Halliburton announced that net income for the first quarter of 2011 was $557 million, or $0.61 per diluted share, excluding the Libya charge of $46 million, after-tax, or $0.05 per diluted share, related primarily to reserving certain assets as a result of recent political sanctions. This charge does not include the operating losses incurred in Libya during the first quarter. Reported net income for the first quarter of 2011 was $511 million, or $0.56 per diluted share. This compares to net income for the first quarter of 2010 of $206 million, or $0.23 per diluted share. The first quarter of 2010 results were negatively impacted by $41 million, or $0.05 per diluted share, associated with the devaluation of the Venezuelan Bolívar Fuerte.
Halliburton's consolidated revenue in the first quarter of 2011 was $5.3 billion, compared to $3.8 billion in the first quarter of 2010. Consolidated operating income was $814 million in the first quarter of 2011, compared to $449 million in the first quarter of 2010. These increases were attributable to increased activity in United States land, as the unabated shift to unconventional oil and liquids-rich basins more than offset geopolitical issues in North Africa and the ongoing effects of the suspension of deepwater activity in the Gulf of Mexico.
"I am extremely pleased with our Q1 results, as overall revenue in the first quarter set a company record of $5.3 billion. North America delivered strong performance as margins progressed due to increased activity while Eastern Hemisphere operating income was significantly impacted by geopolitical events in North Africa, delays in Iraq, and typical seasonality," said Dave Lesar, chairman, president and chief executive officer.
"In North America, rig activity increased 2% from the prior quarter, while revenue and operating income grew 13% and 16%, respectively. This is a result of our continued strategic investment in oil and liquids-rich growth areas where service intensity continues to grow.
"Service intensity in oil and liquids-rich basins is increasing due to the demand for tailored solutions that require more complex fluid chemistry, longer laterals, higher proppant volumes, and strategic placement of frac stages. Going forward, we believe this structural shift will continue through 2011, further increasing demand for our services.
"We have been confident about the robust outlook in North America, and the prospect of higher activity in the coming quarters has made us more bullish in the strength of our business in 2011 and beyond. We believe our unique technologies and operational footprint will allow us to enhance our leadership position and provide opportunities for margin expansion.
"International revenue decreased 9% from the prior quarter and operating income declined by $252 million. The decline was primarily driven by approximately $110 million in weather related issues and the typical seasonal slowdowns of software and direct sales, approximately $105 million from political unrest and other disruptions in North Africa, including asset reserves for Libya, and approximately $20 million for project delays due to customers' logistical challenges in Iraq.
"We expect our Eastern Hemisphere margins to improve in the second quarter but they will continue to be impacted by the situation in Libya and by competitive pricing. As activity accelerates during the second half of the year, we anticipate margins will return to the levels seen in 2010. In North Africa, we expect that Libya will continue to be challenged while Egypt appears to be returning to prior activity levels. In Iraq, our delayed integrated drilling projects are now scheduled to begin in the second or third quarter of this year. We remain very optimistic about this market and expect to be profitable in 2011.
"We continue to commercialize core technologies, win key contracts, and make the necessary investments to ensure that we gain momentum as the industry enters the projected upcycle. We remain focused on global growth markets including deepwater, unconventional resources, and mature fields. We have made progress on this strategy, as evidenced by a number of recent contract awards. We believe our superior execution in these markets will deliver unique growth opportunities and position us to continue to deliver superior shareholder returns," concluded Lesar.
2011 First Quarter Results
Completion and Production
Completion and Production (C&P) revenue in the first quarter of 2011 was $3.2 billion, an increase of $1.2 billion, or 62%, from the first quarter of 2010. The continued growth in activity in United States land accounted for the majority of this increase.
C&P operating income in the first quarter of 2011 was $660 million, an increase of $422 million, or 177%, over the first quarter of 2010. Excluding the impact of the charge for Libya, C&P operating income improved $458 million, or 192%, from the prior year quarter. North America C&P operating income increased $477 million compared to the first quarter of 2010, primarily due to increased demand and improved pricing. Latin America C&P operating income increased $7 million, as lower activity in Mexico was offset by higher activity and improved pricing for production enhancement services in Argentina and higher cementing activity in Colombia. Europe/Africa/CIS C&P operating income was negatively impacted by activity disruptions caused by geopolitical issues in North Africa and project delays in Kazakhstan. Middle East/Asia C&P operating income increased $3 million as higher demand for completion tools and production enhancement services in Malaysia and China was partially offset by startup costs in Iraq.
Drilling and Evaluation
Drilling and Evaluation (D&E) revenue in the first quarter of 2011 was $2.1 billion, an increase of $313 million, or 17%, from the first quarter of 2010 due to higher activity in the Western Hemisphere and the commencement of work in Iraq.
D&E operating income in the first quarter of 2011 was $230 million, a decrease of $40 million, or 15%, from the first quarter of 2010. Excluding the impact of the charge for Libya, D&E operating income decreased $17 million, or 6%, from the prior year quarter. North America D&E operating income increased $25 million compared to the first quarter of 2010, as higher drilling activity in United States land offset the decline in the Gulf of Mexico. Latin America D&E operating income increased $23 million, primarily due to Mexico and Venezuela. Europe/Africa/CIS D&E operating income was negatively impacted due to activity disruptions caused by geopolitical issues in North Africa and lower drilling activity in the North Sea. Middle East/Asia D&E operating income decreased $19 million, primarily due to higher costs in Saudi Arabia and certain locations in Asia Pacific and startup costs in Iraq.
Corporate and Other
During the first quarter of 2011, Halliburton spent approximately $11 million on strategic projects aimed at improving Halliburton's business model, which include lowering service delivery costs in North America and repositioning supply chain, manufacturing, and technology infrastructure to support projected international growth. While the level of investment was tempered in the first quarter due to activity declines in the Eastern Hemisphere, Halliburton expects to continue funding this effort throughout 2011.
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