Halliburton-On the rise? Message Board

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Gold/Mining/Energy : Halliburton-On the rise?

HAL 28.16

-0.1%

3:59 PM EST

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From: Dennis Roth	1/29/2008 9:02:11 AM
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Halliburton Company (HAL): Pressure pumping challenges remain; no change to Neutral rating - Goldman Sachs - 01/28/08 What's changed We are lowering our 2008 EPS estimate for Halliburton by $0.19 to $2.81 to account for our more conservative outlook on North America stimulation pricing in 2008 and a higher corporate expense estimate, partially offset by a slightly lower expected tax rate. We also slightly adjusted 2009/2010 EPS estimates to $3.51/$3.89 compared to $3.52/$3.78 previously. Implications We maintain our Neutral rating on Halliburton and we expect the shares to remain range-bound until there is better visibility on the timing of pricing stabilization in North America pressure pumping, which does not appear likely until 2H08 at the earliest. Key takeaways from the quarter include: (1) North America margins will continue to be under pressure in 1H08 due to contract rollovers in 1Q08 at roughly 7%-9% lower pricing than 4Q07. At this point, we agree with HAL, SLB and BJS that pricing may begin to stabilize sometime in 2H08, though this is dependent on capacity increases slowing which remains a concern given that most companies are still planning on adding horsepower in 1H08. (2) We are estimating 21% revenue growth in 2008 supported by IPM work in Latin America, increased activity in Europe and the Middle East. This growth compares favorably to our 18% forecast for SLB and 19% for BHI. (3) Management now appears more focused on share buybacks in 2008 than originally intended given the current stock price. Valuation HAL is trading at 2008 P-E/EV-DACF 11.9X/9.3X versus SLB at 16.5X/12.5X and BHI at 13.0X/9.6X. We lower our 12-month price target to $38 from $40 due to our lower 2008 EPS estimate. Key risks Weaker-than-expected global economic growth or lower-than-expected oil company spending internationally.

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