Halliburton Swings to Loss but Signals Upturn -- 2nd Update
21 July 2016 - 4:59AM
Dow Jones News
By Alison Sider and Anne Steele
Halliburton Co. revealed that it has cut another 9% of its
workforce, or roughly 5,000 employees, even though the oil-field
service company's management now predicts that the global energy
outlook is finally improving.
The company booked a hefty loss for the second quarter thanks to
charges related to its failed tie-up with Baker Hughes Inc., its
rival that also helps oil-and-gas producers drill new wells and
flush out more fuel from the ground.
Halliburton's head count around the world now stands over 50,000
employees, down from more than 55,000 in the spring. At its peak in
2014, Halliburton employed more than 80,000 people.
Despite a loss of $3.21 billion, or $3.73 a share, for the
period that ended June 30, Halliburton's results beat analyst
expectations. Analysts polled by Thomson Reuters had projected an
adjusted loss of 19 cents a share on $3.75 billion in revenue.
Stock in the company dropped nearly 1% to $44.58 a share in
Wednesday afternoon trade.
Halliburton, which is the second largest oil-field-services
company in the world behind Schlumberger Ltd., is an industry
bellwether. Chief Executive Dave Lesar emphasized that the North
American oil sector is poised for a turnaround in the second half
of the year.
An emotional threshold was crossed in the oil patch when crude
prices rebounded to $50 a barrel during the quarter, Mr. Lesar
said. They have since slid back to less than $45 a barrel, but
companies are starting to think about growing again rather than
just hanging on, he added.
"There's a spring in their step I didn't see earlier in the
year," Mr. Lesar said of Halliburton's customers. "In short, they
are getting back to business."
The hope, however, is forward facing. In the second quarter,
Halliburton said revenue in its North American operations -- the
largest contributor to its top line -- tumbled 43% amid reduced
activity throughout the U.S., particularly for pressure pumping
services and drilling.
Mr. Lesar said that Halliburton executives believes the U.S.
drilling rig count bottomed out during the last quarter. He pointed
to improving utilization numbers in recent weeks. So far, 26 rigs
have been redeployed, reflecting operator confidence in stabilizing
oil and gas prices.
Halliburton expects a modest uptick in the rig count later this
year and a significant ramp up in 2017, Mr. Lesar said.
Some of the pain from nearly two years of low oil prices will
linger. During a conference call with analysts Wednesday morning,
Halliburton President Jeff Miller said the company is still working
to cut its costs. He conceded that some laid-off oil workers won't
ever return to the industry, but stressed that Halliburton has
tried to retain experienced people so it can be ready when the
industry rebounds.
"We know how to do that, and we know how to make those people
effective. So I feel like Halliburton is well positioned," he
said.
Oil-field services companies like Halliburton and Schlumberger
made deep pricing concessions at the depths of the downturn, idling
equipment and laying off tens of thousands of employees.
Exploration and production companies will have to adjust to paying
more for their services if they expect vendors to stay in business,
Mr. Lesar said.
"They know in their heart of hearts that service prices have to
go up," he said.
In May, Halliburton and Baker Hughes called off their merger,
once valued at nearly $35 billion, amid intense regulatory pressure
on several continents. They initially struck a deal in 2014, but it
stalled and in April the U.S. Justice Department filed a lawsuit to
block it.
Halliburton booked $3.52 billion of costs related to terminating
the merger, as well as $423 million of other impairments and
charges during the quarter. Excluding special items, the company
posted an adjusted loss from continuing operations of 14 cents a
share. Total revenue slid 35% to $3.84 billion.
Write to Alison Sider at alison.sider@wsj.com and Anne Steele at
Anne.Steele@wsj.com
(END) Dow Jones Newswires
July 20, 2016 14:44 ET (18:44 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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