North America Could Continue To Weigh On Halliburton’s Results

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Attendees pass in front of the Halliburton Co. booth during the 2018 Offshore Technology Conference (OTC) in Houston, Texas. Photographer: Aaron M. Sprecher/Bloomberg

© 2018 Bloomberg Finance LP

Halliburton, the second-largest oilfield services provider, is expected to publish its Q1 2019 results on April 22. This note discusses Trefis’ expectations, as well as consensus estimates, for the company’s earnings.

What to expect from Halliburton in Q1 2019?

  • Consensus earnings expectations stand at ~ $0.22 per share, marking a 45% decline year
  • Consensus revenue expectations of $5.5 billion represent a slight year-over-year decline

What trends will drive the company’s results?

  • Halliburton is likely to underperform in the North American market (which accounted for ~60% of 2018 revenue), although international operations will fare better.
  • Average North American rig count over the quarter down 1% year-over-year, versus growth of 6% in international rig count
  • While crude oil prices also saw a modest recovery over the quarter, it is unlikely to have benefited results.

Why Is North America expected to underperform?

  • In the on-shore U.S. market, operators are looking to align investments to their cash flows, likely reducing oilfield services spending.
  • Operators could be focusing on spending on the inventory of drilled but uncompleted wells, reducing drilling-related activity.
  • Pipeline capacity in the Permian – the largest U.S. shale basin – is likely to remain a constraint until H2’19, weighing on activity in the region.
  • There has also been a meaningful decline in Canadian activity, with the average rig count down 30% year-over-year.

What about international markets?

  • Weather-related seasonality and the roll-off of higher-margin year-end product/software sales will result in a sequential decline in international revenue.
  • However, there could be a year-over-year improvement, driven by rising activity in markets such as Africa and the Asia Pacific
  • Moreover, equipment availability is expected to be tightening, potentially helping pricing.

View our interactive dashboard analysis on What’s Driving Our Price Estimate For Halliburton. You can change key drivers to arrive at your own price estimate for the company. In addition, you can see all our data for Energy Companies here.

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