Halliburton Co. (NYSE: HAL) stock was up 1.7% reaching a high of $72.20 early Monday after the company reported second-quarter earnings that matched analysts' expectations.
Halliburton is an oil field services company and also the United States' largest hydraulic fracturing company. Hydraulic fracturing or "fracking" is the process of blasting water, sand, and chemicals underground to remove trapped hydrocarbons.
HAL reported Q2 earnings per share (EPS) of $0.91, up from $0.73 last year. The company also reported revenue of $8.05 billion, up from $7.32 billion last year. That revenue beat consensus estimates of $7.88 billion.
The company reported that revenue was up thanks to growth in its drilling and evaluation segment, along with a strong quarter from its completion and production segments. Drilling and evaluation revenue increased 5.3% to $3.11 billion, while completion and production climbed 13% to $4.94 billion.
But it wasn't just revenue figures that sent HAL shares up this morning. There were other bullish signs in the company's quarterly report...
Why HAL Stock Is Up Today
In today's report, company officials also announced that they will be adding crews to the company's North American fracking operations "immediately."
North America is one of Halliburton's most important markets, and the company reported today that revenue in North America climbed 11% this quarter to $4.34 billion.
"We expect North America activity levels to continue to improve, with margins approaching 20% in the third quarter," Chief Executive Dave Lesar said. "We have concluded based on the strength of this outlook that we will immediately accelerate additions to our hydraulic fracturing fleet and logistics capabilities, with new crews available for service beginning later this year."
Another bullish sign for Halliburton is the overall fracking market in the United States.
According to a report PacWest Consulting Partners, prices for fracking services are expected to increase by 2% in 2014. The same report also says that those prices will grow another 4% in 2015. That's good news for HAL, which has been dealing with a down market due to a surplus of fracking equipment in the U.S.
"You're seeing tightening in overall frack capacity," Capital One Southcoast analyst Luke Lemoine told Bloomberg. "People are going to like this, coupled with the large North America beat."
According to oil field services company Baker Hughes Inc. (NYSE: BHI), American fracking production has increased overall this quarter as companies exploit the growing output from several major shale formations. The company reported that the average number of active rigs in the United States increased 5.6% in the second quarter.
Finally, shareholders were also told that the company would be increasing its stock buyback authorization to $6 billion.
While there are numerous bullish figures in today's earnings report, it's the American shale boom more than anything that will keep driving HAL stock. Here are the figures...
What American Shale Means for HAL Stock
Oil and natural gas exports from U.S. shale formations like the Bakken Shale in North Dakota and the Eagle Ford Shale in Texas are absolutely booming.
The United States produces roughly 8.4 million barrels of crude oil a day, and recently surpassed Saudi Arabia as the world's largest oil producer. The United States became the world's largest natural gas producer in 2010, but the recent growth in shale oil production has helped the country become the biggest producer of oil and natural gas liquids.
According to the U.S. Energy Information Administration (EIA), production from the Bakken Shale alone will reach approximately 1,112,000 barrels per day in August. The states of Texas and North Dakota combine to produce approximately 4 million barrels of oil per day.
"The U.S. increase in supply is a very meaningful chunk of oil," Bank of America's head of commodities research Francisco Blanch told Bloomberg this month. "The shale boom is playing a key role in the U.S. recovery."
That production spike is great news for fracking companies like Halliburton.
"There are a lot of profits [in the fracking industry], and it's a great opportunity right now in the USA," Barron's Editor Jack Otter said in a video interview today. "And this mess in Russia, to me, only boosts the domestic fracking industry because the Europeans would like nothing more than to get out natural gas so they don't have to rely on all those pipelines."
According to a survey last month from Thomson/First Call, 12 analysts rate HAL stock as a "Strong Buy," 17 as a "Buy," five as a "Hold," one as an "Underperform," and none as a "Sell." A similar survey of 27 brokers set an average price target of $76.67 for HAL stock - that's an 8% increase from today's open price.
Do you invest in Halliburton? Join the conversation on Twitter @moneymorning @KyleAndersonMM using #Halliburton.
With global energy consumption at an all-time high, and much of the world's economy dependent on oil, the question needs to be asked: Are we running out of oil?...
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