US -based oilfield services provider, Halliburton has recorded a $1 billion loss in the first quarter of 2020.
The huge loss is due to a combination of low oil demand and resulting oversupply being further exacerbated by the coronavirus pandemic.
A statement issued by Halliburton on Monday noted that adjusted net income for the first quarter of 2020, excluding impairments and other charges and a loss on the early extinguishment of debt, was $270 million.
This compares to adjusted net income for the first quarter of 2019, excluding impairments and other charges, of $201 million.
The company recognized $1.1 billion of pre-tax impairments and other charges to further adjust its cost structure to current market conditions. These charges consisted primarily of noncash asset impairments, mostly associated with pressure pumping equipment, as well as severance and other costs.
In addition, based on the current market environment and its expected impact to Halliburton’s business outlook, the company recognized a non-cash tax expense of approximately $310 million as a result of an adjustment to its deferred tax assets.
Halliburton’s total revenues in the first quarter of 2020 were $5 billion, a 12 per cent decrease from revenues of $5.7 billion in the first quarter of 2019.
Reported operating loss was $571 million in the first quarter of 2020 compared to reported operating income of $365 million in the first quarter of 2019.
Excluding impairments and other charges, adjusted operating income was $502 million in the first quarter of 2020, an 18% increase from adjusted operating income of $426 million in the first quarter of 2019.
Jeff Miller, Halliburton Chairman, President and CEO, said: “Our industry is facing the dual shock of a massive drop in global oil demand coupled with a resulting oversupply. Consequently, we expect activity in North America land to sharply decline during the second quarter and remain depressed through year-end, impacting all basins.
“Internationally, we believe the activity changes will not be uniform across all markets. OPEC+ production decisions and the duration of pandemic-related demand and activity disruptions will ultimately determine the extent of international spending declines this year”.
Miller also said the company is taking action to reduce overhead and other costs by $1 billion and lower capex to $800 million.
“We will take further actions as necessary to adjust to evolving market conditions“, Miller added.
Halliburton’s financial results for 1Q 2020 reflect some of the reduced activity experienced towards the latter part of the quarter in various locations around the world.
For the remainder of 2020, the company expects a further decline in revenue and profitability, particularly in North America.