Halliburton Shows Exuberance Over North American Operations

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Written by Daniel Graeber for Industrial Info Resources (Sugar Land, Texas)--Upstream services company Halliburton (NYSE:HAL) (Houston, Texas), said its performance in North America improved and the future was bright, giving some support to the longevity of U.S. oil and gas production.

Halliburton reported total revenue for the third quarter of $5.4 billion, a near-6% improvement over second-quarter figures.

"Halliburton's third quarter results demonstrate the strength of our strategy in action," Jeff Miller, the head of Halliburton, said. "Total company revenue grew 6% sequentially, as activity and pricing increased simultaneously in North America and international markets."

Total North American revenue came in at $2.6 billion, a 9% increase from the previous quarter. The company said that growth was encouraged by an increase in pumping and drilling-related services inland. Revenues there could've been stronger if not for a decline in activity in the Gulf of Mexico.

Offshore leases have been on hold over the last few years as Washington re-examines its auction policies with the environment in mind.

Latin American revenue for Halliburton was $841 million, an 11% increase over second-quarter figures. That was due in large part to increased well activity in Mexico. "In North America, I see continued revenue growth -- the inbounds for calendar slots are stronger than I have ever seen at this point in the year," Miller said. "Our solid performance in the third quarter was the result of our strategy to maximize value and cash flow in this extremely tight market."

If federal forecasts are correct, Halliburton should continue to see growth across its North American portfolio. The Energy Department expects total shale oil production in November to reach 9.1 million barrels per day (BBL/d), which would be the highest production total since March 2020 if the estimate proves correct.

By next year, total U.S. crude oil production should accelerate from current levels by 6% to reach 12.4 million--an all-time high.

North American results came in somewhat mixed, however, for Halliburton's peers.

Schlumberger (NYSE:SLB) (Houston, Texas), now known as SLB, reported total North American revenue of $1.5 billion for the third quarter, unchanged sequentially. International revenue rose 13% from the second quarter and 26% year-over-year to reach $5.9 billion.

Baker Hughes (NYSE:BKR) (Houston, Texas), for its part, took in $942 million in revenue from its North American operations, a 10% improvement over the second quarter. International revenue was $1.9 billion, an increase of 4% sequentially.

Indeed, North American upstream looks busy despite the industry's complaints over federal policies. The latest rig count shows a 42% increase in North America from year-ago levels, compared with a 11% increase internationally.

Most operators in the U.S. shale patch need oil priced at around $50 per barrel to break even and given the current forecasts for triple-digit crude, the sentiment expressed from the likes of Halliburton is understandable.

But the sector is changing on the back of a geopolitical risk premium and pressure to extend greener shoots. Meanwhile, items like steel are increasingly expensive for upstream operators and skilled labor may be hard to come by.

Investor pressure to turn in more capital could also be a future constraint. The number of drilled but uncompleted wells--known as DUCs--has been on a steady decline for the better part of the year as operators focus spending on existing operations rather than new wells.

DUCs can serve as a barometer for future production and if those wells are at a premium, perhaps the future isn't as bright as the upstream players suggest.

Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 200,000 current and future projects worth $17.8 Trillion (USD).