Halliburton beats estimates, boosts job cuts after oil crash

DAVID WETHE

HOUSTON (Bloomberg) -- Halliburton Co. beat analysts’ estimates and accelerated the pace of job cuts ahead of a planned $34.6-billion takeover of Baker Hughes Inc.

Excluding certain items, the world’s second-biggest provider of oilfield services earned 49 cents a share in the first quarter, topping the 36-cent average of 32 analyst estimates compiled by Bloomberg. Shares rose 4% to $48.78 at 11:13 a.m. in New York.

Halliburton has now cut over the past two quarters a total of 9,000 workers, or more than 10% of its global workforce as the crash in oil prices forced drillers to cut back, according to Christian Garcia, interim CFO. The company, which is selling assets to win approval for the merger, previously expected to cut as much as 8% of its workers. It employed about 80,000 at the end of last year.

“We are continuing to take a hard look at our operations,” Garcia told analysts and investors Monday on a conference call. “Additional actions will likely be required in the second quarter.”

Halliburton’s exploration and production customers are expected to cut spending by as much as 35% in the U.S. if oil prices average $60/bbl, according to Cowen & Co. A rout that has seen crude fall about 50% since June has led operators to seek cost concessions of more than 30% for oil services, according to Evercore ISI.

Halliburton expects to cut capital spending by 15% this year to $2.8 billion, Garcia said.

The Houston-based company reported a loss of $643 million, or 76 cents a share, after posting a profit of $622 million, or 73 cents a share, a year earlier, according to a statement Monday. Sales dropped 4.1% to $7.05 billion.

‘Pricing Knife’

“The pricing knife fight continues,” James West, an analyst at Evercore in New York, wrote in an April 14 note to investors. “Operators have been racing to cut pricing in an effort to minimize production costs as low commodity prices have rendered many plays uneconomical.”

West Texas Intermediate, the North American benchmark crude, has fallen about 47% since peaking in June and traded at $56.95/bbl at 11:10 a.m. in New York.

Halliburton in November agreed to buy Baker Hughes, the third-biggest oil services provider, to gain technology and a larger footprint globally. Both companies compete with Schlumberger Ltd. for work that includes hydraulic fracturing.

Schlumberger, the largest oilfield services company, said last week it was more than doubling job cuts because of a delay in recovery for U.S. onshore drilling activity.

Merger Approval

Halliburton and Baker Hughes are planning to sell overlapping business lines to win approval from the U.S. Justice Department for the purchase. Revenue associated with the businesses Halliburton has so far announced for sale generated about $3.5 billion in revenue last year. More assets are expected to be sold to win antitrust approval, although it’s not yet known which ones would be divested, the company said today.

The combined company will be a little more than half the size of Schlumberger. Halliburton expects the deal to close by year end.

“First-quarter earnings results are going to be difficult, especially for those companies leveraged to North America,” West wrote. “The speed and severity of the downturn continues to outpace consensus expectations.”

Baker Hughes will release first-quarter results on Tuesday before the start of regular trading in New York.