Will Halliburton renew its focus on North America?
Jeff Miller, Halliburton’s (HAL) CEO, considers North America one of HAL’s key growth engines in 2018. In the first quarter earnings conference call, he said, “Today, all eyes are on North America as it continues to play a larger role as a global producer. Activity in the U.S. remains resilient as our customers have a large portfolio of economically viable projects in today’s commodity price environment. We expect our customers to remain busy through the rest of 2018 creating significant demand for our services.”
How will Halliburton’s North American business perform?
Halliburton’s management expects the pressure pumping market to remain undersupplied in 2018. Miller said, “The combination of steady rig count growth and completions intensity is improving demand across all of our product service lines. In addition, we believe the pressure pumping market is undersupplied today and will remain tight for the rest of 2018. Despite the incremental horsepower coming into the market, I believe this undersupply will persist as wear and tear continues to degrade existing equipment.”
Tailwinds for Halliburton in 2018
- steadily increasing rig count
- higher completion intensity stoking demand across all its product service lines
- enhanced tender activity in its international operations
Concerns for Halliburton
Despite the above positive growth drivers, pricing pressure due to oversupply in the oilfield equipment and services industry may continue to weigh on its margins. In addition, the US rail and trucking industries may continue to cause bottlenecks for the energy industry’s growth.
Halliburton makes up 9.7% of the iShares US Oil Equipment & Services ETF (IEZ). IEZ tracks an index composed of US equities in the oil equipment and services sector. It rose 3.2% in the past year compared to a 4% rise for HAL stock.
In the past year, the SPDR S&P Oil & Gas Equipment & Services ETF (XES) has risen 4%. Factors such as rig count, upstream activity, and transport capacity bottlenecks typically affect the entire oilfield equipment and services industry and ETFs.
Next, let’s take a look at Halliburton’s revenue and earnings.