Halliburton profit jumps on strong U.S. demand

NEW YORK/SAN FRANCISCO Mon Jul 18, 2011 1:15pm EDT

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NEW YORK/SAN FRANCISCO (Reuters) - Halliburton Co (HAL.N), the world's second-largest oilfield services company, reported a forecast-topping 54 percent jump in profit on Monday as a U.S. onshore drilling boom showed no sign of cooling off.

The second-quarter results clearly demonstrate how Halliburton has benefited from its North American leadership in the pressure pumping technology that enables oil and gas producers to tap in to shale rock.

High oil prices have prompted those producers to plunge billions of dollars into developing fields such as the Eagle Ford shale in Texas, creating a tighter market for equipment that allowed Halliburton to push through price rises.

"It was both top and bottom lines, and a significant component was pricing," said Roger Read, an analyst with Morgan Keegan & Co.

The North American boom was likely to last through 2012, helped by the move to more developments that benefit from high oil prices as natural gas drilling slows.

"What we are seeing in North America, plus the continued international recovery, will lead to even a more favorable earnings picture as we go through 2011 and beyond," Chief Executive Dave Lesar told analysts on a conference call.

Second-quarter net profit climbed to $739 million, or 80 cents per share, from $480 million, or 53 cents per share, a year earlier. Excluding one-time items, it earned 81 cents per share, topping the average analyst estimate of 74 cents from Thomson Reuters I/B/E/S.

Second-quarter revenue rose 35 percent to $5.9 billion and came in above the average analyst forecast of $5.71 billion. (For a graphic on Halliburton versus its competitors: r.reuters.com/dyw62s )

UBS analyst Angie Sedita, who anticipates more positive earnings surprises from Halliburton driven by North America, noted that the stock traded at a discount to its peers.

Shares of industry leader Schlumberger Ltd (SLB.N), with far more exposure to markets beyond North America, were down 0.5 percent on Monday morning while those of Houston-based rival Baker Hughes Inc (BHI.N) rose along with Halliburton.

Halliburton said its margins would grow more slowly in the third quarter than in the second due to cost inflation and a slowdown in the recovery of Gulf of Mexico deepwater drilling as new permits become harder to come by.

"The pace of permit issuance has slowed again and the fact that some of the initially permitted wells are nearing completion creates a risk that the Gulf recovery could slow or stall in the second half of 2011," Lesar said.

Second-quarter activity outside North America was soft. While seasonal pickups in the North Sea and Russia lifted revenue, the Libya shutdown, delays in Iraq, rising sub-Saharan Africa costs and sluggish markets in Britain and Algeria all cut into profits in those markets. Lesar said those factors shaved 4 percentage points off Eastern Hemisphere margins.

Halliburton shares were up 0.3 percent at $53.22 on Monday even as a 2 percent drop in oil prices hurt the sector .OSX.

(Reporting by Matt Daily in New York and Braden Reddall in San Francisco; Editing by Derek Caney, Maureen Bavdek and Matthew Lewis)

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