* Stock jumps 2 pct after dividend boost announced
* Efficiency drive seeks to boost margins 5 pts in 3 years
* Company aims to return 35 pct cash flow to shareholders
By Braden Reddall
Nov 6 Halliburton Co on Wednesday
increased its dividend by 20 percent as the oilfield services
company laid out plans to boost North American profit margins by
2 percentage points next year through cost reductions alone.
Halliburton shares jumped 2 percent after the dividend
announcement at a meeting between company executives and
analysts. Pricing in the North American oilfield market remains
competitive due to spare service capacity, as a natural gas
production glut forced operators to scale back plans, the
But they said Halliburton, the regional market leader, has
invested in efficiency improvements and plans to raise margins
in the region by 2 percentage points over the course of 2014
from 17.8 percent last quarter, part of a 5 point increase over
Any improvements to margins from higher pricing or rising
rig counts in North America would come on top of that rise,
Chief Executive Dave Lesar explained.
"The five points is just going to come from the efforts we
outlined today," he said, calling the push a "multiple-year
pay-off" for the business. "We have some 30,000 employees in
North America - this is not a trivial exercise."
Halliburton said it would raise the dividend to 15 cents per
share for the fourth quarter. The ensuing 2 percent rise in the
company's stock price came on top of a 5 percent rise in the two
weeks ahead of the analyst meeting.
The increased payout is part of the company's ultimate goal
of returning 35 percent of its operating cash flow to
shareholders, Chief Financial Officer Mark McCollum said.
Halliburton, the No. 2 oilfield services company worldwide
behind Schlumberger Ltd, also aims for a return on
capital employed of 20 percent in 2016, compared with an
estimated 11 percent for this year.
Among other goals, executives committed to tripling the
revenue Halliburton earns from its mature fields business to $9
billion by 2016, while expanding in deepwater at least 25
percent faster than the market growth rate.
Eric Carre, senior vice president for drilling and
evaluation, cited industry estimates for deepwater market growth
of 11 percent annually through 2018, with 62 percent of the new
wells to be drilled in the so-called Golden Triangle: Brazil,
West Africa and the Gulf of Mexico.
Over the past three years, Carre said the deepwater market's
compound annual growth rate was 13 percent, against 31 percent
for Halliburton. To achieve that, it invested $1 billion and
increased its Golden Triangle staff by 35 percent.
McCollum said a move toward generating a majority of the
company's revenue outside North America would help shave another
1 to 1.5 percentage points off its effective tax rate, after
reducing it by 3 percentage points this year.
In its home market, Halliburton spelled out the huge
potential for efficiency improvements by giving the example of
one fracking crew. It said that in handling 332 fracking stages,
the crew used 888 truck-loads of proppant, a mix of sand or
ceramic spheres used to crack the rock and pry it open freeing
up the hydrocarbons. The crew also used 200 rail cars and 52
million gallons of fluid.
Halliburton's "frac of the future" effort that it is rolling
out requires 35 percent less personnel and cuts completion time
by 40 percent, instead of the 25 percent it had targeted, while
reducing maintenance costs by half.