NEW YORK (CNN/Money) -
Halliburton Co., the oil services company formerly run by Vice President Dick Cheney, reported third-quarter earnings Wednesday that got a boost from work in post-war Iraq.
Houston-based Halliburton, the world's largest oilfield services company, said third-quarter net income fell to $58 million, or 13 cents a share, from $94 million, or 22 cents a share, a year earlier.
But it said revenue jumped 39 percent to $4.1 billion, mainly due to the work its KBR engineering and construction group is doing for the U.S. government in Iraq and elsewhere.
Excluding a loss from discontinued operations, Halliburton earned 21 cents a share, compared with Wall Street forecasts of 28 cents a share, according to earnings tracker First Call.
Third-quarter earnings got dragged down by higher legal fees related to efforts to settle more than 400,000 asbestos-related claims against Halliburton and a larger-than-expected jury award in another lawsuit.
"Overall, I'm very pleased with our operating performance this quarter," CEO David Lesar said in a conference call.
Iraq work a windfall
Halliburton said Iraq contributed $900 million in revenue and $34 million in operating income in the quarter, and about 5 cents a share of the quarter's earnings per share.
The company, where Cheney was CEO from 1995 to 2000, has come under intense scrutiny in the past year for its no-bid contract, worth up to $7 billion, from the U.S. Army to repair Iraq's oil infrastructure.
Cheney, the Army, and Halliburton -- which has so far been paid about $1.6 billion under that contract -- all deny the company has benefited from any special treatment from the government in winning the contract.
Democratic lawmakers have called for Cheney to forgo the deferred compensation he will receive from Halliburton until 2005, along with the hundreds of thousands of stock options held in trust. Cheney has said these options will be given to charity if and when they become valuable.
During the conference call, Lesar blasted critics of Halliburton's contract and said his company was proud of the work it's doing in Iraq.
"Frankly, when I see the allegations repeated day after day in the press, I'm offended, and I know a lot of people feel the same way," Lesar said. "These attacks are less about Halliburton and more about external political issues."
Though it has separate contracts to provide logistical support to U.S. and British troops, Halliburton may soon lose its Iraqi oilfield work; the Army has taken bids for two contracts to replace Halliburton's contract. The Army said Wednesday, however, that it could delay awarding the new contracts for up to 60 days.
Some potential bidders had complained that Halliburton has already completed the bulk of the work in repairing Iraq's oilfields, but the job has become much more difficult than initially estimated, and a Dow Jones report Wednesday said administration officials have no idea of how much it might eventually cost to get Iraq's oil production up to speed.
Legal woes weigh on earnings
Halliburton's third-quarter earnings were hurt by higher-than-expected costs of a joint venture with DSND Subsea ASA, a Norwegian offshore marine construction company, and increased legal fees for the planned settlement of more than 400,000 asbestos injury claims.
Those claims, many of which may be settled in the fourth quarter, could cost more than $2.775 billion in cash, the company said.
On Oct. 24, Halliburton was also hit by a $77 million jury award to Anglo-Dutch Petroleum International, Inc., which sued a Halliburton subsidiary for breaching confidentiality agreements. The charge for that award -- which was larger than expected -- was taken in the third quarter.
Halliburton also said it expected fourth-quarter earnings per share of no less than 30 cents, excluding the impact of the asbestos settlement. Wall Street analysts, on average, expected earnings of 35 cents per share, according to First Call.
Lesar said Halliburton will likely continue to struggle with a lack of pricing power and sluggish oilfield activity, and that customer spending has been restrained by "continuing economic and political uncertainty," along with fear of a drop in commodity prices.
Halliburton said that, beginning in 2004, it will no longer provide earnings-per-share forecasts, though it hopes to improve the transparency of its accounting.
The company also said it was still cooperating with a Securities and Exchange Commission investigation into the way it accounted for contracts after its merger with Dresser Industries in 1998, when Cheney was CEO. Halliburton has denied any wrongdoing.
Halliburton (HAL: down $0.32 to $23.76, Research, Estimates) stock fell in midday New York Stock Exchange trading.