[Editor's note: A version of this story appears in the January 2019 edition of Oil and Gas Investor. Subscribe to the magazine here.]
Jeff Miller, president and CEO of Halliburton Co. (NYSE: HAL), carries a country charm that subtly contrasts with his dapper gray business suit and “Halliburton red” tie—and with his position as the head of one of the largest oilfield-services providers in the world.
It may be no surprise, then, that Miller once competed as a professional cowboy in rodeos before taking off his cowboy hat and ropers for a CPA job that would ultimately land him with Big Red, having a $28-billion market cap.
He sits at the helm of the Houston-based company at a momentous point in its history: Halliburton celebrates its 100th anniversary this year, solving oil and gas field problems. In 1919, founder Erle P. Halliburton started an oil-well cementing business in Duncan, Okla., with a borrowed wagon, a team of mules and a pump. The rest is history, albeit a storied one.
Today, Halliburton serves E&P operations around the world with 60,000 employees in 80-some countries. “The biggest bets we make are on our people,” Miller told Investor. “The business has changed many times over, but our company doesn’t thrive for 100 years without fantastic people.”
Miller holds an agriculture and business degree from McNeese State University in Louisiana and an MBA from Texas A&M University. He first joined Halliburton in 1997, working his way through various leadership roles until assuming the president post in 2014 and the CEO seat in June 2017. He took the reins during one of the worst downturns in the industry’s history.
Oil and Gas Investor chatted with Miller at the company’s headquarters in Houston.
Investor: Would Erle P. Halliburton be more impressed by the fact that Halliburton has reached $20-plus billion in revenue or 100 years in age?
Miller: I think Erle P. would be more excited about the $20 billion in revenue. Earl P. was an absolute competitor and it came through in everything he did, going back to the beginning with the jet cementer pulled by mules.
He invented a lot of other things as well; he was an innovator at heart. With what the industry has done and what Halliburton has done, he’d be fascinated by it. He’d want to be a part of it.
He’d be excited about the 100 years too, because that’s quite a legacy, and there aren’t many companies that have done that. He would be impressed to see 60,000 employees go into the market, the R&D that we’ve done and the kind of technology that we deliver every day.
Investor: How significant is it to be in business and even a sector leader for a century?
Miller: It’s a really big deal. There aren’t many companies—say 12—that log 100 years and are still in the Fortune 500. We’re excited to be one of them. That kind of staying power says we’re a company that reinvents itself, that delivers new ideas and stays relevant. It’s one thing to be 100 years old; it’s another to be at 100 years and still leading in our field. That, to me, is what’s most fantastic.
Investor: What’s the secret to that longevity?
Miller: When I think about Halliburton, I think about our value proposition: We collaborate and engineer solutions to maximize asset value for our customers. That sounds like a mouthful, but, the fact is, that absolutely captures the DNA at Halliburton. We work closely with our customers, we’re constantly developing new technologies, and we’re always driving toward our customers’ goal of the lowest cost per barrel of oil equivalent (boe). That’s a theme that resonates with customers.
I met with Curtis Mewbourne, a customer, the other day. He’s the 83-year-old gentleman who founded Mewbourne Oil Co., a strong oil company. His first discovery in West Texas was in 1968, I believe. And he told me the story about his first discovery well. They discovered oil, and it’s blowing out the way wells did when they made a discovery back then.
Everyone went home except for him and the Halliburton engineer. He and the Halliburton engineer worked all night long, got some choke on the well and, then, shook hands and the Halliburton guy went home.
He remembers that 50 years later, and that is the essence of Halliburton executing work. We’re there on location, doing the work, committed to our customers.
Investor: Halliburton has a long history of being a technology innovator and a disruptor in the industry. How do you know when to shake things up?
Miller: Great companies are always willing to challenge and disrupt things, and we like to disrupt. But I think at the core of disruption is honesty, and by that I mean the willingness to look at the market, understand the technology and, when the time is right, be willing to disrupt things that may have worked for a very long time.
But it’s also done because we know we want to deliver the lowest cost per boe for our customers. And that’s going to involve disruption.
We’ve got a lot of things we’re working on today that are likely disruptive. We’ll bring those to the market when we think the market is ready for them.
Investor: Such as?
Miller: There are things we’re doing in hydraulic fracturing today that are driving a lot of speed in terms of fracturing. There are things we are doing in formation evaluation, looking through multiple casing strings. All of these things have the ability to disrupt. What we’re doing around lifting chemicals is also exciting.
Investor: How would you say the landscape has changed for service providers during the past few years?
Miller: It’s more competitive. We’ve come through the worst downturn in the history of the industry, just in the last few years. Any time we’re at the bottom of a cycle, it tests value propositions, and I think our value proposition clearly withstands the test of time.
Investor: How has the R&D focus changed over time?
Miller: We’re more focused than we’ve ever been on those things that create lower cost or increase production. And it sounds like an oversimplification, but it’s an important one. That’s the screen that I use when we think about how we invest our R&D dollars. And because of that, we’re more effective than we have ever been delivering technology.
We were 44th in the world in terms of patent grants in 2017. And we’re the only oilfield-services company in the Top 50. We’re excited about that because it means we’re more efficient than we’ve ever been, even when working through a very tough cycle.
Investor: What technologies do you foresee as having the most impact in the coming years?
Miller: Digital is clearly going to have an impact, though I’m very pragmatic around how it’s going to impact our businesses. An open architecture is critical for it to be adopted. But it will drive down costs and make us more efficient. At the same time, I don’t have a utopian view that is oversimplified. Over time it will be impactful.
Investor: How are data analytics or artificial intelligence changing how we explore?
Miller: We’re still in the early days for both. My view is that oil and gas has really been the first big adopter of big data. We were consuming petabytes of data back before anybody else knew what petabytes of data were. We were processing huge seismic libraries and things of that nature.
Our industry is very pragmatic, and I think, in many cases, the key will be “How do we put these technologies to work, so we are collectively making a return?”
At the moment, AI is having more of an impact in the learning and advising sphere than it is in operations. There's a lot of risk associated with what we do, and my view, at least today, is that AI is contributing to better decision-making by people and network-learning from algorithms to give us better visibility of what risks may lie ahead. We still have a lot of human intervention, and I think the human intervention, at this point, is the right thing to have.
Investor: How effective might AI and data analytics be toward improving well economics?
Miller: The value of digital will evolve over time in our business the same as it has in our personal lives—with respect to smartphones and all the things that are automated in our life. There’s still real work that has to be done to deliver oil and gas wells. I am always cautioning that these things have to create value sooner rather than later as we develop them.
I do believe it’s an evolution because I think the road is littered with overspending on technology that wasn’t pragmatically tied to a solution.
Investor: Is your EarthStar LWD tool an example of how data will be gathered in the field?
Miller: EarthStar generates the data that might drive artificial intelligence at some point, but it is a fantastic tool and a tool of choice in many markets today, partly because it reads out so far into the reservoir—200 feet. That data is recovered and the resolution on that data is fantastic; it allows them to really look in real time and understand the reservoir. So that has quite an impact.
We’re developing what those products or what that data can do over time. That’s a story that’s still evolving.
Investor: Similarly, is your Prodigi AB fracturing service a look at how AI is leading to “push-button fracking?”
Miller: Prodigi allows us to, in effect, automate the act of how we control the pumps on location. We use reservoir information as we’re doing the work, and algorithms and artificial intelligence ultimately drive the outcome. And because of that, we’ve got more consistency in how fractures are created, and at the same time the pumping is customized to the rock.
Pictured to the right: A Halliburton team prepares the company’s Earthstar ultradeep resistivity tool, which can measure 200 feet from the wellbore. (Source: Halliburton Co.)
That combination creates a much better outcome for our customers, and means less wear and tear on our equipment because the pressures are more controlled and smooth.
The key here is the algorithms. They take what we know about the reservoir and convert that into making a better decision, rather than the artisan frack operator deciding.
Investor: How much will the industry be able to improve recoveries during the next five or so years?
Miller: I’m going to stay away from the prediction, but I know it will be better. Twenty years ago, we drilled through the shale and threw that stuff away because it had no value at all, and look at it today; it gets bids of up to $60,000 an acre in some cases.
There is a lot of oil in place, and I always bet on our industry, our customers and on Halliburton to solve those problems and find new ways to increase production.
Investor: Has the oilfield-services sector recovered from the downturn, or is it still ongoing?
Miller: Oilfield services are in a better place certainly than we were in the downturn, but it’s clear that we haven’t recovered to the level we were at prior to the downturn. And, so, there’s still more recovery to come. We approached where we were in the last cycle in the second quarter of this year, for example, in North America. It’s a story that’s unfolding now.
Customer-spending behavior is a component of recovery. I also think that oil price has been a component of it and the pace at which money gets spent. All of those things have had an impact on recovery.
But worldwide, the industry is still recovering. Internationally, we didn’t find the trough until the middle of last year. There’s a lot of capacity left from the prior cycle that’s yet to be consumed, and, as that is consumed, then we’ll see more tightness and I expect more recovery. That is a story to be told as we get into 2019 and 2020 and beyond.
Investor: What do you think the timeline is for deepwater recovery?
Miller: It’s going to be longer. It’s been a couple years out for four or five years now, so I’m careful with the timeline. But it feels like it’s a 2020-2021 event.
There are a lot of alternatives to deepwater in the world today to invest in, and I think you see a lot of capital going into those markets. Deepwater, in my view, is an important part of the energy complex in the future, so it does recover.
But clearly it recovers more slowly, and, as I look around the world, I think we’ll see some deepwater activity picking up. But meaningful recovery still feels a couple years out.
Investor: FIDs for deepwater projects have been essentially nonexistent for a few years. Do you think that’s going to affect global supply?
Miller: It can’t help but have an impact. If we look at the decline in international capex, it stepped down 50% in 2015, another 50% in 2016 and maybe a little bit more in 2017. That’s one of the only times in history we’ve had three consecutive years of less spending—and substantially less spending.
It picked up a little bit [in 2018], by maybe 5%. It’s a modest recovery. And these are things with a seven- to 10-year duration in terms of going from discovery to new barrels in the tank. So, yes, it is having an impact, and it will have a more pronounced impact over time.
Investor: Do you believe shale technology is able to achieve scale in countries beyond North America?
Miller: There are great opportunities in other parts of the world, but getting to scale involves a lot of other things—like access to capital and markets and pipeline capacity. We almost take for granted the interstate pipeline investment in the U.S. that’s made shale so successful. That’s what allows a lot of it to get to scale. But good rocks are the place to start, and from there we can scale up.
We’re invested in the unconventional business here and around the world—from a technology standpoint and an execution standpoint. We’re very excited about the work we won with Saudi Aramco. Our expectation is to bring the efficiencies and technologies that we’ve delivered in the U.S. to the Middle East.
Similarly, in Argentina quite a number of operators are working in the Vaca Muerta Shale. We work for many of them. And, again, that same Halliburton execution and collaborating in engineering solutions to maximize asset value for our customers is alive and well.
Investor: Has investor sentiment changed toward service companies?
Miller: Our metric is always going to be returns; returns are always in vogue, and we’ve had leading returns over almost any period we measure.
About investor sentiment, both generalist and energy-specific, it’s tough to call where that is on any given day. Clearly, there’s less energy investment than there was five years ago and certainly less than there was 10 years ago.
But I know oil and gas is supremely important to economies and our way of life. It’s an important part of GDP—not just in the U.S. but practically every country in the world. So the demand for what we do remains high, and I have a lot of confidence that the best days are ahead of us.
Investor: What was your biggest challenge when you became CEO?
Miller: The entire industry was challenged by the downturn of the past four years, and we were in the middle of that. As we move into recovery, I’m excited about looking more to the future in terms of how we put great technology to work and construct better wells for our customers.
Investor: What are the headwinds and tailwinds that you foresee in North America for 2019?
Miller: There are clearly headwinds in the marketplace with respect to takeaway capacity. In certain basins, there’ll be all sorts of labor shortages and things to wrestle with as the market picks up, but those are things we manage every day. And I expect that, as we get into 2019, many of those disruptions are resolved.
But what’s most important is where the macro is on supply and demand for oil. And, right now, it’s in the best place that it’s been in probably four years in terms of both supply—being largely constrained or at least known—and a strong demand for oil. I expect 2019 overall will be very positive for the industry.
Investor: If you had to do it all over again, would you have remained a professional rodeo cowboy?
Miller: Absolutely not! It was great at the time, but I can promise you the good was out of it by the time I let it go. But I wouldn’t trade those days for anything because I learned a whole lot about life and a whole lot about competing while getting to do it. I remember those days very fondly.
Business afforded me the ability to compete in a lot of the same ways I did when I was rodeoing. But I’ve never looked back. I’ve never looked back at all.
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