Halliburton Posts High Operating Margins for 2023

Halliburton delivered its highest operating margins in 2023 and expects 2024 to be a year of growth.

During an investor call discussing the fourth quarter and full year 2023 results, CEO Jeff Miller said the completions and production and the drilling and evaluation divisions achieved their highest operating margins in over a decade.

Eric Carre, Halliburton’s executive vice president and CFO, called 2023 a strong year for the company.

“Multiple financial and operational metrics showed the best business performance in recent memory,” Carre said.

Miller attributed part of the company’s success to customer adoption of its Zeus electric-fracturing (e-frac) solution, citing an example of Zeus’ efficiency.

“As we go from zipper frac to simul-frac (simultaneous frac) to, in this case, a trimul frac (simultaneous frac of three wells) with a customer, that is not a one-to-one increase in horsepower requirements, so we become more efficient as those volumes go up,” he said.

He noted that as fracs get larger, precision becomes more important.

“In the case of the trimul frac, really groundbreaking type work, super excited to do it with this customer,” he said.

Frac fleet outlook

Miller said the market pull for the Zeus technology has been strong. 

“The combination of Zeus fleets working in the field today and Zeus fleets contracted for 2024 delivery represent over 40% of our fracturing fleet,” he said. “I expect well over half of our fleets will be electric in 2025.”

He said Zeus deliveries this year are replacing existing fleets rather than adding incremental fleet capacity.

 “That creates a steady environment, so the rig count's going to move around and do what it does, but our largest part of our business is very stable,” Miller said.

Further, he expects the North American market in 2025 to perform similarly to 2024 in spite of the rig count.

“I do believe we've reached a point where DUCs are drawn down,” he said. “They’re largely drawn down, and I think that we’ll see rig count increase only because it’s supplying the inventory of DUCs required to run a very smooth stable type of business.” 

Halliburton says it isn’t looking to work in the spot market, with Miller calling the spot market “a bit of a free-for-all.” 

“It’s a win-lose on either side of the market, really,” Miller said. “When the market’s getting tight, probably operators are losing when it’s going the other direction. Service loses a lot and our strategy is to stay out of that.”

The focus is more on the long-term game, he said. 

“I would say in the market where we want to play, which is technology driven, lowest total cost of ownership and working on what I think is most important, which is productivity per foot, that’s a different game,” he said.

2023 numbers

Halliburton reported fourth quarter 2023 net income of $661 million on total revenues of $5.7 billion, compared to fourth quarter 2022 net income of $656 million on total revenues of $5.6 billion and third quarter 2023 net income of $716 million on revenues of $5.8 billion.

For 2023, Halliburton posted net income of $2.6 billion on revenues of $23 billion, compared to net income of $1.6 billion on revenues of $20.3 billion in 2022.

During the fourth quarter of 2023, Halliburton generated $1.4 billion of cash from operations, $1.1 billion of free cash flow (FCF) and repurchased approximately $250 million of common stock and $150 million of debt. 

The company generated about $2.3 billion of FCF during the year, retired about $300 million of debt and returned $1.4 billion of cash to shareholders through stock repurchases and dividends.

The company also increased its dividend to $0.17 per share.

Carre said 2024 FCF will be higher.

“We’re expecting the free cash flow to be at least 10% over ’23,” he said. “That’s going to be on the back of improved income. It’s going to be on the back also of improved efficiencies around working capital.”

2024 and beyond

Miller said fundamentals for oilfield services remain strong for two reasons.

“First, we see an increase in service intensity everywhere we operate, whether it’s longer laterals in North America, smaller and more complex reservoirs in mature fields or offshore deepwater, customers require more services to develop their resources, not fewer,” he said. 

Halliburton saw peak levels of service intensity in the first half of 2023. 

“Production’s a function of service intensity, so, simply put, more sand, more barrels,” Miller said. But he added that decline rates are a factor.

“As we watch it unfold, it'll be a matter of how much incremental sand gets pumped to overcome what is clearly going to be a decline rate that comes with—we add barrels rapidly, obviously they fall off rapidly,” he said.

He said the second reason oilfield services fundamentals remain strong is that the long-term expansion of the global economy will 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,” he said.

Miller said he expects international E&P spending to grow in the low double digits in 2024 and projects multiple years of sustained activity growth. Much of that activity will come from the Middle East and Asia region in 2024, and in 2025 Africa and Europe will likely show above average growth, he said.

“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 multi-year upcycle,” he said.