Halliburton Co (HAL.N), the world's second-largest oilfield services company, posted a higher-than-expected profit, but its stock reversed Friday's gain due to the less exuberant outlook of its management.
Chief Executive Dave Lesar talked of the risk of decreased U.S. gas-directed drilling, and expected some rigs to be redeployed to liquids-rich regions, though he also noted such shifts can weigh on efficiency and financial performance.
Kurt Hallead, analyst at RBC Capital Markets, pointed to the executives' discussion of flat international pricing against seasonal weakness in North America as indicating fourth-quarter profit estimates would need to be trimmed from the current average of $1.03 per share.
Halliburton's profit surge in the past year has been driven by the need for drillers to tap its hydraulic fracturing expertise to extract oil and gas from U.S. shale rock
"The bear case mentality is that U.S. fracking has peaked," Hallead said of what investors had to consider when buying the stock at this point in the cycle.
After a rally on Friday, Halliburton shares fell as much as 7.8 percent on Monday, despite another strong quarterly performance.
Third-quarter net profit rose to $683 million, or 74 cents per share, from $544 million or 60 cents per share a year earlier. Excluding one-time items, Halliburton earned 94 cents per share, topping analysts' average estimate of 92 cents, according to Thomson Reuters I/B/E/S.
Revenue rose 40 percent to $6.55 billion. Analysts had expected $6.39 billion.
Many analysts expect the North American shale boom to last at least through 2012, even with the weak American economy, as producers plow billions of dollars into developing U.S. oil shale fields.
Lesar said Halliburton expects to have hired 17,000 people this year, including 12,000 in the United States, implying an increase in its worldwide headcount to about 77,000.
While acknowledging some clients may cut back on spending, Lesar warned against comparisons with the drilling downturn of 2008. He cited the emergence of new U.S. oil resources, easy access to capital, the higher number of large customers in U.S. land drilling, improved contracts and equipment shortages.
"All of these factors provide me with continued confidence in the resiliency of the North American market," he said.
Delays in operations in Iraq and an operational shutdown in Libya hurt third-quarter results, though Halliburton said profit from operations outside the United States "recovered at the rate we expected" during the quarter.
Three rigs did start operating in Iraq toward the end of the quarter. In Libya, where rebels have ousted ruler Muammar Gaddafi, the company is assessing whether to reopen.
Halliburton has put behind it a major liability attached to former unit KBR Inc (KBR.N), which just settled a five-year dispute over failed bolts on subsea oilfield flow lines off Brazil for $200 million. The company took a $163 million related charge in the third quarter.
Halliburton shares were down 7.1 percent at $34.79 on the New York Stock Exchange on Monday morning, off an earlier low at $34.52.
(Reporting by Ernest Scheyder in New York and Braden Reddall in San Francisco; Editing by Gerald E. McCormick, John Wallace and Matthew Lewis)