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Analyzing Halliburton’s Strategies in 3Q16

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Halliburton’s segment wise performance

From 2Q15 to 2Q16, Halliburton’s (HAL) D&E (Drilling and Evaluation) segment’s revenue fell 30%. Its operating income in the D&E segment fell 61% in 2Q16 compared to 2Q15—particularly due to less drilling activity in the US and Brazil. Halliburton accounts for 0.42% of the iShares S&P 500 ETF (IVE). Compared to Halliburton’s 35% revenue fall in 2Q16 over 2Q15, McDermott International’s (MDR) revenue fell 32.5% during the same period.

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From 2Q15 to 2Q16, Halliburton’s C&P (Completion and Production) segment’s revenue fell ~39% due to a steep fall in the segment revenue in North America. The C&P segment’s operating income also fell. It switched to -$32 million in 2Q16 compared to 2Q15. The fall was primarily due to segment operating loss in Halliburton’s North America pressure pumping operations. An increase in Halliburton’s fluid services in the North Sea partially mitigated the negative effects.

Halliburton’s strategies

  • Equipment idling – Management thinks that it can spring into action by reactivating idled equipment once the energy market rebounds.
  • Cost structure change – Through headcount reduction and facility consolidation, Halliburton aims to save $1 billion by 2017.
  • Increased utilization – It helps upstream customers produce at a lower cost per barrel of oil equivalent.
  • Pricing recovery – Halliburton constantly looks for opportunities to administer cost-related pricing and surcharging.

Next, we’ll discuss how management’s outlook transpired in the past quarters.

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