Over the past few weeks crude oil prices have jumped to a high of over $87/b before pulling back. The price for crude had been moderating even before the announcement that the SEC was filing a civil law suit against Goldman Sachs & Co. (GS). Oil fell more than $2/b on Friday, following the SEC’s announcement, and it is down nearly another $2/b so far today.
The price has been rising over the past quarter, so it is not unreasonable to assume that an exploration and production company and an oil field services company would post some earnings gains. That was not the case this morning as Halliburton Co. (HAL) and McMoRan Exploration Co. (MMR) both put up weak numbers.
Halliburton reported first quarter earnings of $206 million (EPS of $0.23) compared with $378 million (EPS of $0.42) for the same period a year ago. Excluding one-time charges, Halliburton posted EPS of $0.28, somewhat better than EPS estimates of $0.25. Revenues for the quarter were down 4% from the first quarter of 2009, but were in-line with estimates.
McMoRan was expected to post an EPS loss of -$0.09 on revenues of $128.4 million. The company’s revenues beat estimates, coming in at $132.5 million, but EPS was much worse than expected at -$0.74. For the same period last year, McMoRan posted an EPS loss of -$0.90. the company’s first quarter loss included impairment charges of $57 million, primarily attributable to low natural gas prices.
McMoRan primarily produces natural gas from the shallow waters of the Gulf of Mexico at depths below the sea floor of 15,000-25,000 feet. The company also drills in “ultra-deep” plays at depths greater than 25,000 feet. In the first quarter, McMoRan produced an average of 190 million cubic feet equivalent of gas/day, down from 198 million cubic feet in 2009. The company expects to produce about 170 million cubic feet/day for the rest of 2010, which is lower than previous estimates of 180 million cubic feet/day.
The company produced over 690,000 barrels of crude oil during the quarter, and sold the black stuff for an average realized price of $76.34/b, which contributed about 40% of McMoRan’s quarterly revenues. If oil prices had been at the same level as a year ago, the company’s revenues from oil production would have been about half that amount.
Halliburton’s results improved sequentially, and the company is looking forward to continued improvement in North American rig counts and demand for services for the rest of 2010. Generally rising crude prices have boosted drilling for oil, which is countering the weak demand and price for natural gas. The company doesn’t expect North American gas drilling to increase much until gas prices rebound.
Halliburton recently announced its purchase of Boots & Coots (WEL) for about $232 million, and has also purchased four other small companies during the first quarter to help diversify its services offerings.
Halliburton shares opened lower this morning, but have bounced back and are up about 0.5%. McMoRan is not so lucky. Its shares are off more than 5%.
