The operator introduces the Halliburton Company Fourth Quarter 2023 Earnings Conference Call and hands it over to David Coleman, Senior Director of Investor Relations. Jeff Miller, Chairman, President and CEO, and Eric Carre, Executive Vice President and CFO, are also present. Forward-looking statements and non-GAAP financial measures are discussed, and the operator reminds listeners to refer to Halliburton's SEC filings for more information. Jeff Miller highlights the company's successful year, with both divisions achieving their highest operating margins in over a decade and $1.4 billion returned to shareholders. Total company revenue increased by 13% and operating income by 33% compared to the previous year.

Despite exiting the Russian market in 2022, our international business grew by 17% in 2023. Our North America business also showed strength with a 9% revenue increase, and we generated $1.4 billion in cash from operations. We thank our employees for their hard work and dedication. Looking ahead, the fundamentals for oilfield services remain strong due to an increase in service intensity, driven by longer laterals, smaller and more complex reservoirs, and offshore deepwater development.

The author predicts that the global economy will continue to grow, creating a high demand for energy. They believe that oil and gas will remain an important part of the energy mix and that Halliburton's strong execution, technology, and collaborative approach will drive demand for their products and services. The company's international performance in 2023 showed profitable growth, with revenue and margins increasing in all regions. The author expects this trend to continue in 2024, with the Middle East/Asia region experiencing the greatest activity growth. They also anticipate above-average growth in Africa and Europe in 2025 and beyond. The company's well construction product lines are expected to see above-market growth as customers choose Halliburton for improved reliability, consistency, and efficiency in drilling operations.

The use of LOGIX' autonomous drilling platform and Halliburton's subsurface expertise is increasing in the industry, especially in targeting small reservoirs and identifying bypassed reserves. The company's technologies, such as DecisionSpace 365 and iStar logging well drilling platform, enable real-time gathering of reservoir properties. In Completion and Production, there is expected to be a higher adoption of technologies like intelligent completions, multilateral solutions, and artificial lift. The company also expects strong demand for its services in carbon capture and storage, where its capabilities in designing, delivering, and validating reliable barriers are crucial. However, the availability of equipment and experienced personnel remains tight due to increasing offshore activity.

In 2023, Halliburton's offshore business is expected to drive improved pricing and higher margins, while their strategy for profitable international growth is expected to continue in the future. In North America, despite a lower rig count, their revenue increased by 9% in 2023 and their fourth quarter margins remained relatively flat. The evolving North America market is a good fit for Halliburton's value proposition, with their Zeus electric fracturing solution being highly sought after. Over 40% of their fracturing fleet is expected to be electric by 2025, generating full return on capital during their initial contract terms.

In 2023, Halliburton's strategy of replacing existing fleets with their Zeus deliveries in 2024 resulted in a strong business with stable activity levels and a contracted portfolio. This led to a flattish revenue and margin environment for the company. They also saw rapid adoption of their technology in North America, demonstrating its value to customers. The company generated $2.3 billion of free cash flow, returned $1.4 billion to shareholders, and increased their quarterly dividend. The outlook for oilfield services remains strong and the company expects to generate significant free cash flow. Eric Carre, the financial executive, will provide more details on the company's financial results.

The overall business performance demonstrated the effectiveness of the company's strategy, with highlights including the highest margins in several years in the C&P and D&E divisions, steady margins in North America despite lower activity, and revenue and margin improvement internationally. This was the result of multiyear investments in drilling and technology, as well as a focus on capital efficiency. The fourth quarter saw reported net income per diluted share of $0.74 and adjusted net income per diluted share of $0.86. Total company revenue was $5.7 billion and the operating margin was 18.4%. The Completion and Production division had revenue of $3.3 billion, operating income of $716 million, and an operating margin of 22%.

The company had better-than-expected results in the fourth quarter, driven by strong completion tool sales, performance across multiple product lines, and favorable weather in North America. Revenue and operating income in the Drilling and Evaluation division were in line with expectations, with international sales and project management activity driving growth. The company also saw sequential growth in international revenue for the tenth consecutive quarter. In North America, revenue decreased due to holiday-related slowdowns, but margins were higher than expected due to fewer weather-related events. Corporate expenses are expected to remain flat in the first quarter of 2024.

In the fourth quarter, the company spent $15 million on SAP deployment and expects to spend $30 million in the first quarter of 2024. They also expect to spend $120 million in 2024 and $80 million in 2025. Net interest expense for the quarter was $98 million and is expected to be around $85 million in the first quarter of 2024. Other net expense was $16 million lower than expected due to non-GAAP treatment of the Argentinian peso devaluation. The adjusted effective tax rate for the quarter was 17.9% and is expected to be around 21% in the first quarter of 2024. Capital expenditures for the quarter were $399 million and are expected to remain at 6% of revenue in 2024. Cash flow from operations was $1.4 billion in the fourth quarter and free cash flow was $1.1 billion, with expectations for higher free cash flow in 2024. The company also expects their first quarter results to be affected by seasonal factors and the end of year product sales.

In the Completion and Production division, Halliburton expects revenue to be flat to down 2% and margins to decline by 125 to 175 basis points. In the Drilling and Evaluation division, they anticipate a revenue decline of 1% to 3% and margin decrease of 25 to 75 basis points. The company had a successful year in 2023, generating $2.3 billion in free cash flow and returning over 60% of it to shareholders. They plan to continue returning over 50% of free cash flow to shareholders in 2024. International business is expected to see low double-digit growth, while North America will continue to be strong due to stable activity and their electric frac solution. The company opened up for questions from analysts. The first question was about the influence of their growing e-frac fleet on their bottom line and how it compares to their Tier 4 dual fuel fleets in terms of pricing and operating costs. The CEO responded by saying that e-frac has operational advantages and they expect the majority of their e-frac fleets to be with larger operators under multiyear contracts due to E&P consolidation.

The speaker discusses the benefits of e-fleets, stating that they are highly efficient and bring value to clients. The speaker also emphasizes the contracted nature of e-fleets, which makes the pricing sticky but also allows for modeling and creates value. These fleets are not a spot market solution and are typically used by companies with steady programs and a clear vision for their business. The electric fleet is a comprehensive system that includes automation and subsurface measurement, making it more accretive and creating a different return profile compared to Tier 4 diesel fleets.

The speaker notes that the company has recently announced collaborations with other service companies in reservoir analysis and MPD, which helps fill gaps in their portfolio without spending a lot of capital. This strategy is different from previous cycles, where acquisitions were more common. The speaker believes that partnering with other companies who have strong technology is a better way to create value and generate returns for the company. They also mention a similar collaboration in the subsea sector with TechnipFMC.

The speaker discusses their company's collaboration with others and their focus on electric completions. They also mention the unexpected increase in US oil production and predict that production growth in 2024 will depend on service intensity and may exceed expectations due to efficiency and the depletion of DUCs. They also mention that they expect stable customers to stick to their production plans.

Halliburton CEO Jeffrey Miller discusses the current state of the oil market, stating that there are not many new companies entering the market to increase production. He also mentions that they have international visibility through the end of the decade, with strong growth expected in the North Sea and West Africa in 2025 and beyond. He notes that they are currently working on tenders for next year and the following year, and have contracts in place for planning work in 2025 and beyond. He also mentions that 40% of their contracted fleets this year will be Zeus, and this is expected to increase to 50% or more in 2025. He is confident in their contracted and planned work, and states that they have a lot of clarity for 2025 and beyond.

The speaker is discussing the efficiency gains in the industry and how they are shared between E&P and service companies. They mention the value created by their technology, Zeus, and how they prioritize maximizing value for North America. The longer-term contracts for Zeus are driven by market demand, and the system continues to evolve with automation and measurement. The efficiency and scalability of Zeus also contribute to its value for both Halliburton and their clients.

The company is utilizing technology and collaborating with clients to conduct groundbreaking work. They have very little exposure to gas and have not factored in any potential upside from LNG. The company's e-fleet has a different contract structure that allows for shared gains with the customer. The company's focus is on creating value for their customers.

The speaker believes that creating meaningful value for customers is important for long-term success. They focus on maximizing returns and avoiding the "spot game" where one side always loses. They prefer to have solid contracts with customers to deliver value and improve recovery and production. They are also excited about working with their current customers to solve pressing issues in the industry. The speaker also discusses the company's use of free cash flow, including elective repurchases of debt and potential share repurchases.

In 2023, the company increased its dividend by 6% and plans to continue buying back shares and retiring debt in 2024. The CEO also mentioned that the industry is focused on running businesses for strong returns over the long term, which is good for clients and shareholders. There is a high level of visibility in the industry, with companies planning for the future to make money for shareholders.

The speaker believes that the current setup is favorable for the company's growth and profitability in the next decade. They have a strong value proposition and are focused on maximizing asset value for customers. They are also careful about not overinvesting in the business and have a structured approach to managing growth and returning cash to shareholders. The D&E margins, which are more levered towards international markets, are expected to improve with natural operating leverage and cooling inflation. The company anticipates strong margins and incrementals in the next few years.

The speaker discusses the positive trend of D&E margins and the company's focus on balancing revenue growth and margin improvement in the business. They expect margins to continue to increase in 2024 and for the US business to deliver more consistent and better free cash flow in the future, thanks to investments such as e-frac. The speaker also mentions that there will not be a significant reduction in domestic CapEx in 2024, but the company's overall goal is to have a more consistent and less CapEx-intensive business model.

Halliburton is deliberate about maximizing value in North America and has a steady drumbeat of execution and cash flow delivery. They will continue to allocate capital to opportunities like Zeus fleets, but will not overbuild in other areas. They plan to continue delivering margins and free cash flow in North America. As leverage decreases and cash flow increases, shareholder return may increase as a percentage of free cash flow, but this will not include any M&A activity.

During a conference call, Eric Carre, the CEO of a company, stated that they expect their free cash flow to increase by at least 10% in 2024, which will lead to higher returns for shareholders. When asked about their North America revenue outperforming the U.S. land rig count in 2024, CEO Jeffrey Miller attributed it to the stability of their business, with 40% of their fleet under long-term contracts. He also believes that their North America business will continue to perform well in 2025, regardless of fluctuations in the rig count, as their customers focus more on turning wells into production rather than the number of rigs in operation.

The speaker discusses the planning and stability involved in completing wells and states that they expect the rig count in North America to increase. They also mention the potential impact of factors such as gas activity and LNG plants, but overall they are focused on maintaining steady and stable margins in the North American market. They also highlight the strong international business and the potential for growth in margins through market leadership positions.

Jeffrey Miller, CEO of Halliburton, was asked about the pricing dynamics for their assets in the C&P and Zeus fleets. He explained that their long-term contracts with clients allow them to have a competitive advantage and they do not need to participate in price openers. Their focus is on creating value and productivity per foot, rather than participating in the spot market.

The speaker, Stephen Gengaro, asks Eric Carre about the cash flow statement and potential changes in working capital parameters for 2024 compared to 2023. Eric Carre responds that they expect free cash flow to increase by at least 10% due to improved income and efficiency in working capital. He mentions specific initiatives they have implemented, such as automating invoicing and implementing demand planning software, to improve DSO and DIO. The next question from Marc Bianchi clarifies that the outlook for North America being flat is for the full year.

Jeffrey Miller, the CEO of the company, believes that the first quarter of the year will see an increase in activity compared to the fourth quarter. However, their business plan for the rest of the year is based on the current visibility and contracted fleets for 2024. There are potential positive factors that could affect their business, but their outlook for 2024 remains the same. The company's D&E division is experiencing weather-related issues in the Eastern Hemisphere and North Sea, but their margins are in line with historical trends. The operator then opens the line for questions.

Jeffrey Miller, CEO of Halliburton, discusses the company's focus on software and automation and how they expect it to have a meaningful impact on service costs and quality over the next few years. He also mentions Halliburton's involvement in direct lithium extraction through their labs program, which has attracted quality investable companies.

The speaker discusses the company's investments in various industries, clarifying that they are not corporate venture capital. They are also excited about the future of the company and expect strong free cash flow in 2024. The call is then closed.

This summary was generated with AI and may contain some inaccuracies.