Halliburton reported that income from continuing operations for the fourth quarter of 2010 was $625 million, or $0.68 per diluted share, compared to $485 million, or $0.53 per diluted share, in the third quarter. Net income for the fourth quarter of 2010 was $605 million, or $0.66 per diluted share. Included in net income for the fourth quarter was a charge to discontinued operations of $17 million, after-tax, or $0.02 per diluted share, related to an indemnity payment on behalf of KBR for a settlement agreement reached with the Federal Government of Nigeria. This compares to net income for the third quarter of 2010 of $544 million, or $0.60 per diluted share.
Consolidated revenue in the fourth quarter of 2010 was $5.2 billion, compared to $4.7 billion in the third quarter of 2010. This increase was attributable to continued strength in United States land and improved international results, as all geographic regions experienced sequential revenue growth during the period. Consolidated operating income was $980 million in the fourth quarter of 2010, compared to $818 million in the third quarter of 2010. A non-cash impairment charge for an oil and gas property negatively impacted third quarter of 2010 operating income by $50 million.
Halliburton's revenue was $18.0 billion for the full year 2010, an increase of 22% from the full year 2009, and consolidated operating income was $3.0 billion, an increase of 51% from the full year 2009. Income from continuing operations for the full year 2010 was $1.8 billion, or $1.97 per diluted share, compared to 2009 income from continuing operations of $1.2 billion, or $1.28 per diluted share. These increases were largely attributable to the improved North America business, with higher activity in the unconventional natural gas and oil basins more than offsetting restrained international markets and the effects of the suspension of deepwater activity in the Gulf of Mexico.
Commenting on 2010 results, Dave Lesar, chairman, president, and chief executive officer said, "I am very pleased with our 2010 results. Beyond the dramatic recovery in the North America market, our performance reflects the successful execution of our strategy and our commitment to deliver superior growth and returns to our shareholders.
"During the fourth quarter, we achieved double-digit sequential revenue and operating income growth in both North America and international operations as we continued to experience strong demand for our services in North America and improvement in activity in a number of international markets.
"In North America, revenue and operating income increased 10% sequentially, outpacing the United States rig count growth of 4%. The increase in horizontal drilling and activity in liquids-rich plays continued to drive service intensity leading to the highest United States revenue in the company's history. This 10% sequential growth is particularly noteworthy given the significant offsetting impact on revenue and operating income due to the fourth quarter decrease of activity in the Gulf of Mexico.
"With the third quarter completion of the Macondo relief effort, we experienced a significant fourth quarter decline in revenue and income in the Gulf of Mexico resulting in a quarterly loss in our Gulf of Mexico operations. We continue to believe that prospects for a recovery in the Gulf of Mexico will remain uncertain through the first half of 2011 and perhaps the full year. However, I believe it is prudent to maintain all of our infrastructure and most of our headcount in anticipation of a rebound in the Gulf. This may result in ongoing losses in the Gulf of Mexico until the rig count recovers.
"During the fourth quarter, we continued to realize pricing improvements that served to offset increased costs in areas such as labor, freight, and materials. Our United States land operations experienced continued improved profitability in the fourth quarter. We are focused on capturing efficiencies through our supply chain and in the field through the reinvention of our service delivery platform, which we believe will result in sustaining our North American margin leadership position.
"Looking into 2011, operators in North America continue to make the exploitation of unconventional resources the focus of their investment. Development of these resources requires expansive well programs resulting in longer-term contracting arrangements for some services. We continue to expect that we can improve prices in select basins where the demand for our integrated services is robust. This will provide us with growth opportunities in revenue and operating income in 2011.
"I am very pleased with our results on the international front. Key markets including Norway, West Africa, Iraq, and Algeria experienced increased activity. While pricing remains competitive across all regions, operating income improved as we benefited from activity increases and the typical year-end impact of software and direct sales. We expect activity increases to continue while we experience the usual seasonal decline in software and direct sales in the first quarter.
"We continue to win significant additional awards in Iraq. We, therefore, are investing heavily in our infrastructure and incurring mobilization costs. I am pleased to announce that we were modestly profitable in the fourth quarter in Iraq, several quarters ahead of schedule. We now have nearly 600 employees in Iraq with a plan to have 1,200 employees in 2011 to handle the work we have been awarded.
"Despite the macroeconomic trends that support a more constructive spending outlook, international pricing remains competitive. However, the improving oil consumption demand levels combined with the industry’s declining spare capacity provides a more favorable outlook for oil services and technologies in 2011 and beyond.
"Given the excellent prospects we see in the Eastern Hemisphere, we are going to leverage opportunities to bring our technology and supply chain closer to the customer in international markets. We have started a major reinvestment and expansion of our technology and manufacturing capacity. This significant investment underscores our belief in the major future opportunities we see in deepwater and unconventional plays throughout the world. This expansion will ensure we are able to meet the goals we have set for growth and shareholder return.
"In 2010, we increased our market position by leveraging our broad-base of technologies to deliver compelling solutions to our global customers. We are excited about the market opportunities in 2011, and we will continue to build on this success to put us in a unique position to benefit from the upcoming cycle," concluded Lesar.
2010 Fourth Quarter Results
Completion and Production
Completion and Production (C&P) revenue in the fourth quarter of 2010 was $3.0 billion, an increase of $330 million, or 12%, from the third quarter of 2010. Continued strength in North America and improved market conditions in Africa accounted for the majority of this increase.
C&P operating income in the fourth quarter of 2010 was $688 million, an increase of $79 million, or 13%, over the third quarter of 2010. North America C&P operating income increased $60 million as increased demand for production enhancement services and some pricing improvement outweighed typical weather-related seasonality in the Rockies. Latin America C&P operating income decreased $4 million, as higher activity in Colombia was offset by lower vessel activity and weather-related issues in Mexico. Europe/Africa/CIS C&P operating income increased $21 million, with higher activity levels in Norway, improved vessel utilization in Angola, and increased completion tool sales in Algeria offsetting weather-related issues in Russia and reduced activity in Nigeria. Middle East/Asia C&P operating income was relatively flat as higher activity in Iraq and increased completion tool sales in Southeast Asia were offset by reduced completions demand in the Middle East.
Drilling and Evaluation
Drilling and Evaluation (D&E) revenue in the fourth quarter of 2010 was $2.2 billion, an increase of $165 million, or 8%, from the third quarter of 2010. The typical year-end seasonality of higher demand for Landmark and direct sales was partially offset by significant activity declines in the Gulf of Mexico and Eurasia.
D&E operating income in the fourth quarter of 2010 was $354 million, an increase of $83 million, or 31%, from the third quarter of 2010. Excluding the impact of the non-cash impairment charge for an oil and gas property in the third quarter of 2010, D&E operating income increased $33 million, or 10%. North America D&E operating income was flat for the quarter, as the decline in the Gulf of Mexico offset higher land activity. Latin America D&E operating income increased $5 million, due to increased software sales and demand for fluid services across the region. Europe/Africa/CIS D&E operating income increased $7 million, reflecting higher software sales across the region and the recommencement of several projects in Algeria. Excluding the impact of the non-cash impairment charge for an oil and gas property in the third quarter of 2010, Middle East/Asia D&E operating income increased $22 million on higher activity in Iraq and increased direct sales in Asia.
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