Halliburton CEO Jeff Miller openly discussed his company’s rough start to the year and the operational challenges it faced in North America due to U.S rail disruptions during a press conference following the release of the company’s first quarter results on April 23. But that didn’t stop the oilfield services giant from posting a 34% increase in revenue over last year’s first quarter, totaling $5.7 billion during the period in 2018.
Miller said that the organization adjusted to the complexities it faced in order to minimize disruptions for customers. "Business conditions are back to where we thought it would be and I'm confident in our ability to reach normalized margins in North America this year," he said.
Halliburton’s adjusted operating income during the period was $619 million driven by robust market conditions in North America. "I'm very pleased with the way our North America business exited the quarter,” he said, adding Halliburton has delivered the highest returns in the industry for the last five quarters.
Halliburton also wrote off its remaining investment in Venezuela at a cost of $312million. The company said it would continue to operate in the country “at a reduced level”, but would be careful about its future exposure.
Schlumberger similarly wrote off its investment in Venezuela at the end of last year, taking a pre-tax writedown of $938 million.
Halliburton’s Completion and Production division achieved a strong March exit with margins in the mid-upper teens and revenue of $3.8 billion in the first quarter. The Drilling and Evaluation revenue in the first quarter was $1.9 billion, which represents a 15% increase from the same period during last year.
According to Chris Weber, Halliburton's CFO, North American revenue in the first quarter of 2018 was $3.5 billion, a 58% year-over-year increase. The increase was driven by increased activity throughout the U.S. land sector in the majority of Halliburton's product service lines, primarily pressure pumping as well as higher drilling and artificial lift activity.
Miller said that the pressure pumping market is undersupplied today and will remain so for the rest of the year. "Despite the incremental horsepower coming into the market, I believe this undersupply will persist as wear and tear continues to degrade the existing equipment, he said.
However, Halliburton has a clear advantage since it use advanced equipment and maintenance technology that reduces maintenance expenses. This helps the company achieve better utilization, with increased pumping hours per day.
"We remain on the path to normalize margins in North America, and our March performance was a strong step in the right direction," Miller said. He explained that the company needs to push prices to recover costs and increase net profit, optimize utilization as the market grows and use advanced technology to create value for customers and reduce costs.
Regarding international markets, Halliburton has never been in a better position for recovery than it is today, according to Miller. International revenue in the first quarter of 2018 was $2.2 billion, primarily due to increased drilling activity and pressure pumping activity in Eastern Hemisphere as well as Latin America.
"We look forward to working with our customers to maximize the value of their investments," he said.
Miller also spoke about the launch of several exciting technologies launched in the last year by Sperry Drilling, which is an industry leader in providing solutions to optimize drilling efficiency. These include advanced technologies to create better wells by utilizing improved mapping, reduce drilling time, as well as improve well placement accuracy to optimize asset value for customers. Miller expects to generate attractive returns from these investments.
"Our strategy is executable, is working well and resonates with our customers," said Miller. He added that his strategy is delivering return and he is confident that it will continue to do so.
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