Strong U.S. land drilling drove Halliburton's better-than-expected 83 percent jump in quarterly profit, sending its shares up nearly 5 percent and lifting the entire oilfield services sector.
The industry's No. 2 player expects U.S. onshore work to offset the impact of a deepwater stoppage that followed the massive blow-out at a BP Plc well in the Gulf of Mexico on which Halliburton Co did the cement work.
Apart from surprisingly resilient drilling activity for natural gas, Halliburton said the number of oil rigs working in the United States was the most since the early 1990s.
Halliburton plans to maintain its overall infrastructure in the Gulf of Mexico in expectation of activity resuming, though it is moving some equipment and staff elsewhere for now.
I do not believe that the deepwater offshore rigs that were mobilized to international locations during this suspension will return to the Gulf for some time, if at all, Chief Executive David Lesar said on a conference call.
He is still planning for 17 deepwater rigs to be at work in the region this time next year, down from more than 30 before.
Halliburton expects the six-month U.S. deepwater moratorium and tighter regulations to trim earnings per share by 5 cents to 8 cents a quarter for the rest of 2010, depending on how shallow-water does.
Analysts had been expecting a profit of $1.44 per share for 2010, up from $1.27 in 2009, though many see estimates rising due to the unexpectedly strong North American performance.
Kurt Hallead, co-head of energy research at RBC Capital Markets, described the North American growth as exceptional. Clearly it was better than most of us had tended to factor in, he said, adding that the Gulf of Mexico impact was roughly as he had anticipated.
Halliburton believes it is indemnified by BP for the Gulf of Mexico disaster, but said it would usher in new regulations and have a profound impact on how deepwater drilling is done. Yet even before that, the sector had been generally planning for better growth outside North America in the next few years.
Second-quarter revenue jumped across all regions, with market share gains internationally, and operating margins jumping to 17 percent from 12 percent a quarter before. Revenue outside North American accounted for 40 percent of the total.
Bill Herbert of Simmons & Co called it an incandescent quarter for the company, especially the strength overseas in the face of tepid rig count growth.
Lesar said private-sector oil companies still had concerns about the pace of the global economic recovery and therefore energy demand, leading them reevaluate project plans for the second half of the year and causing some short-term delays.
Once you start and sanction them, there's really no turning them off until you've spent a lot of money, he said, adding that these projects would likely go forward after the companies took a couple more deep breaths.
Combined with scrutiny of deepwater processes after the Gulf of Mexico spill, and stiff competition, he expected a slower ramp-up in third-quarter revenue and margins outside North America.
(Graphic of oil-service companies' stock performance: http://link.reuters.com/tyn38m)
BY THE NUMBERS
Second-quarter net income rose to $480 million, or 53 cents a share, from $262 million, or 29 cents, a year before.
Leaving out a 1 cent per share gain from discontinued operations, analysts had expected earnings of 37 cents per share, according to Thomson Reuters I/B/E/S. Revenue rose 16 percent to $4.4 billion, while analysts expected $4.1 billion.
Shares of Halliburton, based in Houston and Dubai, were up 4.8 percent to $28.85 in Monday afternoon trading, their highest level in two months.
As of Friday, the stock had lost 17 percent since the April 20 blowout that shook the whole sector. Shares of larger rival Schlumberger Ltd , down 16 percent in that time, were up 3.9 percent on Monday. Schlumberger reports results on Friday.
They both compete with Switzerland-based Weatherford International Ltd , which posts results on Tuesday, and Houston-based Baker Hughes Inc , reporting on August 3. Weatherford shares rose 2 percent on Monday, while Baker Hughes were up 3.3 percent.
Noble Corp , the third-largest offshore rig contractor, will report after the market close on Monday.
(Reporting by Ernest Scheyder in New York and Braden Reddall in San Francisco; Editing by Derek Caney and Tim Dobbyn)