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Halliburton’s Management Discusses the Company’s Outlook

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Jan. 20 2016, Updated 8:36 p.m. ET

Halliburton’s management’s outlook for fiscal 3Q15

According to Halliburton (HAL), its fiscal 4Q15 North American operations may continue to be “challenging and difficult to predict” because upstream operators’ borrowing capacity has decreased. In the company’s fiscal 3Q15 conference call held on October 19, 2015, Halliburton’s senior vice president Christian Garcia said that “in North America, the prospects of reduced borrowing capacity for operators and a prolonged holiday season make the fourth quarter challenging and difficult to predict.”

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Halliburton’s management outlook

In the fiscal 2Q15 conference call, Halliburton’s chairman and chief executive officer Dave Lesar observed that while Halliburton’s negotiated rates for services with upstream companies continue to decline, upstream companies’ drilling activities could fall more in the coming quarters. He said that “price erosion continued in the second quarter and is likely to remain fluid in the near term. We anticipate margin compression in the third quarter, but believe it will be driven more by the full impact of pricing declines that we gave up in the second quarter and from lower activity levels more than continued price erosion.”

Earlier, in the fiscal 1Q15 conference call, Jeffrey Miller, Halliburton’s president, stated that “as we discussed last quarter, we anticipate headwinds across all of our international regions this year with full-year international spending reflecting a mid-teens reduction.”

What does Halliburton’s share price movement tell us?

In the last year, Halliburton’s share price went as high as ~$49 in April 2015. However, it started sliding in May 2015. Quarter-over-quarter, Halliburton’s revenues and net income fall moderated in fiscal 3Q15, as announced in October 2015. Since its fiscal 3Q15 earnings announcement, Halliburton’s share price has fallen 19%. Subsequently, Halliburton’s pending merger with Baker Hughes (BHI) ran into deeper trouble in mid-January when the European Commission said it would open an in-depth probe into the merger. Halliburton makes up 2.9% of the Energy Select Sector SPDR ETF (XLE).

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