Halliburton falls on tepid forecast of revenue, Middle East recovery warning

Halliburton's shares dropped more than 6% Tuesday after the U.S. provider of oilfield services forecast lower third-quarter revenue and signaled uncertainty over the pace at which the Middle East is recovering.

This year, the 'conflict in Middle -East' has dominated the energy markets. A major oil producing region remains on edge after repeated flare-ups. However, oil prices are not as high as expected when Israel and the U.S. went to war against Iran in February.

Halliburton's Chief Operating Officer Shannon Slocum stated that activity in the area was returning to the highs of the conflict. However, she cautioned the pace of recovery would depend on the day-today events.

Halliburton, which is kicking off the U.S. oilfield service industry's earnings season, expects revenue for its Completion and Production business to be flat or down by 2%, and revenue for its Drilling and Assessment unit to fall 3% to 5%.

The company anticipates that the third-quarter revenues in Latin America, Europe and Africa will be a little lower sequentially with some help from a Middle East rebound.

Jeff Miller, CEO of BP, said that energy security is a major issue. "I anticipate this work to take years."

Slocum stated that land well construction activity in the region remained stable in the second quarter with the exception of pockets of disruptions in Iraq and Bahrain. Offshore activity also increased, but was still below the pre-conflict level.

It expects that international business will grow in the third quarter at a?low double-digit percentage compared to a year ago.

NORTH AMERICA SUBDUED

Latin America revenues grew by nearly 15% during the second quarter while Europe and Africa revenue jumped 24%. Lower activity in Kuwait and Iraq, as well as in Qatar, offset the gains.

In North America, the?revenue was flat compared to a year ago as lower activity in specialty chemicals following the sale of a part of the company's chemicals business and weaker drilling in the Gulf of Mexico off-set gains elsewhere.

James West, Melius Research analyst, said that Halliburton was deliberately sacrificing?some domestic work for international work with higher margins. He added that this was "a rational return-focused use" and not a sign of weakness in North America.

According to LSEG, the company reported a second-quarter revenue?? of $5.71 billion, and adjusted earnings??? of 55 cents a share. This exceeded analysts' expectations by a cent.

Baker Hughes and SLB, the top oilfield service providers, will report their results on Sunday.

(source: Reuters)