Halliburton: A Company That Can Only Thrive In The Changing Global Energy Economy

Michael Teague  |

Judging by the strong performance its stock has posted this year, one could almost forget that the world’s second-largest publicly traded oilfield services provider, Halliburton (HAL) , has spent a significant chunk of the new millennium under the dark cloud of scandal.

With a market cap of $44.40 billion, shares for the Houston, Texas-based company have advanced 40 percent year-to-date and are currently trading for $48.30, about $1 below the stock’s 52-week high. In 2013, Halliburton has outperformed all but two of its competitors of similar size (mid-cap or higher) in the oil & gas equipment & services industry. Overall, it is the 15th-best performer in that industry, trading at 24.5 times earnings (more than 5 points ahead of the industry average) and has so far managed to one-up its only larger rival Schlumberger Limited (SLB) , a company more than twice its size.

Halliburton also looks good compared to companies with similar market-share in the basic materials sector, of which Halliburton’s industry is but one sub-component, where the company is the 18th best performing stock of the year. At the end of last month, the company announced it was spending over $3 billion on share buybacks.

Revenues are generated through the wide variety of services Halliburton is able to provide to energy companies, mostly through a network of contractors. According to its website, it assists oil and gas drillers and producers with the entire range of field operations both on and off-shore, from the location and evaluation of potential assets, to the drilling and maintenance of wells, to production itself.

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More importantly, Halliburton is deeply involved in “unconventional” energy sources, meaning that it has the know-how required to tap hard-to-reach and highly-coveted shale gas deposits locked in rock formations deep beneath the earth’s surface.

It is also involved in clean and/or renewable energy sources, primarily through water-management, geothermal, and the more questionable “carbon capture & storage” technology whose proponents still claim will provide for a more environmentally friendly coal industry.

The diversity of services provided by Halliburton is matched only by its global presence, working with energy firms in every continent in the world with the exception of Antarctica (though it is hard to imagine that the company will not play a significant role if, or more likely when, reachable reserves are discovered there). Geographical and operation diversity have been a feature of the company since its founing, and make for a potent combination

Much has been made of the International Energy Agency report released earlier this year stating that the US will overtake traditionally dominant petro-states such as Saudi Arabia by the end of the decade to become world’s largest producer and exporter of energy resources. For the time being, predictions about a future scenario in which the US is both energy-independent and the dominant producer/exporter of energy resources can be speculative at best. What is more certain by far, however, is that Halliburton will have a part to play in all of it.

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