How Will Halliburton’s Over Exposure To North American Markets Impact Its Profits?
The oil slump that began in the second half of 2014 has severely hit the profitability of the oilfield services companies. A sharp drop in commodity prices resulted in sluggish exploration and drilling demand worldwide, particularly in the North American markets, causing sluggish demand for drilling rigs and other oilfield equipment. Consequently, large oilfield service providers saw a notable decline in their revenue as well as earnings.
Such is the case with Halliburton (NYSE:HAL), the world’s second largest oilfield service provider. The Houston-based company derives more than 55% of its revenue, and in turn more than 50% of its value, from its North American operations. However, due to the commodity downturn, the company’s profits from these markets plunged significantly, creating a dent in its bottom line. In contrast to this, Schlumberger (NYSE:SLB), Halliburton’s closest rival, showed resilience even during the turmoil in the commodity markets due to its limited exposure to the North American markets.
- What To Expect From Halliburton’s Q3 After Stock Up 10% This Year?
- What To Expect From Halliburton’s Stock?
- Can Halliburton Stock Return To Its Pre-Inflation Shock Highs?
- Halliburton Stock Likely To See Higher Levels Post Q1 Results
- What to Watch For In Halliburton’s Stock Post Q4?
- Halliburton Stock Up 14% Over Last Ten Days. What’s Next?
Due to the persistently low commodity prices, Halliburton’s exposure to North American markets has been reduced from nearly 46% for full year 2015, to less than 40% in the June quarter of 2016. Yet, the company’s presence in the troubled region is much higher than its peers. Since the North American markets were the worst affected by the commodity downturn, this large exposure has weighed on the oilfield service provider’s operating margins, pushing it into net losses over the last couple of quarters.
That said, Halliburton remains optimistic about its fundamentals and the upside potential of the North American markets. The company believes that the commodity markets have bottomed out and that 900 rigs in this cycle will be equivalent to 2,000 rigs in the last commodity cycle. Thus, we figure that with a gradual recovery in commodity prices, Halliburton’s North American operations will play a crucial role in its future growth and value.
Global Opportunities For Unconventionals
Have more questions about Halliburton (NYSE:HAL)? See the links below:
- Here’s Why Trefis Has Revised Halliburton’s Price Estimate To $45 Per Share
- Halliburton Reports Depressed 2Q’16 Earnings Due To Persistently Low Drilling Demand
- Sluggish Drilling Demand Will Continue To Pull Down Halliburton’s 2Q’16 Results
- Why We Believe Halliburton Is Worth $40 Per Share?
- Halliburton’s 1Q’16 Earnings Plunge As Drilling Activity Remains Low, Particularly In North America
- How Will The Halliburton-Baker Hughes Deal Failure Impact Halliburton’s Equity Value?
- How Will The Halliburton-Baker Hughes Deal Impacted Halliburton’s Credit Capacity?
- Did Halliburton Pay A Higher Price For Baker Hughes’ Acquisition?
- Downward Revision of Halliburton’s Price From $42 To $38 Per Share
- How Valuable Are Halliburton’s North American Markets Compared To Its Middle East & Asian Markets?
- How Much Will Halliburton’s Revenue Grow If Oil Prices Rebound To $100 Per Barrel By 2018?
- What Is Halliburton’s Fundamental Value Based On 2016 Expected Numbers?
- How Much Will Halliburton’s Revenue And EBITDA Grow Over The Next Five Years?
- How Has Halliburton’s Revenue And EBITDA Changed Over The Last Five Years?
- What Is Halliburton’s Revenue And EBITDA Breakdown?
- How Has Halliburton’s Revenue And EBITDA Composition Changed Over The Last Five Years?
- Halliburton: The Year 2015 In Review
Notes:
1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for Halliburton Company
View Interactive Institutional Research (Powered by Trefis):
Global Large Cap | U.S. Mid & Small Cap | European Large & Mid Cap