Themes from Q2 2023 Earnings Calls

Part 2: Oilfield Service (“OFS”) Companies

Special Topics

In our most recent earnings call blog post, Themes from Q2 2023 Earnings Calls: Part 1 – Upstream, common themes from E&P companies included alternate routes to maintain production levels, expectations of a further reduction in inventories, and declines in drilling and completion activity in the Haynesville Shale from recently depressed natural gas prices. This week, we focus on the key takeaways from OFS operators’ Q2 2023 earnings call.

Healthy Commodity Prices Encourage a Positive Outlook

Despite downward trends in commodity prices through the first two quarters of 2023, prices are still healthy, especially for crude oil. Companies anticipate that prices will remain strong in the future, leading to a prolonged period of growth in spending. This outlook has generated a sense of optimism in the current situation as this cycle is expected to last a long duration.

  • “Commodity prices remain attractive. When I talk to customers they expect to work more, not less, and many of their activity plans extend into the next decade. Customers are settling in for a long duration upcycle. Overall, I expect upstream spending to grow in 2023 and beyond.”
    – Jeff Miller, Chairman, President & CEO, Halliburton Company
  • “We do see, in general, especially if commodity prices remain where they are, that there’s a bit of optimism and maybe some early spending for their ’24 program and getting ahead of the game, especially when it comes to locking in some lower cost operations.”
    – William Zartler, Founder, Chairman & CEO, Solaris Oilfield Infrastructures, Inc.
  • “But I think what’s most important is, when I look into ’24, I mean commodity markets are getting more constructive, oil prices firming up, gas seems to have found its footing you know and expect that ramps. We’re seeing some consolidation with customers and that means that bigger customers do more planning through the cycle. They are committed to executing plans over a longer term and service intensity in North America never lets up.”
    – Jeff Miller, Chairman, President & CEO, Halliburton Company

Importance of Technology Looking Ahead

Similar to a theme discussed in our most recent earnings call blog post relating to alternate routes to maintain production levels, a number of OFS operators looked at technology and its impact on performance now and in the future. Most firms noted that their financial results directly correlate with their ability to continually utilize and implement technology efficiently.

  • “Our results in North America clearly demonstrate the success of our strategy to maximize value. We do this through capital efficiency, differentiated technology, and alignment with high-quality customers…. I also believe that  – as I look out into the future, as I said I see, we talked to extensively about service intensity and technology and I think both of those are going to be very high demand as we get into ’24, and I would say for what we do, it’s a high demand now.”
    – Jeff Miller, Chairman, President & CEO, Halliburton Company.
  • “And the one final thing I would say improving margins is really around technology. We’ve been very committed to automation and implementing technology to provide a safer, more certain, and more cost-effective solution for our customers.”
    – John Schmitz, Founder, Chairman, President & CEO, Select Water Solutions, Inc.
  • “Our customers value technologies that are safer, automated and help lower costs, and that is what we are focused on providing. Therefore, we expect to continue our new technology deployments, which will help us continue to improve our earnings power and cash generation, and we look forward to sharing our progress with you over the coming quarters.”
    – Kyle Ramachandran, CFO & President, Solaris Oilfield Infrastructures, Inc.

Mercer Capital has its finger on the pulse of the oilfield service space. As the oil and gas industry evolves through these pivotal times, we take a holistic perspective to bring you thoughtful analysis and commentary regarding the full hydrocarbon stream, including the ancillary service companies that help start and keep the stream flowing. For more targeted energy sector analysis to meet your valuation needs, please contact the Mercer Capital Oil & Gas Team for further assistance.