First, the good news: global number two oil services provider Halliburton (NYSE:HAL) has posted a nice 14% year over year leap in its quarterly earnings. The company posted $1.06 per share income or $901 million for the period ending in December. Given the doom and gloom plaguing the oil sector recently due to the sector’s slump, this is surely good news, right? Well, not so fast. While Halliburton didn’t take a hit like world number one oil services firm Schlumberger (NYSE:SLB), Halliburton’s numbers are rosy precisely because they reflect a shift in the company’s focus to North American petroleum fields-North American shale oil, to be exact. This is where the sheen off the company’s 14% profit jump begins to look less exciting.
Thanks to OPEC’s Saudi Arabian-led push to preserve market share, global oil prices have crashed more than 50% and this is putting a lot of pressure on North American shale oil producers. In fact, according to state figures from North Dakota-the epicenter of the fracking surge in the US, new field applications are down dramatically. Add to this the steep drop in oil rigs in operation in the US and the picture is becoming clear: OPEC’s efforts at choking US shale oil is hurting the industry bad.
While we haven’t seen the full extent of the damage lower oil prices have caused to shale oil producers’ actual income, the hand writing is on the wall. It doesn’t take a rocket scientist to conclude that the overall North American oil industry’s fortunes will be on the skids for a while. Call it a last hurrah or running on final fumes but Halliburton’s nice income jump is definitely not sustainable. Not surprisingly, the company’s shares traded lower after an initial pop when its earnings figures were released.
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