Halliburton, Weatherford profits beat; shares leap

By Braden Reddall and Euan Rocha

SAN FRANCISCO/NEW YORK (Reuters) - Strong results from Halliburton Co (HAL.N) and Weatherford International Ltd (WFT.N) on Monday helped send oilfield service shares soaring, but failed to allay industry-wide anxiety about the outlook for 2009.

The better-than-expected third-quarter results from two of the sector's top six companies were driven by international activity and greater North American demand. Both stocks rose sharply, also lifted by a 3 percent rise in oil prices on expectations OPEC will cut output this week.

Both companies, however, warned that the sharp drop in energy prices, particularly for natural gas, from their summer peaks could hurt profitability.

"If the price of hydrocarbon is down, albeit at a level that is still attractive but is down, obviously pricing power internationally is not going to be the same," Weatherford Chief Executive Bernard Duroc-Danner told investors on a conference call.

In recent weeks, all companies offering equipment and technology to help extract oil and natural gas have been hit hard as the economic slowdown hurts energy prices, threatening marginal exploration and production projects.

Halliburton said the announced reduction in some customers' capital spending would bring down its North American rig counts below previously anticipated levels.

Drilling contractor Nabors Industries Ltd (NBR.N) said on Monday, alongside quarterly results, that due to an expected drilling slump it would cut capital spending that was not tied to contracts or did not offer rapid returns.

"Nobody's making a call on where '09 goes," said Pierre Conner, an analyst at Capital One Southcoast, though he agreed with Halliburton's view that those operating rigs at reduced numbers in North America next year would be more likely to pay for services to increase well output.

Halliburton had a much better quarter for such services in its completion and production unit, which saw North American margins rise 2.6 percentage points from the previous quarter to 27.2 percent, offsetting a fall elsewhere. That was driven at least in part by lower costs, Conner said.

Halliburton CEO Dave Lesar said in a statement that while lower energy prices were likely to curtail drilling activity in North America, he expects most new projects to continue.

"We are cognizant that a worldwide recession would have negative short-term implications for demand," he said.

TOPPING WALL STREET

Excluding special items, Halliburton posted earnings of 76 cents a share on a 23.5 percent rise in revenue to $4.85 billion, comfortably exceeding analysts' average estimates of 74 cents and $4.62 billion, according to Reuters Estimates.

Including an acquisition-related charge and costs from the settlement of convertible debt, it posted a third-quarter net loss of $21 million.

The hurricanes that hit the Gulf of Mexico hurt results by 4 cents a share, but North America was strong despite that.