Halliburton Company (NYSE:HAL) Q1 2024 Earnings Conference Call April 23, 2024 9:00 AM ET

Company Participants

David Coleman - Senior Director of Investor Relations
Jeffrey Miller - President, Chief Executive Officer, and Chairman
Eric Carre - Executive Vice President, and Chief Financial Officer

Conference Call Participants

David Anderson - Barclays
Neil Mehta - Goldman Sachs
Arun Jayaram - JP Morgan Securities
Roger Read - Wells Fargo Securities
James West - Evercore ISI
Scott Gruber - Citigroup
Luke Lemoine - Piper Sandler
Stephen Gengaro - Stifel
Marc Bianchi - TD Cowen
Kurt Hallead - Benchmark
Douglas Becker - Capital One

David Coleman

Hello, and thank you for joining the Halliburton First Quarter 2024 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; and Eric Carre, Executive Vice President, and CFO.

Some of today's comments may include forward-looking statements, reflecting 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, 2023, 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 first quarter earnings release and in the Quarterly Results & Presentation section of our website.

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

Jeffrey Miller

Thank you, David, and good morning everyone. Halliburton delivered solid first quarter results that again demonstrated the power of our strategy and the strength of our execution. Here are the quarter highlights.

We delivered total company revenue of $5.8 billion, and operating margin of 17%. Both divisions demonstrated margin improvement year-over-year. International revenue was $3.3 billion, and grew 12% year-over-year, led by Latin America, which delivered a 21% increase. North America revenue was $2.5 billion, a 5% increase over the fourth quarter of 2023. Finally, during the first quarter, we generated $487 million of cash flow from operations, $206 million of free cash flow, and repurchased $250 million of our common stock.

Let me begin today's discussion with my views on the strength of the oilfield services market. Global energy use is on the rise, with crude oil demand projected to grow between 1.2 million and 2.3 million barrels per day in 2024. This demand growth is greatest in non-OECD countries, where we expect more per capita energy consumption, not less as they develop their economies and improve their quality of life. Globally, secure, reliable hydrocarbon production powers industries, moves people, and advances economies.

In the U.S., after stable electricity demand for nearly two decades, we now expect it to grow more than 15% by 2030. Today, over 40% of United States electricity is supplied by natural gas, and we expect strong demand for natural gas as a base fuel well into the future. The world requires more energy, not less, and I'm more convinced than ever that oil and gas will fill a critical role in the global energy mix for decades to come. My outlook is confirmed by our customers' multiyear activity plans across multiple markets and asset types. Everything I see points towards long-term growth for Halliburton's services. My outlook for the industry is not new, and it drives our focus on oilfield services, and sets our strategy. This focus is the basis for our technology investment, capital allocation, and culture. This multiyear upcycle together with our successful strategy execution make this a great time for Halliburton.

Now, let's turn to international markets, where Halliburton's strategy of profitable growth delivered another solid quarter. International revenue grew 12% year-over-year with growth demonstrated by each region. This marks the 11th consecutive quarter of year-on-year growth in our international business. For 2024, I expect full-year revenue growth in the low double-digits. Equally important, the international market remains tight for equipment, and people, and therefore, we expect to see margin expansion over last year.

One of the many things that excites me about our international business is our technology that creates meaningful value for our customers, and drives above-market growth for Halliburton. In the Drilling and Evaluation Division, our leading formation evaluation tools such as the EarthStar X logging-while-drilling system, and our Reservoir Xaminer Formation Sampling Service, both see strong adoption and increasing levels of demand. The advanced measurements these systems provide create unique insights for our customers and drive profitable growth for Halliburton.

In the Completion and Production division, our Artificial Lift technology continues to generate profitable growth throughout each of our international regions. Our electric submersible pump portfolio proved to be a market leader in the competitive North America market, and we expect to deliver similar results over time in the international markets. Our complete solution, which includes downhole motors, pumps, and surface systems with remote monitoring and automation, provides an end-to-end solution, and the ability to operate at scale. A great example is in Kuwait, where in less than three years, we captured a nearly 20% market share with over 700 ESP installs.

Before we move on, I want to share an observation. I'm consistently seeing more global interest in unconventionals. I can recall over a decade ago, the global scramble to find unconventionals with limited success. Today, two significant markets outside of North America achieve scale, which serves as a proof point for what is possible, and drives interest by others. As global markets grow, the technologies and processes Halliburton developed as the leader in North America over the last three decades have broad applications to unconventional reservoirs throughout the world, which makes this a fantastic long-term opportunity for Halliburton. I'm confident in the duration of this international upcycle in 2024 and beyond.

Turning to North America, our first quarter revenue grew 5% over last quarter. As expected, North America land completion activity bottomed in the fourth quarter of last year and rebounded in the first quarter as our customers quickly resumed operations after the holidays. Looking ahead for the rest of 2024 in North America, we expect steady activity levels for Halliburton. Our customers are planning for the long-term and I expect they will execute work throughout the year as planned. This is consistent with a more industrialized approach to asset development in North America. And while we expect an eventual recovery in natural gas activity driven by demand from LNG expansions, our 2024 plan does not anticipate this recovery.

Overall, we expect that full-year North America revenue and margins will be flattish compared with 2023 levels. Clearly, our strategy is to maximize value in North America. We do it in multiple ways. Today, I want to talk about two of them. The first is the ZEUS platform and the second is our new North America focused directional drilling system. The ZEUS platform, its electrification, automation and subsurface diagnostics continue to advance.

This quarter, we introduced Sensory, which is the latest generation of our subsurface measurement technology. Sensory provides an easy to deploy, cost effective and automated system for real time subsurface measurement of fracturing operations. Additionally, our automation technologies are at the heart of our highly efficient simul-frac and trimul-frac operations and they continue to expand their capabilities creating value for Halliburton and our customers.

The ZEUS platform demonstrates its uniqueness every day. And importantly, it's deployed at scale. Our scale allows for rapid technology innovation. Each technology improvement to the ZEUS platform widens the moat around our leading position in the fracturing market. This creates outsized value for Halliburton and our customers. I am pleased with the results we see in North America from our drilling services product line, which late last year launched a new version of our iCruise Rotary Steerable System specifically engineered for the North America unconventional market.

The new iCruise CX system is designed for the challenging curve and lateral applications in North America. The system's performance is driving strong uptake and this quarter, our iCruise footage drilled in North America more than doubled over last year. We also coupled this high performing system with an asset light sales and rental model that increases the addressable market when compared to a full-service model. This is how iCruise CX both participates in new market segments and increases its speed of market penetration.

The key trend that I see in North America drilling is the move to longer laterals and more complex wells which customers drill to improve economics. iCruise CX is specifically designed for these applications. And its performance is why I am excited about Halliburton's growth in the North America drilling market.

To close out, I would like to thank our employees. I regularly hear from our customers about the work you do. How much it means to them, and how your execution of our value proposition differentiates Halliburton from our competitors. Well done. I am excited about the business outlook for Halliburton. Energy demand growth is strong and so is demand for our services.

I expect that our focus on oilfield services and execution of our strategy will generate strong free cash flow and shareholder returns. This quarter, Halliburton repurchased $250 million of our common stock, a solid start to the year and a good benchmark for our expectations going forward.

Now, I'll turn the call over to Eric to provide more details of our financial results. Eric?

Eric Carre

Thank you, Jeff, and good morning. Our Q1 reported net income per diluted share was $0.68. Adjusted net income per diluted share was $0.76. Total company revenue for the first quarter of 2024 was $5.8 billion. Operating income was $987 million. And operating margin was 17%; flat compared to Q1 2023. Beginning with our Completion and Production division; revenue in Q1 was $3.4 billion, down slightly from Q1 2023.

Operating income was $688 million, up 3% when compared to Q1 2023. And operating income margin was 20%. Compared to Q1 of last year, these results were primarily driven by reduced pressure pumping services in U.S. land. Partially offset by higher activity in international markets. In our Drilling and Evaluation division, revenue in Q1 was $2.4 billion, an increase of 7% compared to Q1 2023.

Operating income was $398 million, up 8%, and operating margin was 16%, an increase of 10 basis points over Q1 last year. These results were primarily driven by higher drilling-related services in the Middle East and North America as well as improvements across multiple product lines in Latin America. Now let's move on to geographic results. Our Q1 international revenue increased 12% year over year.

Europe/Africa revenue in the first quarter of 2024 was $729 million, an increase of 10% year over year. This increase was primarily driven by higher completion tool sales in the region and fluid services in Norway and the Caspian area. Middle East/Asia revenue in the first quarter of 2024 was $1.4 million, an increase of 6% year over year. This increase was primarily related to improved activity in multiple product service lines in Kuwait, Saudi Arabia, and Oman.

Latin America revenue in the first quarter of 2024 was $1.1 billion, an increase of 21% year over year. This improvement was primarily related to higher drilling-related services and increased software sales in Mexico, improved pressure pumping service and fluid services in Argentina, and increased activity in multi-product service lines in Brazil and Ecuador. In North America, revenue was $2.5 billion, representing an 8% decrease year over year, but a 5% increase from the last quarter. This year-over-year decline was primarily driven by lower pressure pumping services in U.S. land as well as lower wireline activity.

Moving on to other items, in Q1, our corporate and other expense was $65 million. For the second quarter of 2024, we expect our corporate expenses to be approximately flat. Our SAP deployment remains on budget and is on schedule to conclude in 2025. In Q1, we spent $34 million, or about $0.04 per diluted share, on SAP S4 migration, which is included in our results. For the second quarter, we expect SAP expenses to be approximately flat.

Net interest expense for the quarter was $92 million. For the second quarter 2024, we expect net interest expense to be roughly flat. Other net expense for Q1 was $108 million, higher than expected, primarily due to impairment of an investment in Argentina and currency devaluation in Egypt.

For the second quarter 2024, we expect this expense to be approximately $35 million. Our adjusted effective tax rate for Q1 was 21.5%. Based on our anticipated geographic earnings mix, we expect our second quarter 2024 effective tax rate to increase approximately 75 basis points.

Capital expenditures for Q1 were $330 million. For the full year of 2024, we expect capital expenditures to remain approximately 6% of revenue. Our Q1 cash flow from operations was $487 million, and free cash flow was $206 million.

During the quarter, we repurchased $250 million of our common stock. For the full year 2024, we expect free cash flow to be at least 10% higher than 2023. Now let me provide you with some comments on our expectations for the second quarter.

In our Completion and Production division, we anticipate sequential revenue to be up 2% to 4% and margins to increase by 25 to 75 basis points. In our drilling and evaluation division, we expect sequential revenue to increase 1% to 3% and margins to increase by 25 to 75 basis points.

I will now turn the call back to Jeff.

Jeffrey Miller

Thanks, Eric. Let me summarize our discussion today. Halliburton delivered solid first quarter results. I am confident in the strength and duration of this up cycle. We expect our North America business to deliver flattish revenues and margins year-on-year despite lower activity levels. We also expect our international business revenue to grow at low double digits year-on-year. I'm excited about the outlook for Halliburton and expect Halliburton to deliver strong free cash flow and shareholder returns.

And now let's open it up for questions.

Question-and-Answer Session

Operator

Thank you. [Operator Instructions] One moment for our first question, and it comes from the line of David Anderson with Barclays. Please proceed.

David Anderson

Thanks. Good morning, Jeff. I want to ask you about a couple of things that you talked about in your prepared remarks. And the first is on the ZEUS fleet. You had an impressive 5% sequential increase in North America this quarter, despite the flat rate count. I have to think it's probably attributed to these e-fleets being rolled out. It's pretty clear, this is a big step change in efficiency for your customer, and demand seems to be exceeding supply at least for the next couple of years, but I guess, the question is what prevents the industry from building out? And can you talk about your competitive advantage today and how you maintain that? You were first to market, establish leadership, but is there differentiated technology? Is it more about relationships? I guess, the question is really on the moat on this business as you see it over the next few years.

Jeffrey Miller

Yes. Thank you, Dave. Look, the most important point is this is a comprehensive platform. ZEUS is a platform. Clearly, it's electric. Yes, it drives efficiency, but the embedded automation actually really changes the dynamics of how it performs. And then, also the subsurface measurements with Sensory that are embedded in this system, and uniquely embedded. And so, that widens the moat. And I think equally important is being at scale. So, it's one thing to do a research project around a thing, but when we're working at scale, these are solutions that can be pushed to the platform at any point in time. So, it's really the ability to grow the moat on existing equipment as well as any new turns on the science as it goes forward. So, I'm super excited about it. Yes, obviously lowest TCO, but it's the technology differentiation as well that widens the moat.

David Anderson

And then, just to touch on something else, you had talked about some unconventional fields in international markets. Clearly, one of the big stories this year has been the Saudi shift in CapEx from offshore towards those unconventionals, specifically around Jafurah. You have a toehold in that field with that liquid mud plant facility, but this is just starting development. My understanding is there's a bunch of tenders on the way more coming. Can you talk about sort of the opportunity set for Halliburton on this field in the near-term, maybe incremental growth you see in '25? And how do you support these build-outs? You said capacity is really tight in the market. Is this a market maybe you bring some diesel fleets in there? Is there other equipment in the region, or how do you think about that, the tightness and the capacity as it relates to building out to some conventional field?

Jeffrey Miller

Thank you, David. And I'm really excited about it. And there's a lot of opportunity for Halliburton around unconventionals, as you know. How we address it, we've got a lot of ways to address it, including some of the technology we've talked about today. We've got a good position in there, but I think with even more opportunity to grow, particularly with drilling technology that continues to advance.

You mentioned mud, but also other aspects of that where we'll be very competitive. So, I think that's a big move forward. And I think more broadly, so good for Halliburton, but I think that more broadly, just the discussion around unconventionals internationally, what can you see today are two markets, at least outside the U.S., that are truly at scale. And I think that serves as a bit of a template for how that can be done, because it was really unclear a decade ago, as you recall. But I think we're in a different place with unconventionals today. And so, we do hear more discussion around, hey, this is possible, and how Halliburton would play a more meaningful role in that in additional markets, so super encouraged.

David Anderson

Thank you, Jeff.

Jeffrey Miller

Thank you.

Operator

Thank you. One moment for our next question, please. One moment, it comes from the line of Neil Mehta with Goldman Sachs. Please proceed.

Neil Mehta

Good morning, Jeff, and team. Jeff, you've talked about wanting to drive your free cash flow per share higher. And so, it's great to see the share repurchases for a couple quarters run rating at this $250 million mark. Can you talk about why you think that's the right number to use going forward? And how does share repurchase fit in the seriatim of capital allocation?

Eric Carre

Yes, Neil, it's Eric. So, the baseline that we use is the framework that we announced several quarters ago to return a minimum of 50% of free cash flow to shareholders. We actually returned over that at just about 60% in 2023. So, when we look at the improvements in free cash flow year-over-year, which we mentioned to be about 10%. So, when we think through that, we think that the $250 million of buyback is a good base load for us to be repurchasing shares. So, expect more buybacks in dollars, expect more overall returns to shareholder dollar-wise, and then, we see where the overall percentage lands, but it should be pretty close to what we did last year. Yes.

Neil Mehta

Okay. That's really helpful. And then, the follow-up is, we are seeing signs of industry consolidation, certainly more in E&P and services, but we start to see some in services as well. Halliburton always struck us as more of a organically driven business, but be curious on how you're thinking about M&A as you plan to go forward for the business?

Jeffrey Miller

Look, Neil, no change to our strategy. You're correct. We like bolt-on M&A technology acquisitions. We think about M&A in terms really of research and development. Is it something that advances research? Does it move it more quickly so that we get to market more quickly? But we see significant organic growth in the businesses that we're in. And so, we like where we are and we see plenty of growth. And we also, I believe that organic growth generates more value for shareholders. And we've seen that with other things that we've done in the past in terms of small acquisitions that we're able to then grow and push through our channel. But we like the space where we compete and we like the technology and how we develop that. And so, you shouldn't expect any change from Halliburton.

Neil Mehta

All right. Thanks, team.

Jeffrey Miller

Thank you.

Operator

Thank you. One moment for our next question, please. And it comes from the line of Arun Jayaram with JP Morgan Securities. Please proceed.

Arun Jayaram

Yes. Good morning, Jeff. I wanted to see if you could characterize your thoughts on the future prospects of the OpEx versus the D&C cycle on a go forward basis. Can you talk about your current leverage to OpEx and production? And is this an area strategically you'd like to grow either organically or inorganically over time?

Jeffrey Miller

Yes. Well, I want to answer the second part of that first in terms of organically. Yes. So, we don't see a change to our strategy or approach to markets. So, yes, we do see quite a bit of organic growth for us in the OpEx part of the market. We're in that business today. We've got strong, I mean, strong lift business today. We're in the chemicals business today. And we're in the intervention business today in a pretty big way. And we continue to develop technology similar to as we've done in the past. And so, it's my outlook for OpEx cycle. We've got plenty of exposure to that and have had.

Now, I want to be careful and say the D&C cycle is very strong and continues to grow. And I suspect that it continues to grow also. So, I think we're well balanced across really all elements of this, whether it's exploration, development, drilling, and OpEx today. Some of the things we've done in the past, again, we bought smaller businesses that we've grown into bigger businesses. And so, again, a strategy that works for us and it delivers the organic growth that we believe is really good for our shareholders.

Arun Jayaram

Great. Jeff, second question is, I wanted to see if you could give us your perspective on any potential impact to how from the changing mix of activity in Saudi Arabia, which looks to be a little bit more onshore versus shallow water. And maybe you could just talk about the year over growth in MENA, which at 6% seemed a little bit lower than we were expecting.

Jeffrey Miller

Well, I think the first part of that in terms of Saudi growth, '24 is still growing, by the way. We expect growth in Saudi in '24. And the rebalancing, the gas and unconventionals is very good for Halliburton. We've got a very strong onshore business in Saudi Arabia. We participate in all aspects of that market. And that market remains tight for equipment. So, I feel good about that market. And I'm very confident in the long-term growth of that market. The rebalancing again to gas is, we're meaningful players in that part of the market and expect that will only be good for Halliburton. Pivot to growth, look, a couple of things. Number one, international business grew 12% overall. So, I want to start there.

Clearly, I'd expect more growth in the region, but here's what we're doing. I want to be really clear that profitable growth has been our primary focus. We see a good pipeline of opportunities. We expect to continue to see growth in MENA. But at the same time, we want to make certain we're building a foundation shipment for growth. That means that we are delivering the technology, we're making the investment while expanding margins and growing, and that's been sort of our mantra, our strategy is profitable international growth. And that's what we saw this quarter.

Arun Jayaram

Thanks, Jeff.

Jeffrey Miller

Thank you.

Operator

Thank you. And one moment for our next question, please. And it comes from the line of Roger Read with Wells Fargo Securities. Please proceed.

Roger Read

Yes, thanks. Good morning. Jeff, I'd like to get back in on the international growth. So, double digits, what you've delivered, double digits, where you're guiding or where you're headed. How much of this would you describe as due to new products or products and services or new markets and how much of it to just underlying expansion? Why don't you get kind of an -- you've talked about a lot of the new stuff you're putting in, just how effective that is in driving some of this growth?

Jeffrey Miller

Yes, thanks. Look, I think the growth is broad based, but the technology matters. It's not necessarily new products. It's actually an expanding market. A couple of things are happening at one time, yes, activity is growing, but we're participating in a larger share of that growth than maybe in the past based on some of the technology I described. So, we're competing differently technically, and so we get a bigger part of that growth.

We've added some new things, yes, like Lift internationally, that's a new product for growth, a new product that's a whole business, but it's growth end markets, and we're really pleased with the progress that that's making. And then, obviously, pricing in the tight market internationally helps us well because that's helping growth all around. But I would not overlook the importance of the improvement in drilling technology, particularly just because it's more access to a larger market and at a much better rate of return for us given the improvement over legacy technology. The capital efficiency of the new technology is probably is right about 40% more capital efficient than the legacy tools. So, getting sort of improvement along several dimensions there, growing market, bigger share, better pricing and better capital efficiency.

Roger Read

Thanks for that. And then, just to pivot back real quick to North America, you mentioned not really anticipating or certainly not built into the expectations for recovery in gas this year. Presuming that that's kind of a well completions way you're thinking about it, at what point of the year would you have to see an increase maybe in activity spending rig count in gas to think that there was a chance that you could outperform I say you, but the market could outperform your expectation. Like if we get to the third quarter and we haven't seen an improvement, we should close the books on '24 having any improvements to dig about '25?

Jeffrey Miller

Yes, look thanks. I think that's the next big leg of growth in North America. It's a question of timing, but it is no question going to drive a lot of growth in North America. And I expect it will drive market growth '25 and beyond. And I think what's overlooked, look through the current timing and look forward to what's coming, attrition has really shrunk the fleet.

The fleet for the market is shrinking to meet the demand that is there today and that happens every day. Equipment is not being built, new equipment. So, when we get to that point in time, it will be an incredibly tight market. And so, I'm actually quite excited and confident about what gas means to the North America market. Just saying, yes, the leading indicators of that will be well construction, it will be offtake contracts for LNG. There will be a number of things that sort of happen, but it will happen just given the capital has been invested on the export side. There's no question that the gas will be developed to meet that.

Roger Read

Great.

Jeffrey Miller

Thank you.

Operator

Thank you. One moment for our next question, please. And it's from the line of James West with Evercore ISI. Please proceed.

James West

Hey, good morning, Jeff. Good morning, Eric.

Jeffrey Miller

Good morning, James.

Eric Carre

Good morning, James.

James West

So, Jeff, one of the areas that we haven't discussed in detail yet in the Q&A is really deepwater where you guys have an advantage position this cycle, I think relative to prior cycles even though you've been strong there for a while. But the technology enhancements that have happened at Halliburton puts you in a unique position to have more share, better profitability. And I'm curious kind of where you're seeing right now the biggest growth? And I think we know kind of Brazil and some other places, but where do you think we're going to be surprised as we go into kind of probably '25 and '26?

Jeffrey Miller

Look, I think the surprise will be West Africa and North Sea in terms of '25 and beyond. I think really we're planning work now. There are great opportunities today that are being planned by clients with the full expectation that we see a meaningful step up as we go into '25 and beyond. And these are all long-term type projects that will extend into the end of the decade. So, but I do think that's where we'll see a lot of activity.

James West

Okay. Okay. That makes sense. And then, maybe just back to North America to pivot back there. Again, I don't want to beat a dead horse, but you guys are dramatically outperforming some of the peers in North America. And where do you hold the line, I guess on kind of pricing? And where do you sacrifice utilization in a market that may be down a little bit? Is it -- we just we'll give up the utilization to keep our pricing, or do you -- are you willing to give some discount to keep utilization high?

Jeffrey Miller

Yes. Look, James, do we see some pressure? Yes. But does that affect our strategy? Absolutely not. We've got a strategy with maximized value in North America. 40% of our equipment is contracted under long-term contracts, and we're not terribly exposed where we do see that pressure. And I think maybe more answer than you want, but I think it's important that we keep central as our strategy is delivering unique technologies that create real value for customers. And so, that's what lowest TCO looks like and that's why we're also work solving for recovery with ZEUS platform and Sensory. We think those two things alone create significant value for customers and so we keep that central.

James West

Right, right. Totally get it. Thanks, Jeff.

Jeffrey Miller

Thank you, James.

Operator

Thank you. One moment for our next question, please. And it comes from the line of Scott Gruber with Citigroup. Please proceed.

Scott Gruber

Yes. Good morning.

Jeffrey Miller

Good morning, Scott.

Eric Carre

Good morning, Scott.

Scott Gruber

Well, it's getting later in the call, so I'll give you a chance to mention AI a few times. Not that it's needed. But are global customers starting to discuss additional demands from power for data centers? And do you think this has the potential to pull forward additional gas developments over the next few years around the world? Or is this still off the horizon?

Jeffrey Miller

I think gas is a critical fuel. And look, yes, I think we mentioned in the prepared remarks that the growth in demand for gas or gas and electricity and that being the most effective way to deliver power certainly today in the most reliable. So, I think that this is almost becoming, it's one of those things that you don't see it until it's on top of you. And I think that right now that demand is on top of us. And so, I think that can only be additive to demand. I have no question that will be additive. And clearly, AI consumes more power than traditional data centers. So, I think all of that combined, there's almost it's not almost, it is a secular trend towards demanding more power and that can only be good for our industry and for Halliburton.

Scott Gruber

Yes, it'll be interesting to watch. Just turning back to the near-term, Latin America was a big outperformer versus our expectation. Can you just provide some more color on the details of what drove the outperformance in Latin America? And overall, what type of growth would you anticipate from the market this year?

Jeffrey Miller

Look, Latin America performed very well. It's broad based growth in Latin America. So, really it's several geographies and types of markets, whether Argentina, Mexico, Caribbean, Ecuador. So, we saw strong growth all over. And important to say, our team in Latin America is doing an exceptional job. I'm very appreciative and pleased with the work that team does. And I think it also demonstrates how oil and gas is critical to economies. Those are economies that require oil and gas. They view oil and gas as critical to both security and economic growth, things that are important in Latin America. And so, I expect there's more to come.

Scott Gruber

Got it. Appreciate it, Jeff. Thank you.

Jeffrey Miller

Thank you.

Operator

Thank you. One moment for our next question, please. And it comes from the line of Luke Lemoine with Piper Sandler. Please proceed.

Luke Lemoine

Hey, good morning. Jeff, you've reiterated your full-year international revs up low-double-digits with margins expanding this year. But could you maybe talk more specifically about how you see the D&E margins unfolding on a full-year basis? And then also, as we kind of look over the next couple of years as international continues to unfold, you roll out new products and services like iStar and iCruise, what are kind of the aspirational targets here in D&E?

Jeffrey Miller

Yes. Look, I like the trajectory that we're seeing in D&E. And I say that because we're growing the business, but we're growing the business at a pace that's profitable and building the kind of foundation that we can use the technology in markets where we know we've got solid growth and profitability and then be able to reach out from there. But clearly, it is a balance of growing margins while opening for example, new businesses. So, we've opened a few new markets while growing profitably. And I think that's sort of the foundational part of our D&E trajectory.

So, I expect to continue to see it aspirationally, continue to expect it to go up and expand quarter-over-quarter, year-on-year. And in the first quarter, we actually saw flooding in some markets. We saw weather in some others, maybe more than we would have expected. Though I expect that we continue on the trajectory in spite of all of the things that sort of come along and businesses that are open. So, should expect to continue to see that moving up.

Luke Lemoine

Okay. Thanks, Jeff.

Jeffrey Miller

Thank you.

Operator

Thanks. And one moment for our next question. And it comes from the line of Stephen Gengaro with Stifel. Please proceed.

Stephen Gengaro

Thanks. Good morning, everybody.

Jeffrey Miller

Good morning, Stephen.

Stephen Gengaro

Two from me, the first, you mentioned the strength in iCruise in North America. I think you said more than double a year ago footage drilled. Is that displacing competitors? Is that organic growth? Is that replacing all technology that you're offering? Can you give some color around that?

Jeffrey Miller

Look, it's performing very well and the uptake has been strong. And so, it is different technology than what we've ever had in the past. It's designed for this market. It's built on the iCruise platform. So, how it gets to market is really customer driven and there's been just more uptake on the technology self.

Yes, it's all organic. In terms of it, we developed the technology ourselves. We've worked on it for some time. We built a platform that has been very effective internationally and now we've gotten to the North America part of it. So, it's early days, but stay tuned. I mean, we're really pleased with the advancement that it's making, but it's really customers will drive the uptake for that. So, the increase in footage drilled is indicative of customers gaining confidence in the performance of that technology, particularly in the curved lateral.

Stephen Gengaro

Great. Thank you. And I know this may be a little harder for you to answer directly, but when we think about the CHX, SLV deal and what's going on in production chemicals, I would imagine it's an area that would have interest to you. But my question is really, you had a great amount of success with Summit and what you bought and built over the last, I guess five, six years plus and the strength of that business. Is that something that you can replicate in production chemicals if you went down that road?

Jeffrey Miller

Look, I think, I'll revert back to strategically we like to grow things organically. We own the kernel of a business there. We continue to make progress. We've got the plant. The capacity is filling up in the Middle East. So, the trade-off is speed, but I think also the trade-off from our perspective anyway has been, we know how to do this and we believe it generates a lot of value for our shareholders when we go about it this way. And so, we're going to continue to grow our chemicals business around the world on the back of some assets that we built ourselves. And so, I'm pleased, I think there's opportunities for organic growth in chemicals, organic growth, and strong growth in intervention, a whole lot of different areas.

Stephen Gengaro

Okay, great. Now, thank you for the call.

Jeffrey Miller

Yes. Thanks.

Operator

Thank you. One moment for our next question, and it comes from the line of Marc Bianchi with TD Cowen. Please proceed.

Marc Bianchi

Hi. I wanted to circle back to the discussion on pricing for North America just because you made the comment that you've seen some softening, but you're not changing your strategy. Could you just comment on how sort of the market has evolved over the last 90 days, if anything has changed. We've had a competitor out there saying that they're going to go after share at the expensive price.

Jeffrey Miller

Look, I don't comment on competitors, but from a strategic perspective we haven't changed. What we're doing and I like where we are. A big part of our fleet is contracted today. We focus on delivering top-notch efficiency, sort of record-setting efficiency, and also lowest ECO. And so, that's where our primary focus is, and we plan to stay with that.

Marc Bianchi

Okay, great. Thanks for that, Jeff. And then, on the second quarter outlook, you gave the C&P and D&E, should we assume that that's a similar profile for international in North America or anything that we should be contemplating there?

Jeffrey Miller

In terms of -- I don't --

Marc Bianchi

Yes. Go ahead Jeff.

Jeffrey Miller

Look, in terms of growth, I think the margin growth I expect will continue. I mean, I think that we talked about expanding margins and D&E and also C&P is continuing to grow. And I think we're solid. We're in a number of very good businesses around C&P.

Marc Bianchi

Okay. Maybe just to clarify, the question was more on revenue, so I guess what I'm wondering is to get to the low double digits for international, it would seem that you need a pretty healthy growth in the remaining -- all three remaining quarters of the year sequentially.

Jeffrey Miller

Oh, yes, sorry, I --

Marc Bianchi

Could you talk about where that's coming from?

Jeffrey Miller

Yes. So, that's pretty broad-based. I mean, and so for C&P that's completion tools around the world. It's production enhancement around the world. So, in a very strong position, and we see a number of things growing, not the least of which would be lift, for example, and some things like that. So, I had heavy lift, I don't see it as a -- I see it as a very middle of the fairway, very doable from where we sit today. And again, equipment's tight. I think that we'll continue to see strengthening there as well, expanding margins in price.

Marc Bianchi

Very good. Thank you.

Jeffrey Miller

Thank you.

Operator

Thank you. One moment for our next question, and it comes from the line of Kurt Hallead with Benchmark. Please proceed.

Kurt Hallead

Hey, good morning. Good morning, everybody. Thanks for slotting me in here. So, Jeff you've been at this a long time. You referenced on more than one occasion, not just today, but in other calls about increasing level of visibility, especially on the international front and talking about opportunities that could extend out to the end of the decade. I think a lot of investors are wanting to kind of get inside the room with you, if you will, and try to get the same sort of conviction you have with respect to that duration. So, I'm just kind of curious if you could give us some perspectives and insights on how those conversations are taking place, how much lead time your customers are asking for, and effectively, what two or three things are you seeing that continue to underpin this confidence and conviction that this cycle is going to extend through the end of the decade?

Jeffrey Miller

Yes, thanks. Look, some of its work that will begin in '25 that is planned to go through the end of the decade. So, I feel very confident about that. Others are work that we're working on planning with clients that again are the types of projects that extend that far. I think just the price of the commodity and the tightness and the rising demand for oil and gas gives me confidence and it gives our clients confidence.

And clearly, we've seen a bit of a return to oil and gas and its importance in a lot of places, but the type of work that we're starting, the type of offshore work that we're starting is takes time to get started and it takes a long time to do, and so, very confident about that broadly. And I would include, anyway, the outlook for North America is similar in terms of duration. I mean, this is the kind of investments that we've seen in North America that are not for a quarter or two. These are decade-long investments that we've seen happen. And the next leg on gas and the demand for gas, it's already been talked about on this call. I feel very confident in the resilience of this cycle.

Kurt Hallead

That's great. I appreciate that. So, the other dynamic you referenced was approving margins, right? So, you've booked contracts that tend to last, I don't know, two to three years on average in the international market, so those will roll through this year and next year and so on. Just curious in the context of that margin improvement from here, right, if you were to try to rank and order it. Is how much of the pricing how much is it? Is it volume? How much is the technology value proposition? Can you give us some additional sense on how you see that? What's driving that margin improvement?

Jeffrey Miller

Look, I think it's a combination of those. Some of it is certainly tightness in the market and pricing, but at the same time we've talked about our R&D investment over the last eight years has all been directed at better capital efficiency, and that drives margin also. That drives margins in our drilling business, it drives margin in our frac business. But these are deliberate choices that we've made to drive down or to improve capital efficiency and return. And I think that's evident, probably most evident in our drilling technology and our ZEUS technology.

But at the same time, that's been a practice in all of our business. And so, anything that we're producing today, sort of its first criteria has to be improved capital efficiency and better returns out of R&D. And so, I'm really pleased with the success we've had there. And so, I would say all are contributing today, in addition to having sort of more market access, more opportunity to compete on the back of improved technology.

Kurt Hallead

I appreciate that. Thanks, Jeff.

Jeffrey Miller

Thank you.

Operator

Thank you. One moment for our next question, and it comes from the line of Doug Becker with Capital One. Please proceed.

Douglas Becker

Thanks. Jeff, would you expand a little bit more on the drivers behind the sequential margin expansion in D&E? And really, the question is just a function that the last several years D&E margins actually declined in 2Q from 1Q.

Jeffrey Miller

Look, I think that's, again, I'm back to the foundation building that I described. So, we've got a better foundation, broader-based work, and so I expect to continue to see expansion, certainly year-over-year. And then, also as that foundation gets stronger, that gives us more ability to grow the business profitably, but from a sound base.

Eric Carre

I think Doug, it's Eric here, that the typical drop in margin in Q2 happens with the reduction in our software business. The way we recognize revenue in our software business means that it's essentially taken in Q4 and in Q1, so we see a bit of a drop there. You see that being more muted this year because, as Jeff mentioned, the D&E margins were softer than we were expecting in Q1, as we had much more significant weather issues in the North Sea in Norway, in Alaska, and then the flooding over in Indonesia. So, the combination of the muted effect and the more traditional software impact moving from Q1 to Q2 results in margins going up here.

Douglas Becker

That all makes sense. Maybe switching to North America, U.S. more specifically, last quarter you were talking about ZEUS e-fleets would represent about 40% by the end of the year, going to maybe 50% in 2025. Is there a reasonable or realistic or probable scenario where you would accelerate this deployment? The results certainly suggest the outperformance and there might be a case for that.

Jeffrey Miller

No. Look, this is a market push. The whole strategy behind e-fleet for us has been build the best technologies and clients demand it, and we've built to the demand that we see in hand, and therefore, they are not built on spec, they are built for customers that plan to use them. And we don't plan to change that. And so, in some ways that adds central to maximizing value in North America. When we maximize value in North America, we are not going to build things, we don't have home. And so, I expect to continue to see market demand for this equipment. 2024 is actually already in hand. It's just delivering the units themselves. They already have homes. And in '25, we actually have some deliveries. And I expect that we will see more as we go forward. But I think that important to remember that that our approach is to build to contract.

Douglas Becker

That makes sense. Thank you.

Jeffrey Miller

Thank you.

Eric Carre

Thank you.

Operator

Thank you. And with that, we conclude our Q-and-A session for today. I will pass it back to management for final comments.

Jeffrey Miller

Okay. Thank you, Carmen. Let me close out the call with this, I am excited about the outlook for Halliburton and expect Halliburton to deliver strong free cash flow and shareholder returns. Look forward to speaking with you next quarter. Let's close out the call.

Operator

Thank you everyone for participating. You may now disconnect.