So this is an important component. They drive margins. And I think our customers understand the level of investment required in order to deliver service quality, performance and technology. So we’ve seen what this market looks like when we burn up equipment at very low returns that don’t allow for that reinvestment, probably we’ve seen that, that’s not a good outcome certainly not for service companies, but it’s also not a good outcome for operators. So I think that’s what gives me confidence in sort of the stability of this. And to that point, we’re mostly I’d say, mostly contracted for 2024.
Operator: And it comes from the line of Roger Read with Wells Fargo Securities. Please proceed.
Roger Read: Yes. Good morning. Probably just to follow up on a couple of the questions already been asked, maybe slightly differently. As you think about the outlook here for the fourth quarter and maybe in the first half of ’24, I was just curious where you feel like you’re being properly cautious, maybe slightly overly cautious and where you think things actually need to come through to sort of hit the numbers, right? I’m just sort of looking for some guidelines maybe of what to pay attention to as the quarter unfolds.
Jeff Miller: Look, I think the guidance we’ve given you is fairly clear, and we’ve got a lot of confidence in the way we looked at the market. And as I described, seasonality in North America, it’s something we’ve certainly seen before and we know what that looks like. I expect our international business continues to do, continues to grow, and we’ve already sort of laid out what we expect this year to look like. So I feel confident in our outlook. And then, as we go into the first half of next year, I think that we’re going to clearly see North America up from here. Maybe that’s the color that wasn’t clear when I answered the last question. But in terms of sort of where the commodity price is and also not as dependent on that, but really what we’re seeing in terms of customers’ plans.
And also, just the decline rates in North America. So the reality is you have to do more work in order to stay flat. And so I suspect that we’ll see some of that as well. As the rest of next year plays out, it’s too early to call that. We don’t have budget numbers from customers but the customers operating in North America today are the kinds of folks that execute their plans and so those plans will be executed. I hope that’s helpful.
Roger Read: Yes, it is. My follow-up question is a little bit different tack. But it gets back to some of your opening comments about adjusting your cost structure and less fixed, more variable, we’ve typically thought of the way to measure performance with service companies in Halliburton, off the incremental margins. But if the fixed costs are becoming more variable, then maybe we don’t see quite the same change in the incremental margin, but we’d still pay attention to the absolute margin. So maybe just as a way to ask about where you think the absolute margin can go relative to what we’ve seen over the last several quarters, any expectations there. I mean, is it — these margins with revenue growth or margin expansion from here?
Jeff Miller: Well, look, I tend to always think more about margin expansion just because it’s sort of core to how we’re operating the business. But I think that the cost reductions have been super important. And I think a lot of what we’ve seen has been off the back of that but that’s critical to how we run the business. And as I’ve said, maximizing value in North America is our fundamental strategy, and that will translate into strong incrementals, which we’ve seen. And I don’t expect those have gone away, but that’s partly because of the type of equipment we’re putting in the market as much as anything. And so as we continue to pivot from diesel to electric, I would expect to see over time as those go into the marketplace, stronger incrementals.
I would also say the same about what we’re doing sort of quietly but equally important with drilling tools in North America. So we have been able to put together much better capital efficiency around our drilling business, and it’s gaining traction. So those are the kind of things that drive incrementals even off of a fairly low fixed cost base.
Operator: And it comes from the line of Scott Gruber with Citigroup. Please proceed.
Scott Gruber: Yes. Good morning. Jeff, the trends in the U.S. certainly seem positive for Halliburton. So my question is, if we experience just a half recovery in market activities, so let’s just say we get back about 50% of the rigs that we lost in the U.S. In that scenario, can Halliburton get back close to operating your peak frac fleet count from earlier this year. Can you get back close to peak numbers in that scenario?
Jeff Miller: Yes. Thanks. So I mean, look, we’ve got a really good position in North America. And I think as we look at ’24, a couple of things, even beyond activity is, I view we have asymmetric sort of opportunity in North America. So I’ve said, I expect activity to be up, not down as we go into ’24, just given where we are and as you described it. But the opportunity is around demand we see for [indiscernible]. So that’s an opportunity that is largely unique to us in terms of the way we’re approaching that. And certainly, our drilling business is equally an asymmetric opportunity for Halliburton just given the fundamental change in technology and the ability to put that to work in North America. And I think that will benefit on its own just from the technology, but equally so, maybe from any growth in rig count will only accelerate the uptake on that technology.
Scott Gruber: Got it. And another unique opportunity for Halliburton has been on the production side of the business, particularly outside of the U.S. as you take in the [indiscernible] business internationally and build the chemical facility in the Middle East. Can you just update us on the outlook for continued share gains within production outside of the U.S. in 2024?
Jeff Miller: Yes, thanks. The lift business continues to grow. I mean, this is a fantastic technology. And the reason it’s leading in North America is because of its execution and its technology. And those are the same reasons that we’re seeing the growth internationally. And so also an initial really solid contract in Kuwait that has continued to expand in the Middle East with trials and opportunities and actually getting meaningful traction. Similarly, in Latin America, where we had quite a bit of success in a variety of countries, including Ecuador and others. And look, lift is becoming — our ESPs are becoming more resilient, the technology continues to improve. The summit team is at the leading edge of that. And so look, very high expectations for where they go and expect that, that is, again, another unique international growth opportunity for Halliburton, very resilient in the North America sort of independence of activity rig count activity.
And then, the chemical business is it continues to get traction. We’re on pace, we’re on plan, I would say, with the plant in the Middle East. So it’s doing what we had expected it to do. And so pleased with where we are.
