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Halliburton 2nd quarter profit falls 7.9% on slowdown in North America

BY ALISON SIDER and TESS STYNES 

HOUSTON -- Halliburton reported that weakness in North America continued to drag earnings and offset growth in the company' s international operations, but the results beat analysts' expectations for the quarter.

Halliburton reported that its profit fell 7.9% from a year ago, with net income of $679 million, or 73 cents a share, down from $737 million, or 79 cents a share, a year earlier. Revenue rose 1.1% to $7.3 billion. Analysts polled by Thomson Reuters most recently projected earnings of 72 cents a share on revenue of $7.25 billion.

Halliburton has made efforts to expand its international business as low natural-gas prices have cut into the demand for the hydraulic fracturing and drilling work it does in the U.S.

In North America, Halliburton' s largest market, revenue fell 8.2% from a year ago. But the company' s international revenue increased 14%, driven by growth in its Middle East/Asia business, which is the company' s fastest-growing market.

"Halliburton' s international business was the fastest growing among the three largest oil service providers again this quarter," Barclays analyst James West wrote in a client note.

In North America, prices that oilfield services companies have been able to charge for pressure pumping, a key part of the hydraulic fracturing process, have fallen amid a glut of equipment available to do the work that outstripped demand.

But analysts said the market for that work showed signs of life. Halliburton' s Completion and Production segment' s North American revenue increased nearly 5% from the first quarter, showing "strong progression in U.S. pressure pumping' s recovery," Tudor, Pickering & Holt analysts wrote in a client note.

Halliburton said it expects margins in North America to improve throughout the rest of the year, even though it believes the rig count is likely to remain flat. A trend toward drilling more wells in a single location, extending horizontally underground in different directions, means more work for oilfield services companies even without an increase in the number of rigs in the field.

"We continue to be optimistic about Halliburton' s performance for the remainder of 2013, our ability to continue growing our North America margins," Halliburton Chief Executive Dave Lesar said.

The company said it bought back $1 billion in shares during the second quarter and announced Monday that its board authorized it to buy back up to $5 billion, moves it said are a sign of confidence in the business.

Talks aimed at settling claims stemming from the 2010 Deepwater Horizon rig explosion have slowed recently, Chief Financial Officer Mark McCollum said during a conference call Monday.

At the end of the first quarter, Halliburton said the settlement negotiations were in advanced stages and set aside an additional $1 billion to pay for a possible deal.

Halliburton still believes such a deal is the best outcome, but discussions have slowed as uncertainty lingers surrounding BP' s challenges to provisions of its own settlement with the Plaintiffs Steering Committee, Mr. McCollum said.

"Given the complexity of the current situation among other parties, it is difficult to estimate when or if a resolution through settlement can be reached," Mr. McCollum said.

Dow Jones Newswires

07/22/2013

 

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