Is Halliburton Cheap Compared To Schlumberger After Declining Over -75%?

by Trefis Team
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Halliburton Company
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Oilfield services stocks have been particularly badly impacted by the ongoing Coronavirus/oil price crisis, as oil companies are expected to curtail capital investments with Brent crude prices down by over 50% over the last month alone. Halliburton stock is down by ~75% since early February, while its rival Schlumberger has seen its stock drop 57% over the same period. While both companies have seen a similar contraction in revenues over the last 5 years (about -7.5% per year), posting fairly consistent losses, Halliburton stock has taken a bigger hit considering its higher exposure to the North American market (53% of total revenue vs. 33% for Schlumberger).  The North American oil market is largely driven by tight oil, which has high marginal costs of production, making exploration and production activity less viable at current prices. Planning cycles are also typically shorter for tight oil plays, allowing operators to respond more quickly to the commodity cycle, meaning that Halliburton’s revenues could fall faster. While the outlook for both companies remains tough, as crude oil prices are likely to remain volatile till there is more certainty about the demand outlook and the containment of the current pandemic, Schlumberger’s relatively lower debt load (long-term debt to equity of 0.6x vs about 1.4x for Halliburton), and better geographic diversification, could help it cope better than Halliburton over the crisis.

Our analysis Is Halliburton Expensive Or Cheap Compared To Schlumberger After Declining Over -75%? compares the stock price performance and fundamentals of Halliburton and Schlumberger over the last few years.

Coronavirus Crisis: Since early February, Schlumberger stock has declined -57% compared to -77% for Halliburton.

  • Schlumberger stock has declined by about 57% since early February, compared to 77% for Halliburton, after the WHO declared a global health emergency relating to the Coronavirus.
  • Schlumberger has fallen by about 40% since March 8th, as oil prices tumbled and U.S. cases accelerated, while Halliburton has declined by about 61%.

Historical Performance: While both stocks have declined between 2009-2019 amid volatility in the oil markets, Halliburton has seen a sharper decline this year.

  • Schlumberger stock went from $50.22 at the end of 2009 to $39.61 at the end of 2019 and stands at $14 currently.
  • Halliburton went from $25.48 in 2009 to $24.21 at the end of 2019. The stock has declined further to $6 currently.

Historical Revenue and EPS Growth: Both companies have seen revenues decline by about -7.5% each year over the last 5 years.

  • Between 2014-19 Schlumberger’s annualized revenues declined by -7.4% vs. -7.5% for Halliburton.
  • Historical EPS Growth: Both Schlumberger and Halliburton have largely been loss-making over the last 5 years, on account of weaker price realizations from contracts and asset impairments. Over 2019, Schlumberger’s EPS stood at -$7.30 vs. -$1.30 for Halliburton.

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