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Nilanjan Choudhury

Halliburton (HAL) Swings to Surprise Q3 Earnings on Cost Cuts

WFT BHI SLB HAL

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Major oilfield services provider Halliburton Company (HAL - Free Report) reported surprise third quarter profit on the back of continued and effective cost management.

The world’s No. 2 oilfield-services company’s ninth consecutive quarterly outperformance was also helped by improved utilization on the back of growing North American rig count. The positive results sent Halliburton’s shares up 3% in early trading to $48.50.

Halliburton’s net income per share came in at 1 cent, contrary to the Zacks Consensus Estimate for a loss of 7 cents. However, revenues of $3,833 million missed the Zacks Consensus Estimate of $3,897 million amid the oil slump.

HALLIBURTON CO Price, Consensus and EPS Surprise

 

HALLIBURTON CO Price, Consensus and EPS Surprise | HALLIBURTON CO Quote

Oil services companies (like Halliburton) – providers of technical products and services to drillers of oil and gas wells – are generally the first of the U.S. energy firms to kick off an earnings season. The remaining three of the so-called Big Four oilfield service and equipment providers – Schlumberger Ltd. (SLB - Free Report) , Baker Hughes Inc. (BHI - Free Report) and Weatherford International plc (WFT - Free Report) -- report third quarter earnings over this week and next.

Positive Sentiment to Boost Rig Count

Along the results, Halliburton also sounded optimistic in its view that the current industry upturn will boost rig count further. As it is, rig counts have generally been rising during the last four months since plunging to an all-time low of 404 in May, with the addition of a flood of new units. As a proof of the recovery, Halliburton reported 9% sequential growth in North American sales. However, most of this bullish sentiment was offset by lower business in other parts of the world.

Outlook   

Halliburton warned that fourth quarter activity is likely to be weak due to holiday and seasonal weather-associated disruptions. Moreover, pricing pressure is expected to continue over the near-term with international business set to be flat sequentially.

Segmental Performance

Operating income from the Completion and Production segment was $24 million, falling sharply from the year-ago profit of $163 million. However, the division turned around from previous quarter’s loss of $32 million, helped by improvements in North American pressure pumping activity.

Halliburton’s Drilling and Evaluation unit profit also dropped big time – from $401 million in the third quarter of 2015 to $151 million this year. However, the number was almost flat with the $154 million earned in the Jun quarter.

Balance Sheet

Halliburton’s capital expenditure in the third quarter was $178 million. As of Sep 30, 2016, the Zacks Rank #3 (Hold) company had approximately $3,108 million in cash/cash equivalents and $12,158 million in long-term debt, representing a debt-to-capitalization ratio of 55.4%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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