Halliburton Sees Big Results from the East in First-Quarter 2014, Expects 'Transitional' Year

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Researched by Industrial Info Resources (Sugar Land, Texas)--Halliburton Corporation (NYSE:HAL) (Houston), a major supplier of products and services to the upstream oil & gas industry, saw steady growth in first-quarter 2014 as double-digit growth in the Eastern Hemisphere more than offset slower growth in North America and weaker activity in Latin America. Net income for the quarter was reported to be $622 million, compared with a net loss of $18 million in first-quarter 2013; last year's quarter included a $637 million after-tax charge related to BP plc's (NYSE:BP) (London, England) Gulf of Mexico drilling disaster in April 2010.

Total revenues stood at a record $7.35 billion, a 5.36% increase from the same period last year. Across all regions, the Drilling & Evaluation segment benefited from improved testing activity, while the Completion & Production segment benefited from higher sales of completion tools. Strong growth in the Eastern Hemisphere was led by Saudi Arabia, where a sharp increase in integrated project activity and a growth in the rig count led to a large addition of product lines, and the Europe/Africa/CIS region, which saw higher sales in completion tools and cement products.

Improved stimulation activity in the U.S. land market proved beneficial to the Completion & Production segment; however, North American results on the whole were tempered by lower pressure-pumping prices, higher logistics costs, and delays related to harsher-than-expected weather. In Latin America, revenues and profits tumbled following a dip in Brazilian drilling activity and cutbacks in Mexico.

Capital expenditures for first-quarter 2014 were reported to be $643 million, compared with $685 million in the same period last year.

Industrial Info is tracking more than $6.6 billion in active projects involving Halliburton, including the $450 million construction of natural gas storage caverns in England. The project involves building a compressor station with two engine-driven compressor packages, and 10 leach caverns to store a total of 100 million cubic meters of natural gas. AMEC (London) is performing the engineering, procurement and construction work.

"I am more excited about North America now than I have been since late 2011," said Dave Lesar, the chairman, president and chief executive officer of Halliburton, in a conference call. "Now I could be off by a quarter or so, but I do not believe I am wrong about this turn [in the markets for the better] happening. Why is that? First, the sense of confidence that I get when I talk to customers, and the sense of confidence that they have in their own business prospects. Supportive commodity prices today are translating into stronger cash flow in [operational expenditure] budgets for our customers.

"Despite the logistical issues we saw in the first quarter, during March we saw record levels of revenues. Completion intensity is rising, lateral lengths are increasing, stage counts are rising, and the average well volume pumped has increased over 30% just since last year."

Halliburton executives announced that the company invested $15 million, pre-tax, during the quarter to improve service and strengthen strategic project growth in North America. Although North American margins ranged from flat to slightly positive during the first quarter, Halliburton executives expect them to expand throughout the remainder of the year, approaching 20% toward the end.

"The Eastern Hemisphere activity continues to expand at a heavy rate, and is playing out about as expected," Lesar said. "Our forecast for the full year remains unchanged: We see customer spending levels increasing by the upper single digits, and our revenue growth to be in the low double digits. And we still expect average full-year Eastern Hemisphere margins in the upper teens.

"Latin America came in slightly better than we projected, but we continue to believe that 2014 will be a transitional year. For the full year, we expect Latin America revenue and profit to be in line with 2013 levels. Longer term, we are very optimistic about our position in Latin America and the future growth potential of this market."

For more information, visit Industrial Info's Oil & Gas Production Database.

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Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, three offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.