Halliburton’s Q1 Results Beat Estimates on Reduced Costs in North America

Written by: Tsveta van Son
April 23, 2013

Halliburton (NYSE:HAL), the world’s biggest provider of hydraulic-fracturing services, on April 22 released its first-quarter results which surpassed analysts’ estimates. The company said that it benefited from lower costs in North America and noted that the worst of the lower pricing pressure in fracking services was over. Halliburton’s share price closed almost 5.6 percent higher in New York on the same day.

**Halliburton’s Q1 Results Beat Analyst Expectations**
In a press release, Texas-based Halliburton said that income from continuing operations for the first quarter of 2013 was $624 million (£410 million), or $0.67 per diluted share, as compared with $826 million or 0.89 per diluted share for the first quarter of 2012. The results exceeded the average forecast of $0.57 of 34 analysts polled by Bloomberg, the newswire said. Brian Uhlmer, an analyst at Global Hunter

Securities LLC, described the results as ‘phenomenal’.
The company’s total revenue was $7 billion, compared with $6.9 billion in the first quarter of 2012. “I am pleased with our operational results, as total company revenue of $7.0 billion represents a record Halliburton first quarter,” Halliburton’s chairman, president and chief executive officer Dave Lesar noted in the press release.

Halliburton’s share price closed 5.59 percent higher at $39.29 on the NYSE on April 22. The price is up 13 percent this year.
**Lower Costs**
The fracking services provider attributed the upbeat results to reduced costs in North America. Fracking, or hydraulic fracturing, is the process for extracting shale gas by means of pumping liquids into rocks to force gas out.

Lesar commented that margins improved with the company benefiting from lower-cost guar, a key component in fracking, as well as from increased customer activity, internal costs efficiency and higher service intensity. The company expects profit margins to continue to expand in 2013 on “modest pricing increases”.
Bloomberg quoted Halliburton’s chief operating officer Jeff Miller as saying that the worst of the lower pricing pressure in North American fracking services had passed, while Lesar noted that pricing for international work had already hit a low point and was “starting to turn up”.

Jeff Tillery, an analyst at Tudor Pickering Holt & Co, expects Halliburton’s results to continue to improve in North America. He also said growth would depend on increase in operating rigs, which has so far been slower than expected.
**Gulf Settlement Update**
!m[Halliburton’s Share Price Closes Higher in New York](/uploads/story/1971/thumbs/pic1_inline.png)
Halliburton’s Q1 results also included a $637 million cost to increase reserves for litigation related to the 2010 Deepwater Horizon disaster. The company supplied the cement intended to secure BP’s (LON:BP, NYSE:BP) Macondo well and is in settlement talks over its liability for the incident which triggered the largest oil spill in US history.
“We have recently participated in court-facilitated settlement discussions with the goal of resolving a substantial portion of private claims,” Leser said. “We are pursuing these settlement discussions because we believe that an early and reasonably-valued resolution is in the best interests of our shareholders.” Reuters quoted UBS (NYSE:UBS) analyst Angie Sedita as saying that a settlement would be “a significant positive” for the company shares.

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