Home Commodities Halliburton’s 2024 outlook optimistic despite near-term commodity price volatility: CEO

Halliburton’s 2024 outlook optimistic despite near-term commodity price volatility: CEO



Oil services intensity rises, requiring more services

Services for complex, mature, deepwater basins too

DUC demand in NAM may result in 2024 rig adds

Macro fundamentals for oil and natural gas remain “strong” even amid near-term commodity price volatility, which should create a healthy outlook for the oilfield services sector in the near and medium term even if most of the projected 2024 growth is internationally weighted, the top executive at oilfield services provider Halliburton said Jan. 23.

Not registered?

Receive daily email alerts, subscriber notes & personalize your experience.

Register Now

An increase in services intensity “everywhere we operate,” even in currently stagnant North America where laterals or horizontal wells are getting longer, should create a large part of the year’s growth momentum, company CEO Jeff Miller said in webcast remarks during a fourth-quarter earnings conference call.

In smaller, more complex reservoirs, mature fields and offshore deepwater, “customers require more services to develop their resources, not fewer,” Miller said, adding “long-term expansion of the global economy will continue to create enormous demands on all forms of energy.”

“I expect oil and gas remains a critical component of the global energy mix with demand growth well into the future,” Miller said.

Moreover, as the energy transition develops, strong demand from many E&P customers has also emerged for services in carbon capture and storage projects, Miller added, which will provide continuing work around the world for Halliburton and other service providers.

In 2024, Miller said he expects international E&P spending to grow at a low double-digit percentage rate and foresees “multiple years of sustained activity growth.”

“Although we anticipate regional differences in growth rates for 2024, we believe the Middle East/Asia region will likely experience the greatest increases in activity with other regions closely behind,” he said. “As we look out to 2025, we expect Africa and Europe, among others, to demonstrate above-average growth.”

Active tender pipeline seen for years

“Beyond 2025, we see an active tender pipeline with work scopes extending through the end of the decade, which gives me confidence in the duration of this multiyear upcycle,” Miller added.

Halliburton posted Q4 2023 revenues of $5.74 billion, down 1% sequentially but up 3% from the same period in 2022.

Its international revenues in Q4 2023 grew 4% sequentially to $3.32 billion and rose 12% on the year.

Halliburton’s 2023 international revenue grew 17% year on year to $12.5 billion, according to the company’s Q4 2023 earnings statement, with each region delivering year-on-year revenue growth throughout 2023.

With this activity growth, “the availability of equipment and experienced personnel remains tight,” Miller said. “We expect asset-intensive offshore activity to increase, which will further tighten the market. As offshore represents over half of our business outside North America land, we expect this activity to drive improved pricing and higher margins for our business.”

Turning to North America’s outlook for 2024, Miller said he expects a continued “strong business with … stable levels of activity in the market,” although this likely results in a flattish revenue and margin environment for Halliburton, Miller added.

And while North American programs involve larger producers, many of whom have recent made corporate or asset acquisitions in the last 12 months, as well as more services and more technology to eke more oil and gas from every well, the number of rigs continues to dwindle.

For example, the US began 2023 at 867 rigs and ended the year at 677, a loss of 190 rigs, according to S&P Global Commodity Insights.

More stable NAM market has larger customers

“The dynamic North America market continues to evolve with larger customers and stable programs, elevated quality expectations and greater demand for technology to improve recovery and well productivity,” Miller said.

Miller noted that in the US, viable drilled but uncompleted wells or DUCs as they are popularly called, are mostly have all been produced and the rig count will need to increase to build up the DUC numbers.

“I would say our customers largely plan their business around turning wells into production,” Miller said. “A lot of planning [occurs] to deliver a stable number of well completions.”

And while Halliburton has “little exposure to gas markets” in its own business, Miller said, he added “legitimately, there could be … upside on gas as LNG comes on.”

North American revenues of $10.5 billion in 2023 represented a 9% increase over those of 2022, even with a substantially lower rig count.

Fewer end-2023 rigs from holiday slowdown

In North America, revenue in Q4 2023 decreased 7% sequentially to $2.423 billion, driven primarily by a decline in US land activity owing to “typical holiday-related slowdowns,” Halliburton Chief Financial Officer Eric Carre said.

“However, we experienced fewer weather-related events than expected,” Carre said, adding completion tool sales in the Gulf of Mexico delivered the strongest quarter in three years.

“Halliburton believes it can continue to outperform the rig count in 2024 given the stable, contracted nature of its portfolio and thinks North American revenue and margin can be flattish in this kind of environment,” Evercore ISI analyst James West said in an investor note following Halliburton’s earnings call.

One positive feature of the current upcycle, even though things are projected to be flattish in North America this year, is a “somewhat unprecedented” level of visibility, West said.

International tendering or at least tendering conversations ongoing currently for 2025-26, and some companies bidding for equipment deliveries that won’t happen until 2029 or 2030, West said. Offshore drillers are having rigs locked up into 2026-27, he added.

“With this oil price range that we’re in, it’s kind of all-systems-go for a long time,” West said during the Halliburton call.

Source link


Please enter your comment!
Please enter your name here