Q3 2026 Halliburton Company Earnings Conference Call - HALLIBURTON CO

Explicit Guidance:

• Full-Year 2026 Capital Expenditures: Expected to be approximately $1.1 billion.
• Full-Year 2026 Revenue: Implied to finish around $22.5 billion based on 2027 growth assumptions (approx. $1 billion+ increase).
• Q4 2026 Revenue: Expected to remain approximately flat to Q3, at ~$5.7 billion.
• Q4 2026 Operating Margin: Expected to improve by 70 basis points sequentially.
• Q4 2026 Earnings Per Share (EPS): Suspected to be $0.62–$0.64.
• Q4 2026 C&P Division Revenue: Expected to increase 3–5%.
• Q4 2026 C&P Division Operating Margin: Expected to improve by 75–125 basis points.
• Q4 2026 D&E Division Revenue: Expected to decline 3–5% year-over-year.
• Q4 2026 D&E Division Operating Margin: Expected to be flat to up 50 basis points.
• 2027 Revenue Growth: Early view indicates mid-single-digit growth (implied ~4–6%).
• 2027 Operating Margin: Expected to expand by 200 basis points to approximately 15%.
• 2027 Free Cash Flow: Expected to increase alongside improved profits and margin expansion.
• 2027 CapEx: Not explicitly quantified, but linked to cost reduction programs and SAP S4 transition ramp-down.

Business-Segment Outlook:

• International (Ex-Middle East): Expects ~12% year-over-year growth in 2026; growth engines (Production Services, Drilling, Unconventionals, Artificial Lift) are on track to deliver $3 billion in added annual revenue by 2028.
• Middle East: Expects Q4 2026 revenue to grow both sequentially and year-over-year, driven by a full quarter of Jafura completions activity and expanded share in Saudi Arabia. 2027 guidance assumes activity remains flat to H2 2026 levels, with potential upside if geopolitical conflicts resolve.
• North America Fracking: Assumed flat for 2027 in guidance base case, but management views any recovery as "pure upside." Notes a "tight market" with limited capacity and early signs of pricing increases in late Q2/Q3.
• North America Drilling: Expects continued growth in land drilling (Sperry, bits, fluids) driven by longer laterals and more complex wells; trends are "clear" with double-digit revenue per rig growth for drill bits.
• Artificial Lift: Expecting accelerating growth with a multi-year ESP rental contract in Argentina, first installations in UAE and offshore Congo, and a first offshore ESP order in Brazil.
• Venezuela: Described as "open for business" with a full management team and facilities; expects "solid growth" and delivering 12+ ESPs to a major operator; views the country as a "sizable" future market.
• Mexico: Expected to see improved performance, with growth likely materializing in H2 2027 rather than H1.
• Suriname: Significant work won with Total Energies and Petronas; expected to drive growth in 2027.

Market and Competitive Outlook:

• Global Demand: Anticipates "multi-year demand growth" for oilfield services driven by the need to restore production, rebuild inventories (1 billion barrels drawn), and strengthen energy security following global supply disruptions.
• Pricing Environment: Observes a "tight market" with limited capacity; notes a "steady drumbeat" of pricing firming, particularly in North America unconventional fracking and international markets.
• Market Share: International business winning on technical merit and total cost of ownership; expects to gain share in offshore, deepwater, and unconventional sectors globally.
• Unconventionals: A "growth engine" where Halliburton differentiates via technology rather than horsepower; tracking to $3 billion revenue addition by 2028.

Macro / Industry Outlook:

• Geopolitics: Acknowledges "geopolitical uncertainty" and the impact of the Middle East conflict on logistics and costs; management has built these elevated costs into the 2027 view.
• Commodity Prices: Notes prices remain "elevated" and "sticky," driving private E&P activity and budget cycles.
• Inflation: Acknowledges persistent inflationary headwinds in the Middle East and globally but states 2027 guidance does not assume meaningful additional pricing increases beyond current firming trends.
• U.S. Elections: States political outcomes are not factored into the outlook due to acute energy requirements and confidence in the business regardless of political shifts.
• Energy Security: Views current supply shortfalls as a driver for sustained industry investment and "up cycle" conditions.

Strategic Initiatives:

• SAP S4 Global Transformation: Now live; expected to drive $120–$150 million in cost savings in 2027 and further simplify back-office functions using AI.
• Cost Reduction Program: Total estimated savings of $100–$150 million (operational and structural) for 2027, combined with SAP savings contributing $250–$300 million to the 2027 margin improvement plan.
• New Capacity Additions:
  • North Sea Frack Vessel: Expected to begin operations at year-end 2026.
  • Zeus Fleet (Argentina): First fleet expected to start up in Q4 2026.
  • Gefora (Middle East): Currently running; supports a runway of 30,000+ stages in Saudi Arabia for next year.
• M&A / Partnerships: Successful integration of automation technology via Seacol acquisition; new awards in Brazil (Boomerang Appraisal) and Cyprus (Kronis Ultra Deepwater).

Risks and Headwinds to Outlook:

• Geopolitical Escalation: Continued conflict in the Middle East creates "near-term uncertainty" and persists inflationary logistics costs; a resolution could trigger upside growth.
• North America Activity Recovery: While not required for 2027 guidance, a slower-than-anticipated recovery in North America fracking could delay the "upside" potential.
• Project Delays: Potential for slower startups (e.g., Saudi Arabia new contract, Argentina fleet) impacting short-term performance.
• Inflation: Persistent inflationary pressures could erode margins if not offset by cost reductions or pricing power.
• Execution Risks: Complex wells and international projects carry execution risks regarding timing and margins.

Management Tone on the Future:

• Confidence Level: High. Jeff Miller expresses strong confidence in the 2027 plan, noting it is "an early view" but rooted in "meaningful depth" and technology adoption.
• Sentiment on Guidance: Management is proactively sharing the 2027 outlook "sooner rather than later" to clarify that growth does not depend on a North America fracking recovery.
• Strategic Confidence: Emphasizes a shift from "commoditized activity" to technology-led differentiation; believes the industry is in a "multi-year up cycle."
• Financial Discipline: Highlights a move toward "return-based" operations (running frack for returns, not share) and significant cost restructuring.

Miscellaneous:

• 2027 Margin Composition: The 200 basis point margin expansion is driven by ~$250–$300 million in cost savings (SAP + cost reduction) plus 20–30% incremental margins on the additional revenue volume.
• Q4 2026 CFP: Free cash flow from operations expected to be ~$1 billion; full-year free cash flow estimated at ~$1.6 billion (after $300 million net CapEx).
• Dividends/Buybacks: Repurchased $250 million in Q3 2026; no explicit 2027 buyback guidance provided.