Bloomberg Audio Studios, podcasts, radio news. You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at ten am Eastern on Effo card Playing and broyd Otto with the Bloomberg Business App. Listen on demand wherever you get your podcasts, or watch us live on YouTube.
The Bloomberg Dollar Index is that the highs of the year so far. You're a dollar is one oh seven. You have, Yes, the year is a little bit stronger against the dollar. But man, it was a really tough week over the last week with the turmoil in French politics. Luckily we have an expert with us. Marcus Ashworth is joining us. He is from Bloomberg Opinion. I haven't talked to you Marcus in I don't know ten months.
Yeah, it's been ages too long, too long.
It is so good to hear your voice. Okay. We love about you is because you have opinions. What do you make of what's unfolding in France right now?
Such a shy retiring title on it.
How what do I make of it?
I mean, look, it's not a crisis yet anyway. I think it's a problem which was three years out in the future in twenty seven. Whoever's going to replace mac Rol, he's just rolled the dice and brought it forward by three years. It's trying to solve for probably a bigger problem now earlier and getting a better result, perhaps he hopes.
What it has highlighted is that there's been a long, deep seated, ever growing fiscal problem in France where they've they've hidden essentially, I mean, not how to get away with it for ages and ages. First, we had a Fitch down grade in October, we got a S and P down grade in the end of May, and we've got Moodies now having a sort of little think about really do do they genuinely think France is worth a
double A two? So that's because the fiscal deaths in France has risen to five point five percent of GDP, and more importantly, it's debt g UP is starting to rise.
It again.
They had this been great hope of this downward glide path of both France and Italy. That's not happening. It hadn't done happen at all last year when quite the other way, and doesn't look like it's going to get better for least down for this twenty twenty seventh period. So no one thinks that even the current situation would own seen any physical improvement with potential of a non
Macron sort of controlled prime minister and government. That means that quite the reverse is going to get even worse, and that isn't great use for France, isn't great use to the European Union. They hate political volitility. They get very spooky, particularly of a potentially eurosceptic or you know, pro leaving the European Unions it once worked party might get into some form of power. They get very antsy. So that's why you're best to sell or get that
or stay out of France until it settles down. June seventh will get the June July seventh, Sorry, we'll get the second round final results the parliamentary elections. Macron's staying around with other three years.
I love the whole snap election thing. I like because we're over here in the US, We're going month after month year just to get to November. So I kind of like this whole snap election thing here. But what's behind Marcus? Do you think that the rise of Marine le pen and the far right? Is it what we're seeing just around the world. Is it political, is it economical?
What's kind of really dru.
I mean, I don't think you can call her far right. To my mind, she's a socialist. She's pretty hard left, okay, and the fact that she's a national so called champion, and that's what she wants to push, you know, French pension rights, welfare rights, she's very pro union. So in some senses, I know it's easy to label them far right. But the point here is is that you know what
clearly she's standing for. It is a sense of enough already from the French people on mass immigrant This is happening in Italy, this has definitely happened in the UK, It's happening ever in Europe, and it's happening in the US. So look, this is a global problem. Isn't going to get solved anytime soon, but you know you're going to get Look what's happened in the UK. We're getting Richie Sinak going to get bounced out because he's failed to
live up to anything he said he would do. But we're having similar across the European elections, where the results tended to favor the more should we say, anti immigration parties whether some of them are left or right is a subjective point. But look, it's this is just bad fiscal situations getting worse combined with you know, that awful thing that European politics really doesn't like is that fear that the European Union, that euro project might come under question.
And that's when investors, which you believe very much in this whole France German bedrock and that eving has been calmed down. We've got the EU isshing bonds by the gazillion in the middle, lots of pandemic programs spraying money everywhere, and yet it isn't enough. And that's a little bit of a worry. I personally, I see it as a little reality check and maybe in the long run this might be better for Europe if they can get their
act together. I don't see it as a proper euro crisis or anything like it.
Have you noticed or are you hearing flows coming out of Europe into the US because of the political issues there. I mean, we have our own mess.
But what we do have is Convidiot, Alex, you've got it all already. What more do you want? You can't want more of our money?
Yes I do, I want all of your money.
Everyone in Europe is already already over the way in the US. Look I mean, I would say it's more like the US investors who might have been tempted to get out of the US and diversified long last, coming up to your elections, may have been tempted to sort of go into Europe and have a little sniff, particularly around banks and things like that. That's why the worst performance so far being French banks. They're being able to
He's spanked. For the reason why I've been spank is because I think there's a very popular situation for US investors looking to play the old rebound there, and that I think is what we've seen. We've seen some fast money exit stays left. I don't think European investors are
going to go anywhere. I think Japanese had already long thought very carefully about the so called budden plus strategy, where you bought French bonds, you locked him like with Germany, you've got in an extra bit of yield that works a few years ago, not so much anymore, but yeah, there may be a little bit. And so I was saying, is I just don't think any new money is going to come in until July seventh. Why would it. It's crazy to take more risks you need to, and you've
got no visibility on the outcome. There's likely to be one or two more bumps in the road before we have a clear idea of the way the French system works. You have this first round on June the thirtieth, and then and only then you get it clear out clarity of what who goes forward into the second round and you can work out which personalities are going to be doing probably better or worse with more accurate polling. But
that will come clearer as it days go by. I know that this afternoon actually France has thunder a little bit better against Germany. French yels have actually gone nowhere in the last week of a bit. It's just the German yields have fallen hard because they're following, Yes, you've got Alex, they're following the US deals lower. It's all about the US.
Seem told you told you, hey, Marcus.
It was just a few weeks ago when mister maccron hosted a basically come back to France conference where David Solomon Goldman Sachs was there and mister moynihand.
From Bank of America.
I mean, is France open for business? Are people investing in?
They're still mark the spot. This is where Jamie Diamond stood. Now we have a little competition. Funnily off, the first thing that a labor government, almost certain in the UK, are going to do is good, do exactly this. Come to the UK. Everything's brilliant, come back to your business. So that part has been very good at this and definitely there's been some signs that not so much that the city's losing jobs, but that France is attracting more
financial jobs. It's quite great tax breaks to go there. At the same time, clearly they want to promote all foreign direct investment and arguably financial big movers you know, Silhadel, JP Morgan, Back of American et cetera. Are responding a little bit to the challenge. And one interesting thing is I think that Macromo is going to relax a bit on the how much that severance pay has to be
in France. Whi's one of the big things that the banks don't like is that the cost of actually losing people and they change their minds on their expansion plans. But for the moment, Yeah, I think they've done a good job in France and probably outside of London. Paris is the logical place for the most financial companies and banks are particularly to go. But you know, again they don't need this att of published It's not very good for them.
Mark's always a pleasure. It was so good to chat with you. Definitely miss all your commentary. Marcus Ashworth of Bloomberg Opinion, And I have to say my Father's Day dinner last night, for some reason, doing business in France came up in the conversation and about unions and I was like, what does this mean? Like are are we a peak union? Like what is the significance of regular people on the upper West side talking about.
Yeah, I mean again, we had that conference, you know, in Paris or in France a few weeks ago, and again all the big heavyweight from Wall Street Global Wall Street were there and it just said basically we were open for business. And you know a lot of the big financial firms have moved some jobs out of London
into Paris in additions to other European capitals. But you just think about the taxes and some of the social programs and is it really open for business, and can they attract significant foreign global investment into that country?
So?
Or is it like the open more open? It's going to be versus other countries, right, like the cleaner shirt.
And I'm saying now it's everything's on hold until July.
Yeah, we get that vote.
Listening to the Bloomberg Intelligence Podcast catch us live weekdays at ten am Eastern on applecar Play and Android Auto with the Bloomberg Business. You can also listen live on Amazon Alexa from our flagship New York station, Just say Alexa play Bloomberg. Eleven thirty.
One stock that's doing some stuff is Micron. It got some price targets raised, it's going to report earnings next week, and it is just having an awesome day and an awesome ride. Let's get to take care from Kim Forrest. She is founder in CIO Book of Capital Partners. She joins us, Now, hey, Kim, Micron, what do you think about it?
I absolutely love it, but maybe not at an entry point right now. It goes up and it goes down. This is a very volatile stock, but it's certainly one to keep your eye on. And you can ask me why why. I have two letters for you.
AI okay, but why like to tell me more? Tell me more?
Because of AI? This company makes the device is that build out data center memory? Okay? Or you know where data lives.
And if there's one thing I know about AI, it's that it eats data like you wouldn't believe. So if you believe in AI, you should believe in the makers of nand and de ram memory devices.
So there you go. That's why I like it, he kim.
At a cocktail party, so many comes up to you and says, how do I invest in AI?
Where do you steer them?
Or you're at the wrong cocktail party? But go ahead?
Yes, actually you know I try to go incognito at cocktail parties.
But that's okay.
Well, I always say invest carefully and I have a reasonable timeline. And I think those are the two things that people right now are probably forgetting by I don't know, making in video go up by thirty percent since the split?
Does that seem right to you? I'm thinking no? But whatever.
So what you really have to look for is the chain of areas that AI touches. And again, one of them is in Nvidia the tip that drives the models, and that's certainly important, but there's going to be a whole lot more infrastructure around it, and even things like I know this could be a big irol, but Telecom is probably going to have to markedly increase its capacity for wireless consumers because we're going to be consuming a lot more data, storing a lot more data, and these models,
as I say, use a ton of data. So anything in that chain is fair game right now for investing in AI.
We would never irol you for saying Telecom, but based on the fact that you say, you know Micron can be really volatile, you don't want to buy at these levels. You want to buy on dips. Are you noticing a lack of dips a our dips becoming less frequent at this point?
Yes?
And I think it's because you know, we're what are we thirty six months into discovering chat or not even that long, eighteen months into discovering chat, GPT, something like that, So people are really still looking for how do I how do I.
Invest in that? You can't buy open AI.
You can buy in video, but that feels a little stretched, So where else do you look? And I say, and AMD is also fair for this because they're going to not only be a competitor for Nvidia, but also make some of the products that go on an end device. We keep forgetting, like the user has to be able to connect to these models, and that's really important in your search for where the outsized growth may be.
So, Kim, what is NetApp and why do you like it? Other than the fact that it's up forty one percent year to date.
Well, I mean that's really helpful, right, but all joshing aside, you know, the nerdiest. I mean, it's almost like a math joke, right, like a finance joke.
But I digress. No, seriously, it's back to storage, storage of data. Now.
Net app makes enterprise storage devices, and I think the enterprise is going to have to store a whole lot more data to be made to make AI work for it. So that's why we really like net app, and just the trends in the world becoming more digitized. Businesses need to have stable, safe and reliable storage appliances and that's what net app provides.
Kim, what else do you like aside from the AI trend? Like, if that's a nice trend, you got the momentum, you know, you got to find your levels et cetera. Aside from that, if I wanted to buy stuff.
Where would it be, buy stuff in tech or not?
No, outside of tech.
Outside of tech, well, I'm kind of loving because I like to buy low and sell high. I'm looking at energy and I like Exxon Mobile because it has just bought some land in the Permian base through its recent acquisition, so that's good. And I'm somebody that believes in giving yourself some margin, some room for error.
And we might like.
Ev cars, but it's unclear that, you know, automobiles and trucks are going to go away immediately, so I think the timeline for energy is much longer. And the big energy companies are also investing heavily in alternative energy as well. So we're going to always need energy. We like our things that use it. Yeah, so I like to invest in that as well.
Yeah, And you have the gross yield three point five percent, so you're still getting something there, Kim. I'm wondering, though, in energy, do you feel like you can own more than one stock, because in talking to people on the street, it feels like part of the reason behind all the consolidation that's not fundamental is that portfolio managers just can
on a lot of them. So those companies need to make themselves very attractive people like you to be like, I'm gonna pull the trigger on this guy right now.
I don't feel like I want to have a huge overweight to it. We run a sector neutral model for our flagship product, and what we do is we have one energy pick because I like concentrated positions, so we enter a position around three percent. And that's why I always try to go for best in class because this is a commodity. You're not going to be able to catch the wave on buying low and selling high because you know oil is doing whatever it's doing. So I just try to go for the very best company with
the widest range of products. And that to me is excellent because it takes everything from getting it out of the ground into your truck, into your car. But also they do chemicals as well, so they have a very large product suite that addresses a lot of needs.
That's why I like it.
Kim, how do you feel about just valuation kind of across the market here? I mean a lot of folks are saying this is the market's rally really hard over the last you know, call it nine twelve months, we've seen good earnings growths, you know, certainly, but has the earnings growth has been good enough to kind of keep pace with where we are?
So how do you think about valuation?
Well, I think the valuation.
You can talk yourself into things being barely or even a little bit below valuation if you believe, and this is a big if the Feed is going to cut rates. And this is the math part of the segment here. Once we have lower rates, we get higher multiples. It's just how it works because we discount those cash flows back at a lower interest rate, not a higher interest rate, and you have to accept higher multiples.
And I think that's part of.
This game in this market right now is just about every last person, retail investor and institutional investors are all assuming the fed's going to cut sooner rather than later.
When the FED cuts, what then looks interesting in a way that it doesn't look now like is that when small caps finally get some action.
I hope so.
I love small caps, and I think you should be invested in small caps regardless of what the FED is doing. It was awfully hard when the FED was raising rates and being into small caps, but good things happen to small, highly.
High quality companies.
And what I mean by that is they either grow into big companies because they have what it takes to satisfy customers and grow, or they get bought by larger companies. And both of those things are going to happen when rates decrease. That is, companies being more willing to buy to acquire product life or companies that they want to add to their portfolio, or just growth in general should start going once that rate cut happened. So all good things come from rate cuts, apparently.
Kim Farrest, founder and chief investment officer, Capital Partners, located in Pittsburgh. Kim Forest, Founder, chief investment officer there. So, uh, there's another investor loving the AI trade. M And you know, I guess it's not just the chips. You can go software places, whether it's Microsoft or somebody else.
You know, some of the sele exactly we seed.
Some hardware companies call it out.
So the telecom angle that you had, the energy angle, which.
We have the energy angle on utilities and in the power trade, it just seems like you can bend this thing any way you like to.
Support where you are.
And I feel like The theory is that you know, at some point we'll come back down to earth. But then you have Julian and Manual all upgrading. His forecast is six thousand, being like the A I trade. It's just it's it's too sticky. Yep, and that I feel like you're finally seeing that analyst capitulation at the end of the day to the broader market angle.
Yep.
Absolutely, And we look at the markets today for Lisa Bromwo's listening.
Who hates this term punched on the SMP five hundred.
Nothing happening near the Dallas AF fifty nine points, nastas off one point.
Not a lot of happening out there on the e greyfront, but that's okay.
You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at ten am Eastern on Focarplay and Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts, or watch us live on YouTube.
We're just talking about AI. Let's siguius.
Tom Keen would say right to some more AI discussioner Mark Bergan. He is a technology reporter for Bloomberg News, joining us from zoom from London. Which is a technology how we all know. Mark, thanks so much for joining us here Google Ai. What's their strategy?
Thanks for having me. I think you know the good way put their their strategy in some ways is they're
trying to longer be in their back foot, right. I think that with the past two years, and that our story this morning looks at how Google and deep Mind really set the infrastructure and then the base layer for this sort of AI boom that we've had, and then Chat Gebt kind of took all the glory in some ways, and so in their playing ketchup in you'd say, not necessarily on the technical side, but there's certainly now you know, Chat Schebt and all iterations from the different companies building
language models like Anthropic and cohere, they're all sort of threatening Google Search in a way that really hasn't happened in almost two decades. And so their their strategy is I would say defensive at this point.
How does it get on the offense? What does it need to do to sort of change that narrative?
Yeah, I think you know, the story we looked at today was a lot about this mergers that they've Google put in place a year ago. So they've had out here in London is deep Mind, which can widely consider like the world's leading AI lab and has for the past decade effectively been the best funded university running in
the world. They basically been a research lab. They put out some great breakthroughs like alpha Go alpha fold around protein folding, but they're not and it haven't been deeply integrated and connected with kind of Google's commercial and profit center, Google Brain, which was the competing AI lab or that they also had in California that was a little bit more tied to a lot of the popular Google services, and they've been merged that for the past year under
Demosacipus here who runs all of Google AI. It's had kind of a bumby road so far, but I think their their plan is to continue to ship things like Gemini their big foundational model, tweak that and start kind of integrating a lot of this research directly into commercial services.
Mark What does Google say about that chat GPT and just as as a fundamental all threat to the core Google search business, what do they how do they respond to that?
Yeah?
I mean, you know, Google publicly is is great about never is talking about their rivals by name. I said anyways, they say nothing, and I think I think that that's something they've talked about for a long time. Is that sort of their their token phrase that soon the butcha uses that the search is the last kind of biggest moonshot for Google. I think they are thinking, and you know, they're thinking a lot about what that search interface looks like.
You know, how they're going to adapt to if consumers move to things like chat, GPT and and Gemini, what is in what does that mean for Google Search ads business,
which is still the line's share of its revenue. They've had some some clear mishaps, the pretty ugly snaff foosh and since the launch of of Gemini this year, right like there was that kind of famous incidents where they were some of the responses were encouraging people to put glue on pizza, right, there were these They described this as sort of like this is kind of early stage in this technology and some some some stumbles that they've had, but you know, they are the world's leaders in search,
and this is something where you know, they have a lot of deep they have a lot of deep responsibility to get this right, not just for their business but for people's trust in using Google.
Well, that's what's so difficult, right, It's like all the technology is changing so fast, but you still need to like do it. So it's it's you're like we're watching
it in real time. Paul and I were just talking about a Washington Post article that was on the weekend and talked about how all the AI models cannot answer it who won the presidential election in the US in twenty twenty, And I'm just wondering, like how these advanced technologies solve for problems that they're using these large language models, which is basically like, you know, me and Paul talking are regular people talking? Does that also mess them up?
Yeah?
I think you know this is it reminds me a little bit of It's a slightly different technology obviously, but you know, they're in twenty sixteen, have this big mess where if there was there was a popular or there's a blog or this kind of fringe blog that said that if I remember this correctly, it's been a long time, but it was that that Hillary Clinton won the election in twenty sixteen, right, and that was at the top of for briefly and momentarily top of Google News results.
And they've dealt with this sort of problem around misinformation, around totally not credible sources being at the top of Google Search. You're singing problems that are now dealing with. I saw a story today about Google images and like consensual porn. I mean, these these problems I think are being multiplied because with these tools of that generative a I do, which Google talks a lot of as being revolutionary,
it also just makes content production so much easier. And so there's this multitude of content now and and Google has been this sort of their primary services to organize this, and that has a lot of messy problems, especially when open Ai has kind of forced in Microsoft. This forced Google is to move a lot faster than they have been in years past, and we've seen some clear stumbles from that.
So mark that that does Google feel like they can just solve this problem or makeup ground simply by spending more, because certainly they have plenty of cash to spend.
I think that's right.
I think, you know, I would say that they have the capax to be able to do that. I mean, so so does Microsoft. I think you know, Google's logic here is twofold, right, they have They clearly have a lot of engineering talent and and a lot of experience on this, right, Like they there I said earlier that they have to launch this paper. They wrote this paper
that launched this entire generative AI boom. They have decades of experience of actually like doing cutting a JI and and I think they also have proprietary data that a lot of companies don't have, right, Like they have not just the main services you know, Google, Maps, YouTube, search, Gmail, Right, just like that corpus of data they have that's able to sort of train AI services. That's something that really
know other company has. I think the question has always been for them, you can they translate that into something like for their cloud business right where they're in third place? Now, this that actual that data set advantages that translate into commercial sales not necessarily clear, but I think that's sort of what they always point to, is is we have the talent and we have the sort of the big this infrastructure in place that's been in there for decades.
Well, it's a really good piece. You guys should all check it out. It was in Bloomberg BusinessWeek today. What are you working on next? Now?
Well it's summer here in Europe, so nothing to say that, I'll tell the story for tomorrow. I think there's, you know, one thing that was we mentioned briefly in this this story. There's I think it's really interesting is a lot of applications in AI are moving not just from kind of generating images and texts and chatbots, but into the material sciences. That's something that the DeepMind is working on a lot.
I think there's a tension we talk about in the story today between you know, whether or not the company should be how much time that allocates to working on Gemini competing with open AI versus working on something that would kind of push the envelope and working to say that biology or pharmaceutical industry and Deep mind Googles shifted more research towards towards the sort of open AI competition.
I think that's created this way for a lot of new companies moving into biology and chemistry and applying AI to the lab. I think that's really interesting.
Yeah.
I think we saw that in cancer research too, Like you're basically can be copilots. So you still need doctors, you still need all the researchers, but they can be copilots. And that idea of thinking about that was quite interesting. Hey, Mark, really appreciate it. Look forward tomorrow's article as well. Mark Bergan, Bloomberg Technology reporter joining us from the UK.
I don't know.
I still don't get it.
I mean, just to ask a person what practical application of AI, and I don't get a nice.
Consistent It's just that's a cool thing about it all developing at once, but it doesn't make it easier for people like Layman's like us to understand.
Again, if you just roll back three, four or five years ago, I think this was big data. We called it big data, and to me, this is just the next iteration of making smarter, smarter analysis of all the data, structured data and unstructured data. You think the Internet, all that unstructured data, chats you know, you know, all those types of emails and all that kind of stuff, and what is that data? How can you use that data to become more efficient?
I don't know.
That's a long way of answering. If you can't do it in like twenty words or less, you don't understand it.
Right, I'm in that camp.
You're listening to the Bloomberg Intelligence podcast. Catch us live weekdays at ten am Eastern on Applecard Play and Android Auto with the Bloomberg Business. You can also listen live on Amazon Alexa from our flagship New York station Just Say Alexa playing Bloomberg eleven.
Thirty AM Alex Deal alongside Paul Sweeney is a Boomberg and Tell Just Radio. We bring you all the top news and business and finance through our lens of our Bloomberg Intelligence analysts. They cover two thousand companies in one hundred and thirty industries worldwide. I also get to bring in some of my oil CEOs and I get to, you know, ale explain to Paul like oil stuff, which I always appreciate, and joining us in the studio. I have a very special guest for us. It's president and
CEO of Weatherford Greech Salagram. Weatherford is an oil services company. It does international, it does domestic, It does onshore, it does offshore. It also has a leg in the energy transition. What makes this company unique is that it went bankrupt in twenty nineteen. Greiche took over in twenty twenty, and the stock has crushed this year. It's up by the
whole over the last year. It's up ninety percent. It's beaten all of its peers, it's beaten the Oil Services Index, and even one analyst over at City said that the turnaround at Weatherford post pandemic has been nothing short of remarkable. And these analysts don't hand out that kind of compliment very often. Greece. It's so good to see you. Thank you for stopping by.
Alex, great to see you again, and Paul is great to meet you. Thank you so much for having me.
So how's it going?
Like what?
So, it's been quite a four years for you. You came in the bankruptcy, Yeah, to turn it around. Where are you in this turnaround? What more do you think you still have to go?
Etc?
No, A great question. Look, it's been a terrific four years. The team's done an incredible job. I think very few people could have dreamt where it would be today and what was possible.
You know.
The way I think about it is, the turnaround's mostly done. You know, we've gotten the company out of the ditch, we have stabilized everything, we've fixed the balance sheet. So the journey so far has been from broken to good.
The next phase of the journey is really the good to great journey, and that's what I'm actually very excited about because if we've been able to do all of the things that we've done over the past four years with a lot of constraints, a lot of shackles, you know, the exciting part is what we can do without that.
So when you go from good to great, does that mean like a lot of buybacks and dividends?
Does that mean?
Yeah?
What is that?
Look, it's a lot of different things, but ultimately it is creation of value, and it's creational value for our customers, for our employees, and most of all for our shareholders. But it's doing that with continued focus on greater cash generation, which comes from better margins, better improvement in the way we manage our networking capital, but also ultimately better investments. So our real goal is to make sure that we've got world classes that are done on invested capital.
Now that I see as an outsider to the energy industry, I see a lot of M and A activity there, and being a former banker myself, that's what hits my radar screen. How do you guys think about M and A for your business now that you are on maybe firmer footing correct?
You know, for the first three years, MNA was a bad word. You know, Weatherford actually grew up on a built up on a series of acquisitions and a lot of issues with that, especially around the lack of integration. So the first three years that I've been in the role, we really focused on the organic capabilities of the company, building out the portfolio, making sure fix the operating intensity and the rigor around the company. But we have now gotten to a point where M and A has become
a very important salient topic. We actually just exercise that muscle for the first time. We announced three small acquisitions back in February, so two in the wireline technology space, one in a very exciting space, and Intervention, which really gives us capability in slaughter recovery and plug an abandonment, which is a very key part of that energy transition.
So we have started to do that and I think there will be more to come because we've now got a balance sheet that allows us to do that, and more importantly, a team that understands the importance of integration and is learning how to build that into the opening cadence of the company.
And just to give our listeners a sense, your services are the life site, like, how do your services differ than say, one of your competitors, and how do you sort of invest for the life cycle of a welfare customer.
Sure, so in oil field services, there's a lot of companies that do a lot of things similarly. So we've got what ferentiates us. We've got a portfolio that provides core ofs services, so everything from drilling services to wireline et cetera. But we're also able to complement that with what we call specialty services, things like managed pressure drilling, tubular running services, intervention services, et cetera that very few,
if anyone, has. So that combination of broad based services that allow us to go toe to toe with the larger peers in the sector as well as then these specialty products and specialty services give us that differentiation and also allow us to have higher margins.
You know, I keep joking to alex with oil at eighty dollars a barrel, I'm going to drive down to Texas and start drilling some holes. I mean, isn't the cost like forty bucks in eighty dollars. I can make some money there, but I don't see a whole lot of drilling activity. What's going to take it for the industry to take advantage of these prices here.
Look, I think the industry has really really embraced this concept of delivering returns for shareholders, and so I think there's a lot of discipline, especially around managing capital within the industry's it's further exacerbated by the wave of M and A that's happening, which again goes back to driving
higher returns. So I don't think in the US there's going to be necessarily a sea change at the range of oil prices that we are seeing right now, which I think in the long term is actually good for our sector, especially it creates a balance versus the seesaw effect that you see in the cyclicality that we've seen in the past. We also have a very robust international market. So for Weatherford, less than twenty percent of our revenues come from North America. The bulk of it is really
an international orientation, international leverage. So we see a very healthy market. Now the US is still the largest market in the world. We see a lot of activity, but it is something that is driven by capital discipline by our customers, which is a good thing.
And we have M and A too. Does that eventually lead into less business for oral services companies because in theory, maybe an Exxon pioneer going to drill ten wells rather than twenty.
Yeah. I think, look, we are seeing a lot of drilling efficiencies, we are seeing the recount go down. But I think it all comes down to differentiation. As long as companies can differentiate and deliver value to allow our customers to make greater headway on their efficiencies to generate higher returns, I think they'll always be business.
Again.
It is the largest market still.
I mean I'm looking at your income savent I mean roughly half your revenue Eastern Hemisphere, half Western Hemisphere. It gives the economics of both of those, your domestic markets versus your international Yeah.
You know, historically North America was a very profitably challenged or challenged market for us on a profitability basis. Yeah, right, So our team's done a fabulous job over the past few years really changing the way we run the North America business. So today the profitability across all of our geographies, all of our regions is pretty much imbalance. So and I think, you know, I've always said the litmus test of our turnaround has been what's happened in the North
America market. Over the past year, we've seen revenues decline in North America, but the profitability has actually gone up. So that's a real testament to what we've been able to do at Weatherford and the opening rigor the opening intensity that the team is put in.
What are you doing on the energy transition space? Where do you play in that?
Yeah? So, first of all, Alex, for US, it starts with this whole space of plug in abandonment. We think that's going to be what does that actually mean? Yeah, so what that is is the responsible decommissioning of mature oil and gas well So as oil and gas fields stop producing, customers want to make sure that those wells are plugged properly so that you don't have any risk of leaks from them and you don't have any environmental damage.
So we play a big role in that, and we've both sterted our portfolio with the acquisition that I just talked about earlier this year. So that's a huge space and we think that'll be something that will play out over several years. So you know, that's number one. The second element for US is geothermal energy. We've been a leader in geothermal for over two decades, mostly driven by
our capability in high temperature tools. We've had a capability leading to very high differentiation in high temperature, which, as you can imagine, is important in geothermal. But we're now extending that beyond just drilling, so multiple aspects of the geothermal loop. We've got partnerships with organizations like Seraphie with Ever, which is a Canadian company doing some very novel work
in geothermal. As geothermal shifts from this whole notion if you've got to be somewhere near a volcanic region to now in multiple parts of the world, you know, in cities as well. I was in Hamburg about a year ago where they're brilling wells in the middle of the city itself, you know, providing district heating, et cetera. So geothermal is a big platform for us. The next one is CCUS. Now, CCUS is a huge ecosystem.
Carbon capture utilizations nice.
Yeah, it's a huge, huge ecosystem. We don't play in a lot of it, but where we do places in the storage and monitoring aspect of it. So again this is where our technological capabilities lend themselves more directly. So that's a huge space for us sort of leading to that or away from that, but somewhat tied is whole
emissions management and emissions monitoring. We recently just announced a agreement and MoU that we signed with Honeywell in this whole methane emissions management which brings Honeywell state of the art technological capability, especially around sensing our access to our customers oil fields. We're also the only ofs player to have its own SCARA system, a data acquisitions system built on top of our production optimization platform. So that's an
area that I'm very excited about. And last but not least, solutions mining, so that's a big area for us.
Garrise, we really appreciate it. Thank you so much for stopping by. It's so good to get your perspective and it's good to get started chatting again and all the opportunities there and like I said, Wetherford really autperforming all of its peers in the last year. Garish Salaground, President and CEO of Weatherford International.
You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at ten am Eastern on applecar Play and androud Outo with the Bloomberg Business. You can also listen live on Amazon Alexa from our flagship New York station. Just say Alexa play Bloomberg eleven.
Thirty Alex Deal here with Carl Sweeney. This is Bloomberg Intelligence Radio. We bring you all the news and business and economics through a lens of our Bloomberg Intelligence analysts. We also every Monday at this time tap Bloomberg ne EF. Their research covers commodities, power, transport, industry, buildings, AG sectors, technology, anything that we need to know as we kind of transition our energy and security and energy transition throughout the world.
And I should point out that every time they release their EV Global Outlook, it is the thing that is quoted by Wall Street analysts. You go to Wall Street Analysts and they are using BNF's data from evs to model their own opinion. So we wanted to dig a little deeper the release. The report was released last week. Corey Kanter is BNF lead US Electric Vehicle analyst. Corey, thank you for joining. What was your overall takeaway like, okay, EV growth will be x and then what was it for the US?
Yeah? No, thanks for having me, Alex.
Great to be back here with you and Paul I think the big takeaway is that EV sales growth is happening on evenly across different regions in the world. Maybe not a surprising finding if you're following EV's on a day to day basis, but moving forward, we expect that to be a bit of the same. To give you a sense of where we see things going, we basically have both the near term out look and a long
term out look. The near turnout look ends in twenty twenty seven, and so what we expect is by twenty twenty seven, global passenger EV sales will be about thirty million in our base case called the economic transition scenario, and a probably better metric of that is thinking about EV share a passenger vehicle sale. So we'll move from a world where one in five cars sold is electric to a world where one and three is about thirty
three percent, up from eighteen percent last year. By twenty forty, we expect that about seventy three percent of all new car sales will be electric. But there's a long way to go. And then on the US question, always good to compare it. I think to China and Europe, US passenger EV's SHAREFF sale last year was around ten percent. We expect the next two years to see a bit of a slower growth, So only about twelve percent of new car sales should be electric this year, rising to
about twenty nine percent by twenty twenty seven. Seems pretty good, but if you look at Europe in China, it's going to be much higher there. So by twenty twenty seven we expect about sixty percent of new car sales to be electric in China and forty one percent in Europe. And when we talk about passenger evs at B and EF, that's both battery electric and plug in hybrid electric vehicles.
So plug and talk to us about those plug in hybrids. It it feels like a lot of folks are suggesting that might be a very vital interim step for at least in the US.
In terms of the transition to EV. Is that how you think about it?
Paul? A really good question. I also co wrote the plug and Hybrid section of the report.
We do a kind of deep dive which we do with a few different deep dives every year, and what we call thematic highlights.
I think around p haves the question.
Really is pheabs Yeah, Phea, plug again?
Hybrids?
Okay, plug in hybrids, Okay, is how good are they going to be?
If you look at the plug and hybrids in China, they're all electric mode, meaning they're kind of electric mileage they get before they have to turn on that gas engine is about twice as high in China currently as it is in the US.
So quite simply, China is making not only.
Better fully electric vehicles, but better plug and hybrids. We still think that there is some role for p havebs to play this decade in markets like the US in Japan. But what I've been big on pushing on is the product that we're getting today is not necessarily as good
as it should be. So when you hear automakers say, oh, well, maybe we'll do more hybrids or do more plug and hybrids instead of fully electric vehicles, I think a fair response would be to say, well, in Europe and China they're getting far more all electric mileage than here, so can you deliver some of that more.
High quality product.
Ultimately, we do a bunch of different scenario analysis in the full report, and one downside of plug in hybrids is that if you go down that route and people aren't charging them enough, which is harder to do. Because of the lower all electric range, you could end up in a scenario where you're having a lot higher oil demand use than if you just switch to fully electric vehicles, and that would not be good for your climate targets.
When do you think the tipping point is when EV's become more of mass adoption here in the US.
So what we've pointed that historically is this idea of upfront price parody. We're seeing total cost of ownership parody, including fueling already being hit in many different regions in terms of upfront costs. It really depends if you're comparing apples to apples, right, you see a lot more evs in that kind of low forty thousand dollars price range
now high thirties. I think once you get to the low thirty thousand dollars price point, Really, according to our analysis, when we're looking at kind of a generic BEV versus a generic ice vehicle, we see it happening in the US over let's say the next three to four years, really twenty twenty six to twenty twenty eight. But really, if you're comparing a Tesla model Y to towards a lot of its competitor vehicles or model three.
You're getting pretty close.
But that's where you start to see I think higher adoption where you won't have to necessarily have a premium and price.
You also get a lot of good leasing deals today on EV's but.
It's a bit messier to kind of figure that out because you've got dealer markups, you've got different rates.
But big picture, that upfront price parity.
How about the charging infrastructure in the United States?
To what extent is that been holding back the adoption of evs here and kind of how do we expect that to evolve?
Yeah, I think that's the biggest difference between Europe and China. Our EVY Outlook for folks who aren't familiar has whole sections on charging infrastructure, how much investment is going to be needed moving forward, But really just taking a base level stat TESLA remains the number one provider of charging infrastructure here in the US in terms of reliability, in terms of number of fast charging stations, and then there isn't really a clear cut number two, three, four, five.
My colleague Ryan Fisher does a bunch of great presentations on this, and one of actually the most impressive find is US and Europe actually have a similar amount of chargers between the top six kind of charging infratructure operators, but Europe has an additional five hundred operators after that that really supply the bulk of the market.
So again, we want to see more of that infrastructure built out.
There's been a lot of reporting around the federal funds rolling out really slowly because they've had to go through state RFPs. But yeah, that's the number one issue holding back probably the US market, maybe even moving past the upfront cost issue.
Oh we only about a minute left. But at least with my ic car, right, I can trade it in and I can get value for it. Do we know how this market evolves for evs?
Yeah?
I mean I did a residual value note with the team at BADF maybe about two years ago, and the market looks so different than that's when Tesla prices were going ten to fifteen percent above their kind of selling price. And so now you've seen because Tesla brought its prices down that residuals for a lot.
Of evs have crashed.
I think it's going to be something that continues to develop to find out how long batteries are going to last.
I do I know that yet?
It varies.
I mean, we don't have I think any research here where we've said that this is what we find amongst all the kind of evs in the market. But right, if your battery holds up longer than people expect, you'd expect to see maybe more residual value. If not, you know, you could see more of an issue. But yeah, it's an outstanding question, like so much of the space. But to your point, Alex, that's why you want to see more, you know, look into battery life over time.
Yeah, exactly. I think that's gonna be really interesting. All right, Corey, Thanks Lott. We really appreciated Corey kant be enough lead you as electric vehicle analysts joining us on their new report. Definitely check it out. It's what all the it's what all the street winds up quoting as we sort of go through this energy transition with the questions that we all have. I don't know how long have you had your phone?
I can burying battery life just five years?
Maybe five years? Okay, so let's just say five years. I'm assuming a car battery is gonna be a lot better than your phone battery. I don't know, But I don't know if you're forced to, like, if you're forced to re up your car because of the battery, I know that feels different. That feels different than like, Oh, I just got to replace my brakes and welco into the Apple Store. Maybe I'm wrong, Yeah, exactly.
All right.
This is Bloomberg Intelligence. Happy Monday, everybody.
This is the Bloomberg Intelligence podcast, available on Apples, Spotify, and anywhere else you'll get your podcasts. Listen live each weekday, ten am to noon Eastern on Bloomberg dot com, the iHeartRadio app, tune In, and the Bloomberg Business app. You can also watch us live every weekday on YouTube and always on the Bloomberg terminal