Halliburton CEO Dave Lesar, in a presentation to the Lehman Brothers Energy and Power Conference this month announced imminent ‘across the board’ price rises for Halliburton’s services. Increasing demand has allowed the rises and ‘allayed concerns over capacity.’ Lesar attributes Halliburton’s success to its ‘vigorous’ R&D which ‘churns-out’ new products and some 34% of Energy Services’ revenue.
Lesar claimed that Halliburton has an 8-10 year demographic advantage over the industry and that an ‘aging industry will outsource more and more to a younger Halliburton’.
Halliburton is to take a ‘tough stand’ on individual product lines and unprofitable geomarkets and anticipates some ‘tough conversations with customers’ on pricing. While North America is where the action is today, the future lies in the Eastern Hemisphere—68% of new ‘big dollar’ projects are outside North America.
Halliburton CFO Chris Gaut described the company’s turn around in profitability. The Energy Services Group used to trail its peers, but is now ahead with operating margins of around 20%. Halliburton’s analysis shows a service industry average annualized return on capital employed (ROCE) for Q2 2005 of 18%. Halliburton leads with 23%, Schlumberger 19%. Laggard WFT 8%. According to Gault, without KBR, Halliburton’s ROCE would be ‘100 basis points higher’. Halliburton is ‘looking to infill acquisitions’ and is moving forward with plans to separate its KBR businesses.
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