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Halliburton says 3Q profit rises as oil firms expand drilling, even with lower crude prices
A five-month slump in oil prices hasn't spooked the petroleum industry so far.
Drilling activity rose in in the U.S. in the third quarter and that boosted net income for Halliburton, a major provider of oil industry services. The company said its profit rose 26 percent.
Halliburton Co., based in Houston, is the first big player in the industry to report third-quarter results.
The company expects producers to continue to drill aggressively for oil in the U.S., particularly the rich underground shale deposits such as the Eagle Ford region of Texas and the Bakken region in North Dakota and Montana. New technologies have allowed companies to cheaply produce oil and natural gas from those fields, sparking a rush to drill despite a 24-percent drop in the price of benchmark crude since May.
The number of drilling projects grew 6 percent in the U.S. from the second to third quarter, Halliburton said. Oil companies may eventually cut back, but CEO Dave Lesar said he doesn't see "any meaningful changes" in the industry for now.
"I continue to believe in the long-term prospects for our business," Lesar said.
A plunge in oil prices three years ago forced many companies to scale back on drilling. The number of active rigs dropped by more than half as oil tumbled from more than $147 per barrel in July 2008 to below $61 per barrel in July 2009.
This time will be different, Lesar said. Oil giants like Exxon, Chevron and Royal Dutch Shell have become increasingly involved in America's oil and gas fields in the past three years, and they usually don't change course because of a short-term fluctuation in prices. Besides, oil prices haven't dropped nearly as much as they did three years ago.
With more money flowing in internationally, banks appear onboard as well, Lesar said. That ensures the industry has plenty of cash to carry out new projects.
Three big acquisitions over the past day show high expectations for the energy industry.
Norwegian oil company Statoil ASA announced Monday that it would buy Brigham Exploration Co. of Austin, Texas for $4.4 billion in cash, giving it control of fields in North Dakota. Less than three hours later AmeriGas said it would pay $2.9 billion for the propane operations of Energy Transfer Partners.
Kinder Morgan plans to buy El Paso Corp. for $20.7 billion in a deal that would create America's largest natural gas pipeline operator.
Still, for investors, Halliburton's prospects were clouded by troubling legal news.
The company may be forced to pay millions or billions of dollars as part of its role in last year's Gulf of Mexico oil spill. Halliburton, which was hired to do cement work on the well, has shared the blame for the disaster with well owner BP and rig owner Transocean. Halliburton has denied that it is at fault, but analysts say it may pay BP anyway to clear itself from any future legal claims.
A stake holder in the well, Anadarko Petroleum Corp., on Monday agreed to pay BP $4 billion.
BP already has accepted a $75 million settlement from contractor Weatherford International Inc. and a $1 billion settlement with MOEX Offshore 2007 LLC, which owned 10 percent of the well.
Shares fell $2.77, or 7.4 percent, to $34.66 in midday trading.
Canaccord Genuity analyst Scott Burk said the stock price decline follows a sharp rise last week. Some investors were anticipating profit increases similar to the first half of the year, when Halliburton nearly doubled its net income. Halliburton may have exceeded analyst expectations in the third quarter, but "it wasn't a blowout quarter," Burk said.
The Houston oil services company reported earnings of $683 million, or 74 cents per share, for the three months ended Sept. 30. That compared with $544 million, or 60 cents per share, for the same period in 2010. Revenue rose 40 percent to $6.55 billion.
Income from continuing operations was 94 cents per share. Analysts, who tend to base estimates on continuing operations, were expecting earnings of 91 cents per share on revenue of $6.35 billion, according to FactSet.
The company said costs rose for materials, logistics and labor in North America, and project delays in Iraq and Libya slowed down its international business.
Profit at Halliburton's completion and production business increased 75 percent to $1.07 billion. The company's drilling and evaluation business saw profit increase 36 percent to $369 million.
Schlumberger Ltd. is expected to release its financial results on Friday while Baker Hughes Inc. will post its results on Nov. 1.
Chris Kahn can be reached at http://twitter.com/ChrisKahnAP