Q3 Results: Halliburton Posts Surprise Profit

Halliburton’s (HAL) announcement on Wednesday of a profitable third quarter was a welcome sign at the beginning of oil and gas industry earnings season. Considering the difficult years suffered by the industry since crude oil hit a price high of more than $100 per barrel in mid-2014, and declined to a low of $28.36 at the beginning of 2016, profits validate the value of cost-cutting and technological advancement in HAL’s industry.

Dave Lesar, Halliburton’s Chairman and CEO announced $0.01 earnings per diluted share, which beat the analysts who had anticipated a loss of $0.07 per share. Reported revenue of $3.8 billion was slightly lower than consensus estimates of $3.9 billion. Operating income was $128 million, with operating activities cash flow topping $1.0 billion. Lesar attributed the positive results to increased North American business and careful management of costs on a global basis.

Halliburton’s stock closed at $49.07 per share, up $2.00 on the day or 4.25% in heavy volume. The day’s trading range was $47.70 to $50.23, breaking up through the important $50 price level on the stock.

Halliburton’s North American revenue increased 9% in the third quarter to $1.7 billion. HAL is the major player in unconventionals, such as oil produced through fracking and other new drilling tactics, and it has a strong presence in the Williston Basin of North Dakota, where unconventional drilling has opened up oil fields where traditional extraction was previously too expensive. A 14% increase in North American rig counts benefited revenue performance. HAL is also is known for its capabilities in optimizing mature oil fields and in deep water drilling operations.

International revenue slipped 6% to $2.2 billion because of a global decline in drilling operations and pressure on oil prices during most of the quarter.

Crude oil prices closed Wednesday at $51.42 for WTI Crude and at $52.57 for Brent Crude. Prices began their rise in reaction to the production cap agreement during an informal OPEC meeting in Algiers in September. Ensuing reports by the API and the EIA indicating declining supplies of crude oil have helped prices to remain above $50 a barrel, which is considered a break-even point for many exploration and production companies.

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