The Risk and Uncertainty of Halliburton When thinking of the energy industry, the great Halliburton always will come to mind. According to their company history, Halliburton began in 1919 in Oklahoma as a small company mixing different elements for oil drilling ("History of Halliburton," n.d., para. 1 and 2). The company has since grown into a corporate giant, with revenues exceeding 18 billion dollars by the end of the third quarter in 2015 (Halliburton Company, p. 1), and currently runs two sectors: “the Completion and Production segment and the Drilling and Evaluation segment” (Halliburton Company, p. 8). While known as an energy industry giant, Halliburton is also known for war time profiteering. As reported by Young, Halliburton …show more content…
13). Halliburton announced in 2014 a consolidation with Baker Hughes, another competitor in their industry (Halliburton And Baker Hughes Reach Agreement to Combine in Stock and Cash Transaction Valued at $34.6 Billion. p. 1). With this consolidation, Halliburton will acquire all assets of Baker Hughes, along with the future subsidiary’s debts. With the uncertainty of the lifetime of the oil industry, and currently facing a significant loss, Halliburton is taking a serious risk facing such a large amount of debt and acquiring Baker Hughes.
Discussion
Background Bloomberg reports that Halliburton controls 6.40% of the market share for the “oil and gas services” industry while it’s two biggest competitors, Schlumberger and Baker Hughes, control 10.00% and 4.90% respectively ("Bloomberg Industry Market Leaders"). It is evident that the anticipated consolidation is the two companies’ attempt to dethrone Schlumberger as the company with the largest market share, or at the very least, gain a large portion of the market. Baker Hughes, a company serving the same customer base as Halliburton, has accrued in 2015 revenues nearing $8.56 billion, expenses of $9.48 billion, facing future liabilities of over $3.9 billion, and a total net loss nearing $800 million ("Baker Hughes Incorporated", p. 2, 4). Trefis Team, a Forbes contributor, reports that this consolidation will cost Halliburton $35 billion of stock and cash dividends and if the consolidation does not occur,
General Dynamics (GD) has realized a long-standing history of success delivering product and service solutions since being formed in 1952. They have purposely divested themselves of technology, product and service offerings in an effort to remain focused on their core competencies and primary customer; the United States Department of Defense. While GD’s primary customer remains the DoD, they have diversified their offerings to adjacent markets within the DoD (e.g, Information Technology and Cybersecurity solutions). GD has also
Currently headquartered in London, BP is one of the largest producers of both oil and natural gas. BP provides its customers with fuel for transportation and energy for heat and light. BP’s core business is gas exploration and production division and their main sources of production include Angola, Argentina, Australia, Azerbaijan, Egypt, Trinidad, the United Arab Emirates, the United Kingdom and the United States (BP PLC (BP) Company Profile | Reuters.com. (n.d.). Retrieved October 27, 2015.). In 2013, BP produced 628,000 barrels of oil each day in the US and was the sixth largest producer of natural gas. Each day, BP sells 50 million gallons of fuel in the US consisting of 7,500 BP branded locations located in 13 states. BP is always seeking new opportunities for advancement in technology so that their operation is safer and more efficient. The company is leading the way in in the energy industry with the world’s largest supercomputer used for commercial research, located in Houston and also the first to use drones in the United States. To further place themselves ahead in the industry, BP has invested over $160 million in 2 dozen companies for advancements in technology. BP currently has 17,000 employees and on average, donates approximately $30 million each year to community
Enron. Enron was once ranked the sixth largest energy company in the world, however, in October 2001 it’s fate changed and it took a turn for the worse. The Enron Scandal came to light, which led to the bankruptcy of the Enron Corporation and the dissolution of Arthur Andersen, one of the five largest audit and accountancy partnerships in the world. Along with being the largest bankruptcy reorganization in American history at that time, Enron is undoubtedly known as the biggest audit failure (“Enron scandal,” n.d.).
BP is a company that delivers energy products around the world through the exploration and refinements of natural resources. The company is also known as one of the world’s largest oil and gas companies that competes with other major household names such as ExxonMobil and Chevron. Because many of these large
Headquartered in Houston, Texas, Enron was one of fortune 500 top companies ranking in at number 7 by 2000. During their 7 year tenure, Fortune named Enron one the Most Innovative companies 6 of those 7 years. Enron is known for its Natural gas and Electricity expanding a total of 36,000 mile radius. Enron formed as a merger of two companies. Houston Natural Gas, which concentrated on its production and exploration of gas to retail businesses during 1976 and by 1984, Houston Natural Gas, had reached sale and assists totaling a whopping $5.7 billon with profits of $123 million dollars. Formally known as Northern Gas Company back in 1930, the other merger was InterNorth. Northern Gas Company originated in Omaha, Nebraska. The merge begin when,
What began as a simple oil company turned into a public energy trading monster, known as
Also, a backlog currently exists of over $80.5 billion, which includes both funded ($56.5 billion) and unfunded amounts. Lockheed Martin states “they have a diverse range of defense, homeland security and information technology products and services which they believe will make it less likely that cuts in any specific contract or program will have a long-term effect on their business.” They also state “termination of multiple or large programs or contracts could adversely affect our business and future financial performance.”
British Petroleum also known as Anglo Persian Oil Company, and now known as BP. The company has experienced many ups and downs in its past history, but BP became one of the largest energy companies. Over BP history has experienced issues such as environmental damage, hazards that affected its works and issue due to business practices (Thome, Ferrell, Ferrell, 2011).
with the start of the Iraq War, many companies are trying to find better and cheaper ways to
“Lockheed Martin said it had been unable to reach an acceptable settlement with the US Government over the deal, which would have created a combined company with revenues of some $37bn. The move was part of the general rush to consolidate in the defense industry. Los Angeles-based Northrop says it now plans to grow its information technology and services business, which currently contributes $1bn to its revenues, to double that figure over the next five years.”
When oil prices fall, valuations get hit, and that creates opportunities for the strong to pick up rivals. After oil collapsed in the late 1990s, we saw some massive deals in the petroleum industry. Exxon (XOM) merged with Mobil, Conoco (COP) combined with Phillips Petroleum, and British Petroleum (BP) acquired Amoco.
As manager of Stanley Black & Decker estimated, it was expected to save $350 million annually over three years if those above synergy would actually work in practice. The company can get cost saving in distribution network consolidation, materials spending, transportation cost and management. These, of course, were no sure thing; achieving them depended entirely on management making them happen. The manager might face the lots of cost synergies risk in operation after merger. First of all, because of different manufacturing modal and distribution channel, the cost of consolidation in reality may be cost much than estimate or the consolidation consequence is not very perfect due to both original companies had already established a maturity product line in long history. Secondly, although the merger would bring huge economic scale advantage and marketing gains to new combined firm, the Stanley Black & Decker has to face other fierce competitions in this industries and even the alliance of other competition in term of purchasing materials and sales in order to against the merger of Stanley Works and Black & Decker. What’s more, as we can see in the Exhibit 1, the business and regional consolidation
Johnson Controls have lost more than a quarter of its value and Tyco’s shares have also fallen by over 30% (TheGlobeandMail, 2016). In order to improve growth, they have taken rationalization measures aimed at saving costs by reducing its workforce and selling off other lower margin units to enable a more competitive and sustainable cost structure in the future (Investopedia, 2015).
In 2010, Halliburton produced revenue of $17,973 billion and operating income of $3,009 billion, reflecting an operating margin of approximately 17%. Revenue increased by $3,298 billion, or 22% from 2009, while operating income increased $1,015 billion, or 51% from 2009. According to Halliburton’s 2010 Annual Report, “these increases were due to its customers’ higher capital spending throughout 2010, led by increased drilling activity and pricing improvements in North America” (Hal 2010 annual report). However, Halliburton remains cautious because of the shifts in oil and natural gas prices and supply/demand factors. These “shifts” are important for equipment and services providers in the oil and gas industry because it affects the
Schlumberger has spread its service operations in a variety of ways. However, the company could be falling in its core company activity. Some critics are actually focused in the operation the company has in the geo seismic area. To attend this sector in 2003 the company bought the