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Must-know: What's in store for oilfield service stocks this year?

Part 4
Must-know: What's in store for oilfield service stocks this year? (Part 4 of 8)

Important highlights from Halliburton’s 4Q13 earnings report

Halliburton’s earnings

On January 21, Halliburton (HAL) reported 4Q13 earnings. Highlights include the following.

Halliburton posted 4Q13 adjusted EPS of $0.93 compared to consensus estimates of $0.89 (excluding after-tax restructuring charges of $0.03 per diluted share). Adjusted EPS increased 12% sequentially from 3Q13 EPS of $0.83 (excluding after-tax restructuring charges of $0.04 per diluted share), and it increased 29% year-over-year from 4Q12 EPS of $0.49. Adjusted net income for 4Q13 was $798 million—up sequentially from adjusted net income of $745 million in 3Q13. Adjusted net income for 2013 was $2.8 billion, compared to $2.8 billion in 2012 ($3.15 per diluted share in 2013 versus $3.00 per diluted share in 2012).

2014.01.29 - HAL EPSEnlarge Graph

Revenue during 4Q13 totaled $7.6 billion, compared to consensus estimates of $7.6 billion. Revenue during the quarter increased 2% sequentially over 3Q13 revenue of $7.5 billion, and 5% year-over-year from 4Q12 revenue of $7.3 billion. Revenue in 2013 was $29.4 billion—an increase of 3% over 2012 revenue of $28.5 billion.

2014.01.29 - HAL RevenuesEnlarge Graph

Regarding specific geographies, HAL stated:

  1. Latin America remains challenging, with 4Q13 revenues and operating income flat with 3Q13.
  2. North America revenue declined 1%, and operating income declined 6%, given seasonal slowdowns and disruptions related to weather and holidays.
  3. Record 4Q13 revenues were largely driven by the Middle East and Asia as well as the Europe, Africa, and Commonwealth of Independent States (or CIS) regions, as the Eastern Hemisphere had revenue increases of 17% year-over-year and operating income increase of 23%.

Capex in 4Q13 was $859 million. Capex for full-year 2013 was $2.9 billion, a 41% decrease from 2012 levels of $2.1 billion. Free cash flow in 4Q13 was $1.0 billion. During 2013, HAL generated $1.5 billion of free cash flow, compared to free cash flow of $88 million over 2012.

During 2013, HAL repurchased ~$4.4 billion, or ~10% of outstanding shares, as well as increased the company’s dividend for a total increase of 67% over the dividend rate in 2012. Note that last November, Halliburton’s Board of Directors increased the quarterly dividend from $0.125 to $0.15 per share, a 20% increase. Management commented, “These actions reflect our continued confidence in the strength of our global business outlook.”

On the company’s earnings call, Halliburton stated that it had previously stated that it would grow its percentage of cash available for distribution to shareholders up to ~35% of operating cash flows over the next few years, and it affirmed that given 2013’s results, it was on track to meet this goal. The company intends for its dividend payout going forward to be at least 15% to 20% of net income. Plus, Halliburton’s Board of Directors has authorized ~$1.7 billion in share repurchases.

Debt at the end of the year was $7.8 billion, compared to $7.8 billion at September 30, and $4.8 billion at year end 2012. Total cash was $2.4 billion at the end of the year, compared to $1.5 billion at 3Q13, and $2.5 billion at year end 2012. Total debt-to-cap at year end was 27%, compared to 28% at 3Q13, and 18% at year end 2012.

To read about Halliburton’s guidance for the year, please continue to the next section of this series.

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