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Halliburton CEO sees recovery in hydraulic fracturing market

DAVID WETHE

HOUSTON (Bloomberg) -- Dave Lesar sees better days ahead for Halliburton Co. in North America’s oversupplied fracing market. The more than two-year glut in pressure-pumping equipment used to shoot water, sand and chemicals underground to release trapped oil and natural gas is easing “much faster” than expected, the CEO said.

“I’m starting to feel the momentum swing,” Lesar said on a conference call after Halliburton posted better-than-expected results for the first quarter. “I am more excited about North America now than I have been since late 2011.”

The recovery is being led by increased drilling in the oil-rich Permian basin of Texas, as well as natural attrition, according to the world’s biggest provider of fracing services. Halliburton expects to increase earnings per share in the second quarter by 25% from the first, with “even more increases after that,” said Lesar.

Halliburton rose 3.3% to $62.92 at 11:50 a.m. in New York after earlier climbing as much as 4.9%, the biggest intraday gain in almost a year. The company reported earnings that were 2 cents more than the 71-cent average of 34 analysts’ estimates compiled by Bloomberg.

Halliburton’s services include cementing wells drilled a mile underground and hydraulic fracturing, the process that has accelerated the U.S. toward energy independence.

Its second-quarter operating profit margin in North America is expected to rebound to levels seen in the second half of 2013, when it averaged 16.9%. Margins were 15.4% in the first three months of this year.

“The sentiment was more bullish,” said Scott Gruber, an analyst at Sanford C. Bernstein & Co. in New York. “They don’t talk about pricing, but you can kind of infer they’re getting bullish on pricing.”

Fracing prices are expected to remain flat this year in the U.S. and Canada and increase in some regions in early 2015, according to a Feb. 14 report by PacWest Consulting Partners in Houston. That’s after tumbling 14% in 2012 and by another 7% last year, the consultant said. About 16.7 million horsepower for fracing is competing to meet demand for 12.7 million this year.

The average number of rigs active in the U.S. and Canada rose 0.7% to 2,304 in the first quarter from 2,289 a year earlier, according to Baker Hughes Inc.

Producers are expected to increase capital spending in the U.S. and Canada by 7% this year after two previous years of less than 5% growth, according to Barclays Plc.

04/21/2014

 

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