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Halliburton points to oil industry recovery after profit beat

January 20/2021

MOSCOW (MRC) -- Halliburton Co predicted a recovery in the global oil and gas industry from the second quarter after the oilfield services provider beat profit estimates on cost cuts and modest gains in activity following last year's slump, said Hydrocarbonprocessing.

Crude oil prices are holding to gains from a rebound in late-2020 from a coronavirus-induced slump, with Brent crude hovering around USD55 per barrel on Tuesday after averaging around $45 in the last three months of 2020. This has encouraged producers to complete more wells and add rigs. North America rig count was 410 at year-end, compared with 341 in the third quarter.

"We view 2021 as a bit of a transition year, and 2022 is when we see the global rebalancing of supply and demand," Chief Executive Officer Jeff Miller said on a post-earnings call, adding that he expected more consolidation in the industry. Miller said he is optimistic that the upturn in activity in North America would continue, while international markets would bottom out during the first quarter and improve as the year unfolds.

However, he expects pressure to improve shareholder returns will hold output flat this year to 2020 exit levels. Halliburton, which kicked off fourth-quarter earnings for service providers, said revenue from North America jumped 25.8% from the third quarter, while international revenue rose 0.4%.

Completion and production business revenue was 15% higher in the fourth quarter, compared with the preceding three months. The company expects revenue from the business to rise 3% to 5% in the current quarter from the fourth, though operating margins are expected to fall 150 to 200 basis points.

Drilling and evaluation revenue rose 1.9% sequentially and is expected to increase in the low single digit in the first quarter from the fourth. Total revenue of USD3.24 billion beat analysts' estimates of USD3.21 billion, while adjusted net income was 3 cents above estimates at 18 cents per share, according to Refinitiv IBES data.

Halliburton, like its customers, has cut its capital spending and reduced its workforce, as energy demand and prices tumbled last year. The cost cuts helped the company generate free cash flow of USD1.15 billion in 2020, above the USD1 billion it had targeted.

Still, profit slumped 43.9% and revenue tumbled 37.6% from the fourth quarter of 2019 as activity levels were still well below year-ago levels. Rivals Schlumberger and Baker Hughes are scheduled to report results later in the week.
We remind that the COVID-19 outbreak has led to an unprecedented decline in demand affecting all sections of the Russian economy, which has impacted the demand for petrochemicals in the short-term. However, the pandemic triggered an increase in the demand for polymers in food packaging, and cleaning and hygiene products, according to GlobalData, a leading data and analytics company. With Russian petrochemical companies having the advantage of access to low-cost feedstock, and proximity to demand-rich Asian (primarily China) and European markets for the supply of petrochemical products, these companies appear to be well-positioned to derive full benefits from an improving market environment and global economy post-COVID-19, says GlobalData.

We also remind that in December 2020, Sibur, Gazprom Neft, and Uzbekneftegaz agreed to cooperate on potential investments in Uzbekistan including a major expansion of Uzbekneftegazs existing Shurtan Gas Chemical Complex (SGCC) and the proposed construction of a new gas chemicals facility. The signed cooperation agreement for the projects includes the creation of a gas chemical complex using methanol-to-olefins (MTO) technology, and the expansion of the production capacity of the Shurtan Gas Chemical Complex.

Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).

According to MRC's DataScope report, PE imports to Russia decreased in January-November 2020 by 17% year on year and reached 569,900 tonnes. High density polyethylene (HDPE) accounted for the greatest reduction in imports. At the same time, PP imports into Russia increased by 21% year on year to about 202,000 tonnes in the first eleven months of 2020. Propylene homopolymer (homopolymer PP) accounted for the main increase in imports.
Author:Anna Larionova
Tags:petroleum products, crude oil, PP, PE, neftegaz, petrochemistry.
Category:General News
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