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Halliburton warns of Q3 hit amid production budget constraints, takeaway issues

Halliburton Co. President and CEO Jeffrey Miller said he expects the company to take an earnings hit in the third quarter amid worse-than-anticipated conditions, including the forewarned downturn in exploration and production activity due to budget constraints and takeaway issues, a decrease in customer urgency that created white space in its calendar and weakness in pricing in several basins.

Combined with project delays in the Middle East, these factors are expected to impact third-quarter earnings between 8 cents per share and 10 cents per share, Miller said Sept. 5 at the Barclays CEO Energy Power Conference.

"This is in response to either budget exhaustion, in some cases, budget exhaustion along with takeaway capacity, either reallocating capital somewhere else, which creates disruption, or in some cases, pulling back and saying we'll get back to you," he said.

Miller said despite the anticipated third-quarter earnings hit, a widespread industry recovery is underway amid an outlook for tightening supply against "solid" demand for hydrocarbons.

In North America, where Halliburton has a strong presence and where a long-term up cycle is in the beginning stages, the tightening market supports oil prices and drives more activity for Halliburton. Internationally, Halliburton is better positioned than ever before to take advantage of the broad base recovery that is underway, Miller said.

On the heels of Halliburton's LIFE2018 conference in Houston, Miller doubled-down on Halliburton's OpenEarth Community and strategy to deliver returns through collaboration and engineering solutions through digital development.

"I really believe that we have it right on the digital alignment. The future will be on open architecture, solution-based world, where we're at the forefront of that space today. Our OpenEarth Community is growing, and the collaboration that occurs on it is continuing to change the industry we work in," he said.

Halliburton paid down $400 million in debt in August and is looking to retire the 2021 $500 million notes by the end of the year, but does not expect to retire additional debt in 2019.

Miller said the company will generate strong free cash flow in 2019, driven by positive market outlook and continued working capital improvements.

Halliburton's stock was down $1.98, or 5%, in late morning trade on the NYSE.