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UPDATE 2-Halliburton sees drop in N.American revenue in 3rd qtr
* Sees weak gas prices hurting profit margins
* Sees little relief from high guar prices until 2013
* Shares down 2.2 pct
By Braden Reddall
Sept 4 (Reuters) - Halliburton Co, the largest oilfield services provider in the United States, said a decline in North American drilling would lower revenue in the region in the third quarter from the second quarter.
U.S. benchmark natural gas prices, despite pulling away from decade lows, are still down more than 25 percent from last year. So the number of rigs working has steadily dropped across North America, dampening services companies' pricing power.
Halliburton, which had been looking for steady revenue, said the effect of weaker pricing on North American profit margins in the third quarter would be between 2.5 and 3 percentage points.
"We do expect that the margin degradation relative to price will level out as we conclude the year," Chief Financial Officer Mark McCollum said at the Barclays CEO Energy/Power Conference in New York, which was available via webcast.
Shares of Halliburton underperformed the sector on Tuesday as a result of the new profit outlook, trading down 2.2 percent at $32.05, compared with a 0.8 percent decline in the Philadelphia Oil Service index.
Halliburton's North American operating margins fell 5 percentage points in the second quarter from the first, to below 22 percent, with about a third of that drop caused by lower prices.
The other two-thirds of the margin depression was due to the jump in prices for a key hydraulic fracturing ingredient, guar. McCollum reiterated that high guar prices would weigh on North American margins throughout the rest of this year.
"I suspect that there won't be significant relief from guar pricing in the fourth quarter," he said, while noting the recent good news of rain in India, the world's dominant supplier of guar beans.
"All indications suggest that we should see a significant moderation in guar pricing as we go into 2013," he added.
McCollum said a positive aspect was that Halliburton's substitute for guar, PermStim, met 5 percent of its guar demand in the second quarter, and the uptake had been even more dramatic in the current quarter. Rival Baker Hughes Inc has reported similar success with its own guar substitute.
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