Halliburton Sees Pricing Pressure in N. America

Halliburton Co warned of pricing pressure in North America, its largest market, and challenges in international operations as drillers continue to slash spending due to an extended slump in oil prices.

 

The oilfield services company, however, posted a better-than-expected quarterly profit, helped by higher revenue and operating income from Latin America, the Middle East and Asia.

 

Halliburton executives spoke to analysts on a conference call on Monday. Here is a selection of comments from the conference call.

 

"Because of the lack of available work driven by the rig count decline and the resulting overcapacity ... we are seeing substantial pricing pressure in all of our product lines and a significant amount of service capacity is looking for work."

 

"Service company behavior has fallen really into one of three buckets. First, those who are still running their businesses to make a profit and returns for their investors; second, those who have decided that covering fixed cost is no longer important and therefore will take work to keep equipment busy and crews intact while operating at a loss; and third, those who are basically working at a price which covers only their cash costs."

 

"We are still seeing activity fall off week-to-week although the pace of decline has slowed."

 

"We are not going to call the bottom, but historically it's taken rig count three quarters to move from peak to trough."

 

"We still expect Middle East Asia to be the most stable region for the company in 2015 as recent project awards in Saudi Arabia, Iraq, UAE and Kuwait are anticipated to move forward."

 

"Input cost reductions around items like sand and logistics began during the first quarter and we expect to realize more of these cost savings as we move through the remainder of the year."

 

"In a typical downturn, we would have reduced our operating cost structure more than we have done, but in anticipation of closing the Baker Hughes acquisition later this year we want to preserve our underlying service delivery platform."

 

"We are not cutting as deep as we might have done so otherwise. Consequently, we're carrying an elevated cost structure. While this decision burdens current margins it is clearly the right thing to do in the long run."

 

"North America will continue to be the most adaptable market ... The US unconventional business is now the lowest cost, fastest to market incremental barrel of oil available in the world today."

 

"When the recovery does come, North America will respond the quickest and offer the greatest upside and that Halliburton will be best positioned to lead the way."

 

"It's a tough market out there and we are not going to try to call a recovery. There are just not enough convincing data points out there at this time for me to make a conclusion."

 

"The operators, vendors and service companies who deal most effectively with the velocity of this downturn will be those who profit the most when it turns. We fully expect Halliburton to be one of those winners."

 

"There will likely be additional divestitures and we plan to provide updates at the appropriate time; however, launching the sale of the drill bits and drilling businesses is a good first step toward expediting this process."

 

"The eventual sale of (drill bits and drilling businesses) is subject to obtaining final approval of the pending Baker Hughes acquisition by the competition authorities reviewing the transaction."

 

"We believe we remain on track to complete the (Baker Hughes) transaction late in the second half of 2015."

 

"We continue to target annual pretax cost synergies of nearly $2 billion."