Despite global financial uncertainties, Halliburton sees upstream oilfield spending growth in 2023

Global financial markets may appear cloudy, but big oilfield services provider Halliburton sees upstream customer spending up by low double-digits in 2023 not only in higher-growth international markets but also in more moderated North America, the company's top executive said April 25.

International spending should grow in the "high teens" in 2023, with most new activity coming from the Middle East, Asia and Latin America, Halliburton CEO Jeff Miller said in webcast remarks during a first-quarter earnings conference call. He said North America, which led the current oil and gas industry upturn, should see "at least" 15% more spending this year,

"Everything I see today validates the strength and duration of this multiyear upcycle," Miller said. "The commodity price volatility in the first quarter does not change our view of customer demand and a tight services market.

"We expect [customer] spending to grow in 2023 and beyond and ... expect much of this investment ... in development activity."

Moreover, offshore markets around the world are virtually racing ahead, as the activity pace in those spheres rises, Miller said.

"We generated nearly 45% of our international revenues in the first quarter from our offshore business," he said, and the company projects further growth in that arena.

"I think that what's clear ... is not only higher service intensity, but [offshore] also requires more equipment to do offshore work. So it has a bit of a double effect in terms of growing revenues and margins, but also consumes backup tools and additional shifts of people. As offshore grows, that has a tightening effect really on everything."

Miller's comments on offshore markets, and upturning activity generally, echoed those of Olivier Le Peuch, CEO of large global oilfield services provider SLB, who said in his own company's Q1 conference call April 21 that offshore activity continues to "surprise to the upside" with further expansions and diverse opportunities across all major basins.

Around the world, Miller said Halliburton's discussions with customers have focused "more around availability than anything else, whether it's services we provide, capital, or more importantly, availability of tools and people."

'Deep planning'

Halliburton is doing "deep planning" today for 2024 activity that is expected to ramp up, he said. "There's enough concern around availability in '24 that significant resources are committed now to solving for that."

Internationally, Miller said he has a "lot of confidence" in that runway based on Halliburton's "strong pipeline" of contract awards that start in 2023 and beyond.

Specifically, the Middle East appears to be "still ... in the early innings of activity," he added. "I see this continuing. Rig counts aren't necessarily at near peak. And I [see] a lot of opportunity to continue to run."

Asia is picking up, especially in development activity, while Latin American growth is especially strong in Brazil. Oil and gas are an important part of Latin American economies. and there's a "lot of motivation to ... deliver more [volumes], partly for economic reasons and for tax revenues," Miller said

"I'm really encouraged by what we see," he said.

In North America, where the volume of services and equipment required is especially large given the quantity of wells that must be drilled to maintain production in the unconventional plays.

"I believe our customers will execute their activity plans and the market for highly efficient equipment and quality services will remain tight," Miller said.

In particular, hydraulic fracturing fleets are being driven harder and thus see more wear and tear than before. Many fracking fleets -- which complete and prepare wells for production -- "need to be retired," he said, adding: "There's still inherent inflation in the frac business today."

Service prices on average still rising

Still, service "prices aren't moving down" in North America, he said, and on average, continue moving up. "High-quality services are very much in demand and hard to deliver."

This may be reflected in US production growth which was a bit over 5% in 2022, but 2023 outlook predict about 3% production growth, Miller said.

"Producing oil doesn't get easier, meaning it demands more of our services and higher-quality services," he said. "I think a combination of activity and and price is what delivers the north of 15%" target for spending growth.

In North America, drilled wells are a function of DUC counts -- drilled but uncompleted wells that aren't yet ready to be produced, Miller said.

"So as the DUCs get drawn down, more wells have to be drilled, [which could prompt] fluctuation in drilling," he said. "It's interesting that you see [that] fluctuation ... but a very steady march in terms of fracking. I think some of that is managing cost at the margin, but the fact is operators don't produce more without fracking wells."

In addition, current North American gas price softness will be resolved as an estimated 6 Bcf/d of additional LNG export capacity starts up in the next 24 months, he added. Halliburton has resolved some of the short-term market softness by moving three pressure pumping fleets from gas basins to oil basins. Also, the company retired a diesel fleet which will reduce near-term maintenance costs and accelerate its move to electric fleets.

"These actions reduced our gas market exposure by about 30% and maintain financial returns," Miller said.