Sluggish Drilling Demand Will Continue To Pull Down Halliburton’s 2Q’16 Results
- Halliburton (NYSE:HAL), the world’s second largest oilfield services company, is expected to release its June quarter 2016 financial results on 20th July 2016. [1]
- Owing to the production disruptions due to a wildfire in Alberta, Canada, and geo-political disturbances in Nigeria and Venezuela, WTI crude oil prices rose by more than 35% in the June quarter compared to the previous quarter. Consequently, Halliburton’s share price went up by greater than 25% in the last three months, as it is highly sensitive to oil price movement.
Source: Google Finance
- While this led to a small improvement in the global rig count in the month of June, the overall rig count for 2Q’16 continued to decline both annually as well as sequentially.
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- Despite the initial signs of recovery in commodity prices, the global upstream capital expenditure is likely to remain low in 2016. As a result, Halliburton has also reduced its capital spending budget for the year to $850 million, 60% lower compared to last year.
- The lower upstream capital spend will continue to weigh heavily on the demand for rigs and further intensify pricing pressure in the oilfield services industry globally. Thus, we expect Halliburton’s 2Q’16 revenue to drop significantly on the back of weak drilling demand.
- Further, the company has a large presence in the North American oil and gas markets, which have been severely impacted by the weak commodity prices. Consequently, we forecast the Houston-based company’s operating margins to deteriorate in this quarter.
Have more questions about Halliburton (NYSE:HAL)? See the links below:
- Why We Believe Halliburton Is Worth $40 Per Share?
- Halliburton’s 1Q’16 Earnings Plunge As Drilling Activity Remains Low, Particularly In North America
- How Will The Halliburton-Baker Hughes Deal Failure Impact Halliburton’s Equity Value?
- How Will The Halliburton-Baker Hughes Deal Impacted Halliburton’s Credit Capacity?
- Did Halliburton Pay A Higher Price For Baker Hughes’ Acquisition?
- Downward Revision of Halliburton’s Price From $42 To $38 Per Share
- How Valuable Are Halliburton’s North American Markets Compared To Its Middle East & Asian Markets?
- How Much Will Halliburton’s Revenue Grow If Oil Prices Rebound To $100 Per Barrel By 2018?
- What Is Halliburton’s Fundamental Value Based On 2016 Expected Numbers?
- How Much Will Halliburton’s Revenue And EBITDA Grow Over The Next Five Years?
- How Has Halliburton’s Revenue And EBITDA Changed Over The Last Five Years?
- What Is Halliburton’s Revenue And EBITDA Breakdown?
- How Has Halliburton’s Revenue And EBITDA Composition Changed Over The Last Five Years?
- Halliburton: The Year 2015 In Review
Notes:
1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for Halliburton Company
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Notes:- Halliburton 2016 Second Quarter Conference Call, 19th May 2016, www.halliburton.com [↩]