Failed merger blamed in loss
But after dropping $5.7 billion for 2016, Halliburton looks to a profitable 2017
Halliburton, the world’s second-largest oil field services company, said Monday that market share gained during the energy downturn has positioned it for a profitable 2017 — after a 2016 that the Houston company would probably like to forget.
Halliburton reported that it lost $5.7 billion, or $6.69, a share in 2016, compared with losses of $671 million in 2015, or 78 cents per share. In the fourth quarter, Halliburton lost $149 million, compared with a profit of $6 million, in the third quarter, and a loss of $28 million in the fourth quarter of 2015.
The company attributed much of its 2016 losses to a single event: the failed $28 billion merger with Houston-based oil field services provider Baker Hughes, which the companies abandoned after it became clear that federal antitrust regulators would oppose it. That alone cost Halliburton more
than $4 billion, including the $3.5 billion breakup fee paid to Baker Hughes and other costs, the company said.
But Halliburton was also hard-hit by the 2-yearold oil price crash that stretched well into 2016. Oil production companies, struggling to make money with oil prices at half — or less — of the 2014 high of $107 a barrel, put pressure on Halliburton and other services companies to lower rates.
The discounts contributed to a revenue decline of more than 30 percent, from $23.6 billion in 2015 to $15.9 billion for the year. In a conference call with analysts, Halliburton CEO Dave Lesar called the downturn the “sharpest and deepest industry decline in history.”
Other services companies felt Halliburton’s pain. The industry leader, Schlumberger, reported Friday that it lost $1.7 billion in 2016, down from a $2 billion profit the year prior. Annual revenue fell more than 20 percent to $27.8 billion from $35.5 billion in 2015.
Baker Hughes, the third largest oil services company, is scheduled to release its earnings Thursday.
Halliburton, however, could report some bright spots, particularly in North America, where rising oil prices have led production companies to resume drilling in shale plays and other fields.
Halliburton’s North America revenue rose 9 percent over the third quarter 2016 to $1.8 billion in the fourth quarter. North American operations showed a profit of $28 million in the fourth quarter, up from a $66 million loss in the third quarter.
Halliburton also said it gained market share in North America during the downturn, allowing it to boost its profit margins. Many of its customers, it added, have agreed to pay more after getting steep discounts during the worst of the bust.
As demand for equipment increased in the fourth quarter, and availability tightened, Halliburton began “sometimes hard talks” on increasing prices, executives said. If customers agreed to increase prices, Halliburton continued to work with them. If not, the company took its equipment elsewhere.
Analysts generally praised Halliburton’s earnings report and prospects.
“Splendid results with profitability faring better than our expectations across all four of Halliburton’s geographic regions,” analysts at the Houston investment bank Tudor Pickering Holt said in a morning note. The recent jump in activity in North American oil fields, such as the Permian Basin in West Texas, “is just getting started,” these analysts said.
Halliburton’s stock fell $1.65, or about 3 percent, to $54.80 on Monday.