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Weak Oil Prices Likely Hit Halliburton’s Results

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October 16, 2015

The turbulence in the oil market in Q3 ultimately leaves oil prices down more than 20% on the year and future production demand in question—a result that’s likely to stain the quarterly results of oilfield-service giants, including in Halliburton’s (HAL) Monday report.

The end run began to surface late Thursday when Schlumberger (SLB), the world’s largest oilfield-services company, turned in Q3 earnings that tumbled 49% from the year-ago comparable, on revenues that were off 33%.

For HAL’s pre-bell Monday release industry analysts expect a similar fate. The current estimate consensus, according to Thomson Reuters, is for a 35.1% drop in revenue to $5.65 billion, accompanied by a 76.5% dive in earnings to $0.28 a share.

Despite all the headwinds, HAL managed to outpace expectations in Q2 on both the top and bottom lines. Industry analysts attribute that to HAL’s cost controls and higher margin technology but note that the company warned then that Q3 would be under pressure.

Oil, Oil Everywhere

Crude oil supply continues to be the big issue even after published reports in recent sessions implied that persistently weak prices were starting to dent production plans. Still, the U.S. Energy Information Administration this week showed crude stocks grew by 7.6 million barrels last week, the highest increase in six months. Oil supplies are holding near record levels and so-so demand has worsened its price outlook. Earlier this week, the International Energy Agency, in its closely-watched monthly oil market report, cut its forecast for oil demand growth for next year by about 200,000 barrels a day compared to its previous outlook issued in September.

Analysts and traders are anxious to hear HAL’s outlook for Q4 and beyond. The continued volatility in oil prices—back below $50 a barrel in U.S.-traded futures after a brief flirt with crossing above that line—leaves HAL in a position to soothe, or further ruffle, investor sentiment. Wall Street will also be listening for more information on its proposed merger with competitor Baker Hughes (BHI).

Halliburton-stock-chart

FIGURE 1: TRENDING LOWER FOR NOW.

HAL shares had retreated some 11% on a year-over-year basis through October 15 and its trading has been choppy in recent weeks. Data source: Standard & Poor’s. Not a recommendation. For illustrative purposes only. Past performance does not guarantee future results.

More from the Banks

Also up pre-bell Monday, Q3 earnings for financial holding company Morgan Stanley (MS). Its release essentially caps the stretch of results from the big banks. Like others, its top and bottom lines are expected to decline, but not to the same degree, says Street analysts.

Those polled by Thomson Reuters are projecting per-share profit of $0.62 per share on revenue of $8.54 billion. A year ago, MS turned in $0.65 per share earnings on $8.7 billion in revenue.

Unlike its competitors, MS’s trading department has been growing revenues, which were up roughly 28% in Q2, according to company reports; analysts believe that helped the firm beat Wall Street’s earnings expectations. Will the same hold true for Q3?

MS stock is flat on a year-over-year basis and is down more than 17% from its 52-week high in mid-July. Shares had been trending higher since bottoming in late September.