(Bloomberg) – Halliburton Co. impressed investors by dramatically cutting costs more than expected as the fracking giant made its way through a historic shale bust. The shares rose more than 8%.
The Houston-based company posted free cash flow of $ 456 million during the second quarter, it said in a statement Monday, and is charting a “fundamentally different course” after laying off thousands of workers and cutting its dividend in the last months. The free cash flow number was more than double the analysts’ forecasts.
The world’s largest provider of fracking “delivered simply outstanding results against expectations,” analysts at Tudor Pickering Holt & Co. wrote in a note to investors. “The structural cost cuts are clearly paying off.”
Halliburton reported an adjusted second-quarter earnings per share of 5 cents, excluding deficiencies, against analyst expectations of a loss of 12.3 cents. The stock rose 5.5% to $ 13.80 at 9:51 a.m. in New York after a previous rise of up to 8.1% for the biggest gain in five weeks.
Chief Executive Jeff Miller let workers go and slashed the Halliburton dividend after falling oil prices caused by a ruined global pandemic fracking much more than expected. Rival Schlumberger Ltd. predicted in April that up to 60% of pressure pumping demand would drop on July 1. Up to 85% of frack teams have lost jobs this year, according to Primary Vision Inc.
The second quarter “marked the nearly complete closure of the US oil field,” Praveen Narra, an analyst at Raymond James, wrote in a note to investors last week. “Companies saw a one-month ‘fraction holiday’ with little or no activity, while drilling rigs dwindled at their fastest rate.”
More than 100,000 US oil workers have lost their jobs since the pandemic-induced decline began, and service companies were the hardest hit. After more than 200 oilfield service providers have sunk in the past five years, 2020 is shaping up to be the worst, with the highest volume of debt owed during the bankruptcy, according to a July count by the law firm Haynes & Boone LLP.
During the first three months of the year, before the worst of the crisis, the world’s three largest oil services companies had already announced more than $ 1 billion in charges reflecting the deterioration of their business.
Halliburton followed suit by announcing $ 2.1 billion in deficiencies for the second quarter, primarily due to the lower value of its fracking and real estate equipment.
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 on July 22, followed by Schlumberger, its biggest rival, at the end of the week.
(Updates with the stock price gain in the first and fourth paragraphs).
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