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Halliburton sees steadily improving global activity in 2021

Highlights

North American momentum to continue through 2021

International markets accelerate recovery in H2 of year

New technologies should help as field complexity increases

Houston — Early-year 2021 positive momentum in North America is expected to continue for the rest of the year, while international market recovery will accelerate in the year's second half, the top executive of giant oilfield services provider Halliburton said April 21.

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With oil demand increasing globally and oil inventories down near five-year averages, the first quarter "strengthened our confidence" about how this year -- believed to be a transition period between a tamped-down 2020 from the coronavirus pandemic and what is widely viewed as a normalized 2022 -- will play out, Halliburton CEO Jeff Miller said during the company's first-quarter earnings conference call.

"We are off to a good start this year. The world is reopening," Miller said. "Today, North America is staging a healthy recovery. The average US land rig count grew 27% sequentially in the first quarter."

North American companies have insisted they will largely remain committed to "disciplined" capital programs in 2021. But "what we are seeing today solidifies our confidence in a steady activity cadence for the rest of the year as operators work to maintain their productive capacity," he said.

Moreover, international markets should benefit from what Miller characterized as "multiple years of growth," although this upcycle will differ from those of the past, Miller said.

"National oil companies and other short-cycle barrel producers will increase investments and gain share to meet future oil demand growth," he said.

Deals becoming more complex

"As deals become smaller and more complex, operators work harder to produce more barrels," Miller added. "Their pursuit of incremental production to meet future oil demand growth should require higher service intensity," presenting expansion opportunities for Halliburton and other oilfield services purveyors.

Moreover, in certain places maturing assets are changing hands, which requires proven technology and experience to revitalize the assets and unlock remaining reserves, he said.

And while multiple years of service company capital budget reductions have limited equipment available internationally, pricing outside North America was starting to rise in early 2020 before the pandemic began to rapidly spread across the globe but halted with the collapse of oil demand.

But "as the world reopens and activity rebounds, we expect large tenders to remain competitive, and leading-edge pricing should increase," Miller said.

After more than five years of oil prices that dropped from lofty levels above $100/b in the years prior to mid-2014, the global supply chain has been "hollowed out," Wood Mackenzie observed in an April 19 research report.

"It's barely sized to service the austere world of sub-US $50/b activity levels," Wood Mac said. "A rush of activity would very quickly tighten markets, causing costs to rise swiftly. Such is the lack of headroom in the market."

'Unique growth opportunities'

Also internationally, there are pockets of what Miller called "unique growth opportunities."

For example, Halliburton plans to begin its first multiyear electric submersible pump (ESP) contract in the Middle East in the second half of 2021, he said.

"We see significant volume and future growth potential for artificial lift solutions in the Middle East as many mature fields across the region come off natural flow and require ESPs to sustain production," he said.

Artificial lift is a process used to increase the pressure of oil wells within a reservoir and encourage oil to flow to the surface.

The company is also accelerating deployment of digital technologies with customers. In Q1, Halliburton introduced what Miller called a new data transmission system for a major North Sea customer. The process performs virtual remote operations without human intervention and uses real-time data and tailored algorithms.

The company also launched a digital workflow on a private cloud on a Middle East contract that helps employees make better decisions, Miller said.

"It uses a proprietary natural language processing service to extract specific information from a variety of documents and locate associated data in our data lake," he said. "We're using our open architecture platform to integrate real-time information from the customer, [from] Halliburton's many digitally enabled technologies and third-party providers across the entire asset."

In Q1, Halliburton's net income totaled $170 million ($0.19/share), compared with a net loss of $1 billion ($1.16/share) in the same year-before period, and a net loss of $235 million ($0.27/share) in fourth-quarter 2020.

Revenue totaled $3.5 billion, up 7% from fourth-quarter 2020 but down 31% from Q1 2020's $5 billion.

Reported operating income was $370 million in the Q1 2021, compared with an adjusted operating income of $502 million in the same quarter a year ago and adjusted operating income of $350 million in Q4 2020, all excluding impairments and other charges.

Halliburton revenues rise from Q4; still lag year-ago amounts
(millions of dollars)
Q1 2021
Q4 2020
Q1 2020
North America
1,404
1,238
2,460
Latin America
535
426
516
Europe/Africa/CIS
634
642
831
Middle East/Asia
878
931
1,230
TOTAL
3,451
3,237
5,037
Source: Halliburton