Halliburton's Lesar Says Oil's Slide Is No Threat to New Orders

By Ayesha Daya

Aug. 14 (Bloomberg) -- Halliburton Co., the world's second- largest oilfield-services provider, said crude oil's 17 percent slide this quarter is unlikely to reduce orders for drilling and exploration contracts.

``Customers are basing decisions on significantly lower oil prices, and they plan very long-term projects that don't switch on or switch off based on the oil price,'' Chief Executive Officer David Lesar said in a telephone interview from Houston yesterday. ``I don't really see it having a major impact on our business.''

Oil tumbled about $30 a barrel since setting a record $147.27 on July 11 on signs that demand in the U.S., which uses a quarter of the world's oil, and Europe will falter as the world economy slows. Prices are about 60 percent higher than a year ago.

Halliburton opened a second headquarters in Dubai last year to court state-run Middle East oil companies that control two- thirds of the world's reserves as they spend more to increase production. The company sold its stake in engineering unit KBR Inc. last year to focus on oilfield work. Its North American division is based in Houston.

The company's biggest Middle East operations are in Saudi Arabia, the world's largest oil producer, where it's drilling wells for the Khurais oilfield. Khurais will produce 1.2 million barrels a day once completed and is state-run Saudi Aramco's biggest project to boost capacity 11 percent to 12.5 million barrels a day in 2009.

Khurais Meets Plan

``Khurais is going very well and is coming to an end,'' said Lesar, 55. ``It is on track and on time.''

Halliburton won a contract in April to provide offshore services at the Manifa field, which has an output target of 900,000 barrels of oil a day, making it Saudi Arabia's second- largest new project.

``We're just in the ramp-up phase and are waiting for some of the drilling rigs to become available, so that project is more ahead of us at this point in time,'' said Lesar. ``We'll probably get started at the latter part of this year, but certainly as we get into early next year.''

The Khurais field will operate by June 2009, and Manifa will add heavy crude from onshore and offshore fields from mid-2011, according to Aramco.

South America

Lesar is heading to Argentina in a tour of Halliburton's South American projects. The company is growing fastest in Latin America, where second-quarter revenue rose by about 33 percent, compared with a year earlier.

Halliburton's revenue outside of North America expanded 26 percent year-on-year, exceeding the company's 20 percent target, Lesar said. He expects ``robust opportunities'' in most Middle Eastern countries where new technologies are required and contractors are in short supply. He's talking with international oil companies about joint projects in Iraq, and will be vying for Abu Dhabi's $10 billion sour gas project, in which ConocoPhillips has a 40 percent stake.

Earnings at Halliburton fell 67 percent in the second quarter because of a year-ago gain from the sale of KBR, and analysts in a Bloomberg survey estimate earnings per share in the third quarter will increase 16 percent from a year earlier.

Halliburton rose about 19 percent in New York Stock Exchange Composite trading so far this year. Schlumberger Ltd., the world's biggest oilfield contractor, fell about 2 percent, while the Standard and Poor's 500 Integrated Oil & Gas Index dropped 12 percent.

The 13-nation Organization of Petroleum Exporting Countries is expected to earn oil export revenue of $1.17 trillion this year, according to U.S. Energy Department estimates.

``A lot of the reservoirs that are being developed today are certainly more difficult to access,'' Lesar said. ``You're looking at heavier oil, higher pressure, deeper water and higher temperatures.''

Lesar said Halliburton wants to be involved in Kuwait's plans to produce an extra 700,000 barrels a day of heavy oil, which is more difficult to pump than conventional reserves. Exxon Mobil Corp. is helping Kuwait expand heavy oil output.

To contact the reporter on this story: Ayesha Daya in Dubai adaya1@bloomberg.net