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Oil Stocks: Halliburton Climbs On Earnings Beat; More Field Service Giants To Report

Halliburton (HAL) beat earnings estimates early Tuesday, as the Houston-based company saw its EPS grow 88% in the second quarter. HAL stock rose, as energy and oil stocks were mixed, in pre market activity.




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Estimates: Wall Street predicted earnings per share of 45 cents and revenue of $4.7 billion for the energy sector giant.

Results: Halliburton EPS ballooned 88% to 49 cents. Revenue in the second quarter increased 38% to $5.1 billion.

Halliburton recorded a pretax charge of $344 million in the second quarter related to its decision to exit Russia due to sanctions. In Q1, the company  also recorded a similar charge of $22 million.

“I expect the international markets will experience multiple years of growth, and I am confident that Halliburton is positioned to benefit more from this multi-year upcycle than ever before,” CEO Jeff Miller said in a statement. “We have a leading technology portfolio, the right geographic presence, and new service line opportunities that align perfectly with our strategy to deliver profitable international growth.”

Oil stocks and prices rose sharply Monday following news that Saudi Arabia did not plan to boost its oil output beyond OPEC+-assigned quotas. Against that backdrop of tight oil and gas supplies, rising demand and soaring energy industry costs, Halliburton kicks off a week of second-quarter reports from  the major oilfield service and infrastructure firms.

The reports — from Halliburton, Baker Hughes (BKR) and Schlumberger (SLB) — should give investors clues on whether oilfield activity points to added supply, and whether oilfield inflation is set to gnaw further into the industry’s capital expenditure budgets.

Oil Stocks Up As Prices Surge

U.S. crude oil surged more than 4% early Monday, after Saudi Arabian foreign minister Prince Faisal bin Farhan Al Saud said oil was not discussed at the U.S.-Arab Summit on Saturday. Partners and members of the expanded Organization of Petroleum Exporting Countries, known as OPEC+, would continue to assess and respond to market conditions.

On Friday, West Texas Intermediate crude prices logged a second straight weekly decline, ending below $100 a barrel for the first time since the start of April. Crude futures were down 7.8% in July through Friday, but still up 30% since Dec. 31. Meanwhile, U.S. natural gas was up more than 29% in July through Friday, a year-to-date gain of almost 88%. Gas prices at the tank on Monday were $4.52, according to AAA data.

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Baker Hughes follows Halliburton on Wednesday and then Schlumberger announces its second-quarter performance on Friday. All three oil stocks traded sharply higher on Monday.


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For much of the year, oil stocks have led the market’s upside by long strides. Recent recession fears, and worries of another Covid wave in China, have slightly dimmed the glow of energy stocks.

While many companies, including Exxon Mobil (XOM) and Chevron (CVX), reported strong capital-expenditure increases in the first-quarter reporting season, oil and gas businesses have shown an unwillingness to scale up production operations.

However, the upcoming earnings reports could be a bellwether of industry production changes. Last week there were 756 active oil rigs in the U.S., an increase of four from the previous week, according to Baker Hughes. BKR releases weekly oil rig counts every Friday. In early June, there were 727 active U.S. oil rigs, a 60% increase from last year’s depressed activity.

Halliburton Stock

HAL closed up 3.6% to 28.88 at the close of Monday’s market trading. Halliburton is one of the world’s largest providers of products and services to the energy industry. The company reports that it has contracts in the Middle East and throughout the Americas, Europe and Africa.

 

Like many oil stocks right now, Halliburton’s chart is not a pretty picture. HAL collapsed after attempting to break out from a cup-without-handle pattern in June. Shares triggered the automatic sell rule, diving in heavy volume below both their 10-week and 40-week moving averages.

Still, Halliburton stock ranks second in the oil and gas field services industry group. HAL stock has a Composite Rating of 74. It has a 78 Relative Strength Rating, which gauges share-price movement with a 1 to 99 score. The rating shows how a stock’s performance over the last 52 weeks holds up vs. all the other stocks in IBD’s database. HAL stock’s EPS rating is 78.

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Baker Hughes

BKR was up 1.8% to 27.17 Monday. The Texas-based company supplies oilfield services, products, technology and systems to the global oil and natural gas industry. The firm operates through multiple segments and provides products and services for on- and offshore operations.

Baker Hughes missed analysts’ forecasts with its Q1 earnings. The company reported a revenue increase of 1% to $4.8 billion. EPS rose 25% to 15 cents.

Estimates: Analysts estimate EPS of 22 cents on $5.3 billion in sales in the second quarter.

Results: BKR will report on Wednesday before the market opens.

Like Halliburton, BKR is broken down and searching for a bottom. It’s down 30% from its 52-week high of 39.78. Baker Hughes ranks third in the oil & gas machinery/equipment industry group. BKR has a 72 Composite Rating and a 74 Relative Strength Rating. Its EPS Rating is 95.

Schlumberger

SLB stock was up 2.57% to 33.13 in Monday’s market trading. The Houston-based multinational is one of the world’s largest providers of offshore drilling services. It also provides technology for well drilling, production, and oil and gas processing.

Estimates: Analysts project the company will post EPS of 40 cents and revenue of $6.27 billion in Q2.

Results: Earnings are set to be released Friday morning.

The company increased its revenue by 14% in the first quarter, to $5.9 billion. Its EPS jumped 62% to 34 cents.

SLB also maintained its full-year guidance. Schlumberger expects year-over-year revenue growth in the midteens and adjusted EBITDA margins at least 200 basis points higher than Q4 2021. On this guidance, SLB initiated an incremental return to shareholders with a 40% dividend increase.

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Like its peer oil stocks, Schlumberger has dived sharply below both its 50-day moving average and 200-day lines. Since June 10, SLB’s relative strength line has also fallen off. Still, the stock is up 4.8% year over year.

Schlumberger ranks fourth in the oil and gas field services industry group and has a Composite Rating of 65. Its Relative Strength Rating is 62 and its EPS Rating is 78.

The Oil Market, Oil Stocks

U.S. crude futures fell around  2% to $100 per barrel Tuesday. The U.S. oil benchmark dropped almost 7% last week and has been declining since mid-June on growing recession concerns and fears that China may reinstate widespread Covid-19 lockdowns.

The price of crude oil has been on an upward trajectory since the beginning of last year. Prices angled sharply higher following Russia’s invasion of Ukraine in February, and as a global backlash against the invasion shunned purchases of Russian oil. Spot prices for U.S. oil briefly touched $130 in March.

U.S. natural gas prices extended a rally slightly above $7 per million British thermal units. This is the highest the price has been since June.

On Monday, Russia’s Gazprom declared force majeure on gas supplies to Europe, citing “extraordinary” circumstances that would not allow it to fulfill its supply obligations, according to Reuters. The Nord Stream pipeline is cutting Russia’s gas supply to Germany, amid already sky-high demand and tight supply.

Gazprom’s Nord Stream pipeline, which connects Russia’s gas fields with Europe, is already closed for annual maintenance until July 21.

Please follow Kit Norton on Twitter @KitNorton for more coverage.

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