Halliburton 2013 Annual Report Download - page 42

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WTI oil prices, which generally influence customer spending in North America, fluctuated throughout 2013, ranging
from a high of $111 per barrel in September to a low of $87 per barrel in April. Outside of North America, customer spending is
heavily influenced by Brent oil prices, which fluctuated during 2013 from a high of $119 per barrel in February to a low of $97
per barrel in April. Oil prices were affected by production disruptions in Libya, Nigeria, and Iraq, offset by growing output by
certain OPEC members. Global oil demand growth appears to have gradually gained momentum in the past 18 months and the
International Energy Agency’s January 2014 “Oil Market Report” forecasts a 1% increase in global petroleum demand from
2013 levels. This is driven by economic recovery in the developed world and an increase in all regions except for Europe,
which is forecasted to remain flat.
Henry Hub natural gas prices in the United States have increased approximately 33% from 2012 as a result of an
increase in storage withdrawals due to cooler temperatures in the early part and December of 2013. This, coupled with higher
natural gas demand for industrial purposes, resulted in higher natural gas prices. Natural gas prices during 2013 ranged from a
low of $3.08 per Mcf in January to a high of $4.52 per Mcf in December. The United States Energy Information Administration
(EIA) January 2014 “Short Term Energy Outlook” forecast projects Henry Hub natural gas prices to average $3.89 per Mcf in
2014 compared to $3.73 per Mcf in 2013. Over the long term, the EIA expects natural gas consumption in the power sector to
increase to offset the retirement of coal power plants.
There has been an increase in natural gas prices over the past year and the global economy continues to recover. We
believe that, over the long-term, hydrocarbon demand will generally increase, and this, combined with the underlying trends of
smaller and more complex reservoirs, high depletion rates, and the need for continual reserve replacement, should drive the
long-term need for our services and products.
North America operations
Volatility in oil and natural gas prices can impact our customers’ drilling and production activities. During 2013, the
average natural gas-directed rig count in North America fell by 157 rigs, or 24%, from 2012 levels. The curtailment of natural
gas drilling activity along with an influx of stimulation equipment into the industry has resulted in overcapacity and pricing
pressure for hydraulic fracturing and other services. Despite the decreased rig count in the United States as compared to 2012,
drilling efficiencies and the trend toward multi-well pads are driving a more robust well count. Additionally, operators have
been, in some cases, increasing the numbers of hydraulic fracturing stages on horizontal wells.
We expect United States land rig count to modestly increase from 2013 levels, driven primarily by the continued shift
to horizontal rigs in the Permian Basin. We are seeing higher well efficiencies due to increased pad drilling, more 24-hour
operations, rig fleet upgrades, and significant advancements in drilling and completion technologies. In 2013, we saw average
drilling days per horizontal well drop approximately 14% compared to 2012 and we anticipate continued efficiency
improvements in 2014. We believe this continued shift towards efficiency will bode well for us in the coming years. In the long
run, we believe the shift to unconventional oil and liquids-rich basins in North America will continue to drive increased service
intensity and will require higher demand in fluid chemistry and other technologies required for these complex reservoirs which
will have beneficial implications for our operations.
In the Gulf of Mexico, improvements in the performance of many of our product service lines was due to a 19%
increase in the offshore rig count from 2012, in addition to the efficiencies and integrated solutions we offer that save our
customers time and enhance productivity. Over the long term, the continued growth in the Gulf of Mexico is dependent on,
among other things, governmental approvals for permits, our customers' actions, and new deepwater rigs entering the market.
International operations
The industry experienced steady volume increases during 2013, with the average international rig count improving 5%
over 2012 levels. These volume increases have led to an absorption of equipment supply and we are seeing sporadic
opportunities for price improvements in select geographies. We anticipate moderate margin improvements and gradual activity
increases in the Eastern Hemisphere, although the operator spending outlook could be impacted by ongoing macroeconomic
concerns. We believe 2014 will be a challenging year for Latin America, primarily in Brazil and Mexico. Over the long term,
however, we expect both of these countries to be strong contributors to our growth and profitability.
We believe that international growth in 2014 will come from volume increases as we deploy resources on our recent
contract and project wins, continued improvement in certain markets where we have made strategic investments, introduction
of new technology, and increased pricing and cost recovery on select contracts. We also believe that international
unconventional oil and natural gas, mature field, and deepwater projects will contribute to activity improvements over the long
term, and we plan to leverage our extensive experience in North America to optimize these opportunities. Consistent with our
long-term strategy to grow our operations outside of North America, we also expect to continue to invest in capital equipment
for our international operations.
Venezuela. As of December 31, 2013, our total net investment in Venezuela was approximately $411 million, including
net monetary assets of $124 million denominated in Bolívares. Also, at December 31, 2013 we had $192 million of surety bond
guarantees outstanding relating to our Venezuelan operations.