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Halliburton’s Earnings Drivers in 3Q17

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Completion and Production segment performance

From 3Q16 to 3Q17, Halliburton’s (HAL) Completion and Production (or C&P) segment revenue rose 62.5%. Operating income for the C&P segment completely turned around in 3Q17 over 3Q16 with a 21x churn an operating income of $525 million. These improvements were due to higher contribution from an artificial lift acquisition, strong pressure pumping asset utilization, and better pricing in the US onshore business. Halliburton is 10.3% of the iShares US Oil Equipment & Services ETF (IEZ). IEZ has fallen 21% in the past year while HAL has fallen 12%.

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Drilling and Evaluation segment performance

From 3Q16 to 3Q17, the Drilling and Evaluation (or D&E) segment’s revenue rose ~15%. Increased drilling activity in the Middle East, North America, and Latin America led to higher revenues in 3Q17. The D&E segment’s operating income growth was more moderate, at 19%, in 3Q17 compared to 3Q16. This moderation was mainly due to lower activity across HAL’s Asia-Pacific operations.

The D&E segment registered only a 4% revenue rise on a quarter-over-quarter basis. HAL is also 0.17% of the SPDR S&P 500 ETF (SPY). The S&P 500 Index (SPX-INDEX) rose 19% in the past year.

Halliburton’s earnings drivers in 3Q17: Positives

  • higher utilization and better pricing in the US onshore business, which mainly benefited Halliburton’s pressure pumping business
  • increased well completion and pressure pumping activity in Canada
  • increased activity in multiple product services lines in Latin America
  • increased pressure drilling activity and pumping services in the Eastern Hemisphere
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Negative drivers for Halliburton

  • lower project management activity in Iraq
  • decreased activity and pricing across Southeast Asia
  • a decline in upstream activity in Angola

How did Halliburton do in 9M17?

In the first nine months of 2017, Halliburton’s revenues rose 24% over the first nine months of 2016. It was also able to turn around to recording a net profit in 2017. In 9M17, HAL’s net income was $361 million compared to $5.61 billion net loss in 9M16. In 9M16, HAL’s bottom line was heavily impacted by a merger-related payment to Baker Hughes.

Next, we’ll discuss Halliburton’s returns.

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