Halliburton Reports Results for Q4, Full Year
Halliburton on Friday said that revenue was $22.6 billion for the full year 2006, an increase of 12% from the full year 2005, and operating income was $3.5 billion, an increase of 33% from the full year 2005. Income from continuing operations for the full year of 2006 was $2.3 billion, or $2.16 per diluted share, compared to 2005 income from continuing operations of $2.3 billion, or $2.24 per diluted share, as significant tax benefits were recorded in 2005.
Net income in 2006 was $2.3 billion, or $2.23 per diluted share, compared to 2005 net income of $2.4 billion, or $2.27 per diluted share. Net income in 2006 included $76 million, or $0.07 per diluted share, in after-tax income from discontinued operations related primarily to the gain on the sale of KBR's Production Services Group. Income from discontinued operations in 2005 was $31 million, or $0.03 per diluted share, related primarily to KBR's Production Services Group operating results.
In the fourth quarter of 2006, income from continuing operations was $667 million, or $0.65 per diluted share. This compares to income from continuing operations of $1.1 billion, or $1.03 per diluted share, in the fourth quarter of 2005. The fourth quarter of 2005 included $540 million, or $0.51 per diluted share, of income related to a reduction in a deferred tax asset valuation allowance. Net income in the fourth quarter of 2006 was $658 million, or $0.64 per diluted share, compared to net income in the fourth quarter of 2005 of $1.1 billion, or $1.04 per diluted share.
Revenue in the fourth quarter of 2006 was $6.0 billion, up 8% from the fourth quarter of 2005. This increase was largely attributable to higher activity in the Energy Services Group (ESG), particularly in the United States and Europe/Africa/CIS, partially offset by lower revenue in KBR, primarily due to decreased activity on government services projects for the United States military.
Operating income was $1.0 billion in the fourth quarter of 2006 compared to $766 million in the fourth quarter of 2005. Operating income in the fourth quarter of 2006 was positively impacted by a $48 million gain on the sale of lift boats in West Africa and the North Sea. Operating income for the fourth quarter of 2005 included a $24 million gain related to a patent infringement case settlement.
"For Halliburton, 2006 was an exciting year as the oilfield experienced exceptional growth in energy services. The ESG benefited from strong global demand, resulting in record revenue, operating income, and operating income margins for 2006. Although we experienced weather-related activity decreases and holiday impacts in the United States during the fourth quarter, we expect demand for our services to remain strong throughout 2007. We will continue to invest in equipment and infrastructure, with a focus on international growth in areas such as the Middle East, Africa, and Asia," said Dave Lesar, chairman, president, and chief executive officer of Halliburton. "KBR had its Initial Public Offering last November and is off to a great start as a public company. We anticipate completing the separation of KBR from Halliburton within the next three months."
2006 Fourth Quarter Segment Results
Energy Services Group
ESG posted record revenue of $3.5 billion in the fourth quarter of 2006, a $661 million or 23% increase over the fourth quarter of 2005. ESG posted operating income of $959 million, up $281 million or 41% from the same period in the prior year. ESG's operating margin was 27.3% during the fourth quarter of 2006, a 350 basis point improvement from the fourth quarter of 2005. Included in the fourth quarter of 2006 operating results was the $48 million gain on sale of the lift boats. The fourth quarter of 2006 results also included $38 million for business interruption resulting from the 2005 Gulf of Mexico hurricanes, offset by activity declines in the western United States due to severe winter weather and holidays.
Production Optimization posted operating income in the fourth quarter of 2006 of $443 million, including the lift boat gains, an increase of $149 million or 51% over the fourth quarter of 2005. Production Enhancement services operating income grew 27%, driven by strong demand for well stimulation services, improved pricing, high equipment utilization in the United States, and increased activity in Asia. Results were partially offset by United States weather-related activity decreases and higher holiday impacts during the fourth quarter of 2006, and decreased activity in Canada. Completion Tools operating income improved 55% over the prior year fourth quarter, with improvements in all regions.
Fluid Systems operating income for the fourth quarter of 2006 was $209 million, a $52 million or 33% increase over the fourth quarter of 2005. Fourth quarter of 2006 results were positively impacted by insurance proceeds related to the 2005 Gulf of Mexico hurricanes, partially offset by increased start-up costs for new Eastern Hemisphere contracts. Cementing services operating income increased due to strength in the United States land, recovery of Gulf of Mexico, and increased rig activity in Africa.
Drilling and Formation Evaluation posted record operating income for the fourth quarter of 2006 of $230 million, a $69 million or 43% increase over the prior year fourth quarter. Operating income in the fourth quarter of 2005 included a $24 million gain related to a patent infringement case settlement. Sperry Drilling Services operating income increased 72% with improvement in all regions, led by increased activity in Europe, Africa, and the Middle East. Sperry's Geo-Pilot® and GeoTap® technologies continued to show solid revenue growth over the prior year quarter. Wireline and Perforating Services operating income increased 56% due to increased activity, pricing, and improved asset utilization in the United States, Latin America, Africa, and Asia Pacific. Security DBS Drill Bits operating income was positively impacted by increased sales in all regions, reflecting improved fixed cutter bit activity.
Digital and Consulting Solutions posted record operating income in the fourth quarter of 2006 of $77 million, an increase of $11 million or 17% compared to the prior year quarter, driven by strong international software sales and consulting services.
KBR revenue for the fourth quarter of 2006 was $2.5 billion compared to $2.7 billion in the fourth quarter of 2005. Operating income for the fourth quarter of 2006 was $120 million compared to operating income of $108 million in the prior year fourth quarter.
Energy and Chemicals posted operating income of $59 million in the fourth quarter of 2006 compared to $54 million in the fourth quarter of 2005. Significant contributors to fourth quarter of 2006 results were a gas-to-liquids project in Qatar, liquefied natural gas projects in Nigeria, Indonesia, and Yemen, and an ammonia plant in Egypt.
Government and Infrastructure operating income for the fourth quarter of 2006 was $61 million, compared to $54 million in the fourth quarter of 2005. The increase was attributable to higher income related to the DML shipyard, which was offset partially by a $12 million loss on an embassy project for the U.S. State Department in Macedonia.
Under the common stock repurchase program, the company repurchased 8.6 million shares at an average price of $32.69 per share, for approximately $280 million in the fourth quarter of 2006. Approximately 40 million shares at an average price of $32.93 per share have been repurchased since the commencement of the program in March 2006.
Technology and Significant Achievements
Energy Services Group new contract awards and technologies:
- Landmark announced a new visual cataloging and tapeless archiving solution designed to simplify and accelerate data archival and retrieval. The solution tightly integrates Landmark's industry-leading reporting tool Corporate Data Archiver(TM) software with the purpose built, software-driven EMC Centera(TM) content-addressed storage system to provide instant retrievability of archived data.
- Halliburton's Energy Services Group has been awarded a $59 million contract by Rosneft-YNG for the provision of hydraulic fracturing services on the Right Bank of the Priobskoye field in Siberia. The scope of work includes providing services for 327 wells. Halliburton will execute the project in 2007 from its base in Poikovo, Nefteyugansk.
- Halliburton's Energy Services Group has been awarded a multi-services contract, valued at approximately $100 million over three years, by TNK-BP for work in the Tyumen region of Russia. The contract also has the option for three additional one-year periods. The Energy Services Group will be providing drilling fluids, waste management services, cementing, drill bits, directional drilling, and logging-while-drilling services for the Uvat development, which is expected to begin in the second quarter of 2007.
- Halliburton's Drilling and Formation Evaluation segment has entered into a definitive agreement to acquire all intellectual property, current assets, and existing wireline services business associated with Calgary-based Ultraline Services Corporation, a division of Savanna Energy Services Corp. for approximately $177 million, subject to adjustments for working capital purposes.
- Sperry Drilling Services and IntelliServ Inc., a wholly owned subsidiary of Grant Prideco, have interfaced their technologies and successfully tested a system using The IntelliServ Network drill string telemetry to transfer data and information generated by downhole drilling and formation evaluation tools to the surface in real time, at rates up to 10,000 times faster than those available today. Halliburton and IntelliServ Inc. have entered into an agreement to globally market and deploy their respective technologies to joint customers.
- Halliburton's Production Optimization segment has been awarded a contract by Pemex valued at $73 million to provide stimulation services in the Bay of Campeche, Mexico. The stimulation services to be supplied by Halliburton are acidizing, acid fracturing, water control, and nitrogen services.
- KBR announced that it has closed its initial public offering of 32,016,000 shares of common stock at a price of $17.00 per share. The number of shares of common stock issued at closing included 4,176,000 shares for the underwriters' over-allotment option. KBR received approximately $508 million of proceeds from the offering, net of underwriting fees and estimated expenses.
Halliburton, founded in 1919, is one of the world's largest providers of products and services to the petroleum and energy industries. The company serves its customers with a broad range of products and services through its Energy Services Group and KBR.
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