Should Halliburton Earnings Have Been Better?

Halliburton Co. (NYSE: HAL) reported first-quarter 2018 results before markets opened Monday. The oil and gas services company posted adjusted diluted earnings per share (EPS) of $0.41 on revenues of $5.74 billion. In the same period a year ago, the company reported EPS of $0.04 on revenues of $4.28 billion. First-quarter results also compare to consensus estimates for EPS of $0.41 per share and $5.75 billion in revenues.

On a GAAP basis, Halliburton reported quarterly EPS of $0.05, compared with a loss of $0.04 per share in the year-ago first quarter. The company wrote down all its remaining investment in Venezuela at a cost of $312 million.

North American revenues rose 58% year over year in the quarter. The company attributed the growth to increased activity throughout the United States land sector in the majority of Halliburton’s business lines, primarily pressure pumping, as well as higher drilling and artificial lift activity. Revenues rose 11% sequentially in the company’s international operations.

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President Jeff Miller said:

Activity in U.S. land remains resilient as our customers have a large portfolio of economically viable projects in today’s commodity price environment. As a result of the improved activity in U.S. land, in March we achieved a new record for stages per spread as the pressure pumping market remains tight. Our North America business exited the quarter in a strong position and I am confident in our ability to reach normalized margins in North America this year.

The company did not provide guidance in its earnings release, but second-quarter 2018 consensus estimates call for EPS of $0.59 on revenues of $6.1 billion. For the full 2018 fiscal year, EPS is forecast at $2.47 on revenues of $24.8 billion.

As of the end of March, the U.S. Energy Information Administration (EIA) reported a total of 7,692 drilled but uncompleted wells in the major U.S. shale regions, 199 more than at the end of December. West Texas Intermediate crude oil traded at around $68 a barrel this morning, more than $3 a barrel higher than at the end of December.

Investors have taken the stock down about 1% in Monday’s premarket, perhaps because Halliburton’s revenues and operating income were lower sequentially. Everyone expected these results to be higher than a year ago, but sequential revenues were lower by $200 million (3.4%) and operating income was down by $29 million (7.8%).

It could be that Halliburton faces some of the same issues in North America that Schlumberger CEO Paal Kibsgaard referred to last week. We won’t know until Halliburton’s conference call later Monday morning.

Halliburton’s stock closed at $51.96 on Friday, down about 0.1% for the day. Shares traded down about 1.1% in Monday’s premarket session at $51.40. The stock’s 52-week range is $38.18 to $57.86. The consensus 12-month price target was $62.69 before this morning’s report.

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