A solid performance in North America’s onshore during the first three months of 2011 lifted Halliburton Co.’s profits from a year ago, helping to overcome the losses in the Gulf of Mexico (GOM) and geopolitical turmoil overseas, CEO Dave Lesar said Monday.
“Never has a quarter had so many moving parts,” Lesar told analysts during a conference call to discuss first quarter earnings. However, the upheaval “has not dampened our enthusiasm for the long-term prospects…The industry is on the verge of the next major upcycle.”
What helped Halliburton succeed in the first three months of this year was its U.S. land business. The Houston-based oilfield services giant is the biggest U.S. provider.
“There’s no mistaking our view…the headline is that there’s clearly room for operating income and revenue to grow as we get further into 2011,” said the CEO.
Halliburton reported net income of $511 million (56 cents/share) in 1Q2011, which was more than double year-ago earnings of $206 million (23 cents). Consolidated revenue jumped to $5.3 billion from $3.8 billion, while consolidated operating income totaled $814 million compared with $449 million in the year-ago period.
Operating income in North America jumped to $732 million in the latest period from $230 million a year ago, even with winter weather-related work stoppages. Onshore services profits in North America were up 170% over a year ago and should continue to increase through 2011, Lesar said.
The “unabated shift to unconventional oil and liquids-rich basins more than offset geopolitical issues in North Africa and the ongoing effects of the suspension of deepwater activity in the Gulf of Mexico,” Lesar said.
Halliburton’s natural gas-directed drilling in North America was down about 10% from last summer, said the CEO.
“Gas drilling is expected to remain under pressure because gas produced from oil and liquids-rich drilling will inhibit a correction of the oversupply situation,” Lesar noted. However, “any curtailment is more than offset by an increase in liquids-directed activity…
“As you know, we were very bullish on the U.S. market when some of our competitors were not. We remain extremely bullish on this market and are happy with our position today,” said Lesar.
Geopolitical turmoil, he said, “is forcing customers to look for more stable markets, like the United States…and we could see an acceleration of spending in the U.S.”
North American onshore rig activity increased 2% from the final three months of 2010, while revenue and operating income grew 13% and 16%, respectively.
The “service intensity” has increased because more producers are asking for “tailored solutions that require more complex fluid chemistry, longer laterals, higher proppant volumes and strategic placement of [hydraulic fracture] frack stages,” said Lesar. “Going forward, we believe this structural shift will continue through 2011, further increasing demand for our services.”
The Interior Department in the first quarter began to issue drilling permits for the GOM’s deepwater for the first time since the Macondo well blowout last year; to date 10 offshore permits have been awarded.
Halliburton, which provided oilfield services to BP plc for the doomed well, is expecting to face mounting legal actions over the Deepwater Horizon tragedy, CFO Mark McCollum said during the call. However, Halliburton already has won 30% of the newly approved GOM drilling services contracts and 40% of the well completion work.
“This is actually higher than our historical market share,” Lesar said of the new GOM contracts. “Our customers continue to communicate their commitment to the Gulf and discuss potential projects using our existing contract base.”
In the coming months Halliburton plans to bring back some equipment and workers to the GOM that it had deployed to the U.S. onshore during the drilling moratorium.
“We believe we have hit bottom on the Gulf of Mexico, with the increased permits,” said McCollum. “In time, we still expect as the year progresses to see the Gulf of Mexico get back to work. It comes at a nice time and adds to the mix favorably.”
Halliburton’s customers “are committed to the Gulf and are discussing projects,” said Lesar. “Our strategy at keeping our infrastructure and most of the headcount impacted the short-term results, but we now can respond to customers quickly and we will start seeing the benefits of our strategy.”
Halliburton already was “confident about the robust outlook in North America, and the prospect of higher activity in the coming quarters has made us more bullish in the strength of our business in 2011 and beyond,” he said. “We continue to commercialize core technologies, win key contracts and make the necessary investments to ensure that we gain momentum as the industry enters the projected upcycle.”
©Copyright 2011Intelligence Press Inc. All rights reserved. The preceding news reportmay not be republished or redistributed, in whole or in part, in anyform, without prior written consent of Intelligence Press, Inc.
© 2020 Natural Gas Intelligence. All rights reserved.
ISSN © 1532-1231 | ISSN © 2577-9877 |