Halliburton Company 2026 Q3 Earnings Call

Sir, please begin. Hello, and thank you for joining the Halliburton third quarter 2026 conference call.

We will make the recording of today's webcast available for seven days on Halliburton's website after this call. Joining me today are Jeff Miller, Chairman, President, and CEO, Shannon Slocum, Executive Vice President and COO, and Eric Carre, Executive Vice President and CFO. Some of today's comments may include forward-looking statements that reflect Halliburton's views about future events. These matters involve risks and uncertainties that could cause our actual results to materially differ from our forward-looking statements. These risks are discussed in Halliburton's Form 10-K for the year ended December 31, 2025, quarterly reports on Form 10-Q, current reports on Form 8-K, and other Securities and Exchange Commission filings. We undertake no obligation to revise or update publicly any forward-looking statements for any reason, except as required by law. Our comments today also include non-GAAP financial measures.

Additional details and reconciliation to the most directly comparable GAAP financial measures are included in our third quarter earnings release and in the quarterly results and presentation section of our website. Now, I'll turn the call over to Jeff.

Thank you, David, and good morning, everyone. I am pleased with Halliburton's third quarter results. Our revenue exceeded our expectations, and we took important steps towards improving our margins. Here are a few highlights from the third quarter. We delivered total company revenue of $5.7 billion and adjusted operating margin of 12.8%. International revenue was $3.5 billion, an increase of 9% year-over-year. North America revenue was $2.2 billion, a decrease of 9% year-over-year. During the third quarter, we repurchased approximately $250 million of our common stock. Before Shannon covers our operations, let me share my thoughts on the market, an early view of the year ahead, and Halliburton's business today. Let's start with the market. We are another three months into one of the largest energy disruptions in history. Commodity prices remain elevated, and geopolitical uncertainty is high.

The world has lost an enormous amount of oil supply, and the shortfall continues to grow. Current estimates are that nearly 3 billion barrels of supply have been lost since the conflicts began, and that about 1 billion barrels have been drawn from global inventories. I expect the work to restore production, rebuild inventories, and strengthen energy security will drive multiyear demand growth for oil field services. Turning to our outlook for the business. Our early view of 2027 for Halliburton is revenue growth in the mid-single digits and operating income margins to expand about 200 basis points or to about 15%. Let me share with you what underpins my view and how Halliburton's business today makes me confident we will achieve those results.

First, as a result of years of deliberate strategy and investment, our international business, in fact, all of our businesses outside of North America Hydraulic Fracturing, are the strongest they have been in many years. These businesses are growing, profitable, and winning on technology and our collaborative value proposition. My confidence is rooted in their strong execution, and I am excited about the pipeline of opportunities in 2027 and beyond. Second, I want to put North America Hydraulic Fracturing in the proper context for 2027. I could tell you anecdotes about pricing adjustments and list the reasons I think the North America frac market should improve. What is important to understand is that Halliburton's path to growth and improved profitability that I just described does not require any recovery in North America frac. To us, it is purely upside.

Shannon is going to take you through the operational details of this quarter, but I will leave you with this. I see growing multiyear demand for oil field services. I see Halliburton delivering growth and margin improvement, and I see any North America frac business recovery is upside. With that, let me turn the call over to Shannon.

Thanks, Jeff. Let me start with international. Our third quarter revenue was $3.5 billion, up 3% sequentially. Much of the strength this quarter came from growth in our D&E division, which significantly outperformed our expectations on the top line and improved operating income margins 150 basis points sequentially. Let us get into the details. I will start with Middle East. The conflict clearly creates near-term uncertainty, but I am pleased with our third-quarter performance. Middle East results improved sequentially despite inflationary headwinds, which we expect to persist for some time. In the fourth quarter, I expect Middle East revenue to grow both sequentially and year over year. Of the many things driving those expectations, I will highlight two: a full quarter of Jafurah completions activity and an expanded share across integrated and discrete services in Saudi Arabia.

Outside of Middle East, Halliburton's international business is winning work, and we are delivering on our growth engines in a healthy market. We expect 2026 year-over-year growth in these regions to be about 12%. Let me say a word on why we win. Our value proposition is simple but powerful. We collaborate with our customers, and we engineer solutions that maximize the value of their assets. We differentiate on technology, and we deliver on execution. When customers award work on technical merit and total cost of ownership, Halliburton wins. I'll give you two examples from this quarter. The Bumerangue Appraisal program for BP in Brazil and the Cronos ultra-deepwater gas development for Eni in Cyprus. In each case, customers chose Halliburton for our technology in drilling, automation, formation evaluation, fluids, cementing, and completions, and importantly, our ability to collaborate with our customers early in the development cycle.

Next, let me give you a brief update on our growth engines. Production services, drilling, unconventionals, and artificial lift. Each is a market we believe will grow faster than the industry as a whole. We are tracking to our target of $3 billion of added annual revenue by 2028. This is a global target, but we see concrete evidence of it materializing as awards move to start-up. In production services, we expect our North Sea stim vessel to begin operations at year-end. In unconventionals, we expect our first ZEUS fleet in Argentina to start up in the fourth quarter as planned. I want to take a moment to highlight artificial lift. In Argentina, we won a multi-year ESP rental contract with a major operator, our largest award of the quarter. With another customer, we delivered our first unconventional installation.

This quarter, we also made our first installations in U.A.E. and offshore Congo, and we received our first order for an offshore ESP in Brazil. I'm excited about the accelerating growth of our international footprint. One more market I want to mention is Venezuela, where we are open for business. Our management team is in place, our facilities are open, key equipment has moved, and we generated revenue in Q3 in multiple product lines. Venezuela is a market we know well. Based on customer conversations, I expect to see solid growth moving forward. To conclude on international, our value proposition is winning. Our growth engines are delivering, and I am excited about the year ahead. Turning to North America, third quarter revenue was $2.2 billion, down 5% sequentially. The frac market did not recover as strongly as anticipated, and our results reflect this.

We run North America Hydraulic Fracturing for returns, not share, and in the third quarter, we moved several crews to new customers at better pricing. These moves created more downtime than we anticipated and weighed on our performance in the region and our C&P division. In North America land, our Sperry Drilling services, drill bits, and drilling fluids businesses grew 23% year-over-year, well ahead of the rig count. Let me tell you what that looks like in each business. In drilling services, the trend is clear. Longer laterals, more complex wells, and more rotary steerable drilling. iCruise delivers on all three, and we see strong demand in all sales channels. In drilling fluids, Baroid also wins in long laterals, where wellbore stability can decide how fast a well gets drilled. We see growing adoption of our high-performance fluid systems.

I expect to see this growth continue as wells get more complex and customers demand greater efficiency. In drill bits, our performance-driven technology is paying off. One example of this is HyperSteer, a bit engineered to run with iCruise and deliver maximum steerability and speed, where North America drill bit revenue per rig is up double digits from the first quarter. Bottom line, North America production requires progressively more complex wells, and more complex wells means more growth for Halliburton. Let me close on North America with how I think about this business as a whole. It generates solid cash flow. Over the last several years, we have made deliberate choices to reduce our exposure to commoditized activity and differentiate through technology. Today, both our drilling and completion businesses are more differentiated than ever before.