Halliburton, Schlumberger Rise on Speculation Rout on Moratorium Overdone
Stock Chart for Halliburton Co (HAL)
Halliburton Co. and Schlumberger Ltd., the world’s largest oilfield contractors, rose in New York trading on speculation they have enough business around the world to weather a deep-water drilling moratorium in the U.S.
Halliburton jumped $2.53, or 12 percent, to $23.68 as of the 4 p.m. close of New York Stock Exchange composite trading, its biggest gain since November 2008. Schlumberger, based in Houston and Paris, climbed 8.8 percent to $56.31.
Halliburton plunged 15 percent yesterday, after BP Plc failed in an effort to stop the flow of oil from a leaking Gulf of Mexico well that led to the moratorium. Houston-based Halliburton, which provided oilfield services on the BP-leased drilling rig that exploded April 20 and triggered the oil spill, had tumbled 37 percent since the blast before today.
“I think the market has overreacted lately to a moratorium that only impacts part of their business and only for a portion of time,” said Brian Youngberg, an analyst at Edward Jones in St. Louis who has “buy” ratings on Halliburton and Schlumberger shares and owns none.
Baker Hughes Inc., another Houston-based oilfield contractor with operations around the world, climbed 10 percent to $39.63. Prior to today, Baker Hughes had tumbled 29 percent since the rig blast.
Halliburton is in talks with customers to relocate equipment and personnel to other markets as appropriate, the company said today in a public filing.
President Barack Obama last week announced a six-month extension of a moratorium on deep-water drilling permits. The halt may go beyond the extension, Halliburton said.
Halliburton has “significant financial flexibility,” including about $3.2 billion in cash and marketable securities, and revolving credit capacity of $1.2 billion, Chief Financial Officer Mark McCollum told investors today on a conference call. The company also has about $600 million in liability insurance, he said.
The Gulf of Mexico accounted for about 16 percent of Halliburton’s North American revenue last year, according to a company filing. Halliburton derives about 39 percent of its revenue from North America, compared with 18 percent of oilfield-services revenue at Schlumberger.
It may take 12 to 24 months for Gulf drilling activity to get to about 50 percent of pre-spill levels, Probert said on the call. In shallow Gulf waters where drilling is allowed, there may be project delays and pricing pressure, he said.
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