Halliburton profit falls on subdued U.S., no bounce yet

Reuters

Halliburton Co said third-quarter profit fell due to the high cost of a key ingredient used in its operations and a slowdown in U.S. drilling, which showed no signs of picking up as corporate budgets for the year were largely spent.

Halliburton, the world's No. 2 oilfield services company, said Wednesday that a drop in North American margins ended up even bigger than the company warned of last month.

Continue Reading Below

Profit from continuing operations matched analysts' estimates.

Revenue in North America fell 5 percent from the second quarter, mainly on weak demand for hydraulic fracturing services and also due to disruptions caused by Hurricane Isaac.

Oilfield services companies have had far less pricing power in the United States this year as depressed natural gas prices reduced the number of rigs targeting gas to a 13-year low.

The company said that although the U.S. oil-directed rig count rose 3 percent from the second quarter, the increase was not enough to offset the 18 percent drop in natural gas rigs.

"We are also seeing activity reductions by some of our customers as they continue to moderate activity to operate within their stated 2012 budgets," Chief Executive David Lesar said in a statement.

International revenue rose 2 percent from the second quarter despite a decline of 2 percent in the global rig count, mainly on solid sequential growth in its operations in Latin America and the Middle East.

Lesar said he was confident in the long-term fundamentals of the overall business, adding that its strategy remained unchanged, with a focus on strengthening international margins and growing market share in deepwater, global unconventional drilling and underserved international markets.

"Somewhat puzzling that the strategy is unchanged, given that the growth profile for the industry is considerably less robust than was the case coming into this year," Simmons & Co analyst Bill Herbert said in a note to clients.

Halliburton's decision to stockpile guar, a key ingredient in hydraulic fracturing fluids, in the second quarter has backfired, as prices have since started to fall.

Net income fell to $604 million, or 65 cents per share, in the third quarter from $685 million, or 74 cents per share, a year earlier. Revenue rose 9 percent to $7.1 billion.

Income from continuing operations, on an adjusted basis, was 67 cents per share, in line with what analysts expected, according to Thomson Reuters I/B/E/S.

(Reporting by Braden Reddall in San Francisco and Swetha Gopinath in Bangalore; Editing by Don Sebastian and Jeffrey Benkoe)