Halliburton, Schlumberger see strong continued international activity

Large global oilfield services providers Halliburton and SLB continue to see stellar results internationally as demand for oil and gas resources grows, and expect momentum from that arena to roll through the rest of 2024 and into next year, the companies' top executives said July 19.

But North America, while showing bright spots in well efficiencies and technology adoption, remains a weaker player during the current ongoing petroleum industry upcycle, the companies' CEOs said in separate second-quarter conference calls, as faster drilling and completion times, coupled with a more compact upstream sector, have resulted in reduced activity.

Revenues decreased in the North American theater during the second quarter for both service providers, although the US Gulf of Mexico helps offset some of the sluggishness in onshore upstream, SLB's CEO Olivier Le Peuch said during his company's call.

"We saw increased drilling revenue and higher digital revenues from sets of exploration data licenses" in the US Gulf, Le Peuch said. "However, this was partly offset by lower drilling in US land as the market continues to be constrained by weaker natural gas prices, capital discipline [in E&P spending] and ongoing market consolidation."

SLB's North American revenues grew 3% sequentially to $1.6 billion in Q2 2024, but were down 6% year on year.

In addition, the company's international revenues in the second quarter grew 6% to $7.4 billion, and were up 18% year on year.

'Ongoing momentum' in international markets

"Looking ahead to the second half of the year, we expect ongoing momentum in the international markets [and] strong digital sales," Le Peuch said. "Beyond 2024, the fundamentals of this cycle remain in place, and there is a long tailwind of growth opportunities, including long-cycle gas and deepwater projects, production and recovery activity, and the secular trends of digital and decarbonization."

For Halliburton, North American revenues were down 3% sequentially to $2.5 billion and down 8% year on year, compared to a 12% decline in rig count over the 12-month period, company CEO Jeff Miller said during his own Q2 call.

"I now expect full-year [2024] North America revenues to decline 6% to 8% versus last year driven by lower activity," Miller said. "I expect the second-half of 2024 will be near the low point of activity levels this cycle."

"And while it's too early to give specific guidance for 2025 in North America, I expect activity to be directionally higher than the second half of 2024," he said.

Not only did rig counts decline in the second quarter, overall services activity for North America -- the largest oilfield services market in the world -- declined through the quarter, he said.

According to S&P Global Commodity Insights rig data, the US total oil and gas rig count averaged 642 in the second quarter, compared to 662 in the first quarter and 787 in Q2 2023.

Analysts have attributed the lower rig counts to well drilling and completion efficiencies and ongoing upstream consolidation, where buyer-operators typically shed rigs after closing transactions, while they high-grade their new assets and figure out how to optimize activity on them.

For example, ExxonMobil recently completed its $60 billion purchase of Pioneer Natural Resources, while Chevron's continues to progress its $53 billion takeover of Hess Corp. More recently, ConocoPhillips said in May it would buy Marathon Oil for $22.5 billion. Less-prominent mergers and acquisitions are also in progress.

Saying that North American activity declined by over 200 rigs in the last 18 months, Miller said he expects an increase in drilling after E&P company-acquirers complete acquisitions and establish new development plans.

More drilling seen post-M&A digestions

In addition, "some of the merged assets will be divested to smaller operators who will put them to work," Miller said. "Finally, I expect some recovery in natural gas activity."

As an example of some of the newer technology, which is raising revenues for oilfield services providers while advancing the speed and efficiency of drilling and completions, Miller said that his company completed field trials on an automatic hydraulic fracturing system in the second quarter.

"With a single click of a button, [the system] executes the entire frac job" -- that is, well completion -- "from ramp-up at the start to ramp down at the end," he said.

"This new level of automation gives customers control to execute the ... frac design exactly how they want it without human intervention," he added. Following commercial trials, the technology "is ready to scale."

In addition, a new Halliburton rotary steerable system for directional wells enables reduced drilling times.

"We are on pace to triple our footage drilled in North America this year," he said.

Rotary steerable systems enable more efficient, higher-quality drilling of wellbores with the ability to place the drill bits in the most productive zones. They also optimize penetration rates and extend bit life.

"We are beginning to get bullish on a North American land recovery kicking off in 2025 and accelerating into 2026," Evercore ISI Group analyst James West said in an July 19 investor note. "The industry will continue to benefit from a global upcycle for E&P spending, especially internationally and offshore, which, coupled with limited oil service capacity, will drive significant top line and earnings growth."

"North America will ... remain more resilient for [Halliburton as it prepares] for a recovery in 2025, while the international markets will drive significant earnings upside and the operating leverage," West said. The company's offshore business "remains underappreciated, as it accounts for over 50% of its business internationally."

Halliburton's international revenues were up sequentially 3% in the second quarter to $3.352 billion, and up 8% year on year.