Halliburton sales drop 36 percent as oil downturn reduces fracking

By David Wethe


Halliburton Co.’s revenue dropped by 36 percent, pushing the world’s largest provider of fracking services to a third-quarter loss as the worst crude-market downturn in decades reshapes the industry.

The Houston-based company had a loss of $54 million, or 6 cents a share, compared with net income of $1.2 billion, or $1.41, a year earlier, according to a statement Monday. Excluding certain items, the per-share result was 4 cents more than the 27-cent average of 34 analysts’ estimates compiled by Bloomberg. Sales dropped to $5.6 billion.

“It was a challenging period,” Luke Lemoine, an analyst at Capital One Southcoast in New Orleans who rates the shares the equivalent of a buy and owns none, said before the results were released. “Most people at the beginning of the quarter were expecting things to level off. Well, they continued to more or less crash.”

Oil has swung between a bear and a bull market in North America this year as the drilling rig count slid. Explorers have cut more than $100 billion from global spending plans for the year after crude prices fell by more than half since June 2014.

Prices that service companies charge for hydraulic fracturing, which blasts water, sand and chemicals underground to release trapped hydrocarbons, are projected to fall as much as 37 percent in North America this year, according to IHS Inc.

Halliburton is operating near break-even in North America, reporting an operating profit margin of 0.8 percent in the quarter, while Schlumberger Ltd. reported a margin of 8.9 percent for the same period last week.

Halliburton has said it’s working at costs higher than the market needs right now so it can be ready for the extra work that comes in once its deal closes in the next few months to buy rival Baker Hughes Inc.

“We are not going to try to call the exact shape of recovery, but we expect that the longer it takes, the sharper it will be,” Chief Executive Officer Dave Lesar said in the statement. “Ultimately, when this market recovers we believe North America will respond the quickest and offer the greatest upside, and that Halliburton will be positioned to outperform.”

Schlumberger predicted last week that it will be 2017 before the industry recovers from the worst oil market rout in decades.

“The market is underestimating how long this period is going to take,” Paal Kibsgaard, Schlumberger’s chief executive officer, said on a conference call with analysts and investors after the world’s largest oilfield services provider reported a 49 percent drop in third-quarter profit.

To survive the downturn and better compete with its largest rival, Halliburton, the second-largest oilfield services provider, is looking to sell assets to win regulatory approval for its acquisition of No. 3 Baker Hughes, a deal valued at $34.6 billion when it was announced in November 2014.

Halliburton took one-time charges of $319 million after taxes in the quarter related to the lower value of its assets due to the oil market downturn and costs related to the Baker Hughes deal.

“North America came in roughly in line,” James West, an analyst at Evercore ISI in New York who rates the shares a buy and owns none, said in a phone interview. “We had expected a break even quarter for them, given they’re carrying about 400 basis points of extra costs right related to the Baker transaction.”

The results were released before the start of regular trading in New York. Halliburton, which has 27 buy ratings from analysts, 8 holds and 1 sell, fell 0.8 percent to $37.49 a share at 8:15 a.m. in New York.

Baker Hughes will release its results on Oct. 21.