Halliburton cuts capex 15pc, takes $1.2bn charge

OREANDA-NEWS. Halliburton cut its 2015 capital expenditure (capex) budget by 15pc to \\$2.8bn and took a \\$1.2bn charge for asset writedowns and headcount reductions as a 50pc plunge in crude prices hits drilling activities, particularly in high-growth markets like North America.

The second-biggest oilfield service provider's US rig count has declined about 50pc from the peak in November, and activity is still falling week on week even though the pace of the plunge has slowed somewhat, president Jeff Miller said. The company's Middle East and Asia business will be the most stable in 2015 as recent project awards in Saudi Arabia, Iraq, UAE and Kuwait move forward, but they won't be enough to offset the fall in the US.

"Looking back over the last several major cycles, the speed of this downturn has been historically high," Miller said on an earnings call. "Because of the lack of available work driven by the rig count decline and the resulting overcapacity in available equipment chasing the work that remains, this is an extremely competitive market."

Historically, it has taken rig counts three quarters to move from peak to trough, Miller said. "Once we see activity stabilize, the healing process can begin."

Halliburton, which is continuing to work toward closing its \\$34.6bn acquisition of Baker Hughes, sees an annual cost reduction of \\$2bn as a result, in addition to all the cost cuts done so far. The company is pressing ahead with cost cuts as the outlook remains bleak. The average US rig count for the second quarter is already down nearly 30pc compared to the first and further activity declines and pricing pressure are likely.

"Industry prospects will continue to be challenged in the coming quarters, and visibility to the ultimate depth and length of this cycle remains uncertain," chief executive Dave Lesar said.

The company did not announce a fresh round of headcount reductions, after cutting by about 9,000, or 15pc of its global total, in the first two quarters. But it said it may reduce count further in the second quarter, "although we expect further charges will be significantly smaller," senior vice president for finance Christian Garcia said.

Net quarterly income fell 33pc to \\$418mn, dragged down by a fall in both the completion and production business as well as the drilling and evaluation segment. Completion and production operating income fell the most, by 30pc overall to \\$462mn and 48pc in North America to \\$212mn, dragging down the company's income. A steep fall in rig counts and price discounts for well completion services in North America led to fall. Decreased activity in Norway, Angola, Mexico more than offset increased business all product lines in Venezuela and higher completion tools sales in Saudi Arabia, Qatar and Nigeria.