Ice cream ingredient boosts fracking cost
"It's not been a fun day for us," Halliburton Chief Financial Officer Mark McCollum said this earlier this week after announcing that profits for the oil field giant will drop twice as much as expected in North America.
A lack of rain in India, the primary provider of guar beans, combined with a failure to account for increased demand, have caused a shortage which is driving prices up to double where they once were.
As a result, Halliburton's profit for the second quarter dropped between 5 and 5.5 percent. The company initially expected declines of 3 percent.
The problem constitutes a key issue for Halliburton, which is probing interim solutions.
"I never thought I'd become a bean expert," McCollum said, "but I'm sort of becoming that bean expert."
McCollum said the company has been able to recoup little of the cost increases by passing them on to customers. Halliburton has a four-month supply of guar gum stockpiled, but anticipates the problem won't last long enough to justify using it. This year, the markets reacted to high guar prices and planted triple the amount of guar it did last year. By November, the crops will be harvested and be available by January.
"We do not perceive that it will be a 2013 issue at this point," McCollum said.
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