Halliburton Co. (HAL), the world’s largest provider of hydraulic-fracturing services, weathered producers’ shift from natural-gas basins to oil fields in the U.S. and Canada better than analysts expected in the first quarter.
Net income climbed to $627 million, or 68 cents a share, from $511 million, or 56 cents, a year earlier, Houston-based Halliburton said in a statement today. Excluding a $191 million charge related to the 2010 Macondo well explosion, the company beat by 4 cents the average of 32 analysts’ estimates compiled by Bloomberg. Sales climbed 30 percent to $6.9 billion.
The number of active oil rigs in the U.S. climbed to a 25- year high, as energy companies shifted production away from lower-profit gas operations, the company said. The average number of active rigs drilling for oil in the U.S. rose 12 percent from the fourth quarter while gas rigs fell 17 percent, the company said.
“The expectation had gotten pretty dire that North America was going to deteriorate significantly,” Brian Youngberg, an analyst at Edward Jones in St. Louis, who rates the shares a hold and owns none, said today in a telephone interview. “They are having a pullback, but I don’t think as much as some investors were expecting.”
Halliburton helps companies drill and complete oil and gas wells using a pressure-pumping technique known as fracking, which blasts water mixed with sand and chemicals underground to free trapped hydrocarbons from shale formations.
Halliburton rose 4.6 percent to $34.17 at the close in New York. The shares, which have 29 buy and five hold ratings from analysts, fell 3.8 percent during the quarter.
The operating margin in North America climbed to 25.5 percent from 24.5 percent a year earlier. The margin for the region is expected to fall 2 to 2.5 percentage points in the second quarter, Chief Executive Officer Dave Lesar said in the statement.
“While the total rig count only declined one percent, the shift to natural gas from oil was dramatic and disruptive to operations,” Lesar told analysts and investors today on a conference call. The negative effects from the transition will lessen in the second half of this year, he said.
The growing competition for fracking work will lead to a lower operating margin and slower earnings growth through next year for the world’s largest oilfield service companies, Stuart Miller, a senior analyst at Moody’s Investors Service, said in an April 12 statement.
Fracking capacity in North America is expected to rise 28 percent this year to about 18 million horsepower after growing 42 percent in 2011, according to Tulsa, Oklahoma-based Spears & Associates. Fracking capacity is measured in horsepower rather than number of active pumping trucks to accommodate for size differences.
Halliburton will delay some of its planned deliveries of newly built fracking equipment until next year, Chief Financial Officer Mark McCollum said on the call.
Rising crude prices are pushing oil companies to boost exploration, especially in the U.S. onshore market. Oil prices climbed 8.9 percent to average $103.03 a barrel on the New York Mercantile Exchange in the first quarter, up from $94.60 a year earlier.
Spending to Rise
In North America, which accounts for 87 percent of the global market for fracking, spending is expected to reach $30 billion this year, according to Spears, an industry consultant.
The company’s operating margin for the eastern hemisphere is expected to climb to a range in the mid to upper teens by the end of this year, McCollum said.
Halliburton’s Macondo-related charge was for losses related to the incident that can be reasonably estimated now, the company said in the statement.
The blowout and explosion on the Deepwater Horizon drilling rig at the Macondo well killed 11 workers and caused the biggest offshore oil spill in U.S. history. The accident prompted hundreds of lawsuits against London-based BP Plc (BP/), rig owner and operator Transocean Ltd. and Halliburton, which provided cementing services at the well.
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