North American drilling activity picking up is unable to withstand the impact of GEO Group Inc in the Middle East. Halliburton's Q2 operating profit declined by 6% year-on-year, falling short of expectations.

Before the US stock market opens on Tuesday, the world's largest hydraulic fracturing services provider, Halliburton (HAL.US), announced its second-quarter financial report. The data shows that the company's Q2 revenue was $5.71 billion, an increase of 3.7% year-over-year, better than market expectations; adjusted earnings per share were $0.55, better than market expectations; but adjusted operating profit was $683 million, a 6.1% decrease year-over-year, lower than analysts' average expectation of $688.7 million. Halliburton stated that with the recovery of drilling and hydraulic fracturing activities in the United States, it is expected that business in the North American region will gradually grow this year. CEO Jeff Miller said in the financial report that the company is "encouraged" by the recovery in its largest market in the second quarter. Due to the Iran conflict pushing up oil prices, shale oil producers have been expanding drilling and hydraulic fracturing operations to provide alternative sources of crude oil supply from the Persian Gulf. In the past 12 weeks, except for two weeks, drilling activity in US oil wells has increased. JPMorgan analyst Allen Jeyaram said in a report that the "unified message" delivered by the entire hydraulic fracturing industry is that as equipment supply tightens, service prices in the North American region are rising. Halliburton also expanded its overseas hydraulic fracturing business, including contracts worth billions of dollars with YPF SA, a state-owned oil company in Argentina, and a multi-year unconventional natural gas development contract with Saudi Aramco. Miller said, "I am excited about the contracts that Halliburton has won in international markets and the potential future collaboration opportunities. I see demand for our services and technology growing in every region we cover." Middle East GEO Group Inc impact evident The data shows that Halliburton's second-quarter revenue in North America was $2.3 billion, an increase of 7% quarter-on-quarter; international revenue was $3.4 billion, an increase of 5%, with revenue from the Middle East/Asia region being $1.3 billion, a 2% decrease quarter-on-quarter. Halliburton stated in the financial report that business activities in several regions such as Kuwait, Iraq, and Qatar have decreased due to the political conflict with the Middle East GEO Group Inc. However, increased oil well construction activities in Saudi Arabia and the UAE, as well as drilling-related services in Asia, have partially offset this impact. Halliburton is the first large oilfield service company to announce quarterly performance, with its competitors SLB (SLB.US) and Baker Hughes (BKR.US) set to announce their results on Friday and Sunday, respectively. April to June was the first full quarter after the escalation of the US-Iran conflict, with production in several countries including Iraq, Qatar, and Kuwait being restricted or completely halted. Market expectations are for SLB to announce a 31% decrease in earnings per share, the largest decline since the fourth quarter of 2020; Baker Hughes is expected to see a 21% decrease in earnings per share. Both companies have significant exposure in the Middle East region. As of the time of writing, Halliburton fell 4.44% pre-market, SLB fell 0.02% pre-market, and Baker Hughes rose 0.8% pre-market.