The two-year extension valued at $450 million may seem small compared to Houston-based Halliburton's annual revenue picture, which reached $18.2 billion in 2008. But the contract extension is still important considering the state of the oil and gas industry, especially in North America.Oil companies including Exxon, Chevron and Royal Dutch Shell are expected to report quarterly earnings dramatically lower than the same period last year, when crude was trading above $145 per barrel. Crude oil is down 58 percent from a record $147.27 a barrel, hit in July 2008. Natural gas prices also fell sharply -- 73 percent from a high in 2008 of $13.694 per million British thermal units -- and continues to remain low. Natural gas rose 12 percent Thursday to $3.668 per million Btu on the New York Mercantile Exchange.
In response, producers have cut back capital spending and either slowed or stopped drilling in certain areas altogether.
The number of active drilling rigs worldwide in June 2009 was 39 percent lower than the same month last year, according to a recent report from Baker Hughes, an oil and gas equipment services company. The figures were more dismal for the U.S. and Canada, which both saw drilling activity fall 53 percent in a year-over-year comparison.
Halliburton's business in North America in 2008 represented about 46 percent of the company's total revenue worldwide, according to spokeswoman Diana Gabriel.
Under the two-year extension, Halliburton will provide fluids systems for multiple fields on the Norwegian continental shelf. This includes cementing services for 20 rigs and drilling and completion fluids for 16 rigs. The contract was originally awarded in 2006 and at the time was considered one of the largest to cover both cementing and drilling as well as completion fluids.
Halliburton is scheduled to report its second-quarter earnings July 20.