Halliburton Has Loss on Debt Costs; Estimates Topped

By Edward Klump

Oct. 20 (Bloomberg) -- Halliburton Co., the world's second- largest oilfield-services provider, posted a third-quarter loss of $21 million on financing costs. The company's shares rose after earnings excluding one-time items exceeded analyst estimates and profit in North America increased.

The loss was 2 cents a share, compared with net income of $727 million, or 79 cents a share, a year earlier, Houston-based Halliburton said today in a statement. Excluding an acquisition charge and $693 million in costs related to redemption of convertible bonds, per-share profit was 76 cents, 2 cents higher than the average of 24 analyst estimates compiled by Bloomberg.

Profit from Halliburton's largest business, completion and production services, climbed 11 percent. That included a 2.8 percent gain in North America, where Halliburton is the biggest provider of pressure pumping, a service where materials such as water or sand are injected into a reservoir to fracture rocks and make gas flow easier.

``What that basically is saying is that pricing has improved for pumping services,'' said Michael Henzi, an analyst at Sterne, Agee & Leach Inc. in Boston who has a ``hold'' rating on Halliburton shares and doesn't own any.

Halliburton rose $2.10, or 12 percent, to $20.36 at 10:21 a.m. in New York Stock Exchange composite trading. Before today, the stock had dropped 52 percent this year.

Spending Cuts

Cuts in capital spending by producers will result in less oil and natural-gas drilling than previously anticipated, Chief Executive Officer David Lesar said in the statement. The reductions will lead to declines in gas supplies and more favorable conditions, he said.

``They are taking a wait-and-see attitude on the future, as expected, I suppose,'' said Pierre Conner, an analyst at Capital One Southcoast Inc. in New Orleans who has an ``add'' rating on Halliburton shares and doesn't own any. ``That's probably the most important thing, even more so than the results being reported today.''

Halliburton has a chance to take market share during the worldwide credit crunch because some competing contractors have less access to capital, Lesar told investors and analysts on a conference call. He said there also may be consolidation in the industry.

The company had $973 million in cash and cash equivalents as of Sept. 30. Halliburton said it has $1.6 billion in unused credit capacity.

Storm Impact

Third-quarter results were hurt by Hurricanes Gustav and Ike, which disrupted output and damaged wells in the Gulf of Mexico on the way to striking the Louisiana and Texas coasts last month. Halliburton said the storms cut its revenue by $74 million and reduced earnings by 4 cents a share.

Halliburton is expanding overseas after gains in oil and gas prices stoked demand for oilfield work from Latin America to Asia. The company opened a Middle East headquarters in Dubai and added technology centers in Russia and Asia.

Third-quarter revenue climbed 24 percent to $4.85 billion, led by a 42 percent gain in Latin America, Halliburton said. The gain was 22 percent in North America, where operating income climbed 14 percent to $569 million. Profit rose 23 percent in the Middle East and Asia.

Oil futures on the New York Mercantile Exchange climbed to a record above $147 a barrel in July, and the average price in the quarter was 57 percent higher than a year earlier. Gas futures traded 44 percent higher and topped $13 per million British thermal units in July.

Highest Since 1985

The number of active oil and gas rigs increased in September to 3,557, the most since 1985, according to a tally by Baker Hughes Inc. The rig count is an indicator of demand for Halliburton's drill bits, well positioning and other products and services.

``The oil-service business is an incredible business when it's tight because pricing improves, your customers are desperate for your products, your margins expand,'' said Dan Pickering, an analyst at Tudor, Pickering, Holt & Co. in Houston. ``When things are softer or slowing, your valuable service becomes more commoditized and the customer is very quick to look for areas to reduce cost.''

Oil tumbled below $70 a barrel last week for the first time since August 2007. Prices will average about $75 a barrel next year, James Crandell, an analyst with Barclays Capital in New York, said in a report this month. North American exploration and production spending will fall 15 percent next year, he said, and spending elsewhere will rise 20 percent.

Schlumberger Ltd., the world's largest oilfield-services company, said Oct. 17 that its third-quarter net income climbed 13 percent to $1.53 billion, or $1.25 a share.

To contact the reporter on this story: Edward Klump in Houston at eklump@bloomberg.net.