When called upon to compare Schlumberger (NYSE: SLB) and Halliburton (NYSE: HAL), I've almost always sided with the former, and this quarter is making me feel pretty good about that. While Schlumberger's energy business seems to be doing better, Halliburton's progress in the energy services business continues to be hampered by results at its KBR subsidiary.
While it's true that Halliburton did miss the median earnings estimate this quarter, it wasn't a large miss. Revenue rose 12% on the whole, margins expanded, and the company posted better-than-32% growth in earnings from continuing operations.
In the energy services group, revenue and operating income rose 26% and 52% (versus 36% and 67% for Schlumberger's oilfield services results). While weather issues in Canada hampered both companies, I found it interesting that Halliburton is faring poorly in Latin America -- at least on a top-line basis. That said, the two companies have many common clients (Chevron (NYSE: CVX), ExxonMobil (NYSE: XOM), and Norway's Statoil (NYSE: STO), just to name three), and Halliburton said nothing to suggest that energy service demand is in peril.
KBR, though, was once again a source of trouble. Revenue was down, and year-over-year comparisons in operating earnings weren't great, even if you reverse the charge incurred on a delay for a Nigerian gas-to-liquids project for Chevron. Management also indicated that it may be backing away from an IPO of KBR, citing the weak IPO market. In its place, the company is exploring a tax-free spinoff to shareholders. In my opinion, any means of getting rid of that business is fine by me.
Of course, Halliburton is sensitive not only to developments with KBR, but also to the current souring mood toward energy services. Here's the thing, though -- if oil would somehow drop $20 overnight, some projects might be canceled, but plenty of profitable business would remain for energy service companies. I know for a fact that there are projects held up by an inability to get rigs or personnel, and the link between energy prices and service demand isn't as immediate as the market would have you think. That suggests to me, then, that we're still not close to the end for this boom in energy service demand.
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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).
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