Summary
- Halliburton’s revenues and profits came under pressure in the third quarter due to the tough market conditions in North America, which was expected.
- The business environment will remain challenging as shale producers continue to keep a lid on spending levels in North America.
- Halliburton’s international business has been doing well but the good times may not last as the global economic growth decelerates and oil prices remain depressed.
- Although Halliburton’s earnings might come under pressure, the company’s efforts to preserve profit margin will provide crucial support to its bottom-line in this difficult period.
Halliburton (HAL) has recently reported a drop in earnings and its profits could fall further in the coming quarters as the business environment remains challenging in North America where shale producers have slashed drilling activity. Halliburton is getting support from the international markets where it has grown revenues by double-digits this year but its long-term outlook outside of North America is also looking uncertain.
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Earnings Recap
Halliburton has posted a profit of $295 million, or $0.34 per share, for the three months ended Sept. 30, down from $435 million, or $0.50 per share, a year earlier. The result was in-line with analysts’ estimate of $0.34 per share, according to Refinitiv IBES data. The total revenues dropped to $5.55 billion from $6.17 billion in Q3-2018. The decline came as Halliburton experienced weak demand for oilfield services from North American shale oil and gas producers. This was evident from the poor performance of the company’s business in North America where third-quarter revenues fell to $2.94 billion from $3.73 billion last year.
Halliburton’s international revenues, on the other hand, increased to $2.6 billion from $2.43 billion a year earlier as drilling activity improved in the international markets. But this growth outside of North America couldn’t make up for the weakness at home and the company ended the quarter with lower revenues and earnings.
Halliburton, however, managed to generate decent levels of cash flows, even as its profits came under pressure. The company delivered $871 million of cash flow from operations which was enough to fully cover the capital expenditure of $345 million. As a result, the company ended the quarter with free cash flows of $526 million ($871M-$345M).
