Halliburton (HAL) 7 Nov 24 2024 Q3 Earnings call transcript

The third quarter earnings call of Halliburton Company, a leading provider of services to the energy industry, showcased the company's resilience and strategic direction in navigating the complexities of the global oil and gas market. The call, led by Jeffrey Miller, Chairman, President, and CEO, and Eric Carre, Executive Vice President and CFO, provided insights into the company's financial performance, strategic initiatives, and market outlook. This article provides an in-depth analysis of the key themes, trends, and insights that emerged from the earnings call, shedding light on Halliburton's financial health and growth prospects.

Key Highlights and Financial Performance

Halliburton reported total company revenue of $5.7 billion for the third quarter, with an adjusted operating margin of 17%. The company's international revenue grew by 4% year-over-year, led by the Middle East/Asia region, which showed an increase of 9%. North America revenue, however, decreased by 9% year-over-year, reflecting the challenges faced in the U.S. land market. Despite these fluctuations, Halliburton generated $841 million of cash flow from operations and $543 million of free cash flow, signaling a solid financial footing.

International Business: Strength and Growth Opportunities

The international business segment was a major focus of the call, with CEO Jeffrey Miller expressing confidence in the company's position in the global oil and gas market. Halliburton's largest international business lines, cementing, completion tools, and drilling fluids, are leaders in their respective markets, driven by the company's legacy of execution, service quality, and digital and technology developments. The transformation of Halliburton's Sperry Drilling business, with its iCruise and iStar directional drilling and logging tools, demonstrates the impact of technology on the company's international competitiveness.

Miller also highlighted the company's expansion into unconventional developments, where Halliburton is the clear leader in technology and execution. The Middle East, with its strategic importance, is a key growth area, with Halliburton already securing a multiyear unconventional drilling services contract and starting up an unconventional hydraulic fracturing fleet. The company expects international growth in the low to mid-single digits next year, driven by the strength of its technology portfolio, value proposition, and clear strategy.

North America: Navigating Challenges and Pursuing Growth

In the North American market, Halliburton faces challenges due to the decline in hydraulic fracturing activity in U.S. land. However, the company is optimistic about its strategy to maximize value, with a focus on returns, not share. The success of Halliburton's Zeus platform, with its unique technologies like electric pumping units, Octiv Auto Frac, and Sensori subsurface measurement, is a testament to the company's ability to differentiate itself in the market. The company expects to continue outperforming its competitors, with 90% of its fracturing fleets committed for work in 2025.

Cybersecurity Incident and Operational Resilience

The earnings call also addressed the impact of the August cybersecurity event on Halliburton's financial condition and operating results. While the event had a temporary impact on revenue and free cash flow, the company remains confident in its full-year expectations for both metrics. The incident underscores Halliburton's operational resilience and its ability to navigate unexpected challenges, a testament to the company's robustness and adaptability.

Conclusion: A Strong Foundation for Future Growth

The third quarter earnings call of Halliburton Company provided a comprehensive overview of the company's financial performance, strategic initiatives, and market outlook. With a focus on technology-driven growth, a strong international presence, and a resilient North American business, Halliburton is well-positioned to navigate the complexities of the global oil and gas market. The company's confidence in its international business and strategic initiatives, coupled with its operational resilience, bodes well for its future growth and success. As Halliburton looks to 2025 and beyond, its focus on maximizing value, expanding into unconventional developments, and leveraging technology will be key drivers of its growth and competitiveness in the energy industry.