see how hal is ramping up fracturing
North American production bolsters Halliburton profit
Halliburton again placing its bets on hydraulic fracturing
By Collin Eaton
July 21, 2014
KARIM SAHIB, Staff
Dave Lesar, Chairman, President and Chief Executive Officer of Halliburton and one of Dubai latest residents hosts press conference, 22 May 2007 in Dubai. He talked about the move to the UAE and Halliburton's plans to grow business in the Eastern Hemisphere. Halliburton is one of the largest providers of products for the gas and oil industries. Formed In 1919, the company employs over 100,000 people in over 12 countries. AFP PHOTO/KARIM SAHIB. (Photo credit should read KARIM SAHIB/AFP/Getty Images)
After a two-year lull, Halliburton is betting on hydraulic fracturing in North America again.
A new wave of demand for oil production equipment in West Texas and elsewhere has eaten into a glut of U.S. hydraulic fracturing pumping power and has prompted Halliburton to accelerate plans to build a fleet of new pumps, CEO Dave Lesar told investors Monday.
That wouldn't have made sense last year, when the fracturing market was still reeling from the collapse of natural gas prices. The resulting cutback in activity left much of the pumping equipment made for the shale gas boom on the sidelines, and much cheaper. But things are changing now, Halliburton says.
"In our last call, some might have been skeptical when I said I was beginning to feel us turn the corner in North America," Lesar said in a conference call discussing second-quarter earnings. "That feeling was dead on. Today, we are not feeling the turn, we are in the turn."
The Houston oil field services company cleared a 21 percent profit boost in the second quarter as demand for oil production equipment climbed in North America, and as drills kept spinning in the eastern hemisphere, the company said.
Halliburton banked a profit of $776 million, or 92 cents a share, in the April-June period, compared with $642 million, or 69 cents a share, in the same period last year.
Revenue grew 10 percent to a record $8.1 billion for the quarter as North American oil companies spent more on post- drilling processes that gear up wells to pump oil and gas, known as completions. The big one: hydraulic fracturing.
Those quarterly results followed financial reports by Schlumberger and Baker Hughes last week that reflected a jump in sales in North America, especially in the Permian Basin, according to Houston-based Baker Hughes.
There, newly minted horizontal rigs are rising over the land near Odessa and Midland, and oil companies are turning to hydraulic fracturing to release trapped hydro- carbons.
Halliburton's North American profits were better than expected, analysts with Tudor Pickering wrote in a note to clients Monday.
"Good results combined with frac capacity additions will add to the already good vibe (and) outlook," they wrote. "It should be no surprise that Halliburton is adding capacity. Their capacity is fully committed and demand is increasing."
In the Middle East and Asia, drilling activity continued to grow, especially in Saudi Arabia, bolstering sales in the region 12 percent to $841 million in the second quarter, Halliburton said.
Halliburton's only big disappointment came in Latin America. Compared with last year, profit there fell 39 percent after Mexico's state-run Petroleos Mexicanos failed to deliver a software order on time, impairing Halliburton's ability to book revenue and offset costs, Lesar said.
The company's North American revenue grew to $4.3 billion, up 14 percent over last year, when U.S. drilling and production spending had slowed.
Completion volumes per well increased more than 35 percent over the second quarter 2013, driving sales on the post-drilling side of the business, the firm said.
Profit margins in the region may reach 20 percent in the third quarter. That's a sign the time's right for Halliburton to launch its Q10 Pumps, expected to arrive in the fourth quarter and throughout 2015, Lesar said.
Fracturing profits had fallen after private equity firms flooded the market with high-horsepower pumps used to shoot water, chemicals and sand two miles underground to fracture shale rock to release oil and gas.
"We believe excess horsepower is below 10 percent now, and the market will require new horsepower to meet demand," Lesar said. "We'll be accelerating our Q10 build to meet customer demand."
The company is expecting North American margins to outpace the increase in the continent's rig count because of its sizable foothold in the market, said Mark McCollum, Halliburton's chief financial officer.
Halliburton also announced it has promoted its chief operating officer, Jeffrey Miller, to president, effective next month.
Lesar holds that title now and said after knowing Miller for more than two decades, he has great confidence in his abilities.
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