Idle trucks and oil-production equipment is seen in a Halliburton yard in Williston, North Dakota, the US. Picture: REUTERS/ANDREW CULLEN
Idle trucks and oil-production equipment is seen in a Halliburton yard in Williston, North Dakota, the US. Picture: REUTERS/ANDREW CULLEN

Houston —  Halliburton impressed investors by slashing costs more than expected as the fracking behemoth works its way through a historic shale decline. The shares surged more than 8%.

The Houston-based company posted $456m  in free cash flow during the second quarter,  it said in a statement on Monday, and is charting a “fundamentally different course” after firing thousands of workers and slashing its dividend in recent months. The free cash flow number was more than double analysts’ forecasts.

‘Structural cost cuts’

The world’s biggest provider of fracking “inked simply outstanding results vs expectations”, analysts at Tudor Pickering Holt & Company wrote in a note to investors. “Structural cost cuts are clearly bearing fruit.”

Halliburton reported a second-quarter adjusted profit per share of 5c, excluding impairments, against analysts’ forecasts of a loss of 12.3c. The stock was up 5.5% to $13.80 in New York after earlier rising as much as 8.1% for the biggest advance in five weeks.

CEO Jeff Miller has let go workers and slashed Halliburton’s dividend after tumbling oil prices brought on by a global pandemic wrecked fracking far more than expected. Rival Schlumberger predicted in April that as much as 60% of pressure pumping demand would fall off by July 1. As much as 85% of frack crews have lost work in 2020, according to Primary Vision.

The second quarter “marked the near total shutdown of the US oilfield”, Praveen Narra, an analyst at Raymond James, wrote in a note to investors last week. “Companies saw a month-long ‘frack holiday’ with little to no activity, while drilling rigs declined at their fastest ever pace.”

More than 100,000 American oil workers have lost their jobs since the pandemic-induced slump began, with service companies bearing the brunt. After more than 200 oilfield service providers went under in the past five years, 2020 is shaping up to be the worst, with the highest volume of debt owed during bankruptcy, according to a July tally by law firm Haynes & Boone.

For the first three months of the year, before the worst of the crisis, the world’s three biggest oilfield service companies each had already announced more than $1bn in charges that reflected the deterioration of their businesses.

Halliburton followed that up by announcing $2.1bn in impairments for second quarter, mainly due the lower value of its fracking gear and real estate.

Halliburton, which generates most of its revenue in North America, was the first oilfield contractor to report second-quarter results. Baker Hughes, the No 2 supplier, will report July 22, followed by Schlumberger, their largest rival, at the end of the week.

Bloomberg

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