Halliburton Update Could Harm All Oil Services Outfits Due To Broader Issues (HAL, SLB, BHI, OIH)

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Halliburton Company (NYSE: HAL) shares were up almost 2% ahead of the company’s operational update.  The stock was halted for this update and the stock is now in the red, but it is driving peers and ETFs lower.

Here is what the company released:  The company has experienced increased costs for guar gum, an agricultural commodity used as a blending additive to its fluids utilized in hydraulic fracturing. The price has inflated more rapidly than previously expected due to concerns over the potential for shortages for the commodity later in 2012.  The higher costs have impacted its second quarter North America margins more than anticipated and it sees North America margins being impacted about 300 basis points higher than its previous guidance of 200 to 250 basis points for a total impact of 500-550 basis points lower than first quarter levels.

Ouch! Keep in mind that this is a sector-wide issue most likely.  The key is this “concerns over the potential for shortages for the commodity later in 2012” in the update.  That will transfer to peers and competitors most likely. Is it possible that Halliburton is the only one experiencing tight supplies? Unlikely.

Market Vectors Oil Services ETF (AMEX: OIH) is still up 1.45% at $35.22 but this was up as high as $35.83 earlier.  Baker Hughes Incorporated (NYSE: BHI) is now down 0.1% at $41.03 after having been up and as high as $42.26 earlier. Schlumberger Limited (NYSE: SLB) is up 2% at $63.49 after having been as high as $64.75 earlier today.

Maybe this should not be a total surprise if you read this obscure article in Reuters out of Mumbai, India from the end of May.