UPDATE 3-Global drilling lifts Halliburton out of domestic mire

Fri Jan 25, 2013 11:49am EST

* Earnings of $0.63 a share versus Wall Street view of $0.60
    * Sees 2013 E. Hemisphere margins averaging "upper teens"
    * Shares up nearly 5 percent, at highest for more than a
year


    By Braden Reddall
    Jan 25 (Reuters) - Haliburton Co's overseas business
lifted fourth-quarter earnings above expectations, belying how
tough the market is for North American oilfield services due to
the glut of natural gas.
    Shares of Halliburton, the world's second-largest oilfield
services company and the North American leader, rose nearly 5
percent on Friday to their highest levels for more than a year.
    Strong margins in the Middle East, Asia, Europe and Africa
helped make up for a 58 percent drop in operating income in
North America, where the "unconventional" boom, driven by
hydraulic fracturing, has produced all the natural gas that put
the market for services so badly out of joint.
    In a reversal of past quarters, 53 percent of Houston-based
Halliburton's profits came from outside its home market, helped
in part by the growth of "fracking" abroad.
    "Globally, 2012 was a watershed year for the expansion of
unconventionals," Chief Executive David Lesar said, noting its
work on the first unconventional wells in China and Australia
and moves toward them in Saudi Arabia, Mexico and Argentina.
    In the fourth quarter of 2011, Halliburton made only 22
percent of its operating earnings in international markets.
    Industry leader Schlumberger Ltd, which has long set
itself apart by earning more money outside North America, posted
better-than-expected results last week. 
    Profits for competitor Baker Hughes Inc, on the
other hand, were hit hard by the U.S. slump. 
   
    Oilfield companies' pricing power, especially for the
pressure pumping fleets used in fracking, has evaporated as the
number of U.S. rigs targeting gas hit 13-year lows. North
American land drilling is likely to remain subdued this year as
oil and gas companies forecast spending around 2012 levels. 
    "We believe that without a significant uptick in natural gas
drilling, it is difficult to see a path for pressure pumping
equipment to reach equilibrium this year," Lesar said. 
    Halliburton expects the North America rig count to improve
from fourth-quarter levels in 2013, though it will be down
slightly compared to 2012. 
    The company, however, does view the fourth quarter as a low
water mark for profit margins, which at 12 percent were half of
what they were at the start of 2012 and what the company
considers to be "normalized" levels.
    After last year's stockpiling of guar -- a key ingredient
for fracking fluid -- at record-high prices, Halliburton now
believes its guar inventory will be at market prices by the
second quarter, which will drive down costs.
    Halliburton expects 2013 margins in the Eastern Hemisphere
to average in the "upper teens," which is better than some
analysts' expectations.
    Fourth-quarter net income fell 35 percent to $589 million,
or 63 cents per share, which beat the consensus expectation of
60 cents, according to Thomson Reuters I/B/E/S. Revenue rose 3
percent to $7.3 billion, above the average estimate of $7.06
billion.
    Simmons & Co analysts called the performance "commendable"
relative to negative expecations, with both Schlumberger and
Baker Hughes issuing profit warnings last month. 
    Shares of Halliburton were up 4.9 percent at $39.64 in
morning trading on the New York Stock Exchange.
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