Service & Supply | Oilfield Services | Second Quarter (2Q) Update | Financial Results | Capital Markets

HAL 2Q: North America Revenue Up 26%; Demand to Remain Strong in 2023

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   |    Tuesday,July 19,2022

Halliburton Co. reported its second quarter 2022 results.

Quarterly Revenue by Region

North America revenue in the second quarter of 2022 was $2.4 billion, a 26% increase when compared to the first quarter of 2022.

• This increase was primarily driven by increased pressure pumping services and artificial lift activity in North America land, increased fluid services, wireline activity, well intervention services, and higher completion tool sales across the region, and increased cementing activity in the Gulf of Mexico.

2Q22 Conference Call Highlights

• US Land Rig Activty "Steps Up" in 2Q; Halliburton Remains Sold Out for 2H22: "The second quarter saw another step-up in both US land rig activity and stages completed. With the first quarter sand supply interruptions resolved, frac activity steadily increased throughout the quarter. As we look at the second half of 2022, Halliburton remains sold out. As for the overall market, I believe it will be all but sold out for the second half of the year due to service company discipline, long lead times for new fleets and supply chain bottlenecks for consumables. We expect public companies will steadily execute on their drilling and completion programs."

• Private E&Ps Fueling Activity Growth, Spending: "Private E&Ps capitalized on available rigs and equipment in the first half of the year and will likely maintain a measured level of activity growth for the rest of the year. We continue to believe that North America operator spending growth will eclipse 35% this year."
  

• 2023 Market to Remain Tight: "Our customer conversations have already pivoted to 2023 plans well in advance of the typical time frame. These conversations make it clear that equipment capacity for 2023 is tight."

• Long Term Outlook "More Bullish": "Our -- my long-term outlook is unchanged except that it's biased upwards. In fact, I'm more bullish than I was before. I want to be careful and not get in the business of trying to update that every quarter. But our outlook, my outlook on sort of the trajectory of the market today, the macro in terms of supply shortage, short oil in the world. And I think really importantly, not only is the price of the commodity, always important. Energy security has moved back central -- front and center for a lot of countries and continents."

2Q22 Results Overview

The company reported net income of $109 million, or $0.12 per diluted share, for the second quarter of 2022. This compares to net income for the first quarter of 2022 of $263 million, or $0.29 per diluted share. Adjusted net income for the second quarter of 2022, excluding impairments and other charges, was $442 million, or $0.49 per diluted share. This compares to adjusted net income for the first quarter of 2022, excluding impairments and other charges and a loss on the early extinguishment of debt, of $314 million, or $0.35 per diluted share. Halliburton's total revenue for the second quarter of 2022 was $5.1 billion compared to revenue of $4.3 billion in the first quarter of 2022. Reported operating income was $374 million in the second quarter of 2022 compared to reported operating income of $511 million in the first quarter of 2022. Excluding impairments and other charges, adjusted operating income was $718 million in the second quarter of 2022 compared to adjusted operating income of $533 million for the first quarter of 2022.

CEO Jeff Miller commented: “Our strong second quarter performance demonstrates that our strategy is working well, and Halliburton’s strategic priorities are driving value. Total company revenue grew 18% sequentially, as activity increased simultaneously in North America and international markets, and adjusted operating income grew 35% with strong margin performance in both divisions.

“I expect the international markets will experience multiple years of growth, and I am confident that Halliburton is positioned to benefit more from this multi-year upcycle than ever before. We have a leading technology portfolio, the right geographic presence, and new service line opportunities that align perfectly with our strategy to deliver profitable international growth.

“In North America, I expect Halliburton to uniquely maximize value in this strong, steadily growing, and all but sold-out market. Pricing gains across all product service lines supported significant sequential margin expansion in the second quarter.

“Halliburton’s competitive position is unique among our peers. We have the scale and technology to benefit meaningfully and differentially from the international market expansion, and we are the leader in the extremely busy North American market. I’m excited about the future of Halliburton and expect us to deliver profitable growth, margin expansion, strong free cash flow, and industry-leading returns in this upcycle,” concluded Miller.

Operating Segments

Completion and Production

Completion and Production revenue in the second quarter of 2022 was $2.9 billion, an increase of $558 million, or 24%, when compared to the first quarter of 2022, while operating income was $499 million, an increase of $203 million, or 69%. These results were driven by increased pressure pumping services in the Western Hemisphere, higher completion tool sales globally, increased artificial lift activity in North America land and Kuwait, and improved cementing activity in the Eastern Hemisphere. These improvements were partially offset by lower stimulation activity in Oman and decreased artificial lift activity in Latin America.

Drilling and Evaluation

Drilling and Evaluation revenue in the second quarter of 2022 was $2.2 billion, an increase of $232 million, or 12%, when compared to the first quarter of 2022, while operating income was $286 million, a decrease of $8 million, or 3%. This revenue increase was due to increased fluid services and wireline activity globally, higher project management activity in Latin America and the Middle East, and increased drilling services in Latin America. Operating income decrease was driven by seasonally lower software sales globally and decreased drilling services in Brazil.

Geographic Regions

North America

North America revenue in the second quarter of 2022 was $2.4 billion, a 26% increase when compared to the first quarter of 2022. This increase was primarily driven by increased pressure pumping services and artificial lift activity in North America land, increased fluid services, wireline activity, well intervention services, and higher completion tool sales across the region, and increased cementing activity in the Gulf of Mexico. These increases were partially offset by seasonally lower software sales across the region and lower stimulation activity in the Gulf of Mexico.

International

International revenue in the second quarter of 2022 was $2.6 billion, a 12% increase when compared to the first quarter of 2022. This improvement was primarily driven by increased activity across multiple product service lines in the Middle East, Argentina, Colombia, Australia, the Eastern Mediterranean, the United Kingdom, and Brunei, improved wireline activity and cementing in Europe/Africa/CIS, increased pressure pumping services in Mexico, and increased fluid services in the Caribbean. Partially offsetting these increases were seasonally lower software sales across international regions, as well as the impact of the wind down of our business in Russia.

Latin America revenue in the second quarter of 2022 was $758 million, a 16% increase sequentially, due to improved activity across multiple product service lines in Argentina and Colombia, increased stimulation and well construction services in Mexico, increased drilling-related services in the Caribbean, improved stimulation activity in Brazil, and higher project management activity in Ecuador. Partially offsetting these increases were seasonally lower software sales across the region, decreased drilling-related services in Brazil, and lower artificial lift activity in Argentina and Ecuador.

Europe/Africa/CIS revenue in the second quarter of 2022 was $718 million, a 6% increase sequentially. This improvement was primarily driven by higher activity across multiple product service lines in Angola and the Eastern Mediterranean, improved cementing activity, pipeline services, wireline activity, and testing services across the region, as well as increased fluid services and completion tool sales in the United Kingdom. These increases were partially offset by seasonally lower software sales across the region, the impact of the wind down of our business in Russia, and decreased drilling services in Norway.

Middle East/Asia revenue in the second quarter of 2022 was $1.2 billion, a 14% increase sequentially, primarily resulting from higher activity across multiple product service lines in the Middle East, Australia, and Brunei. These increases were partially offset by reduced stimulation activity in Oman and seasonally lower software sales across the region.

Other Financial Items

• Halliburton recorded a pre-tax charge of $344 million in the second quarter of 2022 as a result of our decision to exit Russia due to sanctions. This charge was included in "Impairments and other charges" on the Company's condensed consolidated statement of operations for the three months ended June 30, 2022.

Selective Technology & Highlights

• Halliburton announced that it will co-develop next generation field development planning software with Aker BP, a Norwegian oil and gas exploration and production company. The collaboration delivers a new cloud application – Field Development Planning (FDP) – from Halliburton. It also expands the scope of the current Digital Well Program®, a DecisionSpace® 365 cloud application, built on an open architecture to provide integrated well planning and design to increase collaboration and connectivity across drilling activities.

• Halliburton introduced the new Hedron™ platform of fixed cutter polycrystalline diamond compact (PDC) drill bits. These drill bits combine the latest technology with an industry-leading customization process to deliver high-performance, application-specific designs for customers. The culmination of multiple technologies, Hedron drill bits are the toughest and smartest on the market.