National Post (National Edition)
Top fracker sees signs of rebirth as slump ebbs
Halliburton Co. expects the rout in North American shale to peter out after history's worst crude crash decimated many of its customers.
The world's biggest provider of fracking signalled that attrition among oilfield service companies is beginning to show results and, in North America at least, a bottom may have been reached, according to a statement on Monday. Overseas is another story, however, because orders there are still weak.
In an illustration of how deeply Halliburton has cut to cope with the crisis, executives revealed Monday that half the company's North American workforce has been eliminated in the past year. Industrywide, almost one-third of fracking gear has been junked.
The shares rose 3.2 per cent in morning trading in New York, after earlier dropping as much as 3.3 per cent, but by mid-afternoon were up less than 1 per cent.
“The pace of activity declines in the international markets is slowing, while the North America industry structure continues to improve, and activity is stabilizing,” chief executive Jeff Miller said in the statement.
The brightening domestic outlook was partly overshadowed by Conoco Phillips's deal to buy Concho Resources Inc. in a US$9.7-billion takeover that will mean one fewer customer for Halliburton's services. The combination will result in US$500 million in cost cuts, much of those from reduced oil and natural gas exploration.
Oil exploration in North America, which has long been Halliburton's primary cash cow, has atrophied amid lower crude prices and a global pandemic that sapped energy demand. Customer spending in the U.S. and Canada is contracting for the fourth time in six years and hovering at levels not seen in almost a quarter century, according to Evercore ISI.
Almost two-thirds of Halliburton's sales came from overseas markets for a second straight quarter, a historic shift.
Excluding severance costs and other charges, Halliburton's 11-cent per-share profit surpassed the 8-cent average estimate of analysts in a Bloomberg survey. Sales of US$3 billion were just shy of the US$3.1-billion average forecast.
The 101-year-old oilfield-service provider is in the midst of what it calls a “fundamentally different course” that involves cutting more than US$1 billion in costs and looking outside of North America for growth. Miller has also dismissed thousands of workers and clipped Halliburton's dividend.
But growth in oilfield work anywhere in the world will be hard to come for an extended period. Larger rival Schlumberger warned investors late last week not to expect growth over the final three months of the year and said it'll be 2022 before overseas drilling picks up.