Monday, July 18, 2011
Halliburton
Halliburton announced today that net income for the second quarter of 2011 was $747 million, or $0.81 per diluted share, excluding employee separation costs of $8 million, after-tax, or $0.01 per diluted share. Reported net income for the second quarter of 2011 was $739 million, or $0.80 per diluted share. This compares to net income for the first quarter of 2011 of $511 million, or $0.56 per diluted share. The first quarter of 2011 results were negatively impacted by $46 million, after-tax, or $0.05 per diluted share, related primarily to reserving certain assets as a result of political sanctions in Libya. Net income for the second quarter of 2010 was $480 million, or $0.53 per diluted share.
Halliburton’s consolidated revenue in the second quarter of 2011 was $5.9 billion, compared to $5.3 billion in the first quarter of 2011. Consolidated operating income was $1.2 billion in the second quarter of 2011, compared to $814 million in the first quarter of 2011. These increases were primarily attributed to improved pricing and equipment utilization in United States land, where nearly all product service lines have benefited from the shift to unconventional oil and liquids-rich basins. Consolidated revenue and operating income were $4.4 billion and $762 million, respectively, in the second quarter of 2010.
“I am extremely pleased with our second quarter results as total revenue set yet another company record. North America continues to deliver very strong growth in revenue and profitability, while international profit recovered modestly. As a whole, our level of operating margin was the highest it has been since 2008,” said Dave Lesar, chairman, president, and chief executive officer.
“North America revenue grew by 16% sequentially compared to United States rig activity growth of 6%, with incremental operating margins of greater than 50% for both divisions. This was driven by the execution of our North America growth strategy in liquids-rich basins, and our customers’ continued adoption of our integrated solutions.
“We have for some time expressed confidence in the strength of the North America cycle, and our results this quarter validate our positive view on the market. Strong crude prices, operators’ improved cash flows combined with their ability to access capital, and the increasingly liquids-rich nature of the United States land market, give us continued confidence in the strength of North America through 2012.
“International revenue grew 8% from the prior quarter, with 18% operating income growth, excluding the impact of Libya and employee separation costs. Strong sequential operating income improvement was driven by seasonal recovery in the North Sea and Russia as well as improved activity in Latin America and Asia. However, the shutdown in Libya, project delays in Iraq, mobilization costs in Sub-Saharan Africa, and the sluggish market in the United Kingdom and Algeria have impacted the pace of recovery for our international results. In Europe, despite the employee separation costs in the second quarter, increasing interest in shale development gives us confidence in business prospects longer term. We are now seeing some evidence that international pricing is stabilizing and we believe that volume increases will result in pricing improvements toward the end of the year.
“Robust growth in global energy demand supports the continuing need to develop new hydrocarbon resources and provides us with strong growth opportunities. We anticipate that the execution of our strategy and our focus on the high growth segments of deepwater, unconventional resources, and mature fields will result in margin expansion in both our North America and international business, and will support continued delivery of strong shareholder returns,” concluded Lesar.
2011 Second Quarter Results
Completion and Production
Completion and Production (C&P) revenue in the second quarter of 2011 was $3.6 billion, an increase of $446 million, or 14%, from the first quarter of 2011. Continued demand for production enhancement services in the United States accounted for the majority of this increase.
C&P operating income in the second quarter of 2011 was $918 million, an increase of $258 million, or 39%, over the first quarter of 2011. Excluding the second quarter impact of employee separation costs in the Eastern Hemisphere and the first quarter impact of the charge for Libya, C&P operating income improved $228 million, or 33%, from the first quarter of 2011. North America C&P operating income increased $213 million compared to the first quarter of 2011, primarily due to higher demand for production enhancement services in the United States land market. Latin America C&P operating income decreased $7 million, as higher costs across South America offset higher activity levels in Mexico and Brazil. Europe/Africa/CIS C&P operating income improved due to seasonal recovery in the North Sea. Middle East/Asia C&P operating income rose as higher activity across all product service lines in Saudi Arabia and Australia offset lower completion tools sales in Malaysia.
Drilling and Evaluation
Drilling and Evaluation (D&E) revenue in the second quarter of 2011 was $2.3 billion, an increase of $207 million, or 10%, from the first quarter of 2011, with all regions experiencing revenue growth.
D&E operating income in the second quarter of 2011 was $324 million, an increase of $94 million, or 41%, from the first quarter of 2011. Excluding the second quarter impact of employee separation costs in the Eastern Hemisphere and the first quarter impact of the charge for Libya, D&E operating income increased $76 million, or 30%, from the first quarter of 2011. North America D&E operating income increased $52 million compared to the first quarter of 2011, with higher United States drilling activity both onshore and in the Gulf of Mexico. Latin America D&E operating income increased $12 million, primarily due to higher activity in Brazil. Europe/Africa/CIS D&E operating income improved due to higher seasonal demand for drilling services in the North Sea and Russia which offset lower activity in Angola. Middle East/Asia D&E operating income was flat, as higher direct sales in China and Kuwait offset contract delays in Iraq.
Corporate and Other
During the second quarter of 2011, Halliburton invested an additional $12 million in strategic projects aimed at improving Halliburton’s operations and creating the opportunity for competitive advantage for the company. These include a lower cost service delivery model in North America and repositioning technology, supply chain, and manufacturing infrastructure to support projected international growth. Halliburton expects to continue funding this effort throughout 2011.
Significant Recent Events and Achievements
Halliburton was awarded a three-year contract by Chevron to provide integrated services for shale natural gas exploration in Poland. Under this contract, Halliburton will provide directional drilling, mud logging, cementing, coiled tubing, slickline, well testing, hydraulic fracturing, and completion equipment and services. Halliburton’s Consulting and Project Management team will support the project. Drilling is scheduled to begin in the fourth quarter of 2011.
Halliburton invests considerable time, energy, and resources in engineering solutions that set new standards for environmental safety – all while helping our customers do more by using less. The CleanSuite™ services are the latest in a long line of developments designed to reduce the environmental footprint of hydraulic fracturing operations. Recent achievements for CleanSuite™ technologies include the following:
Halliburton and El Paso Corporation announced that an El Paso-operated well in North Louisiana is the first natural gas producing well to be completed using all three Halliburton proprietary CleanSuite™ production enhancement technologies for both hydraulic fracturing and water treatment. More than four million gallons of CleanStim® hydraulic fracturing fluid, comprised of ingredients sourced from the food industry, were utilized to enhance the well and resulted in faster production of natural gas. Nearly 4.8 million gallons of water were treated through Halliburton’s CleanStream® process, which uses UV light instead of additives to control bacteria in water. Another one million gallons of produced water was recycled for use in the well through the CleanWave™ system, significantly reducing the need for freshwater.
Halliburton's CleanWave™ water treatment technology was recognized with the Spotlight on New Technology Award at the 2011 Offshore Technology Conference. The awards program is designed to showcase the latest and most advanced technologies that are leading the industry into the future. Year to date, we have treated over 47 million gallons of fracture flowback water or produced water with this technology.
Deepwater is the most challenging and expensive environment in which our customers operate. Recent technological developments by Halliburton that help improve our customers’ economics by providing more effective reservoir performance information include:
DynaLink® – Halliburton’s proven, two-way wireless acoustic telemetry system – now has the added capability to control downhole test tools from the surface during drillstem testing operations while transmitting real-time bottomhole pressure and temperature data.
This data, along with acoustic actuation of test tools, provides operators the benefit of changing the pre-defined well testing program based on reservoir response while testing. This technology was recently deployed successfully in deepwater wells in Mexico and Brazil.
The 4 Phase Vertical Test Separator is another step change improvement in deepwater well testing. First, the system eliminates the need for traditionally bulky and costly sand-handling equipment and the inherent operational difficulties associated with it. Second, it streamlines rig operations by eliminating costly rig time associated with the removal of produced solids. The Halliburton 4 Phase Vertical Test Separator recently demonstrated noteworthy time and cost savings for an operator in Brazil.
Realm Energy International Corporation has contracted Halliburton’s Consulting and Project Management team to work with Realm Energy to significantly expand the technical evaluation and ranking of the highest-potential shale deposits found in emerging prospective basins globally. Realm Energy and Halliburton’s Consulting and Project Management team began their collaboration in 2009 with an emphasis on European basins. During this initial effort 10 discrete sedimentary basins in four European countries were targeted for evaluation. The collaboration identified key prospect trends, and Realm has now successfully acquired 650,000 gross acres and has filed government applications for 4.4 million acres of contiguous tracts over significant shale resources.
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