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Why Halliburton’s Drilling and Evaluation segment did poorly in 4Q14

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Dec. 4 2020, Updated 10:51 a.m. ET

Why revenues increased in the Drilling and Evaluation segment

We discussed Halliburton’s (HAL) Completion and Production segment’s operating performance in the previous part of this series. In this article, we’ll discuss its Drilling and Evaluation segment’s 4Q14 performance.

In 4Q14, revenues in the Drilling and Evaluation segment increased 6.5% to $3.29 billion from $3.09 billion recorded in 4Q13. The majority of revenue growth came from HAL’s Middle East/Asia operations, partially offset by lower activities in the Europe/Africa/CIS region. In North America, the segment witnessed a 5% growth over 4Q13.

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Why the operating margin squeezed in the Drilling segment

As you can see in the above graph, Halliburton’s Drilling and Evaluation segment’s operating income and margin fell flat from 4Q13 to 4Q14. Operating income decreased 18% to $408 million. The operating income margin decreased to 12.3% in 4Q14 from 16.1% in the prior year’s quarter.

The following are the negative factors affecting these results:

  • decreased drilling activity in the US land market and Canada
  • reduced testing profitability in Brazil and a decline in consulting services in Mexico
  • lower activity and currency weakness in Russia and Norway

The following positively affected income and margin during 4Q14:

  • higher software and product sales in China, Venezuela, Colombia, and Mexico
  • increased drilling activity in Saudi Arabia

Halliburton Company (HAL) is 11.5% of the VanEck Vectors Oil Services ETF (OIH) and 2.6% of the Energy Select Sector SPDR (XLE). Other companies in this industry that are components of OIH include Schlumberger (SLB) and Weatherford International Plc. (WFT).

Investors should read Market Realist’s HAL’s Drilling and Evaluation segment’s operating income increased to know the segment’s historical performance.

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

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