Halliburton Profit Drops as Fracking Prices Fall Amid Glut

Halliburton Co. (HAL), the world’s largest provider of hydraulic-fracturing services, said second-quarter profit fell as prices retreated amid an equipment glut.

Net income declined to $679 million, or 73 cents a share, from $737 million, or 79 cents, a year earlier, Houston-based Halliburton said today in a statement on Business Wire. Excluding one-time items, profit beat the 72-cent average of 33 analysts’ estimates compiled by Bloomberg.

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.

“It’s North America margins, associated with the drop in pressure-pumping pricing,” Scott Gruber, an analyst at Sanford C. Bernstein & Co. in New York, who rates the shares the equivalent of a buy and owns none, said in a phone interview before the results were announced. “We’re not optimistic that pricing power returns in the near future.”

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.

In a separate statement, Halliburton said it completed $1 billion of share repurchases in the second quarter and raised its share buyback authorization to $5 billion.

Halliburton’s Completion and Production division in the U.S. and Canada is expected to report an operating profit margin of 18 percent, down from 22 percent a year earlier, Gruber said.

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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