Halliburton Reports Stronger Q1 Profit
Halliburton's net income for the first quarter of 2007 was $0.54 per diluted share, which includes the results of KBR, Inc. in discontinued operations. Income from continuing operations in the first quarter of 2007 was $529 million, or $0.52 per diluted share. This compares to income from continuing operations of $449 million, or $0.42 per diluted share, in the first quarter of 2006.
Halliburton's consolidated revenue in the first quarter of 2007 was $3.4 billion, up 17% from the first quarter of 2006. This increase was attributable to higher worldwide activity and the company's focus on investing in and expanding Eastern Hemisphere operations.
Consolidated operating income was $788 million in the first quarter of 2007 compared to $692 million in the first quarter of 2006. Results benefited from increased customer activity, pricing gains, and new international contract awards.
"This quarter marks the start of a new chapter in Halliburton's history as we completed the separation of KBR. I am encouraged by the prospects that await us," said Dave Lesar, chairman, president, and chief executive officer. "We are now completely focused on the global growth opportunities in our energy services business. The first quarter saw many positives for Halliburton. Sperry Drilling Services, Wireline and Perforating, Cementing Services, and Baroid Fluid Services all posted revenue that met or exceeded their best quarters ever. Also, we saw revenue growth in the Middle East of 20% year-over-year and 8% sequentially. However, this was overshadowed by a challenging market in the United States for our Production Enhancement business where a combination of weather delays and lower commodity prices had a negative impact. We believe that with the actions we have already taken, coupled with improving market conditions, Production Enhancement operations should improve later this year."
2007 First Quarter Results
Production Optimization operating income for the first quarter of 2007 was $325 million, a decrease of $8 million or 2% from the first quarter of 2006. Production Enhancement services operating income fell 11%, primarily in Canada and the United States Rocky Mountains. These markets were impacted by increased costs related to lower-than-anticipated activity in the first quarter of 2007, driven by decreases in natural gas prices and weather delays. Completion Tools operating income grew 40%, led by increased product sales in the United States and Africa. The company's intelligent well completions joint venture, however, experienced reduced results in the first quarter of 2007 due to manufacturing and supply chain constraints.
Fluid Systems operating income for the first quarter of 2007 was $214 million, a $25 million or 13% increase over the first quarter of 2006, with Eastern Hemisphere operating income increasing 38%. Cementing services operating income increased 10% compared to the prior year's first quarter. Cementing Services were negatively impacted in the first quarter of 2007 by the slowdown in Canada. Outside of North America, Cementing Services operating income grew 50% over the prior year's quarter, reflecting new contract awards and improved pricing. Baroid Fluid Services operating income grew 23% from participation on deeper wells, increased activity, and improved pricing, particularly in the United States, northern Africa, and Mexico.
Drilling and Formation Evaluation operating income for the first quarter of 2007 was $256 million, a $77 million or 43% increase over the prior year's first quarter. Sperry Drilling Services operating income increased 49%, with over 65% of the operating income growth coming from the Eastern Hemisphere. Sperry Drilling Services operating income in the United States grew 36%, benefiting from new contracts in Alaska and increased directional drilling activity throughout the lower 48 states. Wireline and Perforating Services operating income increased 44%, with increased activity in the United States and the Middle East, as well as new contract wins in Africa and Asia Pacific. Security DBS Drill Bits operating income improved 19% over the prior year's first quarter, reflecting strong fixed-cutter bit activity in the United States.
Digital and Consulting Solutions operating income in the first quarter of 2007 was $50 million, essentially flat as compared to the prior year's quarter. Landmark's operating income grew due to improved sales of software in Europe and Asia Pacific.
Technology and Significant Achievements
Halliburton made a number of advances in technology, expansion, and business structure changes.
- Halliburton announced that it had completed the final separation of KBR, Inc. on April 5, 2007. Halliburton accepted 85,273,184 shares of Halliburton common stock in exchange for 135,627,000 shares of KBR, Inc. common stock. KBR's results are presented as discontinued operations for all periods presented. Since the transaction occurred subsequent to the first quarter of 2007, Halliburton's share count for purposes of the first quarter 2007 earnings per share calculation does not reflect the reduction in Halliburton shares.
- Halliburton won the 2007 Offshore Energy Achievement Award in Well Construction for its Sperry Drilling Services' ReFlexRite multilateral system. The ReFlexRite system technology is an important step toward extending the productive life of existing wells in mature fields in a cost-effective manner. The system makes it possible to convert a simple horizontal well into a multilateral well, while simultaneously maintaining the production from the original wellbore.
- Security DBS Drill Bits announced it has added a breakthrough technology to its suite of Hole Enlargement products and solutions. The XR(TM) reamer line of tools is designed for both conventional and rotary steerable applications, and it provides the industry's only available concentric hole enlargement technology that is also capable of enlarging a pilot hole more than 40% while drilling. XR reamer tools offer activation and deactivation capabilities that allow the hole to be selectively enlarged based on existing casing-shoe and well-design parameters.
- Halliburton is opening a new manufacturing center in Monterrey, Mexico, to meet its customers' increasing demands for energy services products. The 9,290-square-meter leased facility is expected to open in May 2007.
- Halliburton has announced that it has entered into a definitive agreement to purchase, subject to regulatory approvals, PSL Energy Services, Limited (PSLES), a leading Eastern Hemisphere provider of process, pipeline, and well intervention services. PSLES is headquartered in the United Kingdom and has approximately 1,000 employees with operations in the United Kingdom, Norway, the Middle East, Azerbaijan, Algeria, and Asia Pacific.
Founded in 1919, Halliburton is one of the world's largest providers of products and services to the energy industry. With more than 45,000 employees in nearly 70 countries, the company serves the upstream oil and gas industry throughout the lifecycle of the reservoir - from locating hydrocarbons and managing geological data, to drilling and formation evaluation, well construction and completion, and optimizing production through the life of the field.
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