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What Were Halliburton’s Earnings Drivers in 4Q17?

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Completion and Production segment

From 4Q16 to 4Q17, Halliburton’s (HAL) C&P (Completion and Production) segment’s revenue increased ~68%. In terms of the operating income, the C&P segment completely turned around in 4Q17—compared to 4Q16. It rose 5.5x and had an operating income of $552 million. It rose due to higher pressure pumping activity and better pricing in the US onshore business. Halliburton accounts for 11.3% of the iShares US Oil Equipment & Services ETF (IEZ). IEZ fell 12% in the past year, while Halliburton increased 3% during this period.

The C&P segment registered an 8% revenue rise in 4Q17—compared to 3Q17. Higher completion tool sales in the Gulf of Mexico, higher software sales in Latin America, and increased stimulation activity in the Eastern Hemisphere benefited the C&P segment’s growth.

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Drilling and Evaluation segment 

From 4Q16 to 4Q17, the D&E (Drilling and Evaluation) segment’s revenue increased ~22%. Increased drilling activity in the Middle East and North America and higher software sales and services in Latin America led to higher revenues in 4Q17. The D&E segment’s operating income growth was more moderate (17%) in 4Q17—compared to 4Q16.

On a quarter-over-quarter basis, the D&E segment’s operating income growth was more prominent (62% rise over 3Q17). Halliburton accounts for 0.20% of the SPDR S&P 500 ETF (SPY). The S&P 500 Index (SPX-INDEX) increased 25% in the past year.

Positive earnings drivers

  • increased utilization and better pricing for Halliburton’s products and services in the US onshore business, which primarily benefited Halliburton’s pressure pumping business
  • higher drilling activity and completion tool sales in the Gulf of Mexico
  • increased activity in multiple product services lines in Latin America
  • increased drilling and stimulation activity in the Eastern Hemisphere
  • higher drilling activity in the North Sea
  • increased drilling and stimulation activity in the Middle East

Negative earnings drivers

  • reduced drilling activity in Venezuela
  • reduced completion tool sales in Nigeria
  • a decline in the upstream activity in Angola
  • higher costs and seasonality in the US business

Next, we’ll discuss Halliburton’s returns.

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