Halliburton reports a loss as shale drillers plan more cuts

DAVID WETHE 01/25/2016

HOUSTON (Bloomberg) -- Halliburton Co. swung to a loss as the world’s largest fracing provider braces for more customer cutbacks during the worst crude market downturn since the 1980s.

The Houston-based provider of drilling and production services reported a fourth-quarter net loss of $28 million, or 3 cents a share, compared with $901 million, or $1.06 share a year earlier. Excluding certain items, the per-share result for continuing operations was 31 cents a share, higher than the 24-cent average of 35 analyst estimates in a Bloomberg survey. Sales dropped 42% to $5.1 billion.

Halliburton recently offered an "enhanced set of divestitures" to resolve the competition concerns of regulators around the world about its planned acquisition of Baker Hughes Inc., CEO Dave Lesar said in a statement Monday.

Halliburton, the second-largest oilfield services provider, is working to sell enough assets to satisfy antitrust regulators and win approval of the acquisition. The deal was announced near the end of 2014 just as oil prices had begun their downward spiral, and was then valued at $34.6 billion. 

"The industry faces the prospect of severe duress in the coming months," Jud Bailey, an analyst at Wells Fargo in Houston, wrote earlier this month in a note to investors. As oil prices have continued falling in 2016, producers are re-evaluating their budgets and drilling rig commitments "to assess the most cost-effective areas to pull back activity," he wrote.

Layoff Charges

The quarter included $192 million, or 22 cents a share, in charges related to layoffs and the write-down of asset values.

Halliburton reporter an operating profit margin in North America of 1.9%, down from 19.4% a year earlier.

E&P companies cut more than $100 billion from global spending plans last year after oil prices fell more than 70% from June 2014.

North America, where Halliburton generates roughly half its sales, has been hardest hit by the crude market downturn. Explorers may cut as much as 50% of their spending budgets this year in the U.S. and Canada, J. David Anderson, an analyst at Barclays, wrote Jan. 13 in a note to investors. That would follow a 35% drop last year, according to the note.

No Profits

"Nobody is making money helping E&P companies complete wells in the U.S.," Andrew Cosgrove and William Foiles, analysts at Bloomberg Intelligence, wrote November 23 in a report. "More capacity will need to be cold-stacked and cannibalized, a process that could take a few quarters to play out."

Prices that service companies charge for hydraulic fracturing fell 38% last year, and additional small decreases are expected in some basins this year, according to PacWest, a unit of IHS Inc.

Halliburton, which has 30 buy ratings from analysts, 6 holds and 1 sell, fell 3.7% in the quarter. Shares have fallen 27% in the past year.

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