HOUSTON (Dow Jones Newswires), Apr. 20, 2009
Oil and gas drilling activity is still falling, and it's unclear when it will rebound, Halliburton Co. Chief Executive David Lesar said Monday.
"There can be no certainty about when the decline in activity will bottom out," Lesar said during a conference call with investors on the company's first-quarter earnings.
The rapid decline in activity, a result of low oil and gas prices and tightening credit markets, is "worse than previous cycles in terms of the speed of the decline," he said.
Most of the decline has occurred in North America, as international operations tend to react more slowly to economic cycles. Latin America will continue to be a "bright spot," with operations in Brazil and Mexico maintaining high levels of activity, Lesar said.
The largest decline came in the Permian Basin, Rockies and the mid-continental U.S.. However, but the falloff was "less severe" in complex shale plays and the Gulf of Mexico, which includes deepwater operations, Lesar said. Those areas have helped in "moderating the effect" of the current environment, he said.
Oil and gas producers are "focusing their efforts in reducing service cost inflation" by renegotiating contracts, Lesar said.
The company aims to maintain its $1.8 billion capital budget program, the same amount it spent last year. "We continue to believe in the long-term prospects of this business," he said.
The downturn, a result of falling demand for energy amid the worst financial crisis in decades, has prompted severe belt-tightening across the sector.
"We reduced our headcount in North America by 12% in the (first) quarter," said Tim Probert, Halliburton's executive vice president of strategy and corporate development.
Halliburton its also negotiating with its suppliers to lower the cost, although it doesn't expect to see a "meaningful impact" from these cost savings until the second half of 2009, Probert said.
Halliburton shares recently fell 1.1% to $18.56.
Copyright (c) 2009 Dow Jones & Company, Inc.
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