For the fifth year in a row, major oilfield service provider Halliburton Co. (HAL) has been selected as a member of the global Dow Jones Sustainability Indexes (“DJSI”), the global indicator tracking the financial performance of leading sustainability-driven companies worldwide.
Launched in 1999, DJSI is widely considered as the benchmark in this area. The index is drawn up by Dow Jones in collaboration with investment management firm Strategic Asset Management (“SAM”).
Halliburton has been selected as a leader in corporate sustainability by the DJSI, which the company claims is recognition of its world class services, products, and programs, as well as the successful integration of corporate responsibility and sustainability into overall business practices.
Houston, TX-based Halliburton offers 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.
Halliburton’s international operations continue to reflect strong demand for its services on the back of higher activity. This is expected to be a key growth driver going forward with pricing in the region remaining competitive. We have identified Latin America – offering enough shale development opportunities – as the important market in this regard. Additionally, despite certain issues in Halliburton’s core U.S. segment, the long-term prospects for the business remain robust.
In a positive development earlier this month, the world's second-largest oilfield services company after Schlumberger Ltd. (SLB) agreed to shell out approximately $1.1 billion as settlement fees for its involvement in the 2010 Macondo oil spill incident. The agreement is likely to clear most of Halliburton’s liability in the incident, while removing the financial overhang from the stock.
However, we expect the pressure pumping market – in which Halliburton is the leader – to remain oversupplied till the second half of 2014. This is likely to exert pressure on the company’s sales. Moreover, given the massive run-up in the stock (1-year gain of almost 35%), we advise investors to proceed with caution.
Halliburton currently retains a Zacks Rank #3 (Hold), implying that it is expected perform in line with the broader U.S. equity market over the next one to three months.
However, some better-ranked oilfield service stocks include Newpark resources Inc. (NR) and Helix Energy Solutions Group Inc. (HLX). Both carry a Zacks Rank #2 (Buy).
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