Oil field services firm Halliburton Co. cited declines in its North America business as it reported Friday a 26 percent drop in fourth-quarter profit despite a small increase in revenue.
Investors shook off the overall results, focusing instead on Halliburton’s strength in its international business and its vow to work harder to control costs. ??During a conference call with analysts, an executive mentioned job cuts as one way the company has been shedding costs, though it was unclear from his comments if more are looming.
Company shares rose $1.60, or 4.2 percent, to $39.41 in morning trading.
The Houston-based company said for the three months ending Dec. 31, it recorded a profit of $669 million, or 72 cents a share, compared to net income of $906 million, or 98 cents a share, a year earlier.
Income from continuing operations for the fourth quarter came to 63 cents a share.
Revenue in the fourth quarter rose 3 percent to $7.29 billion, compared to $7.06 billion a year earlier.
The company said its North America revenue was down 5 percent compared to the previous quarter. It cited a drop in U.S. natural gas rig activity, an unusually high post-Thanksgiving decline in activity levels with key customers, higher costs and pricing pressure involving hydraulic fracturing contracts.
Halliburton continues to be negatively affected by guar gum price volatility.
Guar is a plant grown mainly in northern India, where its seeds are harvested and then developed into a gummy substance that is a key component in the mix of sand, water and chemicals used in hydraulic fracturing – the process for extracting hydrocarbons from tight formations that has revolutionized oil and gas production.
Halliburton is the world’s largest provider of hydraulic fracturing services.
The company said going forward, it expects the North America rig count this year to improve from fourth quarter levels but will be down slightly compared to 2012.
“I’m optimistic about the coming year and our ability to rebuild our North America margins,” CEO Dave Lesar said.
Despite the troubles in North America, Halliburton has been seeing strong growth internationally.
Among the highlights in the October-December quarter: Latin America revenue was up 14 percent sequentially, Middle East/Asia revenue increased 14 percent sequentially, and in the company’s segment that includes Europe and Africa, revenue increased 8 percent compared to the third quarter.
For all of 2012, profit fell to $2.64 billion, or $2.84 a share, from $2.84 billion, or $3.08 a share, in 2011. Full-year revenue rose to $28.50 billion from $24.83 billion in 2011.
Halliburton this year plans to continue to invest in research and development and new technology, though, in an effort to keep costs and expenses down, its overall capital spending will be down year-over-year. Executives also said that it will keep equipment that has been taken out of service in North America stacked until it has contracts to justify redeploying the equipment.
Addressing job cuts, Chief Operating Officer Jeff Miller said the company has made recent headcount reductions and is looking at areas where it can cut more costs. He said investors may see an increase in severance expenses in the first quarter of this year, though it was unclear from his comments if that would be from already announced job cuts or also include new job cuts.
“I am dead focused on capital discipline,” Miller said.
Also during Friday’s conference call, the company said it is not currently in talks with the U.S. government and other parties about resolving pending litigation involving Halliburton over the 2010 Gulf of Mexico oil spill. Executives said the company is preparing for a civil trial in New Orleans scheduled to begin Feb. 25. Halliburton also faces potential criminal liability over the disaster.
Halliburton was the cement contractor on British oil giant BP’s undersea well that blew out.