Halliburton 2Q17 Earnings Call Notes

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Dave Lesar

Last call for Lesar

“Since this is my last call, today I want to share with you my view of the evolution of the North America land market. Our customer base there and why I believe it will continue to surprise to the upside. Now for 25 years I have had fantastic front row seat to the development of US unconventional resources. We have become the largest service company in North America and that growth didn’t by accident. First, it was due to the leadership of Jim Brown and his visionary management team. They saw the potential of unconventional resources in the region but the same time as a group of key early mover customers. As a result, we decided to work together using lots of trial and error to unlock this resource. We established enduring customer relationships and gained unparallel base and knowledge that still provides us a sustained advantage today.”

US operators do not operate as a group

“Currently, there is strongly held view by energy investors that the US independent operators behave as a group. That view is wrong. When thousands of companies make discrete decisions about the same market, each day they do have tendency to swing the activity and production pendulum to far one way or the other. That is not group bank, is the impact of individuals trying to do the right thing for their investors.”

*The development of unconventional resources has been as disruptive to the global energy market as Amazon to big box retailing

“[US independent operators] are you are classic American entrepreneurs, and their success should recognized. In Silicon Valley, such a success would be greatly celebrated as another industry disruptor. The unconventional disruption is not widely celebrated beyond the energy space, but it should be. The development of US unconventional resources has been as disruptive to the global energy market as Amazon has been to Big Box Retailing or Uber to the taxi business. You don’t leash to wave of cheap, reliable energy that is disrupted global geopolitical and energy dynamics. Made the US more energy independent caused OPEC to react and changed the fundamental economic of offshore production. And I believe it is created a hundreds of billions of dollars of economic value, added hundreds of millions of dollars to government tax coffers and provided untold savings for consumers. So unconventional is what I would call a disruptor, so let’s celebrate that.”

Don’t bet against animal spirits

“I said several quarters ago the customer and animal spirits back and they are with a vengeance and they are now running free to North America. Here is my last piece of wisdom for you. Do not bet against the animal spirits that our North America customers embody. I never have and I never will because that is the bet that you will lose.”

Jeff Miller – President and CEO

customer demand has outpaced supply of completions equipment

“today, we believe the current customer demand has outpaced the supply of completions equipment and this should create runway for a strong utilization through the second half of the year. We remain committed to generating industry leading returns and reactivating our equipment was the first step towards delivering the results you have come to expect from us. As some of you’ve heard me say before, customer urgency is the foundation for the path to normalize margin. Today, our customers remain urgent. And therefore, we believe our path to normalized margins is achievable. We get there through a combination of increasing leading pricing, improved legacy pricing, better utilization and continued cost control.”

Decline in average sand pump per well

“For the first time in years, in the second quarter we experienced our first decline in average sand pump for well. Let me repeat that because I think this is important. We saw a decline in the average sand pump per well. And while this is only one data point, it’s something we will be watching. We believe current sand price levels have encouraged operators to optimize their completion design using more science as opposed to simply maximizing sand and trade for increased production.”