Sun, Jul 25, 2004 - Page 11 News List

Halliburton's Q2 loss blamed on Brazil

AP , HOUSTON

An unexpected charge on a troublesome project off the coast of Brazil pushed Halliburton Co to a US$663 million second-quarter loss, overshadowing a 38 percent increase in revenues that the oil services company said on Friday was "largely attributable" to its KBR subsidiary's government contracts in the Middle East.

The net loss, which amounted to US$1.51 per share, also included a charge of US$609 million, or US$1.39 per share, related to the Houston-based conglomerate's pending US$4.17 billion settlement of 400,000 asbestos and 21,000 silica claims.

Halliburton earned US$26 million, or US$0.06 per share, during the same period a year ago.

Excluding the charges, Halliburton earned US$0.34 per share in its most recent quarter, beating Wall Street expectations by a penny. The company credited an improved performance in its energy services group, including increased land rig activity, more drilling and higher prices.

"The margins on the oilfield service business were a pleasant surprise, and the outlook was positive as expected for increased activity and a healthy price," said Pierre Conner, an analyst with Hibernia Southcoast Capital.

Still, investors found it difficult to overlook the overall quarterly loss. Halliburton shares closed down US$0.49, or 1.6 percent, at US$30.55 in trading on Friday on the New York Stock Exchange.

Last month Halliburton said it would take a US$200 million, US$0.46 per share after-tax charge on its project to convert two supertankers into production, storage and offloading vessels for deepwater oil fields for Brazil's Petroleo Brasileiro SA, or Petrobras. The decision followed a review that revealed higher-than-expected cost estimates, schedule delays and other issues.

Earlier this year, Halliburton had said it didn't expect any charges beyond a US$62 million, or US$0.14 per share, charge taken on the project in the first quarter. But in April, Halliburton announced a tentative agreement with Petrobras to settle outstanding claims and extend project deadlines.

Gary Russell, an analyst with Stifel Nicolaus & Co, said "the good news is they're closer to the finish line than the start line. Until those vessels sail away and are up and running on the fields, I'm going to remain skeptical and assume anything can happen now."

The losses for the quarter from April to last month came despite revenues of US$4.96 billion, up 38 percent from year-ago revenues of US$3.60 billion, that Halliburton said were "largely attributable" to its KBR subsidiary's government contracts in Iraq and Kuwait.

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