Halliburton Boosts Share Buybacks as Profit Beats Estimates

Halliburton Co. (HAL), the world’s largest provider of hydraulic-fracturing services, expanded its share buyback plan to $5 billion as second-quarter profit beat estimates on demand outside its home market.

Per-share earnings excluding one-time items of 73 cents exceeded the 72-cent average of 33 analysts’ estimates compiled by Bloomberg. Sales climbed 1.1 percent to a record $7.3 billion, Houston-based Halliburton said today in a statement.

Sales from Europe, Africa, the Middle East and Asia rose 16 percent to $2.6 billion, and full-year revenue growth from these regions is expected to be “in the mid-teens,” Halliburton said. The company raised its share buyback authorization to $5 billion after repurchasing $1 billion of shares in the second quarter.

“They’re in a position where they’re consistently generating free cash flow,” Scott Gruber, an analyst at Sanford C. Bernstein & Co. in New York, who rates the shares a buy and owns none, said in a phone interview. “We expect them to remain in that position for several years.”

Net income declined to $679 million, or 73 cents a share, from $737 million, or 79 cents, a year earlier.

The number of rigs operating onshore in the U.S. dropped 11 percent to an average of 1,686 in the second quarter compared with 1,902 rigs a year earlier, Baker Hughes Inc. (BHI) data show. Prices charged for U.S. fracking services slid 14 percent in 2012 and are expected to fall another 6 percent this year, according to PacWest Consulting Partners LLC, a Houston-based industry adviser.

Blasting Water

The pressure-pumping technique known as fracking involves blasting water mixed with sand and chemicals underground to free trapped hydrocarbons from shale formations. About 16.3 million horsepower is competing to meet demand for 12.5 million this year, the consultant said.

The operating profit margin in Halliburton’s Completion and Production division in the U.S. and Canada dropped to 18 percent from 22 percent a year earlier.

Boosting margins to the “mid 20s” will require help from higher natural gas prices, Chief Executive Officer Dave Lesar told analysts and investors today on a conference call.

A glut in the U.S. fracking market may persist beyond the first quarter of next year, he said.

Halliburton, which has 28 buy, four hold and two sell recommendations from analysts, fell 1.6 percent to $45.08 at the close in New York.

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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