Halliburton’s Results Should Reflect Improving Conditions In The Oil Market
Halliburton (NYSE:HAL) is expected to publish its first-quarter results on Monday, April 23. We expect the company’s results to improve, driven by strong drilling demand and pricing in the North American onshore markets and higher activity in international markets. Below, we take a look at some of the key trends that could drive the company’s results during the quarter.
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The U.S. land market has been witnessing stronger activity, with the average rig count during Q1 rising to around 966, compared to 742 rigs in the year-ago period. Moreover, the mix of horizontally directed rigs has also been trending higher, indicating stronger demand for services such as fracking, in which Halliburton is a major player. Tight oil players have been able to bring down their marginal costs of production through the downturn via cost-cutting and improved efficiencies, likely making production more profitable at current oil prices. Moreover, the positive outlook for commodity prices is likely to boost the investment appetite and availability of financing. As Halliburton has a higher presence in the North American markets, it should be able to leverage the recovery more effectively compared to its key rival Schlumberger. Halliburton’s 2017 revenue rose almost 30% to $20.6 billion, driven by the utilization and pricing improvements in the North American onshore markets.
With the extension of production cuts by OPEC and Non-OPEC members, Halliburton has indicated that oil prices, and in turn, demand for drilling in international markets, will improve gradually throughout 2018. However, due to continued pricing pressure and concessions, the recovery could be a little more sluggish. Over Q1, the global rig count has expanded by more than 10% compared to last year.
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