Halliburton on Friday said it’s adding 2,000 U.S. jobs in the first quarter and ramping up activity faster than anticipated to try to match the surging oilfield activity, especially in West Texas.
In a rare operations update call, Halliburton Chairman and CEO Dave Lesar said the company is spending more money now to protect market share and ensure stronger profits in the future. The plan to “frontload as much of the costs as we can” will mean weaker profits short term to better position Halliburton in the future.
“We are coming off of a historic trough, so what we have to add back is almost unprecedented,” Lesar said, warning that its first-quarter earnings won’t be as strong as previously projected.
At the end of the year, Halliburton had 50,000 employees after cutting 35,000 positions over a two-year oil bust. Now, jobs are beginning to return and idled equipment reactivated. Profits will follow later, Lesar said.
The rig count last week rose to 789, up from a low of 404 in May. But because each rig can now drill more wells and each well can produce more oil, Halliburton President Jeff Miller compared current activity to that of 2014, before prices fell. “Nine hundred (rigs) is the new 2,000,” he said.
Because oilfield activity is picking up faster than Halliburton anticipated, the company is losing some market share temporarily and spending more to maintain as much of that market share as possible, said Bill Herbert, a senior energy analyst at Piper Jaffray & Co.
The state of Texas approved almost 1,000 oil and gas drilling permits in February, as the industry responds to higher oil prices.
Halliburton is the North American leader in hydraulic fracturing, used to extract as much oil and gas as possible from shale rocks.
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Halliburton also is hurt by supply-chain price increases, like the rising cost of sand for fracking, while the company’s own services pricing hasn’t risen to match its growing costs.
Because Halliburton doesn’t have enough sand supplies under contract, Lesar said, Halliburton is taking a $50 million hit just on inflated sand prices.
Internationally and offshore, the industry continues to struggle and won’t begin to bounce back until late 2017 or beyond, he added.
It also doesn’t help that Halliburton lost Chief Financial Officer Mark McCollum, who left to become CEO at smaller rival Weatherford International.
Halliburton’s financial situation was improving late last year, but it still posted a loss of $149 million in the fourth quarter and a $5.7 billion loss during all of 2016.