OREANDA-NEWS. Halliburton expects a "modest uptake in activity" in the second half of the year, but any meaningful increase in drilling is unlikely before 2016, depending on the pace of output declines and where commodity prices settle.

In order to be ready for that recovery — which Halliburton said is likely to be driven by North American activity — the world's second-biggest oilfield services provider is opting to retain staff and equipment "well beyond current market needs." This despite lowering operating margins by 300 to 400 basis points in the second quarter, chief executive Dave Lesar said in the company earnings call today.

"What I do believe is that when the recovery occurs North America will offer the greatest upside and that Halliburton will be the best positioned to lead the way," he said.

The North American rig count has likely reached its low point, so the next step is stabilization in the market, which "means the healing process can begin with respect to pricing and margins," Lesar said. The increase in activity will be driven by activities such as re-fracturing, which is when companies re-enter existing wells to do new hydraulic fracturing. During the quarter, Halliburton signed a deal with private equity BlackRock, which will provide $500mn over three years to fund the re-fracturing business.

Halliburton also cautioned the current drop in investment could lead to a shortage of equipment and workers, but that the equipment shortfall will be felt first. Investment is slowing down as the industry idles about 40-50pc of drilling capacity.

Halliburton is confident of completing its $34.6bn acquisition of rival Baker Hughes by the end of this year despite a 90-day extension of a federal antitrust review. Halliburton has submitted a proposal of additional divestitures to various authorities, in addition to the sale of its fixed cutter and roller cone drill bits business, directional drilling and logging-while-drilling businesses.

In terms of regions, the Europe, Africa and former Soviet Union businesses grew because of an increase in activity in Eurasia and Norway. Higher stimulation activity and completion tools sales in both Algeria and Angola, and overall progress of projects in the Middle East also helped support activity.

In Latin America business fell, driven primarily by Venezuela, because of budget cuts and a sharp depreciation of its currency. In North America the average rig count fell by 40pc but impact on revenue was a 25pc drop, "demonstrating that our cost reduction initiatives are helping to offset the current market challenges," Lesar said.

In terms of business segments, the completion and production (C&P) business fell by 19pc from the first quarter, driven by a drop in pressure pumping activity and, more broadly, across all product service lines in North America, the Middle East and Asia. The drilling and evaluation (D&E) business shrunk by 12pc compared with the earlier three months, as drilling services product sales rose in Russia as did project management activity in Saudi Arabia.

The company's net income fell to $54mn in the second quarter from $774mn a year earlier, on total revenue of $5.9bn versus $8.05bn a year earlier.