Halliburton’s (HAL-NYSE) earnings warning today may have been predictable, depending on your take. If the company came out recently and said it was moving its corporate headquarters to Dubai, UAE to stop losing out on international contracts because it was not anchored enough in the portion of the world that holds its most lucrative contracts, then maybe this is not the biggest surprise in the world. The drop in earnings guidance is from $0.54 to $0.49 for Q1.
If you twist the news a certain way you might even draw the conclusion that the company has done this to be able to point to it over and over how they NEED to move whether they like it or not. This corporate headquarters move is one of the more controversial issues of this year, and maybe this is just what the company needed to be able to show how they need the move. "Oh, don’t throw me in the briar patch!"
Before you go too far into this conspiracy theory, you have to look at what the blame is on. HAL’s Production Optimization and Fluid Systems Divisions of Halliburton’s Energy Services Group experienced reduced activity in North America; and a significant portion of these lower than anticipated results is attributable to decreased drilling and completion activity in Canada and the northern United States. So they say.
This makes note that the results are outside of the tender and exchange offer of KBR (KBR-NYSE), although KBR shares fell up to 4% with HAL shares upon the news. HAL shares are down 7% at $30.00 on the news and any chartist will now tell you they broke their uptrend with this news. There are already some upset holders since it has been such a laggard, but now all the newer shareholders that came in over the last month get to enjoy some of the same pain.
The Oil Service HOLDRs (OIH) are down almost 2% at $139.85; Schlumberger (SLB) is down 1.1% at $65.50; Transocean (RIG) is down 0.4% at $78.00; GlobalSantaFe (GSF) shares are down 0.8% at $60.40. Companies that have recently issued guidance in the sector are probably now under more pressure to come out and say if their business outlook has changed or if it is the same.
Jon C. Ogg
March 20, 2007
Jon Ogg can be reached at [email protected]; he does not own securities in the companies he covers.
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