Houston oil field services company Halliburton is cutting jobs, storing hydraulic fracturing equipment and focusing on higher margin businesses as it contends with fracking slump that pummeled its earnings in the second quarter.
Halliburton is the market leader in North America, where it dominates fracking in U.S. shale fields. North America accounted for about 57 percent of its revenues in the second quarter, but a slowdown in the Permian Basin and other shale fields has undercut the demand for fracking services as oil prices hold at modest levels and pipeline shortages constrain drilling.The company’s profits plunged to $75 million in the second quarter from $511 million in the same quarter a year earlier. Revenues slipped to $5.9 billion from $6.1 billion in the second quarter of 2018.
During a Monday morning investors’ call, Halliburton CEO Jeff Miller said the company is responding to the situation by pulling unused fracking fleets from the field and not redeploying them until it can see “acceptable returns.” Halliburton also sliced its North American workforce by 8 percent during the second quarter, but did not disclose the number of jobs cut.
Halliburton has about 60,000 employees worldwide.
” (Hydraulic fracturing) remains oversupplied and we’re not afraid to reduce our fleet size, as it contributes to righting the supply and demand imbalance,” Miller said. “This may impact our (revenues) in the near term, but saves labor and maintenance costs and I believe will lead to better margins.”
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The oil field services sector is still recovering from the oil bust that ended in 2016 and led to billions of dollars in losses and thousands of job cuts. When oil prices plunged by more than 40 percent at the end of last year, it was another set back for services companies that were just beginning to regain pricing power after years of giving steep discounts to their customers, exploration and production companies. Although prices have recovered to about $56 a barrel from a December low of about $43, oil and gas companies have tightened their spending.
Takes a licking
oil field services stocks have taken a beating in recent years. Halliburton’s stock market value of $20.4 billion, for example, is roughly one-third the $60.4 billion during the second quarter of 2014, the peak of the last oil boom. Industry analysts view Miller’s response to the North American hydraulic fracturing slump as at strategic shift that could improve returns for stockholders.
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Part of Halliburton’s new strategy is spending less of the company’s capital budget on hydraulic fracturing and more on business lines with higher rates of returns such as drilling tools and wireline, which uses cable to lower sensors, equipment and explosives into wells, said Byron Pope, an analyst at the Houston investment bank Tudor, Pickering, Holt & Co.
“Historically, their game plan was one where they would take more market share from smaller competitors,” Pope said.”Today, they announced that they are going after higher returns”
Read it from Houston Chronicle – Photo: Steve Gonzales, Staff / Houston Chronicle
