Halliburton Beats Analysts’ Estimates on International Sales

Halliburton Co. (HAL), the world’s largest provider of hydraulic-fracturing services, said international sales climbed as the rig count and profit margin grew in the Eastern Hemisphere.

Net income dropped to $737 million, or 79 cents a share, from $739 million, or 80 cents, a year earlier, Houston-based Halliburton said in a statement today. Excluding a one-time charge of 1 cent, the company beat by 5 cents the average of 28 analysts’ estimates compiled by Bloomberg. International sales climbed 24 percent to $3 billion, and total sales climbed 22 percent to $7.23 billion.

The world’s second-largest oilfield-services provider helps companies drill and complete oil and natural-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.

“Overall pretty strong results,” James C. West, a New York-based analyst at Barclays Capital Inc., said today in a telephone interview. “The big story this quarter definitely was the international revenue growth.”

West rates Halliburton shares at overweight, which means investors should buy the stock, and doesn’t own any.

Eastern Hemisphere

The company’s region that includes Europe, Africa and Russia reported an operating profit margin of 13.8 percent. Stephen Gengaro, an analyst at Sterne Agee & Leach in New York, said he was expecting 11.7 percent in the quarter. In the Eastern Hemisphere, the rig count rose 8 percent, and revenue rose 23 percent from a year ago.

“International has been a little bit better than we think,” Gengaro, who rates the shares a buy and owns none, said today in a telephone interview. “North America’s probably finding a bottom.”

Fracking capacity in North America was 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, a consulting firm. Fracking capacity is measured in horsepower rather than number of active pumping trucks to accommodate for size differences.

Halliburton said June 6 that second-quarter North American operating profit margins would be 5 to 5.5 percentage points lower than in the first quarter, compared with a previous forecast of a 2 to 2.5 percentage point reduction, because of higher material costs. North America’s operating profit margin dropped 4.8 percentage points to 20.7 percent compared to the first quarter.

Guar Costs

After guar costs rose 75 percent sequentially in second quarter, they are expected to rise another 25% in the third quarter, Chief Executive Officer Dave Lesar told analysts and investors today on a conference call. Guar gum is an agricultural commodity used to blend fracking materials.

“We made the wrong decision,” Lesar said. “The result is we bought too much guar too early and we paid too much for it. We should not have purchased the extra inventory.”

Increased competition has lowered prices for fracking services, said Jeff Tillery, an analyst at Tudor Pickering Holt & Co. in Houston. Service companies are also facing higher costs as fracking supplies and transportation of the materials to the well site are in high demand.

The average number of active oil and gas rigs in the U.S. rose 7.9 percent in the quarter to 1,970, from 1,826 a year earlier, according to Baker Hughes Inc. (BHI)

Halliburton rose 2.4 percent to $31.51 at the close in New York. The shares have fallen 8.7 percent this year.

Schlumberger Ltd. (SLB), the world’s largest oilfield-services provider, beat analysts’ expectations by 5 cents thanks to the growth of international work. Baker Hughes, the world’s third- largest services provider, reported earnings that beat analysts’ estimates by 23 cents because of lower costs in North American fracking.

To contact the reporter on this story: David Wethe in Houston at dwethe@bloomberg.net

To contact the editor responsible for this story: Susan Warren at susanwarren@bloomberg.net

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