Bloomberg News

Halliburton Falls on Slow International Growth, Analyst Says

October 17, 2011

(Updates share price in third paragraph.)

Oct. 17 (Bloomberg) -- Halliburton Co., the world’s second- largest oilfield services provider, fell as much as 8 percent on concern for oil-price volatility and the slower than expected growth in its international business.

Net income rose to $683 million, or 74 cents a share, from $544 million, or 60 cents, a year earlier, Houston-based Halliburton said in a statement today. Excluding an impairment charge and costs from an arbitration ruling against a former subsidiary, the company earned 94 cents a share, 3 cents more than the average of 32 analysts’ estimates compiled by Bloomberg. Operating income in the company’s region that includes Europe and Africa fell by half to $66 million in the quarter.

Halliburton fell 8 percent to $34.48 at the close in New York. The shares have 32 “buy” and 3 “hold” ratings from analysts.

“The international improvement is just not coming to fruition as expected,” said Brian Youngberg, an analyst at Edward Jones in St. Louis, who rates the shares a “hold” and owns none. “Everything’s banking on North America right now.”

Other large oilfield service providers were affected by Halliburton’s results. Schlumberger Ltd., the world’s biggest provider of labor and technology to the producers, fell 5 percent, and Baker Hughes Inc., the third-largest servicer, dropped 6 percent.

Capital Budgets

“We need to hear from the E&P guys on where their capital budgets are going to be and what their plans are,” Brian Uhlmer, an analyst at Global Hunter Securities in Houston, who rates the Halliburton shares at “accumulate” and owns none, said today in a telephone interview.

Oil prices in New York had the largest quarterly drop since the 2008 financial crisis, tumbling to a one-year low as signs of slowing growth in China, the U.S. and Germany heightened concern that fuel demand will weaken. Futures contracts have dropped 24 percent from a high of $113.93 on April 29.

“The recent drop in oil prices and related declines in equity markets have been unsettling to investors,” said Dave Lesar, chairman and chief executive officer, said in the statement. “Despite short-term macroeconomic concerns, I continue to believe in the long-term prospects for our business.”

Halliburton’s international business is showing gradual recovery and the company has “continued confidence in the resiliency of the North American market,” Lesar said. Demand for services to produce oil and natural gas will grow as field development becomes more complex, he said.

Sales Rise

Sales for the third quarter climbed 40 percent to $6.55 billion, driven by growth in its Western Hemisphere business, the company said.

“The big question is what happens over the next six to 12 months in more of a moderate commodity price environment,” said Scott Gruber, a New York-based analyst at Sanford C. Bernstein who rates the shares at “market perform” and owns none. “The main focus is going to be on the sustainability of pumping margins and whether Halliburton can improve its Eastern Hemisphere margins.”

--Editors: Charles Siler, Jessica Resnick-Ault

To contact the reporter on this story: David Wethe in Houston at dwethe@bloomberg.net

To contact the editor responsible for this story: Susan Warren at susanwarren@bloomberg.net


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