Halliburton Earnings Beat with Free Cash Flow Up 79% in a Year

Houston-based oil and gas servicing giant Halliburton reported better than expected fourth quarter earnings Tuesday before the market. HAL posted adjusted income of $656 million, or 72 cents per share, for the quarter compared with a 67 cent EPS consensus. It wasn’t long ago oil services companies were debt laden and loss making, free cash flow was up 79% y/y in Q4 2022. HAL followed up a mixed start to earnings season for the world’s top oilfield services providers with peers SLB and Baker Hughes reporting earlier in the week. The energy crisis from Russia’s invasion of Ukraine continued to boost drilling activity, costs however remained elevated which ate into margins.

Improved North American and international markets for drilling, completion, and production with $HAL’s aggressive approach to cutting costs flowed through to soften some inflationary effects.

Halliburton Oilfield

The Baker Hughes oil rig count benefiting oil service companies have been recovering since falling off the cliff with the decreased activity in North America and the world since the Covid pandemic and then the Russian invasion of Ukraine. Halliburton serves the upstream oil and gas industry throughout the lifecycle extraction to completion of the energy source.

Halliburton Company NYSE: HAL Reported Before Open Tuesday

“Halliburton’s execution in 2022 demonstrated the earnings power of our strategy, and I expect this earnings power to strengthen in 2023 and beyond. Both operating divisions delivered strong margins in the international and North America markets,” Chief Executive Officer Jeff Miller

Halliburton Q4 22 Earnings Highlights

  • Adj EPS $0.72 (est $0.67)
  • Rev $5.60B (est $5.58B)
  • Full year operating income of $2.7 billion, increased 50% year-over-year.
  • Full year revenue of $20.3 billion, increased 33% year-over-year.
  • Free cash flow was up 79% y/y in Q4 2022.
  • Operating margin of 17.5%, increased 460 basis points year-over-year.
  • 2023 first quarter dividend increases by 33% to $0.16 per share.

HAL: Stock Market Reaction

  • $39.61 ▼ -0.96 (2.37%) Premarket
  • $39.61 ▲ +1.95 (5.18%) YTD
  • $39.61 ▲ +11.02 (38.54%) Over year
  • $39.61 ▼ -16.79 (29.77%) Over 5 years
  • 52wk High $43.84
  • 52wk Low $23.22

Production highlights

Completion and Production

  • Completion and Production revenue in the fourth quarter of 2022 was $3.2 billion, an increase of $46 million, or 1%, when compared to the third quarter of 2022, while operating income was $659 million, an increase of $76 million, or 13%.
  • These results were driven by weather related lower stimulation activity offset by improved pricing, service efficiency and activity mix in North America land, as well as higher completion tool sales and cementing activity globally.

Drilling and Evaluation

  • Drilling and Evaluation revenue in the fourth quarter of 2022 was $2.4 billion, an increase of $179 million, or 8%, when compared to the third quarter of 2022, while operating income was $387 million, an increase of $62 million, or 19%.
  • These results were due to increased drilling-related services, testing services, and year-end software sales internationally and higher project management activity in Mexico.
Halliburton Global Locations

Geographic Regions

North America

North America revenue in the fourth quarter of 2022 was $2.6 billion, a 1% decrease when compared to the third quarter of 2022. This decrease was primarily driven by weather related lower stimulation activity and artificial lift activity in North America land. These decreases were partially offset by improved activity across multiple product service lines in the Gulf of Mexico.

International

International revenue in the fourth quarter of 2022 was $3.0 billion, a 9% increase when compared to the third quarter of 2022.

Latin America revenue in the fourth quarter of 2022 was $945 million, an increase of 12% sequentially, due to higher activity across multiple product service lines in Mexico, higher completion tool sales in the region, increased pressure pumping services in Argentina, and improved well construction services in Colombia. Partially offsetting these increases was lower fluids activity in Guyana.

Europe/Africa revenue in the fourth quarter of 2022 was $657 million, an increase of 3% sequentially, primarily driven by higher completion tool sales, testing services, and well intervention services across the region, along with increased drilling-related services in West Africa. These increases were partially offset by lower activity in Norway and decreased pipeline services across the region.

Middle East/Asia revenue in the fourth quarter of 2022 was $1.4 billion, a 10% increase sequentially, primarily resulting from higher drilling and evaluation services across the region, increased cementing activity in the Middle East, and higher completion tool sales in Saudi Arabia and United Arab Emirates. Partially offsetting these increases was lower completion tool sales in Qatar.

Russia Update

Halliburton wound down and sold of its Russia operations in the third quarter to its local management team. That unit now operates under the name BurService LLC, independent of Halliburton.

For the nine months ended Sept. 30, HAL recorded $366 million in charges and impairments, largely due to the sale of its Russia assets, and the impairment of assets in Ukraine.

Outlook

Halliburton Chief Executive Jeff Miller said in a statement:

  • “I am confident in Halliburton’s strong outlook and ability to generate increased returns for shareholders. Halliburton’s exceptional financial performance is a clear result of executing our strategic priorities – to maximize value in North America, deliver profitable international growth and drive capital efficiency,” concluded Miller.”

Halliburton international business has expanded from a year earlier, even after selling its Russian operations. The company expects the Middle East to drive drilling growth, led by Saudi Arabia with meaningful increases in the United Arab Emirates, Qatar, and Kuwait.

Overall fracking costs are expected to climb 27% this year, according to Kimberlite International Oilfield Research. Which gives an indication of what oilfield-service providers can earn in equipment supplies to bolster the prices they can charge.

Halliburton Peer’s Earnings

About Halliburton

Founded in 1919, Halliburton is one of the world’s largest providers of products and services to the energy industry. With more than 40,000 employees, representing 130 nationalities in more than 70 countries, the company helps its customers maximize value throughout the lifecycle of the reservoir – from locating hydrocarbons and managing geological data, to drilling and formation evaluation, well construction and completion, and optimizing production throughout the life of the asset. Visit the company’s website at www.halliburton.com.

Source: HAL

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