Halliburton 4Q Profit Falls 40 Percent, but Beats Analysts Expectations

Halliburton 4Q Profit Falls 40 Percent, but Beats Analysts Expectations

Oil industry services provider Halliburton Co. was upbeat Friday despite a 40 percent decline in fourth-quarter profit, citing heavy demand for its oilfield equipment and personnel and predicting more of the same for 2007.

Earnings fell to $658 million, or 64 cents per share, compared with $1.1 billion, or $1.04 per share, during the same period a year ago. But the prior-year results included $540 million of income, or 51 cents per share, that came from a tax benefit.

Analysts surveyed by Thomson Financial were looking for earnings of 61 cents per share.

In a conference call with analysts, Halliburton Chairman and Chief Executive Dave Lesar offered a positive outlook for this year, saying customers have indicated strong demand for oil-field services despite sliding natural gas prices.

Some industry analysts were concerned by the potential for a slowdown in North American natural gas drilling in the first part of 2007. A relatively mild winter so far has weakened demand for natural gas as a heating source, which analysts say could lead to bloated inventories.

“If U.S. gas producers begin to cut back on their drilling budgets, the service companies will feel the impact almost immediately,” Bear Stearns analyst Robin Shoemaker said in a research note this week.

Halliburton’s energy services group, its largest division, provides a variety of services to oil and gas companies, including drilling the wells and managing the reservoirs once they’re tapped. The energy services group posted record revenue of $3.5 billion in the fourth quarter due to heavy exploration and production.

“We believe any weather-related impact on the price of natural gas will be short-lived and, if the situation occurs, will be self-correcting as activities would slow temporarily, allowing gas inventories to normalize,” Lesar said.

A Halliburton competitor, Schlumberger Ltd., also provided an upbeat outlook when it reported 2006 financial results last week, forecasting “high growth” through the end of this decade and into the next. Schlumberger’s fourth-quarter profit soared 71 percent to $1.13 billion on revenue of $5.35 billion, the company said.

Halliburton’s quarterly revenue rose 8 percent to $6.02 billion from $5.57 billion in the previous year, topping analysts’ estimates of $5.9 billion. Gains at the energy services group were partially offset by lower revenue at Halliburton’s engineering, construction and government-services arms, known as KBR Inc.

KBR, which Halliburton is spinning off, is the Army’s contractor for providing food and shelter to the military in Iraq and Afghanistan — a distinction that’s kept it and Halliburton under Congress’ microscope in recent years. Democrats have been critical of the dealings, claiming KBR benefited from ties with Vice President Dick Cheney, who once led Halliburton.

In November, KBR agreed to pay $8 million to settle six-year old claims it overcharged the Army for construction and other support services in the Balkans.

KBR reported revenue of $2.5 billion for the most-recent quarter, down from $2.7 million in the year-ago period — a decline the company attributed in part to decreased activity on government projects for the U.S. military.

KBR had its initial public offering in November, raising $508 million, the company said. Lesar said he expects the separation of the two companies to be completed in the next three months. Halliburton still owns an 81 percent stake in KBR.

For the year, Halliburton said its net income was $2.3 billion, or $2.23 per share, down from $2.4 billion, or $2.27 a share, in 2005. Still, the 2006 result handily beat the consensus Wall Street estimate of $2.14 a share.

Full-year revenue rose to $22.6 billion from $20.2 billion in 2005.

Lesar said the company’s balance sheet had never been stronger, ending 2006 with $4.4 billion in cash, an increase of nearly $2 billion from the start of last year. As such, he said, the company has increased its capital-expenditures budget by 40 percent for 2007. The company will focus that growth in foreign markets such as the Middle East, Africa and Asia, the company said.

Shares of Halliburton fell 59 cents, or 1.98 percent, to close at $29.15 on the New York Stock Exchange. KBR shares rose 20 cents to finish at $23.45.

Halliburton shares have traded in a 52-week range of $26.33 to $41.99; KBR’s comparable trading range is $20.50 to $27.63.

Source: AP via biz.yahoo.com

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