Halliburton Posts 1Q Earnings
Halliburton announced that income from continuing operations for the first quarter of 2010 was $252 million, or $0.28 per diluted share, excluding the previously disclosed impacts of the recent devaluation of the Venezuelan Bolívar Fuerte. The Venezuela devaluation resulted in a $31 million, or $0.04 per diluted share, non-tax deductible, foreign currency loss and $10 million, or $0.01 per diluted share, of additional income tax expense in Venezuela on the company's United States dollar-denominated monetary assets and liabilities. Including the impact of the Venezuela devaluation, net income for the first quarter of 2010 was $206 million, or $0.23 per diluted share. This compares to net income for the fourth quarter of 2009 of $243 million, or $0.27 per diluted share.
Consolidated revenue in the first quarter of 2010 was $3.8 billion, compared to $3.7 billion in the fourth quarter of 2009. Consolidated operating income was $449 million in the first quarter of 2010 compared to $428 million in the fourth quarter of 2009. A charge related to the settlement of a customer receivable in Venezuela negatively impacted fourth quarter of 2009 operating income by $15 million.
"Led by the strengthening North America market, total revenue increased 2% and operating income increased 5% during the quarter," said Dave Lesar, chairman, president and chief executive officer.
"Revenue in North America increased by 19% during the quarter while operating income more than doubled. United States land activity increased as oil and natural gas operators continued to develop unconventional reservoirs and strong oil prices encouraged an increase in oil-directed drilling activity. The 21% increase in rig count and underlying increase in service intensity during the quarter led to significant absorption of the industry's excess service capacity, which resulted in opportunities for pricing improvement.
"Natural gas fundamentals in North America remain a risk to continued rig count growth in the near term; however, operator hedging positions, the need to drill to hold acreage, and the shift to liquids-rich reservoirs should moderate possible activity declines and may result in a range-bound rig count for a period of time. We believe a sustainable recovery will only occur with an increase in natural gas demand.
"Latin America posted disappointing results in the first quarter as revenue declined by 8% and operating margins declined to 9% due to the further deterioration of activity levels in Mexico as awards for new projects and discrete services have been delayed.
"Eastern hemisphere revenue decreased 9% and operating margins declined to 15% from the fourth quarter. Consistent with historical patterns, we experienced the normal seasonal decline in software and direct sales. This, combined with the impact of last year's contract re-pricing and harsher weather conditions in certain geographies, resulted in slightly higher margin contraction than expected during the first quarter. We believe that margins for eastern hemisphere operations troughed in the first quarter.
"Tangible indications are that, barring any major economic disruption, the industry is likely to experience a steady resurgence in international activity in the second half of the year and into 2011.
"We will continue to employ the strategies that have driven the successful expansion of our market position. We will leverage our broad portfolio of technology and our global footprint to deliver differentiated solutions in growth markets such as unconventional and deepwater reservoirs. This strategy continues to yield positive results as evidenced by several recent contract wins.
"As our customers continue to develop more challenging reservoirs, the ability to optimize processes and technology across drilling and completions activities becomes an important differentiator. With the increased demand for packaged services and integration, we will continue to invest in a balanced portfolio of technologies that increases our efficiency and strengthens our ability to improve our customers' project economics," concluded Lesar.
2010 First Quarter Results
Completion and Production
Completion and Production (C&P) revenue in the first quarter of 2010 increased $146 million from the fourth quarter of 2009. Strong sequential revenue growth was seen from increased production enhancement and cementing activity in United States land and Canada.
C&P operating income in the first quarter of 2010 was $238 million, an increase of $68 million or 40% over the fourth quarter of 2009. North America C&P operating income increased $92 million due to higher activity in unconventional gas and oil basins. The corresponding increase in service intensity led to greater absorption of equipment capacity and pricing improvements. Latin America C&P operating income increased $9 million, primarily due to improved performance in southern Mexico and Venezuela. Europe/Africa/CIS C&P operating income fell $23 million, as the region’s results were affected by seasonally lower activity in the North Sea and Russia and project delays in Algeria. Middle East/Asia C&P operating income decreased $10 million as seasonally lower demand in China and Australia was partially offset by stronger activity in Indonesia.
Drilling and Evaluation
Drilling and Evaluation (D&E) revenue in the first quarter of 2010 decreased $71 million from the fourth quarter of 2009, primarily due to seasonally lower demand for software throughout the regions, a decrease in wireline and perforating direct sales, lower activity in Mexico, and project delays in Algeria.
D&E operating income in the first quarter of 2010 was $270 million, a decrease of $42 million or 13% from the fourth quarter of 2009. North America D&E operating income increased by $35 million, benefiting from higher horizontal drilling activity in United States land. Latin America D&E operating income decreased $11 million due to seasonally lower demand for software across the region and lower activity for testing and subsea services in Brazil. Europe/Africa/CIS D&E operating income decreased $18 million as higher demand for drilling services in Norway and Angola was offset by project delays in Algeria and Nigeria and weather-related drilling activity declines in Russia. Middle East/Asia D&E operating income decreased $48 million as higher demand for drilling services in Saudi Arabia and Kuwait was outweighed by activity declines, partly due to weather-related issues, across all product service lines in Southeast Asia and lower wireline and perforating direct sales in China.
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