeff Miller: I firmly believe that despite recent pressures on the energy macro
Jeff Miller: Halliburton's consistent focus on technology, collaboration and service quality execution create value for our customers and drive long-term success for Halliburton under any market conditions.
Jeff Miller: Turning to our results, I'll begin with the international markets where Halliburton delivered solid quarterly revenue of $3.2 billion.
Jeff Miller: As I look at the balance of this year, while our overall international outlook has not materially changed, it is reasonable to assume that there is more risk embedded in our outlook today than three months ago.
Jeff Miller: As a result, I expect our year-over-year international revenue to be flat to slightly
Jeff Miller: RQ-1 International Tender Activity Remains Strong, Halliburton-1 Meaningful Work Extending through 2026 and beyond.
Jeff Miller: Customers awarded Halliburton several contracts that demonstrate the strength of our value proposition and the power of our service quality execution.
Jeff Miller: Shell awarded Halliburton's significant scopes of work this quarter, including development and intervention work for Gato D'Amato in Brazil, and exploration work in Suriname and West Africa.
Jeff Miller: Halliburton also won additional integrated offshore exploration work with another major in Suriname.
These integrated offshore contracts rely on Halliburton's advanced technologies.
Jeff Miller: like our Intelligent Completions and Comprehensive Directional Drilling Technology, including the I-Cruise and Logics Drilling Automation and Remote Operation Platform, among multiple other well-construction, reservoir evaluation, and intervention product clients.
Jeff Miller: Furthermore, I expect that projects like these, awarded based on the demonstrated execution of our value proposition, will be the core of how Halliburton winds integrated work with
Jeff Miller: Our value proposition to collaborate and engineer solutions to maximize asset value for our customers resonates with customers and is directly tied to our company culture.
Jeff Miller: It is core to our competitive advantage, and I am pleased it is winning in the marketplace.
Jeff Miller: In addition to these offshore examples, our international growth engines also delivered in Q1.
Jeff Miller: Over the next several years, we expect these engines, unconventional, artificial lift, intervention and directional drilling to grow faster than other parts of our business.
Jeff Miller: To give you a few examples of our progress in these areas, in unconventional we mobilized Zeus's equipment to the Middle East and expect trials in the near term.
Jeff Miller: and Artificial Lift. We were direct-awarded new offshore work in Ghana and we expect strong double-digit international growth in this product line in 2025.
Jeff Miller: In intervention, we close the acquisition of Optime Subsea, a technology we expect will transform deep water interventions.
Jeff Miller: And finally, in directional drilling, with our partners, we delivered a first closed loop automated drilling system and drilled the well with it in Norway.
Then we did it again in the Middle East.
Jeff Miller: To summarize international markets, we had a solid start in 2025. Our first quarter contract awards add visibility and give me confidence for this year and beyond.
Jeff Miller: Our growth engines are strong. In my discussions with customers, tell me we are focused on the right things, collaboration, execution, and technology, and I am confident in the future of our international business.
Jeff Miller: Turning to North America, our first quarter revenue increased 1% sequentially.
Jeff Miller: Seasonal increases in frack activity were offset by seasonal declines in Gulf of America
Looking forward.
Jeff Miller: Many of our customers are in the midst of evaluating their activity scenarios and plans for 2025.
Jeff Miller: Activity reductions could mean higher than normal white space for committed fleets and in some cases the retirement or export of fleets to international markets.
Jeff Miller: Nevertheless, I expect Halliburton to outperform the North America Services market, and I believe this because our clear strategy to maximize value in North America has demonstrated success under a variety of market conditions.
Jeff Miller: Our Zeus fleets, which represent more than 40% of our overall frack fleet operate under term contracts.
Jeff Miller: and finally, our technology is highly differentiated and drives value for our customers.
Jeff Miller: Halliburton's recognized leadership was on display recently, when in partnership with our customer range resources and others, we were honored to host Secretary of the Interior Doug Bergham on a field visit in Pennsylvania.
Jeff Miller: The visit featured our Zeus Electric Track Equipment, which we proudly build in Duncan Oklahoma and demonstrated the industry's ability to deliver reliable and affordable energy in the United States and around the world.
Jeff Miller: We were pleased to host Secretary Bergham and I was energized by his vision and support for advancing American energy.
Jeff Miller: I am also excited by the adoption of our latest technologies, which are a cornerstone of our strategy to maximize value in North America.
Jeff Miller: And the first quarter, we achieved a significant milestone with the successful completion of the first closed-loop autonomous fracturing operation in the world.
to put it plainly
Jeff Miller: Close Loop means that the Zeus platform utilizes real-time feedback from the reservoir.
Jeff Miller: that directs pump activity to control where water and sand are placed all without human intervention, effectively reading and responding to the reservoir.
Jeff Miller: I expect that this technology, known as Zeus IQ, will change the game in unconventionals. I believe Zeus IQ provides customers both the measurements and controls critical to their journey to improve productivity and production for lateral foot.
Jeff Miller: I am excited about the future of this technology and we have several other deployments now underway.
Jeff Miller: I would like to thank our Zeus IQ customers for sharing our vision and bringing this technology to the forefront. We look forward to our continued collaboration to improve asset performance with this unique technology.
Jeff Miller: To finish my thoughts on North America, our strategy to maximize value is unchanged.
Jeff Miller: This strategy means we focus on returns, not shared. Our plan is to retire a reallocate equipment rather than operate it on economic levels.
We focus on safety, service quality, and efficiency.
We maintain equipment and invest in training.
Jeff Miller: I am confident that our customers value our execution and it differentiates Halliburton in this market.
Jeff Miller: We lead technology innovation in North America which means we develop technologies that maximize the value of our customers' assets and deploy them at scale.
Eric Carre: Before I turn the call over to Eric, let me close with this.
Eric Carre: I am confident in our strategy to maximize value in North America, drive our growth engines internationally, and deliver technology that creates value for our customers and Halliburton.
Eric Carre: I expect Halliburton generates solid free cash flow in 2025, and we are on pace to return at least $1.6 billion of cash to shareholders through buybacks and dividends.
Eric Carre: With that, I'll now turn the call over to Eric to provide more details on our financial results.
Eric
Eric Carre: Thank you, Jeff, and good morning. Our Q1 reported net income per diluted chair was $0.24 $0.25%
Adjusted net income per diluted share with $0.60
Eric Carre: Total company revenue for Q1 2025 was $5.4 billion, a decrease of 7% when compared to Q1 2024.
Eric Carre: Adjusted operating income was $787 million, and adjusted operating margin was 14.5%.
Eric Carre: During the quota, we recognized a pre-tax charge of $356 million as a result of Severance Costs, in Permanent of Assets held for sale, and real estate, and other items primarily related to legacy environmental reserves.
Eric Carre: We expect our cost rationalization efforts to be supportive of our margins going forward.
Now turning to the segment results.
Eric Carre: Beginning with our completion and production division, revenue in Q1 was $3.1 billion, a decrease of 8% when compared to Q1 2020-24.
Eric Carre: Operating income was $531 million, a decrease of 23% when compared to Q1 2024.
and Operating Income Margin was 17%
Eric Carre: These results were primarily driven by decreased pressure pumping activity and lower completion tool sales in the Western Hemisphere.
Eric Carre: In our Drilling and Evaluation division, revenue in Q1 was $2.3 billion, a decrease of 6%
when compared to Q-1 2020-4. [inaudible]
Eric Carre: Operating income was $352 million, a decrease of 12% when compared to Q1 2020-4.
and operating income margin was 15%.
Eric Carre: These results were primarily driven by decreased activity in Mexico and Saudi Arabia.
Now let's move on to geographic results.
RQ1 International Revenue decreased 2% year-over-year
Eric Carre: Europe Africa Revenue in Q1 was $775 million, an increase of 6% year-over-year
Eric Carre: The increase was primarily driven by improved activity across multiple product service lines in Norway and higher white construction activity in Namibia.
Eric Carre: Millie Stasia, Revenue in Q1, was $1.5 billion, an increase of 6% year-over-year [inaudible]
Eric Carre: This improvement was due to higher activity across multiple product service lines in Kuwait and improved completion and production performance in Saudi Arabia.
Eric Carre: Latin America Revenue for Q1 was $896 million, a 19% decrease year-over-year, primarily due to lower activity across multiple product service lines in Mexico.
Eric Carre: In North America, Q1 revenue was $2.2 billion, a 12% decrease year-over-year [inaudible]
Eric Carre: This decrease was primarily driven by lower stimulation activity in U.S. land and decreased completion tool sales in the Gulf of America.
Eric Carre: Moving on to other items. In Q1, our corporate and other expense was $66 million. We expect our Q2 corporate expenses to be about flat.
Eric Carre: In Q1, we spent $30 million or about three cents per diluted share on SATS for migration, which is included in our results. For Q2, we expect SAT expense to be about flat.
Eric Carre: Net interest expense for the quarter was $86 million. For Q2, we expect net interest expense to increase about $5 million.
Eric Carre: Other net expense for Q1 was $39 million, for Q2 we expect this expense to increase about $5 million.
Eric Carre: Our normalized effective tax rate for Q1 was 22.1%, based on our anticipated geographic earnings mix, we expect our Q2 effective tax rate to be approximately 23%.
Eric Carre: Capital expenditures for Q1 were $302 million. For the full year 2025, we expect capital expenditures to be about 6% of revenue.
Eric Carre: Our Q1 cash flow from operations was $377 million, and free cash flow was $124 million.
Eric Carre: Moving on to other items that will impact free cash flow, we're following the trade situation closely.
Eric Carre: While the situation is fluid, our initial estimates are for an impact of about two to three cents per share in the second quarter, which is included in our guidance. We will provide an estimate of the full year impact next quarter.
Eric Carre: Now, let me provide you with comments on our expectations for Q2.
Eric Carre: In our completion and production division, we anticipate sequential revenue to increase 1-3% and margins to remain approximately flat.
Eric Carre: In our Drilling and Evaluation Division, we expect revenue to be flat to down 2%
and margins to decline 125.
to 175 basis points.
Eric Carre: Primarily due to the seasonal roll-off of software sales and higher mobilization expenses related to contract startups, I will now turn the call back to Jeff. Thanks Eric.
Jeff Miller: Here are the key points I would like you to take away from our discussion today. While there is more uncertainty in the market than there was three months ago, Halliburton's consistent execution of our strategy has driven results that give me confidence that Halliburton will continue to outperform.
Jeff Miller: In international markets, we had a solid start in 2025 with significant contract awards and strong delivery on our growth engines.
Jeff Miller: Our value proposition resonates with customers, and I expect it to deliver further incremental wins throughout the year.
Jeff Miller: in North America, we have expanded our technology leadership with the Zeus IQ closed loop Autonomous Fract System.
Jeff Miller: and Confident. Our unique technologies and high percentage of contracted police will drive our outperformance in the North America market.
Jeff Miller: Finally, I firmly believe Halliburton's consistent focus on technology development, collaboration and service quality execution will create value for our customers and drive long-term success for Halliburton and our shareholders through any market.
and now let's open it up for questions.
Speaker Change: Thank you. Ladies and gentlemen, if you have a question or comment at this time, please press star 11 on your telephone keypad. If your question has been answered or you wish to remove yourself from the queue, simply press star 11 again.
Speaker Change: Again, if you have a question or comment, please press star 1-1 on your telephone keypad. Please stand by while we compile the Q&A roster.
Speaker Change: Our first question of comment comes from the line of Neil Mehta from Goldman Sachs. Your line is open sir.
Speaker Change: A couple more in North America questions. He spent a lot of time [inaudible]
Speaker Change: with your customer base in between these calls. We've had a lot of volatility in the last couple weeks, but as you think about US activity through the balance of the year, if we stay in this type of commodity price environment,
Speaker Change: How do you think about the rig count and the completion count and what type of oil price do you think would really change customer behavior in a meaningful way?
Speaker Change: Yeah, thanks, Neil. Look, I think that customers right now are working through that. I mean, what a lot's happened in three weeks. It's been a busy three weeks from us.
Speaker Change: You know, the digesting information, I think duration is a part of that thinking as well.
Look, when I think about the market...
Speaker Change: in Activity sort of in the 60s. You know, I think some...
Speaker Change: The important things are going on one. From our perspective anyway, the market is not building new equipment. So I think that we're in a good place there. I think that
Speaker Change: You know, activity itself, if it slows down, much starts to have production impact as well and so I think that's a bit of a governor on.
Speaker Change: and I think that much of a decline in activity then is underpinned pretty quickly by its impact on production.
Thank you. Thank you.
Speaker Change: Thanks, Jack. We'll see you in P's report in the next couple weeks. We'll definitely be asking the same question. And then you mentioned Mexico a couple times in the in the prepared remarks and had impacts on margins. It looks like in both C&P and D&E. So just give us a lay of the lay in there. How do you think about the trajectory over the course of this year into 2026 and do you see a path to resolution? Yeah, I think so.
Speaker Change: Yeah, thanks and looking. And I was just there meeting with Victor Padilla, the new CEO and have spent some time with them. You know, clearly not settled at this point as we look forward.
And I think you know I think
Speaker Change: You know, they they have a plan, but I also think that it's going to be tough for a while, and I say tough for a while I don't see immediate recovery in Mexico
Speaker Change: Just as the new administration and they mix themselves work through what does all of this mean but I do know this and what's very important is oil and gas to the economy of Mexico and so I do expect they find their footing. Thank you.
Speaker Change: at some point it's too early to call, when that point is...
But I do think that the client rates are pretty meaningful in that market and I think that that's going to drive.
Recovery.
Speaker Change: I wish I were clear around the timing on that, Neil, but I do believe they're working through what plans are, but obviously the execution of those plans are dependent on a range of things, including kind of what the market does and what the performance does.
Thanks, Jeff. Appreciate the comment.
Speaker Change: Thank you. Our next question of comment comes to an outline of David Anderson from
Barclays, you're Linus Open. [inaudible]
Speaker Change: Great. Thank you very much. Jeff, maybe start with a question on Saudi. It's a little bit of some moving pieces in there. The simulation was up drilling well construction down. Thank you.
Speaker Change: Do you see Saudi growing in the Halliburton portfolio this year? There are a number of tenders for your forward to be announced. Is that the big swing factor for the year? Because you just talked about that within the context of flat international for the year, please. Thank you.
Speaker Change: Sure, and I think that make number one, Saudis, it.
Huge Market.
Speaker Change: and we expect growth for our portfolio in 2025 and Saudi just to be clear.
Speaker Change: You know, I think there's some exciting opportunities. You mentioned one of them, but there are others. We do a lot in that market.
Speaker Change: And so, you know, I think, what I think about Saudi, that's one of those places where we are.
Speaker Change: Are going to grow in those growth engines and we see a lot of what we have unique strengthen those growth engines whether it's unconventional intervention and artificial lifts the all three of those positively. Absolutely.
and Saudi as well. So I hope that clarifies that.
Speaker Change: That's helpful. So, good to see some positives. I know a lot of concerns on the North American side. Eric, I want to ask you a bit more about the margin progression. Margins came down this quarter and both segments below the guidance that we're expecting. You're just, you're looking towards next.
Speaker Change: Second quarter to come down again, usually first quarter is the bottom to come down.
Speaker Change: How are you thinking about kind of margin progression through the rest of the year? I'm particularly thinking about the context of light space in North America, particularly on I think most of your equipment is locked down, but help us understand kind of how margins how you think about margins and maybe where we could exit the year from here. Thank you.
Speaker Change: Yeah, so let me start with giving you a bit of a walk through from Q1 to Q2 and then I'll give you a little bit of color on the full-year margins by division.
Speaker Change: If we look at Q2, as we guided for the starting with the CMT division, we're looking at truly flat revenue in North America, but they pick up...
Speaker Change: in our international business for the C&P division. Margin Flat, Keep in Mind as well, that includes the terrorist impact. When we look at tariffs, we kind of...
Speaker Change: mentioned on the prepared remark, a two to three cents impact about 60% of that is in the CNP division, 40% of that is in the DNA division.
Speaker Change: So that's for CMP on the DNA side of the business. It is really, I mean, if you look at Q2 over Q1, we're basically dropping about 40 million dollars in profits.
Speaker Change: and that can be explained fairly specifically. We have about 10 million in tariffs, 20 millions in mobilization and that is incremental mobilization costs over Q1 as we get geared up for growth in the second half of the year.
Speaker Change: in quite a few of the regions, and then we have 10 million, that's a mix issue with our software business coming down in Q1, our drilling business coming back up a bit, but the delta of that is about 10 million, so.
Speaker Change: I think what's important to realize for the Q2 guidance is that the guidance is really not new run rate is really a couple of specific items.
Speaker Change: If we think about the second half of the year, it kind of gives you some color there. We're at this stage forecasting that our second half, 25.
Speaker Change: The margin levels in 2, 3 and 2, 4 will be in the same zip code as they were in 2024.
Speaker Change: So that's kind of the NE, if we look at CNT, we're not going to guide the year.
Jeff Miller: The International Business for CNPs, about 40% of our business, 60% in NAMM, as Jeff mentioned in the remarks and in a couple of comments here.
Jeff Miller: We're expecting our growth engine to perform really well in the international market, that's on the intervention, lift and conventional, a lot of these growth engines sit in the CNP division.
Speaker Change: for the North America business. It's a bit less clear as we explain in the prepared remarks. Yeah, maybe I'll add some color because it's specifically regarding North America. I think...
Speaker Change: I do mean that the customers are still digesting what precisely that means and then what price range and duration of commodity price.
But that being said, I mean, we have a different looking-
Speaker Change: Zeus, not only the contract terms, but the who it works for in the...
Speaker Change: and the what it's able to do. I also know from a technology perspective that there's a lot of demand for the technology that we have and we really have a different operating model than we've had going into any other period of time.
given the-
Speaker Change: Just the ability to mow up down to take us.
Clearview on what's really required to perform the services.
Speaker Change: and the automation continues to take cost out of the process for us.
Speaker Change: Again, a lot of digesting of data going on but I think from our perspective in a really strong position, certainly relative to the market.
Great. Thank you, Jess, and Eric.
Speaker Change: Thank you. Our next questioner comment comes from the line of Arun Jayaram from
JP Morgan, your line is open.
Dr.
Speaker Change: Yeah, Jeff, good morning. Jeff, I wanted to maybe see if you could elaborate on what you're seeing internationally. You highlighted how it's possible that international spending is down a little bit year over year, which is maybe a little bit...
Speaker Change: Softer than your previous outlook, a relatively flat with obviously Mexico being a headwind.
Speaker Change: with OPEC, clearly bringing on some barrels. Could you talk to us what parts of the non-OPEC food chain do you expect to see maybe some spending impacts?
Yeah, look at that hood.
Speaker Change: Look, let me just start with how we see international with a little more specificity, you know, and when I think about our operating plan today, it looks flat. I mean, San Zimexco. And then overall, it, excuse me, overall looks flat.
Speaker Change: with Mexico in there, but that the key is we do see a bit more risk creeping into the models.
Speaker Change: in the last three weeks or certainly the last three months.
Speaker Change: But when I think about non-OPAC parts of the world, Norway, we see a lot of activity, we see solid growth there.
Speaker Change: We've been quite successful in Brazil. This is where some of the mobilization cost is both for PNA and for
Speaker Change: Integrated Drilling, and then talked about the Shell Integrated Projects and other operators in Sauron Am. So, you know, it's really the deep collaboration model that I'm describing that is gaining work.
Speaker Change: You know, and just winning and developing different types of relationships. So want to think about
Speaker Change: How do we land there? Look, I see the second half of the year Europe and Africa making the biggest jump in Q3 and that's with contract startups and we see the Middle East growth engines, you know having an impact there or the growth engines in the Middle East.
Speaker Change: and then in Q4 Latin America has a pretty stout uplift as well just because we'll see the full quarter of the contract startups that we're mobilizing for in Q2 and that I've described.
Eric Carre: Great, that's helpful. Maybe one for Eric. Eric, I wanted to maybe zero in on the cash flow statement.
Speaker Change: He announced a $345 million equity investment, looks like a minor acquisition, so if you could describe those two plus you had
Speaker Change: about a 350 million outflow in other operating items, so maybe you could give us a little bit of color on those items in the cashless statement.
Speaker Change: Yes, so there was one to start with the investing activities. There was one that was related to the upterm acquisition that we commented on.
Jeff Miller: The second number, the 345, relates to an increase in ownership, in vultagrid, and I'll let Jeff elaborate on this one.
Going back to the operating activities [inaudible]
Jeff Miller: The big item that you see in other operating activities is actually the combination of the typical incentive payout, cash tax payment, etc., but also the cash portion of our restructuring charge in Q1.
Got it. Got it. That's helpful. Thank you a lot.
Jeff Miller: Yeah, and I would just say with respect to the increased position in multigrid, this quarter look wing.
Jeff Miller: We like the power of business. We have a front row seat through our exposure in the Volta Grid investment, but we also see many other exciting opportunities for us in that space. But want to be crystal clear, we're very prudent and it's one step at a time for us.
Great, thanks a lot Jeff.
Jeff Miller: Thank you. Our next question of comment comes from a line of Roger Read from Wells Fargo Securities. Your line is open.
Roger Reed: Yeah, thank you. Good morning. I was hoping Jeff, you can come back and give us a little more on the North American market and how Zeus and how you think Zeus IQ really ought to work in.
Roger Reed: in terms of, you mentioned earlier, a changed customer mix a little bit, but how we should think about, if you want to call it a growth opportunity, maybe not right now, but the way to sustain margins through this, you know, kind of software period.
Roger Reed: Look, thank you, and the key to Zuzai Q is things we have been working on for some time. So in some ways, it's a combination of...
Roger Reed: Octavato Frack, Sensory, the ability to read the reservoir, control the equipment and then
Roger Reed: Analyze in Real Time, I say Analyze, but solve for that in better than real time at the pace of AI time, solve for where it is the sand and the water need to go, and look, this is precisely addresses.
Roger Reed: What kind of the greatest challenges and hydraulic fracturing, which is...
Roger Reed: How to improve recovery rates and almost under any conditions, meaning rock we know over time gets the grades, okay? The best rock gets flagged first.
Roger Reed: But how does that get read and manipulated and addressed in a way that creates better outcomes? And this is...
Really important technology and the types of customers that are...
Roger Reed: Taking it up are the kind that have a very long view of North America. Clearly appreciate the importance of recovery over a long period of time. And yes, I think it drives
Roger Reed: Growth in even this market, we actually put a new Zeus fleet to work in Q1.
Roger Reed: and I think that it creates not just stickiness but clearly it creates more value which is value that grows to us.
Speaker Change: Appreciate that. Eric, maybe a question for you on how we should think about it.
Eric Carre: Uses of free cashflow in this environment, so obviously dividend priority, but how are you thinking about the share repurchase side of things, and what's the right way for us to think about that with the updated guidance?
Eric Carre: Yes, I mean at this stage obviously with the updated guide we're looking at a overall free cash flow for the year which is on the kind of lower end of what we had.
Eric Carre: Given some color on in Q1, but I really don't see anything today that changes are, excuse me, that changes are perspective on cash returns and buy back so we're still on a pace that is very similar to what it was last year.
Appreciate that. Thank you.
Speaker Change: Thank you. Our next question of comment comes from the line of Saurabh Pant from Bank of America. Your line is open.
Hi, good morning, Jeff and Eric.
Morning, Sarah.
Speaker Change: Jeff or Eric, maybe I want to start with the tariff side I think, I know you said two to three cents impact on the second quarter.
Speaker Change: and we'll get more color on the back-off later on as you get more visibility, right? But maybe you can elaborate a little bit on what business is, what exact components or maybe I'm thinking business like chemicals and bear out specifically. What parts of your businesses are seeing the most impact from tariffs and then how are you looking to mitigate that going forward? Yeah, that's good.
Speaker Change: Yes, I'll take that one for up. So, as we said, it's really early days. So, we have reasonable visibility of what is going to happen in Q2, and that is about an impact of two to three cents, and as we indicated.
Speaker Change: We are doing a lot of work on mitigating the impact of tariffs. We have a well-diversified supply chain, we have a lot of levers we can pull.
Speaker Change: but really to be more clear in terms of the overall impact, we need a bit more clarity and stability and the structure of tariffs.
Speaker Change: so that we can really understand what levers we can pull and then what the overall outcome is going to be. So there's just a lot of moving parts right now and I think we'll be able to give you more color in three months from now.
Speaker Change: In terms of the impact of product lines, I'm not going to go into a lot of details, but broadly speaking we're looking at about 60%
Speaker Change: 40% on our DNA business. You're looking at parts like collars for drilling and, you know, gun bodies for perforating business. That's the type of components that are being affected by terraced at this stage.
Speaker Change: Okay, okay. Perfect. Eric, quick clarification on that. I think it responds to a prior question you said. For margins, D&E, you think 3Q and 4Q margins can go back to the same zip code as last year. There's
Broadly speaking, yes with what we know today, yeah.
Speaker Change: Okay, perfect, I got it. And then, Jeffrey, quickly, one for you on the international side of things. If I'm doing my math right, it sounds like Mexico might have been down 70, 75% which is a massive number year over year, right? But excluding that, I think you said mid single digits.
Speaker Change: Rest of International, right? It's pretty healthy growth considering the environment we are in. Maybe talk to what countries, what regions drove that growth? Jeff and what should we expect from those regions going forward? We're going to be able to do that.
Yeah, look, I think I mentioned that, but I think-
Speaker Change: Yeah, we'll see the solid jump in Europe , Africa in Q3, as we start a number of contracts from Italy to expect our growth engines are...
Speaker Change: kicking in as well, whether that's Intervention, which is an important business for us.
in the Middle East as well as... [inaudible]
You know, some activity start up around.
Speaker Change: Lift in new countries. Again, we expect that it's a meaningful part of our business and it's continuing to grow.
Speaker Change: You know, and I think that we'll continue to see activity around drilling, and I've described some of the drilling technology, but that's becomes more and more meaningful.
Speaker Change: and Q4. We really see Latin America making a big step up. And again, very focused in Brazil, Argentina, a number of places where we have a very strong business. So I would say that
Speaker Change: You know Mexico certainly is the outlier but very excited about our business and the type of it's really that
Speaker Change: You know, aligns us very well with our customers, creates opportunity for us. I expect we'll see more growth in the North Sea, maybe even outside of the...
Speaker Change: Norwegian Sector. So I think that for us, we see a great opportunity in the second half of the year.
Jeff Miller: Okay, fantastic. No, it's good to see that momentum continue, Jeff. Okay, I'll do it back. Thank you.
Speaker Change: Thank you. Thank you. Our next question to comment comes from the line of Scott Gruber from City Group. Your line is open.
Yes, good morning.
Warren Skye, Scott E.R.
Scott: Good morning. Jeff, if you highlighted some emerging risk to second-ath activity, Eric, you reiterated CAP-XD in about 6% of sales, obviously, there's...
There's a bit of risk to sales. [inaudible]
Scott: But, you know, at 6% of sales, your Catholic is still trending above D.D.A.
Scott: Can you just speak to, you know, the need for spending, you know, above D.D.A. is that?
Scott: really helping to drive the share gains that you're targeting. And what factors would cause you to adjust that rate of spend? I realize second half spending more in fact, you know, your fleet of tools.
Scott: in 2026. And therefore, it reflects the 26th outwork. But what factors will it cause you to kind of reconsider the rate of spend in the second half?
Scott: The dollar cap expand just with and I'm saying over time intentionally in the sense that
Scott: You know, there is a time element there like most of the capex that we are going to spend in 2024 is the result of orders that were placed in 2024 so there's you know it takes time to kind of adjust things. [inaudible]
Scott: and we're probably not going to be able to adjust very much if the activity ends up changing and as we said right now most of the like international capitals were not seeing we're seeing still the activity fairly flat so if we adjust we'll start adjusting really for
2011 April 8, 2020 April 8, 2026
Scott: The other thing to keep in mind as well, that we have not qualified either, is a potential impact on the CapEx number coming from terrorists as some of the parts get incorporated into the
Dr.
Scott: Yeah, I guess I would follow that, just a little bit of addition around that in terms of
Thank you. Bye bye.
You know that
Speaker Change: The technology that's generating the outperformance, whether it's an IWI or these growth engine areas, we are allocating capital to those things that are growing and so we're very, very thoughtful about that and that will allow us to adjust capital up and down over time.
Speaker Change: and so I would expect that we continue to be effective allocators of capital sort of under any conditions here.
I got it, appreciate it. It turned back to Volta Grid.
Speaker Change: What's the end game here with Walter Greed? Do you intend to just keep it as an equity investment or are you interested in ultimately becoming the majority owner? And do you see benefits to how being the majority owner, you know, could you help accelerate the capture of non-oral field work?
Speaker Change: You know, more data center contracts, more industrial contracts is their international expansion angle that you could push forward as majority other, just kind of how do you think about that investment longer term?
Yeah, look, in my view, that's optionality, and so...
Speaker Change: You know, not predetermined on any direction, and I want to be clear that I'm not, we're not. But again, that's, you know, one avenue that we're looking at, you know, that we're participating in now, you know, obviously.
You know, I think that
Speaker Change: That's an opportunity for growth. Over time, we're going to address it prudently. As I said, we look at lots of options, not just that by any means.
Speaker Change: and we also are, you know, clear around what's strategically, where does that distributed power go as opposed to, is it...
Speaker Change: One area or another, I think there are multiple areas that, you know, demonstrate some growth.
Speaker Change: But just chasing after the thing of the day, you know, we're really, really careful not to do those things. And so, again, burdens and sort of the kinds of things we do at Halliburton are always going to be.
Speaker Change: deeply thought out and have an executable clear strategy around it and right now we see a lot of opportunity broadly in that area and we want to keep those options wide open.
Speaker Change: Scott, appreciate the color, Jess, Eric, thank you. Thank you. Thank you. Thank you.
Speaker Change: Thank you. Our next question or comment comes from the line of Derek Podheiser from Piper Sandler. Your line is open.
Derek Podheiser: Hey, good morning. I just wanted to ask about your outlook for the gas basin activities. Maybe just if you could expand on how your conversations have progressed over the last three months. Just try to think about the equipment market to service those areas. We still have LNG take away, power in the AI movement. Maybe just some overall comments around how you're seeing the gas markets progression now.
Get, look, I'm off!
Derek Podheiser: Positive on the gas markets for sure. And I think that, you know, the structural change that you described, both Power Demand and LNG exports, will continue to...
Derek Podheiser: Structurally drive more demand, which is going to increase activity in the gas markets that I've had dialogue with gas operators.
Derek Podheiser: Moving around, but I think some of that says a result of a lot of the digestion of data that's coming at a high rate is having an impact on that. None of that changes though. The structural demand for gas, which...
Derek Podheiser: Clearly, he's the most reliable, scalable, and affordable form of power, and so I think we'll continue to see improvement there, but like I said for many quarters, I'm not going to pick the date.
Derek Podheiser: That we see the inflection, but we have had more imbalance from gas operators than we've had in some time.
Speaker Change: That's helpful. This might be more of a bigger picture question, but I was thinking about last year when we were talking about the International Cycle, he talked about Hallburn.
Speaker Change: being better position than last cycles, talking about artificial lift chemicals. We now we have deep water offshore starting to pick up, so maybe we could spend some time talking to us about halver and position attacking this offshore cycle, first prior offshore cycle, just given the
Speaker Change: The commentary you laid out in the release and on the calls, it's pretty strong, your outlook seems pretty constructive so maybe just some thoughts around your position this time around and then prior cycles.
Yeah, look, I think...
Speaker Change: It's technically we're in a much better place than any other cycle and that's why I described winning offshore exploration, integrated offshore exploration work.
Speaker Change: I do that just to demonstrate from an example perspective, there are others.
Speaker Change: A, how technical we are and why we are competing so well in the offshore space.
That's one, and then second...
Speaker Change: The value proposition is really meaningful internationally or in deep water because the stakes are much higher, the alignment is much more important.
Speaker Change: The type of ways we work and plan together with our customers, you know, the clarity around asset value, creating asset value for our customer creates amazing alignment.
and culturally, we are aligned around delivering that, which...
Speaker Change: You know, gives customers a lot of confidence that we're going to show up and do the best thing for them.
Speaker Change: We're going to be aligned with them. And so those two things put us in a very different position internationally and in deep water. And for that reason, I'm very I am optimistic around where we sit and how we will perform.
Speaker Change: Great. Appreciate the color. I'll turn it back. Yeah, thank you.
Speaker Change: Thank you. Our next question, a comment comes from the line of Doug Becker from Capital One. Mr. Becker, your line is open.
Doug Becker: Corridor. So, wanted to make sure I got that right. And if so, that still seems pretty aggressive even trying to take into account the unique caliber and growth drivers and just some seasonal improvement. So, anything you could expand on the drivers there.
Doug Becker: So, you are correct, that is what I said, and again...
Doug Becker: You're looking at a significant impact from mobilization in Q2 and we're mobilizing equipment because we have one additional work. So all of that kind of go together. We'll have less cost as we get into the second half of the year. We'll have incremental work.
Doug Becker: that we're mobilizing for, so that's what our operational forecast tells us at this point in time.
Speaker Change: Does that assume any decrease in activity in the second half?
Speaker Change: That includes, it reflects the forecast that we are seeing right now in terms of the top line. As Jeff indicated, there is obviously more uncertainty because of the macro picture right now. So if the macro picture has significant impacts on the international market, then that will differ, but that's not what we're seeing at this moment in time.
Speaker Change: No, understood. Nor is that the feedback we're getting from customers internationally. That feedback is much clearer.
Speaker Change: Yeah, overall, I would say that it is included in the guidance that we're giving, so that's how it will materialize itself, and then you can think about the overall severance impact to have a payback of less than one year.
Roger, got it. No, thank you very much.
Welcome.
Speaker Change: Thank you. Our next question of comment comes from a line of Stephen Gengaro from Stiefel, and the line is open.
Thanks, good afternoon everybody.
Um...
Speaker Change: So, two things to me, I think the first, when we think about sort of the evolution of the pressure probably business over the last five, ten years and the increased probably resiliency in margins.
Speaker Change: Can you talk about what you're seeing right now, kind of on the pricing side, and maybe even if there's any color you could give on, you know, how are these?
Speaker Change: Longer term contracts are in place on the E-fleets. You may or may not kind of reprice on a quarterly or annual basis. Any color you can give us there as we think about margin progression in CMP.
Speaker Change: Well, look, we've continued to extend these contracts sort of throughout, and...
Speaker Change: You know, they continue to be, you know, price consistent with the values that they're creating including the technology that I've been describing. So look, I think that
Speaker Change: It is a much more resilient market for us and that is from a strategic perspective is why that happens. It was pretty clear in my remarks in terms of what maximize value looks like.
and so...
You know, I think it'll be...
Speaker Change: It's competitive, but at the same time we decide a lot of what we do and our view is it has to make a good return and so with 40 and our target 50% being under contract and being at the high end of the technology range. [inaudible]
Speaker Change: and the technology that goes with it, I think puts us in a different position.
Speaker Change: Okay, great. Thank you. And then just a follow-up on the question that came up on VoltaGray, one of the things that we're trying to understand better around PowerGen is the differentiation it brings.
Speaker Change: and given how I think the pressure problem market has become, if it's a word decommoditized over the last 10 years, how do you think about something like Volta Grid and whether that's a more commoditized service?
Speaker Change: and kind of something that the Hallibur and as an auntie's kind of been moving away from over time.
Yeah, obviously.
Speaker Change: Something we think about and what I think about strategic obviously I mean competitive advantage and that's one of the reasons we have a front row seat but before we [inaudible]
Take any steps. I'll have to be crystal clear.
Speaker Change: Technology drives sustainable differentiation, in our case, given the investment in it. And so view that the same way, and air go the reason we're sitting where we are.
Okay, great. Thank you for the color.
Thank you.
Thank you.
Speaker Change: I'm sure that concludes the Q&A session for this, I would like to turn the conference back over the management for any closing remarks.
Speaker Change: Yeah, thank you Howard. As we close out today's call, let me close with this. I'm confident in our strategy to maximize value in North America, drive our growth engines internationally.
Speaker Change: and Deliver, highly differentiated technology that creates value for our customers and Halliburton.
Speaker Change: I expect Halliburton generates solid free cash flow in 2025 and we are on a pace to return at least $1.6 billion of cash in 2025. Look forward to speaking with you next quarter.
Speaker Change: Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may now disconnect. Everyone have a wonderful day.