Halliburton Co., the largest pressure pumper and completions expert in North America, swung to an unexpected profit in the third quarter, driven by “relentlessly managing costs” and a slightly improving market, CEO Dave Lesar said Wednesday.

Quarterly profits totaled $6 million (1 cent/share), versus a year-ago loss of $54 million (minus 6 cents). Total revenue fell 31% year/year to $3.83 billion. Sequentially, total revenue was flat. Operating income totaled $128 million from $43 million a year ago. Cash flow from operating activities was more than $1 billion, driven by gains in its largest business, North America, where revenue jumped 9% — the first increase in seven quarters — on a 41% incremental margin.

“I never thought I would be so satisfied by barely making a profit,” Lesar said during a conference call to discuss the quarterly results. “But given where this market is, I certainly am…Our company’s animal spirits remain alive and well in North America, even though for some, they may feel caged in a bit by cash flow constraints in the short term.”

Completion and production revenue in 3Q2016 was $2.2 billion, a 3% ($62 million) sequential increase, on improved U.S. land stimulation activity.

Drilling and evaluation revenue fell by 4% sequentially to $1.7 billion, while operating income declined 2% to $151 million, because of a low rig count, lower pricing and customer budget constraints. Drilling activity in Mexico experienced the largest sequential decrease, which was partially offset by project management activity in Middle East/Asia.

There is no true recovery underway yet. While the average U.S. rig count increased by 14% over the three-month period, it was driven primarily by “low calorie” rigs, i.e. additions by smaller operators with less service-intensive wells. That activity is not “typically worth chasing at today’s pricing,” Lesar said.

The natural lag between drilling and completion activity also proved a negative. “However, we are now seeing completion activity starting to pick up as we start the fourth quarter.”

Still, the final three months are “difficult to call at this point” for North America’s onshore, Lesar said.

“Based on current customer feedback, we remain cautious around customer activity” because of holiday and seasonal weather-related downtimes. Our customers may take extended breaks, starting as early as Thanksgiving, and push additional work to the first quarter of 2017.”

Uncertainty surrounding customer activity around the holiday season makes the quarter difficult to predict for North American business. Based on what its customers collectively are saying, revenue is expected “to perform in line with the rig count, and we expect our sequential incremental margins to be 35-40%,” CFO Mark McCollum said.

Lesar said some customers aren’t ready to make big financial commitments until 2017.

“As one customer told me, ‘Dave, it doesn’t make any sense for me to rent an efficient high spec rig if I have to start and stop all the time for the holidays over the last five weeks of the year. I just can’t get the efficiencies I’m paying for in the rig. I’d rather just wait until next year to start drilling.’ And I believe we’ll see a lot of that mentality in the fourth quarter. But that being said, it does not change our view that things are getting better for us and our customers.”

The savings instituted across Halliburton are paying off handsomely. On a monthly basis, the Houston-based operator already has achieved the run rate of $1 billion of cost savings annually, and it generated more than $1 billion in cash flow from operating activities in 3Q2016.

The push during the downturn to expand its market share also paid dividends, according to the CEO.

“We believe we now have the highest market share we’ve ever had,” he said. But it’s still all about price, and oil prices aren’t where they need to be for substantial investments by exploration and production companies.

“We remain steadfast in our belief that significant activity increases from our customers starts with sustainable commodity prices over $50/bbl, which we haven’t seen in any meaningful way yet since the rig count activity bottomed out,” Lesar said. “Operators have had time to reflect on their future drilling plans, and I believe they will approach the recovery with a rational methodical response in activity based on commodity price fluctuations.”

Unconventional oil and gas resources, particularly in North America, “are leading the recovery in activity, providing the optimal combination of short-cycle returns and fastest incremental barrels to market…As we have said for some time, North America has assumed the role of swing producer in global oil production.” The shift away from “production discipline,” historically created by the Organization of the Petroleum Exporting Countries, means “our industry will likely experience shorter commodity price cycles going forward. So we see the future market as a combination of shorter cycles in range bound commodity prices.”

The supply and demand balance for U.S. onshore services “is heading in the right direction,” but “we are still in an oversupplied equipment market,” President Jeff Miller said during the conference call. “In pressure pumping, we estimate that the U.S. active fleet — emphasize ‘active’ — grew to over 7 million hp,” with fleet utilization at around 70%.

“This is a long way from full capacity but it represents substantial tightening during the third quarter,” Miller said. More horsepower is sitting on the sidelines, but it’s going to require “adequate price increases to justify its return.”

Tighter utilization is a “critical first step, and we are beginning to see that. We’re also moving away in some cases from work where we don’t see a similar clear path to returns…Equipment’s got to meet returns. And in my view, this does require a step-up in price. For that reason we don’t have current plans to add more horsepower to the market.”