How Will The U.S. Fracking Slowdown Impact Halliburton’s Q4 Earnings?

Halliburton (NYSE:HAL), the second-largest oilfield services company, is expected to publish its Q4 results on January 22, reporting on a quarter that saw a slowdown in fracking activity in the U.S, the company’s bread-and-butter market. In this note, we take a look at some key trends to watch as the company publishes earnings.

We have created an interactive dashboard analysis which outlines our expectations of Halliburton over 2018. You can modify the drivers to arrive at your own price estimate for the company.

Headwinds In The U.S. Markets

The North American oilfield services market is likely to see a soft performance over the fourth quarter, driven by multiple factors. Firstly, the market for pressure pumping services has been weak, due to declining demand and a relatively strong supply of pressure pumping equipment, which has been hurting pricing. Separately, operators have slowed down activity in the Permian, which is one of the largest oil and gas basins in the U.S., due to a lack of pipeline capacity to transport crude from the region. Halliburton also previously indicated that many of its customers had exhausted their budgets, hurting activity. While Halliburton didn’t provide any mid-quarter updates following its Q3 earnings, rival Schlumberger noted that revenues from its North American business could fall 15% sequentially over the quarter, citing similar trends.

How Will Oil Price Declines Impact The Company In 2019? 

Oil prices declined meaningfully over the last quarter, with WTI prices currently trading at under $50 per barrel, which is almost 35% below their October 2018 highs. While this isn’t likely to have meaningfully impacted global activity over the fourth quarter, it could cause customers to take a more conservative approach with their E&P budgets over 2019, hurting drilling activity and broader services pricing. We will be looking for more color from Halliburton on this front during its earnings call.