Army role helped raise Halliburton net income. Core work was key to most of increase
April 29, 2003, 10:48PM By NELSON ANTOSH Copyright 2003 Houston Chronicle
Halliburton said Tuesday that first-quarter net income nearly doubled from a year earlier amid improvements in its core oil-field service businesses, with a little help from an Army contract.
But most of the help came from comparing the first quarter against a year-ago period that included a patent infringement judgment against Halliburton totaling $98 million.
Altogether, net income for the quarter that ended March 31 rose to $43 million, or 10 cents per diluted share, up from $22 million, or 5 cents per share, in the quarter a year ago. Revenues grew 2 percent to $3.1 billion.
Income was reduced by a $34 million charge, equal to 8 cents per share, from cost overruns and delays on the Barracuda-Caratinga project offshore Brazil.
Chairman, President and Chief Executive Dave Lesar said the results were understandable and predicted better.
"In an environment where activity was down in Venezuela and the Middle East, Halliburton Energy Services' results compare favorably to the prior year quarter as well as the fourth quarter of 2002," he said in a statement.
"Although I am disappointed by the additional charges on Barracuda-Caratinga, I believe that progress on this project is being made in our negotiations" with Brazilian state oil giant Petrobras.
Additional improvements are expected during the second quarter as the recovery in the oil-field services industry continues, Lesar said.
The company's stock declined 32 cents to close Tuesday at $20.99.
A $400 million, three-year contract with BP announced Monday should start to produce improvement during the third and fourth quarters, said analyst Kurt Hallead of RBC Capital Markets.
Halliburton Energy Services will provide drilling and completion products and services for BP America in the Gulf and the lower 48 states. The biggest gains in market share with BP will be in logging and well stimulation.
"When you sort out all the noise, their core oil-field service business continues to move in a positive direction," Hallead said.
"Relative to their peers, their performance on the oil-field side was pretty solid," echoed analyst Brad Handler of Blaylock & Partners.
While the pre-Iraq war logistics contract with the Army involved only about $86 million, it was at least moderately helpful to earnings because of relatively good margins, said Handler, compared with the low margins for other engineering and construction work.
Overall, the engineering and construction group produced a first-quarter operating loss of $19 million, despite revenues being up 10 percent to about $1.5 billion.
It was too early to see any results from the Kellogg Brown & Root contract for putting out oil well fires in Iraq, Handler said. KBR is a unit of Halliburton. The Barracuda-Caratinga project has been a thorn in the side of Halliburton for some time, and the analyst isn't sure the problems are over yet.
Halliburton shares are trading at about a 15 percent discount to fair value because of uncertainties about its global asbestos settlement, expected to be wrapped up by year's end, said James Crandell, managing director of oil service equity research at Lehman Bros.
"There are still hurdles and considerable doubt as to how much of the total liability will ultimately be paid for by insurance," Crandell said in a report.
During the quarter, 45,000 asbestos claims were filed as plaintiffs rushed to file before the prepackaged bankruptcy planned for two subsidiaries.
Meanwhile, only 3,700 claims were settled because of the imminence of the global settlement, he said.