Low Expectations Make Halliburton Results Look Good

On a GAAP basis, Halliburton reported an net loss of $0.01 per share. The adjusted EPS excludes a $637 million charge to increase the company’s reserve related to the Macondo well explosion in April 2010 in the Gulf of Mexico. Halliburton has now reserved a total of $828 million to pay claims related to the disaster.

The company’s operating loss in the first quarter totaled $98 million.

The company’s CEO said:

The rig count decline and pricing headwinds in North America were more than offset by our expanding international business. … [W]e expect [North American] margins to continue to expand over the course of the year, and we believe we may see modest pricing increases as customers adopt new technology to improve well production. … We believe that modest rig count improvements, coupled with a continued drive towards efficiency, will bode very well for us in the coming years, as no other company has the ability to execute factory-type operations as well as Halliburton. … We continue to focus on strengthening our global position in the deepwater, unconventional, and mature fields markets, and we will be relentlessly focused on returns

Halliburton’s North American revenue fell 1%, but operating income rose by 30%, even in the face of a 3% decline in U.S. rig count. Margins rose 4% in North America. This is the strongest part of today’s earnings report.

Revenues continue to fall sequentially, even though North American activity is picking up. More than half of Halliburton’s revenue comes from North America, and while revenues have picked up in other regions, those revenues are sliding again.

Internationally, Halliburton’s revenue rose 21% year-over-year in the first quarter, with revenue from Asia up 51%. However, revenues actually declined sequentially in every geographic region. Total revenue fell from $7.29 billion in the fourth quarter of 2012 to $6.97 billion.

The company did not offer guidance, other than to say that it expects international revenue growth “in the low teens relative to 2012, and expect full year international margins to average in the upper teens.” The consensus second-quarter EPS estimate is $0.70 on revenues of $7.24 billion. For the full 2013 fiscal year, EPS is forecast at $3.00 on revenues of $29.55 billion.

Halliburton’s shares are up nearly 5% in premarket trading at $39.01 in a 52-week range is $26.28 to $43.96. Thomson Reuters had a consensus analyst price target of around $49.40 before today’s report.