Tickers in this Article: HAL, SLB, WFT, BHI
Halliburton (NYSE:HAL) expressed continued confidence in the strength and duration of the North American land drilling cycle, with oil and liquids drilling in shale basins still powering activity.



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North America
The North American drilling cycle seems to be continuing despite pessimism on the economy by many investors. Halliburton reported $3.8 billion in revenue here in the most recent quarter, up from $3.4 billion in the previous quarter. Operating income also increased sequentially to $1.14 billion up from $997 million in the second quarter.



Oil and Liquids Drilling
Halliburton attributed the strong results in North America to increased activity in oil plays, including the Bakken in the Williston Basin in North Dakota, as well as the Eagle Ford Shale and the Permian Basin in Texas.



Natural Gas Drilling
Halliburton was not as sanguine on future natural gas drilling with David J. Lesar, the CEO of Halliburton, citing "a risk of decreased gas directed activity." Lesar attributed this to the possibility that demand for natural gas power generation might drop in 2012.



Volatile Markets
One item that might reassure investors is that Halliburton has not noticed any decrease in activity from its customers as a result of renewed volatility in the equity and commodity market. The company said that it would continue to monitor the capital spending plans of its customer base for any change.



Halliburton noted that its customer base has changed relative to previous cycles, with a higher percentage of business from larger and more stable customers as the major oil companies and national oil companies move into the onshore United States.



Pricing
Halliburton is seeing its costs rise for proppant, labor, freight and chemicals and plans to offset these rising costs by raising prices where it can. The company anticipates that the price increases will lag rising costs by as much as two months.



Oil Services Earnings
Other oil services companies report over the next two weeks. Schlumberger (NYSE:SLB) is the world's largest oil services company and its third quarter of 2011 earnings will also contain additional information on the evolving cycle in North America. Schlumberger reports before the market opens on October 21.



Baker Hughes (NYSE:BHI) will release earnings on Tuesday, November 1, before the market opens. The company generates approximately 50% of its revenue from North America operations.



Weatherford (NYSE:WFT) will hold its conference call on Tuesday, October 25, before the market opens. The company has approximately 44% of its total revenue from North America.



The Bottom Line
Halliburton kicked off earnings season for the oil services sector and had mostly positive commentary on conditions in North America. Investors should monitor other public companies in this sector to look for more evidence on the cycle. (For additional reading, see A Guide To Investing In Oil Markets.)



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