Halliburton (NYSE:HAL) is an oil services company that has, for years, provided technology that enabled oil and gas exploration companies to find new fields and make the most of their existing properties. It is becoming more of a play on natural gas because it has recently developed promising “green” technologies that could reduce or even eliminate some of the big controversies surrounding the fracking process.
Halliburton is a big global company operating in 80 countries, but nearly half of its revenue (46%) comes from the U.S. The company provides a variety of products and services related to the exploration, drilling and development of both oil and natural gas, and its customers include major international and independent oil companies.
I’m impressed with how strongly committed HAL is to developing new technologies. It has technology centers in Belgium, Canada, India, Singapore, the U.K. and the U.S., and the company has certainly been an innovator in both horizontal drilling and hydraulic fracking.
The latest innovation is what Halliburton calls its “CleanSuite” Technologies, through which the company is endeavoring to make fracking safer. Among the products is the CleanStim Formulation — the cocktail used in the fracking process. According to the company, it uses the same acids and enzymes present in fruits and vegetables, making it one of the most environmentally safe fracture solutions.
In fact, to demonstrate its safety, a Halliburton executive took a drink of it last summer. Some dismissed it as a publicity stunt, and maybe it was a little over the top. Still, environmental groups also gave the company credit for its efforts to make the process safer and more environmentally friendly. Another criticism of fracking is the amount of water required in the process. However, through what they call the “CleanWave” treatment system, water generated as a part of the fracturing process can be treated and reused.
Poised to Grow
The long-term outlook for U.S. natural gas activity is quite bright. Gas is very attractively priced relative to oil, and we will continue to see the transition to more natural gas fleet vehicles — and perhaps even passenger cars — should the government back an effort to increase natural gas storage and fueling stations. International demand for natural gas liquids also will be robust for a long time as the middle class expands internationally.
I like HAL’s growth potential and view it as a solid play on this trend because of its exposure to fracking and natural gas drilling rigs, its efforts to develop clean fracking solutions and the stock is attractively valued.
Just last week, Halliburton reported Q4 and full-year results for 2010. For the quarter, HAL earned $1 a share (before unusual items), up from 94 cents in Q3 and 68 cents the year before. For all of 2011, earnings grew 65% to $3.26 (from $1.97) in 2010. The gains were driven by increased horizontal oil drilling in the U.S., where the oil rig count was up 8%, along with increased activity in the Gulf of Mexico. Internationally, the company benefited from increased drilling in the Middle East and Asia, which offset a politically related slowdown in Africa.
Management also is optimistic about 2012, but the company is moving away from one part of the natural gas industry and toward another.
Let me explain that a bit.