Halliburton Warns of Earnings Hit Due to Delays in Sand Delivery--Update
16 February 2018 - 4:47AM
Dow Jones News
By Christopher M. Matthews
Halliburton Co. warned Thursday that its first-quarter earnings
would take a hit due to delays on delivery of a key ingredient used
to hydraulically fracture shale wells: sand.
Trading in shares of the oil-field services giant was briefly
halted Thursday morning before Chris Weber, Halliburton's chief
financial officer, said the company expected an impact of 10 cents
per share on its first-quarter earnings due to delays by Canadian
rail companies that would slow sand delivery.
Trading resumed minutes after Mr. Weber made the announcement
during remarks at the Credit Suisse Energy Summit, and the
company's stock was down 1.8% to $47.
Oil-field services companies like Halliburton pump millions of
pounds of sand in each shale well to help producers prop open rocks
cracked during hydraulic fracturing, to help oil and gas seep
out.
Any delays in sand delivery could slow the uptick in production
in oil-rich regions like Texas' Permian basin.
Investment bank Evercore ISI said in a note to investors that it
expects "customer frustration is rampant given the impact to
production. Most other pressure pumpers will likely see similar
headwinds, further hampered by the cold weather Texas experienced
in January."
Fracking companies have traditionally hauled sand from mines in
the Midwest by rail to shale sites across the country, from Texas
to North Dakota. The Canadian National Railway Company said in
January that severe cold conditions in its Canadian and U.S.
Midwest rail network would cause it to run shorter trains in those
regions, reducing capacity.
Evercore said it expects Halliburton will buy sand on the spot
market from new, local suppliers in Texas to supplement the lost
volumes, but that it will not be enough to cover all the needed
sand. More than a dozen companies have flocked to mine sand in West
Texas close to production activity, but only five out of 20 planned
mines are active, Evercore said.
Mr. Weber said that despite the delays, Halliburton is still on
track for normalized margins of around 20% in North America in
2018, following years of steep pricing cuts in the industry due to
low oil prices.
Write to Christopher M. Matthews at
christopher.matthews@wsj.com
(END) Dow Jones Newswires
February 15, 2018 12:32 ET (17:32 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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