Halliburton Tops Estimates Yet Again
Major oilfield services provider Halliburton Co. (HAL) reported better-than-anticipated first quarter 2013 results – the fourth outperformance in the last 5 quarters – helped by robust showing from its international business. Earnings per share from continuing operations – excluding a charge associated with the Gulf of Mexico disaster in 2010 – came in at 67 cents, beating the Zacks Consensus Estimate of 58 cents.
Following Baker Hughes Inc. (BHI) and Schlumberger Ltd. (SLB), Halliburton stepped up as the third member of the ‘big 4 oil service companies’ to post above consensus result. The remaining member of the contingent, Weatherford International Ltd. (WFT), is scheduled to report next month.
However, the company’s per share profits came sharply lower than the adjusted first quarter 2012 level of 89 cents, amid sluggish activity in its core North American operations.
Revenues of $7.0 billion were 1.5% greater than that achieved during the first quarter of 2012 and also surpassed the Zacks Consensus Estimate of $6.9 billion.
During the quarter, North America accounted for approximately 53% of Halliburton’s total revenues and 59% of its operating income.
Segmental Performance
Completion & Production: Revenues for Halliburton’s Completion and Production segment were down by 4.4% year over year and 5.5% sequentially.
Operating income for the unit came in at $615 million, down 40.6% from the year-earlier level, with North American profitability plunging 50.4%. The dismal showing in the region – responsible for more than 70% of the segment profits – was due to a tight pricing environment for production enhancement services and depressed domestic demand for stimulation activities.
However, the segment operating income managed to exhibit a 2.0% sequential increase. This was driven by improved overall activity in Australia and Saudi Arabia, a surge in completion tools demand across Angola, the United Kingdom and Malaysia, as well as higher cementing activity in Indonesia.
Drilling & Evaluation: Revenues from Halliburton’s Drilling and Evaluation business were 2.7% below the fourth quarter levels but improved by a healthy 11.5% year over year to $2.9 billion.
Income in the Drilling and Evaluation unit increased 10.6% from the year-ago period to $407 million, driven by robust drilling activities in international regions and supported by the revival of deepwater work in the Gulf of Mexico. In particular, Halliburton gained from higher demand for drilling services in Azerbaijan and Russia, Mexico and throughout Middle East/Asia. Results were further propelled by encouraging pricing/sales from the ‘Baroid’ product service line in Brazil, Norway and Angola, as well as improved levels of wireline activity in Saudi Arabia, China, and Malaysia.
However, the segment’s operating income fell 15.9% from the December quarter on the back of tepid drilling and wireline services activity in the U.S. land market as well as mobilization expenses related to widening offshore initiatives in Brazil.
Balance Sheet
Halliburton’s capital expenditure in the first quarter was $685 million. As of Mar 31, 2013, the company had approximately $2.0 billion in cash/cash equivalents and $4.8 billion in long-term debt, representing a debt-to-capitalization ratio of 23.4%.
Zacks Rank
As of now, Halliburton, Baker Hughes, Schlumberger and Weatherford are all Zacks Rank #3 (Hold) stocks, implying that they are expected to perform in line with the broader U.S. equity market over the next one to three months.
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