23 Jan Halliburton's 4Q'17 Earnings To Be Driven By Its North American Operations
Halliburton ( HAL ), the world’s third largest oilfield services company, is set to release its financial performance for the December quarter and full year 2017 on 22nd January 2018(( Halliburton To Announce December Quarter 2017 Results , 4th December 2017, www.halliburton.com)). Backed by the growing rig count and strong drilling demand, the market expects the Houston-based company to report a remarkable jump in its top-line as well as bottom-line, both for the quarter as well as for the full year. Given the company’s higher exposure to the North American markets compared to its closest competitor, Schlumberger , it is likely to witness a higher improvement in its fourth quarter results.
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Key Highlights Of 4Q’17
- The North American oil and gas rig count experienced a dip in the months of October and November. However, with the extension of the OPEC production cuts, the WTI crude oil prices rose sharply in December and averaged at around $55 per barrel during the quarter, almost 15% higher than the previous quarter. For the full year 2017, the oil prices averaged at almost $51 per barrel, 17% more than for 2016. As a result, the region’s rig count recovered to 1,135 units at the end of the December quarter.
- Contrary to this, the Latin American and the Middle East markets showed signs of improvement during the quarter. The international rig count rose to 954 units during the same quarter, as opposed to 929 units in the same quarter of last year. For the full year 2017, the global rig count rose to 2,089 units, compared to 1,772 units at the end of last year. Given the surge in the global rig count during the year, we expect to see a sharp rise in Halliburton’s revenues for the quarter as well as full year.
- However, on the pricing front, the company is expected to have witnessed continued pressure in the fourth quarter due to the onset of the holiday season and lower efficiency levels due to winter months mainly in the Rockies and Northern US. Also, the oilfield contractor does not expect to see a stark improvement in the year-end product and software sales in the international markets, as most of its customers are budget constrained. Thus, we foresee the company’s revenue to be lower compared to the previous quarter.
- On the profitability front, the company’s efforts to increase its pricing, improve its equipment utilization, and structurally reduce its operating costs are likely to enhance its margins.
- Lastly, Halliburton announced a fourth quarter dividend of 18 cents to its shareholders. This reiterates the company’s willingness to share its improving cash flows and profitability with its investors.
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