North America outlook may improve in 2024
International to continue growth spurt
Tier 2 plays may drive more services, equipment
Continued demand for oil and gas services and equipment is likely to grow in 2024 and beyond as upstream operators respond to increasing needs for energy security and a realization that conventional energy supplies will be needed longer than believed, the top executive of oilfield services provider Halliburton said Oct. 24.
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The most recent world oil outlook from OPEC expects 10 million barrels of oil demand growth before the end of the 2020s and further demand growth through 2045, Miller noted.
"Against this backdrop, we expect continued demand growth for oilfield services in 2024 and beyond," he said.
In North America, challenges have cropped up during much of 2023 as a 20% drop in the US rig count to 690 has resulted in less work, albeit demand for services continues to increase in intensity from unconventional reservoirs.
North America revenues down 3%
Halliburton's North American revenue totaled $2.6 billion in Q3, down 3% sequentially but 1% lower year over year.
However, there have been "really strong tailwinds" going into the fourth quarter, Miller said, adding he expects activity "to be up, not down [in North America] as we go into 2024."
Miller said it was "hard" to imagine operators want to be smaller rather than bigger given recent $85-$90/b WTI oil prices.
"We see largely a steady market" going forward, he said. "We've seen what this market looks like when we burn up equipment at very low returns that don't allow for reinvestment. So, I think that's what gives me confidence in the stability of this [market]."
"To that point, we're mostly contracted for 2024," he added.
International growth
On the other hand, international markets have continued to improve as activity increased in both the company's completions/production and its drilling/evaluation segments. Halliburton's international revenue in Q3 totaled $3.2 billion, up 17% year over year and up 3% sequentially.
Middle East and Asia revenues were flat sequentially, something which Miller attributed to potentially "lumpy" regional circumstances.
"We've seen a very strong Middle East earlier this year, and we'll probably see growth for the full year 2023," he said.
Internationally, Miller said. Halliburton is on track to deliver revenue growth in the high teens year on- ear in 2023 on top of 20% growth in the previous year, and in 2024 it expects double-digit revenue growth.
A 'much more stable North America'
The ongoing consolidation wave in North America has been marked by two giant acquisitions announced in the last couple of weeks – ExxonMobil's deal to buy Pioneer Natural Resources for $60 billion, and Chevron's deal to purchase Hess Corp for $53 billion. Such activity not only shows the long-term importance of oil and gas, but the long-term importance of North America, Miller said.
"What we're seeing are big players that take a really long view, and these are the kind of customers that clearly work through cycles," he said. "And, so, I think we'll see a much more stable North America."
Miller noted Halliburton and other larger oilfield services/equipment providers are offering more automated services and other work where intensive services are required for unconventional oil and gas operations, and where "the reality is you have to do more work in order to stay flat."
"We're seeing pretty good adoption" on electric frac fleets, Miller said. "I would say north of 60% of our business today is repeat customers. So, these are ... things that are being baked into workflows."
And companies that are beginning to drill outside the traditional Tier 1 or core acreage into less productive rock drives up the service intensity "without question," Miller said.
"It drives more reps [and] it will drive more sand," he said. "But I also expect ... that we'll see the actual breakeven cost or the cost of producing oil and gas in North America continue to come down on the back of technology."
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Continued demand growth seen for oil, gas services in 2024 and beyond: Halliburton CEO - S&P Global
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