Halliburton Co. said energy companies have become so aggressive about exploring for natural gas in the U.S. that its land-based drilling business will make up for a suspension of deepwater drilling in the Gulf of Mexico.
The Houston petroleum services company on Monday reported an 83-percent surge in second-quarter profits. The results beat Wall Street expectations, and shares rose more than 5 percent.
Halliburton is the first of several companies connected to the Gulf oil spill to report second-quarter financial results. The company was handling the cementing job on BP's Macondo well before it blew up on April 20.
The government's moratorium on deepwater exploration in the Gulf "will usher in a new regulatory climate and will have a profound impact on how deepwater drilling is performed," Halliburton's CEO Dave Lesar said in a conference call with investors.
Lesar said that drilling activity throughout the Gulf will slow down this year as drilling permits receive more scrutiny from government regulators. A few deepwater rigs have already left the Gulf for work in international waters. Lesar doesn't expect them to return "for some time, if at all."
Only about 6 percent of Halliburton's $8.15 billion of revenue for the first half of this year came from operations in the Gulf of Mexico. Meanwhile, its land-based operation has benefitted from rush to find natural gas in America's vast formations of shale. The number of rigs searching for oil and gas in the U.S. has jumped more than 70 percent in the past 12 months, according to Baker Hughes Inc.
Halliburton reported net income of $480 million, or 53 cents per share, for the April-June period, up from $262 million, or 29 cents per share, a year ago.
Revenue rose 26 percent to $4.39 billion from $3.49 billion a year ago.
Analysts surveyed by Thomson Reuters had expected earnings of 37 cents per share on revenue of $4.09 billion.
Argus Research analyst Phil Weiss said Halliburton has benefited from an extensive presence in North America, where energy companies are using a process called horizontal drilling to tap oil, natural gas and liquefied natural gas. The process requires more planning, equipment and labor than conventional wells.
"It's really service intensive, and Halliburton has been a big beneficiary" of the added business, he said.
Halliburton has experience in developing natural gas from the Marcellus, Haynesville and other shale plays in the U.S.
The company said that completion and production income in North America increased $173 million in the second quarter. Income from drilling and evaluation increased by $38 million in the U.S., primarily because of higher horizontal drilling activity on land.
Halliburton plans to keep a foothold in the Gulf, although it has already started to move people and equipment out. About 440 Gulf-based employees are being transferred, Chief Financial Officer Mark McCollum said.
The suspension of deepwater drilling will cost the company 5 to 8 cents per quarter in the second half of the year, and it will likely slice into operating income for "a few more quarters," McCollum said.
The jump in land-based drilling will make up for the slump in Gulf operations in the third quarter at least, the company said.
Earlier in the quarter, Halliburton said it planned to buy pressure control services company Boots & Coots for $240.4 million in cash and stock. The company also announced that it would hire about 200 people at a manufacturing center in Duncan, Okla.