US Shale Slows Down: Halliburton Takes Fracking Equipment Out of Service

Halliburton, the world's largest fracking company, is taking equipment out of service as customers cut back due to lower crude prices. This is a sign of a slowdown in the US shale patch, which is also reflected in Diamondback Energy's expected drop in rigs and the US Energy Information Administration's reduced forecast for domestic crude output growth. Halliburton's decision to idle equipment may mean laying off crews, and the company's stock has been the worst performer among oil firms in the S&P 500 this year.

Halliburton (NYSE: HAL), the world's largest provider of hydraulic fracturing services, has announced plans to idle or retire some of its oilfield equipment in response to deteriorating demand among shale companies. The move, announced by CEO Jeff Miller during the company's earnings conference call, reflects a broader slowdown in the U.S. shale patch, as evidenced by Diamondback Energy's expected drop in rigs and the U.S. Energy Information Administration's reduced forecast for domestic crude output growth [1].

The decision to idle equipment comes as the company anticipates reduced margins due to weak demand, which is weighing on the prices it can charge. Halliburton's shares have seen a mixed performance, with a slight positive move of +0.7% following the announcement, despite falling as much as 4.8% in Tuesday's trading. The company posted roughly in-line Q2 results, with adjusted profit of $0.55/share meeting expectations while total revenues fell 5.5% Y/Y to $5.5B but topped analyst consensus [1].

Halliburton's completion and production division, which accounts for a significant portion of its revenue, saw a 5.5% decrease in revenues compared to the previous year. The company expects full-year North America revenue to decline by low-double digits Y/Y due to lower drilling and completions activity, and international revenue is seen shrinking by mid-single digits Y/Y, primarily due to less activity in Saudi Arabia and Mexico [1].

The slowdown in the oilfield services market is also reflected in the broader energy sector. Diamondback Energy (FANG), an exploration and production company, saw its stock decline by 1.08% in the latest trading session, lagging behind the S&P 500's gain of 0.14% [2]. Analysts expect Diamondback Energy to post earnings of $2.63 per share for the upcoming quarter, marking a year-over-year decline of 41.81% [2].

Halliburton's decision to idle equipment may lead to layoffs, as the company aims to reduce costs and retire, stack, or reallocate underperforming assets. The company's stock has been the worst performer among oil firms in the S&P 500 this year, highlighting the challenges faced by the industry [1].

References:
[1] https://seekingalpha.com/news/4470061-halliburton-to-idle-some-oilfield-equipment-due-to-weakening-demand
[2] https://finance.yahoo.com/news/diamondback-energy-fang-stock-declines-221505357.html