Halliburton Earnings Due As Oilfield Services Demand Booms; Biden OKs New Drilling

Oilfield services giant Halliburton (HAL) will report first-quarter earnings on Monday as $100 crude oil and Russia’s Ukraine invasion is spurring a pickup in drilling activity. On Friday, the Biden administration said it will resume selling leases to drill for oil and gas on federal lands starting Monday.

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Halliburton rivals Schlumberger (SLB) and Baker Hughes (BKR) report later in the week. HAL stock is at multiyear highs, while SLB stock and Baker Hughes are consolidating just below highs.

Even as crude oil prices rose in 2021, shale producers were reluctant to ramp up drilling activity, vowing to focus on profits and shareholder returns. But with Russia’s Ukraine invasion pushing crude above $100, drilling activity is picking up. Oil rig counts, while well off the levels of late 2018 and early 2019, have risen for four straight weeks.

With Russian crude likely out of favor for an extended period, shale operators may feel more confident that ramping up production won’t lead to a glut that slashes prices and profits.

All that points to steadily rising demand for oilfield services and equipment.

Biden OKs Drilling On Federal Lands

The Interior Department will resume leases for oil and gas drilling on federal lands from Monday. The number of acres — 144,000 —  is 80% below what was originally considered, while companies will have to pay higher royalties.

But the move is a reversal for President Biden. During the 2020 campaign, he urged a complete ban on new drilling on federal lands. With gasoline prices soaring and inflation at a 40-year high, Republicans had harshly criticized Biden over the lack of new drilling.

In late February, the administration said it was delaying decisions on new oil and gas drilling on federal land after a federal court blocked federal agencies from using an estimate known as the “social cost of carbon” to evaluate the damage done by carbon emissions stemming from energy production.

Haliburton Earnings

Estimates: FactSet analysts expect Halliburton to earn 34 cents a share in Q1. That’s 80% above the year-ago period. Sales are seen coming in at around $4.2 billion, about 22% higher than the same quarter last year.

Halliburton, along with Schlumberger and some others, could report some impact from exiting Russian contracts.

Results: Check back Monday.

HAL Stock

Shares have skyrocketed in lockstep with soaring oil prices since the start of the year. HAL stock rose just over 2% last week to 40.76, hitting their best levels since late 2018. Shares are well extended past a 26.85 buy point from a cup base, according to MarketSmith.

Halliburton has posted three straight quarters of triple-digit earnings gains. Sales growth has accelerated in the last three quarters as well. The company’s RS Rating is 98 out of a possible 99. Its EPS Rating is 75.

Halliburton’s relative strength line is rising and at a multiyear high.

Meanwhile, BKR stock is consolidating after hitting a 52-week high of 39.78 on March 24. Baker Hughes reports earnings on Tuesday. SLB stock also is consolidating near a 52-week high. Shares have rebounded from their 10-week line and could have a proper base after another week. Schlumberger reports earnings on Friday.

Halliburton ‘Better Equipped’

Griffin Securities analyst Kevin Simpson, who has a Buy rating and raised his price target for HAL stock to $45 from $35, says in a recent report to clients Halliburton is well-positioned to benefit from the current geopolitical environment.

“With Russian oil and natural gas now tainted in the West probably for many years, the case for a strong drilling upcycle has clearly strengthened further,” he wrote.

Simpsons says investors can expect drilling budgets to grow at an accelerated pace. But he also says supply-chain issues will likely persist at least through this year.

“We believe that HAL is relatively better equipped to manage their supply chains than most of its competitors and that the company has the pricing power to pass on higher costs of raw materials, including fraction sand,” Simpson said.

Follow Adelia Cellini Linecker on Twitter @IBD_Adelia.

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