76.3 F
Fort Worth
Sunday, September 27, 2020
- Advertisements -
Energy Halliburton ready to sacrifice market share to boost profit

Halliburton ready to sacrifice market share to boost profit

Other News

Closing prices for crude oil, gold and other commodities

The Associated Press Benchmark U.S. crude oil for September delivery rose 31 cents to settle at $41.60 a barrel Monday. Brent crude...

Trump to discuss energy, tour oil rig, raise money in Texas

By DARLENE SUPERVILLE Associated PressWASHINGTON (AP) — President Donald Trump will shift his focus to American energy dominance during a stop in...

Basic Energy Services makes organizational changes

Fort Worth-based Basic Energy Services, Inc. (OTCQX: BASX) in late May announced the implementation of changes to the organizational structure of the...

Texas oil producers were cutting output before Railroad Commission chose not to, Commissioner Christi Craddick says

By Cassandra PollockMay 12, 2020 Texas Railroad Commissioner Christi Craddick on Tuesday doubled down on the agency’s recent decision...

After boosting North American sales for the first time during the downturn, Halliburton Co. is determined to raise prices for its services to lock in profits in the world’s largest fracking market.

Dave Lesar, chief executive officer for the biggest fracking provider, said he’s even ready to give up market share to cheaper rivals if that’s what it takes to return to a solid record of profitability. The company surprised investors by posting a penny-a-share third-quarter profit Wednesday, due in part to two-years of brutal cost-cutting during the downturn. Halliburton also benefited from an increase in oilfield drilling as crude prices strengthened from February lows and customers went back to work.

“I never thought I would be so satisfied by barely making a profit,” Lesar told analysts and investors Wednesday on a conference call to discuss the earnings. “Our customers’ animal spirits remain alive and well in North America, even though for some, they may feel caged in a bit by cash flow constraints in the short term.”

Halliburton rose the most in six months as oil prices climbed above $51 a barrel. Shares were up 4.7 percent to $49.26 at 11:40 a.m. in New York after earlier climbing as much as 5.8 percent, the biggest intraday gain since April 6.

The Houston-based company that helps oil explorers drill and complete wells eked out net income of $6 million, or 1 cent a share, according to a statement Wednesday. Investors had been braced for another loss comparable to the $54 million, or 6-cent, loss Halliburton posted a year earlier.

“In the U.S., we believe we now have the highest market share we’ve ever had,” Lesar said. “At this point, if we have to give some of it back to move margins up, we might take that approach.”

Oilfield service prices are expected to improve next year, the company said Wednesday, putting within reach an operating profit margin not seen in more than four years.

“We’re definitely going to need some price to get back toward the historic margins that we’ve had in the past,” Chief Financial Officer Mark McCollum said on the investor call. “We’re going to be pushing as hard as we can to get back to 20 percent as quick as we can.”

Halliburton sales in the U.S. and Canada had plunged by more than two-thirds during the downturn as customers slashed spending to survive a global oil rout brought on by a glut of new production. Executives at Halliburton and its largest competitor, Schlumberger Ltd., declared at the end of July that the worst may be over after oil prices bounced off their low in February and the U.S. land rig count hit bottom in May.

“There’s definitely light at the end of the tunnel as it relates to North America onshore activity,” said Byron Pope, an analyst at Tudor Pickering Holt & Co. in Houston. “Now it’s just a question of what’s the timing and the magnitude of the recovery.”

Lesar credited the surprise third-quarter profit in part to “relentlessly managing costs” as the company took advantage of an uptick in drilling in U.S. shale fields, according to Wednesday’s statement. Explorers boosted the U.S. onshore rig count by 100, or 25 percent, during the third quarter, according to Baker Hughes Inc.

Most of the oil-services sector this year has been operating at a loss in North America. Halliburton still isn’t expected to report a profit in North American operations until the first quarter next year, Pope said.

The amount of hydraulic-fracturing equipment active in the U.S. stands at 7 million horsepower throughout the industry, Jeff Miller, president of Halliburton, said on the call. With about 70 percent of the industry fleet being used, more will have to go back to work in order for service companies to have pricing power.

While the world’s contractors have begun trying to boost service pricing as activity climbs, Miller has lately characterized negotiations with customers as a ” barroom brawl.” The pricing battle was on display at this week’s Oil & Money conference in London, where BP Plc CEO Bob Dudley said he’s aiming to get 75 percent of the cost reductions producers won during the downturn to “stick.”

Oil Explorers will continue to be conservative in their spending as they plan for oil prices to stay below $60 a barrel for the foreseeable future, making many higher-cost projects uneconomic. Dudley said BP is unlikely to invest in new deepwater frontier exploration.

Lesar said Wednesday Halliburton will have to strike a balance between providing the service its customers need, while raising prices enough to generate profits for its own shareholders.

“It’s going to be a give and take,” he said on the investor call.

Halliburton last reported an operating profit margin of 20 percent for North America in the second quarter of 2012, said Andrew Cosgrove, an analyst at Bloomberg Intelligence. The company’s margins in the region were once as high as 29 percent a year before that, he said. For the third quarter 2016, Halliburton’s margin of operating loss was 4.1 percent.

Shares rose 1.7 percent to $47.89 at 8:57 a.m. in premarket trading in New York. West Texas Intermediate, the U.S. benchmark for crude, slipped 0.2 percent in the quarter to average about $45 a barrel.

The margin of operating loss in North America improved more than expected, Angie Sedita, an analyst at UBS Investment Research, wrote Wednesday in a note to investors.

“Total revenues were 1 percent below our forecasts, however, impressive cost controls across all regions led to higher margins across the board with operating income 65 percent above our forecasts,” Sedita wrote. “We view the results as a modest positive for the stock.”

Schlumberger is scheduled to report third-quarter results on Thursday.

- Advertisements -
- Advertisements -

Latest News

Permian investments grow as market shows signs of recovery

CARLSBAD, N.M. (AP) — An American energy investment company has pledged $8.5 million to develop oil and gas assets in the Permian...

Closing prices for crude oil, gold and other commodities

The Associated Press Benchmark U.S. crude oil for November delivery rose 33 cents to $39.93 a barrel Wednesday. Brent crude oil for...

Closing prices for crude oil, gold and other commodities

The Associated Press Benchmark U.S. crude oil for October delivery rose 81 cents to $40.97 a barrel Thursday. Brent crude oil for...

U.S. Energy Development Corp. announces $8.5 million deal in the Permian Basin

U.S. Energy Development Corporation, an exploration and production firm that provides direct investments in energy, has announced an interest in a horizontal...

Closing prices for crude oil, gold and other commodities

The Associated PressBenchmark U.S. crude oil for October delivery fell 7 cents to $37.26 a barrel Monday. Brent crude oil for November...