We have upgraded major oilfield services provider Halliburton Co. (HAL) to Outperform from Neutral, reflecting strong demand for its services in North America.
Halliburton enjoys a strong competitive position within the global oilfield services markets. We like the company’s broad and technologically-complex product and service offerings, along with its robust financial profile. It remains the best-positioned company in the U.S. pressure pumping market, with significant acreage positions in the highest profile plays, such as Haynesville, Eagle Ford shale and Bakken.
As reinforced by results from the last few quarters, the all-important North American activity levels (to which the company is heavily exposed through its market-share-leading pressure-pumping business) are showing signs of strength and sustainability. Margins had bottomed in most basins during the third quarter of 2009 and now appear to be rapidly gaining steam, as the industry looks to balance supply growth with recovering hydrocarbon demand.
The world’s second-largest oilfield services company after Schlumberger Ltd. (SLB) believes that bullish near-term U.S. land drilling trends, where activity is being driven by horizontal drilling and liquids-rich plays, were able to make up for the disruptions in North Africa and sluggish international pricing.
Going forward, Halliburton anticipates benefiting from demand improvements in select North American basins, as operators continue to make the exploitation of unconventional resources the focus of their investment.
As such, we believe the company is favorably positioned to continue accelerating revenue and earnings growth over the next few quarters. Halliburton currently retains a Zacks #1 Rank, which translates into a short-term Strong Buy rating.
Houston, Texas-based Halliburton is one of the largest oilfield services providers in the world, offering a variety of equipment, maintenance, and engineering and construction services to the energy, industrial, and government sectors. The company operates under two main segments: Completion and Production, and Drilling and Evaluation.
