Halliburton’s strategy for 2017 is shifting, and the company will have a whole different M.O. this year. Jeff Miller, Halliburton President expressed his feelings about the new year this way: “in many ways, 2016 was like a bar room brawl where everyone, and I mean everyone, took a punch. But it is 2017 now and the brawl will continue, but I like our chances in that fight.”
Halliburton is gearing up for some big strategic changes during 2017. We’ve identified five things the company will do this year that it didn’t do last year in this update.
- Reactivate Frac Spreads At $10-$12mm A Pop. Three months ago, Halliburton said prices were too low to justify unstacking frac spreads. That may have been because Halliburton isn’t reactivating cheaply. Management now plans to return multiple frac spreads to service during each of 1Q17 and 2Q17 (they wouldn’t say how many for competitive reasons). The cost to reactivate each spread will amount to a penny per share, which equates to $10-$12mm per spread after adjusting for the tax shield. This seems very high to us. For example, Patterson-UTI just reactivated two frac spreads within the past 30 days for only $2mm per spread. It is possible that Halliburton’s cost guidance may not be apples to apples with figures other companies are providing (i.e. Halliburton’s could include indirect expenses others aren’t including). Halliburton cited equipment repair, logistics, and advanced hiring as key components of the cost. Management also talked about retrofitting some of the older equipment as it returns, perhaps with Q10 pumps. The costly resurrection of Halliburton equipment implies that management is very bullish on pricing, for they would not spend that kind of money without visibility on rapidly rising frac prices.
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