Halliburton reports an 'unprecedented decline in drilling activity'

The fallout from the oil crash is here getting clearer.

Oilfield services giant Halliburton reported first quarter earnings before the market open Monday, beating on both earnings and revenues.

But the big story is the impact the oil plunge, and the subsequent decline in drilling activity, is having on the company.

Here are the highlights:

  • Earnings per share: $US0.49, excluding special items, down from $US0.73 the previous year, but beating expectations for $US0.35, according to Bloomberg.
  • Revenue: $US7.1 billion, down from $US7.3 billion last year, but beating expectations for $US6.89 billion.

In the release, CEO Dave Lesar noted, however, that the company has lowered activity levels and sought price concessions in the wage of the oil crash and decline in active oil rigs.

“Lower activity levels” involve the plunge in oil rig counts.

In the release, Lesar said:

North America experienced an unprecedented decline in drilling activity during the first quarter, which drove pricing pressure and margin compression across all product lines. First quarter revenue declined 9% and operating income declined 54%, year-over-year, compared to a 21% reduction in the United States land rig count. Activity has dropped approximately 50% from the peak in late November and we expect to continue to see pricing pressure for our services until the rig count stabilizes.

Active rig counts will keep plunging until at least July, when Morgan Stanley forecasts the counts will bottom. On Friday, data from oil driller Baker Hughes showed that the number of US oil rigs in use fell by 26 to 734 during the prior week, the lowest oil-rig count total since November 2010.

In its earnings report Thursday, oilfield services giant Schlumberger said the sudden drop in drilling activity, particularly in North America, prompted the company to cut 11,000 additional jobs.

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