Halliburton Company (NYSE:HAL) announced 3Q12 recurring EPS of $0.67,  in line with consensus. North American margins declined 556bp sequentially, vs the company’s pre-announced decline of 460-510bp.  HAL’s international revenues increased 2.4% sequentially, and margins improved 35bp primarily driven by Latin America and Middle East/Asia, partially offset by lower Europe/Africa/CIS results driven by transitory issues.

Halliburton Company (NYSE:HAL) reiterated its belief that international activity will continue its gradual progression and expects margins to improve as new projects start, new technologies are introduced and pricing on select projects rises. HAL’s strategy to aggressively grow its international presence appears to be gaining traction and we anticipate continued revenue and margin growth.

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North American revenue of $3,943 million fell 5% sequentially and was lower than than $3,991 million estimate. Operating income of $597 million dropped 30% from the previous quarter and missed the $634 million forecast. The margin at 15.1% contracted from 20.7% in 2Q12 and was below 15.9% estimates. The 560 bps in margin contraction was more than the company’s previous guidance of 460-510 bps, driven by pricing pressure in stimulation, higher guard costs, and downtime in the Gulf of Mexico due to Hurricane Isaac. Halliburton Company (NYSE:HAL) is seeing activity reductions by some of its customers into year end, likely leading to more declines in activity for North America in 4Q.

International results for Halliburton were mixed for the quarter, with strong activity in LatAm and the Middle East, offset by weaker results in Europe. HAL’s international top line grew 2.4% sequentially, below  5% expectations. International margins at 14.9% matched analysts’ forecast of 14.8%, as better-than-expected operating income for Latin America and the Middle East more than compensated the somewhat weaker-than-expected margins in Europe/Africa/CIS.

In Latin America, revenue of $952 million rose 8% sequentially, and was in line with with $949 million estimates. Operating income of $154 million increased 12% from the previous quarter and beat $149 million forecasts. The margin at 16.2% expanded from 15.7% in the prior period and was above estimates. The strong performance was led by Mexico and Brazil, and Halliburton saw a significant increase in unconventional activity across the region during the quarter. Margins should improve sequentially again in 4Q, with the seasonal impact of end of year software sales.

Middle East/Asia revenue of $1.8 billion rose 3% sequentially and was modestly below  estimates. Operating income of $167 million increased 9% compared to the previous quarter and beat $164 million forecasts. The margin at   15.3% expanded from 14.1% in 2Q12 and topped 14.7% estimates. The sequential improvements were driven by strong activity improvements this quarter in Malaysia and Australia, and improved profitability in Iraq.

Completion & Production (C&P): Revenue down 3.7% seq.; margins of 14.9% down 561 bps seq.

Drilling & Evaluation (D&E): Revenue up 1.6% seq.; margins of 15.3% down 109 bps seq.

Disclosure: No position