Halliburton Company (NYSE:HAL) announced results for the third quarter of 2016 of $0.01 per diluted share.
“I am pleased with our third quarter results given the devastation our industry has faced over the last two years. These results reflect the hard work and determination of our organization. While the recent cycle has provided its fair share of challenges, we out-executed even against the very high expectations we place on our organization,” said Dave Lesar, Chairman and CEO.
“Total company revenue was flat at $3.8 billion, operating income was $128 million, and cash flow from operating activities for the third quarter was in excess of $1.0 billion. These results were driven primarily by increased utilization in North America, as well as effective global cost and working capital management.
“During the quarter, North America results improved as we took advantage of the rig count growth by increasing utilization, working our surface efficiency model and relentlessly managing costs. Our North America business delivered 9% sequential revenue growth, and operating results improved by $58 million, which represents 41% incremental margins. This is a step in the right direction as we work to regain profitability in North America.
“As we look forward, we expect an increased commodity price to stimulate rig count growth. In the near term, we remain cautious around fourth quarter customer activity due to holiday and seasonal weather-related downtimes. However, it does not change our view that things are getting better for us and our customers.
“The Eastern Hemisphere continued to experience activity and pricing headwinds throughout the quarter, which was offset by our focus on cost management. As a result, revenue declined by 5%, while operating income margins increased 3%. In the Middle East/Asia region, further activity declines in Asia Pacific were coupled with pricing headwinds across the region. In Europe/Africa/CIS, declining activity inNigeria, Angola and Continental Europe was offset by further cost management in the region.
“Latin America revenue and operating income declined by 13% and 50% respectively, as a result of declining activity levels in Mexico, Argentina andVenezuela. Latin America results continue to suffer from the effects of restricted customer budgets, delayed projects, and rig counts at historical lows. However, we maintain a long-term positive outlook on the region and expect it to recover with improved commodity prices.
“For our international business, we believe the seasonal year-end sales will be minimal and customer pricing pressure will continue; however, these will likely be offset by continued cost management. As such, we expect fourth quarter results to come in flat compared to the third quarter.
“Globally, we will continue to expand our portfolio in unconventionals, mature fields and deepwater. We believe the underlying fundamentals driving our industry are strengthening, and I am optimistic about Halliburton’s relative performance as we move into the new year,” concluded Lesar.
North America revenue in the third quarter of 2016 was $1.7 billion, a 9% increase sequentially, relative to a 14% increase in average U.S. rig count. Operating results improved by $58 million, or 47% sequentially, with a loss of $66 million. The improvement in North America operating results was driven primarily by increased utilization throughout the United States land sector, and effective cost management.
International revenue in the third quarter of 2016 was $2.2 billion, a 6% decrease sequentially, driven primarily by a decline in drilling activity and well completions, as well as continued pricing pressure. International third quarter operating income was$241 million, a 2% decline compared to the second quarter. Margins remained relatively flat as decreased logging services and production solutions activity were partially offset by increased project management activity and continued expense reductions.
Latin America revenue in the third quarter of 2016 was $415 million, a 13% decrease sequentially, with operating income of $11 million, a 50% decrease sequentially. These declines were largely a result of reduced activity in Mexico, Argentina andVenezuela.
Europe/Africa/CIS revenue in the third quarter of 2016 was $744 million, a 6% decrease sequentially, driven by reduced activity in Nigeria and Continental Europe. Operating income of $76 million increased 19% sequentially, primarily related to our cost savings initiatives and improved pressure pumping and pipeline services profitability throughout the region. These increases were partially offset by lower drilling activity in Nigeria.
Middle East/Asia revenue in the third quarter of 2016 was $1.0 billion, a 3% decline sequentially, with operating income of $154 million, a 4% decrease. These declines were driven by reduced activity, particularly in Indonesia and Australia, and pricing pressure across the region.
Completion and Production
Completion and Production (C&P) revenue in the third quarter of 2016 was $2.2 billion, an increase of $62 million, or 3%, from the second quarter of 2016, due to improved United States land stimulation activity, which drove the majority of the C&P revenue increase. International revenue declined as a result of reduced pressure pumping services across most regions, reduced activity in the Gulf of Mexico and fewer completion tool sales in Nigeria.
C&P operating income in the third quarter was $24 million, which improved by $56 million from the second quarter of 2016 primarily as a result of increased pressure pumping activity in North America and increased pipeline and process services inEurope/Africa/CIS.
Drilling and Evaluation
Drilling and Evaluation (D&E) revenue in the third quarter of 2016 was $1.7 billion, a decrease of $64 million, or 4%, from the second quarter of 2016, while operating income declined 2% to $151 million. Revenue declines were seen across many product lines due to the low rig count, lower pricing, and customer budget constraints worldwide. Drilling activity in Mexico experienced the largest sequential decrease, which was partially offset by project management activity in Middle East/ Asia.
Selective Technology & Highlights
- Sperry Drilling announced the release of GeoForce® Endure™ and StrataForce™ Endure™ motors, the latest additions to the drilling motor product line focused on increasing reliability in harsh drilling environments. Challenging drilling operations can cause elastomers to degrade and motors to fail, resulting in nonproductive time. The Endure motor technology is designed to overcome this with a proprietary metal helix that controls vibration and prevents overloading the stator elastomer.
- Halliburton developed the Global Rapid Intervention Package™ (GRIP), a suite of services to help reduce costs and deployment time in the event of subsea well control events. GRIP provides well planning and well kill capabilities facilitated by the company’s global logistics infrastructure and existing product service lines. This includes both an inventory of well test packages, coiled tubing units and relief well ranging tools. In addition, GRIP features the new high temperature, 15,000 psi RapidCap™ Air-Mobile Capping Stack. RapidCap incorporates a specially designed gate valve-based system making it significantly lighter, less expensive and more mobile than options currently on the market.
- Halliburton announced the release of the Acoustic Conformance Xaminer® (ACX) service, a technology to help operators identify and pinpoint costly wellbore leaks by analyzing sound waves that describe flow patterns in the formation and casing. The ACX service saves time by providing a continuous flow of data to the surface, allowing real-time identification of areas with possible leaks in the wellbore. The ACX service is effective in a variety of environments, including mature fields and unconventionals. (Original Source)
Shares of Halliburton Company closed yesterday at $47.07, up $0.75 or 1.62%. HAL has a 1-year high of $47.96 and a 1-year low of $27.64. The stock’s 50-day moving average is $43.83 and its 200-day moving average is $42.60.
On the ratings front, Halliburton has been the subject of a number of recent research reports. In a report released yesterday, Jefferies analyst Brad Handler maintained a Buy rating on HAL, with a price target of $58, which represents a potential upside of 23% from where the stock is currently trading. Separately, on October 14, FBR’s Tom Curran reiterated a Buy rating on the stock and has a price target of $58.
According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Brad Handler and Tom Curran have a total average return of -5.9% and 1.0% respectively. Handler has a success rate of 46% and is ranked #3933 out of 4180 analysts, while Curran has a success rate of 50% and is ranked #1900.
Overall, one research analyst has rated the stock with a Sell rating, one research analyst has assigned a Hold rating and 12 research analysts have given a Buy rating to the stock. When considering if perhaps the stock is under or overvalued, the average price target is $53.75 which is 14% above where the stock closed yesterday.
Halliburton Co. engages in the provision of services and products to the energy industry related to the exploration, development, and production of oil and natural gas. The company operates through the Completion and Production; and Drilling and Evaluation business segment. The Completion and Production segment delivers cementing, stimulation, intervention, pressure control, specialty chemicals, artificial lift, and completion services. The Drilling and Evaluation segment provides field and reservoir modeling, drilling, evaluation, and wellbore placement solutions that enable customers to model, measure, and optimize their well construction activities.