Halliburton Q3 2026 Earnings Call Transcript

Halliburton (NYSE:HAL) reported third-quarter financial results on Tuesday. The transcript from the company’s third-quarter earnings call has been provided below.

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Summary

Halliburton Company reported third-quarter 2026 revenue of $5.7 billion, exceeding expectations, with an adjusted operating margin of 12.8%.

International revenue increased by 9% year-over-year to $3.5 billion, while North America revenue decreased by 9% to $2.2 billion.

The company repurchased $250 million of common stock during the quarter.

Halliburton expects mid-single-digit revenue growth and a 200 basis point improvement in operating margins to about 15% in 2027.

Strong performance was noted in the Middle East with expected sequential and year-over-year revenue growth despite geopolitical uncertainties.

Operational highlights include increased activity in international markets, with significant wins in Brazil and Cyprus due to technological strengths.

Halliburton’s growth engines, including production services, drilling unconventionals, and artificial lift, are projected to add $3 billion in annual revenue by 2028.

The company expects Q4 2026 revenue to remain flat at around $5.7 billion, with a slight improvement in operating income margin.

SAP S/4 implementation is expected to drive cost reductions, contributing to the anticipated margin expansion in 2027.

Management expressed confidence in the company’s strategic positioning and the potential for upside in North America, particularly in the hydraulic fracturing market.

Full Transcript

OPERATOR

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Halliburton Company’s third quarter 2026 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker’s presentation, there will be a question and answer session. To ask a question, you will need to press Star 11 on your telephone keypad. At this time I would like to turn the conference over to Mr. David Coleman, Senior Director, Investor Relations.

Sir, please begin.

David Coleman (Senior Director, Investor Relations)

Hello and thank you for joining the Halliburton third quarter 2026 conference call. We will make the recording of today’s webcast available for seven 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, quarterly reports on Form 10-Q, 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 third quarter earnings release and in the quarterly results and presentation section of our website. Now I’ll turn the call over to Jeff.

Jeff Miller (President and Chief Executive Officer)

Thank you, David, and good morning, everyone. I am pleased with Halliburton’s third quarter results. Our revenue exceeded our expectations, and we took important steps towards improving our margins. Here are a few highlights from the third quarter. We delivered total company revenue of $5.7 billion and adjusted operating margin of 12.8%. International revenue was $3.5 billion, an increase of 9% year over year. North America revenue was $2.2 billion, a decrease of 9% year over year.

During the third quarter, we repurchased approximately $250 million of our common stock. Before Shannon covers our operations, let me share my thoughts on the market and early view of the year ahead and Halliburton’s business today. Let’s start with the market. We are another three months into one of the largest energy disruptions in history. Commodity prices remain elevated and geopolitical uncertainty is high. The world has lost an enormous amount of oil supply and the shortfall continues to grow. Current estimates are that nearly 3 billion barrels of supply have been lost since the conflict began and that about 1 billion barrels have been drawn from global inventories.

I expect the work to restore production, rebuild inventories, and strengthen energy security will drive multi-year demand growth for oilfield services. Turning to our outlook for the business, our early view of 2027 for Halliburton is revenue growth in the mid-single digits and operating income margins to expand about 200 basis points, or to about 15%. Let me share with you what underpins my view and how Halliburton’s business today makes me confident we will achieve those results. First, as a result of years of deliberate strategy and investment, our international business, in fact all of our businesses outside of North America hydraulic fracturing, are the strongest they have been in many years.

These businesses are growing, profitable, and winning on technology and our collaborative value proposition. My confidence is rooted in their strong execution, and I am excited about the pipeline of opportunities in 2027 and beyond. Second, I want to put North America hydraulic fracturing in the proper context for 2027. I could tell you anecdotes about pricing adjustments and list the reasons I think the North America frac market should improve. But what’s important to understand is that Halliburton’s path to growth and improved profitability that I just described does not require any recovery in North America frac. To us it is purely upside. Shannon is going to take you through the operational details of this quarter, but I will leave you with this.

I see growing multi-year demand for oilfield services, I see Halliburton delivering growth and margin improvement, and I see any North America frac business recovery as upside. With that, let me turn the call over to Shannon.

Shannon Slocum (Executive Vice President and Chief Operating Officer)

Thanks, Jeff. Let me start with international. Third quarter revenue was $3.5 billion, up 3% sequentially. Much of the strength this quarter came from growth in our D&E division, which significantly outperformed our expectations on the top line and improved operating income margins 150 basis points sequentially. Let’s get into the details. I’ll start with Middle East. The conflict clearly creates near-term uncertainty, but I am pleased with our third quarter performance. Middle East results improved sequentially despite inflationary headwinds, which we expect to persist for some time. In the fourth quarter, I expect Middle East revenue to grow both sequentially and year over year. Of the many things driving those expectations, I’ll highlight two: a full quarter of completions activity and an expanded share across integrated and discrete services in Saudi Arabia.

Outside of Middle East, Halliburton’s international business is winning work and we are delivering on our growth engines in a healthy market. We expect 2026 year-over-year growth in these regions to be about 12%. Let me say a word on why we win. Our value proposition is simple but powerful. We collaborate with our customers and we engineer solutions that maximize the value of their assets. We differentiate on technology and we deliver on execution. When customers award work on technical merit and total cost of ownership, Halliburton wins. I’ll give you two examples from this quarter: the Boomerang appraisal program for BP in Brazil and the Cronos ultra-deepwater gas development for Eni in Cyprus.

In each case, customers chose Halliburton for our technology in drilling automation, formation evaluation, fluids, cementing, and completions, and importantly, our ability to collaborate with our customers early in the development cycle. Next, let me give you a brief update on our growth engines: production services, drilling unconventionals, and artificial lift. Each is a market we believe will grow faster than the industry as a whole. We are tracking to our target of $3 billion of added annual revenue by 2028. This is a global target, but we see concrete evidence of it materializing as awards move to startup. In production services, we expect our North Sea frac vessel to begin operations at year end, and in unconventionals, we expect our first Zeus fleet in Argentina to start up in the fourth quarter as planned.

I want to take a moment to highlight artificial lift. In Argentina, we won a multi-year ESP rental contract with a major operator, our largest award of the quarter, and with another customer we delivered our first unconventional installation. This quarter we also made our first installations in UAE and offshore Congo, and we received our first order for an offshore ESP in Brazil. I’m excited about the accelerating growth of our international footprint.

One more market I want to mention is Venezuela, where we are open for business. Our management team is in place, our facilities are open, key equipment has moved, and we generated revenue in Q3 in multiple product lines. Venezuela is a market we know well. Based on customer conversations, I expect to see solid growth moving forward. To conclude on international, our value proposition is winning, our growth engines are delivering, and I am excited about the year ahead.

Turning to North America, third quarter revenue was $2.2 billion, down 5% sequentially. The frac market did not recover as strongly as anticipated, and results reflect this. We run North America frac for returns, not share, and in the third quarter we moved several crews to new customers at better pricing. These moves created more downtime than we anticipated and weighed on our performance in the region and our C&P division in North America land.

Our Sperry Drilling Services, drill bits, and drilling fluids businesses grew 23% year over year, well ahead of the rig count. Let me tell you what that looks like at each business. In drilling services, the trend is clear: longer laterals, more complex wells, and more rotary steerable drilling. iCruise delivers on all three, and we see strong demand in all sales channels. In drilling fluids, Baroid also wins in long laterals where wellbore stability can decide how fast a well gets drilled. We see growing adoption of our high-performance fluid systems. I expect to see this growth continue as wells get more complex and customers demand greater efficiency.

In drill bits, our performance-driven technology is paying off. One example of this is HyperSteer, a bit engineered to run with iCruise and deliver maximum steerability and speed. Our North America drill bit revenue per rig is up double digits from the first quarter. Bottom line, North America production requires progressively more complex wells, and more complex wells means more growth for Halliburton. Let me close on North America with how I think about this business as a whole. It generates solid cash flow, and over the last several years we have made deliberate choices to reduce our exposure to commoditized activity and differentiate through technology. Today both our drilling and completion businesses are more differentiated than ever before.

Before I turn the call over, I want to thank our employees in more than 70 countries for their focus on our customers, safety, and execution. With that, I will turn the call over to Eric to provide more details on our financial results.

Eric Carre (Executive Vice President, Chief Financial Officer)

Thanks, Shannon, and good morning. Our Q3 adjusted net income per diluted share was $0.60. Q3 revenue was $5.7 billion, adjusted operating income was $731 million, and adjusted operating income margin was 12.8%. Let me share what we saw in Q3 relative to our expectations. First, in our C&P division, revenue and operating margins were both below our expectations. This was primarily due to lower-than-expected activity in hydraulic fracturing in North America land and Argentina, and a slower startup of a new contract in Saudi Arabia. Turning to D&E, we delivered better-than-expected revenue and operating margins led by U.S. land, Middle East, and Latin America.

As expected, we saw a more favorable revenue mix during Q3 and higher incremental margins, resulting in stronger overall margins than anticipated. Turning to other financial items in the quarter, consistent with our expectations, free cash flow in Q3 was down from Q2 levels, but we expect sequentially higher free cash flow in Q4. Capital expenditures for Q3 were $266 million. For the full year 2026, we expect capital expenditures to be about $1.1 billion.

Moving on to our forward-looking expectations, starting with an early view of 2027, we expect Halliburton to deliver revenue growth in the mid-single digits. This assumes flat North America, Middle East activity in line with the second half of 2026, and steady growth in other regions. We expect operating income margins to expand about 200 basis points to about 15%, driven by margins firming up in our core business, the startup of new work, our cost reduction program, and the ramp-down of SAP S/4.

On this last point, I am pleased to announce that we are now live on SAP S/4, completing a major global transformation. I expect this is the beginning of further simplifying our business processes, adopting AI at scale in our back-office functions, and driving further cost reductions. I want to thank the teams around the world who made this possible. Turning to Q4, we expect total company revenue to remain approximately flat to Q3 around $5.7 billion, and operating income margin to improve about 70 basis points. As a result, we expect Q4 earnings per share to be approximately $0.62 to $0.64.

Let me provide some color on the guidance. In our C&P division, we expect Q4 revenue to increase 3% to 5% and operating margins to improve 75 to 125 basis points. The main drivers are stronger performance in Latin America and the Middle East, higher seasonal completion tool sales, and steady frac activity in North America land. In our D&E division, after a strong Q3, we expect Q4 revenue to be 3% to 5% lower and operating margins to be flat to up 50 basis points.

We expect margin improvement across several product lines and a more favorable product mix. I will now turn the call back to Jeff.

Jeff Miller (President and Chief Executive Officer)

Thanks, Eric. Here are the important takeaways from today’s call. Halliburton delivered a solid third quarter, revenue exceeded expectations, and we took important steps towards improving our margins. Based on our early view of 2027, we expect mid-single-digit top-line growth and operating margins of about 15%. I am confident we will deliver revenue growth, margin expansion, and leading returns for our shareholders. Let’s open it up for questions.

OPERATOR

Ladies and gentlemen, if you have a question or comment at this time, please press star-1-1 on your telephone keypad. If your question has been answered or you wish to remove yourself from the queue, simply press star-1-1 again. Again, if you have a question or comment, please press star-1-1 on your telephone keypad. Please stand by while we compile the Q&A roster. Our first question or comment comes from the line of David Anderson from Barclays.

Mr. Anderson, your line is open.

David Anderson (Analyst)

Thank you, and good morning, gentlemen. So within your 2027 framework that you provided, can you talk a little bit about the Middle East in terms of how you see that trending? You’re having it increasing this quarter and in fourth quarter, which seems to be kind of going against trend. So how does that sort of play out in your mind over the next couple of quarters? And also within that guidance, that 200-basis-point margin improvement, I’m curious how much international unconventionals are impacting that.

Is that starting to be a driver for margins yet?

Eric Carre (Executive Vice President, Chief Financial Officer)

Hi, David. Let me kind of provide some high-level view on the margin improvement first, and then I’ll hand it over to Shannon to discuss the Middle East part of your question. So again, important to understand that the view on 2027 is an early view. It is based on two major assumptions: one, which is our business in North America is flat, and our business in the Middle East is flat to H2 2026. So if we walk through the numbers from a very, very high-level perspective, we should finish 2026 at about $22.5 billion.

That for ’27 means about a billion dollars and change additional revenue. Two hundred basis points in margin means about $500 to $600 million in operating profit. About half of it is going to come from cost savings—operating cost savings, structural cost savings—and the ramp-down of the SAP S/4 program. What remains is basically incremental margins on the additional revenue of about 20% to 30% range. So we think that’s a very reasonable assumption.

So that’s, at this stage, how we get to the 200-basis-point improvement in margins.

Shannon Slocum (Executive Vice President and Chief Operating Officer)

Yeah. Dave, good morning. You know, what we see in the Middle East—I’ll start there, then I’ll move to the unconventional question—is that region has been incredibly resilient. It’s obviously highly fluid right now, but we see a good market moving forward. As Eric said, H2 flat to H2 next year. But if you look at really the things that we have won over the last year or so—restarting in Jafurah unconventionals, the reentry work that we’ve won, integrated offshore work, our Iraq—we’ve seen Iraq starting to get busier, and we won some work there, as you know, with IFMs, and also the expansion of artificial lift throughout the region—both Saudi, Kuwait, Oman, and Iraq—and all that work we see as accretive to our business. So we’re really pleased with the direction of travel for our business and also believe that’s an important market to the operators there, but also important market to the world.

So we see that staying busy throughout next year. And as it relates to just unconventionals as far as next year, we’re really excited about the direction we’re going. We’re now operating in over six countries around the world, plus Argentina, Algeria, UAE, Kuwait, Australia, and Saudi Arabia, and adding a few more. But I think what’s important is the work we’re winning in unconventionals—it’s not about the horsepower; it’s about the technology and some deliberate decisions we made in those investments.

And that’s part of the reason you see that growth in unconventionals for us.

David Anderson (Analyst)

Appreciate the color, both Shannon and Eric. A follow-up here, sort of related to that, would be on Latin America. It looks particularly interesting for ’27. I was wondering if you could talk about some of the specific opportunities that you’re seeing over the next few years—Argentina, as you just mentioned, but we also have Mexico, which seems to be doing better, and Venezuela being talked about quite a bit. Could you sort of address some of the upside that’s potentially there for Latin America not just in ’27, but beyond?

Shannon Slocum (Executive Vice President and Chief Operating Officer)

Yeah, Dave, I’d say interesting but exciting. We believe Latin America will lead the charge for growth for us—certainly in Argentina with the unconventional growth we’ve seen, as I mentioned in prepared remarks. Venezuela is open for business—bases are open. We’ll be delivering a dozen-plus ESPs to a major customer in Venezuela. Mexico—probably not an H1 recovery; it will stay fairly flat, but opportunities in H2. But I don’t want to forget about Suriname in this conversation.

We have won some significant work between TotalEnergies and Petronas in an integrated way. But I think if I look at Latin America, a lot of the work that we’re winning is really centered around our value proposition—how we engage with our customers, and also their confidence in our ability to execute.

David Anderson (Analyst)

Appreciate it. Thank you very much. Thank you.

OPERATOR

Our next question or comment comes from the line of Arun Jaram from J.P. Morgan. Your line is open, sir.

Arun Jaram (Analyst)

Yeah. Good morning, team. Jeff, fairly unusual for Halliburton to provide kind of outlook comments at this time of the year, particularly prior to budgeting season from the big oils, integrated and E&Ps. So I guess my first question is what gave you and the team confidence to provide this revenue and margin guidance kind of this early in the season, and maybe just give us a sense of how confident you are to deliver, call it, that mid-single-digit growth and the 200-plus basis points of margin expansion.

Jeff Miller (President and Chief Executive Officer)

Thank you, Arun. Look, I wanted to help you see what I see. That is the primary driver here. I don’t like where margins are today, and we’ve made specific choices around cost structure, and I believe—I’m confident—that the direction of travel for margins is up and wanted to make sure that I shared that with you sooner rather than later, and also make clear that this outlook, this plan, does not depend on a North America frac recovery. Look, Halliburton’s international depth is meaningful, and you heard Shannon allude to a lot of it, and you’ve seen the growth. The adoption of technology that we’ve worked on for a number of years is meaningful. We are seeing a solid, steady drumbeat of technology adoption around the world. We’ve got confidence in the cost structure in terms of actions we’ve taken and also SAP being implemented—got a lot of confidence in our core business and the kind of technology that’s being adopted.

And then finally it’s the pipeline of new work, and we see it—it’s moving from contract award to startup and into execution. That’s happening. And I suppose finally, the energy security is a real thing, and I know we’re heading into an up cycle, and so that all gives me a lot of confidence around 2027 and, as I said, wanted to make sure I shared that with you sooner rather than later.

Arun Jaram (Analyst)

Great. And just my follow-up is on North America. We have observed a pretty nice rebound in the rig count, yet completion activity has been quite measured. We do know a lot of the rigs being picked up are by private E&Ps and not the publics. Jeff and Shannon, can you talk a little bit about the disconnect and when do you see this translating into incremental demand for frac, and understanding that you’ve outlined some pretty conservative expectations of, call it, a muddle-along scenario today?

Shannon Slocum (Executive Vice President and Chief Operating Officer)

Yeah, Shannon here. Yeah, we see roughly 40 rigs being added in North America, so we have seen an uptick, as I’ve mentioned in prepared remarks, around Sperry, bits, and mud, and the 23% growth we’ve seen just in Q3 alone. And we have seen privates adding and increasing their activity on the unconventional frac side of things. And our customers right now are in the middle of their budget cycle. But we are seeing some really good anecdotes that are playing out right here in front of us.

For example, we just had a big customer go in tender and only one service company showed up. We had another customer call us back and extend our E-fleet with price and then added another fleet on top of that. And we had several price increases throughout the quarter. So we’re seeing those indicators, and we do know it is a very tight market and there’s not a whole lot of capacity out there. And so when we think about 2027—again, early, early days as far as looking at ’27—but we see there’s a real opportunity for growth in frac in North America next year.

Arun Jaram (Analyst)

Great, thank you.

OPERATOR

Thank you. Our next question or comment comes from the line of Steve Richardson from Evercore. Mr. Richardson, your line is now open.

Steve Richardson (Analyst)

Thank you. I was wondering if you could just follow up on that last question a little bit, Shannon, if we could, on North American Frac, like do we need to see your big customers pick up activity to be a little bit more pointed, or are you seeing enough momentum in the market with broader activity that that pricing comes through? And can you talk about how anomalous was 3Q from these moves and repricing that was going on?

Shannon Slocum (Executive Vice President and Chief Operating Officer)

Yeah, Steve, on Q3, there was white space that we saw and that was a good indicator that white space was not dead time. It was us actually making deliberate choices to move crews around at a higher price. That’s first. We are seeing Q4. You know, you will have some level of seasonality, but we’re seeing that tight as well. As for white space, I believe the bigger customers, the bigger operators, we’ve actually here over the last week seen indications of some of them going and looking at their frac schedule next year and actually have gotten phone calls. So all it takes is really one or two of these guys to put together a sizeable program and that changes things for Halliburton and will benefit in a big way.

Steve Richardson (Analyst)

Got it. Thank you. And then perhaps another follow up on the Middle East. Appreciate your guiding flat activity with the second half of this year of what we’ve observed. Can you talk a little bit about the incremental cost that the business is absorbing right now? And if there is a cessation of hostilities and things start to normalize, is there some upside, international margins there just from those costs rolling off?

Eric Carre (Executive Vice President, Chief Financial Officer)

Yeah. Hey, there is certainly an increased cost with just logistics and getting materials to location with everything going on within the strait. We have built all of that cost assumptions into 2027, assuming that will continue. I see the upside really in, you know, if you look at H2, it’s, you know, times, you know, times two really, that’s up year over year. So we see growth there, but more importantly, the growth we see is from our core business.

Some of the awards I mentioned.

Steve Richardson (Analyst)

Thanks very much.

OPERATOR

Thank you. Our next question or comment comes from the line of Saurabh Pant from Bank of America. Mr. Pant, your line is open.

Saurabh Pant (Analyst)

Hi. Thank you. Good morning. Jeff, Shannon, and Eric.

Eric Carre (Executive Vice President, Chief Financial Officer)

Good morning, sir.

Saurabh Pant (Analyst)

Hey, Eric, I think I heard on 2027 margin improvement, the 200 basis point I think you were calling out, half of that is from cost improvement. Just the SAP roll off maybe. Can you dig into that a little bit for us, Eric? How much is that a SAP roll off versus cost cutting? And then just in general, when we think about 2027 margin, I think there are several cross currents, these cost savings initiatives, but there are also some pricing headwinds.

We’re in a pretty inflationary environment. And yet you are able to deliver these kind of margin improvements. Maybe just unpack that a little bit for us, Eric.

Eric Carre (Executive Vice President, Chief Financial Officer)

Yes, so if I, if we start with the cost reduction, which I say was about half of the improvement in margin in 27. So some of it comes from the cost right-sizing exercise we did in Q3, which you can look at being partially operational costs and partially structural costs. So the structural cost will remain until we decide otherwise. Operational costs sometimes tend to address imbalances in terms of product lines or geographic revenue growth mix. So these might come back up over time.

But we estimate overall that the cost reduction will be between 100 and 150 million dollars for next year. In terms of SAP, we’ve been spending about a little bit over 150 million dollars a year. It will not go away in one go because we have to maintain some level of support as we transition to the new system and make sure everything works fine. But overall the savings are estimated to be anywhere in between 120 and 150 million. Give or take, will be around 250 to 300 million dollars coming from cost savings. And the rest of it is, as I mentioned earlier, very reasonable assumptions on incremental margins from our core business.

So yes, there are inflationary pressures. Some of them are already built in our Q3 numbers and our Q4 numbers. So we don’t necessarily expect to have a lot more inflation from there, but offsetting that also we are not assuming meaningful pricing increase and we are seeing pricing firm up. So all in, we believe that our view of 2027 is a very balanced view with what we know today.

Saurabh Pant (Analyst)

No, that’s very helpful, Eric, thank you. It does seem very balanced.

Jeff Miller (President and Chief Executive Officer)

I agree with that.

Saurabh Pant (Analyst)

And then the second one maybe Jeff or Shannon, if you want to answer this, you did have some comments in your prepared remarks about Venezuela. I think you were talking about expecting solid growth going forward. And we know you signed a couple of MOUs recently with a couple of customers in the country. Just maybe talk to that a little bit. How big could Venezuela be? How fast could this move? And how should we think about this opportunity for Halliburton?

Shannon Slocum (Executive Vice President and Chief Operating Officer)

Yeah, good morning, sir. Shannon Slocum here. Yeah, as I said, we are open for business. Team is in place, facilities open and equipment has moved. And we’re getting multiple inbounds. And you’ve probably read all the reports that I have. You know, a lot of major operators, Eni, Total, Chevron, Repsol, all looking at have either entered or will enter. The work that we started with has been primarily interventions, as we expected. But just in the quarter here, we’ll have 12 ESPs being delivered.

And as far as size, before we left Venezuela, it was greater than a half a billion dollar business. We see that tracking to be in a sizable country for us in the future. That won’t happen overnight. But we do like our start to the year, it trending that direction.

Saurabh Pant (Analyst)

Okay, okay. No, that makes sense. And the fact that your portfolio is fuller, has a lot more production in it. Right. I think that should be helping as well. But that’s very helpful, Shannon. I’ll turn it back.

OPERATOR

Thank you. Thank you. Our next question or comment comes from the line of James West from Melius Research. Mr. West, your line is open.

James West (Analyst)

Hey, good morning, guys. Lots of good color already on the call. I wanted to dig in on two points. One is on the Middle East. Your guidance assumes flatlining from second half, which is obviously better than 2Q, but no growth. If we were to see some type of resolution here, what could that growth look like? Or maybe another way to think about it is what was the level of activity or where you are relative to where you were pre-conflict?

Jeff Miller (President and Chief Executive Officer)

Yeah, James, thank you. Look, we’ve taken a view that, you know, we’ve got great line of sight of what we know is resilient and that’s how we think about 2027. But you know, if things were to resolve immediately somehow, dare to dream would be my comment. I mean, I think we’d see solid growth. I don’t know how to even forecast that under the conditions we’re under today, other than what we have line of sight to. But obviously a good business where we’ve done a lot of really good work, we’ve won some important contracts.

And I think that, you know, if that were to somehow go away, you know, the core business, sort of the ongoing core business would bull up pretty quickly.

James West (Analyst)

Okay. Okay. And then maybe on North America or U.S. frac, I guess, more and more to the point, you’ve moved equipment out because you didn’t like the returns and the pricing. Sounds like from Jeff, your comments and Shannon’s comments that you’re starting to see some movement on price. Could you maybe characterize is this widespread yet? Is it kind of one off? Like, where are we? Are we in the early days of that pricing cycle? Are we getting to that pricing cycle kind of where, I mean, you guys.

You guys dominate the market. So where do you think we are in that cycle?

Shannon Slocum (Executive Vice President and Chief Operating Officer)

Yeah. Hey, what we have seen really starting in late Q2 is a steady progression of conversations starting at the privates on more activity and being opportunistic of really where the strip was at that time and some operators that have hedges and saying, I can create some value here. The sense that we see, right, what we see right now is more foundational kind of contracts being looked at and believing that commodity pricing is sticky and that is driving another level.

And I mentioned those anecdotes that we’ve been seeing, and those are real and we’ve seen them kind of a steady drumbeat of more of those. And that right there alone has really created some tightness. And like I said, you know, we’re the largest in North America, and we’re assuming that that’s flat for 2027. But we’re really excited about the conversations we’re having.

Jeff Miller (President and Chief Executive Officer)

Yeah. Let me just clarify or just add to that a little bit, just to say that as we described 27, that’s an assumption that we have made. That is not our view for North America. We’re actually quite excited about North America. We run a great frac business, but we do run it differently because our return expectations are different maybe than what the markets are. And so we run it for absolute returns and we raise price or we lose share. As Shannon said, we are early in the process, but the anecdotes and the activity dialogue absolutely points in the right direction for recovery.

James West (Analyst)

Right, got it. Thanks, Jeff.

OPERATOR

Thanks, Shannon. Thank you. Our next question or comment comes from the line of Derek Podhaizer from Piper Sandler. Mr. Podhaizer, your line is now open.

Derek Podhaizer (Analyst)

Hey, good morning. I just wanted to revisit the international growth engines you mentioned in the prepared remarks last quarter. You said you were ahead of schedule. Originally talked about 2 and a half to 3 billion by 2028. Just wanted to hear about your confidence as you look over the next couple years and now you’re actually talking towards the high end of that range. So what type of visibility do you have into the different product lines, the regions, maybe split it out onshore, offshore that’s driving this expected growth.

Just trying to think about these growth engines as we move into 2027.

Shannon Slocum (Executive Vice President and Chief Operating Officer)

Yeah. Good morning, Derek. Yep. Yeah. Hey, the growth engines first, they are growing and we have a lot of visibility to those on track and actually ahead of schedule as far as our target. You know, you start with drilling. Really love our business. We mentioned two pretty significant awards here in the quarter both in Brazil and East Med. Those are good examples of drilling moving in the right direction. You look at unconventionals. I mentioned, you know, a dozen plus countries around the world.

We just within the last two months added two spreads, one in Argentina and now have Jafurah up and running and have a good runway of over 30,000 stages that will need to be fracked in the Kingdom next year. Production services, the stim vessel starts up at the end of this quarter here and then Lift. What a fantastic story that’s been for Halliburton, going from a single country when we acquired it. Now we’re in 21 countries and added two countries just in the last year.

So all of those things are good baselines to the growth and the target I mentioned and they’re multi-year. But I think what’s important in this whole conversation, these have been deliberate choices we’ve made on strategy and choices we made on technology investment that is paying off.

Derek Podhaizer (Analyst)

Got it. Great. That’s super helpful. I know there’s been a lot of discussion around the Middle East, more about looking into next year. But maybe if you can help us understand some of the more recent disruptions that we saw which turned into rig suspensions both onshore and offshore, conventional, unconventional. Maybe you just help us with a bit of the state of the market right now, specifically around Saudi and then maybe how we should think about as we trend towards the end of the year into next year.

Jeff Miller (President and Chief Executive Officer)

Yeah. Derek.

Shannon Slocum (Executive Vice President and Chief Operating Officer)

Hey, the recent over the last couple of weeks — yeah, it’s been fluid. There have been some disruptions. What I’d say is that the events you’ve read about have not had a real material impact on operations. We see the rig count holding steady both offshore. You mentioned Saudi. There’s a little bit of a dip in rig count in the unconventionals that’s not related to the crisis. We see those building back and see a real runway of activity moving forward.

It’s obviously very fluid. We keep a real close eye on that. But right now, like I said, the last couple of weeks have not had any impact on operations.

OPERATOR

Thank you. Our next question or comment comes from the line of Josh Silverstein from UBS. Mr. Silverstein, your line is now open.

Josh Silverstein (Analyst)

Good morning, guys. Last quarter one of the big awards discussed was in Iraq over there, and you guys kind of labeled it as transformational for you guys. Can you discuss a little bit more details on kind of the timing of the ramp and just talk a bit about the margin profile for Iraq relative to maybe the rest of the Middle East?

Shannon Slocum (Executive Vice President and Chief Operating Officer)

Yeah. Good morning, Josh. That project, IFMS project, that is a multi-year project. It’s a bit of a wind-up for a project of that size, but it is real significant work. The start of that project will begin sometime probably H1 of next year, and it will start with more of subsurface, Landmark studies, those sort of things. You know, this is a full-field development. So think of us as going in there and studying the field, understanding where to drill, where to put the pads and all the infrastructure around it.

It’s a five- to eight-year project, so it will build over time. And as far as Iraq, it has been a very challenged market for us, and we see that win and also some activity that’s coming that is going to be impactful for us structurally and help improve that market. The wins you’ve seen and the work we’re going to be doing is not only good for Iraq, but it’s good for Halliburton. So just a little bit of a wind-up on the IFMS work, but excited about it.

Josh Silverstein (Analyst)

Got it. And then maybe just on the offshore front, you’ve highlighted LOGIX and some composed loop drilling opportunities as key differentiators for you guys. Are these primarily helping you win market share, or are you able to win market share and also gain margin with it as well? Thanks.

Shannon Slocum (Executive Vice President and Chief Operating Officer)

Yeah, we really like our position offshore. Just year to date, we’ve won about close to $4 billion of work, and we believe all of that is accretive. The acquisition that we made at CCAL has been additive to that automation that you mentioned. You look at the offshore wins we’ve had — I mentioned the Suriname work with TotalEnergies and Block 52 with Petronas, the East Med work. We’re going to see robust activity in Norway with $10 billion of investments going in exploration and development.

And that’s a big market for us. So that automation and some of the acquisitions and really the deliberate focus on technology has helped us pull through a lot of these offshore wins I mentioned. So really love our position globally with offshore.

OPERATOR

Hello, still online. We’ll go on to the next question. He can come back if he has a follow-up. Our next question or comment is Mr. Scott Gruber from Citigroup. Mr. Gruber, your line is now open.

Scott Gruber (Analyst)

Yes, good morning, everybody. As I listen to the call here, a lot of bullish data points across the international markets, you know, really from Venezuela to Argentina, deepwater, and even your Middle East revenues are growing, which I think is a surprise to everybody. You mentioned that prices are starting to stabilize. But what do you think would need to manifest from here for you and your peers to start to see, you know, more broad-based pricing gains?

You know, is it if we just see the Middle East activity normalize, would that be a sufficient consumption of capacity across tools and people to complement the absorption that’s going on in other markets to start to see some pricing gains, or what else do you think needs to happen?

Shannon Slocum (Executive Vice President and Chief Operating Officer)

I would say pricing has continued to get better. It’s going to be accretive. We see a strong pipeline this year. We’ve won roughly about $14 billion of work year to date. And our view is this is nobody’s really overbuilt in this market. So it’s tight. And what that tightness is really has us in a place where we’re making deliberate choices of where we go. And, you know, we had just here in the last month, we had Sperry tools that were three different customers need them.

We had to make a choice of where to go. So I think the general macro outlook for us, we expect more tightening. With tightening, we think that creates an opportunity for more price. So yeah, we see that as being accretive.

Scott Gruber (Analyst)

Got it. No, it sounds good. And just turning to free cash flow, you guys have been carrying some extra working capital through the SAP implementation phase. What does that mean for free cash in 4Q, and what’s your early read on potential free cash conversion next year as margins improve and your cost base comes down?

Eric Carre (Executive Vice President, Chief Financial Officer)

Yes, Scott, it’s Eric. So look, in terms of free cash flow, we were a little below what we were expecting in Q3. Some of it was due to collections that were a bit lower. That has started to fix itself this month. And some headwinds in inventory related to S4, related to the buildup of inventory for a lot of the projects that Shannon mentioned, as well as some concerns around Middle East logistics at large. If we look at Q4 and the overall year, for Q4, we think cash flow from operations will be about a billion dollars. If you take out capex, net of sales, about $300 million. So that lands you at about $1.6 billion of free cash flow for the year. As we look at 2027, we believe that goes up with improved profits generated in the business. We think as well that free cash flow margins will improve in 2027.

Scott Gruber (Analyst)

Got it. I appreciate it, Eric. I’ll turn it back. Thank you.

OPERATOR

Thank you. Our next question or comment comes from the line of Keith Mackey from RBC Capital Markets. Mr. Mackey, your line is now open.

Keith Mackey (Analyst)

Hey, good morning, and thanks. The release called out Mexico for having improved performance quarter over quarter within multiple product and service lines. Can you just maybe give us a bit more color on what drove that and generally what you’re seeing in the market in Mexico?

Shannon Slocum (Executive Vice President and Chief Operating Officer)

Yeah. Hey, the Mexico business, we continue to see it improve. I think the macro environment we’re seeing into 2027 should be, you know, should be supporting even further activity — it’s probably, as I said, more of an H2 event. But what has driven really the quarter has been software sales. That really has.

Keith Mackey (Analyst)

What’s been the impact there? Got it. Appreciate that. And just secondly, on the 2027 outlook, appreciate the comments you’ve given so far. Just curious if you can maybe walk us through a little bit about how you might think the results of the US midterm elections might impact your guide either positively or negatively, potentially. Do you think that there could be any impact depending on how the results go, or is it something that we’ll just have to monitor at this point?

Jeff Miller (President and Chief Executive Officer)

Look, you know, politics change all the time. I’m quite confident in our business under any political outcome. So that’s not factored into our outlook. I think that macroeconomics and the requirement for energy has never been more acute than it is right now. And I think that a lot of quality of life is built around the availability and affordability of oil and gas, which sets up this industry, oilfield services, for a really strong few years.

Keith Mackey (Analyst)

Okay, thanks very much.

OPERATOR

Thank you. Thank you. Our next question or comment comes from the line of Sebastian Erskine from Rothschild. Mr. Erskine, your line is now open.

Sebastian Erskine (Analyst)

Yes, good morning. Thanks for taking my questions. I appreciate all the color on the call. Just in terms of the guidance there, trying to back out — so obviously roughly flat North America sort of implies that international growth of about, call it, 7 to 10% year over year. I mean, maybe could you give a view of how much of that you already have view on in terms of kind of the contracted work that you’ve kind of secured through this year versus how much would be new wins, and some of the other sensitivity around the Middle East.

Just trying to get a sense of the building blocks around, call it, 7 to 10% growth year over year in ’27, assuming based on that assumption.

Shannon Slocum (Executive Vice President and Chief Operating Officer)

Yeah, I would say I heard North America and Middle East in there. I believe the Middle East business is contracted. We have real good line of visibility to that. In North America, I’d say, hey, everything — our frac spreads are all working and busy, and again we’re not making any — we believe that what we’ll be modeling right now is just flat for us in 2027. But yeah, really North America we think is going to be higher than what we’ve talked about.

Sebastian Erskine (Analyst)

Super, appreciate it. And then just very quickly, kind of just on the guide, just a clarification — I appreciate, Eric, you gave that number in terms of the ’27, but in terms of the North America base, obviously you’ve got this sort of unseasonal kind of the step up in the fourth quarter. So just in terms of is that based off the 2026 average or the 4Q exit rate in terms of flat North America?

Eric Carre (Executive Vice President, Chief Financial Officer)

Is your question around ’27, or is it around Q4, Seb?

Sebastian Erskine (Analyst)

Yeah, it’s just in terms of the North American — the flat North America into 2027 — is that based off the average of 2026, or the exit rate for 4Q?

Eric Carre (Executive Vice President, Chief Financial Officer)

Total year to total year.

Sebastian Erskine (Analyst)

Appreciate it. Thanks very much.

OPERATOR

Thank you. I’m afraid that concludes our Q and A session. At this time I would like to turn the conference back over to management for any closing remarks.

Jeff Miller (President and Chief Executive Officer)

Yeah, thank you, Howard. And before we wrap up today’s call, let me just close with this. I see growing multi-year demand for oilfield services, and I am confident that in 2027 Halliburton will deliver revenue growth, growth margin expansion, and leading returns for shareholders. I look forward to speaking with you next quarter. Let’s close out the call.

OPERATOR

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

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