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Halliburton posts $1.7bn loss in

warning sign for earnings season

US OILFIELD services firm Halliburton has
reported a $1.7bn loss for the second quarter
of 2020, compared with a loss of $1.0bn in the
first quarter of this year and a $75mn profit
during the same quarter a year ago. This was
the company’s third consecutive quarterly loss
and paves the way for more losses among oil-
field service providers and producers alike in
the coming weeks as the latest earnings season
plays out.
The collapse in crude prices began at the end
of the first quarter. But the worst of it played out
in the second quarter – the first full three-month
period to be affected – as lockdowns enforced
to combat the coronavirus (COVID-19) pan-
demic took an increasingly larger toll on oil and
gas demand.
Amid these low oil prices and shrinking
demand from North American producers, Hall-
iburton reported a $2.1bn impairment charge for Halliburton’s results were followed by those Illustrating the impact
the second quarter. The company’s total revenue of another major oilfield services firm, Baker of the downturn
fell 37% on the previous quarter from $5.0bn to Hughes, which reported on July 22. Baker on shale drillers,
$3.2bn. Illustrating the dramatic impact of the Hughes posted a second-quarter loss of $201mn, Halliburton’s North
downturn on shale drillers, Halliburton’s North compared with a loss of $9mn a year ago. American revenue fell
American revenue fell 57% on the previous “Although the majority of lockdowns have 57% on the previous
quarter to $1.0bn in April-June, while interna- been easing globally and economic activity likely quarter.
tional revenue was down 17%. troughed during the second quarter, visibility
There were, nonetheless, some bright spots. on the economic outlook remains extremely
The company said to date it had been able to limited,” Baker Hughes’ chairman and CEO,
achieve roughly 75% of the $1.0bn of additional Lorenzo Simonelli, stated.
annualised cost reductions it announced in The company said it would cut its costs by
April. On the firm’s earnings call, Halliburton’s $700m on an annualised basis by the end of 2020.
chairman, president and CEO, Jeff Miller, noted Meanwhile, adding to the woes for the oil-
that these reductions were largely permanent field services sector, a smaller company, BJ
changes. Services, filed for Chapter 11 bankruptcy pro-
Halliburton also reported $456mn of free tection in Texas this week. The company said it
Halliburton also cash flow – a better result than analysts had been was in discussions with bidders for the sale of its
reported $456mn expecting. This, combined with the cost-cutting cementing business and portions of its hydraulic
of free cash flow measures, helped boost the company’s shares by fracturing operations, which have been hit hard
around 5% to $13.74 in pre-market trading on by the downturn in demand from shale drillers.
BJ Services listed assets and liabilities in the
– a better result July 20. The share price then crept up further, range of $500mn to $1bn in its bankruptcy filing.
rising above $14 from July 21.
“Halliburton’s second-quarter performance
“Severe downturn in activity and subsequent
than analysts had in a tough market shows we can execute quickly lack of liquidity resulted in an unmanageable
been expecting. and aggressively to deliver solid financial results capital structure”, BJ Services’ CEO, Warren
and free cash flow despite a severe drop in global Zemlak, said.
activity,” Miller stated. “Our results demonstrate The company, which operates in US shale
a significant and sustainable reset to the power plays and in Canada, was previously taken over
of our business to generate positive earnings and by Baker Hughes, before starting to operate as
free cash flow.” an independent company again in 2017 after the
Looking ahead, the company anticipates its larger company sold a majority stake in BJ Ser-
international business contributing more to vices to private equity firm CSL Capital Manage-
revenue as North American activity remains ment and Goldman Sachs’ West Street Energy
under pressure. With North American produc- Partners for $325mn.
tion predicted to remain “structurally lower”, BJ Services has been unable to reach an
according to Miller, Halliburton anticipates that agreement with lenders thus far, and on July 21,
its third-quarter revenue will decline by low sin- a judge gave it seven days to continue operations
gle digits. and resume negotiations.™

P12 www. NEWSBASE .com Week 29 23•July•2020