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Halliburton focusing on higher-dollar customers during downturn: president

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Halliburton focusing on higher-dollar customers during downturn: president


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Houston — The low oil prices of the past year, which are expected to continue in 2016, have led oilfield services giant Halliburton to focus on larger, higher-dollar customers, a top executive said Monday.

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Those customers typically have "fairway acreage in the [top] basins and stronger balance sheets," company president Jeff Miller said during a quarterly conference call.

In North America, where the downturn that began in mid-2014, but sharpened late that year, and has been most severe, Halliburton's top 17 customers comprise 50% of its revenues, Miller said.

"When the downturn began, these customers were among the last to lay down rigs," he said. When the recovery comes, "we believe these operators, and therefore Halliburton, will be more positioned for the upside," he added.

The company is also collaborating with them on ways to lower their cost per barrel of oil equivalent, Miller said.

Maximizing well production and efficiencies while reducing costs appears to be one of the few flourishing business in the current downturn which first began 18 months ago when oil prices began to drop from over $100/b and ended 2014 at about $50/b. That accelerated as 2015 approached, oilfield service companies say.

Since then, low oil prices have been a feature of the energy landscape and tamped-down prices are expected to persist through at least part of this year.

"Despite the downturn in activity [in 2015], we saw an uptake in new technologies," notably the ones that help customers maximize production and lower costs per barrel of oil equivalent, Miller said.

On Friday, Schlumberger -- the world's largest oilfield services and equipment provider -- also said its level of new technology sales was "significantly" higher in recent months than in previous downturns, 24% higher than in 2008-2009, CEO Paal Kibsgaard said in its quarterly earnings call. Halliburton managers said they did not know when a recovery would take place, but analysts and other industry-watchers have said they hoped for some lift in oil prices from the roughly $30/b level today.

On Monday, WTI front-month crude futures were trading down $1.59 at $30.60/b.

Halliburton CEO Dave Lesar, echoing Kibsgaard's comments last week, said during the call that the uncertainty surrounding oil prices had played havoc with its upstream customers' ability to plan their 2016 capital budgets.

Most have yet to unveil a capex plan, although they are expected to do so in the next month. The industry generally expects as much as a 30% to 50% year-on-year drop in capex in 2016, on top of 40% in 2015.

"There's sort of a constant revision of budgets going on and those revisions are clearly with a downward bias," Lesar said.

"Right now in North America our customers don't know how much they'll spend, where and when they'll spend it," he said. "We're trying to run the business literally on a week-by-week, crew-by-crew, unit-by-unit basis, until customers see some improvement in pricing."

From a 2014 peak, the company's overall North American well completions declined 33% relative to a 64% reduction in the US land rig count, he added.

"This demonstrates the customer flight to quality that has emerged during this downturn," Lesar said.

But Miller said service intensity continues to creep up, with a 9% a well sequential increase in use of proppant, which is sand or other material to hold open fractures after a well is fracked.

That means "equipment is working as hard as it ever was," he said.

Halliburton's adjusted income from continuing operations was $270 million or 31 cents/share in the fourth quarter of 2015, down 73% compared with the same 2014 quarter.

Its total revenues were $5.08 billion in Q4, down 42% from the same period in 2014.

The company North American revenues dropped to $2.15 billion in Q4, down 54% year on year. Non-North American Q4 revenues totaled $2.93 billion, down 27% from the same period a year ago, it said.

--Starr Spencer,
--Edited by Keiron Greenhalgh,