Halliburton 3Q15 Earnings Call Notes

Activity level could drop substantially in the last five weeks of the year as operators have exhausted 2015 budgets

“Based on current feedback, we believe most operators have exhausted their 2015 budgets, and will take extended breaks, starting as early as thanksgiving. Therefore our activity levels could drop substantially in the last five weeks of the year.”

We’ve never had less near term visibility

“In my 22 years in this business, I’ve never seen a market where we’ve had less near-term visibility. In reality, we are managing this business on a near real-time basis, customer-by-customer, district-by-district, product line-by-product line, and, yes, even crew-by-crew”

First quarter should be the bottom of this cycle

“Our view is that the first quarter could end up being a mirror image of the fourth quarter. So, just as the fourth quarter is facing a speed drop-off post thanksgiving, we expect to see a slow ramp up beginning in January, and improving from there, suggesting that the first quarter could be the bottom of this cycle.”

Reduced borrowing capacity for operators

“In North America, the prospects of reduced borrowing capacity for operators, and a prolonged holiday season make the fourth quarter challenging and difficult to predict.”

Rig count could drop more

“So far, the average horizontal rig count is down a little less than 10% from the third quarter average. If these headwinds play out, we estimate that the fourth quarter average horizontal rig count could drop about 15% to 20% sequentially.”

Pumping is obviously the most stressed

“Obviously, the most stressed part of our business is pumping. Now, this is the business that we know the best. It’s the business that recovers the fastest. It’s the business that recovers the most sharply”

Game plan is stick with customers we know

“we know what that path looks like. It looks like this. It looks like staying with the fairway players in the basins that we know. It does not mean chasing every stake. It looks like staying with the customers that are loyal, even if that means working at a price that we don’t like, collaborating on our path forward that lowers their costs per BOE”

Budgets will be reloaded in Q1. When our customers have cash they will find a way to spend it

“there will be a budget reload that takes place in Q1. I think the big question mark is how fast do our customers go back to work once they do reload their budgets, given off what we think we will be a relatively low rig count volume in the latter part of the quarter, especially in December? So it really depends on the bounce back, but the cash will be there. And I think one of the things that our customers demonstrate, and believe me, we love all our customers. If they have cash they are going to spend it.”

Unconventional wells decline so quickly that many companies are in drill or die mode. If they don’t start drilling, they’re going to have to dismantle infrastructure

“with the high decline curves that exist on these unconventional plays. They are really are in drill or die mode. So if you go a year without drilling a well, and your production starts to turnover, you are going to have to start drilling or you are going to have to take your infrastructure apart that you’ve built up as a company. So I think that as we get to the end of the year, if these guys have money, they are going to drill it up, and that’s just the fact that it is.”