Service & Supply | Oilfield Services | Frac Markets - Pressure Pumping
Halliburton Expects Continued High Margins for Pressure Pumping in North America
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Halliburton has announced that income from continuing operations for the first quarter of 2014 was $623 million, or $0.73 per diluted share.
Dave Lesar, chairman, president and chief executive officer, said: "I am pleased with total company revenue of $7.3 billion, which was a record first quarter for Halliburton.
Operating income of $970 million was 8% higher than adjusted operating income in the first quarter of 2013, and was the result of our double-digit growth in the Eastern Hemisphere.
In the Eastern Hemisphere, we continue to successfully execute our growth strategy. Relative to the first quarter of 2013, we grew revenue by 11% and operating income by 16%. We continue to forecast that full-year Eastern Hemisphere revenue growth will be in the low double digits, and average full year margins will be in the upper teens.
In the Middle East/Asia region, compared to the first quarter of the prior year, both revenue and operating income increased by 13%. Saudi Arabia led the improvement with growth across all product lines due to an increase in integrated project activity along with an overall higher rig count that is driving increased services.
In Europe/Africa/CIS, relative to the first quarter of 2013, we saw revenue and operating income increase 9% and 21%, respectively. The improvement was led by higher completion tools sales and cementing activity throughout the region, and increased drilling and open hole wireline activity in Angola.
In Latin America, revenue and operating income declined by 9% and 8%, respectively, compared to the same quarter last year, primarily due to a decline in drilling-related activity in Brazil and activity reductions in Mexico. For the full year, we expect Latin America revenue and operating income to be in line with 2013 levels.
In North America, revenue increased 5% and operating income was flat compared to the first quarter of 2013. Results were negatively impacted by lower pressure pumping pricing and transitory issues related to weather disruption and higher logistics costs. We are optimistic about the potential for increased activity levels in the second half of the year, and expect North America margins to expand over the remainder of 2014. Service intensity levels are expanding across the United States, where we continue to see a trend to longer laterals, increased stage density, and rising volumes per stage. We continue to expect North America margins to approach 20% before the end of the year.
Our strategy is working well and we intend to stay the course. I am optimistic about our ability to grow our North America revenue and margins, and to realize industry-leading revenue and margin growth in our international business, resulting in solid EPS growth and significantly higher cash generation. We expect earnings per share to grow approximately 25% in the second quarter, with further increases to follow. We remain focused on generating superior financial performance and providing industry-leading shareholder returns, as evidenced by our $500 million share repurchase this quarter."
2014 First Quarter Results
Completion and Production
Completion and Production (C&P) revenue in the first quarter of 2014 was $4.4 billion, an increase of $320 million, or 8%, from the first quarter of 2013. This increase was primarily driven by stronger stimulation activity in the United States land market, as well as higher completion tools sales in all regions.
C&P operating income in the first quarter of 2014 was $661 million, an increase of $46 million, or 7%, from the first quarter of 2013. North America C&P operating income, improved by $14 million, or 3%, compared to the first quarter of 2013, due to increased stimulation activity in the United States land market, partially offset by pricing pressures associated with pressure pumping services. Latin America C&P operating income rose by $20 million, or 71%, compared to the first quarter of 2013, primarily due to improved profitability for pressure pumping in Argentina. Europe/Africa/CIS C&P operating income increased $14 million, or 22%, compared to the first quarter of 2013, driven by increased completion tools sales in Angola and Norway, and higher Boots and Coots activity in Algeria. Middle East/Asia C&P operating income was down $2 million, or 2%, compared to the first quarter of 2013, due to lower completion tools sales in Malaysia and decreased Boots and Coots activity in Australia and India, which were partially offset by increased completion tools sales in Saudi Arabia and China.
Drilling and Evaluation
Drilling and Evaluation (D&E) revenue in the first quarter of 2014 was $2.9 billion, an increase of $54 million, or 2%, from the first quarter of 2013. This increase was primarily driven by higher drilling activity in the Eastern Hemisphere and improved testing activity in all regions, which more than offset the decline in Latin America activity.
D&E operating income in the first quarter of 2014 was $398 million, a decrease of $9 million, or 2%, from the first quarter of 2013. North America D&E operating income decreased $17 million, or 10%, compared to the first quarter of 2013, due to decreased activity in Canada and decreased logging services in the United States land market, which were partially offset by increased testing services in the Gulf of Mexico. Latin America D&E operating income decreased $29 million, or 36%, compared to the first quarter of 2013, primarily due to lower drilling activity in Brazil. Europe/Africa/CIS D&E operating income improved by $11 million, or 19%, compared to the first quarter of 2013, due to increased drilling activity in the United Kingdom and Angola, which was partially offset by lower demand for fluid services in Norway. Middle East/Asia D&E operating income increased $26 million, or 27%, compared to the first quarter of 2013, due to increased drilling services in Thailand and Saudi Arabia, which were partially offset by a decline in logging sales in China.
Significant Recent Events and Achievements
Halliburton announced the signing of a partnership agreement with Gubkin Russian State University of Oil and Gas for the development of unconventional resources in Russia, including the Bazhenov shale. As part of the agreement, Halliburton will provide senior technical and management staff to serve on Gubkin's Industry Advisory Boards, as well as provide the foundation material for Gubkin's unconventional resources curriculum that will become the basis for student and industry training.
Halliburton announced its plans for a new Integrated Completions Center located in New Iberia, LA. This new facility will expand Halliburton’s resources and capabilities for deepwater completion tools while continuing to focus on service alignment, equipment maintenance, preparation, and job execution for Halliburton’s Gulf of Mexico customers.