Halliburton: HAL Partial Sell Recommendation
Investment Thesis • We should hold 300 shares of HAL to build upon the 10% gain achieved over the past 11 months and take advantage of the positive outlook for 2013. • We should sell 200 shares of HAL to lock in current gains.
The Company • Locate oil and natural gas for companies • Determine if they can be produced. • Provide the services that allow oil and gas companies to begin production • Well intervention, pressure control, and pipeline and process services.
HAL Stock History
Thursday Snapshot Close: Open: 43. 32 40. 72 Bid: 43. 32 x 400 Ask: 43. 33 x 200 1 y Target Est: Beta: Next Earnings Date: 47. 41 1. 82 Day's Range: 40. 72 - 43. 96 52 wk Range: 26. 28 - 41. 44 Volume: 26, 175, 786 Avg Vol (3 m): 10, 654, 000 Market Cap: 40. 37 B P/E (ttm): 15. 24 EPS (ttm): 2. 84 N/A Div & Yield: 0. 36 (0. 90%)
HAL vs Energy ETFs
HAL vs SLB and BHI
HAL vs WTIC and Brent Crude
2012 Performance • After purchase, the stock price decreased rapidly due to 1. High guar gum cost (increased operating cost) 2. Decrease in North American activity 3. 2012 energy price decreases (through October) 4. Deepwater Horizon – BP blamed, Transocean $400 M guilty plea, HAL largely unaccountable legally
2013 Projections • Steady increases since November are expected to continue due to 1. Solid financials (reasonable debt levels, good return on equity) 2. Oil production expected to increase in the NA 3. Foreign revenues continue to outpace spending levels 4. P/E ratio: 14. 7; 15% discount to 3 -year avg. of 17. 3 • Q 4 Financials • Released Jan. 15; immediate increase in stock price • Showed higher than expected earnings • Strong 2013 outlook
Executive Insights from the CEO • In the fourth quarter, revenue of $7. 3 billion was up 3% sequentially and represents the highest quarterly revenue in company history. • NA…operating income was down 22% compared to Q 3 results, driven by an increased consumption of our high priced supply of guar and continued pricing pressure around hydraulic fracturing contracts… and anticipate the NA rig count will improve from Q 4 levels • In the Eastern Hemisphere, revenue grew 11% sequentially, and operating income increased 35% sequentially, driven by year-end sales of completion tools, software, and other equipment. We believe activity levels will continue to grow in 2013, and anticipate full-year margins should average in the upper teens.
The Bottom Line • Expected growth throughout 2013 • Target stock price: $47 by year’s end (BLM, S&P) • Rebound of North American operations • Guar Gum cost • Increased rig numbers • Continual growth of foreign operations
SWOT Analysis Strengths • Solid financial position (debt levels and return on equity) • Low P/E ratio • Better growth over past 3 years than two main competitors Weaknesses • Sub par growth in net income • Natural gas prices are flattening out • Slowdown in NA gas production • Venezuela bolivar devaluation cost est. $30 M this Q 1 Opportunities • Rebound in NA oil production • Upgraded to “buy” status by majority of analysts • Foreign revenues continue to outpace spending levels Threats • Competition from SLB and BHI • Reduction in new oil fields in NA • Shrinking margins to compete with SLB and BHI
Stock History • Bought: • 200 Shares at $38. 16 on 02/23/2012 • 300 Shares at $36. 81 on 02/09/2012 • Current Value: • 500 Shares at $43. 32 • Total Value: $21, 660
Recommendation Sector: Energy (Energy and Utilities) Current Holdings: PXJ, FEN, VPU, AMLP, OXY, HAL Target (Current) Allocation as of 2012 Dec: 7. 23% (8. 96%) Recommendation: Partial Sell • Sell 200 shares at current market price to lock 10 -15% profit • Hold the other 300 shares to capture an expected greater future return
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