Halliburton expects large drop in Q4 drilling

OREANDA-NEWS. October 20, 2015. Halliburton expects North American oil and gas drilling activity to drop substantially in the fourth quarter because of lower commodity prices, especially in the last five weeks of 2015.

"We believe most operators have exhausted their 2015 budgets and will take extended breaks starting as early as Thanksgiving," chief executive Dave Lesar said on an earnings call today, referring to the US Thanksgiving Day holiday on 26 November.

Halliburton, the world's second-largest oilfield service provider, said the outlook in the fourth quarter is "murky at best" and that it is managing business on a "near real-time basis, customer by customer, district by district, product line by product line" and even crew by crew.

Halliburton said it expected a slow ramp-up beginning in January and picking up in the second half of 2016, suggesting that the first quarter of 2016 could be the bottom of the cycle.

Oilfield service companies such as Halliburton, Schlumberger, and Baker Hughes have been at the forefront of job cuts as they bear the brunt of the drop in crude prices to 6?-year lows. A boom in shale drilling in North America drove exploration and production activity in the first half of this decade, boosting supplies that triggered the current weakness.

Halliburton said it reduced its global headcount by 21pc, or about 17,000 workers, since the beginning of this year, including eliminating an entire level of management in North America in the third quarter. A company official said the management reduction was "not a one-time initiative," hinting at further cuts.

Halliburton's North America revenue in the third quarter fell by 47pc compared to the third quarter of 2014 and by 7pc from the second quarter of 2015 to \\$2.5bn, because of continued activity declines and pricing pressure.

International markets fared better, declining by 5pc while operating income margins remained the same. Total company revenue fell by 6pc to \\$5.6bn compared to the second quarter of 2015.

Schlumberger, the largest oil field services firm, said last week that a continuing decline in rig activity and lower oil prices cut its revenue by 6pc to \\$8.5bn in the third quarter, with the outlook for the coming quarters "increasingly challenging."

Schlumberger's revenues in North America have fallen by 34pc in the first nine months of this year compared with the year-earlier period, while international revenue dipped by 18pc. But the company said the figures are substantially better than those delivered during the 2009 downturn.

Halliburton said that its \\$34.6bn acquisition of smaller rival Baker Hughes should be completed by the end of the year, but the transaction could move into 2016, which is allowed under the merger agreement. The first round of divestitures related to the Baker Hughes deal has moved into the negotiation process and the marketing process on the second round will begin shortly, the company said.