Every once in a while we show you the wizard behind the curtain here at Spears & Associates. This essay is one of those times.

We measure markets for oilfield products and services.  The primary measurement we take, the primary metric that we forecast, is product line revenues for individual oilfield service companies that, when combined with similar companies, make up a market.  Perhaps that market is bits or drilling fluids or frac jobs or supply vessels or seismic surveys… we cover the waterfront.  We are not perfect, but we try to be transparent and repeatable so that everybody learns while we learn.

For example, here’s seven product lines inside Halliburton… they have FAR more that seven and don’t report the revenues of a single one:

Did Halliburton have exactly $389 million in cementing revenues during Q2 2020?  Probably not, although I hope we were pretty close to the actual number.

When we plot our estimates for Halliburton’s cementing revenues each quarter and compare those estimates with the prior quarter, we can see the market’s cycle emerge, a cycle that tells us a lot about company performance and buyer behavior.  When we compare Halliburton’s cycle with a competitor’s cement revenue cycle, we can then see how Halliburton is doing versus the competition – gaining share, losing share, maintaining:

You can see that a market does not stay down forever, nor does it grow to infinity (and beyond!).  You see the abrupt reversal of fortunes when a market turns down AND when a market returns to growth. You see why the management of oilfield service companies needs to keep one foot firmly on the gas and the other poised over the brake.

At this point we are assuming that the 2020/2021 downturn does NOT include the double dip of the 2015/2016 downturn.  We think this is a reliable assumption because oil companies (the customer) have slammed the door on drilling, unlike their behavior in 2015.  2015 was a correction, but it needed to be A CORRECTION, hence 2016 to complete the job.  We think 2020 was A CORRECTION.

Are we too optimistic for Halliburton’s Q4 2020 revenues?  Maybe.  They are global and the international offshore piece is still trying to find its new low.  Growth in North America might not offset international weakness.  Nevertheless, stability is upon us and the market builds from here.

Are you ready?