The Risk And Uncertainty Of Halliburton

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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,
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