The oil and gas industry has seen rapid growth in recent years, primarily due to new technologies such as hydraulic fracturing, or fracking, as well as continued expansion in deepwater drilling. Though most investors turn to Big Oil companies like ExxonMobil, there is another corner of this industry that offers unique exposure to the industry: oil field services. In this piece, we highlight the biggest name in this sub industry – Halliburton Company (HAL) [for more commodity news and analysis subscribe to our free newsletter].
Oilfield Services in Focus
Founded in 1919, Texas-based Halliburton is one of the world’s largest providers of products and services to the energy industry. The firm serves the upstream oil and gas industry by providing a wide range of services including locating hydrocarbons, managing geological data, drilling, formation evaluation, well construction and completion, and optimizing production through the life of the field. Halliburton’s business operates in two primary segments: drilling and evaluation, and completion and production [see The Next Big Industry: Sand].
The three fastest growing business segments for Halliburton have been its deepwater, mature fields, and unconventionals businesses. The deepwater segment increased revenues by 31% in 2013, the mature fields business tripled its size, and HAL’s unconventionals business revenues grew 70% last year.
Furthermore, Halliburton just recently announced its merger with Baker Hughes, combining two of the largest oilfield services companies. The deal still needs to get regulatory approval.
- Market Cap: $43.18 billion
- Volume: 12,134,700
- P/E Ratio: 12.82
Halliburton is one of the biggest players in the oil and gas services industry, with a market cap of over $43 billion and an average three-month trading volume of over 12 million. HAL’s P/E ratio is relatively lower than other companies in the industry; the stock’s forward P/E ratio (1 year) is 10.54, making it a compelling option [see 5 Commodity Trading Mistakes You Could Be Making].
- Annual Payout: $0.72
- Dividend Yield: 1.43%
Halliburton began paying a dividend in 1993, but it has only consecutively increased payouts over the last year. In 2013, HAL’s annual dividend growth was 45.8%. Currently, the stock pays dividends quarterly at an annualized $0.72 per share. Based on its current price, the stock yields approximately 1.43%.
Year-to-date, Halliburton Company has lost roughly 1.8%. The stock started off the first half of the year on a solid note, gaining over 45% by the end of July. Since its peak this year, however, the stock has taken a steep tumble, primarily due to the downward oil price trend seen in recent months.
The Bottom Line
Halliburton Company may be a compelling option for those looking to add indirect exposure to the oil and gas industry, given the company’s focus on providing key products and services for the commodities’ largest explorers and producers. As always, investors should also keep in mind that there are a number of factors that could affect the stock’s performance, including the price of oil, operational costs, as well as outside economic issues.
Disclosure: No positions at time of writing.