Halliburton Earnings: Strong International Growth Offsets Subdued North American Activity

Halliburton’s HAL third-quarter earnings fell in line with our expectations, with revenue increasing 8% year over year, led by the firm’s completions and production segment. The firmwide operating margin was 18%, up nearly 250 basis points compared with the third quarter of 2022, reflecting strong international drilling and completions activity. We maintain our $40 per share fair value estimate and narrow moat rating following results.

Drilling and completions activity has moderated in North America over the last few months, leading to a 3% sequential revenue contraction, mainly attributable to reduced demand for pressure pumping services. This almost exactly offset a 3% sequential increase in international sales, led by growth in Latin America, Europe, and Africa, where offshore projects continue progressing at a steady clip. Roughly one third of Halliburton’s total revenue relates to offshore activity, by our estimate. We expect offshore oil and gas production will serve as a key growth engine over the next several years, with a global project pipeline extending well into 2025. As one of the premier oilfield service providers, we expect Halliburton will continue to secure contracts around the world, contributing to a more profitable revenue mix for the next several years.

Correction: In an earlier version, the moat rating was incorrectly listed as none, rather than narrow.