Halliburton Hammered by Drilling Declines

April 20, 2015

Halliburton reported income from continuing operations for 1Q 2015 of $418 million, down from $623 million in 1Q 2014. Operating income was $699 million, down from $970 the previous year; total revenue was $7.1 billion, down 4 percent from 2014.

“North America experienced an unprecedented decline in drilling activity during the first quarter, which drove pricing pressure and margin compression across all product lines," said Dave Lesar, chairman/CEO. "First quarter revenue declined 9 percent and operating income declined 54 percent, year-over-year, compared to a 21-percent reduction in the United States land rig count. Activity has dropped approximately 50 percent from the peak in late November, and we expect to continue to see pricing pressure for our services until the rig count stabilizes.

Primarily as a result of the recent downturn in the energy market and its corresponding impact on the company’s business outlook, Halliburton recorded approximately $823 million, after-tax, or $0.97 per diluted share, in company-wide charges during the first quarter of 2015 related to asset write-offs, inventory write-downs, impairments of intangible assets, severance costs, and other charges.
Halliburton also recorded a Venezuela currency devaluation loss of $199 million, or $0.23 per diluted share, and Baker Hughes acquisition-related costs of $35 million, after-tax, or $0.04 per diluted share. Reported loss from continuing operations was $639 million, or $0.75 per diluted share. Reported operating loss was $548 million for the first quarter of 2015.

“Our international business has been more resilient than the domestic market, with the international rig count down 9 percent from the peak last July," Lesar said. "We continue to anticipate headwinds across all of our international regions this year, as operators reduce their budgets. Lower commodity prices are influencing our customers to re-evaluate asset economics and defer new projects.

“Industry prospects will continue to be challenged in the coming quarters, and visibility to the ultimate depth and length of this cycle remains uncertain. We will continue to manage through this downturn focusing on reducing input costs, protecting our market position, and delivering the superior execution and solutions our customers have come to expect. In advance of the pending Baker Hughes acquisition, we have made the decision to preserve our global delivery infrastructure through the downturn, which is having a negative impact on our operating margins but will allow us to realize cost synergies after the close," Lesar said.

"We continue to look beyond the cycle and invest in capital and strategic programs to maintain the health of the franchise and to emerge even stronger when the industry recovers.”