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Halliburton revenue drops 28% in Q4, 2016 to be ‘a tough year’

Total Halliburton annual revenue of $23.6 billion declined 28% year-over-year, moving ahead with Baker Hughes acquisition

Halliburton

Economic headwinds affecting the global oil and gas industry took their toll on industry leader Halliburton, but the company says it still managed to outperform industry averages.

Halliburton has announced that income from continuing operations for the fourth quarter of 2015 was $270 million, or $0.31 per diluted share, excluding special items. This compares to income from continuing operations for the third quarter of 2015 of $265 million, or $0.31 per diluted share, excluding special items.

Adjusted operating income was $473 million in the fourth quarter of 2015, compared to adjusted operating income of $506 million in the third quarter of 2015. Halliburton’s total revenue in the fourth quarter of 2015 was $5.1 billion, compared to $5.6 billion in the third quarter of 2015.

As a result of the downturn in the energy market and its corresponding impact on the company’s business outlook, Halliburton recorded company-wide charges related primarily to asset write-offs and severance costs of approximately $192 million, after-tax, or $0.22 per diluted share, in the fourth quarter of 2015, compared to $257 million, after-tax, or $0.30 per diluted share, in the third quarter of 2015.

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“We are pleased with our fourth quarter and full-year results in this challenging environment, as once again we outperformed our peer group in North America and international revenue, both sequentially and on a full-year basis,” said Jeff Miller, president.

“Total company annual revenue of $23.6 billion declined 28 per cent year-over-year, outperforming a 35 per cent decline in both the average worldwide rig count and global drilling and completions spend.”

Halliburton recorded Baker Hughes acquisition-related costs of $79 million, after-tax, or $0.09 per diluted share, in the fourth quarter of 2015, compared to $62 million, after-tax, or $0.07 per diluted share, in the third quarter of 2015. Halliburton also incurred $27 million, after-tax, or $0.03 per diluted share, of interest expense associated with the $7.5 billion debt issuance in the fourth quarter of 2015.

Reported loss from continuing operations was $28 million, or $0.03 per diluted share, in the fourth quarter of 2015, compared to reported loss from continuing operations of $54 million, or $0.06 per diluted share, in the third quarter of 2015. Reported operating income was $86 million for the fourth quarter of 2015, compared to reported operating income of $43 million for the third quarter of 2015.

revenueTotal revenue for the full year of 2015 was $23.6 billion, a decrease of $9.2 billion, or 28 per cent, from 2014. Reported operating loss for 2015 was $165 million, compared to reported operating income of $5.1 billion for 2014. Both revenue and operating income declines resulted from the impact of reduced commodity prices creating widespread pricing pressure and activity reductions on a global basis.

Adjusted income from continuing operations for 2015 was $1.3 billion, or $1.56 per diluted share, compared to adjusted income from continuing operations for 2014 of $3.4 billion, or $4.02 per diluted share. Reported loss from continuing operations for 2015 was $666 million, or $0.78 per diluted share, compared to reported income from continuing operations for 2014 of $3.4 billion, or $4.03 per diluted share.

 

“Our international business was resilient during 2015. Annual revenue declined 16 per cent from the prior year, outperforming our largest peer sequentially and on a full-year basis for both revenue and margins,” said Miller.

“Despite pricing and activity headwinds, we were able to improve 2015 operating margins due to a focus on cost management. North America revenue declined 39 per cent compared to 2014, as a result of unprecedented declines in activity, with the U.S. land rig count ending the year down 64 per cent from the 2014 peak.

Fourth quarter total company revenue of $5.1 billion declined 9 per cent sequentially, while adjusted operating income declined by 7 per cent to $473 million.

Halliburton

Halliburton frack site in the Marcellus Shale formation.

“For our international business, fourth quarter revenue and operating income declined sequentially by 5 per cent and 10 per cent, respectively, as a result of price concessions and activity declines,” said Miller.

“In addition, due to customer budget constraints, we did not see the typical benefit from year-end equipment and software sales.

In the Middle East / Asia region, revenue declined by 5 per cent sequentially, with a similar decline in operating income of 6 per cent. Lower activity levels in Saudi Arabia and Iraq were partially offset by modestly higher sales in China and increased activity in Kuwait and Oman.

In Europe/Africa/CIS, revenue declined 6 per cent sequentially with a decrease in operating income of 18 per cent. The decline was primarily driven by activity reductions in the North Sea, partially offset by increased activity levels in Angola and Algeria.

Latin America revenue and operating income declined sequentially by 6 per cent and 9 per cent, respectively, driven by reduced activity across most of the region. Partially offsetting this decline was improved activity levels in Mexico.

“North America revenue declined 13 per cent sequentially, led by reduced activity and pricing concessions in US Land. Operating margins improved by 160 basis points, driven by cost reduction efforts, and year-end completion tool sales in the Gulf of Mexico,” Miller said.

Halliburton margins continue to include an elevated cost structure in North America, in anticipation of the pending Baker Hughes acquisition.

“Our strategy remains unchanged. We are focused on maintaining a strong customer portfolio, investing in more efficient technology, and delivering reliable, best-in-class service quality for our customers. We are looking through this cycle, drawing upon our management’s deep experience and preparing the business for growth when the industry recovers,” said Miller.

Halliburton

Shale Development

“We remain fully committed to closing the pending acquisition of Baker Hughes. We are continuing our discussions with competition authorities, and recently offered an enhanced set of divestitures in an effort to resolve competition-related concerns as soon as possible. We are diligently focused on pending regulatory reviews, the divestiture process, and planning for integration activities after the closing of the deal,” said Dave Lesar, chairman and CEO.

“2016 is expected to be another challenging year for the industry. We believe our customers will remain focused on cost per barrel optimization and gaining higher levels of efficiency, both of which bode very well for Halliburton. Ultimately, when this market recovers we believe North America will respond the quickest and offer the greatest upside, and that Halliburton will be positioned to outperform.”

Completion and Production

Completion and Production (C&P) revenue in the fourth quarter of 2015 was $2.8 billion, a decrease of $369 million, or 12 per cent, from the third quarter of 2015, primarily driven by activity and pricing headwinds in all regions. Sequentially, North America revenue declined as a result of seasonal activity reductions for pressure pumping as well as customer budget constraints, partially offset by higher year-end sales in the Gulf of Mexico.

Latin America revenue declined sequentially for all product lines due to lower activity in Argentina, Mexico, Brazil and Colombia. Sequentially, Europe/Africa/CIS revenue declined as a result of lower cementing activity in the North Sea, and Middle East/Asia revenue improved due to increased stimulation services in Kuwait and Australia, as well as higher production solutions activity across the region.

Drilling and Evaluation

Drilling and Evaluation (D&E) revenue in the fourth quarter of 2015 was $2.3 billion, a decrease of $131 million, or 5 per cent, from the third quarter of 2015, driven primarily by decreased drilling activity and logging services in the United States, Latin America, and Europe/Africa/CIS, along with reduced project management activity and drilling services in Middle East/Asia. This was partially offset by increased fluid services and software sales in Mexico.

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