Halliburton Posts Strong Returns, but North America Is a Dark Cloud

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Written by Daniel Graeber for Industrial Info Resources (Sugar Land, Texas)--Upstream services firm Halliburton Company (NYSE:HAL) (Houston, Texas) said Tuesday that first-quarter revenue was record-setting, but returns from North American operations were down year-on-year because of lower activity in the region.

Halliburton posted net revenue of $5.8 billion during the first quarter of the year, a 2.2% improvement relative to year-ago levels and its best quarterly performance in more than a decade. That compares with rival SLB (NYSE:SLB) (Houston), which recorded a 13% year-on-year increase in revenue at $8.7 million.

"Halliburton delivered solid first-quarter results that again demonstrated the power of our strategy and the strength of our execution," said Jeff Miller, the company's president and chief executive officer.

But its North American operations took a hit this year, with revenue down 8% compared with year-ago levels. The company said lower activity inland was offset somewhat by an improvement in drilling-related services in the Gulf of Mexico.

Baker Hughes Company (NASDAQ:BKR) (Houston) in its regular rig count report showed U.S. energy firms added oil and gas rigs for the first time in five weeks, ending something of a lackluster period for upstream activity. Net rigs increased by two to 619 during the week ending April 19, though that figure is about 18% lower than during the same period last year.

U.S. oil and gas production continues to set records, though the pace of growth month-on-month is slowing. In its Drilling Productivity Report for April, the U.S. Energy Information Administration (EIA) said it expects oil production to drop off in two of the seven primary shale basins next month, while gas production declines in all but two of the reserve areas.

Because natural gas often is associated with shale oil deposits, drillers are getting squeezed by historically low market prices. Henry Hub, the U.S. benchmark for the price of natural gas, is down around 18% so far this year due to lower demand and ample supplies. Crude oil prices, meanwhile, are up 14.5% on the year.

Elsewhere, Halliburton reported positive gains in its Latin American portfolio, driven in large part by operations in Argentina, Brazil and Ecuador.

In Europe and Africa, gains were driven by operations in Norway and in the Caspian Sea, while the Middle East saw improvements from services rendered in Kuwait, Oman and Saudi Arabia.

Baker Hughes reported a net gain of 13 rigs internationally, with much of the increase coming from the Asia-Pacific region. Middle East rig counts were down by five relative to February levels year-on-year, and the international rig count increased 4.4% to 971 for March.

Shares in Halliburton were down about a quarter of a percent early Tuesday to trade at around $38.60 per share.

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