Halliburton Company (HAL), Overweight, Target $54.

We hosted Eric Carre—EVP & CFO; David Coleman—Senior Director, Investor Relations; and
Shobhana Mani—Director, Investor Relations at our 2023 Wells Fargo Energy Conference. Below are some key topics discussed.

E-Fleet Conversion Upside. HAL continues to phase out their older diesel fleets in favor of new electric fleets. This offers long-term upside to ROCE, margins and CFFO. From the customers' perspective, E-fleets increase productivity over time with less downtime/more hours per day, greater reliability and efficiency improvements. To shrink the diesel fleet and avoid obsolescence risks, HAL will generally cannibalize its existing diesel fleet. This implies HAL's PP fleet will not expand — and might
even shrink slightly — in coming quarters.

International Service Capacity Remains Tight. Middle East and Latin America offer the highest growth, but Asia is also expanding. Global service capacity remains tight, which should allow for greater pricing power and further revenue/margin improvements. An inflection point on margins seems unlikely, but a steady grind toward margin improvements should continue.

Exploration Upside Limited. Exploration activity is accelerating but remains well below historical ranges. Increases in E&A activity, particularly in the offshore, are important because of their "claims" on service capacity. Operators need (i.e., will pay for) additional capacity and backup capabilities when operating offshore and in exploration mode. This shift in capacity and capabilities to E&A efforts from
development implies higher revenue and margin potential for the service sector.

Natural Gas Outlook. Mgmt expects natural gas markets to remain soft until LNG export build takes in ‘24/’25, a consensus view we share.