24 Apr

Halliburton’s Earnings Drivers in 1Q18

WRITTEN BY Alex Chamberlin

Completion and Production segment

Halliburton (HAL) released its 1Q18 financial results on April 23. For more about HAL’s earnings, read Market Realist’s What Worked for Halliburton’s 1Q18 Earnings. Between 1Q17 and 1Q18, Halliburton’s C&P (Completion and Production) revenue rose ~46%. The segment’s operating income turned around, rising 240% to $500 million due to increased US onshore activity, increased well completion services in Europe, Africa, and the Commonwealth of Independent States, and higher stimulation activity in the Middle East. C&P revenue was flat between 4Q17 and 1Q18.

Halliburton comprises 10.6% of the iShares US Oil Equipment & Services ETF (IEZ), which tracks an index composed of US equities in the oil equipment and service sector. IEZ has fallen 6% in the past year, while HAL has risen 11%.Halliburton’s Earnings Drivers in 1Q18

Drilling and Evaluation segment

Between 1Q17 and 1Q18, Halliburton’s D&E (Drilling and Evaluation) revenue rose ~15% due to increased drilling activity in North America and the Eastern Hemisphere, specifically in the North Sea. Year-over-year, the D&E segment’s operating income grew 54%. However, D&E revenue fell 10% quarter-over-quarter in 1Q18, primarily due to activity decline across multiple product service lines in Latin America.

Positive drivers for Halliburton

  • increased pressure pumping, drilling, and artificial lift activity in US onshore operations
  • increased drilling activity and pressure pumping services in the Eastern Hemisphere
  • increased pressure pumping activity in Argentina
  • higher drilling activity and well completion services in the North Sea
  • strong drilling activity in Indonesia
  • increased drilling and stimulation activity in the Middle East

Negative drivers for Halliburton

  • reduced drilling activity in Latin America
  • lower completion tool sales and project management activity in the Middle East
  • a decline in upstream activity in Angola

Next, we’ll discuss Halliburton’s returns.

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