Halliburton took a writedown of $2.1bn on Monday, even as it managed to successfully slash spending, as the crash in crude prices caused work to dry up in the oilfield services sector.
The group, one of the world’s biggest oilfield services providers, is the latest company to account for the crude price collapse on its balance sheet. Analysts expect hundreds of billions of dollars worth of writedowns across the sector before the year is out.
The impairment pushed Halliburton to a net loss of $1.7bn in the three months to June, although efforts to cut costs allowed it to post an adjusted operating income of $236m — beating analysts estimates and sending shares up 8 per cent in early trading.
“Halliburton’s second quarter performance in a tough market shows we can execute quickly and aggressively to deliver solid financial results and free cash flow despite a severe drop in global activity,” said Jeff Miller, Halliburton chief executive.
“Our results demonstrate a significant and sustainable reset to the power of our business to generate positive earnings and free cash flow.”
100,000 Jobs lost in the US oil and gas industry since price crash in March
Services groups carry out the oil industry’s grunt work, from drilling wells to installing pipes and supplying sand and maintaining roads. They tend to be hit particularly hard by downturns, as producers cut expenditure and put any new work on hold.
But analysts lauded the group for managing to impose discipline in the face of the downturn. Stephen Gengaro at Stifel Financial said the “aggressive cost-cutting initiatives” had allowed Halliburton to beat market expectations “despite the very stiff macro headwinds”.
Nonetheless, with oil prices remaining historically low, the performance is significantly weaker than last year. The net loss of $1.7bn compares with a $75m profit in the June quarter of 2019. Total revenue of $3.2bn was down 45 per cent on the same period last year.
In line with the rest of the services sector, the company has been forced to cut thousands of jobs. In March it said it would furlough 3,500 employees at its Houston headquarters, before cutting 1,000 jobs in May.
The bulk of the 100,000 jobs lost in the US oil and gas industry since the beginning of the crash, triggered by the pandemic and a price war between Russia and Saudi Arabia, have been in services.
US oil prices, which in April entered negative territory for the first time, have bounced back. But at $40 a barrel, they remain down by about a third since the beginning of the year — and too low for most US shale groups to restart drilling and create demand for services providers.