Did Halliburton Earnings Hit Bottom in Q2?

Halliburton Co. (NYSE: HAL) reported second-quarter 2016 results before markets opened Wednesday. For the quarter, the oil and gas services company posted an adjusted diluted loss per share of $0.14 on revenues of $3.84 billion. In the same period a year ago, the company reported earnings per share (EPS) of $0.44 on revenues of $5.92 billion. Second-quarter results also compare to the Thomson Reuters consensus estimates for net loss of $0.19 per share and $3.75 billion in revenues.

On a GAAP basis, the firm posted a quarterly net loss of $3.21 billion ($3.73 per share), compared with net income of $54 million ($0.06 per share) in the second quarter of 2016. In the quarter, Halliburton recognized a $3.5 billion breakup fee paid to Baker Hughes following the termination of the merger agreement between the two companies. Halliburton also took $423 million in impairments and other charges, included a pretax loss of $148 million related to an adjustment related to a financing agreement with its biggest Venezuelan customer.

In the quarter, North American revenue declined by 15% sequentially on a 23% decline in the average U.S. rig count. The company posted an operating loss of $124 million in North America, attributed to reduced activity in the United States onshore sector, particularly in pressure pumping services and drilling activity.

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The company did not provide guidance in its earnings release, but the third-quarter consensus estimates call for a net loss per share of $0.01 on revenues of $3.78 billion. For the full year, the net loss is estimated at $0.24 per share on revenues of $15.66 billion.

CEO Dave Lesar said:

Our second quarter results showed resilience in the face of another challenging quarter marked by lower activity levels and continued pricing pressure around the globe. … After falling 78% from the November 2014 peak, the US rig count reached a landing point during the second quarter, as we predicted during our last earnings call. Since reaching the bottom, the rig count has improved by 26 over the last several weeks, reflecting operator confidence in stabilizing commodity prices. …

We believe the North America market has turned. We expect to see a modest uptick in rig count during the second half of the year. With our growth in market share during the downturn, we believe we are best-positioned to benefit from any recovery, including a modest one. Internationally, we are maintaining our service footprint, managing costs and continuing to gain market share.

The company’s operating income from well completion and production fell from $313 million a year ago and $30 million in the first quarter to a loss of $32 million in the second quarter. Drilling and evaluation income fell from $400 million in the second quarter of 2015 and $241 million in the first quarter to $154 million. Whether a “modest uptick” can turn these numbers around is questionable. The good news, though, is that there are no breakup fees on the horizon.

Halliburton’s stock closed at $44.99 on Tuesday, down about 1.4% for the day. Shares traded up 0.7% in Wednesday’s premarket to $45.32. The stock’s 52-week range is $27.64 to $46.69. Thomson Reuters had a consensus analyst price target of $49.78 before the report.

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