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Tuesday, October 21, 2008

Halliburton Helps Oil Services Stocks


Melinda Peer, 10.21.08, 12:51 AM ET

Halliburton






Halliburton shares regained some strength Monday on better than expected earnings but the company could offer little in the way of reassurance regarding its near-term outlook.
Oilfield service providers' stocks have taken a beating as natural gas and oil prices have come down from the summer's unprecedented highs. Halliburton (nyse: HAL - news - people ) shares are trading 46.2% lower than last month as fears of a global recession pummeled commodity markets and the shares of companies closely tied to them.
Analysts worry that a decline in energy demand will reduce exploration and production spending--concerns echoed by Schlumberger (nyse: SLB - news - people ) in last week's third-quarter earnings report. (See " Schlumberger Paints A Dark Picture.") Halliburton shares gained $2.54, or 13.9%, closing Monday's trading session at $20.80 and lifting shares across sector despite warnings that spending cutbacks could reduce the company's expected rig count in 2009.
RBC Capital Markets analyst Kurt Hallead expected Halliburton shares to get a much-needed lift on Monday since it, and other oil services companies' shares have served as a punching bag for investors frustrated by the dramatic drop in oil prices. Hallead said Halliburton's stock has fallen 67.0% from highs reached in July when oil soared past $147 a barrel.
"We are cognizant that a worldwide recession would have negative short-term implications for demand," Chairman David Lesar said adding that current energy prices are still sufficiently high enough to support Halliburton's current projects. "We are and will remain focused on our customers' long-term technology and service requirements," he said pointing to an anticipated shift within the industry to smaller, more complicated reserves as resources get scarcer, propelling long-term growth.
The Houston-based company posted a third-quarter net loss of $21.0 million, or 2 cents a share, compared with year-ago earnings of $727.0 million, or 83 cents a share. Earnings excluding acquisition-related charges and settlement of a portion of its convertible senior notes were $687.0 million, or 76 cents a share, surpassing the mean estimate of analysts polled by Thomson Reuters for earnings of 73 cents a share.
Halliburton said the quarter's results would have been higher by 4 cents a share if not for hurricane-related disruptions. Sales climbed 23.5%, to $4.9 billion from $3.9 billion in 2007's third quarter, driven by robust growth in Latin America. Results surpassed the $4.6 billion expected by analysts.
JPMorgan analyst Michael LaMotte was pleased with Halliburton's better-than-expected results but said "the questions now is how quickly North America volume and pricing retreats as smaller independents are hit with declining commodity pricing and a stricter credit environment."
Outside of North America, sales grew 25.0% from the prior year led by Latin America, where sales shot up 42.0% during the quarter. Citing 50.0% sales growth in Northern Africa and strong improvement in Saudi Arabia, Halliburton said it will continue to expand its business in the Eastern hemisphere but will begin moving out of West Africa where rising costs largely offset higher sales.



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