Halliburton announced that net income for the second quarter of 2009 was $274 million, or $0.30 per diluted share excluding employee separation costs of $12 million, after tax, or $0.01 per diluted share. Reported net income for the second quarter of 2009 was $262 million, or $0.29 per diluted share. This compares to net income for the second quarter of 2008 of $504 million, or $0.55 per diluted share.
The second quarter of 2009 results were negatively impacted by the steep continued downturn in North America drilling activity. The second quarter of 2008 results were negatively impacted by a $30 million charge related to a patent settlement partially offset by a $25 million gain related to the sale of two investments in the United States.
Halliburton’s consolidated revenue in the second quarter of 2009 was $3.5 billion, compared to $3.9 billion in the first quarter of 2009. Revenue for most product service lines fell, with the exception of completion tools and software and asset solutions, primarily based on a reduction in North America rig count leading to lower pricing and demand for products and services. Consolidated operating income was $476 million in the second quarter of 2009 compared to $616 million in the first quarter of 2009.
"Weak global demand and volatility in the commodity markets continue to weigh on the oilfield services industry. The worldwide average rig count decreased 25% sequentially, further weakening industry fundamentals during the second quarter," said Dave Lesar, chairman, president and chief executive officer.
"North America continued to experience steep declines in drilling activity leading to increased overcapacity. North America average rig count declined in the second quarter by 39%. Activity in the United States has progressively shifted to unconventional plays, where horizontal drilling now accounts for 43% of the current rig count. This shift increases the demand for complex solutions, creating the opportunity for a packaged-services commercial approach helping to partially mitigate pricing erosion and protect market share.
"Due to the continued weakness in natural gas demand, reflected in the high injection rates for working gas storage, we believe it is unlikely that there will be a meaningful recovery in natural gas prices and, consequently, drilling activity for the remainder of the year.
"The downturn in international markets has not been as pronounced due to the strengthening commodity prices, deflationary cost environment, and stabilizing financial markets which are improving our customers' overall project economics. The strength of international markets will ultimately be dependent on the health of commodity pricing, financial markets, and robustness of global demand.
"Operating margins outside of North America remained at 20%. We rationalized our costs to offset pricing pressures; however, customers have continued to focus on aggressively lowering their project costs.
"We believe that the long-term economic fundamentals of our industry are bright. While we have taken prudent steps to control costs and improve financial flexibility, we continue to execute our strategy of maintaining disciplined investments in technology, capital equipment, and global infrastructure to ensure that we are well positioned at the other side of this cycle. The successful execution of this strategy has been validated by approximately $3.5 billion of recent contract awards.
"Although the depth and duration of the cycle remains uncertain, we believe the market will benefit companies with broad, integrated offerings, and a strong capital structure such as ours, allowing them to customize solutions across global markets," concluded Lesar.
2009 Second Quarter Results
Completion and Production (C&P) operating income in the second quarter of 2009 was $243 million compared to $363 million in the first quarter of 2009. North America C&P operating income decreased $114 million, primarily due to the decline in US land activity, volume reductions, and pricing declines across all product service lines in the United States. Latin America C&P operating income was flat as increased activity in Brazil and Mexico offset declines in Argentina and Colombia. Europe/Africa/CIS C&P operating income decreased $8 million as higher activity in Norway and Russia was outweighed by declines in Africa and the United Kingdom. Middle East/Asia C&P operating income increased due to a better mix of completion tools sales and increased activity in Australasia and the Northern Gulf.
Drilling and Evaluation (D&E) operating income in the second quarter of 2009 was $284 million compared to $304 million in the first quarter of 2009. North America D&E operating income declined by $36 million due to lower volumes and pricing declines across all product service lines except software and asset solutions. Latin America D&E operating income was flat as higher activity in Mexico offset sequential reductions in Colombia. Europe/Africa/CIS D&E operating income decreased as declines in Egypt and Angola offset higher activity in Russia and Norway. Middle East/Asia D&E operating income increased $22 million with higher activity in Asia outweighing activity declines in certain countries in the Middle East.
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