Halliburton sees ‘multi-year upcycle’ as return of oil services

(Bloomberg) — Halliburton Co., the largest provider of fracking services, is gearing up for several years of expansion in both the US and foreign markets as spending in the global energy industry recovers.

“The positive business momentum we see today in the North American and international markets, combined with our expectations for future customer demand, gives us confidence for an unfolding multi-year upcycle,” Chief Executive Officer Jeff Miller said in a statement on Tuesday. .

The Houston-based contractor rose a whopping 2% in pre-market trading Tuesday after reporting better-than-expected second-quarter results. The bullish comment from the world’s No. 3 oil services company follows last month’s comments from its biggest rival, Schlumberger, who said the global economic recovery will spark an energy industry “supercycle” that should lead to wider margins.

That represents a dramatic rebound for the sector, which was lowest last year due to the pandemic and was forced to lay off tens of thousands of workers. The three largest companies – Halliburton, Schlumberger and Baker Hughes Inc. – all report earnings this week and are expected to increase earnings by at least 20% compared to the first three months of the year, according to an average of analyst estimates compiled by Bloomberg.

“Margin performance supporting results should be enough today to drive relative outperformance for Halliburton pending company comments on the outlook,” analysts at Tudor Pickering Holt & Co. said. Tuesday in a note to investors. “We will be listening to comments on the international revenue outlook as COVID-19 begins to affect certain international regions again.”

Oil service providers haven’t seen three consecutive quarters of stock appreciation since the days of $100 a barrel of crude in 2014. Now, as drilling speeds up around the world, the Philadelphia Oil Service Index shows just that.

The Houston-based contractor reported second-quarter earnings per share excluding one-time items of 26 cents, ahead of the analysts’ average of 23 cents, while revenue of $3.7 billion lagged the average of $3.7 billion. $3.75 billion. Halliburton reported its largest North American quarterly revenue since the start of the pandemic last year.

Miller, who saved more than $1 billion in costs during the recession, forecasted double-digit annual growth in international orders in the second half of this year three months ago. Closer to home, he left investors disappointed with the more subdued outlook for the North American market.

Shares have made a 2.4% gain this year from Monday’s close, following four consecutive annual losses that saw the company’s market value plummet by more than half. The stock has 16 “buy” recommendations among analysts, compared to six “hold” and three “sell”.

Of its largest competitors, Halliburton relies most on North America, where it generates about 40% of its sales. According to Goldman Sachs, US fracking is expected to grow by 7% in the current quarter, before wiping out those gains in the final three months of the year. Explorers are expected to increase spending by 20% next year, the bank said in a note to investors last week.

Expenditure on exploration and production is widely seen as a measure of future crude oil production, as budgets cover everything from drilling new holes in the ground to fracking and completing the wells to keep oil flowing.

(Updates with analyst comments in fifth paragraph.)

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