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Is Halliburton Expecting a Recovery in 2Q16?

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Halliburton’s revenue growth

Halliburton’s (HAL) revenues have been in a downtrend from 1Q15 through 1Q16. From 1Q15 to 1Q16, Halliburton’s Drilling and Evaluation (or D&E) segment revenue fell 33% due primarily to a decline in activity and pricing in North America pressure pumping. From 1Q15 to 1Q16, the Completion and Production (or C&P) segment revenue fell 45% due primarily to a steep revenue drop in North America.

In comparison, McDermott International’s (MDR) 1Q16 revenues rose 32% compared to last year. MDR is HAL’s smaller market cap peer. HAL makes up 0.06% of the iShares Core Growth Allocation ETF (AOR).

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Factors that affected Halliburton’s performance

  • lower prices for HAL’s services in the US
  • lower drilling activity levels in North America
  • lower pricing for HAL’s Completion and Production segment products in Angola, Australia, and the North Sea

A reduction of downtime in HAL’s international operations due to improvement in safety metrics partially mitigated the negative effects we mentioned above.

Is Halliburton expecting a recovery in 2Q16?

Halliburton’s management expects the US rig count to bottom out in 2Q16 before its recovery begins. According to the management, HAL’s North America operations have been resilient compared to the rig count crash there. Regarding this, the CEO commented in the 1Q16 press release, “we believe we will see the landing point for the U.S. rig count during the second quarter. Once we see stability in the rig count, our cost cutting measures will start to catch up. Previous downturns indicate that there is typically at least a one quarter lag after the rig count flattens before we see our margins begin to improve.”

Next, we’ll discuss HAL’s management outlook in the past few quarters.

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