It’s no secret that oil prices have risen steadily over the course of the year. That rise has benefited many energy stocks but not really oil services stalwart Halliburton (NYSE:HAL). At first, HAL took off. But since the end of January, HAL stock has spent much of its time trending downward and underperforming its peers.

That includes a mega-sized drop this past week when it reported earnings.

However, by all measures, the recently reported quarter was pretty good and showed overall improvement to its bottom line. Even guidance wasn’t nearly as bad as some analysts had predicted. So, what gives? Is Halliburton a huge bargain, or is there something more sinister afoot?

A Bumpy Ride for Halliburton

The fall in energy prices hit the oil services names particularly hard. Thanks to lower rig counts and a big drop in drilling activity, demand for pressure pumping and other equipment needed to produce oil/natural fell like a stone. In order to keep its market share, Halliburton cut services prices hard. And because of that, the stock and its profits suffered.

But as the global economy started to grow and energy began to surge, HAL stock came back. After starting the year well, the oil services stock started to report a series of weather-related issues as well as various supply-chain problems.

The inability to get frack sand from suppliers and a tightening in the labor markets also managed to crimp results. With these issues, Halliburton was once again forced to deal with a lowered outlook and profits.

Heading into this month’s earnings report, HAL stock underperformed its peers and was actually down about 9%.

So, the pressure was on for Halliburton this quarter. And by all accounts it delivered. HAL managed to report higher revenues as pressure-pumping services/rig counts surged. For the quarter, the firm posted sales of $6.147 billion, up from just $4.957 billion in the second quarter a year ago.

The best part was all of its businesses units managed to see decent improvements in their sales in the quarter. Moreover, it managed to translate those sales into profits. Halliburton reported net income of 58 cents per share, a much higher profit than the 41 cents it reported last quarter.

Given the decent results, naturally HAL stock surged, right? Nope, it dropped by nearly 9%.

Terrible Guidance for Halliburton Once Again

The devil for Halliburton is once again in the details. Like before, it’s all about guidance and forward-facing issues.

For starters, despite the earnings improvement, the number missed analysts expectations by a penny. The previously mentioned issues — weather and eating supply-chain/labor costs — hurt the firm more than predicted. That sent the stock lower. However, what really sent HAL stock down fast was its forward guidance and issues in the Permian Basin.

The low-cost Permian has been a hotbed of drilling activity in the U.S. for years now. Thanks to its low cost of drilling and sheer abundance of energy, the shale formation has been ground zero for energy production. However, to quote Halliburton CEO Jeff Miller, “In some ways, we’re a victim of our own success.”

Because energy stocks have drilled and drilled, infrastructure hasn’t been able to keep up with supplies. Much like the Bakken shale a few years ago, there’s so much oil being produced and no way to get it to market. Pipelines and extensions are planned, but these take years to complete. The first won’t be ready until the end of the year at the earliest.

As a result, E&P firms are starting to cut back. According to Bloomberg, unfinished wells have surged by 90% over the last month alone, while a few of the major players have already cut CAPEX spending in shale by an average of 25%.

This is a huge problem for a variety of reasons, but for Halliburton, it’s particularly troubling. The growth of the Permian was one of the reasons behind its better results. With these factors affecting shale not showing any signs of stopping in the near term, it’s easy to see why HAL sank hard on its earnings.

Buy, Sell or Hold HAL Stock?

The question is, what is going to happen to HAL stock? On one hand, it still managed to see great results from its quarter. On the other, the issues in the Permian could really set it back.

Given how much the Permian means to Halliburton’s bottom line, I’m much more inclined to be cautious going forward. HAL has always been the more U.S. focused of the major drillers, with rival Schlumberger (NYSE:SLB) only realizing about 30-40% of its earnings from the U.S. Halliburton’s is north of 60%.

Because of this and its other issues, investors may want to pass on the dip in HAL stock. If anything, SLB seems better suited to take advantage of rising global energy prices.

In the end, while HAL delivered on earnings, the uncertainty may be too great.

Disclosure: None