Halliburton announced that third quarter net income excluding non-recurring items was $687 million, or $0.76 per diluted share.
Hurricanes in the Gulf of Mexico negatively impacted results by $33 million net of tax, or $0.04 per diluted share. This compares to net income for the third quarter of 2007 of $727 million, or $0.79 per diluted share. Third quarter 2007 results were favorably impacted by a $133 million, or $0.15 per diluted share, income tax impact from the ability to recognize United States foreign tax credits that were previously assumed not to be fully utilizable.
Net loss for the third quarter of 2008 was $21 million, or $0.02 per diluted share. This included a non-tax deductible loss of $693 million, or $0.79 per diluted share, related to the portion of the 3.125% convertible senior notes premium settled in cash. In addition, a WellDynamics acquisition-related charge of $15 million, after tax and minority interest, is reflected in the third quarter 2008 results.
Halliburton's consolidated revenue in the third quarter of 2008 was $4.9 billion, up 24% from the third quarter of 2007. All product service lines contributed to this increase, driven by both increased international activity and higher demand in the United States. The hurricanes in the Gulf of Mexico negatively impacted third quarter 2008 revenue by approximately $74 million.
Consolidated operating income was $1 billion in the third quarter of 2008 compared to $910 million in the third quarter of 2007. Both segments contributed to the increase primarily driven by Latin America. The hurricanes in the Gulf of Mexico negatively impacted third quarter 2008 operating income by approximately $52 million.
"A very successful quarter from an operating standpoint for Halliburton has been overshadowed by a severe downturn in global stock markets," said Dave Lesar, chairman, president, and chief executive officer.
"The North American market experienced revenue growth of 22% year-over-year, as unconventional activity throughout the United States and Canada accelerated. Natural gas prices have fallen from the levels seen during the early parts of the summer to levels in line with where they were a year ago but above levels seen in 2006. The announced reduction in some customers' capital spending will result in a decline in rig counts below those previously anticipated, but should bring gas storage levels into a more favorable long-term position, similar to the situation we experienced in the first half of 2007.
"Sequentially, revenue in North America grew 13% and operating income grew 12% as pricing stabilized and cost recoveries began to be realized.
"Internationally, while energy prices have declined from the levels experienced during the second and third quarters of 2008, current prices still support most projects underway. We are cognizant that a worldwide recession would have negative shortterm implications for demand. However, we are and will remain focused on our customers' long-term technology and service requirements as underlying trends toward smaller and more complex accumulations and increasing depletion rates should drive long-term growth.
"Outside North America revenue grew 25% year-over-year, again exceeding our international target of 20%, from investments in infrastructure, technology, and people made in the past year. This robust growth was led by Latin America with year-over-year revenue growth of 42%. While Mexico remains the largest market in this region, growth of 70% in Brazil is indicative of the overall strength occurring throughout the region.
"In the Middle East/Asia region, revenue grew 19% and operating income increased 23%, as a number of markets in the Arabian Gulf and Southeast Asia experienced strong growth.
"Growth of approximately 50% across Northern Africa, along with above average growth in Saudi Arabia, has been the catalyst for the continued expansion of the franchise in the Eastern Hemisphere.
"Year-over-year, revenue in the Europe/Africa/CIS region grew 21%, but operating income was essentially flat as revenue increases were offset by an unfavorable mix and increased operational costs in West Africa, along with contracts ending in the North Sea where we are in the process of redeploying assets and people to other areas of greater demand and profitability."
2008 Third Quarter Results
Completion and Production (C&P) operating income in the third quarter of 2008 was $660 million, an increase of $64 million or 11% from the third quarter of 2007. Europe/Africa/CIS C&P operating income increased 15% with the most significant impact coming from increased production enhancement activity in Europe.
WellDynamics also contributed to the increase. Middle East/Asia C&P operating income was flat with higher demand for production enhancement products and services balancing out declines in sales of completion tools and cementing services. North America C&P operating income increased 3%, primarily due to more favorable pricing and product mix for production enhancement services and higher demand for completion tools in the United States, partially offset by the hurricanes in the Gulf of Mexico. Latin America C&P operating income more than doubled from increased demand for completion tools in Brazil and higher vessel utilization in Mexico.
Drilling and Evaluation (D&E) operating income in the third quarter of 2008 was $472 million, an increase of $100 million or 27% over the third quarter of 2007. Europe/Africa/CIS D&E operating income decreased 14% as a result of declines in activity for Sperry Drilling Services in the North Sea during the third quarter. Middle
During the third quarter of 2008, Halliburton purchased 3.5 million shares of common stock at a cost of $122 million. Approximately $1.8 billion remains available under the company's share repurchase program. Since the inception of the program, Halliburton has purchased 92 million shares for a total cost of approximately $3.2 billion.
Halliburton made a number of advances in technology and growth.
• Halliburton acquired the assets of Pinnacle Technologies, Inc. from CARBO Ceramics Inc., including the Pinnacle brand. Pinnacle is a leading provider of microseismic fracture mapping services and tiltmeter mapping services, and it has monitored more than 12,000 hydraulic fracture treatments since its founding
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