26% Annual Return And Halliburton
Chris DeMuth Jr. • 44 Comments
Chris DeMuth Jr. • 44 Comments
Fri, Apr. 22, 5:32 PM
- Halliburton (NYSE:HAL) says Q1 revenues totaled $4.2B, a 17% Q/Q decline but slightly ahead of the $4.14B analyst consensus estimate.
- HAL says Q1 revenue in North America was $1.8B, down 17% Q/Q vs. a 27% decline in the average U.S. rig count, with a $39M operating loss, driven by reduced activity throughout the U.S. land sector, particularly pressure pumping services; Q1 international revenue was $2.4B, down 18% Q/Q, with operating income of $310M, down 38% Q/Q, driven by lower completion tools and software sales.
- HAL says it cut more than 6K jobs during the quarter, and will book a $2.1B Q1 expense for cutting jobs and writing off assets.
- HAL also says it is postponing next Monday's scheduled earnings conference call to May 3, citing the upcoming April 30 deadline in its merger agreement with Baker Hughes (NYSE:BHI).
- Now read Earnings: Q1's over for HAL, what's ahead?
Thu, Apr. 21, 5:39 PM
Wed, Apr. 20, 5:45 PM
- Wells Fargo analysts say they are sticking with Halliburton (NYSE:HAL) as their top picks among oil service stocks even as the proposed merger with Baker Hughes looks increasingly iffy.
- The firm says it is re-adjusting its rankings with a bias towards large cap names along with high level of conviction towards execution, and expects the market to pay a premium multiple for the best-in-class names in the next multi-year recovery.
- In order, Wells' favorites in the sector are a stand-alone HAL, Baker Hughes (NYSE:BHI), U.S. Silica (NYSE:SLCA), Nabors Industries (NYSE:NBR), FMC Technologies (NYSE:FTI) and Schlumberger (NYSE:SLB); it maintains an Outperform on Weatherford (NYSE:WFT) but moves the stock down in the rankings based on debt concerns and re-investment capacity in a recovery.
- Now read Schlumberger is Barclays' top pick in North America oilfield services
Wed, Apr. 20, 2:33 PM
- Schlumberger (SLB +2.4%) is on the move after being upgraded to Overweight from Equal Weight with a $93 price target, raised from $83, at Barclays, which believes that "no company has improved itself more during the downturn than SLB."
- Naming the company its top pick in the North America Oilfield Services & Equipment group, Barclays also expects SLB's international share to continue growing and its return on invested capital to expand the most among the group.
- But the firm also thinks a "scarcity premium" has evolved as investors have little to work with in the sector, as the offshore market is several years away from a recovery and liquidity issues are enveloping many of the small and mid caps.
- The firm views Halliburton (HAL +1.7%) as the "purest way to play the U.S. land recovery" but says "valuation looks a bit stretched post the BHI deal and is highly dependent on higher E&P spending."
- Barclays also upgrades Superior Energy (SPN +1.6%) to Overweight from Equal Weight and Dril-Quip (DRQ +0.3%) to Equal Weight from Underweight, and downgrades Hornbeck Offshore (HOS +3.6%) and National Oilwell Varco (NOV -1.2%) to Equal Weight from Overweight as well as Pacific Drilling (PACD -1.7%) to Underweight from Equal Weight.
- Now read Schlumberger shares soared by 20%, but with muted fundamentals
Wed, Apr. 20, 11:29 AM
- Halliburton’s (HAL +0.6%) bid to buy Baker Hughes (BHI -0.9%) faces a formal complaint as soon as this month from European Union regulators through a statement of objections that would list concerns about how the deal would hurt competition throughout the EU, Bloomberg reports.
- HAL’s plans have been stalled repeatedly by the EU as regulators seek more information about the deal; last week, the EU set a new deadline of Aug. 11 for a final ruling on the merger.
- The deal already faces opposition from the U.S. Justice Department, which has sued to block the deal saying it threatens to eliminate head-to-head competition in 23 products and services used in oil exploration.
- Now read Halliburton: $3.5 billion break-up fee... ouch!
Wed, Apr. 20, 10:33 AM
- With the chances of a Halliburton (HAL -0.4%) takeover dimming as the Justice Department files suit, Baker Hughes (BHI -0.1%) ought to consider a merger of equals with National Oilwell Varco (NOV -2.4%) as “the best route to value creation over the next cycle,” according to J.P. Morgan analyst Sean Meakim.
- A BHI-NOV merger would be more than a marriage of convenience, Meakim says, adding that “neither side needs a transaction from a balance sheet perspective, but each could benefit strategically” and a deal would not face significant regulatory hurdles.
- The agreement between BHI and HAL is scheduled to expire on April 30, but Meakim points out that the merger deal is not dead, and HAL likely will to fight hard to find a path to deal completion and avoid the $3.5B breakup fee.
- The firm rates BHI at Neutral with a $36 price target.
- Now read Why shares of National Oilwell Varco will likely go down
Mon, Apr. 18, 1:03 PM
- Deutsche Bank upgrades Ensco (NYSE:ESV) to Hold from Sell.
- Price target goes to $9 from $5. Implied downside 11%.
- Late last week, ESV announced an equity offering expected to raise $525M.
- "Although we did not necessarily expect an offering from ESV given its already strong balance sheet, we did (and continue to) believe this is exactly the kind of action needed to restore the offshore drilling industry to health.
- "The company is now positioned to lead much needed consolidation. However, the current mixed outlook leaves us with a HOLD rating.
- "Should the industry follow suit, it could lead to a harder line on pricing which, in turn, could bring about price discovery on assets/ M&A and help put a floor under the stocks."
- ESV’s actions are consistent with our view that in order for the industry to survive, industry leaders needed to shore up their balance sheets and aggressively retire older assets which would put a floor under dayrates/asset values and help facilitate consolidation. We thought the floater companies would be the first movers given the more distressed balance sheets and the segment would be easier to consolidate.
- Deutsche Bank's top picks in the oil-services industry:
- HAL - price target $40. "HAL's ability to deliver value by driving customer unit costs lower through technology and efficiencies will become increasingly important during the downturn."
- BAS - price target $3. "Basic's high exposure to completion/production will allow the company to benefit from the growing backlog of drilled but uncompleted wells."
- KEG - price target $1. "KEG's production leveraged businesses should hold up better than overall drilling activity and also recover sooner when oil fundamentals return to balance."
- SPN - price target $15. "SPN is a uniquely positioned mid cap diversified service provider. Its product mix drives high, through-cycle margins relative to peers, which will allow it to lower pricing to protect market share during the downturn."
Mon, Apr. 18, 10:25 AM
- The energy sector (XLE +0.1%) pokes into the green as crude oil prices pare earlier losses even after the collapse of the Doha meeting, and it's a mixed bag among the top global oil companies in early trading: XOM +0.1%, CVX +0.3%, RDS.A -0.9%, BP -0.3%, TOT -0.4%.
- Kuwait may have achieved what Doha failed to do, at least in the short term, as a labor strike that began Sunday has cut the country's production by 60%, shuttering 1.7M bbl/day, slightly more than H1's global surplus that caused prices drop to a 12-year low in January.
- Some oil analysts say the lack of a Doha deal is better for oil prices in the long run now that the rebalancing process of supply and demand can continue to its natural conclusion.
- Other noteworthy names: KMI -0.1%, CHK -4%, MRO -1.4%, COP +0.1%, SLB +0.2%, HAL +0.2%, BHI -0.7%, OXY +0.5%, APC -0.1%, HES +0.6%, ENB +0.8%, ETP -0.4%, EPD +1.5%.
- ETFs: XLE, VDE, ERX, OIH, XOP, FCG, ERY, GASL, DIG, DUG, BGR, XES, IYE, IEO, FENY, IEZ, PXE, PXI, FIF, PXJ, RYE, NDP, GUSH, PSCE, DRIP, DDG, FXN
- Now read No deal! Our 'enfant terrible' Saudi Arabia did it again
Thu, Apr. 14, 2:57 PM
- P-E firm Carlyle Group (CG -1%) is in serious talks to buy oilfield services assets from Halliburton (HAL -0.4%) and Baker Hughes (BHI +5.2%) that could be valued at more than $7B, Dow Jones reports.
- The talks would mark a shift for HAL and BHI, which have focused on overcoming Justice Department objections to their planned merger by attempting to sell the assets to General Electric (GE +0.1%); GE remains in the mix, but reaching agreement on a price for the assets has been difficult, according to the report.
- The need for HAL and BHI to strike a divestiture deal took on increased urgency last week when the DoJ filed an antitrust lawsuit challenging their proposed $35B merger.
- Now read The Halliburton-Baker Hughes merger is falling apart - what happens next?
Tue, Apr. 12, 6:19 AM
- EU competition regulators have resumed their scrutiny of Halliburton's (NYSE:HAL) plan to acquire smaller rival Baker Hughes (NYSE:BHI), a deal which U.S. authorities say is uncompetitive and want to block.
- The European Commission, which halted its investigation into the $35B deal last month while waiting for more details from the companies, will now decide by Aug. 11 whether to clear or veto the takeover.
Fri, Apr. 8, 1:45 PM
- Analysts are split on Baker Hughes' (BHI +4.3%) future if its merger with Halliburton (HAL +4.4%) fails, but Jefferies squarely comes down on the side of pessimism, downgrading BHI to Underperform from Buy while saying the DoJ lawsuit and scrutiny from other world regulators make the acquisition very unlikely.
- The DoJ lawsuit is "daunting," Jefferies says, and even if HAL-BHI prevails, the merger may be unable to clear regulatory resistance elsewhere in the world, and an aggressive share buyback or quick acquisition by another company is not likely.
- Analysts at Wells Fargo, Citigroup and FBR are among those still optimistic toward BHI even without a tie-up, but Deutsche Bank, Evercore ISI and Jefferies not so much (I, II, III, IV).
- Now read Including a $3.5 billion breakup fee, Baker Hughes is worth $20
Thu, Apr. 7, 3:33 PM
- Halliburton (HAL -0.6%) and Baker Hughes (BHI -1.8%) are lower today in the wake of yesterday's DoJ decision to block their proposed merger, when both stocks rose in an oil price surge-fueled group rally.
- Even with much lower odds of closing, FBR analysts still like BHI's risk/reward - if the deal fails, BHI would benefit from the $3.5B breakup fee, with the ability to fully implement restructuring initiatives that have been constrained by the merger deal; if the deal succeeds, FBR believes the stock will deliver a 40% return, all else constant, within 3-4 months.
- FBR also thinks any "Hail Mary” solution likely still relies on GE (GE -0.9%), and believes GE is the “prospective buyer” with whom HAL has had “lengthy discussions.”
- Now read Baker Hughes a Buy if Halliburton deal folds, Wells Fargo says and Baker Hughes downgraded at Deutsche Bank, as deal close "a coin flip at best"
Wed, Apr. 6, 10:42 AM
- Baker Hughes (BHI +5.3%) is downgraded to Hold from Buy with a $43 price target, cut from $78, at Deutsche Bank, which expects shares to remain relatively range bound during any litigation process concerning the Halliburton (HAL +4.8%) merger.
- Although BHI and HAL will have a strong case to fight the DoJ lawsuit, the odds of the merger closing are "a coin flip at best," Deutsche Bank says
- The firm lowers its 2016 EPS estimate for BHI to a $0.42 loss from its earlier outlook for a $0.37 loss, and cuts its 2017 EPS estimate to $1.20 from $1.60, citing challenges BHI would face as a stand-alone company.
- Deutsche Bank maintains a Buy rating on HAL while lowering its price target to $40 from $53, as the company likely would be on "extremely strong footing” even if the deal falls through
- "If anything, the lack of distractions after well over a year of merger related activities as well as investors currently on the sidelines coming in could actually benefit [HAL] in the short-term,” the firm says.
- Now read It's official: DoJ files lawsuit to block Halliburton from buying Baker Hughes
Wed, Apr. 6, 10:12 AM
- Halliburton (HAL +5.2%) and Baker Hughes (BHI +5.2%) move higher following official news that the U.S. Justice Department has filed a civil antitrust suit seeking to block their $35B merger deal, confirming earlier reports.
- The DoJ alleges the HAL-BHI merger, which would combine the no. 2 and no. 3 oil services companies, threatens to eliminate competition, raise prices and reduce innovation in the oilfield services industry.
- The companies say they will "vigorously contest" the DoJ action, and that the combination would provide customers with access to high quality and more efficient products and services, and an opportunity to reduce their cost per boe.
- Now read Halliburton: ValueAct really is the mullet
Tue, Apr. 5, 2:25 PM
- Baker Hughes (BHI -5.5%) sinks to its lows of the day before rebounding a bit following media reports that the Justice Department is poised to file a lawsuit to stop its merger with Halliburton (HAL +1%).
- Bloomberg says the DoJ plans to file the lawsuit as soon as this week, claiming it violates antitrust laws by eliminating competition between the firms.
- Analysts at Evercore ISI say BHI shares could fall into the low $30s if the deal breaks apart, citing employee turnover, the cannibalization of its equipment at the onset of the downturn, and general disorder within the company that would cause revenue growth and margin improvement at a standalone BHI to lag its peers when the upcycle resumes.
- The government’s view of the deal appears to have been previewed yesterday in a court filing when the DoJ said the merger "threatens to substantially lessen competition in numerous markets."
- Now read Halliburton: Beware
Mon, Apr. 4, 2:19 PM
- The Justice Department files a civil suit against the ValueAct Capital Management hedge fund for failing to tell the U.S. government about more than $2.5B in stock purchases in Halliburton (HAL -3%) and Baker Hughes (BHI -5.5%) after the oil companies announced their $35B planned merger in 2014.
- The DoJ says ValueAct's purchase was a pre-merger notification violation of the Hart-Scott-Rodino Antitrust Improvements Act of 1976 with the intent to influence the companies business decisions.
- The violation “allowed ValueAct to become one of the largest shareholders of both Halliburton and Baker Hughes, without providing the government its statutory right to notice and prior review of the stock purchases,” the DoJ says.
- Now read NY Post: DoJ leaning against Halliburton-Baker Hughes deal
Halliburton Co. provides services and products to the energy industry related to the exploration, development, and production of oil and natural gas. The company operates through two segments: Completion & Production and Drilling & Evaluation. The Completion & Production segment delivers... More
Sector: Basic Materials
Industry: Oil & Gas Equipment & Services
Country: United States
Other News & PR