Halliburton 3Q Profit Soars on N. America Rebound
Halliburton announced that net income for the third quarter of 2010 was $544 million, or $0.60 per diluted share. The third quarter results were unfavorably impacted by a non-cash impairment charge for an oil and gas property of $32 million, after-tax, or $0.04 per diluted share, and higher tax expense of $11 million, or $0.01 per diluted share, related to an anticipated international tax ruling. In addition, the company recognized $62 million, or $0.07 per diluted share, of income from discontinued operations due to the finalization of a United States tax matter with the Internal Revenue Service.
Consolidated revenue in the third quarter of 2010 was $4.7 billion, compared to $4.4 billion in the second quarter of 2010. This increase was attributable to a record quarter in North America, where higher activity in the unconventional natural gas and oil basins offset declines linked to the deepwater drilling suspension in the Gulf of Mexico.
Consolidated operating income was $818 million in the third quarter of 2010, compared to $762 million in the second quarter of 2010. Excluding the impact of the non-cash impairment charge for an oil and gas property of $50 million, third quarter consolidated operating income was $868 million, an improvement of 14%.
"Our third quarter results illustrate our ability to leverage our balanced geographic portfolio as the unique strength of North America contrasted against flat performance in the international market. Excluding the impact of the oil and gas impairment and prior year employee separation costs on operating income, total revenue increased 6% and operating income grew 14% sequentially, and total revenue increased 30% while operating income grew 73% on a year-over-year basis," said Dave Lesar, chairman, president and chief executive officer.
"Revenue in North America increased 13% sequentially, outpacing the 7% increase in United States rig count. The shift to oil and liquids-rich activity continues to drive service intensity through horizontal drilling and completions complexity. Operating income increased 30% as accelerating demand in these basins provided further opportunity to increase pricing across all of our product service lines.
"We believe the shift to oil and liquids-rich basins will provide an offset to the reduction of dry gas activity and remain a catalyst for increasing service intensity through 2011, sustaining the growth opportunity in North America.
"In international markets, uneven growth across several regions led to flat sequential revenue. Currently, five countries represent approximately 70% of the international rig count growth year-over-year and we saw a revenue increase in those countries. However, the lack of a more broad-based international rig count increase prevented meaningful absorption of spare equipment capacity and delayed opportunities to improve pricing in these markets.
"Going forward we expect steady, incremental increases in activity internationally will generate volume-led margin improvements as we move into 2011. Longer term, we believe that the global economic recovery will increase the demand for liquids and the technology needed to unlock the next generation of complex reservoirs.
"We continue to be pleased with the strength of our balanced geographic and technology portfolios. Our third quarter results reflect the successful execution of our strategy to utilize our broad global capabilities to enhance our market position, generate growth, and improve margins," concluded Lesar.
2010 Third Quarter Results
Completion and Production
Completion and Production (C&P) revenue in the third quarter of 2010 was $2.7 billion, an increase of $262 million from the second quarter of 2010. Strong sequential revenue growth was seen in North America, where production enhancement experienced another record quarter.
C&P operating income in the third quarter of 2010 was $609 million, an increase of $112 million or 23% over the second quarter of 2010. North America C&P operating income increased $148 million, due to strong results in United States land and Canada. Pricing improvements continued in most basins as equipment utilization levels remained elevated. Latin America C&P operating income decreased $6 million, as increased sand control demand in Brazil was offset by the curtailment of activity in Mexico. Europe/Africa/CIS C&P operating income decreased $22 million, with lower vessel utilization, activity and completions sales in Norway, project delays in Algeria, and the conclusion of a project in Congo offsetting increased activity in the United Kingdom. Middle East/Asia C&P operating income decreased $8 million, as higher completion tool sales in China were offset primarily by reduced activity and mobilization costs for production enhancement in India and reduced activity in Southeast and Central Asia.
Drilling and Evaluation
Drilling and Evaluation (D&E) revenue in the third quarter of 2010 was essentially flat from the second quarter of 2010, with higher activity in United States land, the United Kingdom, and Southeast Asia offsetting the effects of the deepwater drilling suspension in the Gulf of Mexico.
D&E operating income in the third quarter of 2010 was $271 million, a decrease of $47 million, or 15%, from the second quarter of 2010. Excluding the impact of the non-cash impairment charge for an oil and gas property, D&E operating income slightly improved for the quarter. North America D&E operating income decreased $16 million, with the deepwater drilling suspension more than offsetting strong United States land results. Latin America D&E operating income decreased $6 million, as lower overall activity in Mexico and Argentina offset strong activity in Colombia and Ecuador. Europe/Africa/CIS D&E operating income increased $13 million, primarily due to higher activity in the United Kingdom, Angola, and Russia, offsetting lower activity in Norway and project delays in Algeria. Excluding the impact of the non-cash impairment charge for an oil and gas property, Middle East/Asia D&E operating income increased $12 million, as higher drilling activity in Southeast Asia and Iraq, and increased demand for wireline and perforating services in China offset activity declines in the Middle East.
During the third quarter of 2010, Halliburton purchased 3.5 million shares of common stock at a cost of $114 million. Approximately $1.7 billion remains available under the company’s share repurchase program. Since the inception of the program, Halliburton has purchased 96 million shares for a total cost of approximately $3.3 billion.