Halliburton Sees Good Results in 2Q07
Halliburton (NYSE:HAL) announced that net income for the second quarter of 2007 was $1.5 billion, or $1.62 per diluted share, which includes a net gain of $933 million from the separation of KBR, Inc. recorded in discontinued operations. This compares to net income of $591 million, or $0.55 per diluted share, in the second quarter of 2006. Income from continuing operations in the second quarter of 2007 was $595 million, or $0.63 per diluted share. This compares to income from continuing operations of $498 million, or $0.47 per diluted share, in the second quarter of 2006.
Halliburton's consolidated revenue in the second quarter of 2007 was $3.7 billion, up 20% from the second quarter of 2006. This increase was attributable to increased worldwide activity, particularly in the Eastern Hemisphere.
Consolidated operating income was $893 million in the second quarter of 2007 compared to $760 million in the second quarter of 2006. The increase in operating income was generated primarily by increased customer activity and new international contracts. Also included in second quarter of 2007 operating income was a $49 million gain before tax ($0.03 after tax per diluted share) from the sale of an investment.
"We are pleased with this quarter's results in the Eastern Hemisphere, where we posted 14% revenue and 21% operating income growth as compared to the first quarter of 2007. Our operating income margins in the Eastern Hemisphere increased to nearly 22%. Our commitment to invest in high-growth Eastern Hemisphere markets is evident in our results," said Dave Lesar, chairman, president, and chief executive officer. "In addition, we have seen a strong recovery in the United States well stimulation market from the slowdown we experienced last winter. In fact, in June we experienced the highest monthly United States well stimulation revenue in our history. Our Canadian operations were impacted by the significant decline in activity and the spring breakup season. Our Drilling and Formation Evaluation segment experienced a $21 million decline in operating income from the first quarter due to Canadian operations."
2007 Second Quarter Results
Production Optimization operating income in the second quarter of 2007 was $403 million, an increase of $35 million or 10% from the second quarter of 2006. Production Enhancement operating income declined 2%, primarily from reduced activity in Asia Pacific and Eurasia, while North America was stable. Completion Tools operating income grew 58%, with non-North American operating income increasing more than 64%. The Completion Tools operating income increase was led by the Middle East, Malaysia, Brazil, and Mexico.
Fluid Systems operating income in the second quarter of 2007 was $200 million, consistent with the results in the second quarter of 2006. Cementing operating income increased 9% compared to the prior year second quarter with increased activity in all regions. Baroid Fluid Services operating income declined 22%, primarily from reduced activity in Latin America and the recording of an additional reserve related to an environmental matter.
Drilling and Formation Evaluation operating income in the second quarter of 2007 was $235 million, an increase of $41 million or 21% over the prior year second quarter. Sperry Drilling Services operating income increased 42%, with a 75% increase in the Eastern Hemisphere, benefiting from increased activity and the introduction of new technology. Wireline and Perforating Services operating income decreased 7%, primarily due to the Canadian breakup impact on the expanded business in Canada. Security DBS Drill Bits operating income improved 42% over the prior year second quarter, reflecting increased rig activity and fixed cutter bit sales in the United States and the North Sea.
Digital and Consulting Solutions operating income in the second quarter of 2007 was $117 million, up $66 million, or 129%, from the prior year quarter. The second quarter of 2007 operating income included a gain of $49 million from the sale of an investment. Landmark's year over year operating income grew 49% with increases in all four regions on improved sales of software and consulting services.
Technology and Significant Achievements
Halliburton made a number of advances in technology and growth.
- Halliburton has entered into a definitive agreement with the shareholders of OOO Burservice to purchase the entire share capital of this Russian directional drilling company. This agreement is subject to regulatory approvals.
- Halliburton's Drilling and Formation Evaluation segment has acquired the intellectual property, assets and existing business associated with Vector Magnetics LLC's active ranging technology for Steam-Assisted Gravity Drainage (SAGD) applications.
- Halliburton has been awarded a contract to provide completion products and services to a group of energy companies for operations throughout Malaysia for a term of five years. The group includes PETRONAS Carigali, Exxon, Shell and Newfield. Valued at $200 million, the contract has the potential to extend beyond the five-year term. This project will be aided by the addition of Halliburton's new manufacturing facility, which is under construction in Malaysia.
- Halliburton has been awarded a major contract by Reliance Industries Limited for the provision of deepwater sand control completion technology in the Dhirubhai-I and Dhirubhai-3 fields offshore India. The scope of the work includes supplying products and installation services for upper completion for 18 wells and open-hole gravel packs for 15 wells.
- Landmark and Statoil have signed a project development agreement to jointly create a geoscience interpretation software system for Statoil's basin- and prospect-scale exploration activities.
- Halliburton announced the opening of a new training center in Tyumen, Russia, in cooperation with the Tyumen State Oil and Gas University. Designed to further develop the professional and technical skills of the company's employees in Eurasia, the Tyumen training center is Halliburton's twelfth such center worldwide and the first in Russia.
- Halliburton's board of directors increased the authorization of Halliburton's common share repurchase program by an additional $2 billion. The $2 billion increase brings the aggregate authorization to $5 billion, with approximately $2.8 billion currently remaining. The share repurchase program does not require Halliburton to acquire any specific number of shares and may be terminated or suspended at any time. This additional authorization may be used for open market share purchases or to settle the conversion premium over the face amount of the company's 3 1/8% convertible senior notes, should they be redeemed. During the second quarter of 2007, Halliburton purchased 25,746,000 shares at an average price of $35.37 at a total cost of $911 million.
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