Halliburton posts North American profit on shale recovery

A Baker Hughes sign at one of the company's facilities in Houston is seen in this 2014 photo. A day after its merger with Halliburton was called off, Baker Hughes said it will buy back shares and debt with the $3.5 billion break-up fee it’s due this week. CREDIT: Bloomberg photo by Aaron M. Sprecher.

Halliburton reported fourth-quarter adjusted profit that beat analysts’ estimates as North American shale producers lead the rest of the world into an oilfield recovery.

The world’s largest fracking services provider posted a profit excluding certain items of 4 cents a share, according to a statement Monday, exceeding the 2-cent average of 39 analysts’ estimates compiled by Bloomberg. Sales in North America rose 9 percent, while revenue in international markets grew 2 percent compared with the prior quarter.

With the price of oil rising above $50 a barrel in New York, U.S. drillers increased the number of rigs working in shale fields by 19 percent in the final three months of 2016. That helped spur a return to profitability for the company that helps explorers map pockets of underground oil, complete the wells and maintain output. Halliburton is expected to swing to a profit of $1.08 a share this year, according the average of 46 analysts’ estimates compiled by Bloomberg.

“Halliburton is realizing increased pricing and utilization throughout its U.S. onshore region,” analysts at Tudor Pickering Holt & Co. wrote Monday in a note to investors.

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Halliburton cut thousands of workers during a downturn that saw oil fall below $30 a barrel early last year, and has been pressing customers for higher prices in order to return to profitability in North America. Customers in the U.S. and Canada boosted the number of oil and natural gas drilling rigs 19 percent in the final three months of the year.

“Despite the positive sentiment surrounding the North American land market, it is important to remember that our world is still a tale of two cycles,” Chief Executive Officer David Lesar said in the statement. “The North America market appears to have rounded the corner, but the international downward cycle is still playing out.”

Schlumberger Ltd., the world’s largest oilfield services provider, generates most of its sales outside the U.S. and Canada. On Friday, it reported that fourth-quarter net losses narrowed to $204 million from $1.02 billion a year earlier. Shares fell the most in more than a month.

After unprecedented spending cuts over the past two years, explorers are forecast to boost capital expenditures worldwide by 7 percent in 2017, according to a Barclays Plc note to investors earlier this month. The U.S. is expected to lead the rest of the world with as much as a 40 percent hike in exploration and production spending, according to Bloomberg Intelligence.

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Halliburton’s fourth-quarter net loss was $149 million, or 17 cents a share, compared with a loss of $28 million, or 3 cents a share, a year earlier. Shares fell $1.82 or 3.2 percent to $54.63 at 10:28 a.m. in New York after earlier sinking 4.5 percent, the most since Sept. 9.

After a third-quarter operating loss in North America, Halliburton returned to profitability in its largest region with a 1.6 percent operating margin in the final three months of the year.

“They were pretty full on market utilization heading into the fourth quarter, so there’s only so much more utilization you can get,” Luke Lemoine, an analyst at Capital One Securities who rates the shares the equivalent of a buy and owns none, said Monday in a phone interview. “With revenues up just 9 percent and you still have 65 percent incremental margin, that gives a lot of hope in what 2017 EPS could be.”