Halliburton Adds to Chemical Services Capabilities with Multi-Chem Acquisition
Halliburton (NYSE:HAL) announced earlier this week that would be acquiring Texas based private oilfield services player Multi-Chem for an undisclosed sum. [1] The takeover, which is still subject to regulatory approval, is expected to help Halliburton to expand its range of services. Oilfield services firm Multi-Chem specializes in oilfield production and completion chemicals. Halliburton competes with players such as Schulmberger (NYSE:SLB), Baker Hughes (NYSE:BHI) and Weatherford International (NYSE:WFI).
We have a $60 price estimate for Halliburton, which is a 45% premium to its current market price.
Halliburton improves breadth of services
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Halliburton, which has been pushing its integrated services offering, is plugging a vital gap in its offering with the Multi-Chem acquisition. Multi-Chem is the fourth largest production chemicals company with around 750 customers and provides customized solutions for oilfield products, gas well treatments and pipelines. [2] Halliburton will benefit from the company’s product portfolio that includes biocides, viscosity reducers and wetting agents. Multi-Chem provides chemical and services to 30,000 oil and natural gas wells in the U.S. and Canada. [3]
A wider range of services is expected to help Halliburton increase its average revenue per rig figure. Our estimates for the growth in the revenue per rig figure for Halliburton include the growth in the services offered because of inorganic growth.
Rig Count grows despite fall in crude prices
Halliburton, which has seen its share price recede since oil prices slid on the worries of a slowdown in the U.S., seems to be confident that demand for its services will not see a significant slump in the near future. [3] CFO Mark McCollum remarked that the company expected the North American market to continue to grow as clients are factoring lower oil prices into their plans. The international market for oilfield services is also expected to continue on its slow growth trajectory.
The company’s outlook seemed to be in line with the latest rig count data released by Baker Hughes. Total rig count in North America increased from 2,247 in July this year to 2,430 in August. [4] Rig count also increased in Europe, Africa and Latin America in the same period. The rig count in the Middle East stayed stable at 287 as well.
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Multi-Chem
- Halliburton to buy Multi-Chem, Associated Press [↩]
- Multi-Chem, CV BIZ [↩]
- Halliburton fills services gap with chemicals deal, Reuters [↩] [↩]
- Baker Hughes Announces August 2011 Rig Counts, PR Newswire [↩]