Halliburton's Path Forward: Navigating Recent Challenges in North America

Current Market Conditions in North America

Current market conditions in North America are characterized by a significant decline in activity, with over 200 rigs lost in 18 months. Companies anticipate low to mid-single-digit market declines, volatile oil prices due to geopolitical risks, and a cautious outlook on supply growth, though some recovery in natural gas activity is expected.

"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." --- (HAL, earning call, 2024/Q2)

"In North America, we previously expected the market to decline in the low to mid-single-digit range compared to last year." --- (BKR, earning call, 2024/Q2)

"So I believe that if you combine this with what is happening in North America, which is North America operating within a threshold and not necessarily with significant anticipation of supply growth in that market in short term." --- (SLB, earning call, 2024/Q1)

"It is expected that the price of oil will be volatile for the foreseeable future given the current geopolitical risks, evolving macro-economic environment that impacts energy demand, future actions by OPEC and non-OPEC oil producing countries, the Russia-Ukraine war and the conflicts in the Middle East, and the U.S. Government's management of the U.S. Strategic Petroleum Reserve." --- (OXY, sec filing, 2024/Q2)

"Finally, I expect some recovery in natural gas activity. 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" --- (HAL, earning call, 2024/Q2)

Operational Efficiency and Cost Management Strategies

Halliburton is focusing on enhancing operational efficiency and cost management through strategic partnerships and innovative technologies. By improving production recovery and integrating solutions across the operational spectrum, the company aims to maximize asset value and capitalize on industry trends towards efficiency.

"The customers are shifting towards being strategically looking at the production recovery efficiency and performance, and we believe it was compelling to join force with SharpenEX to offer and address that gap and possibly unlikely create a new chapter for operational recovery in the industry and that's our strategy." --- (SLB, event transcript, 2024/04/02)

"was led by cost efficiency and productivity enhancements that we've been executing across the business." --- (BKR, earning call, 2024/Q2)

"The versatility of this feature ensures increased efficiency throughout the entire operational spectrum, from running casing to total depth, to the release of the cementing wiper plugs, to the installation of the liner." --- (HAL, press release, 2024/04/23)

"The transaction represents an opportunity to deliver leading capital efficiency and cost performance as well as increase production by combining Pioneer's large scale, contiguous, high-quality undeveloped Midland acreage with ExxonMobil's Permian resource development approach." --- (XOM, sec filing, 2024/Q1)

"Both of our companies have loyal customer relationships, and we know those customers are seeking to maximize the value of their assets, while improving efficiency in the production and reservoir recovery phase of their operations. This presents a significant opportunity for service providers who can partner throughout the entire pollution lifecycle, offering integrated solutions and delivering differentiated value." --- (SLB, event transcript, 2024/04/02)

Financial Performance and Resilience Metrics

Halliburton's financial performance is bolstered by a resilient order book and margin improvements, enabling it to meet full-year guidance despite market volatility. Companies like Baker Hughes and SLB emphasize operational efficiency and targeted investments, highlighting a collective industry focus on sustainable growth and robust cash flow generation.

"The resilience of our order book and margin progress in both OFSE and IET put us on a path towards achieving our full year guidance and overcoming external volatility." --- (BKR, earning call, 2024/Q1)

"Moving forward, we will remain focused on driving quality revenue growth and leveraging operational efficiency to grow EBITDA, expand operating margins, generate robust cash flows and meet our commitment to return to shareholders.I'm here to clearly express my full gratitude to the entire SLB team for delivering such a strong second quarter and first half results.Next, let me describe how the market is evolving and the steps we are taking to capture profitable growth across the business.As the cycle continues, investments will increasingly be targeted to in the most resilient area of the market, including key international markets such as the Middle East and Asia and in offshore globally." --- (SLB, earning call, 2024/Q2)

"Both our operational and financial performance as well as our progress along our net zero pathway positioned us nicely for 2024.This year, we are applying technical expertise and operational excellence to preserve and enhance our premier asset base in support of a sustainable and growing dividend." --- (OXY, event transcript, 2024/05/02)

"In OFSE, results were supported by a solid seasonal recovery in the Eastern Hemisphere, portfolio resilience in North America and added success in driving enhanced cost efficiencies across the business." --- (BKR, earning call, 2024/Q2)

"Now, looking at the priorities for producing assets today and tomorrow, we recognize the need to increase our exposure to the Production and Recovery market, including the more resilient OpEx spend, as operators work to offset natural decline, extend performance, and maximize the value of their assets." --- (SLB, earning call, 2024/Q1)

Competitive Landscape and Customer Demand Trends

The competitive landscape in North America is shaped by strong market fundamentals and a growing demand outlook, particularly for lower-carbon fuels. Halliburton's innovations, like DecisionSpace 365 and its expanding artificial lift product line, position it well to meet these evolving customer demands.

"We remain very optimistic about the continued aspect of international growth and also the mature assets and the opportunity around mature asset solutions that we can actually provide to the company and the customers we have, and brownfield opportunities that exist, as people continue to look at increasing production." --- (BKR, earning call, 2024/Q2)

"I am confident that Landmark's DecisionSpace 365 will expand and add to our customers' productivity and innovation journey. Next, Halliburton's artificial lift product line is growing in the international markets at double the rate of our overall international business." --- (HAL, earning call, 2024/Q1)

"It will help reduce greenhouse gas emissions across hard-to-decarbonize sectors, including industry, energy and transportation, meet rising demand for lower-carbon fuels, and accelerate a net-zero future." --- (OXY, press release, 2024/09/17)

"The oil and gas industry continues to benefit from strong market fundamentals driven by a growing demand outlook." --- (SLB, sec filing, 2024/01/26)

"All of this enables our ability to help customers both in the industrial space as well as the energy space to transition and also to build the infrastructure they need for what is increasing energy demand." --- (BKR, conference, 2024/06/18)

Strategic Initiatives and Future Outlook

Halliburton's strategic initiatives focus on innovation and sustainability, aiming to enhance customer value and reduce costs in energy projects. Their recent contracts and technology programs underscore a commitment to advancing sustainable energy solutions, positioning the company for future growth in the North American market.

"Founded in 1919, we create innovative technologies, products, and services that help our customers maximize their value throughout the life cycle of an asset and advance a sustainable energy future." --- (HAL, press release, 2024/08/08)

"At the same time, hopefully, we will have made significant progress on our technology programs that we're running today that are focused on bringing the cost of abatement down to the next generation of projects." --- (XOM, conference, 2024/09/05)

"Register here to be part of the experience and contribute to the future of sustainable energy." --- (HAL, press release, 2024/07/23)

"I think there is a big opportunity there. So but that's – I’d say Carbon Ventures is still early in the technology cycle, but I think we've gone far enough along to see some real opportunity there. And as I said in my prepared remarks, the challenge I've given the Product Solutions organization is what's a realistic but aggressive business plan look like and what would be the investment required to establish that." --- (XOM, earning call, 2024/Q2)

"The block's proximity to other international operators further underscores its strategic relevance." --- (HAL, press release, 2024/04/24)

Impact of Regulatory Changes on Operations

Regulatory changes are imposing significant operational challenges for Halliburton, as the company faces the same hurdles as its peers in the industry. These changes may prioritize environmental benchmarks over shareholder value, complicating the balance between compliance and strategic growth.

"• Significant operational or investment changes imposed by existing or future environmental statutes and regulations, including international agreements and national or regional legislation and regulatory measures to limit or reduce GHG emissions." --- (COP, sec filing, 2024/Q1)

"In the absence of policy measures that address global demand and with the shape and pace of technology and policy yet to be determined, setting and meeting Scope 3 targets would require a shift of production to other global operators that have established less ambitious targets or no targets to reduce their own operational emissions or do not have any other ambitions or plans to manage climate-related risks, potentially eroding energy security and affordability as well as undercutting global climate change objectives." --- (COP, sec filing, 2024/Q2)

"It risks prioritizing unattainable or misguided environmental benchmarks over shareholder value and strategic business growth. Our proposal, item 5, seeks to address this misalignment by urging the Board's Human Resources and Compensation Committee to revisit the executive pay incentives and eliminate or reevaluate greenhouse gas reduction targets that do not align with legitimate fiduciary goals. This approach will help ensure" --- (COP, event transcript, 2024/05/14)

"Between 2016 2022, we achieved a 41% intensity reduction on a gross operated basis through a combination of specific emission reduction projects and portfolio changes." --- (COP, AGM, 2024/05/14)

"We see, like you see sort of critical milestones being progressed. But they face the same regulatory hurdles that the rest of the industry does." --- (COP, earning call, 2024/Q2)

Innovations in Technology and Service Delivery

Halliburton is advancing its technology and service delivery through initiatives like Halliburton Labs, which supports innovative startups, and partnerships focused on low-carbon solutions. The company emphasizes improved technology as a competitive advantage, aligning with industry trends towards sustainable practices and enhanced service offerings.

"So combining sequestration and capture to offer this combined opportunity for the customers as technology solution and using the platform of the commercial carbon capture, Aker Carbon Capture, that exists today, is commercial, and using it as a platform to deploy and add and supplement this with new disruptive technology." --- (SLB, earning call, 2024/Q1)

"These changes are designed to continue delivering Baker Hughes' successful strategy and executing for long-term growth, meeting customer needs in the rapidly evolving energy and industrial segments." --- (BKR, press release, 2024/09/03)

"And so, I'm really pleased with the success we've had there. And so, I would say all are contributing today, in addition to having sort of more market access, more opportunity to compete on the back of improved technology. Kurt Hallead: I appreciate that. Thanks, Jeff. Jeffrey Miller: Thank you." --- (HAL, earning call, 2024/Q1)

"We’re proud to announce a long-term agreement with Wabash Valley Resources, a leader in low-carbon ammonia fertilizer production, to supply advanced technology services and solutions to support their Clean Ammonia Production Project in Indiana, US." --- (BKR, Twitter, 2024/07/16)

""Halliburton Labs has cultivated a unique ecosystem that enables innovative startups, such as NanoTech Materials, to use their time and capital efficiently while establishing market traction and scale operations," said Dale Winger, Halliburton Labs' managing director." --- (HAL, press release, 2024/04/15)

Risk Management and Mitigation Strategies

Companies in the energy sector are implementing robust risk management strategies. Halliburton's CarbonEdge enhances operational efficiency and mitigates risks, while ConocoPhillips focuses on climate-related uncertainties and a Net-Zero Energy Transition Plan. Schlumberger's corrosion inhibitors ensure gas storage integrity, highlighting targeted risk mitigation efforts.

"With the launch of CarbonEdge, we not only expand our portfolio of digital solutions to support new energies and empower our customers' ability to mitigate risk while enhancing operational efficiency, but also take a bold step toward a future with more sustainable energy development." --- (BKR, press release, 2024/09/12)

"The objective of our Climate Risk Strategy is to manage climate-related risk, optimize opportunities and equip the company to respond to changes in key uncertainties, including government policies around the world, technologies for emissions reduction, alternative energy technologies and changes in consumer trends." --- (COP, sec filing, 2024/Q1)

"The corrosion inhibitors are designed to ensure the integrity and reliability of the gas storage infrastructure by mitigating corrosion risks during both the injection and withdrawal phases of gas." --- (SLB, press release, 2024/04/24)

"An important component of our Climate Risk Strategy is the Plan for the Net-Zero Energy Transition (the 'Plan')." --- (COP, sec filing, 2024/Q2)