Halliburton announces $242m drop in Q2 profits
Downturn in US drilling activity to blame says US/Dubai-based company
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The US/Dubai-based oilfield services company Halliburton has announced 2009 second quarter net profits of US$262 million compared to $504 million for the corresponding period of 2008.
In a statement released to the media, the company blamed the “steep continued downturn in North America drilling activity’ for the drop. Other factors blamed included lower revenue for most product service lines as well as lower pricing and demand for products and services.
"Weak global demand and volatility in the commodity markets continue to weigh on the oilfield services industry,” Dave Lesar, chairman, president and chief executive officer of Halliburton said.
“The worldwide average rig count decreased 25% sequentially, further weakening industry fundamentals during the second quarter."
"North America continued to experience steep declines in drilling activity leading to increased overcapacity. North America average rig count declined in the second quarter by 39%,” he added.
Lesar also said that the drop in profits had been mitigated by unconventional drilling activity on certain projects in the US.
“Horizontal drilling now accounts for 43% of the current rig count [in the US]. This shift increases the demand for complex solutions, creating the opportunity for a packaged-services commercial approach helping to partially mitigate pricing erosion and protect market share,” Lesar said.
Lesar added that a weakness in natural gas demand had also contributed to the company’s profits plunge.
"Due to the continued weakness in natural gas demand, reflected in the high injection rates for working gas storage, we believe it is unlikely that there will be a meaningful recovery in natural gas prices and, consequently, drilling activity for the remainder of the year,” Lesar said.
The Halliburton CEO remained bullish about the company’s future however.
"We believe that the long-term economic fundamentals of our industry are bright. While we have taken prudent steps to control costs and improve financial flexibility, we continue to execute our strategy of maintaining disciplined investments in technology, capital equipment, and global infrastructure to ensure that we are well positioned at the other side of this cycle,” Lesar said.
"Although the depth and duration of the cycle remains uncertain, we believe the market will benefit companies with broad, integrated offerings, and a strong capital structure such as ours, allowing them to customize solutions across global markets," Lesar concluded.