Halliburton sees ‘multi-year upcycle’ as oil services return

Drilling completion operations Source: Halliburton Company

Halliburton Co., the biggest provider of fracking services, is gearing up for several years of expansion in both the U.S. and foreign markets as spending recovers in the global energy industry.

“The positive activity momentum we see in North America and international markets today, combined with our expectations for future customer demand, gives us conviction for an unfolding multi-year upcycle,” chief executive officer Jeff Miller said in a statement Tuesday. Shares rose two per cent in pre-market trading.

The Houston-based contractor reported second-quarter earnings per share excluding one-time items of 26 cents, exceeding the 23-cent average of analysts’ estimates, while revenue of $3.7 billion trailed the $3.75 billion average. Halliburton reported its largest North American quarterly sales since the onset of the pandemic last year.

Oil-services providers haven’t seen three straight quarters of share appreciation since the days of $100-a-barrel crude back in 2014. Now, as drilling accelerates around the world, the Philadelphia Oil Service Index is showing just that.

Halliburton’s biggest rival Schlumberger said last month that the global economic recovery will trigger an energy-industry supercycle that should lead to wider margins. The three main oil-services providers, which includes Baker Hughes, are expected to boost second-quarter profits by at least 20 per cent compared to the first three months of the year when they report this week. The companies are pivoting away from North American shale work to focus on overseas customers.

Miller, who slashed more than $1 billion in costs during the downturn, three months ago forecast double-digit year-on-year growth in international orders during the second half of this year. But closer to home, Miller has left investors disappointed with a more subdued outlook for the North American market.

The shares have eked out a 2.4 per cent gain this year as of Monday’s close, after four consecutive annual losses that saw the company’s market value cut by more than half. The stock has 16 “buy” recommendations among analysts, compared with six “holds” and three “sells.”

Among its largest peers, Halliburton is most dependent on North America, where it generates roughly 40 per cent of sales. Fracking in the U.S. is expected to grow seven per cent in the current quarter before erasing that gain and falling back to second-quarter levels of 220 frack crews by the final three months of the year, according to Goldman Sachs. Explorers are forecast to boost spending by 20 per cent next year, the bank said last week in a note to investors.

© 2021 Bloomberg L.P.

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