Page 7 - NorthAmOil Week 29

NorthAmOil COMMENTARY NorthAmOil
pre-tax asset impairment charges and severance costs. Halliburton’s adjusted earnings of $0.35 per share beat analysts’ estimates of $0.30 per share.
The company’s second-quarter revenue of $5.9bn marked a year-on-year decrease from $6.1bn, but was up from $5.7bn in the rst quar- ter of this year.
Halliburton’s North America fell from $3.83bn in the second quarter of 2018 to $3.33bn in the most recent quarter. However, this was a 2% rise on rst-quarter North American rev- enue of $3.28bn. e company attributed the sequential increase to higher stimulation, arti- cial li and wireline activity onshore North America, as well as increased drilling activity in the US Gulf of Mexico. It added that the gains were partially o set by lower so ware revenue across the region and reduced uids activity in the Gulf.
North America is by far Halliburton’s largest market. However, its international revenue in the second quarter of 2019 was $2.6bn, up 6% on the rst quarter and 12% year on year. Hal- liburton attributed the international revenue growth to “higher completion tool sales and increased cementing, project management and uids activity in the Eastern Hemisphere, cou- pled with improved stimulation activity in Mid- dle East/Asia and higher wireline activity across allregions”.Itnotedthatthesegainswereslightly o set by reduced uids activity in Latin America and lower so ware revenue internationally.
“We continue to build on the growth momen- tum internationally and successfully manage the market dynamics in North America,” Hal- liburton’s chairman, president and CEO, Jeff Miller, said. “We are successfully executing our strategy of controlling what we can control and
managing our business to perform well in any market conditions,” he added, in reference to North America.
What next?
e two oil eld services providers’ results do not bode particularly well for North American com- panies as more quarterly earnings are released. Shale operators in particular are expected to underperform, or at least scale back drilling and spending for the remainder of the year.
e downturn in oil prices at the end of 2018 took many drillers by surprise, as prices had been steadily creeping up prior to that, and many operators had anticipated this trend to continue as they planned their budgets and drilling pro- grammes for 2019. Some contracts for services would have been locked in already for the rst half of this year, and second-quarter results are expected to re ect this. Indeed, US production continues to hit new highs, though the growth rate is thought to be slowing. is is still being driven overwhelmingly by the boom in the Per- mian Basin, where output records are continu- ously being broken. However, a readjustment is also anticipated in line with the new, lower price environment. Results for the third and fourth quarters are thus even more likely to re ect the North American slowdown.
Those companies that have operations beyond shale – such as in the Gulf or overseas – are anticipated to do better than their pure-play counterparts.
It is not all bad news for North American producers, but there are certainly a few warning signs that can be seen in Schlumberger and Hal- liburton’s earnings. More results over the coming weeks will provide a clearer idea of the direction in which North American drillers are heading.™
US production continues to hit new highs, though the growth rate is thought to be slowing.
Results for the third and fourth quarters are even more likely to re ect
the North American slowdown.
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