By Liz Hampton and Rithika Krishna
(Reuters) -Oilfield services firm Halliburton Co on Tuesday posted an 85% rise in first-quarter adjusted profit and raised its forecast for customer spending in North America as a rally in oil and gas prices boosted demand.
Halliburton said it anticipates North American spending to grow by 35% this year due to stronger activity and inflation, revising higher an earlier estimate of a 25% increase.
Oil futures climbed to their highest in more than a decade during the quarter on market turmoil stemming from Russia's invasion of Ukraine. U.S. oil is around $105.34 a barrel while Brent is trading at $110.25 a barrel.
Strong prices have encouraged drilling activity, sending the U.S. rig count to 673 at the end of the first quarter, up almost 15% from late 2021, according to Baker Hughes data.
Margins in its Drilling and Evaluation division eclipsed 15% in the first quarter for the first time since 2010, despite weather and supply chain disruptions, Halliburton said.
Supply chain issues that have plagued the industry since demand rebounded from coronavirus-related lockdowns will continue, it warned. Halliburton "can't and won't subsidize operators" and would pass on higher materials prices to its customers, an executive said.
Its hydraulic fracturing equipment is fully booked and appears to be sold out for the second half of the year.
"At $100 oil, everything is busy. And people want to be busy, but the question is, can they be busy?" Chief Executive Officer Jeff Miller told investors on Tuesday, blaming some of the supply chain constraints on years of underinvestment.
Shares were volatile as Wall Street weighed the company's bullish comments against some softer-than-expected results, including a decline in margins from Halliburton's Completions and Production unit and negative free cash flow of $183 million.
"We call today's in-line Q1 print a slight negative relative to lofty Street expectations," analysts for Tudor, Pickering, Holt & Co wrote.
Halliburton's shares were up 1.75% to $42.36 in early trading, after falling by roughly 4% in pre-market activity.
The company recorded a pre-tax charge of $22 million in the quarter to writedown its assets in Ukraine due to the ongoing conflict.
Adjusted net income was $314 million, or 35 cents per share, for the quarter ended March 31, compared with $170 million, or 19 cents per share, a year ago. Analysts had anticipated earnings of 34 cents per share for the first quarter, according to Refinitiv IBES.
(Reporting by Rithika Krishna in Bengaluru and Liz Hampton in DenverEditing by Chizu Nomiyama and Mark Potter)