Halliburton Company (HAL) — Q3 2024 Earnings Call Transcript

Hello, and thank you for joining the Halliburton third quarter 2024 conference call. We will make a 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; and Eric Carre, Executive Vice President and CFO. Some of today's comments may include forward-looking statements reflecting 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, 2023, Form 10-Q for the quarter ended June 30, 2024, recent 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. 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'll begin today's discussion with our highlights from the third quarter. We delivered total company revenue of $5.7 billion and an adjusted operating margin of 17%. International revenue was $3.3 billion and grew by 4% year-over-year, led by the Middle East Asia region, which delivered an increase of 9%. North America revenue was $2.4 billion, a decrease of 9% year-over-year. Finally, during the third quarter, we generated $841 million of cash flow from operations, $543 million of free cash flow and repurchased approximately $200 million of our common stock. The August cybersecurity event has not had a material effect on our financial condition or operating results. However, that event, together with the effect of storms in the Gulf of Mexico, did reduce our adjusted earnings for the quarter by roughly $0.02 per share due to lost or delayed revenue. The cybersecurity event also impacted our free cash flow during the quarter due to delayed billing and collections and caused us to pause our share repurchase program while we assess the impact of the event. Importantly, our full-year expectations for free cash flow and cash returned to shareholders remain unchanged, and we expect both to accelerate in the fourth quarter. Before we move on, I would like to take a moment and thank our employees for their extraordinary work while we navigated the cybersecurity event this quarter. Our employees maintained operational continuity under challenging conditions, and I celebrate their effort and grit as they worked through the event. I would also like to extend my thanks and appreciation to our customers for their support and close collaboration through this time. Turning to our geographic results. I'll begin with the international markets where Halliburton's revenue grew 4% year-over-year, led by the Middle East Asia region. For the full year, I expect international revenue growth to be in line with the overall market and below our prior guidance. I am pleased with our performance and the continued growth of our business. Next year, directionally, we see international growth in the low- to mid-single digits. I'm encouraged by projects I see in the pipeline, and I am confident that Halliburton will deliver on these opportunities and create value for both us and our customers. My confidence comes from the strength of our largest international business lines, the depth of our technology portfolio, the breadth of our global reach and the power of our value proposition. Halliburton's largest international business lines, cementing, completion tools and drilling fluids, form the backbone of oil and gas development spending globally and each is a leader in their market. We've earned these leadership positions through our legacy of execution, consistent service quality and our digital and technology developments. The transformation of our Sperry Drilling business clearly demonstrates the impact technology developments have on our business. The success of our organically developed iCruise and iStar directional drilling and logging tools, LOGIX automation and remote operation platform and ultra-deep resistivity and look-ahead tools create a step change in Halliburton's international competitiveness and return profile. Year-to-date, Sperry has delivered the highest international revenue growth of any major product line. Further, Halliburton today is present in all major international basins as well as select frontier areas with promising future development potential. Our international business operates both on and offshore with roughly 50% of our revenue outside of North America land earned from offshore operations. Finally, our value proposition to collaborate and engineer solutions to maximize asset value for our customers drives our unique approach to creating value for our customers and Halliburton. Our collaborative approach wins with our customers and is exemplified by our alliances in the North Sea and elsewhere. These alliances have pioneered new ways of working to consistently deliver industry-leading performance on integrated projects. I am confident in our international business. I am confident because of the strength of our technology portfolio, our unique value proposition, our clear strategy, our experienced workforce and deep customer relationships. I expect that Halliburton's international franchise will continue to deliver growth and returns. Today, I would like to spend some time describing a few areas where I expect outsized international growth for Halliburton in 2025 and beyond. These are unconventionals, artificial lift and intervention. Two things are clear to me. One, unconventional developments are becoming more important, and I expect they will grow faster than other market segments over the next few years. Two, Halliburton is the clear leader in unconventionals, both in technology and execution, and I expect Halliburton to play the same leadership role internationally as we have in the U.S. We see evidence of this in the Middle East, where Halliburton was awarded a multiyear unconventional drilling services contract and started up an unconventional hydraulic fracturing fleet, both of which grow Halliburton's market share in a strategically important customer asset. Elsewhere in the region, we see several other growth opportunities for Halliburton in emerging unconventional plays. Turning to Halliburton's international artificial lift business, we saw over 30% year-on-year revenue growth this quarter, and we expect to continue to outgrow the market on the strength of our leading technology portfolio. One such technology is our TrueSync hybrid motor, which combines the reliability of an induction motor with the efficiency of a permanent magnet motor. Initially deployed in North America, we anticipate strong international demand, especially in Latin America and the Middle East, where its economic benefits can be realized at scale. Another key technology is our Intelevate service, which uses AI to process real-time data and remotely manage pumps for optimal performance. We saw a 50% increase in international wells monitored since the start of the year. In North America, Halliburton performed over 160,000 remote interventions this year, and we expect Intelevate to deliver similar value internationally as we expand our installed ESP base. Well intervention is another segment I believe will outgrow the overall market. We have seen this already with our Production Solutions product line, which this year alone has grown at twice the rate of our overall international business. Well intervention has long been an area of focus for Halliburton's organic investment and technology development. For example, Halliburton and alliance with TechnipFMC achieved the world's first riserless coiled tubing intervention service. This technology means Halliburton's full suite of subsea well intervention services can be deployed without the requirement for a riser-equipped deepwater rig. Customers can now intervene in thousands of marginal or end-of-life offshore wells that otherwise could not be economically serviced. These are a few examples that describe the unique above-market growth opportunities we see for Halliburton. To summarize international markets, I am confident in the strength of our international business. I believe our technology portfolio, value proposition, and strategy will drive profitable growth in 2025. Turning to North America. Our third quarter revenue declined 4% compared to the second quarter, primarily due to lower hydraulic fracturing activity in U.S. land. I expect the combination of seasonality and budget exhaustion will result in a full year revenue decline at the low end of our prior guidance. Our strategy to maximize value in North America remains unchanged, and I expect we will continue to outperform our competitors. Here's how I expect to maximize value in North America as I look to 2025. In our Completion business, maximizing value means unique technology leading service quality and efficiencies and disciplined capital deployment. The success of this strategy is clear. And today, I am pleased that 90% of our fracturing fleets are committed for work in 2025, with multiple opportunities for the remaining 10%. Further, the unique completion technologies we deploy in this market are key differentiators for Halliburton and our customers. Together, they comprise the Zeus platform, electric pumping units, Octiv Auto Frac and Sensori subsurface measurement. Each of these technologies is commercial, and we are seeing accelerated adoption into customer workflows. This quarter, we signed contracts for two new e-fleets and also secured extensions on several existing fleets at prices commensurate with the leading performance of our platform. We believe the performance of our e-fleets and their integration with other unique components of the Zeus platform will continue to drive demand for this equipment, which we expect exceeds 50% of our active fleet next year. Turning to Octiv Auto Frac. Customers have contracted this automation technology at a remarkable pace. Since launch in Q3, we've deployed Auto Frac on 20% of our e-fleets and expect to expand to 50% in the next two months. In 2025, we expect the vast majority of our e-fleets to operate with Auto Frac contracts. I am also pleased with the deployment progress of Sensori fracture diagnostics, which provide the building blocks for improved per-foot recovery for our customers. During the third quarter, we embedded Halliburton's Sensori fracture monitoring technology into a number of our customers' well completion workflows and expect to further expand our customer base for this unique technology in the fourth quarter. Looking ahead, I expect the Zeus platform and its constituent technologies to see continued adoption. I believe these technologies, working together seamlessly in an automated real-time environment will create a path to greater fracture consistency, ever higher levels of efficiency and ultimately improved recovery. The potential value creation related to these technologies is significant. We are working today with several market-leading operators to advance this integrated application of the Zeus platform. I believe we are just at the beginning of what this technology will accomplish. Shifting to Drilling and Evaluation. Our North America drilling services business demonstrated nearly 20% year-on-year growth this quarter despite a rig count decline of 5% over the same period. I expect this unique growth to continue in 2025. In unconventional basins, our iCruise rotary steerable tool and LOGIX drilling automation platform reliably deliver curve and lateral sections in a single run. We delivered revenue growth this year in each of our commercial models: rental, sales and full service, and I expect further expansion next year. In Canada, Halliburton's leading portfolio of well-ranging technologies, such as our Aurora magnetic ranging service, is the preferred solution for steam-assisted gravity drainage wells. Expanded midstream infrastructure has improved market access for oil producers in Canada, which creates a strong future runway for these technologies. In Alaska, our EarthStar ultra-deep resistivity tool and reservoir mapping service deliver unmatched performance and unique insights for customers drilling extended reach wells on the North Slope. We see significant growth opportunities for our logging while drilling and directional drilling services as activity increases in multiple projects in the area over the next few years. Across a broad spectrum of North America drilling applications, Halliburton's technology delivers performance, precision and unique insights for our customers that have driven meaningful share growth and strong returns, and I expect further revenue growth in 2025. To finish my thoughts on North America, our strategy to maximize value is unchanged. The strategy means we focus on returns, not share. We deliver leading service quality and efficiency, and we develop differentiated technologies that create value for our customers and Halliburton. I believe Halliburton's execution of this strategy has transformed the resilience and profitability of our North America business. Let me close with this. I see solid opportunities across business lines and geographies for Halliburton. As we execute on our strategies for profitable international growth and maximizing value in North America, we will target opportunities to deliver unique value, allocate capital to the highest return opportunities, and prioritize free cash flow generation and shareholder returns. With that, I'll now turn the call over to Eric to provide more details on our financial results.

Thank you, Jeff, and good morning. Our Q3 reported net income per diluted share was $0.65. Adjusted net income per diluted share was $0.73. Before we turn to our detailed results, I want to take a moment to discuss the impacts of the cybersecurity event this quarter on our earnings, free cash flow, stock buybacks and SAP deployment. Starting with earnings, the lost revenue resulting from the cybersecurity event and the storms in the Gulf of Mexico impacted our adjusted results by approximately $0.02 per diluted share. In addition, we incurred $35 million of cybersecurity event-related expenses, which is excluded from our adjusted results. In Q4, we do not expect to incur significant further expenses related to the event. Our free cash flow was impacted by system outages, which affected our ability to invoice and collect receivables during the quarter. We work closely with our customers and expect to collect those amounts in Q4. We maintain our expectation of greater than 10% growth in full-year free cash flow compared to last year. We paused our stock repurchase program as we assess the impact of the event and repurchased fewer shares this quarter than targeted. Our plan is to catch up on buybacks in Q4. Finally, this quarter, we successfully completed the implementation of SAP S4 in our first country. Based on lessons learned there, and the cybersecurity event, I now expect the project to be delayed three to six months and cost approximately $20 million to $30 million more than our initial estimate. Turning now to our company results. Total company revenue for Q3 '24 was $5.7 billion, a decrease of 2% sequentially. Adjusted operating income was $987 million, and adjusted operating margin was 17%. Now turning to the segment results. Beginning with our Completion and Production division, revenue in Q3 was $3.3 billion, a decrease of 3% sequentially. Operating income was $669 million, a decrease of 7% sequentially and operating income margin was 20%. These results were driven by lower hydraulic fracturing services in U.S. land and Latin America. In our Drilling and Evaluation division, revenue in Q3 was $2.4 billion, while operating income was $406 million, both sequentially flat. Operating margin was 17%, a sequential increase of 36 basis points. These results were driven by improvement in fluid activity in Latin America and higher software sales globally, offset by greater-than-anticipated rig count reductions in the Middle East and project delays in the North Sea, two of our largest well construction markets. Now let's move on to geographic results. Our Q3 international revenue was flat sequentially. Europe Africa revenue in Q3 was $722 million, a decrease of 5% sequentially. This decline was primarily due to decreased drilling-related services in the North Sea, and lower completion tool sales in West Africa. Partially offsetting these decreases were higher cementing activity in the North Sea. Middle East Asia revenue in Q3 was $1.5 billion, an increase of 3% sequentially. This increase was primarily due to increased pressure pumping services in Saudi Arabia, higher completion tool sales and fluid services in the Middle East, and higher wireline activity in Asia. Partially offsetting these improvements were lower drilling services and project management activity in the Middle East. Latin America revenue in Q3 was $1.1 billion, a 4% decrease sequentially. This decrease was primarily due to lower hydraulic fracturing activity in Argentina, partially offset by increased drilling-related services and improved project management activity in the region. In North America, Q3 revenue was $2.4 billion, a 4% decrease sequentially. This decline was primarily driven by decreased pressure pumping services in U.S. land in addition to lower activity across multiple product service lines in the Gulf of Mexico, partly due to the impact of storms. Moving on to other items. In Q3, our corporate and other expense was $60 million, which was below our prior guidance. As a result, we expect our Q4 corporate expenses to increase about $10 million. In Q3, we spent $28 million or about $0.03 per diluted share on SAPS for migration, which is included in our results. For Q4, we expect SAP expenses to increase about $5 million. Net interest expense for the quarter was $85 million. For Q4, we expect net interest expense to increase about $5 million. Other net expense for Q3 was $52 million, which was higher than anticipated, driven by unfavorable foreign exchange movements in multiple currencies. For Q4, we expect this expense to be approximately $35 million. Our effective tax rate for Q3 was 21%, and our normalized effective tax rate was 23.5%. Based on our anticipated geographic earnings mix, we expect our Q4 effective tax rate to be approximately 23.5%. Capital expenditures for Q3 were $339 million. For the full year of 2024, we expect capital expenditures to be approximately 6.4% of revenue. Our Q3 cash flow from operations was $841 million, and free cash flow was $543 million. For the full year 2024, we expect free cash flow to be at least 10% higher than 2023. Now let me provide you with comments on our expectations for Q4. In our Completion and Production division, we anticipate sequential revenue to decline 1% to 3% and margins to decline 75 to 125 basis points. In our Drilling and Evaluation division, we expect sequential revenue to be flat to up 2% and margins to be flat to up 50 basis points.

Thanks, Eric. Here are the key points I would like you to take away from our discussion today. I am confident in our international business. I believe the strength of our technology portfolio, unique value proposition, and clear strategy will continue to deliver growth and returns. I'm excited about the emerging trends in the international market, where I believe Halliburton will demonstrate unique growth. And in North America, we are widening the moat around our Zeus platform and expect to keep growing our drilling business. And now, let's open it up for questions.

So maybe let's just start with the obvious, and how you think the election might impact your business? Is the thesis out there, obviously, the market sort of buying first asking questions later? But that reduced regulation, faster permitting is going to result in higher onshore activity kind of going forward. Is that a valid assumption? I mean, is that the way you're thinking about the market for the next couple of years? I could certainly see how complete the Gulf of Mexico, which seems to be mired in red tape. But how do you think this impacts your North America onshore business?

Look, Dave, it's only positive. It could only be positive. In fact, I'm quite optimistic about that outlook. And here's why. I mean, I think what you saw was a reflection of a commonsense view of economics and resource development, which are incredibly important in this country. And then more importantly, it's the way it was rolled out. I mean it reflects the majority of people that have a rational view about how important energy is to our country. And so, when I think about that, I think every dollar that is not spent defending and debating the industry, but rather being invested in this industry are absolutely good for Halliburton's business.

What about the Gulf of Mexico? Do you think there could be an increase in activity there? I know there have been some challenges with obtaining permits. Do you think that could potentially be resolved?

Yes. I think there's a lot of risk associated with this industry, especially regulatory risk, which is particularly significant in the Gulf of Mexico due to the scale of investments and the long-term decisions made by operators. As those risks are reduced through regulations or legislation, it creates a better environment for growth. Operators are constantly managing risks, and we see that energy is extremely important. There is no reason we shouldn't be optimistic about energy development in this country.

Understood. If I could shift to the current situation in U.S. onshore, it is clearly slowing as we approach year-end, which we've all noted. You seem to be facing significant pricing pressure, and it looks like you're guiding down for margins in the fourth quarter. Can you discuss the potential widening spread of pricing among conventional diesel, Tier 4, and e-frac? Are you observing that spread? If so, are you considering accelerating your Zeus platform, which sounds quite differentiated? I wanted to know if you're thinking about expediting that program, as it could lead to higher pricing in the future.

We continue to observe strong demand for our Zeus platform, and it is growing. Our acceleration will depend on customers recognizing its value and choosing to contract with us. We've experienced this in the current quarter, including renewals, which gives me confidence. I believe the platform’s availability in the market will naturally lead to increased demand, rather than us needing to push aggressively for acceleration. We plan to maintain our strategy of maximizing value, transitioning from diesel to electric, while ensuring that our platform delivers significant value for our customers.

Jeff and Eric, I really want to get your thoughts on how you see North America and Completion and Production kind of trending next year? You mentioned that 90% of your frac fleets is committed for '25 and perhaps 50% of that capacity up to that could be Zeus fleets. So, it sounds like you've kind of navigated through the RFP season, and you got a lot of equipment kind of committed. You also mentioned that you've announced some extensions on some Zeus fleets that's maybe a little bit earlier than we're thinking. So, I was just wondering, given that amount of capacity that's been committed, what's your just outlook for non-frac next year? And I'm trying to think about how margins could play out over the next 12 months.

I feel optimistic about 2025, and I interact with customers daily, and they are clearly making plans to operate. They are also looking to increase efficiency and enhance recovery simultaneously. This aligns perfectly with our strengths, whether it involves more silo frac, longer laterals, faster wells, and of course, our Zeus platform. When I consider 2025, I focus on maximizing value, which entails addressing the toughest challenges in unconventionals with improved recovery, expanding the advantages of our Zeus platform, and the drilling performance I mentioned, along with the significant adoption we are experiencing for our drilling solutions. Having 90% of our fleets committed today shapes my perspective on 2025, and I have detailed the initiatives we will undertake in the market that are in line with the performance we have demonstrated so far. Regarding the current market, we have arguably been in a downturn for 18 months. The tools and strategies we have employed will continue to be our approach moving forward.

Okay, fair enough, Jeff. This helps us think about 2025. We've consistently received questions about the North American frac market, particularly regarding companies like Halliburton increasing their daily operational hours and completing more footage each day. Many of my E&P coverage highlights that one operator mentioned they could use four frac fleets in 2025 to achieve the same amount of work that five fleets accomplished in 2024. This implies a reduction in equipment use. We're trying to understand how this affects profitability if these four fleets are managing similar footage. Specifically, we're curious about how this impacts Halliburton, considering the possibility of losing some margins or revenues through pass-through, and how it affects your base frac business in this scenario.

We are at the forefront of efficiency, meaning we can achieve more outputs with less investment in equipment. It doesn’t require double the equipment to perform a simul-frac; in fact, it takes less than 50% more. Generating the same or higher revenue with reduced equipment is beneficial and aligns with our strategy in equipment design. Additionally, increasing value through pumping is part of how operators improve, and I prefer being at the forefront of this progress. Leading this charge keeps us engaged and creates opportunities for added value. You're approaching this correctly; the industry is becoming more efficient, though it may become more challenging to achieve further efficiency. However, I believe Halliburton will remain at the forefront as a leader. Capital efficiency is a priority for us and ultimately helps maintain margins. Looking ahead, we know how to navigate our current environment successfully, but we must not overlook future catalysts, such as changes in rock tiers, which could also bring about positive developments.

You emphasized intervention a lot this quarter. I think investors who aren't as closely following the company as myself or Dave or Arun may not be aware of the significant amount of R&D and effort you have invested in building that aspect of your business as a major strength. Could you discuss why you're highlighting this now, as well as your journey from where you started, the progress you've made, your current position, and how you perceive this as a key strength of the company?

Yes. Thanks, James. Look, this has always been an important business for Halliburton intervention, whether it's stimulation, it's entering wellbores, and those are the markets that maintain the baseload of oil and gas production around the world. And so, we've been in that business, but I'm highlighting it partly because I don't want anyone to forget how important predicting that base load is, and how much work that generates. But I also would like to characterize that in terms of the R&D effort that we're putting in around that. And so, if I go sort of contextually overlook some history. In Halliburton when we invest in a direction, it's important for us. So, I think unconventionals, if you go back a number of years, then we've talked about what we've done around Sperry drilling from an R&D and creating critical mass and a bigger business doing the same thing with intervention. And we've done it for a number of years. However, you're going to see us developing things like we described on the call today, riserless intervention is an incredible step forward in terms of making wells economic. We've talked about it for a decade probably worked hard on it with TechnipFMC for five years, and now we're here. But those are the kind of things I expect to see us do more of and create a bigger growing market for us. And so, from our perspective, this is where we will see outsized growth internationally.

Okay. Very good to hear. And then, Jeff, the growth in the interventions part of the business make earnings a little bit less cyclical than perhaps they've been previously and therefore, a higher multiple.

I think so. I mean these are completely agree with you, and it's part of the reason we want to continue to invest and generate that outsized growth. But it's the kind of growth that decline curves never go away. And so, everything is obviously declining. Therefore, there is always demand for intervention as we described.

Jeff, can I get your take, you talk a lot here about the opportunities international. And obviously, everybody talks about the productivity and efficiency that's going on in North America. Could you give us a little bit of a contrast of what you see happening globally? I mean, not just your products and services that improve it. But if you were to just say, what you think your customers are getting right now in terms of productivity and efficiency, how that's affecting your business question asked earlier, I think, by Arun, right, five frac crews goes to four, what the impacts are. So, as you think about the opportunity internationally, how does that compare? What kind of headwinds are you facing on the productivity front there?

North America is a fantastic market with an excellent resource where operators can easily implement technology. In contrast, internationally, we are lagging significantly in technology application. Some regions, like Argentina, are just beginning to mature in this aspect. The Middle East has made some progress, but I believe we will see an increase in equipment consumption before we witness any significant efficiency improvements, as there is still a substantial amount of work to be done. These markets particularly benefit from Halliburton's technology that helps in creating better wells. Historically, in the U.S., wells were well designed, and there are many that we would like to go back and refrac. However, with our current technology, I am confident we will produce better wells. To address your question directly, we are far from reaching a point of efficiency that reduces international demand. In reality, we are at the opposite end, resembling the early days in the U.S., where our focus is more on adding capacity rather than reducing it. I hope that clarifies things, Roger.

Yes, it does. What we're looking at seems to indicate that, but I wanted to speak with the experts about it. Another thing we hear is that a way to possibly speed up drilling in the U.S. could be greater use of rotary steerable systems and other advanced drilling technologies. You mentioned in your introduction that this is something to be implemented in Latin America. However, I'm curious about how you perceive this in North America regarding increased adoption in the coming years.

Yes, thank you. I am very clear that the market for rotary steerables is continuing to grow. The efficiency and precision of these tools, along with the increasing complexity and length of wells being drilled, indicate that rotary steerables will play an increasingly significant role in the market. This is evident in North America, where we're seeing strong demand for our iCruise tools, particularly due to their reliability in drilling curve laterals. I observe a similar trend internationally; for instance, we have secured a contract in the Middle East for Sperry, reflecting the same developments. I anticipate growth in unconventional markets globally because the iCruise CX is an excellent tool whose performance is driving our increased market share. I am very satisfied with our position, and I believe we are well-placed for long-term growth, as the market must evolve to improve efficiency and accommodate the complexity of the wells being drilled.

I had a couple of company-specific items here, which is around the cybersecurity incident what are, Jeff, lessons learned around that certainly something that all Fortune 500 companies are having to contend with. But how do you ensure protection of this going forward? And help us understand it sounds like, it could create some delays to the ERP system rollout. Can you talk a little bit about what those impacts were?

Yes. Thanks. Look, I think from a lessons learned standpoint, I cannot overemphasize the importance of preparedness in terms of desktop drills, contracting with the absolute best professionals in the industry. And I'm so appreciative of the companies that have supported us, Mandiant and others. But I would say that is probably one of the most important things any company can do is be absolutely prepared in advance for that.

In regard to the SAP ERP rollout, there are a couple of key points to consider. Firstly, the cyber incidents had a direct impact. When the incident occurred, most of our IT team focused on resolving the issue and restoring systems, which meant they could not participate in the rollout. Once the systems were back up, our finance and procurement teams had to catch up by entering transactions that had been done manually during the outage. The second impact was related to localization events that occur when launching a system in a new country. We typically send a team ahead to understand statutory and tax differences to prepare for specific regulations in that country. Our first rollout took place in Canada and was successful, allowing us to close the quarter on S4 and wrap up October on S4. Throughout this process, we identified areas for improvement in training and managing processes across two different systems. Consequently, we've had to adjust our rollout timeline, and we now expect it to take about three to six months longer than originally planned, targeting H1 2026 for completion.

Okay. Great. I'm glad you guys navigated. The follow-up is just around the stock buybacks. Again, you did $250 million in March and then $250 million in June in this quarter, it was closer to $200 million, and you explained why. But is $250 million the right run rate, all else equal, as we think about 2025 and given the pullback in the share price given the macro environment, is there an argument to really lean into the share repurchase and take it to another level and really drive that free cash flow per share? So, I'll turn it over to you guys on that.

Yes. To respond to your first question, we are planning for an average of $250 million per quarter, which would lead to approximately $1 billion for the year, a significant increase from 2023. In Q3, we employed a cautious approach regarding our share buybacks, utilizing two methods: we filed a 10b5-1 plan and conducted open market purchases. However, once the cyber incident occurred, we halted all open market purchases to avoid complications if the investigation revealed MDI. We continued with the 10b5 plan, resulting in a figure lower than our initial target, and as mentioned, we aim to make up for that in Q4. Regarding your second question, we view buybacks as a consistent method to return cash to shareholders, considering it across market cycles. While there may be short-term opportunities based on current share prices, we prefer not to be opportunistic and instead see stock buybacks as a long-term strategy to return cash. We may increase our activity slightly, but overall, we intend to maintain a steady approach. Looking ahead to next year, we haven't finalized our plan, but we generally expect to increase our buyback efforts in 2024.

Jeff, maybe I have a couple of questions, one on offshore, one on North America. Let me just start on the offshore side of things because that's one place where there is a lot of optimism and structural optimism, not just short-term optimism. I want to just come back to that I know in the past, you have talked about upside in '25, particularly in West Africa and Norway and obviously offshore in general. But amongst the conversation from the offshore drillers and delay in contracting, maybe some projects being delayed due to the macro supply chain delays, given all of those headlines on the offshore driller side of things, is there anything we should be mindful of for the offshore side of your business as we think about 2025?

We see stability in our major markets, such as the Gulf of Mexico, Brazil, Guyana, Norway, and the Black Sea, which we highlighted earlier. From our perspective, we transfer equipment between rigs, and since we are not focused on the rig business, the contracted status of those rigs does not significantly affect us. The main point is that operators are committed to drilling and developing offshore resources, which shows considerable strength. Even with the activity levels in the Gulf of Mexico, there is a lot of movement and variability in the rig business regarding contracting and timing, but that does not influence us. We are collaborating with clients who have available rigs, and they are either executing existing work or planning new projects, which presents some exciting opportunities worldwide and specifically in the Gulf of Mexico.

Okay. Fantastic. No, that's good color, Jeff. And then just one quick clarification on, Jeff, I think you made the comment in your prepared remarks about 90% of your fleet committed for 2025. That's really impressive like I think about it. But my follow-up is, do we know at least roughly what the pricing on those fleets are going to look like, right? So basically, do we have line of sight on the profitability as well versus just activity on those fleets?

Look, yes, we do have some of that, but we obviously work through that as well. What I would say about without getting into details because I won't. We're sticking with our strategy, which is to stay out of the spot market and size the fleet to the market that we see as we've described, and we've been successful in getting things to work. We obviously don't exist in a vacuum. But at the same time, I believe Halliburton, and I know Halliburton reflects the performance and the technology that we bring to the market, which puts us at the high end of the range, and I get told that every single day. So, I'm well aware of where we are from that perspective. But confident that our strategies in place, and we're executing on the strategy that's gotten us to here.

As I mentioned earlier, the CapEx still intended to be at 6%. Look, it's going to be a little higher than 6% this year as we revised revenue compared to the projection we had at the beginning of the year, and we had a lot of equipment and flat. I mean, we're still dealing with lead time on big pieces of capital equipment between six months and over a year. But as we look into next year, it's 6%. It's a balance between CD&E balance between the projection that we have for revenue in North America and international and the overall ratios continue to evolve as our business evolves and becomes more and more internationally weighted.

Yes, Carmen, thank you. As we close out today's call, I just want to leave you with this. I see solid growth opportunities for Halliburton across our business lines and geographies. I'm confident in our international business and its strong technology portfolio, unique value proposition, and clear strategy. In North America, we are widening the moat around our Zeus platform, and we expect to keep growing our drilling business services in North America. So, I look forward to speaking with you next quarter. Thank you.