Will Headwinds In The Permian Impact Halliburton’s Q3?

by Trefis Team
Halliburton Company
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Halliburton (NYSE:HAL) is expected to publish its Q3 2018 results on October 22, reporting on a quarter that saw Brent crude oil prices rising to levels of around $85, with the average worldwide rig count over the quarter rising by about 8% year-over-year to 2262 units, per data from Baker Hughes. While we expect Halliburton to post year-over-year earnings growth, results could still be weighed down by a slowdown in the Permian basin and pricing weakness in several other basins in the United States. The company previously warned that its third-quarter earnings could be hurt by 8 to 10 cents per share partly due to these headwinds. Below, we take a look at what to expect when the company publishes earnings.

Our interactive dashboard on what lies ahead for Halliburton in 2018 details our expectations for the company through the rest of the year. You can modify any of our forecasts or key drivers to see the impact that changes would have on the company’s results.

Permian Basin Headwinds Could Impact The Company

Activity in the Permian basin – which lies in western Texas and southeastern New Mexico – has been lackluster due to a lack of pipeline capacity for transportation of crude from the region.  This has effectively created a glut of oil in the basin, pushing local prices close to four-year lows, causing operators to slow down their drilling and production activity. The Permian is the most important oil and gas basin for services companies, as CapEx in the region is expected to represent close to a third of total spending on major U.S. land plays within the next three years. This could impact Halliburton’s revenues from the region. Separately, the company also indicated that a tight labor market in the U.S. and inflation concerns are also hurting activity in the region. Additionally, the Marcellus shale – another fast-growing basin in the U.S. – has been showing some signs of slowing, as operators are hitting their production targets sooner than anticipated. However, the broader North American market should still perform well, considering the higher rig count (up by about 11% year-over-year in the U.S.) and higher service intensity, which could translate into stronger demand for products such as pressure pumping, drilling, and artificial lift.

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