Earlier this year, Halliburton (NYSE: HAL) CEO Dave Lesar said he thought opening a headquarters in Dubai would help his company's international business. On Monday, the world's second-largest oilfield services company posted strong results, in part on the basis of gains overseas.
For the quarter, the company reported income from continuing operations of $595 million, up 19.5% from the $498 million in the second quarter of 2006. Including a $933 million gain from the separation of KBR (NYSE: KBR), the company's former engineering and construction unit, Halliburton's reported results looked like earnings of $1.5 billion and $1.62 per share in the quarter.
According to Lesar, Halliburton posted a 14% revenue increase and a 21% growth in operating income in the Eastern Hemisphere. The CEO also pointed out that the company's commitment to invest in high-growth markets in that hemisphere is evident in the results for the quarter. At the same time, the company experienced a meaningful recovery in the previously soft U.S. well stimulation market. Indeed, in June, Halliburton recorded the highest domestic well stimulation revenue of any month in its history.
But as with other big service companies Schlumberger (NYSE: SLB) and Baker Hughes (NYSE: BHI), Halliburton was not left unscathed by the substantial slowdown in Canadian drilling activity during the quarter. That slowdown resulted in a $21 million sequential decline in operating income for the company's drilling and formation evaluation segment. On a year-over-year basis, however, the segment posted a 21% increase in operating income.
Halliburton, with its new United Arab Emirates headquarters, constitutes the most tangible example of the tectonic change occurring in the location and production of oil and gas, functions that are moving steadily toward concentrations in the Eastern Hemisphere. That change, and the challenges inherent in operating a world away from headquarters, clearly had an effect in the planned merger of offshore drilling contractors Transocean (NYSE: RIG) and GlobalSantaFe (NYSE: GSF) announced Monday. It will almost certainly result in other major corporate transformations in the oil patch in the months and years ahead.
Halliburton, for its part, has taken a giant step toward dealing with this major geographic reorientation. I fully expect the company to continue to benefit from this bold step, and urge Fools with an appetite for oilfield service investments to monitor the company's performance carefully.
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Fool contributor David Lee Smith does own shares in Halliburton and Baker Hughes, but not in the other named companies. He welcomes your questions or comments. The Motley Fool has a disclosure policy.
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