North American market has turned: Halliburton

OREANDA-NEWS. July 21, 2016. The world's second-largest oilfield service provider Halliburton expects a modest uptick in drilling in North America in the second half of the year amid a rise in the rig count.

"We believe the North America market has turned," chief executive Dave Lesar said in a statement detailing second quarter earnings. "With our growth in market share during the downturn, we believe we are best-positioned to benefit from any recovery, including a modest one."

US rig count rose to 447 as of last week, from 404 rigs at the end of May — the lowest for nearly three decades, according to Baker Hughes data. A recovery in Nymex WTI to near \\$50/bl and relative stability is prompting a few producers like Pioneer Natural Resources and Devon to gradually step up drilling later this year.

As drilling activity improves, the \\$3.2bn loss posted by Halliburton in the second quarter — compared with a profit of \\$54mn a year earlier — may mark the low point in the current downturn that began in mid-2014. It may also be a sign that profits for the rest of the industry have also bottomed out.

"We believe Halliburton's results should provide relief given concerns of weakness across the sector," analysts at Seaport Global said.

The optimitic outlook from Halliburton in its first earnings report since calling off a \\$35bmn merger with rival Baker Hughes is particularly important as investors were awaiting further updates on operations, margins and market share.

Halliburton booked a \\$3.5bn termination fees in the second-quarter after scrapping the deal in May that would have combined the world's second and third-largest services firms and closed in on the gap with global leader Schlumberger.

North American revenue fell by 15pc from the earlier three months to \\$1.5bn, beating a 23pc decline in average US rig count. But it fell by 43pc compared to a year earlier level of \\$2.7bn. Latin American revenue fell to \\$476mn, down 38pc from a year earlier level of \\$767mn, while Europe, Africa and Commonwealth of Independent States (former Soviet Union) declined to \\$795mn, or 28pc from \\$1.09bn a year earlier. The Middle East and Asia dropped by 24pc to \\$1.05bn from \\$1.39bn.

Halliburton expects its Latin American business to remain weak. "Looking at our major countries, rig activity in both Brazil and Mexico is at 20-year lows, while Venezuela continues to experience significant political and economic turmoil," Lesar said.

By business segment, completion and production fell to \\$2.1bn, down 39pc from \\$3.4bn a year ago, with the majority of the decline driven by North American pressure pumping services. Its drilling and evaluation division declined by 30pc to \\$1.7bn from \\$2.5bn, as a result of the low rig counts, lower pricing and a global cut in customer budgets.