Halliburton’s healthy first quarter may have been priced in (NYSE: HAL)

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Halliburton (NYSE: HAL) stocks swing between gains and losses despite a first-quarter earnings report that been generally in line with estimateswith total revenues up 24% year-on-year, driven by 37% growth in North America.

Free cash flow in the first quarter was $183 million, the company’s first negative quarter since Q1 2019 and a big turnaround from free cash flow of $157 million in the first quarter of the previous year, which may worry investors about the impact of inflation on labor and equipment costs. can exceed strong incomes.

Evercore’s James West says not to worry: “The company is clearly investing for the multi-year up cycle…so we’re not at all worried about FCF being negative because that’s what happens when the cycle starts. “

Halliburton (HAL) expects the shale drilling rush to gather pace as much of the global oil market seeks alternatives to riskier, more expensive and time-consuming traditional projects like deepwater wells, a CEO Jeff Miller said on the company’s earnings conference call.

The company said its entire hydraulic fracturing fleet in the United States and Canada was at work, leaving no spare capacity, which will continue to drive up prices for workers and equipment throughout the current quarter. .

As a result, Halliburton’s operating margins increased 1.2 percentage points in the quarter from a year earlier to 11.9%, and margins in its drilling and appraisal segment climbed to 15.2%, the highest margin in the first quarter since 2010.

Halliburton (HAL) also raised its outlook for total spending for North American oil and natural gas drillers, expecting a 35% increase this year, up from a 25% forecast before the invasion. Ukraine by Russia.

Jinjoo Lee at the wall street journal‘s Heard On The Street suspects all of this optimism may have been priced into the stock price, which is up more than 80% year-to-date.

Tuesday’s drop in oil prices could also weigh on Halliburton shares, as WTI crude fell 5%.

Karen J. Nelson