Company Update (NYSE:HAL): Halliburton Company Announces Third Quarter Income from Continuing Operations of $0.31 Per Diluted Share, Excluding Special Items


Halliburton Company (NYSE:HAL) announced that income from continuing operations for the third quarter of 2015 was $265 million, or $0.31 per diluted share, excluding special items. This compares to income from continuing operations for the second quarter of 2015 of $380 million, or $0.44 per diluted share, excluding special items. Adjusted operating income was$506 million in the third quarter of 2015, compared to adjusted operating income of$643 million in the second quarter of 2015. Halliburton’s total revenue in the third quarter of 2015 was $5.6 billion, compared to $5.9 billion in the second quarter of 2015.

Primarily as a result of the downturn in the energy market and its corresponding impact on the company’s business outlook, Halliburton recorded company-wide charges related primarily to asset write-offs and severance costs of approximately$257 million, after-tax, or $0.30 per diluted share, in the third quarter of 2015, as compared to $258 million, after-tax, or $0.30 per diluted share, in the second quarter of 2015. Halliburton recorded Baker Hughes acquisition-related costs of $62 million, after-tax, or $0.07 per diluted share, in the third quarter of 2015, as compared to $67 million, after-tax, or $0.08 per diluted share, in the second quarter of 2015. Reported loss from continuing operations was $54 million, or $0.06 per diluted share, in the third quarter of 2015, as compared to reported income from continuing operations of$55 million, or $0.06 per diluted share, in the second quarter of 2015. Reported operating income was $43 million for the third quarter of 2015, as compared to reported operating income of $254 million for the second quarter of 2015.

“We are pleased with our third quarter results, especially the resilience of our international business, where we outperformed our largest peer on a sequential and year-over-year basis for both revenue and margins,” said Jeff Miller, President.

“Total company revenue of $5.6 billion declined 6% sequentially, while adjusted operating income declined 21%. North America led the decline as a result of continued activity declines and pricing pressure.

“In the Eastern Hemisphere, third quarter revenue declined by 5%, but despite activity and pricing headwinds, operating income margins remained at similar levels to the second quarter, due to our relentless focus on cost management.

“Latin America revenue and operating income declined by 4% sequentially, driven primarily by activity reductions in Mexico, partially offset by improved activity levels inArgentina.

“North America third quarter revenue declined 7% sequentially, with operating income at near breakeven levels while we continue to retain our service delivery infrastructure in anticipation of the Baker Hughes acquisition. We saw another step down in activity levels throughout the third quarter, accompanied by further price reductions across the business, especially in the pumping-related product lines, while our North America Drilling & Evaluation margins increased to 10%.

“This is a challenging market, but our strategy remains the same. We are looking through this cycle to ensure that we are positioned to accelerate our growth when the industry recovers, and we are managing through the downturn by drawing upon our management’s deep experience in navigating through past cycles. Our financial results reflect our strong execution culture, and we remain focused on delivering reliable, best-in-class service quality for our customers,” said Miller.

“As we continue to work toward the closing of the pending Baker Hughes acquisition, we are diligently focused on finalizing all regulatory filings, completing the divestiture process, and preparing for integration activities after the closing of the deal,” addedDave Lesar, Chairman and CEO.

“We are enthusiastic about and fully committed to closing this compelling transaction, and remain confident we can achieve annual cost synergies of nearly $2 billion. We continue to maintain our superior service delivery platform and other infrastructure costs in excess of current market needs. This cost was approximately 400 basis points for North America margins in the third quarter.

“We continue to invest in technology, build capital equipment, and prepare for our pending acquisition of Baker Hughes. There are a number of moving parts in the market today, and 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. 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,” concluded Lesar.

Completion and Production

Completion and Production (C&P) revenue in the third quarter of 2015 was $3.2 billion, a decrease of $244 million, or 7%, from the second quarter of 2015, primarily driven by a decline in activity and pricing pressure for all product service lines in the United States, reduced pressure pumping activity in Latin America, lower stimulation activity in Middle East/Asia, and reduced pressure pumping services and completion tools sales in Europe/Africa/CIS. This was partially offset by higher completion tools sales in Brazil, higher stimulation services in Argentina, and increased stimulation activity in Canada.

C&P operating income was $163 million, which decreased $150 million, or 48%, compared to the second quarter of 2015. North America C&P operating income declined $122 million, or 167%, sequentially, primarily due to reduced activity levels and downward pricing adjustments for most product service lines. Latin America C&P operating income decreased $2 million, or 4%, from the second quarter of 2015, primarily as a result of reduced activity in cementing services in Mexico and lower production solutions and cementing activity in Venezuela, which more than offset higher stimulation activity in Argentina. Europe/Africa/CIS C&P operating income fell$13 million, or 14%, sequentially, mainly due to reduced stimulation activity and completion tools sales in Angola. Middle East/Asia C&P operating income decreased by $13 million, or 14%, compared to the second quarter of 2015, primarily due to a decline in stimulation activity in Saudi Arabia and reduced production solutions activity in Iraq.

Drilling and Evaluation

Drilling and Evaluation (D&E) revenue in the third quarter of 2015 was $2.4 billion, a decrease of $93 million, or 4%, from the second quarter of 2015. Decreased drilling and logging services in North America, coupled with a decline in drilling services and offshore testing activity across all regions, more than offset increased project management activity in Middle East/Asia.

D&E operating income was $401 million, which remained relatively flat compared to the second quarter of 2015. North America D&E operating income remained flat, sequentially, as savings from cost reduction initiatives were partially offset by pricing pressure and reduced logging services in the United States land market. Latin America D&E operating income declined $2 million, or 4%, sequentially, as reduced drilling activity in Mexico more than offset increased fluid services in Brazil and higher software sales in Colombia. Europe/Africa/CIS D&E operating income remained essentially flat from the second quarter of 2015, as increased drilling services in Nigeria and higher fluid services in Angola were partially offset by reduced fluid services in Tanzania and decreased drilling services in Angola. Middle East/Asia D&E operating income increased $4 million, or 2%, sequentially, driven by activity growth for drilling and logging services in United Arab Emirates, coupled with increased project management activity in Iraq, and higher drilling activity in Saudi Arabia.

Corporate and Other

During the third quarter of 2015, Halliburton incurred $62 million, after-tax, for costs related to the pending Baker Hughes acquisition.

Significant Recent Events and Achievements

  • Halliburton and Baker Hughes announced that the timing agreement with the Antitrust Division of the U.S. Department of Justice has been extended to the later of December 15, 2015 or 30 days following the date on which both companies have certified final, substantial compliance with the DOJ second request. In light of the timing agreement, Halliburton and Baker Hughes have agreed to extend the time period for closing of the acquisition pursuant to the Merger Agreement toDecember 16, 2015. The Merger Agreement also provides that the closing can be extended into 2016, if necessary.
  • Halliburton and Baker Hughes announced that the companies will market for sale additional businesses in connection with Halliburton’s pending acquisition ofBaker Hughes. Pursuant to the Merger Agreement, and in order to permit completion of Halliburton’s acquisition of Baker Hughes, Halliburton’sexpandable liner hangers business, which is part of the company’s Completion & Production Division, is intended to be divested.
  • Halliburton announced that two of the company’s facilities and nine of the company’s business lines in Brazil received the American Petroleum Institute Specification Q2 Certification (API Q2), an advanced industry certification standard for oil and natural gas service companies. They are the first in Latin America to receive the certification. API Q2 is a risk-based quality management system approach that focuses on competency, service design, contingency planning, supply chain controls, preventive maintenance, inspection, service quality plans and management of change.
  • Halliburton announced that for the sixth consecutive year, the Dow Jones Sustainability Indices (DJSI) identify Halliburton as a leader in corporate sustainability. The company exceeded industry averages in the Economic, Environmental and Social Performance categories, maintaining its place in the DJSI World Index. Halliburton’s continued commitment to advancing its global vision and goals for corporate responsibility and sustainability earned high rankings in several industry categories, and the company received industry best scores for Codes of Conduct, Compliance, Corruption and Bribery; Releases to the Environment; and Human Capital Development. Halliburton received a perfect score in the “Releases to the Environment” category.(Original Source)

Shares of Halliburton Company closed last Friday at $37.81. HAL has a 1-year high of $58 and a 1-year low of $30.93. The stock’s 50-day moving average is $37.68 and its 200-day moving average is $42.10.

On the ratings front, Halliburton has been the subject of a number of recent research reports. In a report issued on October 13, Deutsche Bank analyst Mike Urban maintained a Buy rating on HAL, with a price target of $57, which implies an upside of 50.8% from current levels. Separately, on October 5, Citigroup’s Scott Gruber maintained a Buy rating on the stock and has a price target of $47.

According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Mike Urban and Scott Gruber have a total average return of -2.4% and 8.2% respectively. Urban has a success rate of 41.1% and is ranked #3191 out of 3788 analysts, while Gruber has a success rate of 58.8% and is ranked #920.

The street is mostly Bullish on HAL stock. Out of 9 analysts who cover the stock, 7 suggest a Buy rating and 2 recommend to Hold the stock. The 12-month average price target assigned to the stock is $43.00, which represents a potential upside of 13.7% from where the stock is currently trading.

Halliburton Co is a provider of services and products to the energy industry related to the exploration, development, and production of oil and natural gas.