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Halliburton, Schlumberger Report Major Losses In 2016, Aim To Raise Prices

January 24, 2017

Source: Houston Buisiness Journal

Schlumberger Ltd. and Halliburton Co.,the top two oil field services companies worldwide, saw their 2016 revenue decline by about a third and reported 10-figure net losses for the year.

Schlumberger Ltd. Chairman and CEO Paal Kibsgaard.(Photo-HOUSTON BUSINESS JOURNAL)During conference calls to discuss the results, top executives of both companies discussed the need to raise oil field services prices in 2017.

Houston-based Halliburton reported Jan. 23 that its net loss was more than $5.76 billion, or $6.69 per share, for 2016 and about $671 million, or 79 cents per share, for the fourth quarter. Excluding special items, Halliburton reported adjusted income from continuing operations of 4 cents per share for the quarter, beating analysts’ expectations of 2 cents. For the year, the adjusted loss from continuing operations per share was 2 cents, beating the expected loss of 5 cents, according to Yahoo Finance.

Halliburton also reported that total revenue for 2016 was nearly $15.89 billion, down about 33 percent from more than $23.63 billion for 2015 and slightly less than the $15.94 billion analysts predicted. For the quarter, revenue was $4.02 billion, which is about 21 percent lower than the fourth quarter of 2015 and a little shy of the predicted $4.09 billion. However, the quarter’s revenue was up 5 percent compared to $3.8 billion in the third quarter.

The news comes on the heels of Schlumberger, which has its primary U.S. office in Houston, releasing results on Jan. 20.

Its revenue was $27.81 billion for the year, down about 22 percent from nearly $35.48 billion in 2015. However, that includes about $4.2 billion in revenue from acquiring Houston-based Cameron International Corp. in April. Without the Cameron acquisition, revenue would have been down 34 percent compared to 2015.

Revenue for the fourth quarter was nearly $7.11 billion, down about 8 percent year over year but up 1 percent from the previous quarter. It also beat analysts’ expectations of $7.07 billion, according to the Wall Street Journal.

Schlumberger reported a net loss of nearly $1.69 billion, or $1.24 per share, for the year and $204 million, or 15 cents per share, for the fourth quarter. Excluding special items, Schlumberger’s adjusted earnings per share were $1.14 for all of 2016 and 27 cents for the fourth quarter, the latter of which was in line with analysts’ expectations.

In a conference call Jan. 20, CEO Paal Kibsgaard noted Schlumberger was trying to recover some of the pricing concessions the company gave during the downturn. The company is having "active pricing discussions, I would say, with all customers at this stage, so that process has started and will continue in the coming quarters," Kibsgaard said, according to a transcript from Seeking Alpha.

Meanwhile, Halliburton President Jeff Miller kicked off his portion of his company's Jan. 23 conference call by talking about pricing trends, according to a transcript from Seeking Alpha.

“While rumors are circulating in the industry about huge price increases, that’s just not a universal fact,” he said, noting “the service price recovery is starting from an extremely low base.”

However, he stressed the industry’s regressive pricing trend “needs to become a pricing progression. This means that, for now, Halliburton will have to compete with companies that are satisfied with lower levels of short-term profitability. But we don’t believe their pricing is sustainable. You can’t have negative margins forever.”

Schlumberger is the Houston area's third-largest public company, and Halliburton is the sixth, based on their 2015 revenues, according to Houston Business Journal research. Houston-based Baker Hughes, the third-largest oil field services company worldwide, will announce its results Jan. 26.

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