Image source: Halliburton Company. 

The first quarter was a rough one for the oil patch, with crude oil crashing during the quarter spending much of it below $30 a barrel. That made for a very challenging environment for both producers and oil-field services companies like Halliburton (NYSE:HAL). Needless to say, there's not a lot of optimism surrounding Halliburton's first-quarter earnings report, which is expected to hit the wires on Monday morning. Here's a look at three things to watch in that report.

First, let's review
Before we get to that, let's take a quick look back at the company's fourth-quarter results. Halliburton reported surprisingly resilient financial results, with revenue down just 9% from the third quarter to $5.1 billion while adjusted earnings of $270 million, or $0.31 per share, were roughly in line with the prior quarter. The company was buoyed by its strong international business, which helped it partially offset a very challenging quarter for its North American operations:













North America






Latin America












Middle East/Asia






In millions of dollars. Data source: Halliburton Company.

1. Halliburton vs. its international guidance
After only experiencing mid-single-digit sequential revenue declines across its international operations last quarter, Halliburton expected those declines to have accelerated during the first quarter. As acting CFO Christian Garcia noted on the company's fourth-quarter conference call:

Although difficult to predict at this point, we anticipate first quarter Eastern Hemisphere revenues to decline sequentially by a low double-digit percentage with margins similar to the first quarter of 2015 levels. In Latin America, we anticipate revenues to decline sequentially by a mid-teens percentage with margins retreating to the upper single digits.

Garcia noted that Halliburton expected to have a very tough first quarter across its intentional operations. What investors will want to look at is if the company's experienced a more severe decline than it forecasted. Specifically, Garcia pointed to the North Sea and Russia as two geographies that typically experience weather-related seasonality that could be exacerbated by uncertainty around customer spending levels potentially leading to a sharper-than-expected revenue decline in the Eastern Hemisphere. Meanwhile, Brazil has been hard hit by the oil price decline as well as the corruption scandal at its largest oil producer, leading to very tough operating conditions. Any of these issues could have had an unexpected negative impact on Halliburton's quarter.  

2. Halliburton vs. the rig count
The company expected even worse results in North America, with Garcia noting:

In North America, we also have limited visibility, but estimate that first quarter revenues will decline with the US rig count, which is already down double digits against the fourth-quarter average. We currently anticipate margins to come in at around break-even levels.

Given that Halliburton expected its revenue in North America to follow the rig count lower it would imply a revenue decline of roughly 21%. That said, what investors will want to check out is whether the deep cut that North American producers made to their capital budgets led to an even steeper decline in Halliburton's North American revenue than even the rig count would seem to indicate. It's also important to see if the company was still able to deliver breakeven results on the bottom line given how weak industry conditions were during the quarter. 

3. Any news on the pending Baker Hughes (NYSE:BHI) merger?
In last quarter's earnings release Halliburton CEO Dave Lesar said that the company "remain[s] fully committed to closing the pending acquisition of Baker Hughes." Furthermore, he noted that it was working with competition authorities to resolve their competition-related concerns as soon as possible. However, a lot has happened since he made those comments, with the company recently being sued by the U.S. Department of Justice to block the merger with Baker Hughes.

The clock is ticking down on this deal, with it set to expire at the end of this month if the companies don't receive the necessary regulatory approvals. In that case, both companies have a big decision to make as they can either continue to work with regulators to try to obtain these approvals or choose to terminate the merger. Any news on which direction Halliburton is leaning would give investors a better idea on what the future holds for the company.

Investor takeaway
Halliburton has already set expectations very low for the first quarter. However, given how bad the oil market was last quarter, there's a real possibility that Halliburton could report worse-than-expected quarterly results. Meanwhile, the company is running low on time to get approval for its pending Baker Hughes merger, which only adds to the suspense of what it will say on Monday morning.