Overview: Halliburton’s drilling and evaluation segment

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Aug. 7 2014, Updated 5:00 p.m. ET

Halliburton’s drilling and evaluation segment

Halliburton Company’s (HAL) drilling and evaluation segment offers drill bits and services, wireline and perforating services and testing, and subsea services that comprise acquisitions and analyses of reservoir information and optimization solutions.

This segment also provides

  • drilling fluid systems
  • integrated exploration
  • drilling
  • production software and related professional and data management services
  • oilfield project management and integrated solutions.

Why revenues increased in the drilling and evaluation segment

In the second quarter of 2014 (or 2Q14), revenues in the drilling and evaluation segment increased 3.6% from $2.9 billion recorded in 2Q13 to ~$3.1 billion. The majority of the revenue growth came from HAL’s North American and Middle Eastern operations, primarily driven by higher wireline and fluid services.

The Canadian spring breakup and lower activity in Mexico offset the growth. In Latin America, revenues went down by 9.2% during the quarter, compared to the same quarter a year ago.

Why margins did not change much in the drilling segment

Operating income and operating income margin changed little from 2Q13 to 2Q14. In fact, operating income margin went down to 13.4% in 2Q14 from 13.9% in last year’s quarter.

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The flat sales and earnings number resulted from the mixed activities across the globe. Lower software sales in the U.S., the adverse effect of Canadian spring breakup, lower drilling activity in Mexico and Brazil, and lower drilling activity in the United Kingdom and some other parts of Europe contributed to the fall in margin.

Partially offsetting these were the positive developments from

  • higher logging and fluid services in the U.S.
  • higher wireline activity in Venezuela
  • improved drilling in Norway, Angola in Africa, and Saudi Arabia
  • higher direct sales in China.

Key ETFs

HAL is a component of the VanEck Vectors Oil Services ETF (OIH) and Energy Select Sector SPDR Fund (XLE). Other companies in this industry that are components of OIH include Weatherford International plc (WFT) and National Oilwell Varco, Inc. (NOV).

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