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Halliburton Company (HAL)
Q1 2019 Earnings Conference Call
April 22, 2019 09:00 AM ET
Abu Zeya - Senior Director, Investor Relations
Jeff Miller - Chairman, President and Chief Executive Officer
Lance Loeffler - Chief Financial Officer
Conference Call Participants
Angeline Sedita - Goldman Sachs Group Inc.
James West - Evercore ISI
Judson Bailey - Wells Fargo Securities LLC
William Herbert - Simmons & Company International
Scott Gruber - Citigroup
Sean Meakim - J.P. Morgan Chase & Co.
Kurt Hallead - RBC Capital Markets
Dan Boyd - BMO Capital Markets
Marc Bianchi - Cowen & Company
Previous Statements by HAL
» Halliburton Company (HAL) CEO Jeff Miller on Q4 2018 Results - Earnings Call Transcript
» Halliburton Company (HAL) CEO Jeff Miller on Q3 2018 Results - Earnings Call Transcript
» Halliburton Company (HAL) CEO Jeff Miller Presents at Barclays CEO Energy-Power Brokers Conference (Transcript)
I would now like to turn the conference over to Abu Zeya. Please go ahead.
Good morning and welcome to the Halliburton first quarter 2019 conference call. As a reminder, today's call is being webcast, and a replay will be available on Halliburton's website for seven days. Joining me today are Jeff Miller, Chairman, President and CEO; and Lance Loeffler, CFO.
Some of our comments today may include forward-looking statements reflecting Halliburton's views about future events. These matters involve risks and uncertainties that could 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, 2018, recent current reports on Form 8-K, and other Securities and Exchange Commission filings.
We undertake no obligation to revise or update publicly any forward-looking statements for any reason. Our comments today also include non-GAAP financial measures that exclude the impact of impairments and other charges. Additional details and reconciliation to the most directly comparable GAAP financial measures are included in our first quarter press release and can be found in the Investor Downloads section of our website. After our prepared remarks, we ask that you please limit yourself to one question and one related follow-up during the Q&A period in order to allow time for others who may be in the queue.
Now, I'll turn the call over to Jeff.
Thank you, Abu, and good morning, everyone. What a difference 90 days make in this market. Commodity prices have rebounded, customer budgets are refreshed and we're back to work. Our results for the first quarter played out as we expected and I'm pleased with how our organization executed both in North America and internationally.
Here are the first quarter highlights. Total company revenue of $5.7 billion was essentially flat compared to the first quarter of 2018 and adjusted operating income was $426 million. International revenue increased 11% year-over-year, which was a great first step towards our expectation of high single-digit international growth for all of 2019.
Our Drilling and Evaluation division had a strong year-over-year revenue growth of 7% with activity improvements across all geographic regions. Finally, as expected, hydraulic fracturing activity ramped up in U.S land as customers refreshed their budgets. And despite pricing headwinds, our execution resulted in delivering better than expected margins in our Completion and Production division.
From a macro perspective, 2019 is off to a strong start. Commodity prices have been rising since the beginning of the year due to tightening oil supplies and stable demand. OPEC plus production cuts and supply disruptions from Venezuela, Iran and Libya have supported market rebalancing. Oil demand trends, particularly in China and India, have also been constructive. Overall, the macro environment remains favorable for our industry.
Against this backdrop and with winter behind us, customer activity in both hemispheres has picked up off December lows and continues to trend higher. Although we often discuss the hydraulic fracturing business in North America, it's important to remember that Halliburton has a portfolio of 14 product service lines operating in North America. For example, our artificial lift and cementing businesses showed excellent results in the first quarter, growing both revenue and margin year-over-year.
Our artificial lift product line grew top line revenues 55% year-over-year in the first quarter driven by strong demand for ESPs that are now installed much sooner in the life of the well and sometimes right after the wells put on production. Halliburton is the number one cementing provider in U.S. land. Demand for our cementing services continue to be strong in the first quarter. Congratulations to our artificial lift and cementing teams for an outstanding performance.
Now let's turn to our North America land hydraulic fracturing business. We experienced an increase in the stages pumped every month this quarter with March finishing on a high note. Overall, the first quarter activity level was modestly higher compared to the first quarter of 2018. As expected, we had pricing headwinds throughout the quarter. However, we believe the worst in the pricing deterioration is now behind us. And as we’ve discussed in the past, the success of our hydraulic fracturing business is not dependent on pricing alone.
Given our presence in all basins and exposure to all customer groups, we have the ability to pull other levers such as utilization, cost savings and operational efficiency to drive a better outcome for our business. Let me describe what I believe will happen with hydraulic fracturing supply and demand throughout 2019. On the demand side, it's evolving as we had anticipated. Our customers have announced their 2019 budgets and we expect that overall spend will be down 6% to 10% in North America.