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Halliburton CEO Sees Big Opportunities amid Not-so-Small Fiscal 2016 Challenges

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Jan. 26 2016, Updated 12:28 p.m. ET

Breaking down Halliburton’s 4Q15 performance by segment

From fiscal 4Q14 to fiscal 4Q15, the revenues for Halliburton Company’s (HAL) D&E (drilling and evaluation) segment declined by 32%. The D&E segment’s operating income decreased by 16% in fiscal 4Q15 over fiscal 4Q14, primarily due to the decreased drilling activity and logging services in the US, Latin America, and the Europe, Africa, and CIS regions. There were also project delays in the Middle East and Asia. Halliburton makes up 12.7% of the VanEck Vectors Oil Services ETF (OIH).

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Between fiscal 4Q14 to fiscal 4Q15, revenues for Halliburton’s C&P (completion and production) segment declined by 48%, primarily due to a steep segmental revenue drop in North America. In fiscal 4Q15, all of Halliburton’s geographic operations witnessed lower revenues in the C&P segment, and the C&P segment’s operating income also crashed, declining by a sharp 86% in fiscal 4Q15 over fiscal 4Q14. This was primarily due to segmental operating losses in Halliburton’s North America operations.

Compared to the 93% decline in operating income that Halliburton saw in fiscal 4Q15 over 4Q14, Weatherford International’s (WFT) fiscal 3Q15 operating income slumped by 96% over fiscal 3Q14. Weatherford’s market capitalization stands at $4.4 billion, compared to Halliburton’s $25.1 billion.

Factors that affected Halliburton’s fiscal 4Q15 performance

The following factors played a noticeable hand in Halliburton’s fiscal 4Q15 performance:

  • Lower prices for Halliburton’s services in the US
  • Lower drilling activity levels in Saudi Arabia and Iraq
  • Activity reductions in the North Sea that led to lower revenues and earnings from Europe
  • Higher sales in China and increased activity in Kuwait, Oman, and Mexico

Understanding the recent warning from Halliburton’s CEO

Halliburton’s Chairman and Chief Executive Officer, Dave Lesar, expressed caution about the challenges lying ahead for the company in fiscal 2016, although he also expects strong growth opportunities for Halliburton.

In the fiscal 4Q15 press release, Lesar said that “2016 is expected to be another challenging year for the industry” but that the company believes its “customers will remain focused on cost per barrel optimization and gaining higher levels of efficiency, both of which bode very well for Halliburton.”

Now let’s move to Halliburton’s fiscal 4Q15 returns.

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