Overview: Halliburton’s Drilling and Evaluation segment 3Q14 earnings

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Why revenues increased in the Drilling and Evaluation segment

Halliburton’s (HAL) Drilling and Evaluation segment offers drill bits and services, wireline and perforating services, and testing and subsea services comprising acquisition and analysis of reservoir information and optimization solutions.

This segment provides drilling fluid systems, integrated exploration, drilling, production software, and related professional and data management services. In addition, the segment offers oilfield project management and integrated solutions.

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In 3Q14, revenues in Halliburton’s (HAL) Drilling and Evaluation segment increased 10.4% to $3.28 billion, from $2.97 billion recorded in 3Q13. The majority of the revenue growth came from HAL’s Middle East operations. Europe/Africa/CIS was driven primarily by higher drilling and consulting activity.

However, a decline in activity across the majority of HAL’s product service lines in Mexico and Ecuador offset the growth. In Latin America, revenues increased the least, 3.4% during the quarter compared to the year-ago quarter.

Drilling Segment Revenues

Why operating income and margin fell flat in the Drilling segment

Operating income and margin fell flat from 3Q13 to 3Q14. In fact, the operating income margin decreased to 13.7% in 3Q14 from 15.1% in the prior-year quarter.

Negative factors affecting results were 16% decrease in operating income from North America due to lower demand for Halliburton’s (HAL) product service lines. Also, demand was lower in Mexico.

Positively affecting income and margin during 3Q14 were increased drilling and fluid activity in the Eastern Hemisphere, particularly in Europe/Africa/CIS, and also due to higher product service lines in Brazil and higher logging activity in Venezuela.

Drilling segment operating income and margin

Key exchange-traded funds (or ETFs)

Halliburton (HAL) is a component of the VanEck Vectors Oil Services (OIH) exchange-traded fund (or ETF) and Energy Select Sector SPDR (XLE). Other companies in this industry that are components of OIH include Schlumberger (SLB) and Weatherford International Plc (WFT). Read our article Key highlights: Schlumberger drilling group’s 3Q14 performance here.

Until now, we’ve critically analyzed Halliburton’s past performance. But will it continue to perform well in the near future? How does it expect to hold the positive momentum? We’ll explore that idea in the next part of the series.

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