Halliburton’s 3 Biggest Growth Opportunities

These three regions and markets will fuel Halliburton’s growth over the next few years.

Jul 25, 2014 at 1:45PM

Halliburton (NYSE:HAL) recently reported strong second-quarter financial results that were largely in line with analyst expectations. The company's profit surged 21% on better-than-expected demand for oilfield services in North America and strong growth in drilling activity in the Middle East and Asia.

Going forward, global upstream spending is expected to continue growing at a strong pace, bolstering the outlook for Halliburton and other leading oilfield services companies. With that said, let's take a closer look at three key regions and markets that will drive Halliburton's growth over the next few years.


Photo credit: FMC Technologies

North America
The first and most obvious is North America, which accounts for about half of Halliburton's revenues. While the company's huge exposure to the continent makes it more susceptible to regional weakness as compared to peer Schlumberger (NYSE: SLB), which relies on North America for just about 31% of its revenues, it also presents a major opportunity.

For instance, onshore US well completion is poised to be one of the fastest-growing market segments over the next few years. This market, which Halliburton dominates, provides a major opportunity for both revenue growth and margin expansion. Thanks to heavy investments in research and development, Halliburton has introduced a number of highly sought-after new products and services, which have helped its customers boost production rates by up to 30%.

Coupled with the high costs of switching to a competitor's products and services, strong customer satisfaction has allowed the company to charge more. As Halliburton continues to improve its onshore US well completion offerings, its pricing power should improve further. This should result in significant margin expansion over the next few years.

Another important trend that bodes well for Halliburton in North America is upstream firms' increasing implementation of higher frac stage counts in both established and emerging shale plays. This should significantly boost demand for Halliburton's stimulation services, which provide cost-effective approaches to fracturing.

In addition to its dominant position in North America, Halliburton also has huge international opportunities, primarily in deepwater and mature field services. Deepwater drilling, which is poised for rapid growth in the years ahead, is extremely expensive and technically complex and requires exceptional project management capabilities to maximize profitability.

To that end, Halliburton provides a leading suite of products and services that help customers improve deepwater drilling efficiency through performance workflow solutions that can save millions of dollars per well and up to a month of rig time. It provides these services to operators in 30 countries, representing virtually all the major global deepwater markets. Over the next three years, the company expects its deepwater segment to grow 25% faster annually than the deepwater industry average.

Mature fields
Mature field services will be another major driver of growth for Halliburton, with the company expecting to triple its revenue from the service line to $9 billion by 2016. Mature fields account for roughly 70% of worldwide oil and gas production, which means optimizing production from these fields is crucial to virtually all types of upstream operators.

Halliburton provides customers with a comprehensive mature field solution that consists of complete asset management, entire field and individual well optimization, and well abandonment designs and execution services. Thanks to its innovative and integrated solution, the company's customers have been able to boost their ultimate recovery from mature fields by an average of 20% or more.

Investor takeaway
Halliburton's dominance in North America, coupled with its increasing penetration into deepwater and mature fields, should help ensure continued double-digit earnings-per-share growth over the next few years. With shares currently trading at 14x forward earnings, I think the company still has a lot more room to run -- provided oil prices don't collapse and upstream companies keep spending.

Risk-free for 30 days: The Motley Fool's flagship service
Tom and David Gardner founded The Motley Fool over 20 years ago with the goal of helping the world invest...better. Their flagship service, Stock Advisor, has helped thousands of investors take control of their financial lives and beat the market. Click here to sign up today.

Arjun Sreekumar has no position in any stocks mentioned. The Motley Fool recommends Halliburton. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at www.fool.com/podcasts.

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to www.fool.com/podcasts, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.


Compare Brokers