Halliburton Aktie

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the First Quarter 2026 Halliburton Company Earnings Conference Call. [Operator Instructions]. As a reminder, this conference call is being recorded. At this time, I would like to turn the conference over to Mr. David Coleman, Senior Director of Investor Relations. Sir, please begin.

Hello, and thank you for joining the Halliburton first quarter 2026 conference call. We will make the recording of today's webcast available for 7 days on Halliburton's website after this call. Joining me today are Jeff Miller, Chairman, President and CEO; Shannon Slocum, Executive Vice President and COO, and Eric Carre, Executive Vice President and CFO.

Some of today's comments may include forward-looking statements that reflect Halliburton's views about future events. These matters involve risks and uncertainties that could cause our actual results to materially differ from our forward-looking statements. These risks are discussed in Halliburton's Form 10-K for the year ended December 31, 2025, current reports on Form 8-K and other Securities and Exchange Commission filings. We undertake no obligation to revise or update publicly any forward-looking statements for any reason, except as required by law.

Our comments today also include non-GAAP financial measures. Additional details and reconciliation to the most directly comparable GAAP financial measures are included in our first quarter earnings release and in the quarterly results and presentation section of our website.

Now I'll turn the call over to Jeff.

Thank you, David, and good morning, everyone. Before I get into my thoughts on the current market and Halliburton's outlook, let me begin with a few highlights from the first quarter. We delivered total company revenue of $5.4 billion and operating margin of 13%. International revenue was $3.3 billion, an increase of 3% year-over-year. North America revenue was $2.1 billion, a decrease of 4% year-over-year. During the first quarter, we generated $273 million of cash flow from operations $123 million of free cash flow and repurchased $100 million of our common stock.

Now let's turn to our market outlook. To begin, I believe the situation in the Middle East will have meaningful and long-lasting implications for the global energy sector. Here's what I expect. First, energy security is no longer simply, a talking point. It demands action by every nation to ensure a reliable supply of oil and gas. I expect we will see increased investment in localized oil and gas developments and urgency to diversify sources of oil and gas for those countries without their own resources. Second, recovery of oil and gas production and inventories will not be a quick or simple process. Cumulative production deficits are in the several hundreds of millions of barrels and trending towards 1 billion. This represents several years of meaningful incremental demand to replace strategic reserves on top of what I believe will be continued structural demand growth.

Big picture, this means the world is fundamentally tighter oil and gas than it was 60 days ago. In my view, that supports a durably stronger commodity environment and a far more constructive backdrop for upstream investment in oilfield services activity. I believe Halliburton will thrive in this market. We are active in all the major markets that matter with the right service lines, strategy and technology. In addition, we are the services leader in North America, which in my 30 years of experience has always been the first market to respond to price signals.

With that, I'll turn the call over to Shannon.

Thanks, Jeff. Before I get into our operational results, I want to recognize our employees around the world, but especially in the Middle East. They're executing under challenging circumstances. They are staying focused on our customers and are keeping each other safe. Their fortitude and resilience represents the best of Halliburton, I want to personally thank them.

Now let's turn to our International business, where our first quarter revenue was $3.3 billion. I'll start with the Middle East, where we have remained closely engaged with our clients through disruptions. Activity has been most impacted in the region's offshore markets in Qatar, UAE, Saudi Arabia and the land markets in Iraq and Kuwait. Halliburton continues to support our customers in these areas with service capability they require to navigate current conditions and resume activity, as markets recover.

In the broader region, the closure of the Strait has resulted in Halliburton's use of alternative supply chain routes, which has increased logistics cost. We have also seen price increases in purchase materials and supplies related to the conflict. In my view, these are manageable disruptions as we work closely with our customers to mitigate these additional costs within the terms of our contracts and agreements. Outside Middle East, we saw better-than-expected results during the quarter, and we expect year-over-year revenue growth in the mid- to high single digits for the full year, led by Latin America. I recently returned from the region, I came away even more confident in our outlook. Activity is strong. Customer engagement is high and our growth engines are performing in several important markets.

In un-conventional, YPF recently awarded Halliburton, a multibillion-dollar award for Integrated Completion Services in Argentina. This award expands our position in Argentina and represents an important milestone for Halliburton. Under this contract, we will deploy our full completions portfolio, including ZEUS electric fracturing services for the first time outside of North America. The word also includes Octiv Auto Frac, which brings electrification, automation and digital workflows to unconventional fracturing in Argentina.

In drilling, we continue to build momentum with our automated offerings. We recently closed our acquisition of Sekal, a global leader in rig automation. With this acquisition, our portfolio now combines Halliburton LOGIX drilling automation, with Sekal's DrillTronics platform and services. This means Halliburton has the technology in-house to fully close the loop for automated geo-steering. This includes the bottom hole assembly, the hydraulics and now the rig itself. We worked with Sekal for several years and recently delivered this technology in offshore Guyana. Our closed-loop automation technologies delivered better-than-expected drilling times and most importantly, better reservoir contact. I am confident in the power of these technologies, working together to maximize asset value for our customers.

As our drilling technology continues to advance, so does my confidence in our offshore business. Our drilling capability and collaborative model were key drivers of a recent win in Suriname's with Petronas, who selected Halliburton and Valaris for a strategic collaboration agreement to support the development of its offshore assets. The agreement brings the teams together early in the development cycle and reflects exactly the kind of close alignment that creates value for customers and for Halliburton, more broadly nI'm increasingly confident in our offshore outlook. Across markets, customers are choosing Halliburton for offshore projects because of our technology, our execution and our ability to collaborate earlier and more effectively throughout the well life cycle.

We see that in Guyana. We see it in Suriname, and we see it increasingly other offshore markets around the world. To conclude on international, I am confident in our business outlook based upon the strength of our growth engines, the value of our collaborative model and the differentiation of our technology. While the Middle East remains the key near-term variable, we see real momentum across the rest of our international portfolio, and I believe Halliburton will continue to win and deliver profitable growth.

Turning now to North America, where Halliburton delivered first quarter revenue of $2.1 billion. Early in the quarter, winter weather delayed services activity in the Permian and Northeast but those impacts were more than offset by stronger-than-anticipated activity for the remainder of the quarter. In a recovery in North America, there are several signposts I expect to see. Today, we are already seeing a couple of important ones. First, the frac calendar white space in the first half of the year is now gone. As we entered this year, there was a risk that completion work might slip to the right and the gaps in the calendar could widen. That is no longer a concern. Second, we have seen an uptick in inbound costs for spot work. While these calls are not for committed crews, they do suggest incremental demand is building in spot markets with smaller operators. This is the leading edge of capacity tightening.

While we are in the early innings in my view the setup for North America is constructive. Premium equipment is already tightening. The commodity price is supportive and we see signs of incremental demand. As we look to the rest of the cycle, our strategy to maximize value in North America will not change. Here's how we'll approach this market. First, we're going to focus on returns, not market share, which means our priority is to improve the returns of our existing fleets before we add capacity. Clearly, restoring price to acceptable levels is a key component of this. And second, we'll deploy differentiated technology at scale that solves for customers' greatest opportunities, improving recovery with ZEUS IQ and drilling efficiency with iCruise.

In summary, I am excited about North America. We see a recovery in progress. As activity grows, we believe customers will place high value on technology, efficiency and execution, which plays to Halliburton's strengths. With that, I will turn the call over to Eric to provide more details on our financial results. Eric?

Thank you, Shannon, and good morning. Our Q1 reported net income per diluted share was $0.55. Total company revenue for Q1 2026 was $5.4 billion, flat when compared to Q1 2025. Operating income was $679 million and operating margin was 13%. Our Q1 cash flow from operations was $273 million, and free cash flow was $123 million. During Q1, we repurchased $100 million of our common stock.

Now turning to the segment results. In Q1, both of our divisions were impacted by the conflict in the Middle East, which resulted in an impact of approximately $0.02 to $0.03 per share. Beginning with our Completion and Production division, revenue in Q1 was $3 billion, a decrease of 3% when compared to Q1 2025. Operating income was $439 million a decrease of 17% when compared to Q1 2025 and operating income margin was 15%. These results were primarily driven by lower stimulation activity in North America and lower completion tool sales and decreased pressure pumping services in the Middle East. Partially offsetting these decreases were higher completion tool sales in the Western Hemisphere and improved pressure pumping services in Africa.

In our Drilling and Evaluation division, revenue in Q1 was $2.4 billion, an increase of 4% when compared to Q1 2025. Operating income was $351 million, flat when compared to Q1 2025, and operating income margin was 15%. These results were primarily driven by higher project management activity in Latin America and increased drilling-related services in Europe and in the Western Hemisphere. Partially offsetting these increases were lower activity across multiple product service lines in the Middle East, lower [ wireline ] activity in the Eastern Hemisphere and decreased fluid services in the Gulf of America.

Now let's move on to geographic results. Our Q1 International revenue increased 3% when compared to Q1 2025. Europe Africa revenue in Q1 was $858 million, an increase of 11% year-over-year. This increase was primarily driven by increased drilling-related services and higher completion tool sales in Norway and improved pressure pumping services in Angola. Middle East Asia revenue in Q1 was $1.3 billion, a decrease of 13% year-over-year. This decrease was primarily driven by conflict-related disruptions that resulted in lower activity across multiple product lines. Latin America revenue in Q1 was $1.1 billion, a 22% increase year-over-year. This increase was primarily driven by higher activity across multiple product service lines in Ecuador, the Caribbean and Brazil and improved stimulation activity in Mexico and Argentina.

In North America, Q1 revenue was $2.1 billion, a 4% decrease year-over-year. This decline was primarily driven by lower stimulation activity and decrease artificial lift activity in U.S. Land and lower stimulation activity and decreased fluid services in the Gulf of America.

Moving on to Other items. In Q1, our corporate and other expense was $69 million. We expect our Q2 corporate expenses to increase about $5 million. In Q1, we spent $42 million on SAP S/4 migration, which is included in our results. For Q2, we expect SAP expenses to be about $45 million. Net interest expense for the quarter was $82 million, lower than expected due to favorable interest income. For Q2, we expect net interest expense to increase about $5 million. Other net expense in Q1 was $28 million. We expect Q2 expense to be about $35 million. Our effective tax rate for Q1 was 18.5%. Based on our anticipated geographic earnings mix, we expect our Q2 and full year effective tax rate to be approximately 20%. Capital expenditure for Q1 were $192 million. For the full year 2026, we expect capital expenditures to be about $1.1 billion.

Now let me provide you with comments on our expectations for Q2 2026. In the Middle East, the timing and path of a recovery to pre-conflict activity levels is unclear. In addition to lost revenue, we also expect higher costs related to supply chain logistics and fuel. We estimate the impact in the second quarter will be approximately $0.07 to $0.09 per share which is embedded in our divisional guidance. In our Completion and Production division, we anticipate sequential revenue to increase 4% to 6% and margins to improve 50 to 100 basis points. In our Drilling and Evaluation division, we expect seasonal software sales to roll off in the second quarter. As a result, we expect sequential revenue to be flat to down 2% and margins to decline 75 to 125 basis points.

I will now turn the call back to Jeff.

Thanks, Eric. Here's what you should remember from today's call. The macro environment has changed in the last 60 days. I believe Halliburton will thrive in the market that we see. In North America, we already see the early signs of recovery. Outside of the Middle East, we expect our International business to grow. Our growth engines delivered significant milestones during the quarter and our collaborative value proposition is winning in the offshore market. Let's open it up for questions.

[Operator Instructions] Our first question or comment comes from the line of David Anderson from Barclays.

Obviously, the Iran conflict isn't resolved, so it's really hard to guide for the next several quarters. But I think everybody is just trying to figure out what the other side of this looks like. I realize it's early, but the global supply now a priority, kind of how does this shape your views over the next few years? And how has that really changed over the last 60 days?

Look, I think the most important change is that the supply overhang is no longer a concern. That's swept away. And demand -- structural demand remains intact. And so I think that combination sort of moves the rebalancing up closer, that's sort of done. And when I look out, I think equally important is the the view that energy security is no longer a talking point. I mean, I said that. But I mean that's going to drive activity. And so I think that change is not temporal, but that's a few years, a solid few years. So that's what's changed in the last 60 days, in my view.

And then you touched on North America. North America is kind of always the first one to see a reaction. It sounds like you're saying kind of early innings here. Shannon, you were trying to talk about some of this white space shrinking. Are you starting to see E&P customers showing signs of picking up activity? How much -- as everybody's kind of waiting on the back part of the curve to lift up, just kind of a little bit more color on kind of what you're seeing on the ground on U.S. onshore?

Yes. Thanks, Dave. The short answer is yes. We've seen a couple of really good signposts. As I said, white space for Q2 is all but gone. We've seen a lot of pull forwards. We see inbounds. We're also seeing H2 firming up as well. I think the next flip of the coin would be rig adds and some longer-term discussions on frac activity. And I think as far as investments of the smaller and the bigger operators, the bigger operators tend to invest throughout the cycle. The smaller or medium subs usually move a little quicker.

But hey, I think they are looking at the front end of the curve -- at the back in the curve, but they're also looking at the front of the curve as well. We like this market. We believe being the only fully integrated service company in North America is a fantastic position for us, along with our E-fleets, ZEUS IQ and also really the demand for iCruise as well in this market. So the short answer is yes, early innings, but we like where we are.

Our next question or comment comes from the line of Arun Jayaram from JPMorgan.

Shannon, maybe I could start with you. I was wondering if you could walk us around your core international and offshore markets outside of the Middle East and perhaps elaborate on the strength in LatAm and Europe, Africa. I believe you mentioned that outside of the Middle East, you expect International revenues to grow mid-single to high single digits. I'm just wondering how that compares to your thought process maybe before the conflict?

Yes. Thanks, Arun. Yes, a lot to be excited about a lot of bright spots, Latin America leading the way. Really excited about the work we're doing the Caribbean, in particular, Guyana and Suriname, working in a very collaborative way. But Argentina is really exciting. We just announced a multiyear, multibillion first-ever deployment of [indiscernible] frac spreads in Argentina with YPF. That's going to be a really great business for us moving forward. The deepwater work as well in Brazil. But hey, if you move east outside of Middle East, the Norway market is one that we've had a real strong position in. We're very collaborative with a number of customers. We're starting to see rig adds coming towards the back half of this year, early next year.

And with regard to West Africa, we're seeing some light in the tunnel, real sizable programs both in Namibia. Nigeria, we have excisable footprint in both of those places and two countries we like our contracts in. And I would just put Asia Pac just as a really resilient market for us, throughout the cycle. It's stayed busy. We expect that to continue. And yes, we expect the full year mid- to high single digits outside of Middle East. We think certainly a lot of unknowns in the Middle East, but still feel pretty good about where we are with that guide.

Great. And my follow-up is in North America, we have a bit of an unusual dynamic where we have relatively modest natural gas prices, including kind of in markets like the West Texas, which are significantly below diesel prices. One of the things about Halliburton's frac fleet is you have a lot of exposure to natural gas, kind of burning equipment E-Fleets that use natural gas as an input. But I was wondering if you could talk about opportunities to arbitrage this delta to the benefit of how shareholders in terms of arbitraging that delta in terms of pricing power?

Well, look, I think that, that just reinforces the value in our e-Fleets. And yes, clearly, an opportunity -- and look, we work that all over the time in terms of pricing and where is that going. But yes, I would describe that as an opportunity. It's certainly a benefit for operators that are consuming natural gas. And I think just to add to that, in terms of the E-fleets that we have, the ZEUS platform is proving itself such a unique solution, particularly with respect to ZEUS IQ and the ability to move on recovery that while the ability to be more economic with the gas consumption due to the arbitrage, I think the real power in the ZEUS IQ and the ZEUS platform has been what it's able to do subsurface.

Our next question or comment comes from the line of Saurabh Pant from Bank of America.

Hi Good morning Jeff, Eric, and welcome, Shannon to the call. Jeff, obviously, you had your comment on North America in the press release, you gave us a lot of good color in your prepared remarks. But I recall last quarter, we were talking about this, and you were talking how the supply side of the equation, again, this is mostly a frac comment, right, is a lot tighter than people think, and it would take just a little bit of demand coming back for pricing power to come back. How are you thinking about that right now, Jeff, Shannon, maybe you want to pitch in, right? How do we move through the remainder of '26 based on -- based on what we know right now, right, on the demand side and then the pricing power side of things?

Yes. This is Shannon here. Yes, we're seeing some, as I mentioned earlier, some really good signposts. What that is doing is driving some real constructive conversations with our operators. There's a handful of fleets that can go to work. And the way we think about it is, first is we have to address the pricing of our existing fleets, those conversations are having -- I think the next flip of the coin, longer-term programs, more rigs being added, that creates another level of constructive conversations for us.

But first things first for us is focus on the fleets we have now. And it doesn't take much attrition for things to get tight and early innings, but starting to see signs of that.

Yes. I think just to follow that up, what in my view is even clearer than it was as sort of the availability of equipment in the market, and that's what those early signposts are calling out is the fact that equipment is tighter, and we're getting calls. And I think we're within a handful of fleets of sort of premium fleet, dual fuel type fleets are being absolutely sold out as an industry.

No, that's helpful color, Shannon and Jeff. I think it's very positive for the industry and for Halliburton in particular. My second question, Jeff, Shannon is on the International side of things. Obviously, like you said in the beginning, there's going to be almost a billion barrels of lost production from what's happening in the Middle East. That's bound to have profound impact. If we just focus on the international side of things, which markets, which kind of customers, operators do you think would be the first to change their behavior which regions should we expect to benefit first? I know you talked about Latin America, which has been really strong for you. And then just how would Halliburton seek to benefit from that? I know your collaborative approach has been really helpful in outperforming the market.

Yes. I just finished a bit of a tour around all the international location regions. Conversations that I'm having with customers and energies and ministers are the dependency of being down to a Strait is in their mind. Anybody that's a net import of oil is thinking about bringing forward programs and reevaluating their capital budgets. I think that's one.

I also think our growth engine is really excited about where we're heading with growth engines and how we can apply that to what would be a hopefully improved drilling program in some of these locations. But Asia Pac, all of those West Africa, all those areas are really markets that we see potentially picking up with what's going on in the Strait.

And I guess last to add is you're right, the collaborative model that we work under has been big for us, a lot of the areas that I mentioned earlier, we were very collaborative. We were invited in earlier, and I think that's been a big supporter of us in winning the work we have in a number of those markets.

Our next question or comment comes from the line of Steve Richardson from Evercore.

I appreciate the guidance on 2Q in terms of the EPS impact of the conflict and how it's embedded in your guidance. Could you just talk a little bit about how you thought about -- we think about the $0.02 to $0.03 that you experienced really just in the month of March, how does that roll over? What have you -- like it's a tough situation to game. So how have you kind of thought about escalation or de-escalation and the timing at which that $0.07 to $0.09 will kind of be derisked?

Yes, Steve, it's Eric. I'll take that one. So let me tell you what we saw in Q1 and what we have built in our guidance for Q2. So as you mentioned, Q1, $0.02 to $0.03, Q2 $0.07 to $0.09, again, built into the guidance that we gave. There are two major buckets of impact to our business. One is lost revenue. The second one is inflated costs primarily through logistics, fuel costs, et cetera. So the assumptions we made for the Middle East for the second quarter is a bit of our best guess it is to assume that the level of disruptions are similar to what we had when we exited Q1. We're also building a restart of some of the offshore work kind of halfway through the quarter. So that kind of is the -- what drives our $0.07 to $0.09 commentary. Now I would say as well that if the restart that we are assuming around some of the offshore operations are delayed. This could mean another impact to our business of, say, $0.03 to $0.05 potentially.

Very helpful. So if we could follow up just quickly on the Argentina contract and YPF. I mean, clearly, the situation there has changed a lot on the ground from a regulatory and aboveground situation. Can you talk to -- there's clearly other operators in the basin and also still a lot of interest in other geographies such as Australia in terms of unconventional. Can you talk about how much you view this contract as somewhat of a template or a good baseline for how Halliburton will approach some of these other unconventional jurisdictions?

Yes. Thanks. Look, this is a huge opportunity for Halliburton in Argentina, but I do believe it speaks to the maturity of that market in terms of growth. It's not mature by any means, but it's in terms of a growth trajectory, it's demonstrating what was really required for meaningful growth. By that, I mean multiple fleets over multiple years. They're building out infrastructure there in order to make frac more efficient. I mean it's going to be very competitive from a cost standpoint with the rest of the world.

In addition to that, that's attracting new investors into that market, which I think are good both for the market itself in terms of developing the resource, but also speaks to what I think in view as how important Vaca Muerta is to Argentina, broadly, economically. And so all of that very positive for Argentina. And your point about this being a template is spot on because when we look around the world, we look obviously Australia, but Algeria, Kuwait, UAE, Saudi Qatar, all of these places are in different places along sort of a continuum, but all working towards some form of stability and then growth and then maturation into what we're describing in Argentina. So fantastic for those countries, but more fantastic for Halliburton in terms of where we are technically clearly one of our growth engines and a place where we have meaningful competitive advantage. And the uptake on the electric fleets and the ZEUS IQ platform in Argentina is a great first step to broadening that capability around the world.

Our next question or comment comes from the line of James West from Melius Research.

Jeff, I wanted to ask a bit about, obviously, the year of what we called 3 months ago, rebalancing is no longer the year rebalancing. It's a much different environment, as you've noted. And you've talked about the NAM recovery and you've announced a number of major contract awards internationally. And so I'm curious about the customer conversations, Jeff and Shannon, that you're having today, is there a sense of urgency building? Is it still a little bit too early? Do they understand -- I mean, do the customers, I'm assuming they do, because the board rooms have to be talking about, the CEOs have to be talking about it and thinking about it. But is the sense of urgency of getting these projects going faster starting to unfold?

Yes. James, this is Shannon here. While it's still early innings, as I said, we had the signpost. But it was encouraging to us to see white space in Q2 just really get taken out in a very short period of time. I think another tail was really -- it wasn't just a short-term blip of trying to take advantage of the current curve right now. We're seeing H2 firming up as well. So I don't know if I used the word urgency, I'd say just really constructive conversations about getting back to work and grabbing the value that's out there that they see, not only now but for the future.

Okay. That's very helpful. And then maybe if you could briefly talk about what you're seeing on the exploration side. It seems to me a lot of the super majors have at least added a few incremental dollars to their exploration budgets. Is that -- am I reading that correctly? Does exploration going through a little bit of -- after a 10-year lull kind of a re-burst cycle?

Look, I think we're seeing a little bit of exploration, but I think exploration, we done some of that in different places. But I think a lot of the muscle is around development, I mean, in terms of producing more barrels. And that gets very much into what we're seeing in Namibia, West Africa actually largely in, let's say, Suriname, for example, we participated in a fair amount of the exploration. But more importantly, we're getting into the heavy lifting of development in the Caribbean broadly, and elsewhere, actually in Brazil. We've been quite successful in Brazil as well. So while some exploration, but I think really what we're seeing ahead of us is a lot more development in a lot of places.

Our next question or comment comes from the line of Neil Mehta from Goldman Sachs.

Yes. Great quarter here, Jeff. I guess the first question I had is just around capital returns. The buyback at $100 million was, I think, a little bit lighter than the run rate we've seen at $250 million a quarter. Was that just a timing thing? Just how are you guys thinking about the share return over the course of the year?

Niel, so overall, there's been no change in our focus on shareholder returns or our overall philosophy on buybacks, so to be very clear. We started the year lowered in our run rate, the run rate we were on in 2025, that is something that we actually mentioned on the Q4 call, and we mentioned that, that was our intent considering the macro situation we were facing at the time and some of the concerns around the speed of activity increase in the Middle East, et cetera. What you can expect from here is you can expect Q2 to be higher than Q1. You can expect H2 to be higher than H1 in terms of overall buyback. So our objective long term remains per share value creation really.

That's very clear. And then the follow-up is just on the technology side. You guys have had a lot of success here with VoltaGrid and your investment there. And of course, you're looking to deploy that over time, bigger in the Middle East. But any of your perspective on the power side of the business and [ bolt-on ] particular in your perspective on driving value from that segment?

Yes. Look, we're -- we really like our position in VoltaGrid, and we like where we are today. And we like what the company is doing. So from a shareholding position in VoltaGrid, very pleased with where we are and what the company is doing. I think separate from that, but along with that, is the international pursuit that we have underway and venture that we have with VoltaGrid. And I'm very excited about that very much on track. And I don't constrain that to the Middle East. In fact, lots of inbounds, lots of back and forth with potential customers in Australia, Japan, Canada, all around the world. And so I don't -- I'm actually very encouraged about that, where we have 400 megawatts sort of in the queue ready to get placed and have a lot of line of sight around how that might happen. So very excited about that, still.

Our next question comes from the line of Sebastian Erskine from Rothschild & Company.

Hopefully, you can hear me. Just a focus on portfolio longevity. That seems to be the theme kind of visual for the IOCs. Investors are rewarding growth. They're focused on reserve replacement ratios. And I guess Venezuela, we've kind of moved on a bit from that. But of course, with the higher commodity price environment, I presume that those barrels look more interesting now for operators. What are you hearing from the customers? And what's the latest on the [ revolization ] there?

Yes. Thanks. Look, making progress in Venezuela. I spent some time there. We're having great discussions with customers. We're talking about commercial terms. We've been and visited our bases or our facilities there. Those are in better shape than I expected. Lots of inbounds -- and yes, clearly, that is an opportunity. It's -- there's work to do with that question. I think some of that work comes faster than others. But really, really pleased to be back in -- have Venezuela back in business and the opportunity to work on really productive things. So share your view.

Really appreciate that. And just a question back on the U.S. Land environment. So obviously, we talked a lot the frac market and kind of the tightness there. Of course, it really requires a little bit to see a step-up in pricing. What might that mean for your incremental margins in the C&P business. I'm thinking about kind of 2027, if we presume there's a little bit of a slow start given a lot of CapEx budgets already set in the U.S., what might that mean for your incremental margins in C&P going forward?

Well, I think it'd be solidly up from here. Look, and again, it's an efficient business. We're running at the top of the market today in spite of where the market is and it doesn't take much at all in order for incrementals to be strong in North America. But it's the tightness that matters the most. And I think that as we've described before, the frac market sizes to what's in the market pretty quickly just because the absence of maintenance and other things as equipment runs down fairly quickly and sizes to what's in the market today.

One of the reasons why we're so disciplined about stacking or setting equipment aside so that we force that level of discipline and efficiency on our operations all of the time. But with that said, I -- it's right there. It's very close to being, I would say, at a sold-out point for equipment that is effective and operating and maintained and all of those things.

Next question or comment comes from the line of Scott Gruber from Citigroup.

Yes. I want to come back to the shale developments abroad, which we're picking up even before the Middle East conflict, as you mentioned, now that those could accelerate. Do you see the international share opportunities outside of Argentina utilizing more ZEUS fleets given the efficiency advantage? Or do most of those plays just simply because they're less mature than Argentina, if they don't have the supply chains required for ZEUS, do they end up pulling more the legacy deal fleets from the U.S.? Just some color on how you see the equipment demand evolving internationally?

Well, ZEUS [indiscernible] unique solution and because of that, it's time to go to work in Argentina. There's scale, there's runway of work to do and absolute focus on improving recovery. And that combination is what makes it so valuable in Argentina, for example. I would argue as others are at different places on maturity, they're not at a place where they take advantage of ZEUS. And so you described it in economic terms, but I'm going to describe it more in technology terms because I think that's where it creates the most value. And quite frankly, the reason that commands a premium is because of its ability to measure where the sand is going, move the sand around and create a closed-loop fracturing environment. That's very different than simply the arbitrage on gas to oil.

And I would say the markets that are in the earlier stages, let's call it, exploration phase for lack of a better word, really don't demand that level of capacity. And so for that reason, we've taken the exact same approach to ZEUS internationally than we did in the U.S., which is, we deploy those to contracts that have the duration to return the cost of capital and the capital during the term of the first contract. And so we view that the same around world, and we just don't see those conditions in a lot of other markets. Doesn't mean we don't get to that. In fact, I feel certain we will get to that, but that may not be today.

Got you. And the YPF contract sounds meaningful to your business in country. Can you dimension that at all for us? Just how much bigger it will grow your business in the country, the timing of that growth and just given the integrated nature and the efficiency gains that you're going to deliver, how do you think about the margin profile in the contract relative to your C&P segment average of around 15%.

Yes. Huge win for Halliburton there. We had a good footprint before the award. We have even a better footprint now. This is already being rolled out. We got fleets coming in throughout -- coming in literally now and then towards the end of the year into next year. So -- and the way we kind of think about our fleet just generally is it's going to go to the best pace as far as returns and pricing, and so we're moving that equipment out of North America, as we believe we have good pricing there and a sustainable program. So -- and I think it also just demonstrates the importance of our technology and improved recovery. YPF sees that and should be some really some long-term work and really pleased with that win, huge win for us.

Our next question comment comes from the line of Stephen Gengaro from Stifel.

I think two for me and one just going back to the U.S. frac business and pricing potential. Are your customers willing to take diesel, if you had any diesel available? And how much are they thinking about the price arbitrage and which should be, I would think, lead to higher -- obviously, higher prices for gas burning, but how would -- how are customers thinking about that right now?

Look, I think our customers are always looking for the most effective solution they can find. That's certainly the case. But I don't know that, that is what would motivate tightness in the market. So I think that's more of a decision between equipment and less of a decision about add equipment. And so I think the more important point is, if we just look at oil exports today and kind of where the market is in terms of the value, the price of the commodity and the advance of the commodity, I think that's more of the driver than it is arbitrage in terms of pick up a fleet, don't pick up a fleet. I think it's certainly valuable and it makes it more economic and it should create more pricing opportunities or your willingness to pay more. But I don't know that, that's what's driving what we see as tightness, two separate ideas in my view.

Okay. Great. And the other question, we've heard for years now about E&P capital discipline kind of being unwilling to add a lot of rigs and frac fleets back. Are you seeing any shift in that? Like how should we be thinking about this over the next several quarters? And obviously, [indiscernible] said what E&P say, but how are you viewing that especially in what was probably a tighter oil market for the next couple of years.

Look, I said we're in the early innings, and we are in the early innings. And by that, I mean big public companies typically would come later in that cycle. And so -- but the early movers are the smaller companies and -- but that's an important move because that early move by small operators are what take capacity out of the market, and creates tightness. And so timing of big operators, et cetera, is less clear today. However, what is clear is commodity prices structurally higher than what it was and there's going to be more demand growing and fewer barrels in the market. And that's going to create an opportunity for operators of all sizes to make more money. And so I think that tightness that we're seeing created by smaller operators shouldn't be overlooked. And I think the front edge of what we're seeing here a lot of inbounds our smaller operators taking capacity out of the market. And that's a good thing. That's really good for Halliburton.

Our next question comment comes from the line of Marc Bianchi from TD Cowen.

Hello, can you hear me?

Loud and clear.

Okay. Great, guys. I guess the first one is if the Strait were to open tomorrow and it were kind of a green light to get back to normal operations in the Middle East. How quickly could that happen? Maybe walk us through some of the industrial challenges and opportunities that exist there?

Yes. This is Shannon here. It's really -- I'll start with really kind of unclear how quickly that comes back. I'd say that we're ready as far as Halliburton's operational footprint is intact. Most of our business is working today. Our biggest scenarios was in Iraq and Qatar. But we are in constant contact with our customers and they're to support them when they're ready and able to go back to work. But the things that you'll start seeing first moving is probably just turning back on wells. And that would be a well-by-well situation of how they produce and how they flow, I'd say the longer they get shut in the more complex that gets.

So that would be probably the first thing, and I think that puts Halliburton in a fantastic position. We are market leaders when it comes to intervention work in the Middle East, with our HWO and [ coal ] tubing work. So that would probably be first and then you will start seeing customers offshore starting to drill more in the deeper reservoir sections for the most part, the work that is going on offshore is on top holes. But like I said, unclear, but we're ready, and it will just take time to figure that out.

Go ahead, Eric sorry, Jeff, go ahead, please.

No, that's fine. Look, I think that the turning back on just at a high level is not immediate by any means, and there's certainly a gap in the supply chain in terms of oil to market. And so Again, I don't think that's an overnight matter. But I think what's equally important to the turning back on timing of that, again, important. However, the change in perception, I think, is equally important with respect to energy security. And I think it would not take that lightly. I think that is the probably bigger overriding impact on supply and demand and pricing.

Yes. Okay. Great. And then one for Eric on CapEx. So you reiterated the $1.1 billion which would imply an uptick in spending for the balance of the year. Is there a shot that we end up doing better than the $1.1 billion? Or is that just timing? And then just remind us if the VoltaGrid the part of the spend for the $400 million is happening in that guidance?

Yes, Marc. So again, the target right now for CapEx in '26 is $1.1 billion. It was a bit higher than the $1 billion we had initially guided to, that is really not related to the situation in the market is simply that we had some delayed delivery of capital equipment. I think the way to think about it is we intend to stay within a range of 5% to 6% of revenue for CapEx spend. We guided [ '26 ] on the low side of that range. So depending on having shape up, depending on opportunities, we might move slightly within that range. That is not impossible to think about particularly with the macro picture that we see today. So we'll just see how that evolved. And I think the other way is to think the other dimension to think about is the fact that the CapEx has really been overweighted towards the growth engines that we keep discussing. So we're really feeding the areas of growth in our business.

Okay. And that does incorporate your proportional spend of this 400 megawatts, whatever happens in '26...

It does not because we -- yes, we don't see that happening in 2026. So we kind of kept it separate.

Our next question comment comes from the line of Keith MacKey from RBC Capital Markets.

Just curious if you can expand a little bit more on your offshore comments you mentioned a few markets where you're seeing incremental demand. But can you just expand on that a little bit more? And specifically, how the market is shaping up versus what you might have thought 3 months ago or so?

Well, look, we really like our position in offshore. And so I view the offshore business from our perspective of what we're winning and the kind of work we have in the queue. And we've won a lot of work last year, and that's very strong for us. And we continue to be quite successful in the offshore market, led by, I think, a couple of things.

Number one, our value proposition, which is to collaborate in engineered solutions, maximize asset value for our customers has proven to be meeting an unmet market need in terms of how we work and perform with our customers. But I think second and maybe equally important has been the progress we've made with technology, and particularly closed-loop automated geo-steering, I know that's a mouthful, but you'll hear it more and more because truly a significant step forward in terms of reservoir contact. And I think that's a big deal. So feel good about the offshore business. I really like our position, and we do see solid growth, [ '26, '27, '28 ] in the offshore market just from what we're going to be doing.

Got it. I appreciate the color. And just one more on the Middle East. I don't know if investors have a real good sense of what it will actually require to restart production when it is safe and feasible to do so in many places. Can you just walk us through a little bit more about some of the things you think will be required, whether it's workovers and other items like that? And ultimately, how will that translate into service line potential for Halliburton?

Well, look, I think that there's -- the work that we do, we are drilling in the upstream. I think there's clearly some storage and facility work that has happened before us. Then as far as bringing wells back on that might be shut in, again, I think as Shannon described, that's going to span the spectrum of how quickly they come on or don't come on and it would be irresponsible for me to project what I think that might be just because it would be an absolute guess.

I do believe what happens though is the longer things are shut in, typically, the more complex they are to bring back on. But there's a lot of capacity certainly with Halliburton in the Middle East to participate in bringing those wells back on whatever might be required.

Thank you. This concludes the Q&A portion of our call. At this time, I would like to turn the conference back over to Mr. Jeff Miller for any closing comments.

Yes. Thank you, Howard. Before we wrap up today's call, let me close with this. I believe the oil and gas markets are structurally tighter, and I am convinced that Halliburton has the right service lines, strategy and technologies across the key oil and gas basins around the world. I believe this is a market where Halliburton will thrive. I look forward to speaking with you again next quarter. Thank you, Howard, you can close out the call.

Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may now disconnect. Everyone, have a wonderful day.

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Fourth Quarter 2025 Halliburton Company Earnings Conference Call. [Operator Instructions]

As a reminder, this conference call is being recorded. At this time, I would like to turn the conference over to Mr. David Coleman, Senior Vice President of Investor Relations. Sir, please begin.

Hello, and thank you for joining the Halliburton Fourth Quarter 2025 Conference Call. We will make a recording of today's webcast available for 7 days on Halliburton's website after this call. Joining me today are Jeff Miller, Chairman, President and CEO; and Eric Carre, Executive Vice President and CFO.

Some of today's comments may include forward-looking statements that reflect Halliburton's views about future events. These matters involve risks and uncertainties that could cause our actual results to materially differ from our forward-looking statements. These risks are discussed in Halliburton's Form 10-K for the year ended December 31, 2024; Form 10-Q for the quarter ended September 30, 2025; recent current reports on Form 8-K; and other Securities and Exchange Commission filings. We undertake no obligation to revise or update publicly any forward-looking statements for any reason, except as required by law.

Our comments today also include non-GAAP financial measures. Additional details and reconciliation to the most directly comparable GAAP financial measures are included in our fourth quarter earnings release and in the quarterly results and presentation section of our website.

Now I'll turn the call over to Jeff.

Thank you, David, and good morning, everyone. I am pleased with Halliburton's fourth quarter performance and the way we closed out 2025. We outperformed our expectations with stronger-than-anticipated activity and solid execution in both our North America and international Completion and Production businesses. It is clear that Halliburton's strategy and value proposition deliver differentiated results. Here are some of the highlights from 2025.

We delivered total company revenue of $22.2 billion and adjusted operating margin of 14%. International revenue was $13.1 billion, down 2% year-over-year. North America revenue was $9.1 billion, a decrease of 6% year-over-year. During the year, we generated $2.9 billion of cash flow from operations, $1.9 billion of free cash flow and repurchased $1 billion of our common stock.

Finally, we returned 85% of our free cash flow to shareholders, reducing our share count to its lowest levels in 10 years.

These results reflect hard work and dedication by the men and women of Halliburton all around the world. I want to thank each Halliburton employee for your dedication to safety and our value proposition, maximizing value for our customers and delivering returns for our shareholders.

Now let's turn to our macro outlook for 2026. We believe 2026 will be a year of rebalancing. The return of OPEC spare capacity and higher non-OPEC production have created a market with abundant supply. We expect supply increases to moderate this year as demand continues to rise.

Near term, absent geopolitical disruptions, we expect commodity prices are unlikely to rise. We anticipate moderate softness in some key markets, particularly North America. We expect international activity to be stable year-over-year.

Medium term, we believe supply and demand will rebalance. We expect the combination of steeper decline rates, diminishing reservoir quality and limited exploration success to create favorable tailwinds for oilfield services. I expect the next cycle to begin where it always has in North America, followed by a global push to meet the growing demand.

Let me close our macro outlook with this. I am confident in the future of oilfield services and excited about Halliburton's opportunities now and in the years ahead.

Let's turn to our international business. Halliburton delivered another solid quarter, underscoring the strength of our global franchise and the resilience of our strategy. For the full year, international revenue was $13.1 billion, a decrease of 2% year-over-year, outperforming a 7% decline in rig count. While we experienced notable declines during the year in Saudi Arabia and Mexico, the remainder of our international business demonstrated strong growth of about 7%.

Looking ahead to 2026, we expect total international revenue to be flat to up modestly. I am confident in the outlook for our international business. First, our collaborative value proposition is winning. What began as alliances with independents has expanded to include IOCs and NOCs across all of our regions. Today, this collaborative approach consistently drives outperformance for Halliburton and our customers. Deep collaboration is in our DNA, and we believe it is the future of oilfield services. I am confident Halliburton is uniquely positioned to lead and thrive through this collaborative strategy.

Second, our Drilling and Formation Evaluation technology is now a differentiator for Halliburton in all markets. The depth of our drilling portfolio allows us to compete and win in the most technically demanding integrated projects worldwide.

Finally, I believe the market structure is evolving in a way that differentially favors Halliburton. We see consistent international growth in unconventionals, development drilling and intervention, all of which are directly aligned with Halliburton's strengths.

Let's take a closer look at our international growth engines: Unconventionals, drilling, production services and artificial lift, where we have a clear line of sight to outperform the overall market. We continue to make great progress. In unconventionals, Halliburton uniquely brings North America technology to the international market. Today, we operate in 7 countries and see growing adoption of simul-frac and continuous pumping operations along with our Auto Frac and Sensori technology.

In drilling, we completed the first fully autonomous geosteering run for a customer in the Caribbean, where we maximized reservoir contact and delivered outstanding performance for the customer.

Finally, artificial lift delivered record international quarterly revenue and is now active in 15 countries.

Turning to our international power business. Our strategic collaboration with VoltaGrid continues to gain momentum. I am pleased with our progress so far. Customers recognize that Halliburton's global footprint and reputation for execution are a strong complement to VoltaGrid's distributed power platform. The opportunity pipeline is expanding rapidly across the Eastern Hemisphere with several projects already in engineering review.

During the quarter, Halliburton and VoltaGrid secured manufacturing capacity for 400 megawatts of modular power systems. I am convinced, more than ever, that these opportunities will manifest and provide a significant avenue for future growth.

To summarize, Halliburton's international business is strong. Our collaborative value proposition is winning. Our technology is delivering and our growth engines are aligned with the evolution of the market. I am confident that Halliburton will outperform in 2026.

Before we leave international, here are a few of my views on Venezuela. I have always believed that oil and gas is the key to Venezuela's economic recovery. I'm excited about the tremendous opportunity for Halliburton in Venezuela. Halliburton entered Venezuela in 1938 and only exited in 2019 because we are an American company in compliance with U.S. sanctions. Halliburton knows this market well, and we will grow our business there as soon as commercial and legal terms are resolved, including payment certainty. The early steps are already well underway.

Now moving on to North America. Halliburton delivered a strong fourth quarter, supported by less-than-anticipated white space and solid execution. For the full year, revenue was $9.1 billion, down 6% year-over-year. As we look towards 2026, we expect North America revenue to decline high single digits compared to 2025. This outlook reflects the full year impact of reduced customer activity in land operations, our decision to stack uneconomic fleets and the timing of customer programs in the Gulf of America.

Here are 3 observations on North America that shape our view and strategy. First, attrition is accelerating at a time when new capital investment is falling. The equipment is working harder than it ever has due to widespread adoption of continuous pumping and simul-frac. This is why I believe a small increase in demand will tighten the market quickly.

Second, the largest opportunity for the industry is to increase recovery, and I believe that this is only possible with technology adoption. This is why I am so excited about ZEUS IQ.

Third, when the commodity outlook improves, we believe North America will be the first to recover. We have seen this countless times in the past, and the same drivers are in place today. Our strategy in North America is to maximize value. This means that we prioritize returns over market share, and we develop technology that addresses customers' most critical opportunities, improving recovery and drilling longer, faster, more precise wells. Let's look at how we do that.

First, with respect to return, as we have done in the past, we will continue to stack equipment that is uneconomic. Prudent stacking of equipment preserves it for the recovery in North America and becomes an avenue to feed our growing international unconventionals business. With respect to technology, our differentiated ZEUS platform is driving value through automation and subsurface measurement. Only Halliburton's ZEUS platform directly measures and automates the control of sand placement, which I believe are critical building blocks for improving recovery. This quarter, customer adoption of ZEUS IQ, Sensori and Auto Frac increased by 18%, which tells me it is working.

We are also differentiated with our iCruise rotary steerable system and LOGIX automation, which deliver precision and reliability in long laterals. No trend in unconventionals is more clear than the growth of lateral lengths along with complex geometries such as horseshoe wells. We see this trend in every major basin. The impact of iCruise has been dramatic on our North America drilling services business, which grew meaningfully this year despite a 6% decline in rig count. The high performance of iCruise and LOGIX and the secular trend towards rotary steerable drilling in North America give me great confidence in the continued success of our drilling services business.

To summarize North America, our priority is clear. We will maximize value. We have consistently executed this strategy and delivered differentiated results. I am confident this strategy will deliver value for our customers, Halliburton and our shareholders.

Before I turn the call over to Eric, let me close with this. I've never been more excited about the future of Halliburton, and here's why. Oil and gas have a critical and recognized role to play in the energy mix of the future. The shift from idealism to pragmatism is refreshing and consistent with the reality that there will be growing demand for oilfield services for decades to come.

Our value proposition is clear. We collaborate and engineer solutions to maximize asset value for our customers. The proven outperformance of our strategy and the ongoing shift towards collaborative work means Halliburton is squarely where the market is headed.

And finally, our differentiated technology delivers exceptional value for our customers and for Halliburton. I am confident Halliburton will deliver leading returns and capitalize on future growth opportunities.

Finally, I'm also pleased to announce an important leadership update. Shannon Slocum has been promoted to Chief Operating Officer effective January 1. Shannon's COO role will be important to our success as we execute our strategy, and I look forward to him joining us on future earnings calls.

With that, I'll turn the call over to Eric to provide more details on our financial results. Eric?

Thank you, Jeff, and good morning. Our Q4 reported net income per diluted share was $0.70. Adjusted net income per diluted share was $0.69. Total company revenue for Q4 2025 was $5.7 billion, flat when compared to Q3 2025. Adjusted operating income was $829 million and adjusted operating margin was 15%. Our Q4 cash flow from operations was $1.2 billion and free cash flow was $875 million.

During Q4, we repurchased $250 million of our common stock. For the full year, we repurchased approximately 42 million shares at an average price of $23.8 per share.

Now turning to the segment results. Beginning with our Completion and Production division, revenue in Q4 was $3.3 billion, flat when compared to Q3 2025. Operating income was $570 million, an increase of 11% when compared to Q3 2025, and the operating income margin was 17%. Revenue improvements were primarily driven by higher year-end completion tool sales globally and offset by lower stimulation activity in the Western Hemisphere.

Operating income increased due to activity mix improvements from completion tool sales. In our Drilling and Evaluation division, revenue in Q4 was $2.4 billion, flat when compared to Q3 2025. Operating income was $367 million, an increase of 5% sequentially and operating income margin was 15%. Revenue improvements driven by higher wireline activity in the Eastern Hemisphere and increased year-end software sales were offset by lower fluid services in North America. Operating income increased due to better activity mix from our wireline business in the Eastern Hemisphere and the year-end software sales.

Now let's move on to geographic results. Our Q4 international revenue increased 7% when compared to Q3 2025. Europe/Africa revenue in Q4 was $928 million, an increase of 12% sequentially. This increase was primarily driven by higher completion tool sales in the North Sea and improved activity across multiple product service lines in Africa.

Middle East/Asia revenue in Q4 was $1.5 billion, an increase of 3% sequentially. This improvement was primarily driven by increased well intervention services and higher stimulation activity in the Middle East and improved activity across multiple product service lines in Asia.

Latin America revenue in Q4 was $1.1 billion, a 7% increase sequentially. This increase was primarily driven by higher completion tool sales in Brazil and the Caribbean and higher software sales in Mexico.

In North America, Q4 revenue was $2.2 billion, a 7% decrease sequentially. This decline was primarily driven by lower stimulation activity in U.S. land and Canada, decreased fluid services in the Gulf of America and lower well intervention services in U.S. land.

Moving on to other items. In Q4, our corporate and other expense was $66 million. We expect our Q1 corporate expenses to increase about $5 million. In Q4, we spent $42 million on SAP S/4 migration, which is included in our results. For Q1, we expect SAP expenses to be about $45 million.

Net interest expense for the quarter was $86 million. For Q1, we expect net interest expense to increase about $5 million. Other net expense in Q4 was $25 million. We expect Q1 expense to be about $35 million. Our normalized effective tax rate for Q4 was 19.8%. Based on our anticipated geographic earnings mix, we expect our Q1 and full year 2026 effective tax rate to be approximately 21%.

Capital expenditures for Q4 were $337 million, which is $100 million lower than expected due to late equipment deliveries. For the full year 2026, we expect capital expenditures to be about $1.1 billion, consistent with our prior guidance adjusted for the timing impact of late deliveries. This guidance excludes any capital spending necessary for a potential reentry into Venezuela.

Now let me provide you with comments on our expectation for Q1 2026. In our Completion and Production division, in Q1, we anticipate a higher-than-normal roll-off of year-end completion tool sales and lower international activity. As a result, we anticipate sequential revenue to decrease 7% to 9% and margins to decline about 300 basis points.

In our Drilling and Evaluation division, we expect sequential revenue to decline 2% to 4% and margins to decline 25 to 75 basis points.

I will now turn the call back to Jeff.

Thanks, Eric. Let me summarize the key takeaways from today's discussion. Halliburton delivered solid Q4 results and closed 2025 with strong execution despite the market environment. Oil and gas have a critical and recognized role to play in the energy mix of the future. I expect 2026 to be a rebalancing year, which I am confident is followed by a period of sustained strong growth.

Halliburton's international business is strong. Our collaborative value proposition is winning, our technology is delivering and our growth engines are aligned with the evolution of the market.

In North America, we will maximize value, meaning we will stack fleets that do not make adequate return and focus our investments on differentiated technologies that solve for our customers' greatest opportunities. I expect that as macro fundamentals improve, North America will be the first to respond. I am confident in the outlook for our business and Halliburton's ability to deliver leading returns and capitalize on future growth opportunities.

And now let's open it up for questions.

[Operator Instructions] Our first question or comment comes from the line of Saurabh Pant from Bank of America.

Jeff, maybe I want to start with the topic, which everybody has been bombarding us for the past 2 weeks, which is Venezuela, if you don't mind. I noted, Jeff, you said in your prepared remarks, right, that -- I know it's early days, right? But you talked about early steps are well underway, right? So my question is, maybe just help us think about how quickly can Halliburton, your customers move into the country? What do you need to see to start doing that?

And then secondly, ultimately, I know this is not certain, right? But what is the potential size of the opportunity? And how quickly can you scale up in Venezuela?

Yes, Saurabh. Look, I think we could scale up fairly quickly. We're working through the mechanics around licenses and things that we're certain will get in place. But as far as returning to the country, we move equipment around all over the world. So we can move equipment quite quickly. We still have a footprint there in Venezuela in terms of operating bases and whatnot. And so getting equipment there to work, fairly straightforward. There are operators in Venezuela today. And so I think there are opportunities for us sooner rather than later to get back to work. And so we're assessing what we would do and where we would start. I have -- my phone is ringing off the hook in terms of interest in Halliburton being there. And so confident that we can move fairly quickly in Venezuela and excited about that.

As far as the size of the market, small market today relative to what it was a decade ago. A decade ago, it was probably a $0.5 billion business for us pretty consistently. Now as time dragged on, that market started to shrink and it got smaller. But I -- quite optimistic about longer term being a much bigger business. And I think in the near term, getting back to work and contributing to our business at Halliburton.

Right. No, that's a good update, Jeff. I think we need to stay in tune on what's going on, but that sounds like a good opportunity.

Just a very different pivot going back to 2026, Jeff, I know you gave some color on your expectations for activity, for revenue, which frankly, is in line to a little better than I think several people were thinking. So that's a good place to start. But on the margin side of things, Jeff, as we think about the pluses and minuses, pricing is part of it and not just NAM, but international pricing, operating leverage, cost is part of it. And then Eric, maybe a little color on SAP spending trajectory.

If we put all of that together, what does the margin side of the story look like for '26? Any preliminary thoughts on that?

Well, look, I think the second half looks stronger than the first half, most certainly. When we look around the world, it's pretty steady around the world. Obviously, larger tenders are going to be more competitive and we see some of those. But by and large, it's a stable market internationally. And so I see, again, progress as we get certainly into the second half of the year around margins.

Yes, Saurabh, and as it relates. Go ahead, Saurabh. No, no, I was going to jump to your SAP question, but if you have a follow-up for Jeff, go ahead.

No, SAP, let's cover SAP first, Eric.

Okay. Yes. So SAP, we guided $45 million for Q1, and that's pretty much the run rate that you should be thinking about throughout 2026. So $40 million to $45 million. We anticipate the project to complete in Q4 of this year, which is a little later than we had earlier guided. We've adjusted the plan slightly as we learn progressing through the rollout of the system. We've also broadened the scope of the project to include some of the adjacent processes such as outsourcing our payroll and redesigning our overall OTC process.

So in summary, about $45 million -- $40 million, $45 million a quarter until the end of the year and project completed in Q4 with expected savings of about $100 million a year after the project is completed.

Saurabh, if I may go back to your first question a little bit here as well. So if I look at all of 2026, as I said, I think second half is better than the first half. But again, North America is taking a conservative posture. I think we've got some bright spots internationally.

But I think the more important point is what's happening in terms of the rebalancing of the market. And that's really this pragmatic view of the world as opposed to idealistic, barrels are being absorbed, decline rates are higher now than they were in terms of -- because unconventionals are a larger part of the supply stack. And quite frankly, exploration success has been anemic. And while all that's happening, demand is growing. So I think we're setting up for a rebalancing year in '26 of supply and demand to be followed by very sustained strength.

Right. No, that makes a ton of sense, Jeff. Like you said, rebalancing year and really the focus should be on '27, '28, right? And hopefully, things go in the right direction.

Our next question or comment comes from the line of Neil Mehta from Goldman Sachs.

A quick question here first on the international breakout. You said up slightly '26 versus '25. Can you just go -- give us a tour around the world, Jeff, and give us perspective by market? Where do you see increments and decrements?

Yes. Look, our outlook at this point is flattish to maybe up a little modestly. Look, I think Latin America leads the way in terms of growth. Brazil, deepwater is powering ahead. Argentina, we see quite a bit of growth, and that's obviously right in our wheelhouse. Ecuador, Guyana. Obviously, Guyana has been a strong business for us and will continue to be. And so overall, Latin America, very much a bright spot.

Middle East, I think it's flattish, flattish, maybe even down slightly. And I say that just because I'm well aware of the activity growth in Saudi Arabia, but taking a bit more conservative view of the timing and pacing of that coming back. It likely will, but it's less clear to me sort of how impactful and how early that would be. But overall, the rest of the Middle East is solid business, pleased with that business.

And then Asia Pacific really looks fairly flattish to us. A lot of gas demand in Asia. So positive things happening, but overall, flattish for '26 anyway.

Got it. That's a helpful break. And Jeff, maybe take a moment to talk about VoltaGrid. I think we've gotten more comfortable as an investment community around that business and the potential, and you've announced an important joint venture in Middle East. From where you sit, how important is this business for you guys? How big can it be? Do you see yourselves as a logical consolidator over time? Do you like the minority position? Just your perspective, anything you're willing to share about it.

Yes. Look, I'd say I'm really excited about where we are in the outlook for that business and the international piece of that business. I won't comment on the U.S. I think that's well understood and the pace of growth there and our role and ownership in VoltaGrid. As we look around the world, a lot of interest from customers around the combination of VoltaGrid technology and Halliburton's proven execution and footprint and capability.

And so solid pipeline, like the volume. And so I think that this could be a very big business over time. I mean it's like all businesses we're starting. We're very familiar with the business. It's going to grow at the pace that it will, but we've already committed to 400 megawatts. I think 400 megawatts is a good start as we place those. And what we've seen historically is that we place a few hundred megawatts and then that tends to grow over time as data centers expand. And there's -- just no question that there's not enough electricity power generation in the world today, in the U.S. or anywhere else. So very confident in this, and I think it could be a very big business over time.

Next question or comment comes from the line of David Anderson from Barclays.

You've talked about rebalancing of the market. I was wondering if you could talk more specifically about North American stimulation market and how that's rebalancing. You talked about the attrition going on, but I'm wondering how pricing is holding up here and whether or not you see this firming up throughout the year because you're also seeing equipment moving out to Middle East. I know you talked about you're bringing some equipment down to Vaca Muerta. So how is that component kind of factoring into pricing? Do you expect pricing to kind of hold up here? And is this sort of a part of the rebalancing story?

Yes. Look, I think frac pricing is fairly stable at this point. We did -- Q4 is fairly stable. And as we go into Q1, our frac business stays very stable as well going into Q1. Now from a pricing standpoint, broadly, I think that given where pricing is and performance of companies in that market, we are fortunate that we outperformed the market by quite a bit. But pricing reaches a point where it's not -- companies aren't investing in it. We are moving equipment away from it.

And so I think it's certainly stable at that level. And yes, I think there's incentives to move equipment outside the U.S., which we're doing in some cases. And so I think we're at a bottom, and I would expect that, that improves over time, but I'm not going to give you a date when it improves. But I think the bias is towards there's not investment in the market in terms of more equipment and equipment is wearing out, which we know. And equipment, in some cases, is moving outside the U.S. and some equipment and ours in some cases, is being stacked. So I think all of those are positive and rational behavior in a market where we require returns.

That makes a lot of sense. Of course, you do on that side. I was wondering if you could talk -- Eric, maybe you could talk a little bit more about the C&P margin progression throughout the year. The guide for first quarter is more or less in line with what we were looking for. But how should we think about kind of where the rest of the year shakes out on the margin side? And perhaps you could also just talk a little bit how Multi-Chem, the sale of Multi-Chem impacts that and maybe the decision to sell Multi-Chem? And does that provide an uplift for margins throughout the year?

So the -- let me start with the Multi-Chem. So we think the sale should be completed this quarter. The impact on the margin will be positive, but frankly, it will not be material overall. Talking about the progression of C&P margin, we think the margin progress throughout the year. But let me give you some color as well to the guide of margins from Q4 to Q1 because while it is not out of line with the differential in margin that we've seen in prior year, the actual makeup is a bit different.

So if you look at the Q1, so we guided about 300 basis points down for C&P margin. So that is actually coming from 3 buckets. The first bucket, which is over half of the drop is related to the roll-off of completion tool sales. That part is not unusual. What is a bit unusual is the amount of completion tool sales we had in Q4. If you look at the progression Q3 to Q4, our completion tool revenue increase was 3x what we saw in the prior 2 years. So that talks a lot to the strength of our completion business. But that's about over half of the drop, then you get about 25% of the drop that's related to the typical seasonality in the international business for C&P as our C&P business has an increasingly large footprint in the international markets, and that's about 3% to 6% reduction in revenue. So that's kind of typical with historical decreases. And the rest is really a product geographic mix issue, which is really not structural as it relates to C&P.

And then there is a bit of a kind of an optical view on Q4 to Q1, which is we typically have a lot of tailwind with the U.S. frac business, which goes through seasonal factor, I mean, seasonality in Q4 and benefits from an uplift going into Q1. We don't have any of that this year as our Q1 frac business in the U.S. looks to be just straight flat to Q4. So again, a little bit of color as the makeup of the delta is a bit different from prior years.

Our next question or comment comes from the line of Arun Jayaram from JPMorgan.

Yes. Jeff and Eric, I appreciate the outlook comments on 2026. I was wondering if we could maybe think about what your outlook comments around international and North America could mean for overall margins. You gave us some good color on where you expect revenues to kind of shake out. But just trying to narrow thoughts around -- the Street today sitting at just under $4 billion of EBITDA for '26. I'm just trying -- want to get just general comfort level of where the Street sits today based on your outlook comments.

Yes. Go ahead, Eric.

No. If you look at just kind of margins overall, as Jeff professes, we think H2 is better than H1. So you're going to see some slight progression through the year. And while we typically don't comment on Street estimates or provide guidance at this stage on margins, the $4 billion that you quoted is really within the range of outcomes that we are looking at.

Great. That's helpful, Eric. And just my follow-up, Jeff, in your prepared comments, you talked about ZEUS IQ and some of the things that Halliburton is doing to help North American operators boost well productivity. I also wanted to talk to you a little bit about some of the updates we've gotten from the majors where they're talking about using lightweight proppant and surfactants. And I was wondering if you could discuss some of these efforts and maybe how you're helping clients maybe to use some of these emerging technologies? And could these be needle movers for HAL?

Look, my comments are around our technology and the technology that we produce, and very pleased with what we are doing. And I think that the ability to place proppant and do things with proppant effectively is one of the really unique features of ZEUS IQ. And I think that's under all conditions, a very valuable solution, and as I said, a building block to how recovery has improved because quite frankly, where the sand goes has been an unknown in this business since it started in 1947. And really just in the last year or 2 have we been able to directly measure sand placement and also control where sand goes. And this is primarily because of the ZEUS setup and its ability to handle the pressure and the things required in order to respond to the reservoir.

Our next question or comment comes from the line of James West from Melius Research.

So Jeff, clearly, international outlook, second half better than first half, we get that. Venezuela, a little bit of a wildcard. But curious where you think there could be pockets of strength that emerge, knowing that neither you or I, as long as we've been doing this, have a crystal ball and the cycle is always going to play out a little bit differently. But we've got a lot of things in the works here that could influence the oil price, and so could cause some markets to either inflect higher or lower. But where do you think maybe the surprises could come from if you think about a higher oil price environment in the second half and leading into, of course, as you described, a solid upturn in '27, '28?

Well, look, I think Argentina is one that's going to respond. It's already responding. But I think when I think about that market, the pace of interest in international investors in that market is high. I mean, that's become a very solid market that's going to become more and more responsive to commodity price in a positive way. Kudos to the operators in that market today who have taken on the challenge of building infrastructure and evacuating the hydrocarbons from the market. I mean, these are all of the things that a very dynamic market can do and will do, and that's what we're seeing being done in Venezuela -- excuse me, in Argentina. I think the Caribbean is another place we're really excited about possibilities and what could happen sort of throughout the Caribbean as we look at next year.

I think that West Africa is another where we're seeing sort of renewed interest and better -- it seems like better terms for operators and better terms for us where we're able to execute sort of all of our services in these markets. So I'm pleased with that. I think that's a bright spot. And then ultimately, Algeria, I think over time, in '26 could become a brighter spot than we would expect. So I'm thinking about upside surprise, I think those are some of the places where we could see those.

Okay. That's very helpful, Jeff. And then just a follow-up for me on the power markets broadly, VoltaGrid is obviously with your investment there and taking them into the Middle East and leveraging your platform is critical for you. How are you thinking about other potential investments in power? Is VoltaGrid kind of your main objective here? Or are you talking with others? I mean, how do you think about just the build-out of the electrification theme and the data center theme and the power theme as it relates to Halliburton?

Well, thanks. It's one of the things that we take a step at a time is the bottom line. I mean, we're certainly aligned with VoltaGrid in the U.S. We're knowledgeable and have built out a team around power that's looking at our international business, both in the Middle East and beyond the Middle East, most certainly.

And so I think what we'll do, like we do in all things around here, is we take them a step at a time. We build businesses. We don't get ahead of our skis, and we look for the things that we think will be contributing to that. And so the outlook is really good in this area. We know a lot about it and would expect that we continue to grow that business as we get deals done.

Our next question or comment comes from the line of Stephen Gengaro from Stifel.

So curious, Jeff, what do you think about -- like the fourth quarter was stronger than we had thought, and there was less downtime, white space, et cetera. We've heard that from many going into earnings. Why do you think that was? Like does that tell you anything about the way E&Ps are thinking about it? Or is it just weather related? Is there any drivers behind that and what it might mean going forward?

Look, I think weather was a factor. I think a number of things conspired to make Q4 more solid than we expected. I think the operators that we work for stayed busy. I mean, we've got a solid group of customers that take a long view of unconventionals and technology for that matter. And so for that reason, stayed busier certainly for us. And I think that that's probably how this market may look more this way over time, although I expect there probably will be solid inflection if commodity price gives it some help.

And then the follow-up is just around sort of your expectations for sort of completion efficiency and sort of the impact on U.S. production, just as we're sort of thinking about kind of frac demand relative to some of the other high-tech services you provide and how that kind of impacts U.S. production and if you think we have enough activity right now to sustain production?

Yes. Outlook is we're probably at maintenance sort of levels today if not below those is my view. And I think that technology driving better recovery is really the key as we look ahead. I mean to go faster, we are going faster, but we're continuous pumping at rates that you really just can't pump any faster. And so I think the real hurdle is going to be how to better produce a fantastic resource. And I know that technology is at the core of that, same as it has been everywhere.

And so look, I think our frac fleets get bigger than they were in the past. And so I think it takes more horsepower to do more work. It takes more technology to keep the equipment both working, continuous pumping requires technology as does certainly the ability to place sand.

That said, our drilling services business is continuing to strengthen into what has been a slowing market, at least from a rig count standpoint. And I think that's a reflection again of technology, what we do with LOGIX, which is our automation platform for drilling, what the tools themselves are able to do. We see similar -- I mean, the uptake on that has been fantastic. And I think that's all driven by the real drilling requirements to drill longer wells, more complex wells. And so look, I'm just pleased with the growth of technology for both of our divisions today.

Our next question or comment comes from the line of Scott Gruber from Citigroup.

So I want to come back to power as the growth prospects are certainly exciting, and excited to hear that they're bubbling to the surface internationally. How do the prospective returns on these power projects compare to your organic investments? You also have pockets of growth, obviously, within your core and maybe that expands with Venezuela. So just curious how the power project returns kind of compare? Are they higher, lower, broadly in line? And more importantly, kind of how does that shape the vigor with which you could deploy capital into the power opportunity set?

It's Eric here. So I think it will depend on the opportunities, the country, what type of other potential power sources we would be competing with. So it's really early to tell you that it's accretive, dilutive to our current return. It will depend. But overall, these are typically very long-term contracts where you enter in it with a fairly low risk, long-term very good view of what you have to deliver. And if we look at the comparison of what's been happening in North America, then you could say the returns are probably higher than what we have today.

Got it. And then, Eric, maybe if you could walk through some of the items that will impact cash conversion this year. Thinking about working capital, do you anticipate continued catch-up payments from your customer in Mexico? Anything to note on cash taxes? And any comment on SAP spending for the full course of the year would be appreciated.

Yes. I mean, look, there's a lot of moving parts in what you're describing. It's a bit early to comment on working capital impact, collections, et cetera. I mean, collections have been great throughout the year. It was a bit challenging as we talked on several calls, collecting from Mexico, the situation seems to be going a lot better.

So look, we'll give more details, and we'll update our thoughts overall on all the kind of ins and outs that touches, the projection around free cash flow.

Our next question or comment comes from the line of Derek Podhaizer from Piper Sandler.

Just wanted to go back to the attrition discussion in U.S. land. Obviously, a lot of moving pieces here between equipment high-grading, idling, stacking legacy diesel fleets, redeploying some of those fleets to international unconventional markets. But just when you look at your fleet and maybe canvas the market, is everything deployed that could be? Or are there a few fleets that could be thrown together? Just trying to think through the tangible attrition and your comment around the small increase in demand could tighten this market quickly. What does that look like for you and the market? And what could it mean for C&P specifically this year?

Well, we have consciously stacked fleets. We stacked fleets in Q3, and we stacked some more fleets in Q4, all of which could go back to work for returns that are acceptable to us, and some of those may go internationally. But from our standpoint, our fleet is in really good shape. And there are things that could go to work that aren't working. And they will go to work when we see the appropriate level of pricing for those.

But when I look at the whole market in terms of attrition, I'll just use an observation in terms of fleet size. We've got, let's say, 65,000 horsepower out for a simul-frac. We see a number of fleets in the market running 120,000 horsepower to do similar work that tells me that equipment is being repaired and put together in an effort to keep it working, which tells me that expanding or taking those apart would be really a challenge. And so the market is moving more towards bigger fracs that require more equipment. And I think the ability to add fleets is just really not there. And so it doesn't take much, in my view, to create tightness just because the performance requirements are high, the technology requirements are increasing and all of those things create quite a bit of tightness.

Got it. That's helpful. Moving over to the Middle East. I know in your comments, you talked about a flattish outlook, even slightly down. Can you just maybe walk through some of the regions for us and what you're seeing specifically Saudi, UAE, Kuwait, Oman, Iraq and anything else you'd like to highlight?

Look, actually fairly stable in most of those markets. There's always shifting from completion to drilling, and drilling to completion in some markets. I'd say UAE is strong. Kuwait is very strong for us. And I think the Iraq is a good story in terms of activity that we see coming up. And so look, I think as I look across the entirety of the Middle East, fairly stable. See, again, rigs being added in Saudi Arabia, very positive, but taking a bit of a more cautious view around the timing of that.

Our next question or comment comes from the line of Marc Bianchi from TD Cowen.

Jeff, I was hoping you could comment on the offshore market outlook in a little bit more detail. I think everybody is sort of anticipating some sort of uptick in the second half of '26, but there have been prior calls for upticks that didn't materialize. So just kind of curious what your view is on that.

Look, I'll leave a lot of that to the rig contractors in terms of rig placements, et cetera. But we've won a lot of offshore work. It's very strong for us, continues to be a significant part of our international business. And I'd say the bias towards integration and our value proposition in offshore is important, and it's one of the reasons that we're winning work in offshore. It's really strong in Norway, Latin America, West Africa. All of those will be busy for us.

And I think the other indicator is our completion tool order book is at an all-time high, which tends to be, again, biased towards deepwater and offshore work. So from our perspective, that's a strong business for us and expect it -- where we are for it to stay strong in 2026.

Okay. Great. And then the other question I had was on Venezuela, going back to that. So you had mentioned that you're looking to grow the business as soon as commercial and legal terms are resolved and including payment certainty. Can you maybe level set for us what that time line might look like? And is this going to be led by the IOCs and then Halliburton will follow? Or do you anticipate Halliburton moving in either coincident or perhaps before some of these IOCs make up their mind?

Well, I think there's a path to both of those. And as we work through what payment certainty looks like and how we solve for that, obviously, IOCs are an important part of that, but we -- also there are companies operating there today that we can work for under the right conditions and circumstances.

And so from a timing perspective, as we solve those, which I don't -- I think there's a lot of will to solve for these things. And so I -- this is -- we can mobilize in weeks. I think it's in months that we -- but again, we work through those things, but I feel confident we can move fairly quickly as opportunities arise. And again, talking with lots of customers, some operating, some wanting to operate, and this will all be a continuum of getting back to work in Venezuela.

Thank you. I'm afraid that's all the time we have for questions at this time. I would like to turn the conference back over to Mr. Miller for any closing remarks.

Yes. Thank you, Howard. Before we wrap up today's call, let me close with this. I'm excited about Halliburton's opportunities now and in the years ahead. Our differentiated technology delivers exceptional value for our customers and for Halliburton and the ongoing shift towards collaborative work means Halliburton is squarely where the market is headed. Look forward to speaking with you again next quarter.

Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may now disconnect. Everyone, have a wonderful day.

Good morning, and thank you for standing by. At this time, I would like to welcome everyone to the Halliburton Company's Third Quarter 2025 Earnings Conference Call. [Operator Instructions]

I would now like to turn the conference over to David Coleman, Senior Director of Investor Relations. Please go ahead.

Hello, and thank you for joining the Halliburton Third Quarter 2025 Conference Call. We will make the recording of today's webcast available for 7 days on Halliburton's website after this call.

Joining me today are Jeff Miller, Chairman, President and CEO; and Eric Carre, Executive Vice President and CFO.

Some of today's comments may include forward-looking statements that reflect Halliburton views about future events. These matters involve risks and uncertainties that could cause our actual results to materially differ from our forward-looking statements. These risks are discussed in Halliburton's Form 10-K for the year ended December 31, 2024, Form 10-Q for the quarter ended June 30, 2025, recent current reports on Form 8-K, and other Securities and Exchange Commission filings. We undertake no obligation to revise or update publicly any forward-looking statements for any reason.

Our comments today also include non-GAAP financial measures. Additional details and reconciliation to the most directly comparable GAAP financial measures are included in our third quarter earnings release and in the quarterly results and presentation section of our website.

Now, I'll turn the call over to Jeff.

Thank you, David, and good morning, everyone. I'm pleased with Halliburton's third quarter performance. I will begin today's discussion with our highlights from this quarter.

We delivered total company revenue of $5.6 billion and adjusted operating margin of 13%. International revenue was $3.2 billion, a decrease of 2% year-over-year. North America revenue was $2.4 billion, flat year-over-year. During the third quarter, we generated $488 million of cash flow from operations, $276 million of free cash flow and repurchased approximately $250 million of our common stock. And finally, we took cost reduction actions that we expect will save approximately $100 million per quarter going forward.

Before we dive into the geographic results, let me talk about the bigger picture for oil and gas. We share the well-accepted view that oil and gas demand will continue to grow over the long term. We also know there is a tremendous amount of investment required to maintain production at current levels, let alone to sustainably grow production. Recent estimates are that 90% of upstream spending simply offsets natural declines, underscoring the requirement for ongoing oil and gas investment.

Near term, operators are navigating volatile commodity prices as OPEC+ spare capacity returns and trade concerns persist. The impact is most apparent in North America, where we expect customers to maintain the cautious posture they adopted in the second quarter. In international markets, activity remains broadly steady from here as we look forward to 2026.

In this environment, we took steps to address the near-term conditions. First, we improved our cost structure by rightsizing our operations and overhead, which we expect will reduce quarterly labor costs by roughly $100 million beginning in the fourth quarter.

Second, we reset our capital expenditures target for next year. And as a result, I expect capital spending in 2026 to decline by almost 30% to around $1 billion.

Third, we are actively managing our deployed capital, and we will continue to idle, relocate or retire equipment that does not meet our return thresholds.

Finally, and most importantly, we took these steps while maintaining a strong focus on our technology development, our growth engines and our value proposition. I am super confident in the Halliburton team, our ability to execute and the strength of our competitive position. Near-term conditions will not change our focus on delivering value for our customers and leading financial performance for our shareholders.

Now let's turn to our geographic results. I'll start with the international markets, where Halliburton delivered quarterly revenue of $3.2 billion, roughly flat to the second quarter. For the fourth quarter, we expect international revenue to increase 3% to 4% on roughly flat activity levels with typical seasonal software and completion tool sales.

Let me share some progress on our international growth engines. Those businesses where we expect growth outperformance by Halliburton relative to the oilfield services market. These growth engines, production services, artificial lift, unconventionals and drilling are central to our international strategy. We made solid progress this quarter, and here are a few updates.

In Production Services, we won a major 5-year contract from ConocoPhillips in the North Sea. To deliver this contract, we will transform a conventional offshore service vessel into an advanced stimulation platform, complete with the first deployment of Octiv Automation to an offshore environment. This demonstrates our leading technology and execution that maximizes asset value for our customers.

In artificial lift, Kuwait Oil Company named Halliburton Service Partner of the Year, and awarded Halliburton a multiyear ESP contract, which further strengthens our position in Kuwait. Additionally, in Colombia, Ecopetrol awarded Halliburton ESP contracts in 9 of 11 fields.

In International unconventionals, we saw a further adoption of our leading completions technology and set a new continuous pumping record in [indiscernible]. I'm encouraged by our technology penetration in this market as we deliver leading performance and maximize asset value.

And finally, in drilling, we introduced iCruise Force in the UAE and Qatar with strong results in both markets. iCruise Force maximizes rate of penetration while utilizing advanced formation evaluation tools, delivering significant value where logging requirements and rig costs are high.

Beyond our growth engines, I am pleased with the performance of our international business. Our value proposition to collaborate and engineer solutions to maximize asset value for our customers continues to win work and deliver results. We see this most clearly in deepwater. During the quarter, I met with customers in Latin America and Europe to recognize the performance we've achieved through our collaborative model. Together, we are reducing drilling times, improving well placement and deepening our collective competitive advantage.

The strength of our value proposition and the breadth of our technology offerings underpins my confidence in our offshore position where we have leading technologies and formation evaluation, drilling automation, drilling fluids, cementing, well completions and intervention. Offshore is roughly half our revenue outside of North America land today, and I expect that share to grow.

To conclude my thoughts on the international market. Our value proposition is winning with customers. We are demonstrating differentiated performance both on and offshore, and our growth engines are delivering. I am confident in the future of our international business.

Now let's turn to North America. Our third quarter revenue of $2.4 billion was above our expectations with 5% sequential growth driven by less than anticipated completions white space and strong activity in the Gulf of America. During the quarter, we executed our strategy to maximize value in North America. We stacked on economic frac fleets, expanded our leading automation offerings and executed cost-out initiatives to reduce our operating costs and overhead.

Looking to the fourth quarter. We expect greater than typical white space and seasonal activity slowdowns to result in approximately 12% to 13% lower sequential revenue. Despite softer activity in the near term, technology demand remained strong across both divisions as our customers are focused on maximizing the value of their capital dollars.

In completions, ZEUS is the recognized leader in technology and performance. Year-to-date, we have introduced 2 additional ZEUS electric fleets under contract. And today, over half of our active North America fleet is ZEUS, an important milestone.

We also see strong demand for our ZEUS IQ closed-loop fracturing offering. We expect meaningful growth of this service in 2025 and 2026, deepening our competitive advantage and reinforcing our leadership in fracturing technology, efficiency and execution.

In drilling services, we delivered solid sequential and year-on-year growth driven by iCruise. In the third quarter, we introduced the [ 7 7/8 ] iCruise CX, a highly sought after hole size for the Permian Basin with outstanding results. The system completes curve and lateral sections in a single run replicating the proven success we've achieved in other hole sizes. This new offering broadens the iCruise product portfolio, and given the system's consistent performance and our advances in telemetry, automation and rig integration, I am confident we will see rapid adoption by our customers and continued growth in our North America drilling services business.

To close, North America is a tough market today. We are taking steps and executing our strategy to maximize value. This means we are prioritizing returns, technology leadership and working with leading operators. I am confident that our strategy execution will drive further success.

Now let me address our investment in VoltaGrid. As disclosed in our Form 8-K filed on October 14, Halliburton owns approximately 20% of VoltaGrid on a fully diluted basis. We invested early and increased our ownership over time because distributed power is a critical enabler for electrified oilfield services and a growing opportunity set beyond the oilfield.

Last week, VoltaGrid announced an agreement to deploy 2.3 gigawatts of generation capacity to support Oracle's next-generation artificial intelligence data centers. This expands VoltaGrid's contracted backlog, broadens its revenue base, extends a line of sight to multiyear growth and validates VoltaGrid's position as a leading provider of long-term behind-the meter power solutions.

I am also pleased to announce that we have signed an agreement with VoltaGrid to be their international partner for delivering distributed power solutions for data centers outside of North America. Through this agreement, we will combine Halliburton's global reach, design, manufacturing and operating capabilities with VoltaGrid's distributed power expertise to deliver reliable power at scale. I expect this will be an important long-term growth opportunity for both VoltaGrid and Halliburton. Looking ahead, I'm excited by the opportunities for Halliburton and VoltaGrid.

Before I turn the call over to Eric, let me close with this. Oil price volatility is likely to impact the near-term macro environment. While I firmly believe a recovery in activity is inevitable, the timing and shape remain uncertain. Near term, we will execute our collaborative strategy and advance our technology, invest in our international growth engines, maintain cost and capital discipline, including idling equipment when returns are not economic, and finally, remain focused on returning cash to shareholders.

I'm excited about Halliburton, our strategy, our team, our customer relationships and our technology. Our portfolio is highly differentiated. We lead in critical product lines, both on and offshore. Our value proposition is validated by the work we are doing today and the customer discussions we are having about future work. And finally, our leadership team is focused on executing the strategies that deliver strong financial performance.

With that, I'll turn the call over to Eric.

Thank you, Jeff, and good morning. Our Q3 reported net income per diluted share was $0.02. Adjusted net income per diluted share was $0.58. Let me start with some color on the charges taken this quarter. All the details are available in the press release, but a few items are worth highlighting.

First, to address near-term market conditions, we took steps to reset our cost structure. As a result, we recorded severance and fixed and other asset write-offs of $284 million. We expect cash operational savings from the actions we took to result in approximately $100 million in quarterly savings.

Second, because of the changes to U.S. tax laws, we recorded an additional valuation allowance expense of $125 million. As a result of these changes, we also expect a lower effective tax rate on our U.S. taxable income going forward.

Now turning to operations. Total company revenue for Q3 2025 was $5.6 billion, an increase of 2% when compared to Q2 2025. Adjusted operating income was $748 million, and adjusted operating margin was 13%. Our Q3 cash flow from operations was $488 million and in free cash flow was $276 million. During Q3, we repurchased approximately $250 million of our common stock.

Now turning to the segment results. Beginning with our Completion and Production division, revenue in Q3 was $3.2 billion, an increase of 2% when compared to Q2 2025. Operating income was $514 million, flat when compared to Q2 2025, and the operating income margin was 16%. The increased completion tool sales and higher artificial lift activity in North America were partially offset by lower completion tool sales internationally and decreased well intervention services in the Middle East.

In our Drilling and Evaluation division, revenue in Q3 was $2.4 billion, an increase of 2% when compared to Q2 2025. Operating income was $348 million, an increase of 12% sequentially and operating income margin was 15%. These results were primarily driven by higher project management and improved wireline activity in Latin America, increased drilling services in North America and Europe/Africa, and higher software sales in Europe/Africa. Partially offsetting these increases for lower activity across multiple product service lines in the Middle East.

Now let's move on to geographic results. Our Q3 international revenue was flat when compared to Q2 2025. Europe/Africa revenue in Q3 was $828 million, flat sequentially. Improved completion tool sales in Norway and increased drilling-related services in Namibia were offset by lower completion tool sales in the Caspian area and lower fluid services across Europe.

Middle East/Asia revenue in Q3 was $1.4 billion, a decrease of 3% sequentially, primarily driven by lower activity across multiple product service lines in Saudi Arabia. Latin America revenue in Q3 was $996 million, a 2% increase sequentially. This increase was primarily driven by higher project management activity across the region and increased drilling services in Argentina.

In North America, Q3 revenue was $2.4 billion, a 5% increase sequentially. This increase was primarily driven by improved stimulation activity in U.S. land and Canada and higher completion tool sales and increased wireline activity in the Gulf of America.

Moving on to other items. In Q3, our corporate and other expense was $64 million. We expect our Q4 corporate expenses to increase about $5 million. In Q3, we spent $50 million on SAP S4 migration, which included milestone payments and is included in our results. For Q4, we expect SAP expenses to be about $40 million.

Net interest expense for the quarter was $88 million. For Q4, we expect net interest expense to increase about $5 million. Other net expense in Q3 was $49 million, which included $23 million due to the impairment of an investment in Argentina and a mark-to-market gain on a derivative. We expect Q4 expense to be about $45 million.

Our normalized effective tax rate for Q3 was 21.5%. Based on our anticipated geographic earnings mix, we expect our Q4 effective tax rate to be approximately flat.

Capital expenditures for Q3 were $261 million. For the full year 2025, we expect capital expenditures to be about 6% of revenue. In Q3, tariffs impacted our business by $31 million. For Q4, we currently expect a gross impact of about $60 million, increasing quarter-on-quarter due to Section 232 tariffs. These impacts are included in our guidance.

Now let me provide you with comments on our Q4 expectations. In our Completion and Production division, we expect greater than typical white space and seasonality in North America, partially offset by strong international results in the fourth quarter. As a result, in our Completion and Production division, we anticipate sequential revenue to decrease 4% to 6%, and margins to be down 25 to 75 basis points. In our Drilling and Evaluation division, we expect sequential revenue to be flat to down 2%, and margins to increase 50 to 100 basis points.

I will now turn the call back to Jeff.

Thanks, Eric. Let me summarize the key takeaways from today's discussion. Halliburton delivered solid Q3 results with $5.6 billion in revenue. We took steps that will deliver estimated savings of $100 million per quarter, reset our 2026 capital budget and idle equipment that no longer meets our return expectations.

Our international growth engines, production services, artificial lift, unconventionals and drilling are performing well. In North America, Halliburton is executing its strategy to maximize value. ZEUS electric fleets now make up over half of our active fleet, and iCruise CX is driving performance in key basins like the Permian, reinforcing our technology differentiation. Also, Halliburton and VoltaGrid agreed to launch an exciting new opportunity for international growth in data centers. And finally, we are committed to returning cash to shareholders, maintaining cost and capital discipline and investing in differentiated technologies that drive long-term performance.

And now let's open it up for questions.

[Operator Instructions] Your first question comes from the line of Arun Jayaram with JPMorgan.

Gentlemen, you described how your relationship with VoltaGrid gives you a front seat to the emerging distributed power generation market. I was wondering if you could talk about your views on the evolution of that market over the last 3, 6, 9 months? And maybe talk a little bit about the strategic collaboration you announced last night, which I believe allows you to invest in project level economics internationally, but maybe you could provide a little bit more detail around that.

Yes, certainly. Look, the demand for power and for AI is like nothing I've ever seen in terms of demand growth and that we've watched that. And we also know that not only in the U.S. but around the world, the rest of the world is a really big opportunity set for the same level of growth. And as we look ahead to what we've announced with VoltaGrid, this is where Halliburton invests in project economics.

So we are sharing the economic value of projects together. And also it's an opportunity to effectively leverage what we each do really well. And from a Halliburton perspective, we've got boots on the ground in 70 countries. We've got excellent execution skills, a proven manufacturing, and we also have global scale, industrial global scale, which I think is critical. At the same time, both the grid has solved for how to execute these projects technically and at scale. And we've built a strong relationship over 5 years as that technology has developed. We've worked closely with VoltaGrid in our own business, and that gives us a great deal of confidence in how they've gone about solving the technical requirements for data centers, and we're just super excited to be part of this whole venture going forward.

Great. And Jeff, maybe my follow-up. North American revenue was up 5% sequentially, a lot better than we had expected and maybe you'd guided to, it had been relatively flat on a year-over-year basis. Can you talk about some of the drivers of the outperformance in North America and thoughts on what this could mean for 2026?

Well, look, we saw less white space than we expected in Q3, which obviously drove revenues better than what we would have thought. And I think it also gets to the strength of the customers that we work with, the solid programs that they have. And as I look towards 2026, it gives me a lot of confidence in Halliburton's positioning in the market, both how we execute and maybe even more importantly, the technology that we're bringing to market. And as we described, put a couple of new ZEUS fleets to work and see demand for not only the electric fleet, which is a fantastic piece of equipment, but maybe even more so ZEUS IQ in terms of what that means to solving for [ EURs. ]

Your next question comes from the line of Neil Mehta with Goldman Sachs.

Jeff and team, I want to spend more time talking about the Middle East opportunity as it relates to power. Why specifically is that the region you think makes sense to be spending time on? And talk about some of the constraints that might exist in the Middle East in terms of really scaling the AI opportunity set and how do you intend to debottleneck them.

Look, I think that it's the Middle East and Rest of World. I think our initial focus, Middle East, we see a lot of opportunity there. Obviously, that's an economy that is developing capabilities every single day and are very much focused on looking forward to investment. And so the other thing is there is certainly a lot of available energy in the Middle East, and there is also a lot of capital in the Middle East. And so those things all conspire to make that very attractive.

Right. Super. And then, Jeff, I know it's too early to talk about '26 at this point, and we'll get more color on the fourth quarter call. But just as you look at what is still a very uncertain macro for North America, in particular, just any early thoughts in helping us think through the picture for '26 and based on early customer conversations?

Yes. Look, it is really early. Customers haven't produced budgets yet at this point. We clearly are having discussions with customers. If I step back and say '26 is overall flattish with some bright spots is how I would describe all of '26. North America, we did stack some fleets in the quarter. Those probably don't come back to work. But here's what's more important to think about for '26, in my view, and it's going to be looking at the mild posts as we go through '26 because I think some important things are happening now.

Number one, OPEC+ barrels are getting into the market. We know that. North America, in my view, is probably below maintenance level spend. And so -- and then Mexico stays kind of probably where it is for a little while, but that decline in production there is also meaningful. So if we think about Mexico declining, North America, likely rolling over and all the OPEC+ spare capacity in the market, that creates a real inflection point.

Now when precisely that happens is less clear, but oil demand continues to grow, and that gives me a lot of confidence. And I think that with the OPEC barrels sort of behind us, it creates real tightness, that sort of undisputable tightness in the market that I think the snapback will be super strong for us.

All right. We'll stay tuned as you have more investor -- customer conversations.

Your next question comes from the line of David Anderson with Barclays.

I just had a question about the margins, which were quite a bit stronger than we were expecting this quarter. You talked about taking $100 million of costs out per quarter. How much of that was in this current quarter? I'm just kind of curious as to how much it impacted the numbers.

Yes. Let me give you some color, Dave, on the Q3 margin versus guidance. So the first thing, we had about half of the beat that came from reductions in labor cost that actually we've realized the savings earlier than expected as our operation teams move pretty quickly to get things done. Then in terms of what came out of operation between C&P and D&E, as Jeff just mentioned, very, very -- a lot less white space in North America and strong performance from the Gulf of America team. And then overall, just a strong international performance, primarily from our completion tool and cementing business. And on the D&E side, the strong result came from our project management business in Latin America.

Okay. So Jeff, you know I'm asking the power question here. So we have a partnership here. I'm curious about a couple of things. Obviously, we know VoltaGrid is bringing the power. So I guess maybe you, could just sort of simplify for us what HAL is bringing to the table here?

And then sort of secondarily, what size of projects are we talking about here? VoltaGrid just announced a big 2.3 gigawatt project. Are you talking about that size? Or are you talking more like 100, 200, 400, that kind of range? And just kind of might as well throw this in there, what kind of time line are we talking here? Are we talking like 2028? Just kind of wondering about supply chain tightness and how that all lines up.

Well, let me start with maybe the last question. From a supply chain standpoint, VoltaGrid is in a fantastic position from a supply chain standpoint and comfortable with where they are. From a size of project, we're aligned with VoltaGrid around projects of the size and scale that they're talking about. And so I think they -- I'm not going to forecast size of projects, but feel comfortable they can be pretty big.

And then what does Halliburton bring? And I think Halliburton brings some very important things, particularly, I would say, industrial scale and working internationally. And we've all seen how difficult that can be for companies as they scale internationally. We've seen a lot of them less than successful as they scale and boots on the ground managing projects, investing in projects, customer relationships. There's a long list of things that Halliburton brings to the international markets where we are clearly can be additive. And then from a VoltaGrid perspective, clear on what they're doing.

Your next question comes from the line of Saurabh Pant with Bank of America.

Jeff, maybe I'll continue with that line of questioning on the power front, but pivot a little bit on the CapEx side of things because this is pretty CapEx intensive, not something that you're not used to, right, Jeff, over the past. But how do you think about that? How do you think you'll fund that, not just at the VoltaGrid level, but how does the collaboration outside the U.S., right? So the Middle East like you're targeting right now, how does that look like from a funding from a CapEx standpoint?

Yes. So to be clear about how we're thinking about it, Saurabh, is -- so our CapEx budget for next year is $1 billion. Whatever we do around power with VoltaGrid in the international market is not included in that $1 billion. The overall intent is to share total project economics. So we will be funding this on a project by project basis incrementally over the $1 billion or whatever baseline CapEx we have for our oil and gas business.

Okay. Okay. I got it. No, that's helpful, Eric. And then one for the North America market, right? Like somebody noted on the call, your performance has been a lot better than a lot of us were thinking. It seems like, Jeff, and correct me if I'm wrong, it seems like you are not trying to be everything to everybody. You're targeting the customers, the large sophisticated customers, that value, what you bring to the table, right? But just maybe talk to that a little bit. How are you targeting the North American market with the aim of maximizing value like you've been trying to do?

Well, look, maximizing value means that we are focused on efficiency and technology, and electric fleets bring that, but we continue to invest in technology in North America. And I think that's where the point of bifurcation happens, and we've been clearly targeting customers that want to use that technology, both the electric and stepping forward into the subsurface and the control of sand and a lot of the things that ZEUS IQ and the many things that we've built along the way allow customers to do. And we continue to deepen that competitive advantage in terms of how we help customers solve for EUR, sand control, measure sand performance, all of those things in the subsurface.

And so very deliberate, we don't compete in the spot market. We don't want to be competing in the spot market. You've seen us stack some diesel dual fuel fleets in the quarter for that very reason. And so yes, clearly, we are not going to be everything to everyone. We're very pleased with the technology performance and pleased with the uptake on the technology. So there's really not a good reason to continue to burn up dual fuel equipment in a market that's not making returns. We have opportunities to send dual fuel equipment overseas, which we may do, we probably will do, or we just idle it and wait for later when things get tighter and we put it back to work then.

Makes sense. Makes sense. Okay. Jeff, I'll turn it back. And by the way, as much as I like the $100 million in cost savings, I'm waiting for the day when activities are going up and we are adding labor costs. But until then, thanks a lot for the color.

Your next question comes from the line of James West with Melius Research.

So I want to be -- the guys have been dancing around the VoltaGrid relationship with their questions so far, but I was hoping to just create some clarity here. We obviously know, they have a distributed power technology that is going to be extremely useful. We understand the Middle East is energy rich. But really outside of industrial scale, is it not the relationship that you bring to the table? I mean nobody walks into the Kingdom with the Arabians and says, "Hey, guys, can I do business?"

Correct. And that's when I described global industrial scale, I'm including customer relationships, markets, knowledge of markets, history and markets and history of execution in markets that is well respected by most of the people in those markets, clearly by the people in those markets, customers and governments and all the rest.

Exactly. That's exactly what we see. And then maybe on -- if we think about '26, and I know in North America, we can kind of leave that out for now because of the uncertainty. But looks to me like Saudi's bottoming and is going to recover here in the first half, deepwater coming back in the second half. Is that consistent with what your customers are kind of alluding or telling you at this point?

Yes. I mean our deepwater business is getting traction now and continues to strengthen as projects start and as we win projects, so that's sort of the view of that into '26 and beyond Middle East, Saudi in particular. I expect that picks up as we go into next year. Now I don't think that it springs back to maybe where it was, but not declining as a form of improving, and I think there will be some improvement on top of that as we go into 2026 -- middle of 2026.

And so, yes. Look, the international business looks solid. Our technical position internationally looks very solid in terms of the growth engines I described, the contract wins we're having. And really, our value proposition is just continues to gain traction with customers all around the world. So very happy with that.

Your next question comes from the line of Doug Becker with Capital One.

A good segue, Jeff. You've been highlighting the growth engines. Earlier this year, you talked about those engines could add $2.5 billion, maybe $3 billion of annual revenue, 3 to 5 years. How do you think Halliburton is progressing relative to those targets? And I assume you feel pretty comfortable that Halliburton should be growing, outgrowing the industry internationally given those growth engines.

Yes. They're on track, I mean, to do what we described. I pointed out a few of the anecdotes around the progress, but the progress is really deep rooted in our value proposition. And so these are strategic opportunities that continue to gain traction globally, whether intervention. You've seen the acquisition of Optime, which is playing a more and more meaningful role. I know we just -- I think there was a press release just last night or yesterday around application of that in the North Sea with Aker BP, but that continues to -- [indiscernible] gained traction really in all deepwater markets. I'm very excited about that.

Artificial lift continues to gain traction throughout the Middle East, Latin America. So that's very much on track. Drilling technology continues to advance with automation and drilling, done some just amazing work in terms of automated drilling, controlling or automating not only the rig, but the hydraulics, which is a key technical differentiator for Halliburton. And then in unconventionals, continue to -- look, we applied the technology of sensory and continuous pumping in Argentina. Those are market firsts there. They have an impact, a positive impact for customers and for Halliburton, see the Middle East the same way, and we see a lot of opportunity even Australia, where we've done quite a bit of work in international unconventional. So very much on track and super excited about the differential growth opportunity that Halliburton has in these areas.

Definitely sounds encouraging. I wanted to touch base on Brazil specifically. Halliburton recently received a completion and stimulation contract expected to start next year. We've been hearing some of the offshore drilling contractors have been having one-on-one discussions with Petrobras about reducing cost. Just what's your outlook for Brazil? And has Halliburton been approached about helping to reduce costs?

Look, we're super positive about Brazil. We've got a strong position there, both with IOC work and with Petrobras. Again, continue to develop technology specific for that market. We're in all sorts of discussions with [indiscernible] And look, no. In terms of the market in Brazil, we see growth in execution and technology uptake given the complexity of that deepwater market.

Your next question comes from the line of Scott Gruber with Citi Group.

You guys have taken a very disciplined approach with respect to idling frac crews, where you will make a reasonable return. I'm just curious, kind of where do you stand in that process? Was it more weighted to kind of 3Q? Or would the idling be more weighted to 4Q when customers slow down? I'm just trying to think through your market comments around North America being down 12%, 13%, trying to separate the underlying market from the idling trend.

Look, I think that we will -- we idled some crews probably later in the quarter. You may see some of that in Q4. I think the idling and the white space in some respects go together. However, some of those crews that have been retired, or not retired but idle, will stay idle until we see margins snap back on them. But I think what's important as we look at the miles posts that I described is that the first thing to snap back or recover will be North America, and it's been that way for 1.5 decade. And we've seen it through several downturns. And so we fully expect that the recovery will come quickly in North America when it comes, and we're going to want those fleets available to fill in gaps and actually take on some bigger work.

I appreciate the color. And then turning to the CapEx budget for next year. I think at $1 billion, it's a bit below where expectations were at. But at the same time, your frac maintenance CapEx should be coming down a lot with the idling and investment in e-frac. Can you discuss kind of within the budget your ability to continue to make the strategic investments in the D&E toolkit and your growth verticals within C&P.? It seems like those investments have borne a lot of fruit here in terms of share gains. So just kind of talk through the moving pieces in the budget next year and your ability to still make those strategic investments.

Look, let me start. The capital budget, the 30% reduction is still in line, I think, largely, but it's -- look, as you described, investment cycles, we just view it as we don't -- that's where we need to be. From a strategic perspective, we continue to invest in R&D. We continue to invest in the technology that's differentiating. We have quite a bit of that, but we also have the ability to manage that inside of the budget that we have. And I think that driving some tightness in equipment is a good thing. And I expect that you'll continue to see Halliburton investing in the technology that makes the outsized market returns.

I guess another way to kind of phrase it is, do you think you can still deliver the share gains in D&E and C&P with the $1 billion budget next year?

Unequivocally, yes.

Your next question comes from the line of Marc Bianchi with TD Cowen.

I wanted to pivot back to some stuff on Volta. Is the arrangement that was announced last night, this international collaboration, is that an exclusive arrangement where Halliburton is sort of exclusively deploying the Volta technology? Or can they go work with someone else if they choose to?

Well, look, it's exclusive in parts. And I think where we're targeted, it's exclusive with certainty over a pretty good period of time. I'm not going to get into all the mechanics of the agreement, but the relationship is such that I feel confident that we are the partner and like I said, co-investing and the work that we've done to get to where we are has all been important work. And so quite confident in where that goes. And so what I think the more important takeaway is this is a fantastic growth opportunity for Halliburton and for VoltaGrid internationally.

Indeed, Jeff. And if there's some dollar of spend that needs to occur in 2026 on top of the $1 billion CapEx that you have related to this, like is there a certain percentage that Halliburton would be obligated to? Is it a 50% obligation or anything like that you can help us? So if we see a press release from Volta that they're spending $1 billion and we can sort of get a sense of what that might mean for Halliburton' requirement?

Look, I think we will be investing alongside them. I think the capital -- we know how to raise capital, and we know how to get capital. I think that these projects are imminently capitalizable. And so I don't see that as any kind of impediment whatsoever. And if you see them announcing capital investment around the world, we're likely -- more than likely, we are part of that.

The next question comes from the line of Derek Podhaizer with Piper Sandler.

I just wanted to go back to the theme around idling equipment. If we can get a little bit more color, maybe help us understand how many fleets that you've idled, how many you expect to be permanently impaired, how many things might go back to work? Just trying to get a sense of the total market idling equipment. We've heard that from one of your peers last week. How significant could this accelerated attrition really be for the market and create a better setup from a supply and demand perspective for 2026?

Well, let me -- we're going to idle things that aren't economic, and that's really the way we approach it. It's not so much a number of things. Well, the way I think about attrition, and I think this is what we're really seeing in the marketplace. We, in fact, are idling things and they remain idle. They're not being bled back into the fleet to help shore up underperforming assets elsewhere for customers. And I think that is really the key when we think about attrition. So if we just look at amount of horsepower on the simul frac, for example, we're fairly disciplined about that quantity. We probably won't have more than 65,000 horsepower on a location like that. If we go look at competitors performing simul frac, that number could be 100,000, 120,000 horsepower, effectively saying that, that's attrition in motion. And I think when the market -- it doesn't need to recover much, if any, before we'll see real tightness in pricing in North America.

Got it. That's helpful. And this one might be for Eric. I just wanted to ask about the free cash flow here in the quarter. It's a little bit light versus expectations, your working capital headwind. Should that flip to a tailwind in the fourth quarter? And then maybe some early indications around 2026 free cash flow expectations, just given where CapEx is going down to $1 billion.

Right. So as it relates to 2025, Derek, we're still shooting for about $1.7 billion for the year. Q3 was indeed a bit lower than expected. That came from high revenue, slightly lower collection than expected and then the cash part of the charge that we took. We're confident about the yearly numbers. Q4 is always the strongest quarter for collection. So we're not expecting that to change this year.

As it relates to cash flow for 2026, it's really early to say. The big focus right now is obviously on ensuring and focusing on the strength of operation, returns, et cetera. But I would say this, the cost reductions that we've undertaken, everything else being equal, will result in $400 million less cost. We have $400 million lower CapEx. So in a way, it's $800 million of additional liquidity as we get into 2026.

That being said, as we talked about the macro environment is fairly volatile. So as we think about 2026, we may take a bit more of a conservative approach as to how we utilize the cash flow, particularly as it relates to buybacks.

Your next question comes from the line of Stephen Gengaro with Stifel.

I think two things for me. One is just to kind of get your views as we sort of think about '26 a little bit. We're hearing that frac activity is below levels to sustain U.S. production. And I'm just curious kind of in your conversations and what you've heard, how you think the E&Ps react to that as you go through 2026?

Look, I think that each E&P is going to do what they need to do. I'm stepping back and taking a broad view and there are some that are slowing down and some that are maybe are speeding up. But I think that overall, based on our view, North America, and I don't think that I'm the only one that thinks this is the fact that North America is flattish to down a little bit next year just based on activity level and capital spend. And so I think every customer is going to do what they think they need to do. But I would say conserving capital is one of the things that they're doing.

And the other question I had is, as it pertains to some of the growth areas you've talked about, like lift and chemicals, how do you think the competitive landscape has changed? And do you think that aids in your ability to continue to gain share in those areas?

I do. I think that -- well, in the lift area, it certainly does. And I think it's both performance and technology. We've got -- Intelevate is a key part of the software and AI around pumping our pumps. Artificial lift today are differentiating, and we continue to grow that business. And if you recall, we didn't have any international footprint to speak of. We had none when we acquired Summit. And so what we're seeing is outsized growth certainly for Halliburton. And I think ESP is broadly become a more important tool as operators and governments and others seek to produce more oil from existing assets. So I think secular growth is in front of ESP. And I think our unique position, both technically and from where we started, get Halliburton an outsized opportunity for growth.

Your next question comes from the line of Keith MacKey with RBC Capital Markets.

Just wanted to start out on the CapEx guide for next year. I appreciate the incremental color on free cash flow. But when it comes to CapEx, you've always messaged that we should think about it as a 5% to 6% of revenue type target. Is that still the case for next year? Or have things changed just given the market outlook?

No, I think you should take the $1 billion guidance as a dollar number versus a ratio to revenue. And as Jeff gave some color that we've invested a lot in a couple of really key strategic initiatives around electric frac, around the revamping of our technology for directional drilling. We continue to invest in these, but the rollout has progressed significantly. So we don't need to use the same amount of capital dollars in these 2 strategic initiatives. So you should be viewing this as being disciplined around our capital spend, but making sure that we can still deliver on growth and on all of our strategic initiatives.

Got it. Appreciate the color. And just stepping back to the market. Jeff, you mentioned North America generally the first place to come back in as the cycle turns upward. Can you just talk to us how you're thinking a little bit more about how the drilling versus completion of that potential upswing might play out? I know some cycles, it's been drilling first in completion or vice versa? How do you see this one playing out?

Look, I think the supply chain in North America is much better wired together than it's ever been. So the idea that it's all drilling and then there are [ ducts ] and then there's fracking, operators and service companies have solved for how to execute more efficiently. And so I think what you would see as rig count and frac count coming back generally together, and the timing of that, again, less clear.

And at this time, that is all that we have for questions. I will now turn the call back over to Jeff Miller, Chairman, President and CEO, for closing remarks.

Okay. Thank you, John. And before we wrap up today's call, let me leave you with a few thoughts. I'm excited about what's ahead for Halliburton. We have the right strategy, team, customer relationships, technology and exciting new opportunities. Our value proposition is validated by the work we're doing today and customer discussions we're having about future work. We are focused on executing the strategies to deliver strong financial performance. I look forward to speaking with you next quarter.

This concludes today's conference call. We would like to thank you for your participation. You may now disconnect your lines. Have a pleasant day.

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Halliburton Second Quarter 2025 Company Earnings Conference Call. [Operator Instructions]

At this time, I would like to turn the conference over to Mr. David Coleman. Sir, please begin.

Hello, and thank you for joining the Halliburton Second Quarter 2025 Conference Call. We will make the recording of today's webcast available for 7 days on Halliburton's website after this call. Joining me today are Jeff Miller, Chairman, President and CEO; and Eric Carre, Executive Vice President and CFO.

Some of today's comments may include forward-looking statements that reflect Halliburton's views about future events. These matters involve risks and uncertainties that could cause our actual results to materially differ from our forward-looking statements. These risks are discussed in Halliburton's Form 10-K for the year ended December 31, 2024, Form 10-Q for the quarter ended March 31, 2025, recent current reports on Form 8-K, and other Securities and Exchange Commission filings. We undertake no obligation to revise or update publicly any forward-looking statements for any reason.

Our comments today also include non-GAAP financial measures. Additional details and reconciliation to the most directly comparable GAAP financial measures are included in our second quarter earnings release and in the quarterly results and presentation section of our website.

Now I'll turn the call over to Jeff.

Thank you, David, and good morning, everyone. I will open today's call with a discussion of the oilfield services market, which appears very different today than it did only 90 days ago.

In the second quarter, Commodity markets were volatile, driven by trade and tariff uncertainty, geopolitical unrest and the accelerated return of OPEC+ production cuts. Against this backdrop, here's what I observe in the market today, which directly influences my outlook.

In North America, multiple operators, even large and established customers, are now planning meaningful schedule gaps in the second half of 2025. In international markets, particularly among some large NOCs, we continue to see reductions in activity and lower discretionary spend, typical of much lower commodity price environments. And finally, we've seen several well-publicized reorganizations and cost reduction efforts by large independent operators and IOCs.

To put it plainly, what I see tells me the oilfield services market will be softer than I previously expected over the short to medium term. We will, of course, take action to address this near-term softness. That said, I believe the demand fundamentals remain strong for both oil and gas. I expect conditions will improve as additional OPEC+ production is absorbed by the market, and operators around the world work to replace declining production and meet increasing demand. As I look ahead, I believe that Halliburton is well aligned with the themes that I expect will define the next several years.

First, unconventionals will continue to be a critical component of the supply picture. I expect that advanced technology to maximize recovery and returns will expand both in the United States and around the world.

Second, production-related services like intervention and stimulation along with artificial lift will grow alongside increased global production of both oil and gas.

Third, I expect demand will rise for complex drilling and well construction services to access available resources. This requires advanced tools and automation technologies for efficient development and delivery.

I believe our strategic alignment with these themes positions Halliburton to deliver industry-leading returns. I fully expect that the strategic execution that delivered performance in recent markets will continue to deliver outperformance in the future. Now let's move on to our geographic results.

I'll start with the international markets, where Halliburton delivered quarterly revenue of $3.3 billion. The second quarter demonstrated 2% sequential growth with activity increases in Latin America and Europe, Africa, offset by activity reduction in Saudi Arabia. As we look at the full year 2025, I expect our international revenue will contract by mid-single digits year-on-year primarily driven by activity reductions in Saudi Arabia and Mexico. Despite the ongoing softness in these large markets, I do expect Halliburton to demonstrate growth in Brazil and Norway, as well as offshore frontier basins, where we secured key wins last quarter through our technology, operational excellence and collaborative approach.

Thinking broadly about our international business going forward, our growth engines, unconventionals, drilling, production services and artificial lift remain key to our international strategy, and we believe Halliburton has unique opportunities to grow in each of these areas as evidenced by our recent progress.

In unconventionals, we continue to see adoption of North America style development, multi-well pads, long laterals and large completions in several international unconventional basins, which reinforces our confidence in our unique ability to lead in unconventionals. In Argentina, we achieved a record quarterly stage count and performed our first sensory fiber optic fracture monitoring service, a milestone in expanding our leading unconventional technologies outside of North America. In Australia, we recently completed a 67 stage stimulation, the largest job to date in the [ Beetaloo ] Basin. And in the Middle East, we drilled the longest well in the region's largest unconventional play.

Turning to Drilling Services. iCruise, LOGIX Automation and the iStar platform delivered strong performance and introduced unique capabilities in several technically demanding markets. Globally, we surpassed 0.5 million feet drilled with LOGIX closed-loop automation and completed an important trial with a customer in the Middle East. In Norway, we recently utilized iCruise and LOGIX to drill the longest well in the Norwegian continental shelf to a measured depth of over 10 kilometers. In reservoir mapping, we launched EarthStar [ 3DX ]. It builds on our leading EarthStar X and Brightstar mapping technologies, and provides a 3-dimensional map ahead of the bit while drilling. This unique capability allows proactive steering around hazards and precision wellbore placement for optimum drilling efficiency and recovery.

Next, in Production Services, we had several activity highlights during the second quarter. In Brazil, we began operations on our largest integrated well intervention contract which highlights the expansion of our collaborative model from well construction to production. In Norway, we expanded our [ riserless ] coiled tubing services beyond our initial pilot and completed a 3-well intervention campaign for a customer. Finally, in artificial lift, Halliburton secured its largest international ESP contract to date from a Middle East NOC. Middle East Asia remains our largest and fastest-growing international lift region with strong year-over-year growth also achieved in Latin America and Europe, Africa.

We expect International artificial lift revenue to grow over 20% this year and plan to double the installed base of [ Intelivate ], our remote operations and automation platform. It has been a strong start to the year, and I expect to exit the year with an international franchise that is larger than all of Summit at the time of acquisition, a significant milestone in our growth journey.

To conclude my thoughts on the international market, while activity reductions in a few large markets will likely overshadow the solid performance of other geographies, I am confident our strategy is the right one, and our growth engines remain key to that strategy.

Now let's turn to North America, where our second quarter revenue of $2.3 billion was roughly flat to first quarter. Seasonal improvements in completions were offset by lower service pricing and reduced artificial lift activity. As we look at the remainder of the year in North America, we expect that revenue in the second half will decline due to lower drilling and completion activity. This comes in the form of more white space in our frac calendars, the full period effects of recent service pricing reductions, and the stacking of frac fleets that do not meet our returns threshold.

While increases in gas activity are likely to absorb some service capacity this year, it is unlikely to offset the decreases in oil-directed activity. We now forecast full year North America revenue to decline low double digits year-over-year. In this environment, differentiation has never mattered more. Halliburton's leading technology remains an important differentiator for us. This quarter, we were pleased to see Chevron announce their ZEUS IQ closed-loop fracturing milestone in the Rockies. Customer enthusiasm is strong, and we are actively deploying ZEUS IQ across our U.S. operations. I expect up to 1/3 of our ZEUS electric fleets to operate with ZEUS IQ by year-end, a strong endorsement of a technology that debuted only a quarter ago.

In North America drilling, iCruise and LOGIX Automation enable our customers to maximize the value of their assets by consistently delivering curve and lateral sections on today's longer wells. This performance has driven rapid growth in our U.S. land rotary steerable business and double-digit revenue growth in North America drilling services, even amid rig count declines.

To finish my thoughts on North America, activity reductions will affect the oilfield services market this year. I am confident in our plans to take the necessary actions to address these headwinds. My customer conversations tell me technology and service execution are key to maximizing the value of their assets. And I believe Halliburton has unmatched capability to deliver both of these at scale, which is why I am confident we will deliver returns in North America that outpace our competitors.

For both the international and North America markets, here's how I plan to address the near-term softness. First, we will not work equipment where it does not earn economic returns, and this includes North America frac fleets. Second, we will reduce our variable and fixed cash costs over the quarters ahead to size our business to the market we see. And finally, we will remain focused on free cash flow and returns, and will remain diligent stewards of capital.

Before I turn it over to Eric, let me close with this. I am confident in Halliburton's future. Today, we are more differentiated with deeper technology advantages to address our customers' requirements and more collaborative than ever before. I believe our value proposition to collaborate and engineer solutions to maximize asset value for our customers is a powerful driver of both customer and shareholder value.

With that, I'll turn the call over to Eric to provide more details on our financial results. Eric?

Thank you, Jeff, and good morning. Our Q2 reported net income per diluted share was $0.55. Total company revenue for Q2, 2025 was $5.5 billion, an increase of 2% when compared to Q1, 2025. Operating income was $727 million, and the operating margin was 13%. Our Q2 cash flow from operations was $896 million, and free cash flow was $582 million. During Q2, we repurchased approximately $250 million of our common stock.

Now turning to the segment results. Beginning with our Completion and Production division, revenue in Q2 was $3.2 billion, an increase of 2% when compared to Q1, 2025. Operating income was $513 million, a decrease of 3% when compared to Q1, 2025, and operating income margin was 16%.

Revenue increased largely due to seasonal improvement in pressure pumping activity in the Western Hemisphere. The decline in operating income was primarily driven by lower pricing for stimulation services in U.S. land. In our Drilling and Evaluation division, revenue in Q2 was $2.3 billion, an increase of 2% when compared to Q1 2025. Operating income was $312 million, a decrease of 11% when compared to Q1, 2025 and operating income margin was 13%.

Revenue increased due to higher drilling-related services globally. Operating income decreased due to seasonal roll-off of software sales and increased startup and mobilization costs across multiple product service lines. Now let's move on to geographic results.

Our Q2 international revenue increased 2% sequentially. Europe-Africa revenue in Q2 was $820 million, an increase of 6% sequentially. This increase was primarily driven by higher activity across multiple product service lines in Norway. Middle East Asia revenue in Q2 was $1.5 billion, a decrease of 4% sequentially. This decrease was primarily due to lower activity across multiple product service lines in Saudi Arabia and Kuwait.

Latin America revenue in Q2 was $977 million, a 9% increase sequentially. This increase was primarily due to improved activity across multiple product service lines in Mexico and Brazil, and increased well intervention services in Argentina. In North America, Q2 revenue was $2.3 billion, relatively flat when compared to Q1, 2025. Slightly higher well construction activity, completion tool sales, and stimulation activity in the region were offset by lower artificial lift activity and software sales.

Moving on to other items. In Q2, our corporate and other expense was $66 million. We expect our Q3 corporate expenses to increase by about $5 million. In Q2, we spent $32 million on [ SAPs ] for migration, which is included in our results. For Q3, we expect SAP expenses to be about flat. Net interest expense for the quarter was $92 million. For Q3, we expect net interest expense to be approximately flat. Other net expense for Q2 was $24 million. For Q3, we expect this expense to be about $45 million.

Our effective tax rate for Q2 was 21.4%. Based on our anticipated geographic earnings mix, we expect our Q3 effective tax rate to be approximately 23.5%. Capital expenditures for Q2 were $354 million. For the full year 2025, we expect capital expenditures to be about 6% of revenue. In Q2, tariffs impacted our business by $27 million. For Q3, we currently expect a negative impact of about $35 million, or about $0.04 per share, which is included in our guidance.

Now let me provide you with comments on our Q3 expectations. In our Completion and Production division, we anticipate sequential revenue to decrease 1% to 3%, and margins to decrease 150 to 200 basis points. In our Drilling and Evaluation division, we expect sequential revenue to also decline 1% to 3%, and margins to improve 125 to 175 basis points.

I will now turn the call back to Jeff.

Thanks, Eric. Let me summarize the key takeaways from today's discussion. First, we are aligning our business with the current market conditions. We will reduce costs and retire, stack or reallocate underperforming assets.

Next, internationally, we see strong performance in our growth engines unconventionals, drilling, production services and artificial lift. We secured key wins last quarter through our technology, operational excellence and collaborative approach.

In North America, the ZEUS platform and iCruise continue to differentiate Halliburton by delivering unique value to our customers. Combined with our ability to execute at scale they reinforce our position as the leading services company. And finally, we remain focused on returns, capital discipline and free cash flow.

And now let's open it up for questions.

[Operator Instructions] Our first question, or comment, comes from the line of Neil Mehta from Goldman Sachs.

The first question was really just -- is around C&P margins. They were a little softer in the quarter, and we appreciated the Q3 volume Q3 guide.

But can you just unpack that a little bit more? What are you seeing that's contributing to that? And how do we get that moving back in the right direction?

Yes, Neil, it's Eric. So let me -- I'll give you a couple of colors on the C&P margins versus what we guided for Q2, and then I'll give a little more color around the Q3 guide for Q3.

So starting with Q2, we actually were kind of on guidance in terms of revenue margins was a bit lower than the guidance on flat. We are, I think, 80 bps below the guide. So what really happened in terms of the revenue side, we were up in most regions and most product lines across the C&P division with two major exception. One, Saudi, and also the artificial lift business in North America. The reduction in Saudi is actually a reduction in frac, but also on the related services as a lot of the frac in Jafurah slowed down ahead of the award of the new tender.

The other element that contributed to softer margins are obviously the pricing headwinds in U.S. land and also the reduction in the Saudi activity I talked about. Some of that was offset by the performance of our cementing and completion tool product lines. But overall, it resulted in a slight miss from a margin perspective. So that's the color on the performance versus the Q2 guide.

Now if we move to Q3. So our guidance is 1% to 3% reduction in revenue and 150 to 200 basis point reduction in margin. There are really three main elements that contribute to the guidance. The first one is the reduction of activity and reduction, or softness, in pricing in North America land pressure pumping, which is both frac and also cementing. The second element is the reduction of completion tool deliveries in most international markets, partially offset by increase in completion deliveries in the Gulf of America and these are essentially just operation, the cycle of drilling versus completion, et cetera. And the third element, which is the one I mentioned that affected also Q2 is the reduction in activity of frac in Saudi.

And so maybe, Jeff, for you, a quick question is just can you help us walk through your customer conversations about the white space as you think about the back half of the year in North America for the frac side of the business?

And any early thoughts on 2016? I know it's a really volatile macro, but you probably have some great perspective as you talk to your most important customers.

Yes, certainly. And, well, I think that conserving cash, we look and we see that as I mentioned in my prepared remarks, quite a bit of reorganization and activity going on around that. And so I would say customers are fairly cautious in conserving budget. They also say, though, that the most important thing is technology and service quality performance, which is certainly good for Halliburton, and we'll probably talk more about it, but sort of the technology steps we've taken have been important. And so as I look out to '26, it's really early with the volatility that we see and just -- what precisely they're going to do for 2026 is sort of on hold.

But what I would expect is that we would see activity earlier in the year, picked up above what it is in certainly Q3 and [ 4 ]. But as far as sort of doubling down, I think that I don't see that happening soon until we see some catalysts that change trajectory on sort of price outlook.

Our next question, or comment, comes from the line of Dave Anderson from Barclays.

Just kind of curious, Jeff, where are we right now in terms of these E&Ps resetting their programs? You talked about some meaningful schedule gaps coming up. I'm just kind of curious, we've seen a pretty steady decline in oil [indiscernible] the last few months. Do we be thinking about kind of a 4Q bottom?

And then related to that, if you could give us maybe a little bit more color on pricing? I know at the end of last year, concessions were made to keep fleets contracted. The situation today, I'm curious, are they coming back for another bite of the apple?

And it sounds like you've walked away from some work. I'm curious, does that mean you're getting rid of the final diesel fleets? Sorry, threw a lot of that first question.

Yes, fair enough. Couple of questions in there, Dave. All good questions.

So let me just start with outlook on where are we in sort of the cycle or where are we relative to a bottom? And I really think we have to look at the supply and demand fundamentals here. And we projected, I think broadly as projected, there's solid growth in oil demand. But we also have spare capacity coming into the market, and sort of the U.S. producing at a fairly high level. And so I think as supply consumes -- as demand starts to consume spare capacity, and we also start to see sort of production rollover in some key markets, which it likely will. I mean, the decline curve is still working. I think those are the signposts we look for in terms of where do we things come -- where do we see sort of a bottom versus a recovery?

What I do know, though, is that the -- it becomes a question of duration. Duration and sort of depth. And so if it comes off hard, it comes back on pretty hard, and pretty quickly, and that's what we see. So we need to look for those signposts. We've seen that we're below maintenance level today in North America, certainly below maintenance level in Mexico and a few other key markets around the world. So I think we're -- from a trajectory standpoint, that recovers.

From a price standpoint. Yes, I mean, we at a place where I would describe it as we get to make choice. And so we are making choice around equipment working or not working, and we'll clearly stack some fleets. Just because -- just we're not going to work it on economic levels. And it's a commitment, it's strategic for us, and it takes some equipment out of the market as well. But from our perspective, working at uneconomic levels is literally burns up equipment, creates [ HSE ] risk and all sorts of things that we just don't want to do. And so that's -- those are steps we are taking now broadly from a -- Dave I'll stop there. That's kind of where we are.

No, that makes sense. That makes sense, Jeff. And maybe if I could shift to international markets. You mentioned unconventionals a number of times. Argentina, Australia and obviously, Saudi, which is the big one we're all kind of watching here.

I was wondering if you could give us a sense as to kind of how big this now -- right now is in your international portfolio? And how big it could actually be in a couple of years? Just trying to get a sense. Is it like 10% of international revenue that at this point? Like kind of where does it go from here? Just a little bit of a relative sense here in terms of the opportunity.

Yes. Let's -- look, I think there's opportunity in certainly Argentina, as you described. Also Saudi Arabia, but it's well beyond that in terms of sort of trajectory. And like all things that start slowly and then gains legs, which I would -- how I would describe probably Argentina more so just because of the sort of a broad group of customers all investing in a market and it got a lot of legs. And now today, that is a meaningful market, a very meaningful market, and a technology-driven market.

I think that we expect growth beyond just those two countries. And I think that's what's important. As we go forward. We've seen pretty solid growth year-on-year. I would say double digits growth year-on-year with our international frac business, non-U.S. frac business. That's why I described Australia. I'll describe the UAE, where we see quite a bit of opportunity. And then also, most of North Africa actually presents pretty good opportunities for unconventionals, and also having the markets.

And yes, and I think in gas demand is going to drive in a number of these markets, you're going to see unconventionals driven more by gas demand than anything else.

Our next question, or comment, comes from the line of Arun Jayaram from JPMorgan.

I wanted to maybe elaborate -- I wanted to see if you could maybe elaborate on that commentary on unconventionals. And wondering if we could focus on the Middle East? I know I cover [ EOG ] and they'll be testing an unconventional play concept in the UAE. And perhaps I wanted to see if you could comment on how was positioned in the upcoming Jafurah tender.

I know that, that tender will include -- called a tripling of the amount of stages, so it's a large tender. Jeff, how important do you think technology will be within that tender? And when do you expect to see activity kind of rebound in Saudi?

Yes. Look, from an unconventional perspective, we're well positioned in the Middle East for unconventionals, both from an equipment standpoint and technically. And we have work starting Q4-ish in UAE, and we're happy with that, and that will be a technology showcase, I expect in terms of what we can do with ZEUS IQ and some other things.

I'm not going to comment on Jafurah, other than to say it's in process now. It's -- we've got a very disciplined approach to bidding work. And I think that's what needs to be remembered here. And we're centered on -- that whole process is centered around returns and long-term returns, not just volumes. And I think we know quite a bit about this [indiscernible] price frac, et cetera. And so from that perspective, look, by the time we're talking about named tenders on calls and things of that nature, you can bet they've gotten pretty competitive.

But that said, we do like the frac work we're doing internationally, and I really like the interest in the technology, beyond interest actually buying the technology in Argentina, for example, that we're able to do with how to place fracs, where the sand is going, how to improve recovery.

Great. Jeff, my follow-up just on the portfolio. I know in the last 10-Q, you commented on the focus on Halliburton maybe to market a portion of its chemicals business, but just thoughts on [ pruning ] of the portfolio?

Look, we want to be investing in the thing -- we are investing in the things that we believe show the best returns for us and the best sort of opportunity for growth and returns. And so we do. We bring the portfolio from time to time. We really like what we're doing with lift. And we think the [ ESP ] lift in particular, is the most attractive, certainly for us.

And as we look at other parts of our portfolio where we don't see necessarily, we don't see the opportunity for the kind of accretive returns that we would like. We take a hard look at it.

Our next question, or comment, comes from the line of Roger Read from Wells Fargo Securities.

Coming back to the -- let's just call it the North American outlook here, that I recognize. A lot of things are kind of going against this year in terms of rig count, frac count, all that. We did get some tax reform with a big better bill, or a big beautiful bill, whatever that BBB. And we've heard a number of the E&P companies talk about it will be favorable to their free cash flow.

So when we think about your outlook as it is today kind of through year-end, and then we think about maybe commodity prices hold flatter, and some of these guys have a little more cash. What sort of in the risk profile of your outlook? In other words, is that something that could help meaningfully? Or do you feel, hey, visibility is actually pretty solid here, and we got a good view in the year-end of significant softness?

Look, I don't think the [ big beautiful build ] necessarily factors into the plans in terms of what customers do. I think that's going to be quite a bit more sort of budget and commodity driven and returns driven for them. But what -- when I look at the market, I think we have a fantastic group of customers. And really good customers. And so -- they are serious about this work. Got good strategies. And if there's white space appearing, it's to manage budget. The plan for 2026 is far from set for them at this point. But they're the kind of customers that we know will be active in this market.

And so when we see white space like this, in some cases, we will stack for a short time and then come back or we will reallocate things in a way that we think is best from a returns perspective. Or we will, in some cases, make the determination to stack and keep something stacked. So I think that from an activity set we really need to watch supply and demand. And as I said, those signposts around what does production overall do in North America, I think, will be a key driver in terms of what '26 looks like.

Yes, that makes sense. And then in terms of your comments about not wanting to chase uneconomic work. Historically, this has been a sector that sometimes gets more market share rather than, let's call it, returns or margin focused. Is that -- we should think it's a little different this time you are going to be focused on maintaining, call it, margins and returns as opposed to a market share fight?

Look, we are -- strategically, we're about maximizing value in North America, maximizing returns in North America, and that includes not working at uneconomic rates. And so -- this is exactly what we did -- what we did a year ago in the gas markets and something we will continue to do.

I mean, the fact is we want good equipment when it snaps back, we want to make money with the equipment. And that's just the approach we're going to take. We've taken it before. So it should not be -- it's not something we're going to do. It's something we've done, and we'll certainly do it again.

Our next question, or comment, comes from the line of Saurabh Pant from Bank of America.

Jeff, or Eric, maybe. I want to spend a little time on the cost side of things. I know you have worked hard to variabilize your cost structure in North America and yet you did speak to reducing your variable and fixed cost, right? But how should we think about what kind of level of activity that you would be using to frame what you think you can take out of your cost structure?

Or put differently, how should we think about protecting margins? Maybe overall, maybe [indiscernible] and C&P, however, you want to talk about that?

Yes. Look, we are looking at a market where we want to take action around variable costs, clearly. It's not a perfect science, but as activity slows down, we want to take equipment and cost out of the market. Not a perfect science, but we've seen some moves in the market that caused us to do that. So that's 1/2 of the equation.

When I get to the other half of the equation around structural costs, we're still relatively busy around the world. That said, contributing to margins, or maintaining -- taking actions that drive efficiency, no different than what our customers are doing is right in our wheelhouse. And we've done that before also and expect to do that again.

To frame that, look, it's probably in the 1% range sort of type thing is early days as we get started. And it may be a couple of quarters as we get rightsized around what we see in terms of the market. It's a bit of a dynamic market today. So we're targeting what we see. I think we probably got a pretty good handle on where we need to get from a reduction standpoint, but we'll need to let that play out.

Got it. Got it. Okay. And then the other one I have, Jeff, for you is on the Saudi market. We have all seen the rig count in the country come down, right? To speculate for me at this point to say where it goes, right? But one thing I've been hearing is that maybe the Saudi market becomes more or less [ TK ] over time as activity comes back or even if it doesn't come back, right?

But Look, I don't know, right. But just a philosophical question, if that's what happens, right? Saudi more [ LSTK ], Middle East in general is more [indiscernible] How does Halliburton play in that market? Is it to Halliburton's advantage? Or do you have to adapt the way you do things? Maybe just a high-level comment on that.

Well, look, we've got very strong muscles in that area, and we've been successful doing that. I would say our project management organization is the strongest it's been. We do a lot of collaborative work and we do [ LST ] work today. In fact, today, that type of work, [ LSTK ] and collaborative type work that we described represent more than 20% of our international business. So clearly, I think it -- it's in our wheelhouse to do, and it's a strength for us. And so I would see that as advantageous.

So I will start all of that with what I said earlier around our tendering process, which is highly disciplined and is geared towards returns. And so again, volume and market share at the expense of returns is not -- it doesn't help the cause at all. And so what you'll see us be is very sharp around how we look at those things and make sure that we can make a return. But the capability to do it, we do a lot of it today, and really pleased with actually where that whole business is.

Our next question, or comment, comes from the line of Marc Bianchi from TD Cowen.

I guess I wanted to ask about sort of doing some math here from the 3Q guide you gave and the outlook you gave for the year for North America and international. It seems to imply a pretty big step down in 4Q to kind of get to the numbers that you talked about.

And I guess I'm curious how much visibility you have to that at this point? How are you thinking about -- is it more pronounced in international versus North America when we look at fourth quarter?

Marc, it's Eric. So we're not going to give you an exact guide on what Q4 looks like. There are a lot of moving parts that we touched on today is what the U.S. activity is going to look like, the among white space, the activity in Saudi. Mexico is kind of being on and off, et cetera. So a lot of things can happen between now and Q4 that will shape Q4, how Q4 looks like.

But directionally, to give you some color, we're looking at probably kind of flattish revenue at best, it would seem. We'll see a reduction in C&P revenue, an increase in D&E revenue. Margin will continue to soften probably in C&P because of the amount of white space in the U.S. frac market, Jeff talked about. We will see a continued strengthening of the D&E margin on top of what we did in Q3. And we'll see the usual seasonality that we see Q4 over Q3. So frac in the U.S. tends to come down. Software sales will pick up materially, and then typically completion tools in the C&P division go up as well. So that's kind of how we look at Q4 at this point in time.

Okay. And I guess given the cost actions you're taking and the efforts you're making to sort of manage through the market, do you think that C&P margins can hold above double digits as we exit the year?

Yes.

Yes. Yes. No, for sure. Yes.

Very much [indiscernible] that.

Our next question, or comment, comes from the line of Scott Gruber from Citigroup.

I just want to follow that last line of questioning. Eric, the margin improvement, you mentioned in D&E in 4Q, is that going to be largely just seasonal factors, some more software sales, et cetera? Or is there any of the mobilization expense and contract start-up costs that weighed on 2Q? Is there an element of those costs still impacting 3Q? Or most of those in the rearview mirror now?

No. I mean if we look at -- so I think Q4 will be a continuation of Q3 with a with a material impact in terms of improvement in margin coming from the software sales part of the business. Now if we kind of peel the onion a little bit in the Q3 guide for D&E and the improvement there. So we guided an improvement of 125 to 175 basis points. So the different factors that are coming into play there is, one, the reduction in activity in Saudi, which is kind of a headwind for us in terms of [indiscernible]

The second element is on -- is a bit of a change in the drilling versus completion cycles. We talked about it in completion the Gulf of Mexico completions coming up, but the offset of that is like drilling fluid, which is a really big business for us in the Gulf of Mexico, and in Europe is coming down a bit.

The two largest drivers, or three largest drivers of margins in Q3, though is the start of the improvement in software, a global improvement in our directional drilling business and the elimination of mobilization costs that dragged margins down in Q2. So that's a little bit of color on Q3 and Q4 from a D&E perspective.

I appreciate that. I appreciate the details on how you're responding to the current environment. CapEx should now be sliding with lower sales. But is there a plan to pause the ZEUS fleet expansion either in the second half or next year? And if we think about that investment on an annual basis, how much would CapEx come down if that program has [ passed ]?

Yes. Look, I think that, that program has always been demand driven in terms of we've only built equipment, four contracts that we had in hand. And so it's been less of a program and more of a demand-driven activity. And so the extent to which we don't see demand for new equipment, that obviously will come in.

And so -- and then with respect to anything else, we will expect to bring down CapEx to the lower end of that range as we go into 2025 -- or 2026 certainly. And -- but from a ZEUS build standpoint, I would expect that slows down just because we've achieved the 50% of our fleet, [indiscernible] thereabouts of ZEUS fleets and like the portfolio that we have.

And is it kind of $40 million, $45 million of fleet in terms of what you'd say is?

No. CapEx -- for CapEx?

CapEx [ especially ].

About ballpark.

Our next question, or comment, comes from the line of Derek Podhaizer from Piper Sandler.

So there's a lot of interesting comments on artificial lift on the call. You're seeing some bifurcation, seeing softness in the U.S. land, but significant growth internationally.

Can you maybe walk through the puts and takes in each region there? Are you seeing tariffs maybe bite into the U.S. land artificial lift market? International, is that more of a function of the increasing unconventional activity? Just maybe some color on artificial lift, U.S. versus international?

Yes. Look, the demand for artificial lift is around accelerating production. And so it's not as much as unconventional story internationally as it is just great technology in conventional wells to produce more oil. And we -- when we acquired [ Summit ], they had no footprint internationally. And so we've been quite successful in growing that business into markets on the back of just the technology and performance, and automation, that Summit has developed and has taken to new markets.

In the U.S. market, it is going to be somewhat affected by just activity levels that we see. And then secondly, from a tariffs, do they have an impact? Yes, they do.

Yes. On the tariff side of things, as we said, Derek, we expect tariffs go up a bit in Q3. Artificial lift is probably the largest component of the tariffs for us today. So our team in [ Summit ] and our supply chain team are working hard, trying to kind of rewire part of the supply chain around what they source from China, but it's going to take a couple of quarters to work through.

Got it. Very helpful. Appreciate it. And then just a question on two regions. So you talked about Mexico being a source of strength here in the quarter, with [ LatAm ] up 9%. I was surprised with that. So maybe can you just give us an update on Mexico, seeing a lot of new slot of the country and where we are with that?

And then separately, Kuwait. You pointed as a sign of a bit of softness, which I was surprised about given it was one of the bright spots that's been talked about over the last quarter. So maybe just your thoughts on where you see for Mexico go forward and Kuwait?

Look, Kuwait overall is a solid market and it will bounce around from month-to-month, quarter-to-quarter. But ultimately, we see growth in Kuwait. No question about growth in Kuwait, and we do important work in Kuwait. Today and expect to do more of that in the future.

From a Mexico perspective, we saw a solid improvement in LatAm, but it was not Mexico. And so solid performance in Mexico. I mean, with the issues in Mexico, in my view, aren't settled. And so I think we see starts and stops in Mexico. And I've been to Mexico. I've met with the management team there. I think what we're going to see is decline rates at a pace that create sort of pressure to reactivate the business there. And oil and gas is obviously critical to the economy of Mexico, and I think that will drive recovery.

Our next question, or comment, comes from the line of Stephen Gengaro from Stifel.

So two for me. And I think the first -- Eric, I'm not sure you'll comment on this or not. The guidance color you gave kind of for the different geographies and segments, it feels like [ C&P's ] kind of step down like double digits in 4Q to get there. Is that accurate?

Yes, it's about right.

Okay. Okay. The other question, when we started thinking about kind of the pricing in U.S. pressure pumping, particularly as we kind of get into the fourth quarter, and then thinking about 2026, how do you approach the customers for -- obviously, the service quality and the quality assets you're delivering, and what clearly is going to be kind of a soft market. And as you kind of contract these out into '26, what is sort of the pricing strategy to kind of maintain margin in that environment?

Well, look, I'm not going to get into the details around pricing strategy here. But we obviously look at value in terms of value created for customers, and we look at the opportunities to provide more technology and how does that create value. And then ultimately, we step back if the pricing is not in a situation where we can make economic returns, then we just say no. I mean -- and that's where I say we get to exercise some choice as well in terms of [indiscernible] what the market looks like for us.

And just one quick one. We've heard kind of maybe fleet attrition is accelerating a bit. Are you seeing that in the overall market?

I'm sorry, repeat the question?

Whether you're seeing fleet attrition across the industry accelerating at all, or expected to accelerate in this market?

Yes, I do expect it to accelerate in this market, and it is, to a certain degree, it's always sizing to the market that's there. I mean that's what happens. And so it's -- equipment will get retired and then it will be, in many cases, harvested to -- for spares and other things, and that's how it gets consumed.

At the same time, fracking and gas is just harder on equipment than it is in oil. It's just higher pressures, which means it's harder on the equipment. That means the equipment wears out more quickly. And so we're really thoughtful about pricing and where we put equipment to work for those very reasons.

Our next question, or comment, comes from the line of Doug Becker from Capital One.

Jeff, Eric, just given the updated outlook, I wanted to get your thoughts on free cash flow this year. And does the commitment to the cash returns framework explicitly mean the [ $1.6 billion ] cash return targets still intact?

Yes. I mean, the update as we talked about a bit of a softening in the market. So we've revised our outlook for free cash flow in '25 and right now, the range that we're looking at is anywhere between $1.8 billion and $2 billion. That's kind of how we're setting things. That's how we're seeing things evolve [indiscernible] on the free cash flow for '25.

Now we're not seeing anything that really changes our perspective on the cash return to shareholders. I mean when we're through Q2, if you account for the second half of the year dividend will be over our 50% return already. Now we'll probably maintain the pace at which we have been going. So yes, that's kind of how we look at that free cash flow and returns.

I'm showing no additional questions. At this time, I'd like to turn the conference back over to management for any closing remarks.

Thank you, Howard. Look, before we wrap up today's call, let me leave you with a few thoughts. Despite industry cycles, I believe the demand fundamentals remain strong for both oil and gas. Today, Halliburton is more differentiated with deeper technology advantages to address our customers' requirements, and more collaborative than ever before. Those are powerful drivers of both customer and shareholder value.

Throughout the cycles, Halliburton will remain focused on free cash flow and returns. I look forward to speaking with you next quarter. Howard, please close out the call.

Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may now disconnect. Everyone, have a wonderful day.