Thursday, May 24, 2012

HAL's 2012 1Q Can Be Summarized By Growth

On April 18, 2012, Haliburton (HAL) reported revenues of $6.9 billion in the first quarter (1Q) of 2012, compared to $5.3 billion in the 1Q of 2011 that represented an increase of 30.2%. Total operating profit was $1.0 billion, compared to $814 million in the 1Q of 2011. Excluding the $300 million ($191 million after-tax) charge related to the Macondo well incident, income from continuing operations in the 1Q of 2012 was $826 million, or $0.89 per diluted share. The $300 million Macondo charge is an amount that was estimated by HAL as the company anticipates this as being the future cost of the incident (this can be adjusted as new developments occur). Income from continuing operations in the 1Q of 2011 was $558 million, or $0.61 per diluted share, excluding an after-tax charge of $46 million relating to asset reservation in Libya caused by political sanctions.

Overall, all regions and most product service lines realized double-digit revenue and operating income growth from the 1Q of 2011.

·         Completion and Production: Revenue in the 1Q of 2012 was $4.3 billion, a 35% increase from the 1Q of 2011. HAL reported that increased demand for pressure-pumping services in the United States and the addition of the Multi-Chem product line accounted for the majority. More specifically, cementing servicing led the way in the U.S and Latin America and all regions realized tremendous growth across this service line.

·         Drilling and Evaluation: Revenue in the 1Q of 2012 was $2.6 billion, a 22% increase from the 1Q of 2011. This was primarily driven by higher drilling activity and strong demand for wireline and perforating services.

HAL experienced steady growth in unconventional oil-directed activity in the U.S. which increased by 12% and nearly countered the 17% decline in natural-gas directed rig count. The U.S continues to show strength in the oil and liquids-rich basins, while experiencing further decline in natural gas prices and related natural –gas directly activity. HAL experienced cost inflation on certain scarce materials and pricing pressure due to excess service equipment capacity in certain basins that negatively affected margins. The company expects “the transient impact of some additional natural gas rig dislocation, further cost inflation, continued pricing pressure, and the impact of spring break up in Canada to negatively impact North America’s margins by 200-250 basis points in the second quarter.

Revenue from Latin America and the Eastern Hemisphere increased by 27% and 14%, respectively. In Latin America, deep water drilling continues to lead the way, while focusing on cost structure in the Eastern hemisphere has kept HAL relatively competitive.  The company expects global demand for energy to remain robust for the remainder of fiscal year 2012.

-Kelechi Nwokocha

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