Halliburton Co. reported a softening North American market as activity fell through the second quarter, but management remained confident in a rebound as dust around E&P consolidation begins to settle.
Halliburton expects 2024 North America revenues to decline between 6% and 8% compared to last year.
Halliburton Chairman, President and CEO Jeff Miller said rig counts and overall service activity in North America declined through the quarter. That will extend into the second half of the year, “near the low point of activity in this cycle,” he said during the company’s July 19 earnings call.
Miller’s comments echoed recent views by Liberty Energy management of lagging E&P activity in the second half of 2024.
While Miller said it was too early to give specific guidance for North American activity in 2025, he said he expects circumstances to be “directionally higher than the second half of 2024.”
“First, I expect an increase in activity after E&P companies complete their acquisitions and establish new development plans,” Miller said. “Second, some of the merged assets will be divested to smaller operators who will put them to work.”
Miller also expects some recovery in natural gas activity. Many E&Ps in gassy plays have delayed completions and curtailed volumes as natural gas prices remain depressed.
“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 to demonstrate the margin resilience and earnings power of our strategy,” Miller said.
Halliburton delivered strong completion and production margins through the period and Miller expressed confidence that the company’s strategy will deliver strong results in the future.
“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,” he said.
Evercore ISI analyst commentary agreed with Miller’s view in a July 19 report.
“We are beginning to get bullish on a North American land recovery kicking off in 2025 and accelerating into 2026; Halliburton will be a major beneficiary,” analyst James West wrote. “Halliburton’s vision of the future of the oilfield aligns with our own—an industry that is lower cost/higher margin, less capital intense, more internationally focused and digital—with an enhanced return profile.”
Compared to the first quarter, Halliburton’s second-quarter North America revenues were down 3% to $2.5 billion. The company attributed the decline primarily to decreased pressure pumping services in U.S. land and lower activity across multiple product service lines in the Gulf of Mexico (GoM).
Declines were partially offset by increased drilling-related services in Canada and U.S. land, higher wireline activity in U.S. land and the GoM, improved pressure pumping services in Canada and increased cementing activity in the GoM.
Despite lagging North American revenue and strong competition in the pressure pumping business, Miller said Halliburton will allocate capital to the markets and products that drive superior returns and margins.
“We will prioritize returns over market share and as such, we have retired several frac fleets this quarter,” Miller said.
A Barclays analyst on the call observed that much of Halliburton’s e-fleet—about 40%—is under contract. The analyst asked if, given those contracts, prices could run higher if terms run two or three years.
Miller responded that Halliburton still sees a lot of demand for e-fleets as a leading technology the company rolled out in the second quarter.
“That's a runway through the end of this year and into ‘25 that we see today,” Miller said. “We don't have any contracts that expire early [until] next year. And so, that's a process that we're working through.”
Miller declined to go into further detail but said Halliburton is signing up repeat customers, “which is a pretty good indicator of the value that they're creating. So, [we] feel confident about that process.”
Overall, the company delivered total revenue of $5.8 billion with an operating margin of 18%. International revenue grew 8% to $3.4 billion year-over-year (yoy), led by Latin America, which delivered a 10% increase, Miller said.
North America revenue fell by 8% yoy to $2.5 billion as the rig count declined by 12% during the same period.
The company’s drilling and evaluation division and the completion and production division both demonstrated margin improvement yoy. During the second quarter, Halliburton generated $1.1 billion in cash flow from operations and $800 million in free cash flow. The company repurchased $250 million of common stock.
The company saw a modest margin beat, a revenue miss but positive international returns according to a July 19 report by Jefferies Equity Research Firm.
“Slightly negative but expectations were low going into the earnings,” Jefferies said.
Halliburton credited innovation in its Landmark software business for supporting quarterly performance due to its scalable earth models and AI and machine learning developments. The upgrades helped drive efficiencies from asset-level planning through production.
Halliburton reported that its artificial lift technology is growing in international markets at double the rate of their overall international business. New lifting technology for geothermal environments contributed to quarterly performance, Miller said.
“In international markets, we had a strong quarter in unconventional drilling applying a new rotary steerable system and an autonomous drilling platform,” the company said.
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