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Halliburton Slashes Costs After Posting $1 Billion Loss

By John Bromels – Updated Apr 20, 2020 at 4:02PM

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It's the latest danger sign from a top oil industry company.

Oilfield services behemoth Halliburton (HAL 1.95%) pledged to cut its 2020 spending by 50% and reduce other expenses by $1 billion after it announced a billion dollar net loss in Q1 2020. 

Low oil prices have hurt demand for Halliburton's services as oil producers cut back on spending. In early March, OPEC+ members Russia and Saudi Arabia flooded the market with cheap crude, cutting oil prices nearly in half. Meanwhile, travel restrictions due to the COVID-19 pandemic caused demand to plummet. On Monday, U.S. oil prices had crashed below $11/barrel, a 34-year low. 

Workers near an onshore oil well at sunset.

Image source: Getty Images.

Drastic action

"We have been through downturns before," said Halliburton CEO Jeff Miller in a statement released Monday morning. "We know what to do and will execute based on that experience. We are taking swift actions to reduce overhead and other costs by approximately $1 billion, lower capital expenditures to $800 million, and improve working capital. We will take further actions as necessary to adjust to evolving market conditions."

Halliburton's shares opened about 10% lower Monday morning, on news of the huge net loss. However, they moved higher throughout the morning as Wall Street digested the company's massive cost-cutting plan, and by noon were up about 6% over Friday's close. 

Impairment charges

The company's massive net loss was primarily the result of non-cash asset impairments. In total, Halliburton booked $1.1 billion in total pre-tax charges, and another $310 million in after-tax charges. That more than offset the company's $345 million in operating income, which was down 6% from Q1 2019. 

Halliburton's woes should be a warning sign to energy investors that the turmoil in the oil industry is far from over.

John Bromels has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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