Geoffrey Smith 

Halliburton (NYSE) stock dropped in premarket trading on Tuesday. This was due to profit taking after a huge rally. The market took the strong report from its first quarter as an opportunity to withdraw some of their money.  

Halliburton saw a 54% increase in net profits to $263 millions from one year ago. However, adjusted per share was only 35c. This is an 89% improvement on last year’s quarter but a small fraction of the prior year. The company’s revenue meanwhile rose to $4.28 million. These numbers came in slightly above the forecasts.

Halliburton shares fell 3.9% as a result. They had doubled in value since December, when a worldwide rally in prices spurred production companies around the globe to increase their output. Although the process has been slow for much of 2021 it is now accelerating since Russia invaded Ukraine. This led to Western sanctions being imposed on Moscow. Halliburton had to absorb a $22million charge for the quarter because it wrote down assets in Ukraine. It wasn’t as affected by Russia sanctions than its peers in the industry, since it had no joint ventures there.

Russia’s invasion of Ukraine and the worldwide recovery in demand after the pandemic receded have significantly tightened the market. This has given American producers, and their lenders, more confidence to invest. Baker Hughes North American production is up 14%, to 548. This marks its highest point in nearly two years. Consultancy East Daley Capital expects the U.S. to increase its oil production by on average 1.29 million barrels per day in 2015, 23% higher than what it anticipated in December to reach 12.86 million B/d.  

As such, Halliburton Chief Executive Jeff Miller was upbeat about the outlook, seeing “significant tightness across the entire oil and gas value chain in North America” along with “supportive commodity prices and strengthening customer demand against an almost sold-out equipment market.” 

He also noted that its Drilling and Evaluation division’s operating margin had reached 15% for the first-time in 12 years.

“First-quarter revenue growth in all our international regions together with North America demonstrates that this multi-year upcycle is well underway,” Miller said.