HAL Halliburton Co

By Christopher M. Matthews 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (February 16, 2018).

Halliburton Co. warned Thursday that its first-quarter earnings would take a hit due to delays on delivery of a key ingredient used to hydraulically fracture shale wells: sand.

Trading in shares of the oil-field services giant was briefly halted Thursday morning before Chris Weber, Halliburton's chief financial officer, said the company expected an impact of 10 cents per share on its first-quarter earnings due to delays by Canadian rail companies that would slow sand delivery.

Trading resumed minutes after Mr. Weber made the announcement during remarks at the Credit Suisse Energy Summit, and the company's stock fell 2.1% to $46.89 by 4 p.m. On the day, the S&P 500 gained 1.2%, while its energy sector lost 0.4%.

Oil-field services companies like Halliburton pump millions of pounds of sand in each shale well to help producers prop open rocks cracked during hydraulic fracturing, to help oil and gas seep out.

Any delays in sand delivery could slow the uptick in production in oil-rich regions like Texas' Permian basin.

Investment bank Evercore ISI said in a note to investors that it expects "customer frustration is rampant given the impact to production. Most other pressure pumpers will likely see similar headwinds, further hampered by the cold weather Texas experienced in January."

Fracking companies have traditionally hauled sand from mines in the Midwest by rail to shale sites across the country, from Texas to North Dakota. The Canadian National Railway Company said in January that severe cold conditions in its Canadian and U.S. Midwest rail network would cause it to run shorter trains in those regions, reducing capacity.

Evercore said it expects Halliburton will buy sand on the spot market from new, local suppliers in Texas to supplement the lost volumes, but that it will not be enough to cover all the needed sand. More than a dozen companies have flocked to mine sand in West Texas close to production activity, but only five out of 20 planned mines are active, Evercore said.

Mr. Weber said that despite the delays, Halliburton is still on track for normalized margins of around 20% in North America in 2018, following years of steep pricing cuts in the industry due to low oil prices.

Write to Christopher M. Matthews at christopher.matthews@wsj.com

(END) Dow Jones Newswires

February 16, 2018 02:47 ET (07:47 GMT)

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