Halliburton’s outlook overshadowed by weak end to 2018

Halliburton, the largest provider of hydraulic fracturing services, has seen demand for its services soften as U.S. producers cut down on spending and transportation bottlenecks in the Permian Basin of west Texas and New Mexico pushed the price of regional crude lower. Shares of oilfield services provider Halliburton Co fell on Monday after the company warned that fourth-quarter earnings would come in below analysts forecasts amid ongoing weakness in the North American hydraulic fracturing market. Halliburton, the largest provider of hydraulic fracturing services, has seen demand for its services soften as U.S. producers cut down on spending and transportation bottlenecks in the Permian Basin of west Texas and New Mexico pushed the price of regional crude lower.

“The catalysts for improving demand for services are clearly visible: supportive commodity pricing, expanding offtake capacity, building well inventory, and reloaded customer budgets,” Halliburton CEO Jeff Miller said in a statement. CFO Chris Weber told investors and analysts on a conference call that the Houston-based company’s fracing activity will decline in the current quarter by a low double-digit percentage.

Halliburton said it expects the U.S onshore sector to find a “bottom” in the fourth quarter, as producers reset 2019 budgets and next year begin working through a record backlog of drilled-but-uncompleted wells. The company on Monday said it anticipates a fourth quarter profit of 37 to 40 cents per share. Analysts were forecasting a profit of 49 cents per share, according to Refinitiv. While investors are relieved to hear “realistic” expectations for the current quarter from Halliburton, they’re skeptical if things will turn around as quickly as the company says they will, Byron Pope, an analyst at Tudor Pickering Holt & Co. said in an interview.

While demand for its North American completions services has weakened, the firm’s international business is showing signs of recovery, the company said on Monday, as global oil prices have climbed to around $80 a barrel. Halliburton had warned last month that third-quarter results would be hurt by a range of 8 to 10 cents a share, partly from the Permian slowdown. With that in mind, its third-quarter numbers weren’t surprising, Stephen Gengaro, an analyst at Stifel Financial Corp., said in an interview.

Halliburton’s international revenue rose 5 percent from the second quarter to $2.4 billion, while in North America, revenues decreased 2 percent sequentially to $3.74 billion. North American revenues are up 18.2 percent year-over-year. “Our international business continues to show signs of a steady recovery,” Chief Executive Officer Jeff Miller said in a statement. Shares of Halliburton were down about 2 percent at $36.93 in early trade. In September, they fell to a roughly two and a half year low after the company warned of slowing U.S. activity. “We’re not exactly doing cartwheels given near-term pricing and utilization headwinds in the domestic hydraulic fracturing market,” analysts for Tudor Pickering Holt & Co wrote in a note on Monday.

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