Halliburton takes $2.2b charge on shale slump
NEWYORK, Jan 22: US oilfield services firm Halliburton Co on Tuesday disclosed a $2.2 billion charge to earnings as weakening North American shale activity continued to hit the industry. The charge for asset impairments was centered on hydraulic fracturing and legacy drilling equipment units, and employee severance costs, the company said. Halliburton dismissed 8pc of its North American staff at mid-year, and later cut staff across several western US states.
US producers are pulling back on drilling and completing wells, pressured by investor demands to focus on debt reduction and returns. Rival Schlumberger NV on Friday said it cut more than 1,400 workers, and would idle 50pc of its hydraulic fracturing equipment due to weak demand. Fracking applies high pressure to release trapped oil and gas in shale wells.
Schlumberger last year recorded a $12-billion charge to earnings and US oil major Chevron Corp took an at least $10bn charge on projects that were no longer economic to tap. "The US shale industry is facing its biggest test since the 2015 downturn, with both capital discipline and slowing leading edge efficiency gains weighing down activity and production," Halliburton Chief Executive Jeff Miller said on call with analysts.
Halliburton will reduce capital spending by 20 per cent this year, to $1.2bn, executives said on the call, as North American customers further slash spending. It will recognise $50 million of the charges in the current quarter.
The US rig count has fallen by roughly 24pc to 796 in the past year, according to rival Baker Hughes. Halliburton exited 2019 with 22pc less working frack equipment than it began the year.
Profit margins in units that drill, evaluate and put oil and gas wells into production will fall this quarter, it forecast. Excluding the charge, Halliburton topped analysts' estimates for quarterly profit, boosted by higher drilling activity outside North America, a recent bright spot for oilfield service providers.
The company swung to a $1.7bn loss in the fourth quarter on the charge. On an adjusted basis, the company earned 32 cents per share, compared with analysts' average estimate of 29 cents, according to Refinitiv.
Shares were up 1.6pc in early trading at $24.48.
Halliburton said revenue from North America fell over 30pc to $2.33bn, while international markets rose over 10pc to $2.86bn in the fourth quarter ended Dec 31. Halliburton's total revenue fell 12.6pc to $5.19bn, but beat estimate of $5.10bn. -Reuters