Halliburton Company HAL has lost 32.5% in the past year and the struggle is likely to continue as crude volatility has created an uncertainty for oilfield service businesses.
The one-year pricing chart shows that Halliburton has underperformed the Zacks Oil & Gas Field Services industry, which has lost around 14.4%. Moreover, the Zacks Consensus Estimate for 2019 earnings per share has been revised downward to $1.47 from $1.87 over the past 30 days.
Factors Dragging the Stock Down
Despite posting higher-than-expected results in the fourth quarter, Halliburton’s quarterly earnings per share and revenues fell year over year.
This was owing to the slowdown in the North American completion services demand that led to pricing pressure in the hydraulic fracturing business.
In other words, the pipeline bottleneck problem in the prolific U.S. shale plays and the plunging crude prices through the December quarter of 2018 lowered demand for oilfield services, affecting Halliburton’s year-over-year results.
There are major headwinds confronting Halliburton as volatility in oil prices will continue to affect the energy market through first-half 2019. The company expects crude volatility to affect its customers’ budget as well.
Halliburton added that many of its customers fixed their 2018 capital budget by assuming oil at $50 per barrel. Hence, considering the current commodity pricing scenario, the customers’ capital spending through 2019 is likely to remain flat, believes Halliburton.
The oilfield service giant also said that its customers, with constrained reach to the capital market, may lower capital budget in 2019 if crude volatility persists.
Hence, conservative capital spending by explorers and producers can keep oilfield service demand weak in 2019. Thus 2019 is unlikely to be an outstanding year for oilfield service giants like Schlumberger Limited SLB, Halliburton and Baker Hughes, a GE company BHGE.