Halliburton (HAL) had been raking in profits during the recent energy boom - but now natural gas prices have fallen during recent months. The Houston oilfield services company said Mar. 20 that it expects first quarter earnings below analyst consensus estimates.
Halliburton says its earnings per share for the first quarter of 2007 will be around 49 to 54 cents, excluding items such as the potential impact from possible additional losses related to KBR's 50% owned gas-to-liquids project in Escravos, Nigeria. The analyst consensus estimate was for 59 cents during the quarter, according to Thomson Financial.
The company cited weakness in drilling and completion activity in Canada and the northern U.S. states. "We had thought that weak activity levels had been confined to the Canadian market, and we note that HAL has higher exposure to North America than its major oilfield services peers," Standard & Poor's equity analyst Stewart Glickman said in a research note. He reduced his estimates for Halliburton's earnings in 2007 and 2008, bringing his target price on the stock down by $4 to $39 per share. (S&P, like BusinessWeek.com, is owned by The McGraw-Hill Companies.)
Glickman was probably not the only one. Investors sold the stock 5.9% to $30.50 per share in afternoon trading on March 20.
The company made its announcement while in the midst of transforming itself into a pure oilfield services company. In an effort to spin off its engineering and construction unit KBR, Halliburton on Mar. 2 began offering Halliburton shareholders the chance to swap their stock for KBR shares instead. The offer expires March 29. "Freed from its KBR shackles, Halliburton should thrive as a technological leader in the oil patch," Morningstar analyst Matt Moran, CFA said Nov. 6.
The company continues with other efforts to grow its business worldwide. On Mar. 11, for example, Halliburton announced the opening of a corporate headquarters office in Dubai, United Arab Emirates, an effort that it said would help to focus resources into investments in the Eastern Hemisphere.