Monday, October 21, 2013

Halliburton Reports Q3 2013 Numbers

Halliburton today released Q3 results, reporting net income of $745 million and $.83 per diluted share, excluding restructuring charges of $38 million.  This result in fact beat the street’s estimates by $.01 per share.  However, Halliburton reported revenues of $7.5 billion (quarter record), which was $60 million below expectations.  The major regional drivers behind their improving numbers were Latin America and Europe/Africa/CIS.

In the Eastern Hemisphere this year revenues have improved 17% and operating income has improved 30%.  New projects in Russia, the North Sea, and Angola have helped to drive the revenues throughout the year and should continue into the future.  The slowest growth was in fact seen in North America, as pricing for pressure pumping has declined due to an influx in offerings from multiple firms.  This trend will most likely continue in the coming quarter as services in North America typically slow down in the 4th quarter and new contracts will be signed with some clients.  Services were also halted for an extended period of time in Colorado this past quarter due to extensive flooding in the state.  Many energy firms experienced these delays and production should hopefully be back at full capacity within a month or so.

Looking towards Q4 of 2013 we should see continued growth especially within Latin America where the end of the year is a very strong time for software and consulting.  We also have seen strong growth in rig counts in Canada as there are now 388 rigs operating compared to about 190 in the second quarter.  This revival of activity should help fuel revenues in the region.

Halliburton also had multiple new technologies come out this quarter and they signed a contract to support Gazprom in all their technology needs regarding improving operational efficiency of their fields.  They also opened their newest manufacturing and technology center in Malaysia, which should help them extend their offering of products to eastern hemisphere clients. 

Halliburton had strong results for the quarter and after evaluating the firm and updating the model, I recommend HAL as a buy with a 2014-year end price target of $66.46, representing a 31% upside.

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