Halliburton at Barclays Conference Notes

Jeff Miller – President

We’re on the road to recovery but this is the worst downturn we’ve ever seen

” I think the headline reads on the road to recovery. You have to look hard, but if you look at the red line, you’ll see on the road to recovery. But at the same time, I would describe this as sorting through the wreckage of the worst downturn that we’ve ever seen. We see the after-effects just about everywhere that we look. There have been more than 350,000 layoffs in the industry, mostly weighted towards oilfield services, some companies laying off as much as 80% of their workforce. At Halliburton we’ve laid off about 40% of our workforce. Bankruptcies and restructuring are quite commonplace today and CapEx has been radically reduced and asset sales are now strategy.”

We’ve found bottom

“So fundamentally, we’ve found bottom. I would describe it now is that we are in the early innings of a recovery. But what’s important to remember is we study the script every day and we look at oil price and all the other things that we do on a day-to-day basis. It’s important to remember that the starting point is from a 100 year low in activity”

Decline rates with capex spending lead to a 14m barrel per day gap

” The current decline rates, if we conservatively estimate those at 3%, are working on the slide behind me right now. What you’d see is that just a 3% decline rate. Again conservative means about a 14 million barrel per day gap grows over the next 5 years. What this model does not consider is what I like to describe as almost CapEx starvation, which would only serve to exacerbate that gap, meaning more that 14 million barrels per day.”

The unconventional barrel is the fastest barrel to market

“the unconventional barrel is simply put, the fastest incremental barrel of oil to market. That means it will be the first to fill demand, to fill the imaginary supply bucket that I described on the prior slide. In addition though, the unconventional barrel is the shortest cycle return barrel, which makes it an attractive barrel, not only for filling demand, but from a return stand point.”

Deepwater will be slowest to recovery

“The slowest recovery will be Deepwater. That’s really a duration question. It’s 7 to 10 years from discovery to barrels in the tank. It has 2 implications. The first being financial and it’s just as simple as more money upfront and a longer wait for a return, but then also from a demand standpoint in terms of filling that barrel.”

Brazil has stopped declining

” there are a few glimmer spots, I won’t call them bright spots. I’ll call them glimmering spots, but Brazil for example has stopped declining in activity and is doing what it can to make their reserves work in the current economy.”

Differentiation in service companies

“Service Company differentiation has never been clearer. On the one hand we have a competitor moving towards a distribution model, moving away from full service execution in the last mile, while on the other hand a competitor pursuing single source sector integration, basically saying we already know what you need, we’ll define it.”