Halliburton Company (HAL)

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Halliburton Company (HAL)

Q1 2014 Results Earnings Conference Call

April 21, 2014 9:00 AM ET


Kelly Youngblood - Vice President, Investor Relations

Dave Lesar - Chief Executive Officer

Mark McCollum - Chief Financial Officer

Jeff Miller - Chief Operating Officer


James West - Barclays

David Anderson - J.P. Morgan

Bill Herbert - Simmons & Company

Angie Sedita - UBS

Kurt Hallead - RBC Capital Markets

Jeff Tillery - Tudor Pickering

Jim Wicklund - Credit Suisse

Jim Crandell - Cowen

Doug Becker - Bank of America

Waqar Syed - Goldman Sachs

Scott Gruber - Sanford Bernstein



Good day, ladies and gentlemen. And welcome to the Halliburton First Quarter 2014 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. (Operator Instructions)

As a reminder, this conference call is being recorded. I would now like to introduce your host for today’s conference, Kelly Youngblood. Sir, you may begin.

Kelly Youngblood

Good morning. And welcome to the Halliburton's first quarter 2014 conference call. Today’s call is being webcast and a replay will be available on Halliburton's website for seven days. The press release announcing the first quarter results is also available on the Halliburton website. Joining me today are Dave Lesar, CEO; Mark McCollum, CFO; and Jeff Miller, COO.

I would like to remind our audience that some of today’s comments may include forward-looking statements reflecting Halliburton's views about future events and their potential impact on our performance.

These matters involve risk and uncertainties that could impact operations and financial results, and cause our actual results to materially differ from our forward-looking statements. These risks are discussed in Halliburton's Form 10-K for the year ended December 31, 2013, recent current reports on Form 8-K and other Securities and Exchange Commission filings.

Our comments today include non-GAAP financial measures. Reconciliations to the most directly comparable GAAP financial measures are included in our first quarter press release which, as I have mentioned, can be found on our website.

In our discussion today, we will be excluding the impact of an increase to our reserve related to the Macondo litigation that was taken in the first quarter of 2013 unless otherwise noted.

We will welcome questions after we complete our prepared remarks. We ask that you please limit yourself to one question and one related follow-up to allow more time for others who have questions.

Now, I’ll turn the call over to Dave. Dave?

Dave Lesar

Thank you, Kelly, and good morning, everyone. We are going to change up our format this quarter to more effectively communicate the items you've told us you want to hear. I will provide the highlights then Mark will add the financial details that will be followed by Jeff who will give the operations and technology update.

So here are my highlights for our first quarter. Results played out about as expected that the earnings mix was a bit different. We had record first quarter total company revenue of $7.3 billion and operating income increased 8% over the first quarter of 2013 as a result of double-digit growth in the Eastern Hemisphere.

Now let’s do our outlook by key geographies. Eastern Hemisphere activity continues to expand at a steady rate and is playing out about as expected. Our forecast for the full year remains unchanged. We see customer spending levels increasing by the upper single digits and our revenue growth to be in the low double digits, and we still expect average full-year Eastern Hemisphere margins in the upper teens.

Latin America came in slightly better than we projected, but we continue to believe that 2014 will be a transitional year. For the full year, we expect Latin America revenue and profit to be in line with 2013 levels. Longer term we are very optimistic about our position in Latin America and the future growth potential of this market.

As Jeff will discuss, we were successful in winning over $3 billion in IPM contracts in Mexico during 2013 and the constitutional changes in Mexico seem to be progressing as planned and we believe the opportunity for foreign investment to come into this market will be very beneficial to our businesses beginning as early as 2015.

Turning to North America, as you know, I went through a number of turns in the market and let me tell you, I'm starting to feel the turn. I'm starting to feel the momentum swing not only that, I'm starting to see it happen. I’m more excited about North America now than I have been since late 2011. Now I could be off by a quarter or so, but I do not believe I am wrong about this turn happening.

Now why is that? First, the sense of confidence I get when I talk to customers and the sense of confidence they have in their own business prospects. Supportive commodity prices today are translating into stronger cash flow than OpEx budgets for our customers and despite the logistical issues we saw in the first quarter, during March we saw record levels of revenues.

Completions intensity is rising, lateral links are increasing, stage counts are rising and the average well volume pumped has increased over 30% just since last year and due to natural attrition, demand growth in the Permian, we believe that excess frac capacity has tightened much faster than expected. And we don't think we'll have any problem filling our frac calendar through the end of the year and believe we will be able to pull-through additional product lines.

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