October 24, 2025
Things I Learned This Week About Sand
The sand in Pensacola is much more conducive to wiggling your toes in than the sand underneath the cactus outside of Tucson. Over the weekend, a group of old friends told lies on the beach while smoking cigars and drinking smuggled cocktails. No meat was consumed, but the city was complaining about a shrimp shortage by the time we left. One question on the beach. Would you rather live at the beach and visit the mountains, or live in the mountains and visit the beach? Think about it. While we did have hills in the background outside of Tucson, they don’t qualify as mountains, and “desert” was never a category that was considered.
The Desert. I am on the Advisory Board of the National Ocean Industry Association, which represents all types of energy interests in the offshore sector. The Fall Meeting was held this week. This may be the best positioned of all the energy trade associations, since offshore, specifically deepwater, is doing better, at least relatively, than other geographies in the oil and gas industry. Even though oil prices are down, we have weathered these storms before and offshore is at least relatively safer and improving compared to onshore activity. Budget uncertainty was mentioned by many in terms of issues the industry faces, but interestingly, debt is still very much available, even as the equities languish.
Hammered. I had the privilege of interviewing Mary Katherine Ham, a political writer and pundit who appears on TV and in print, and hosts two podcasts known as Hammered and Normally. She is market-savvy. One interesting point she made was that AOC, the congresswoman from the Bronx, is a money-raising machine who is “buying friends” by donating to other Democratic politicians through her PAC, and she appears smarter than many have given her credit for. I asked about the Kamala/AOC ticket in 2028, but she just laughed. Catch the podcasts. She is exceptionally reasonable in a time when few in information and journalism are anymore.
At His Word. Rich Dealy, ExxonMobil Vice President for the Permian Basin, said that more consolidation is inevitable in the basin during Hart Energy's DUG Permian Conference in Midland, Texas.
Broken Clock. Amin Nasser, the CEO of Saudi Aramco, has warned of a looming global oil shortage due to a decade of underinvestment in exploration and production. A decade sounds about right, since that is when SLB started making the same statement. So, if we had invested a lot more over the last 10 years, where would oil prices be today? Higher or lower? And how much money would we have lost at that point? I have heard this argument for many years and have never seen it play out. We have been making deepwater discoveries, increasing production in Alaska and finding big reserves in Namibia and many other places. And technology has not even started to impact the Middle East in terms of achieving the same production per rig that we have elsewhere. But further out, he does have a point. Exploration was largely put on hold about 10 years ago, with the focus shifting to developing the reserves we had already found. With shale, finding them was about as easy as finding the floor. New projects, especially offshore and other international megaprojects, can take five to seven years to come online, in a world where even giants like Exxon and Chevron are chasing the immediate gratification of shale production. For most of my career, the goal of being in the oil business was finding oil. Producing it was the easy part. Shale changed that, but the waning of that resource and the different supply timelines could very well cause a serious issue in a couple of years.
Quote. “There is NO bullish story in the oil market yet.”
OMG! Indian and Chinese companies are buying Russian oil! The U.S. convinced them not to buy Russian oil, and of course we believe them? Don’t you realize that someone will buy the oil? Russia is going to shut in about nine million barrels a day of oil production? Won’t happen. You can make it increasing dangerous and difficult, but a producer has two choices, which is either to produce it and put it somewhere, or shut in the well. The first option is always preferred, but if there is nowhere to put it, the second becomes necessary. We can slow the leak, but it’s a slippery liquid that finds a home somewhere, somehow, at some price. Good luck.
An Option? To run the U.S. on solar, we would need 274 billion panels, consuming 96 billion barrels of oil, a trillion cubic feet of natural gas and 23 billion tons of coal for mining, manufacturing and installation. Mining releases acid rain, wastewater and heavy metals into the land, water and air. Solar panels last only 15 to 20 years, necessitating repeated mining, smelting and manufacturing each new generation. Solar doesn't provide 24/7 power, requiring additional gas plants for backup. The second law of thermodynamics limits efficiency. Solar is an industrial treadmill of endless mining, manufacturing and battery production for backup, creating even more waste. All solar and wind do is add the giant bonfire of burning fossil fuels.
Earnings. Oilfield Services’ earnings have started, followed by E&P, with majors and midstream sprinkled in. The Oilfield Services stock index is up 18% over the last six months, though current activity wouldn’t suggest that. Most of the gain comes from the understanding that a significant amount of natural gas will be needed for AI data centers, which is good news for Oilfield Services. At least to some extent and for a while. But up is up and we will take it. Several OFS stocks beat expectations, which were low to begin with, and the trend was confirmed by the downward guidance to U.S. onshore activity and several international regions that remain in some turmoil. We have excerpted some analyst opinions.
Weatherford
Weatherford appears to be back in “beat and raise” mode, as 3Q results exceeded topline expectations by mid-single digits, driven by a strong DRE segment. Regionally, Latin America was the strongest performer, with activity in Mexico showing signs of recovery. Combining this with higher-than-expected margins led to a ~6% adjusted EBITDA beat, though free cash flow fell short of expectations by ~20%. Looking ahead, 2025 revenue and EBITDA guidance were raised by ~2% at the midpoint, implying 4Q25 adjusted EBITDA ~4% above prior Raymond James and Street expectations. The only potential weak spot is 2025 FCF guidance of +$345 million, which hinges on the timing of payments from Pemex. This implies a ~33% conversion rate versus prior guidance of +100-200 basis points relative to the ~38% 2024 conversion rate. Lastly, CEO Girish Saligram noted that the company’s early-year actions have positioned Weatherford for a strong 2H25, supported by a newly cleaned-up balance sheet.
Weatherford International's (WFRD) Q3 2025 earnings missed analyst expectations, reporting $1.12 per share versus the consensus estimate of $1.15, though revenue of $1.23 billion beat the expected $1.18 billion. Analysts' views remain mixed, with the average rating categorized as a “moderate buy” and a median 12-month price target of around $75-$76. The company guided for increased Q4 revenue and improved margins, citing cost-saving measures and a more optimistic outlook for Mexico, but acknowledged risks from market softness and tariff pressures.
Halliburton
Halliburton (NYSE: HAL) produced a strong quarter, as the company achieved sequential growth despite the choppy U.S. land market. Both segments outperformed, resulting in a mid-single-digit topline and EBITDA beat. Halliburton larger U.S. land share (relative to SLB, BKR and WFRD) grew mid-single digits as the company continues to prioritize technology and cost management. Shareholder returns continued, albeit under modestly weaker free cash flow for the quarter, despite lower capex. Guidance calls for ~3% lower revenues in 4Q25 with a flat margin outlook, leading to a Raymond James-calculated adjusted EBITDA of just over $1 billion. The quarter is expected to see larger-than-typical whitespace in the frac market, resulting in lower expectations for NAM and C&P. Additionally, the company provided further commentary on its strategic collaboration with VoltaGrid to pursue opportunities beginning in the Middle East. We maintain our Market Perform rating.
Halliburton’s 3Q EBITDA was 11% above consensus, driven by stronger revenue and margins in the C&P division. Notably, NAM revenue grew despite a lower rig count. While free cash flow missed due to working capital build, the company’s strategic collaboration with VoltaGrid, focused on DC power in the Middle East, along with ongoing cost-saving initiatives and capital discipline are seen as positives.
Halliburton's Q3 2025 earnings report showed adjusted earnings per share of $0.58, beating analyst expectations of $0.50, driven by successful cost reductions and strong performance in key international markets such as Brazil and Norway. However, revenue declined 1.7% year over year to $5.6 billion, and the company expects a significant revenue drop in North America for Q4 due to market softness.
Halliburton rose +2.6% in Wednesday's trading as RBC Capital and HSBC upgraded the stock to Outperform and Bu, respectively, with price targets of $31 and $30. The upgrades followed the company’s better-than-expected Q3 results and its outlook for $400 million in annual savings from cost-cutting initiatives.
SLB
SLB's Q3 2025 earnings report showed a beat on earnings per share ($0.69 vs. $0.67 consensus) but missed revenue expectations ($8.93 billion vs. $8.99 billion consensus). Analysts noted that while revenue declined year over year, the recent acquisition of ChampionX positively impacted the results and future growth is anticipated from international markets. Analyst ratings remain mixed, with some maintaining an “Overweight” rating and others a “Hold.”
SLB’s results generally met expectations this quarter relative to consensus estimates, despite pipeline challenges in Ecuador that affected the company’s APS business. Both revenue and EBITDA were roughly in line with Street estimates and ~1% above our estimates. Free cash flow was solid at $1.1 billion, leaving an implied strong 4Q25 target to reach the ~$4 billion annual goal. SLB also executed $114 million in share repurchases, which, combined with dividends, brings year-to-date shareholder capital returns to ~$3.6 billion. Commentary on the call centered on the newly separated Digital segment, which is expected to achieve double-digit topline growth into the foreseeable future and trend toward 45% EBITDA margins over time. Overall guidance for 2H25 was reiterated, supported by a tailwind from an additional month of ChampionX contribution and typical year-end software and product sales.
Patterson-UTI
Patterson-UTI continues to navigate a challenging U.S. land market, focusing on cost reductions, integration and a shift toward performance-based agreements. The topline result was generally in line with expectations. However, strong margins, particularly in completion services, drove a mid-single-digit EBITDA beat. Management highlighted cost reductions within pressure pumping, as price, HHP and HR remained steady sequentially. Free cash flow came in slightly below our estimate and last year's result. However, shareholder returns remain strong, now totaling 110% of FCF year-to-date. Guidance calls for normal seasonality to close out the year, with a steadier environment expected heading into 2026. Additionally, CEO Andy Hendricks noted that the production impacts of lower rig and frac counts have not yet been fully reflected in production numbers, and any further pullback would negatively affect 2026 global oil supply.
Broader Outlook
SLB believes deepwater drilling activity will bottom in 4Q25 and expects an uptick in the later part of 2026 and into 2027 to support both exploration and development. While short-term scheduling uncertainties have resulted in white space, particularly in Sub-Saharan Africa, SLB expects this to progressively disappear as there are several FIDs planned for 2026 and early 2027. This bodes well for FTI and the offshore drillers. Saudi activity has stabilized, if not bottomed. SLB anticipates a rebound in Saudi activity during 1H26 for both gas and oil. Internationally, many countries remain poised for investment growth, tied to long-term capacity expansion plans and assurance of energy supply, particularly for gas. While OPEC+ production increases are expected to eventually require new infill drilling or new developments, this reinforces the potential for higher activity in 2026.
Shrinkage. The oilfield services world has shrunk. 2014 was the top and we have been shrinking ever since. The industry is now the market cap of Shell. The entire industry. It isn’t all bad. As long as everyone is making money. We aren’t there yet but we will be. It is a very physical industry and we will learn to become more efficient. But as an industry, we won’t be replaced. And the companies left standing will be more profitable, even if smaller, and the sun will shine again! The list below are some companies that I follow that missed earnings. Feel free to provide additions.
PPHB U.S. Energy Market Highlights:
Commodity Prices: WTI crude oil is currently $61.79 per barrel (up ~8.1% week-over-week) and natural gas is $4.32 per MMBtu (up ~6.5% week-over-week).
Crude Oil Production: U.S. crude oil production is currently ~13.6 MM BOPD (up ~1.0% year-over-year).
Crude Oil Inventories: U.S. crude oil inventories decreased by ~1.0 million barrels week-over-week vs. an estimated increase of ~2.2 million barrels.
Frac Spread Count: There are currently 175 frac spreads operating in the U.S. (no change in spreads week-over-week).
Onshore Drilling Rig Count: There are currently 528 drilling rigs operating in the U.S. (a decrease of 1 rig week-over-week).
A Foreign Offering. Tamboran Resources completed a follow-on equity offering, raising about $48 million. The stock, priced at $21, is currently trading at $26 on the NYSE. Its an E&P company with a ~$300 market cap. RBC Capital Markets, LLC, Wells Fargo Securities, LLC, and BofA Securities did the deal. Some equity deals get done! But this is different. Tamboran describes itself as an early stage, growth-driven independent natural gas exploration and production company focused on an integrated approach to the commercial development of the natural gas resources in the Beetaloo Basin located within the Northern Territory of Australia. I used to live in Darwin, the capital of the Northern Territory. Bleak.
The Word is Electricity. We all read articles about how China makes everything and that they are growing so fast it makes a dandelion look slow. The real comparative scale gets lost in all the many discussions. But considering the increasing need for power globally over the next several years for today’s hyper scale data centers, there was one comparison that struck me. China added 429 gigawatts of new power generation last year, while the U.S. added 50 gigawatts. The most germaine metric to almost everything today is power and electricity. It’s not oil and gas, nor is it wind and solar. It’s not hydro geothermal. It’s power and electricity. I’m sure it’ll be different in 10 years, but that’s what it is for today’s metric. We lag dramatically.
Our Share. So far, large scale, solar, wind and battery projects under construction or in various stages of planning is 214 GW. Of that, only 10% are natural gas-powered projects through 2027. But since Trump got elected, $22 billion worth of renewable projects have been canceled under his new tax and spending law.
Power. OMG. If you own a turbine, you are the most popular guy in class. Anything that generates electricity is seeing the biggest “gold rush” ever. Transformer and turbine backlogs are now measured in years, the big manufacturers are doubling capacity and acquisitions are being made at very rich valuations. Then I read this. “Customers are saying “Hey, can you help us bridge the next 2 to 3 years until we can get a utility connection?” Doubling manufacturing capacity to serve a 2-3 year boom? Sound in any way familiar? I understand that power demand is exploding and it will take years, maybe 3 or even 4 to build out large, efficient power plants. But we will, and the push for SMRs could accelerate their entry. All these are great places to play, but the premiums being paid for equipment with an obvious path to being increasingly marginalized after a 2-3 or so year run, can seem high. But then again, it’s never what you buy. It’s what you do with it. But if demand starts to plateau or drop and the manufacturers have aggressively increased capacity, you have a classic oilfield services cycle roll!
Need a Buck? Credit markets are open to oilfield services, both public and private. Risk adjusted returns are very good. Equity is very volatile with drilling and completion, the least attractive, and production optimization, the favored. Water, compression and artificial lift are all doing alright. International performance based on longer term contracts provides bright spots in Abu Dhabi, Kuwait, Saudi, Guyana, Brazil and a few others. The major oilfield services companies have shifted their focus away from the U.S. and towards international opportunities. That leaves the U.S. very over supplied.
Transitioning. We and the world have been talking for years about how Saudi Arabia still burns oil for power. The conventional wisdom had been ~250k barrels per day for power generation, and then someone in a position to know told me it was closer to 1 million barrels. It is starting to work. Oil based power generation fell by 270k barrels in the summer, and, last month, exports surged by 400k barrels. Finally! It was one of the biggest ambitions of the focus on natural gas over the past several years. Reducing the volume of oil used power generation frees up more oil for export and improves the operations overall.
Captain Obvious. Anaym Capital shows it only owns about $30 million worth of Baker Hughes stock. It's about 14% of their portfolio, but they don't register on the list of top institutional owners. The idea of spinning off Baker’s oilfield equipment business has been kicked around by all of us for the last couple of months since Baker announced buying Chart Industries. There's a list of companies that could buy the whole thing, but it's a short one and anti-trust might get in the way. They could sell it in pieces, but they always have the risk of ending up owning a couple of pieces that nobody wants. They could also spin it out to shareholders or do an IPO. The IPO seems to be the cleanest way, but, in this market, an oilfield service IPO would have a great deal of trouble getting a multiple much over four or five. We can talk until we're blue in the face about what multiple they deserve, but the only reality is what the market will give. I'm sure most every large and middle-size oilfield service company has already done a dive into everything that Baker owns and has come up with a wish list. I'm also certain that the large companies have taken a look, but that would cause anti-trust problems across the board in many jurisdictions. We're all waiting to see what happens, but this isn't breaking news. The activist seem to have gotten more headline than impact, but he did say publicly what has been going around for some time and for that I congratulate him.
Headlines.
Amazon is aiming to replace 600,000 jobs with robots by 2033
North America is below maintenance level spend" - Halliburton
“The timing of rigs and frac spreads coming back in North America is not clear" - Halliburton
“Thirteen Texans will play a crucial role in helping fight petroleum theft plaguing the Texas energy industry as members of the State Taskforce on Petroleum Theft” - The RRC
“Agriculture is bad for the environment” - X / Twitter
“Houston peak load to grow nearly 50% in 6 years” - CenterPoint
An Opinion. Analyst Anas Alhadjii is well known and respected. He has a note out saying that much of the hype about how much oil is on the water is greatly exaggerated and that oil prices could rise sooner than current conventional wisdom. Global crude exports, especially from OPEC+, rose in September, as did oil on water. “The key point is that crude exports surged, significantly increasing oil on water. However, analysts and journalists overstated the impact of such increases for four reasons: they ignored recent shipping sanctions, the destination of Saudi exports, changes in Iranian shipping, and details of Brazilian exports. Ironically, they also ignored the fact that this increase in oil exports and oil on water increases oil demand by about 45 kb/d, according to our estimates.” Chart below.
The Other Side of the Coin. The IEA said, “The global oil market may be at a tipping point as signs of a significant supply glut emerge.” The overall oil surplus averaged 1.9 million barrels per day through the first nine months of the year. Now we see surging supplies from the Middle East and the Americas which are pointing to a surplus of nearly 4 mb/d in 2026. China’s SPR is being filled, and refineries have been told to stockpile oil. In the U.S., we are stockpiling NGLs since shipments to China as chemical feedstocks have been hit by trade restrictions, so inventories of NGLs are high. With production growing by over 1.5 million barrels this year, by the end of next year, we will have a 4 million barrels a day surplus. That is his argument and is obviously a bit bearish on oil prices, at least through next year.
It's Come Down. 2-3 years ago, we did a great deal of work on longer-term crude oil prices, focused on making sure that all parts and companies in the sector would earn their cost of capital. Our number came out to be $82 and the most likely long-term oil price. Technology seems to have changed this. When I updated my model a couple of years ago to today’s efficient reality, the number that comes out is very close to what Bloomberg has. “U.S. Inventory-Price Analysis Suggests WTI's Fair Value Is $65.” As seen in the table below, based on BI comparative price-inventory regression analysis, which correlates with the 30-week average U.S. crude, gasoline and diesel inventory of 753 million barrels comes up to $65. With OPEC+ having increased output since April amid sluggish global demand, an inventory build will only become apparent in 1Q26 or after.
The Bond Market. The 10-year note is going down. Large deficit, capital demand, persistent inflation, uncertainty, the independence of the Fed are all things that should be pushing the 10-year higher, not lower. Only time will tell.
Changing Hands. Citadel is buying over a billion dollars worth of Haynesville from Comstock. Now JERA, Japan’s largest power generation company, who already participates in the Haynesville, is buying $1.5 billion in property and production from Williams and a private group. The Haynesville has the lowest transportation costs to the Gulf Coast where most of the LNG facilities are being built. We need another 7+ Bcf of natural gas production to fill the LNG facilities under construction. The home run Haynesville. The Marcellus is huge, and the Utica is productive, but the Haynesville is our version of the Permian Basin and the deals being done confirm the shift by investors away from crude oil and toward natural gas. Infrastructure will eventually get more Marcellus gas to more customers but for now, the Haynesville is in the driver’s seat. The properties are in western Louisiana and currently produce more than 500 MMcf/d and includes 200 undeveloped locations, with plans to ramp production to 1 Bcf/d over the coming years. JERA is being aggressive in the market, recently signing a 20-year LNG offtake contract. JERA currently holds full or partial ownership in 10 U.S. power generation assets.
Stunned. I saw the map below, flipped the page, then immediately flipped back. The red is the well track of a recent well, with the well path of nearby wells shown in black. While many will not appreciate it, as a geoscientist, the idea of this well being steered around looking for the best rock is amazing. Yes, steering a bottom hole assembly drilling horizontal holes is an amazing thing, but, as can be seen by the well tracks in black, they were almost military turns instead of the wandering around of the red line. We have broken the line on how we can drill wells.
Any and all comments, arguments and rebuttals are welcome!
In addition to my association with PPHB, I serve on three private company boards. Merit Advisors is a property valuation company and I have long been a fan of optimizing how a business is run, not just the tools we make. Merit is in the business of savings companies’ money, actual cash, by doing a much more in-depth and realistic view of equipment and reserve valuations and I am very impressed with their work. I am also on the advisory board of Preng & Associates, a leading executive search boutique that specializes in all things related to Energy & Power. Nova is a gas compression company run by a very dynamic CEO with a very strong board and ownership.
I serve on the Advisory board of the Energy Workforce & Technology Council (formerly PESA), the National Ocean Industries Association (NOIA), and the Maguire Energy Institute at SMU my alma mater.
jim
214-755-3914 | james.wicklund@pphb.com
Leveraging deep industry knowledge and experience, since its formation in 2003, PPHB has advised on more than 180 transactions exceeding $11 Billion in total value. PPHB advises in mergers & acquisitions, both sell-side and buy-side, raises institutional private equity and debt and offers debt and restructuring advisory services. The firm provides clients with proven investment banking partners, committed to the industry, and committed to success.
