Halliburton Company (HAL) — Q1 2025 Earnings Call Transcript

Well thank you, David, and good morning everyone. I will begin today’s discussion with our highlights from the first quarter. We delivered total company revenue of $5.4 billion and adjusted operating margin of 14.5%. International revenue was $3.2 billion, a decrease of 2% year-over-year due to lower activity in Mexico. Excluding Mexico, international revenues grew by mid-single digits. North America revenue was $2.2 billion, 12% lower than the first quarter of 2024. Finally, during the first quarter, we generated $377 million of cash flow from operations, $124 million of free cash flow, and repurchased approximately $250 million of our common stock. Before we take a closer look at our geographic results, I'd like to take a moment and talk about the macro environment for oil and gas. The last three weeks have been highly dynamic as the trade environment injected uncertainty into markets, raised broad economic concerns, and along with a faster than expected return of OPEC production weighed on commodity prices. These market forces impact us all, but here's what I know to be true. First, oil and gas will play a fundamental role in global economic growth and prosperity. Second, the world is consuming more oil and gas than ever before. And finally, decline curves are real and in many basins significant. Adequate supplies today do not guarantee adequate supplies tomorrow despite our ongoing investments. Given these realities, I know that our technology will continue to transform the industry and will unlock new sources of value for us and our customers. Our unique collaborative approach improves outcomes and deepens customer relationships. Finally, I know that safety and service quality formed the cultural bedrock of Halliburton and are key differentiators for our customers. On that note, I would like to take a moment to thank the Halliburton employees for their outstanding safety and service quality performance last quarter. I firmly believe that despite recent pressures on the energy macro, Halliburton's consistent focus on technology, collaboration, and service quality execution creates value for our customers and drives long-term success for Halliburton under any market conditions. Turning to our results, I'll begin with the international markets where Halliburton delivered solid quarterly revenue of $3.2 billion. As I look at the balance of this year, while our overall international outlook has not materially changed, it is reasonable to assume that there is more risk embedded in our outlook today than three months ago. As a result, I expect our year-over-year international revenue to be flat to slightly down. Our Q1 international tender activity remains strong. Halliburton won meaningful work extending through 2026 and beyond. Customers awarded Halliburton several contracts that demonstrate the strength of our value proposition and the power of our service quality execution. Shell awarded Halliburton significant scopes of work this quarter, including development and intervention work for Gato do Mato in Brazil, and exploration work in Suriname and West Africa. Halliburton also won additional integrated offshore exploration work with another major in Suriname. These integrated offshore contracts rely on Halliburton's advanced technologies, like our intelligent completions and comprehensive directional drilling technology, including the iCruise and LOGIX drilling automation and remote operation platform, among multiple other well-construction, reservoir evaluation, and intervention product clients. Furthermore, I expect that projects like these awarded based on the demonstrated execution of our value proposition will be the core of how Halliburton wins integrated work with customers. Our value proposition to collaborate and engineer solutions to maximize asset value for our customers resonates with customers and is directly tied to our company culture. It is core to our competitive advantage, and I am pleased it is winning in the marketplace. In addition to these offshore examples, our international growth engines also delivered in Q1. Over the next several years, we expect these engines, unconventional, artificial lift, intervention, and directional drilling to grow faster than other parts of our business. To give you a few examples of our progress in these areas, in unconventional, we mobilized Zeus equipment to the Middle East and expect trials in the near term. In artificial lift, we were directly awarded new offshore work in Ghana and we expect strong double-digit international growth in this product line in 2025. In intervention, we closed the acquisition of Optime Subsea, a technology we expect will transform deep water interventions. Finally, in directional drilling, with our partners, we delivered a first closed loop automated drilling system and drilled the well with it in Norway. Then we did it again in the Middle East. To summarize international markets, we had a solid start in 2025. Our first quarter contract awards add visibility and give me confidence for this year and beyond. Our growth engines are strong. My discussions with customers tell me we are focused on the right things: collaboration, execution, and technology, and I am confident in the future of our international business. Turning to North America, our first quarter revenue increased 1% sequentially. Seasonal increases in frack activity were offset by seasonal declines in Gulf of America completion tool sales. Looking forward, many of our customers are in the midst of evaluating their activity scenarios and plans for 2025. Activity reductions could mean higher than normal white space for committed fleets and in some cases the retirement or export of fleets to international markets. Nevertheless, I expect Halliburton to outperform the North America services market, and I believe this because our clear strategy to maximize value in North America has demonstrated success under a variety of market conditions. Our Zeus fleets, which represent more than 40% of our overall frack fleet, operate under term contracts. Finally, our technology is highly differentiated and drives value for our customers. Halliburton's recognized leadership was on display recently when, in partnership with our customer Range Resources and others, we were honored to host Secretary of the Interior, Doug Burgum, on a field visit in Pennsylvania. The visit featured our Zeus electric frack equipment, which we proudly build in Duncan, Oklahoma, and demonstrated the industry's ability to deliver reliable and affordable energy in the United States and around the world. We were pleased to host Secretary Burgum and I was energized by his vision and support for advancing American energy. I am also excited by the adoption of our latest technologies, which are a cornerstone of our strategy to maximize value in North America. In the first quarter, we achieved a significant milestone with the successful completion of the first closed loop autonomous fracturing operation in the world. To put it plainly, closed loop means that the Zeus platform utilizes real-time feedback from the reservoir that directs pump activity to control where water and sand are placed, all without human intervention, effectively reading and responding to the reservoir. I expect that this technology, known as Zeus IQ, will change the game in unconventional. I believe Zeus IQ provides customers both the measurements and controls critical to their journey to improve productivity and production for lateral foot. I am excited about the future of this technology, and we have several other deployments now underway. I would like to thank our Zeus IQ customers for sharing our vision and bringing this technology to the forefront. We look forward to our continued collaboration to improve asset performance with this unique technology. To finish my thoughts on North America, our strategy to maximize value is unchanged. This strategy means we focus on returns, not share. Our plan is to retire or reallocate equipment rather than operate it at economic levels. We focus on safety, service quality, and efficiency. We maintain equipment and invest in training. I am confident that our customers value our execution, and it differentiates Halliburton in this market. We lead technology innovation in North America, which means we develop technologies that maximize the value of our customers' assets and deploy them at scale. Before I turn the call over to Eric, let me close with this. I am confident in our strategy to maximize value in North America, drive our growth engines internationally, and deliver technology that creates value for our customers and Halliburton. I expect Halliburton to generate solid free cash flow in 2025, and we are on pace to return at least $1.6 billion of cash to shareholders through buybacks and dividends. With that, I will now turn the call over to Eric to provide more details on our financial results.

Thank you, Jeff, and good morning. Our Q1 reported net income per diluted share was $0.24. Adjusted net income per diluted share was $0.60. Total company revenue for Q1 2025 was $5.4 billion, a decrease of 7% when compared to Q1 2024. Adjusted operating income was $787 million and adjusted operating margin was 14.5%. During the quarter, we recognized a pre-tax charge of $356 million as a result of severance costs, impairment of assets held for sale, real estate, and other items primarily related to legacy environmental reserves. We expect our cost rationalization efforts to be supportive of our margins going forward. Now, turning to the segment results. Beginning with our completion and production division, revenue in Q1 was $3.1 billion, a decrease of 8% when compared to Q1 2024. Operating income was $531 million, a decrease of 23% when compared to Q1 2024, and operating income margin was 17%. These results were primarily driven by decreased pressure pumping activity and lower completion tool sales in the western hemisphere. In our drilling and evaluation division, revenue in Q1 was $2.3 billion, a decrease of 6% when compared to Q1 2024. Operating income was $352 million, a decrease of 12% when compared to Q1 2024, and operating income margin was 15%. These results were primarily driven by decreased activity in Mexico and Saudi Arabia. Now let's move on to geographic results. Our Q1 international revenue decreased 2% year-over-year. Europe Africa revenue in Q1 was $775 million, an increase of 6% year-over-year. This increase was primarily driven by improved activity across multiple product service lines in Norway and higher well construction activity in Namibia. Middle East Asia revenue in Q1 was $1.5 billion, an increase of 6% year-over-year. This improvement was due to higher activity across multiple product service lines in Kuwait and improved completion and production performance in Saudi Arabia. Latin America revenue for Q1 was $896 million, a 19% decrease year-over-year, primarily due to lower activity across multiple product service lines in Mexico. In North America, Q1 revenue was $2.2 billion, a 12% decrease year-over-year. This decrease was primarily driven by lower stimulation activity in U.S. land and decreased completion tool sales in the Gulf of America. Moving on to other items, in Q1, our corporate and other expense was $66 million. We expect our Q2 corporate expenses to be about flat. In Q1, we spent $30 million or about $0.03 per diluted share on SAP S4 migration, which is included in our results. For Q2, we expect SAP expense to be about flat. Net interest expense for the quarter was $86 million. For Q2, we expect net interest expense to increase by about $5 million. Other net expense for Q1 was $39 million. For Q2, we expect this expense to increase by about $5 million. Our normalized effective tax rate for Q1 was 22.1%. Based on our anticipated geographic earnings mix, we expect our Q2 effective tax rate to be approximately 23%. Capital expenditures for Q1 were $302 million. For the full year 2025, we expect capital expenditures to be about 6% of revenue. Our Q1 cash flow from operations was $377 million and free cash flow was $124 million. Moving on to other items that will impact free cash flow, we're following the trade situation closely. While the situation is fluid, our initial estimates are for an impact of about $0.02 to $0.03 per share in the second quarter, which is included in our guidance. We will provide an estimate of the full-year impact next quarter. Now, let me provide you with comments on our expectations for Q2. In our completion and production division, we anticipate sequential revenue to increase 1% to 3% and margins to remain approximately flat. In our drilling and evaluation division, we expect revenue to be flat to down 2% and margins to decline by 125 to 175 basis points, primarily due to the seasonal roll-off of software sales and higher mobilization expenses related to contract start-ups. I would now turn the call back to Jeff.

Thanks, Eric. Here are the key points I would like you to take away from our discussion today. While there is more uncertainty in the market than there was three months ago, Halliburton's consistent execution of our strategy has driven results that give me confidence that Halliburton will continue to outperform. In international markets, we had a solid start in 2025 with significant contract awards and strong delivery on our growth engines. Our value proposition resonates with customers, and I expect it to deliver further incremental wins throughout the year. In North America, we have expanded our technology leadership with the Zeus IQ closed loop autonomous frack system. I am confident our unique technologies and high percentage of contracted fleets will drive our outperformance in the North America market. Finally, I firmly believe Halliburton's consistent focus on technology development, collaboration, and service quality execution will create value for our customers and drive long-term success for Halliburton and our shareholders through any market. And now let's open it up for questions.

Yeah, good morning, Jeff and team, and thank you for the time here. A couple of North America questions.

Good morning, Neil.

Good morning, Jeff. A couple of North America questions. You spend a lot of time with your customer base in between these calls. And we've had a lot of volatility in the last couple of weeks. But as you think about U.S. activity through the balance of the year, if we stay in this type of commodity price environment, how do you think about the rig count and the completion count, and what type of oil price do you think would really change customer behavior in a meaningful way?

Thank you, Neil. I believe customers are currently navigating through various challenges. There's been significant change in just three weeks, particularly regarding commodity prices and tariffs. I frequently communicate with customers, and it seems they are processing information. Duration factors into their decision-making as well. When I assess the market activity, especially in the 60s, several key points stand out. From our viewpoint, the market isn't investing in new equipment, which is a favorable situation for us. If activity decreases, it may impact production. Therefore, there's a limit to how activity can fluctuate. Overall, I expect this information will be processed, and operators in North America are generally inclined to work through these issues compared to previous instances. A substantial drop in activity would likely be quickly reflected in production impacts.

Thanks, Jeff. Well, C&P’s report in the next couple weeks we'll definitely be asking the same question. And then, you mentioned Mexico a couple of times in the prepared remarks, and it had impacts on margins, it looks like, in both C&P and D&E. So, just give us a lay of the land there, how do you think about the trajectory over the course of this year into 2026, and do you see a path to resolution?

Yes, thanks. And look, I was just there meeting with Victor Padia, the new CEO, and I've spent some time with them. Clearly not settled at this point as we look forward. And I think they have a plan, but I also think that it's going to be tough for a while. And I say tough for a while, I don't see immediate recovery in Mexico. Just as the new administration has to work through, what does all of this mean. But I do know this, and what's very important is the role oil and gas play in the economy of Mexico. And so I do expect they will find their footing. At some point, it's too early to call when that point is. But I do believe the decline rates are pretty meaningful in that market. And I think that, that's going to drive recovery. I wish I were clearer around the timing on that, Neil. But I do believe they're working through what the plans are, but obviously the execution of those plans are dependent on a range of things, including kind of what the market does and how performance develops.

Okay, thanks Jeff, appreciate the color.

Thank you very much. Jeff, maybe start with a question on Saudi. There's a little bit of some moving pieces in there. The simulation is about drilling well construction down. Do you see Saudi growing in the Halliburton portfolio this year? There are a number of tenders for Jafurah to be announced; is that the big swing factor for the year, could you just talk about that within the context of flat international for the year, please? Thank you.

Sure. Saudi Arabia is a significant market, and we anticipate growth in our portfolio there by 2025. There are many exciting opportunities, including the ones you mentioned, as well as others. We have a strong presence in that market, particularly in Jafurah, and I am pleased with our performance and the opportunity to leverage technology in both unconventional resources and various other sectors. When I consider Saudi Arabia, I see it as a key area for growth, and we possess unique strengths in these growth areas, including unconventionals, intervention, and artificial lifts, all of which are very promising in Saudi Arabia. I hope that provides clarification.

That's helpful. It's great to see some positive developments. I understand there are many concerns about the North American market. Eric, I would like to inquire further about the margin progression. This quarter, margins declined in both segments, falling below our expected guidance. You seem to anticipate a further decrease in the second quarter; typically, the first quarter serves as the low point. How do you envision margin progression for the remainder of the year, especially in relation to the opportunities available in North America? I believe most of your equipment is secured, but could you provide insight into your thoughts on margins and where we might end the year? Thank you.

Yes. Let me provide an overview from the first quarter to the second quarter, followed by some insights on the full-year margins by division. In Q2, as we anticipated, the C&P division is expected to have relatively flat revenue in North America, but we are seeing an improvement in our international business for this division. Margins are also flat, and this includes the impact of tariffs. We previously noted an impact of $0.02 to $0.03 from tariffs, with approximately 60% affecting the C&P division and 40% impacting the D&E division. For D&E, comparing Q2 to Q1, we are looking at a decline of about $40 million in profits. This can be attributed to approximately $10 million in tariffs, $20 million in mobilization costs as we prepare for growth in the latter half of the year in several regions, and a $10 million mix issue with declines in our software business offset by slight improvements in our drilling business. It is important to understand that the Q2 guidance reflects specific items rather than a new run rate. Looking ahead to the second half of the year, we anticipate that margin levels in Q3 and Q4 will align with those from 2024. Regarding C&P, we will not provide annual guidance; however, our international business accounts for about 40% of our total business, with 60% in North America. As mentioned by Jeff, we expect strong performance from our growth engines in the international market, particularly in intervention and lift unconventional areas, many of which are within the C&P division. In North America, the outlook is less certain, as explained in our prepared remarks.

Yes, I'll provide some additional insight regarding North America. Customers are still trying to understand what this means for them in terms of pricing and the duration of commodity prices. That said, our customer base looks different now than it has in the past, especially considering Zeus and the changes in contract terms, the clients we serve, and the capabilities we offer. From a technology standpoint, there's significant demand for what we provide. Our operating model has also evolved compared to previous times, allowing us to adapt and clearly identify what is necessary to deliver our services. Automation continues to reduce costs for us. While there's a lot of analysis happening, we believe this positions us strongly in relation to the market.

Great, thank you Jeff and Eric.

Yes, Jeff, good morning. Jeff, I wanted to maybe see if you could elaborate on what you're seeing internationally. You highlighted how it's possible that international spending is down a little bit year-over-year, which is maybe a little bit softer than your previous outlook of relatively flat with obviously Mexico being a headwind. With OPEC clearly bringing on some barrels, could you talk to us what parts of the non-OPEC food chain do you expect to see maybe some spending impacts?

Yes. Let me start by providing more detailed insights into our international outlook. Currently, our operating plan appears flat overall, even including Mexico. However, we have noticed some increased risk factors emerging in our models recently, particularly over the last few weeks to months. In terms of non-OPEC regions, we are observing significant activity and solid growth in Norway. We have also had success in Brazil, where there are mobilization costs associated with plugging and abandonment, as well as integrated drilling. Moreover, our collaboration on integrated projects with Shell and other operators in Suriname is showing positive results. This deep collaboration model is yielding fruitful partnerships and winning new work opportunities. Looking ahead, I expect Europe and Africa to experience considerable growth in the second half of the year, with the most significant increase occurring in Q3 due to contract start-ups. Additionally, the Middle East will play a vital role as a growth engine in this timeframe. In Q4, we anticipate a substantial uplift in Latin America as we complete the full quarter of contract starts that we are mobilizing for in Q2.

Great. That's helpful. Maybe one for Eric. Eric, I wanted to maybe zero in on the cash flow statement. You announced a $345 million equity investment; looks like a minor acquisition. So I was wondering if you could describe those two, plus you had about a $350 million outflow in other operating items. So maybe you could give us a little bit of color on those items in the cash flow statement?

Yes. So there was one to start with the investing activities. There was one that was related to the Optime acquisition that we commented on. The second number, the $345 million relates to an increase in ownership in VoltaGrid, and I'll let Jeff elaborate on this one. Going back to the operating activities, the big item that you see in other operating activities is actually the combination of the typical incentive payout, cash tax payments, etc., but also the cash portion of our restructuring charge in Q1.

Got it, got it. That’s helpful. Thanks a lot.

Yes. And I would just say with respect to the increased position in VoltaGrid this quarter, look, we like the power business. We have a front-row seat through our exposure in the VoltaGrid investment, but we also see many other exciting opportunities for us in that space, but I want to be crystal clear, we're very prudent, and it's one step at a time for us.

Great, thanks a lot Jeff.

Yes, thank you and good morning. Jeff, could you provide us with more insights on the North American market and your thoughts on how Zeus IQ should operate? You mentioned a shift in the customer mix earlier. How should we view this as a growth opportunity, even if it's not immediate, and how can we maintain margins during this softer period?

Thank you. The key to Zeus IQ is something we have been developing for a while. It represents a combination of several technologies, including the capability to read the reservoir, control the equipment, and analyze data in real time, effectively responding even faster than real time with AI technology to determine the optimal flow for sand and water. This technology directly addresses one of the biggest challenges in hydraulic fracturing, which is enhancing recovery rates under various conditions. We understand that over time, the best rock is fracked first, so the real question becomes how to read, manipulate, and manage these elements to achieve better results. It's crucial technology, and the customers adopting it recognize the long-term value of improved recovery rates in North America. I believe this will drive growth even in the current market. We deployed a new Zeus fleet in Q1, which not only fosters customer loyalty but also generates significant value for us.

Appreciate that. Eric, maybe a question for you on how we should think about the uses of free cash flow in this environment. So obviously, dividend priority. But how are you thinking about the share repurchase side of things and what's the right way for us to think about that with the updated guidance?

Yes. I mean at this stage, obviously, with the updated guidance, we're looking at an overall free cash flow for the year, which is on the lower end of what we had given some color on in Q1. But I really don't see anything today that changes our perspective on cash returns and buybacks. So we're still on a pace that is very similar to what it was last year.

Appreciate that, thank you.

Hi, good morning Jeff and Eric.

Good morning, Saurabh.

Jeff or Eric, can you start by discussing the impact of tariffs? You mentioned a $0.02 to $0.03 impact for the second quarter and that we’ll have more information about the second half later as you gain visibility. Could you expand on which aspects of your business, particularly in areas like chemicals, are facing the most significant effects from tariffs and how you plan to address that in the future?

Yes. So I'll take that one, Saurabh. So as we said, it's really early days. We have reasonable visibility of what is going to happen in Q2, and that is about an impact of $0.02 to $0.03. As we indicated, we are doing a lot of work on mitigating the impact of tariffs. We have a well-diversified supply chain. We have a lot of levers we can pull. But really to be more clear in terms of the overall impact, we need a bit more clarity and stability in the structure of tariffs so that we can fully understand what levers we can pull and what the overall outcome will be. There's a lot of moving parts right now, and I think we'll be able to give you more color in three months from now. In terms of the impact on product lines, I'm not going to go into a lot of detail. Broadly speaking, we're looking at about 60% in C&P with some impact on our lift business, some chemicals, etc. 40% on our D&E business. You're looking at parts like colors for drilling and gun bodies for perforating business, that's the type of components that are being affected by tariffs at this stage.

Okay. Perfect. Eric, a quick clarification on that. I think in response to a prior question, you said for margins; D&E you think 3Q and 4Q margins can go back to the same ZIP code as last year. Does that include any of the tariff impacts reversing?

Broadly speaking, yes, with what we know today. Yes.

Okay. Perfect. I got it. And then, Jeff, quickly one for you on the international side of things. If I'm doing my math right, it sounds like Mexico might have been down 70%, 75%, which is a massive number year-over-year, right. But excluding that, I think you said mid-single digits rest of international, right? It's pretty healthy growth considering the environment we are in. Maybe talk to what countries, what regions drove that growth, Jeff and what should we expect from those regions going forward?

I mentioned earlier that we anticipate a significant increase in Europe and Africa in the third quarter as we begin several contracts in the Middle East. I expect our growth engines to activate, particularly in intervention, which is crucial for us in the Middle East, along with new activities launching in different countries. This is expected to play a significant role in our business and is continuing to expand. We will also see ongoing activity in drilling, and the advancements in our drilling technology are becoming increasingly important. In the fourth quarter, I expect Latin America to take a significant leap forward, particularly in Brazil and Argentina, where we have a strong presence. However, Mexico remains a unique case. I'm very optimistic about our business and our strategic focus on collaboration and maximizing asset value, which aligns well with our customers and creates opportunities for us. I foresee more growth in the North Sea, potentially even outside the Norwegian sector. Overall, we see a great opportunity in the second half of the year.

Okay, fantastic. No, it is good to see that momentum continue, Jeff. Okay, I will turn it back. Thank you.

Yes, good morning.

Good morning, Scott.

Good morning. Jeff, you highlighted some emerging risks to second half activity. Eric, you reiterated CAPEX being about 6% of sales. Obviously, there's a bit of risk to sales. But at 6% of sales, your CAPEX is still trending above DD&A. Can you just speak to the need for spending above DD&A? Is that really helping to drive the share gains that you're targeting, and what factors would cause you to adjust that rate of spend? I realize second half spending more impacts your fleet of tools in 2026 and therefore, reflects the 2026 outlook, but what factor caused you to reconsider the rate of spend in the second half?

Yes. Regarding CAPEX, there is a self-regulating aspect as we view it in relation to revenue. As revenue changes over time, the dollar amount we spend on CAPEX also changes. It is important to note that much of the CAPEX planned for 2024 is based on orders placed in 2024, which means adjustments take time. If there are changes in activity, we may not be able to adjust our spending significantly. Currently, international CAPEX activity remains fairly stable, and any adjustments would likely be considered for 2026. Additionally, we should be aware that tariffs on some components may also affect the CAPEX figures as they are included in capital expenditures.

Yes. I guess I would follow that just a little bit of addition around that in terms of the technology that's generating the outperformance, whether it's in IWI or these growth engine areas, we are allocating capital to those things that are growing. So we're very, very thoughtful about that, and that will allow us to adjust capital up and down over time. I would expect that we continue to be effective allocators of capital under any conditions here.

Got it. I appreciate it. Turning back to VoltaGrid, what is the long-term strategy with VoltaGrid? Do you plan to maintain it as an equity investment, or are you aiming to become the majority owner? What advantages do you see in becoming the majority owner? Could you enhance the acquisition of non-oilfield work, secure more data center contracts, or obtain additional industrial contracts? Is there an opportunity for international expansion that you could pursue as majority owner? How do you envision this investment evolving in the future?

Yes. In my opinion, that represents opportunity. It's not fixed in any single direction, and I want to clarify that we're not committed to just one path. That is one option we are currently exploring. Clearly, I believe it presents a chance for growth over time, and we will approach it thoughtfully. We consider a variety of options, not limited to that one. We also understand strategically where distributed power should be focused, rather than narrowing it to just one specific area. I think there are several sectors showing potential for growth. However, we are very cautious about simply following the latest trend. Therefore, our approach at Halliburton will always be carefully considered with a clear strategy for execution. Currently, we see many opportunities in that field and intend to keep our options broad.

Appreciate the color Jeff and Eric. Thank you.

Hey, good morning. I just wanted to ask about your outlook for the gas basin activities. Maybe just if you could expand on how your conversations have progressed over the last three months. Just trying to think about the equipment market to service those areas. I mean we still have LNG takeaway, power and AI movement. Maybe just some overall comments around how you're seeing the gas markets progress now?

Yes. Look, I'm positive on the gas markets for sure. I think that the structural change that you described, both power demand and LNG exports will continue to structurally drive more demand, which is going to increase activity in the gas markets. I've had dialogue with gas operators. They certainly like the price where it is better than where it had been. We've come a long way. The strip today, or at least the current price today, is moving around, but I think some of that is as a result of a lot of the digestion of data that's coming at a high rate is having an impact on that. None of that changes though the structural demand for gas, which clearly is the most reliable, scalable, and affordable form of power. I think we'll continue to see improvement there. But like I said for many quarters, I'm not going to pick the date that we see the inflection, but we have had more inbound from gas operators than we've had in some time.

Got it. That's helpful. This may be more of a broader question, but I was reflecting on our discussions from last year regarding the international cycle, particularly about Halliburton's stronger position during that cycle, especially with artificial lift chemicals. Now that deepwater offshore operations are beginning to gain momentum, could you share your thoughts on Halliburton's stance in tackling this offshore cycle compared to the previous one? Your commentary in the release and on the call has been quite strong, and your outlook appears positive. I’d appreciate any insights you can provide about your position this time compared to earlier cycles.

We are in a significantly better situation than in previous cycles, particularly in offshore exploration, where we are successfully integrating our efforts. Most of our recent contract wins have come from offshore projects, encompassing both development and exploration. This highlights our technical capabilities and explains why we are competing effectively in this area. Additionally, the value proposition internationally and in Deepwater is particularly strong since the stakes are higher and alignment with our customers is crucial. Our collaborative approach fosters clarity on asset value and helps create significant value for our customers, which builds their confidence in our commitment to performing well for them. These factors place us in a strong position for international and Deepwater operations, and I feel very optimistic about our future performance.

Great, appreciate the color. I will turn it back.

Thank you. Eric, I wanted to circle back to your comment that second half 2025 D&E margins would be in the same ZIP code as second half 2024. If I'm interpreting that correctly, it might imply about 300 basis points of margin improvement from the second quarter. So I wanted to make sure I got that right, and if so, that still seems pretty aggressive even trying to take into account the unique caliber and growth drivers and just some seasonal improvement. So anything you could expand on the drivers there?

Yes. You are correct. That is what I said. Again, you're looking at a significant impact from mobilization in Q2, and we're mobilizing equipment because we have won additional work. All of that kind of comes together. We'll have less cost as we get into the second half of the year. We'll have incremental work that we're mobilizing for. That's what our operational forecast tells us at this point in time.

Does that assume any decrease in activity in the second half?

That includes it reflects the forecast we are currently observing regarding the top line. As Jeff mentioned, there is certainly more uncertainty due to the current macroeconomic environment. If the macroeconomic situation significantly affects the international market, it could lead to different outcomes, but we are not seeing that at this moment.

Nor is that the feedback we're getting from customers internationally. That feedback is much clearer.

Got it. And then just very quickly on the severance charge, over $100 million in the first quarter; you had a $60 million or so severance charge in the third quarter. Just any color on how that might be helping on the margin front going forward?

Yes. Overall, I would say that it is included in the guidance that we're giving. You can think about the overall severance impact to have a payback of less than a year.

Got it, thank you very much.

You're welcome.

Thanks. Good morning everybody. So two things for me. I think the first, when we think about sort of the evolution of the pressure pumping business over the last 5 to 10 years and the increased probably resiliency in margins. Can you talk about what you're seeing right now kind of on the pricing side? And maybe even if there's any color you could give on how these longer-term contracts that are in place on e-fleets may or may not kind of reprice on a quarterly or annual basis? Are there any color you can give us there as we think about margin progression in C&P?

We have been actively extending our contracts, which continue to be priced according to the value they provide, including the technology I've mentioned. This has created a more resilient market for us, which is strategically beneficial. I've outlined what maximizing value entails, and while it's competitive, we have significant control over our decisions. Our focus is on ensuring good returns. With 40% of our target 50% under contract and positioned at the high end of the technology spectrum, we believe we are in a stronger position.

Thank you for the follow-up on VoltaGrid. We're trying to better understand the differentiation in Power Generation, especially considering the increased commoditization in the market over the past decade. How do you perceive VoltaGrid in this landscape? Do you view it as a more commoditized service, and is that a direction that the company has been moving away from?

Yes, this is certainly something we consider. When I think about our strategy, I refer to our competitive advantage, which is why we are well-positioned. Before proceeding with these strategies, I need to have a clear understanding of how we can maintain that competitive edge in the long term. This is similar to what I've shared regarding our commitment to a unique business model, as we believe that technology facilitates sustainable differentiation for us, given our investments in it. We maintain this perspective, which explains our current position.

Okay, great. Thank you for the color.

Thank you.

Yes. Thank you, Howard. As we close out today's call, let me close with this. I'm confident in our strategy to maximize value in North America, drive our growth engines internationally, and deliver highly differentiated technology that creates value for our customers and Halliburton. I expect Halliburton to generate solid free cash flow in 2025, and we are on pace to return at least $1.6 billion of cash in 2025. I look forward to speaking with you next quarter.