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International Recovery Drives Halliburton (HAL) Q4 Earnings

Nilanjan Choudhury

Oilfield services behemoth Halliburton Company HAL reported higher-than-expected fourth quarter profit on robust international activity. This more than offset slowdown in the North American completion services demand that led to pricing pressure in the hydraulic fracturing business.  

The world's second-largest oilfield services company after Schlumberger SLB saw its adjusted income from continuing operations (excluding a tax benefit associated with change in the company’s corporate structure) come in at 41 cents per share, ahead of the Zacks Consensus Estimate of 37 cents.

However, the bottom line was below the adjusted earnings of 53 cents in the year-earlier quarter. Net income reported by Halliburton was $358 million, 22.5% lower than the same period last year.

Meanwhile, revenues of $5.9 billion were approximately flat with the year-ago quarter and scraped past the Zacks Consensus Estimate by a 1%.

 

Halliburton Company Price, Consensus and EPS Surprise

Halliburton Company Price, Consensus and EPS Surprise | Halliburton Company Quote

 

Management’s Outlook

The world’s biggest provider of hydraulic fracking noted that for operators in North America, where oil production has reached record levels, it’s more about the returns and not growth. The volatility in the commodity price has convinced explorers and producers to take a relatively conservative approach on capital expenditure programs. Meanwhile, Halliburton is witnessing steady recovery in its international business.

In response to the changing market dynamics, the company is looking to cut down on spending, develop sophisticated technologies and generate strong cash flow from operations.

Segmental Performance

Operating income from the Completion and Production segment was $496 million, 10.5% below the year-ago level of $554 million. The division’s performance was affected by lower stimulation activity and pricing in North America.

However, the segment operating income bettered our consensus estimate of $466 million. The outperformance could be attributed to increased completions activity internationally and higher stimulation activity in Argentina.

Meanwhile, Drilling and Evaluation unit profit fell from $293 million in the fourth quarter of 2017 to $185 million in the corresponding period of 2018. The segment income was also below the Zacks Consensus Estimate of $220 million. The underperformance was on account of lower drilling activity in the Western Hemisphere.

Balance Sheet

Halliburton’s capital expenditure in the fourth quarter was $551 million. As of Dec 31, 2018, the Zacks Rank #4 (Sell) company had approximately $2 billion in cash/cash equivalents and $10.4 billion in long-term debt, representing a debt-to-capitalization ratio of 52.2%.

(You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.)

Earnings Schedules of Other Major Oilfield Service Providers

Among the major players, Schlumberger kicked off the earnings season last Friday, while Baker Hughes, a GE company BHGE will report on Jan 31. Weatherford International plc WFT, another biggie, will report fourth-quarter earnings early next month.

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