Halliburton reported its second quarter earnings on Wednesday, revealing a huge loss of $3.21 billion, or $3.73 per share. That compares to net income of $54 million for the same quarter a year earlier.
It has been a rough two years for the oilfield services industry, although the pain has become more acute in 2016 as drilling activity has ground to a halt. Bloomberg notes that all four major oilfield services companies dipped into negative earnings territory in North America in the first quarter, where much of their business is located.
Halliburton’s bad quarter also reflects a $3.5 billion termination fee that it was forced to pay Baker Hughes for its failed takeover bid. The U.S. government blocked the $28 billion merger on antitrust grounds. Halliburton also took an interest-bearing promissory note from Venezuela in exchange for $200 million in outstanding trade receivables.
Halliburton is curtailing activity in the South American country because of lack of payment. While North America represents nearly half of Halliburton’s revenue, South America is still a substantial slice of its business. The region accounts for more than a tenth of Halliburton’s revenues, and its earnings there fell 22 percent from the first to second quarter.
Nevertheless, Halliburton’s CEO put on a brave face, arguing that not only will the oil markets start to rebound in the near future, but Halliburton is strongly positioned to profit as it has actually gained market share during from competitors because of the down cycle.
“We believe the North America market has turned. We expect to see a modest uptick in rig count during the second half of the year. With our growth in market share during the downturn, we believe we are best-positioned to benefit from any recovery, including a modest one,” Halliburton CEO Dave Lesar said in a statement. “Internationally, we are maintaining our service footprint, managing costs and continuing to gain market share.”
The rig count has indeed climbed over the past two months, a sign that some producers are starting to bring back some drilling activity. Still, with oil prices back down to $45 per barrel, the oilfield services industry is not out of the woods yet.
By Charles Kennedy of Oilprice.com
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