Tags: Halliburton | Profit | Oil | Fracking

Halliburton Profit Rises 23 Percent as U.S. Oil Fracking Demand Grows

Wednesday, 18 April 2012 09:18 AM

Halliburton Co., the world’s largest provider of hydraulic fracturing services, said first-quarter profit increased as rising crude prices drove producers to expand drilling in North America.

Net income climbed to $627 million, or 68 cents a share, from $511 million, or 56 cents, a year earlier, Houston-based Halliburton said in a statement today. Excluding a $191 million charge related to the 2010 Macondo well explosion, the company beat by 4 cents the average of 32 analysts’ estimates compiled by Bloomberg. Sales climbed 30 percent to $6.9 billion.

Halliburton helps companies drill and complete oil and natural-gas wells using a pressure-pumping technique known as fracking, which blasts water mixed with sand and chemicals underground to free trapped hydrocarbons from shale formations. The average number of active oil and gas rigs in North America rose 12 percent in the quarter to 2,574, from 2,303 a year earlier, according to Baker Hughes Inc.

“Activity levels are definitely going to be a benefit to year-on-year earnings growth,” John Keller, an analyst at Stephens Inc. in Houston, said in a telephone interview before the earnings were released. He rates the shares at overweight, which means he recommends that investors should buy the stock, and owns none.

Rising Capacity

Fracking capacity in North America is expected to rise 28 percent this year to about 18 million horsepower after growing 42 percent in 2011, according to Tulsa, Oklahoma-based Spears & Associates. Fracking capacity is measured in horsepower rather than number of active pumping trucks to accommodate for size differences.

The growing competition for fracking work will lead to lower operating margins and slower earnings growth through next year for the world’s largest oilfield service companies, Stuart Miller, a senior analyst at Moody’s Investors Service, said in an April 12 statement.

Rising crude prices are pushing oil companies to boost exploration, especially in the U.S. onshore market. Oil prices climbed 8.9 percent to average $103.03 a barrel on the New York Mercantile Exchange in the first quarter, up from $94.60 a year earlier.

In North America, which accounts for 87 percent of the global market for fracking, spending is expected to reach $30 billion this year, according to Spears.

Macondo Charges

The Macondo-related charge represents the amount of probable losses related to the incident that can be reasonably estimated now, the company said in the statement.

The blowout and explosion on the Deepwater Horizon drilling rig at the Macondo well killed 11 workers and caused the worst offshore oil spill in U.S. history. The accident prompted hundreds of lawsuits against London-based BP Plc, rig owner and operator Transocean Ltd., and Halliburton, which provided cementing services at the well.

The earnings statement was released before the start of regular trading on U.S. markets. Halliburton rose 1.9 percent to $32.66 yesterday in New York. The shares, which have 29 buy and five hold ratings from analysts, fell 3.8 percent during the quarter.

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Wednesday, 18 April 2012 09:18 AM
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