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Halliburton Project

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stefano rovelli

on 2 May 2016

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Transcript of Halliburton Project


COMPANY PRESENTATION
Alexandria Allen, Austin Hogan, Federico Raviola, Giulio Tanzi,
Stefano Rovelli

Strategic Challenges
Halliburton's future financial performance will be significantly influenced by the following factors:

Dependency on oil price and oil price trend
Customer's strong bargaining power
Regulatory issues with respect to hydraulic fracking
Acquisition of the rival Baker Hughes
Dependency on oil prices
Correlation of 0.97 with Brent oil price in the period 2014-2016
Huge drop in revenues after the oil collapse started in 2014 and the following CAPEX cuttings made by all big oil companies
Different impact on the two divisions of the company
The company has not the opportunity to diversify
Oil price trend
Forecasting future oil prices is fundamental for the company.
Oil prices are determined by:
Short term factors: Doha agreement, Kuwait oil workers strike, pipeline leaks
Long term factors: Oil traders expect demand to excess supply in the late 2016
But what can the company do in case of a new drop in oil prices?
Customers' strong bargaining power

Oilfield services companies are largely dependent on the capex of major oil firms

Low oil prices have reduced the profitability of most oil projects

Big oil companies are pushed to exploit their bargaining power even further

Bargaining power of oil service companies is not significantly influenced by their size
Regulatory issues on fracking

They would cause an increase in drilling costs and limit future investments

Environmentalists' protests for stricter regulations

New federal rules on hydraulic fracking approved in March 2016
Acquistion of Baker Hughes


$34.6 billion deal, significant premium paid

Difficult integration because of the previous fierce competition between the two companies

Risky espansion in new markets where Baker Huges has a strong presence (e.g. Russia)

Authorities concerns

$3.5 billion break-up fee

Industry overview
Porter Analysis
Porter Analysis
Overall the industry is
attractive
but there are two main concerns:

Customers' bargaining power
Low oil prices

Tangible resources
Headquarters in Houston
V

R

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Cash position

V

R

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N


Intangible resources
Brand and client portfolio
V

R

I

N




Patents portfolio

V

R

I

N


Capabilities
Expertise in acquisitions
V

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N


Summary of contents

Company overview
Sector Analysis
Company Analysis
Strategic Challenges
Recommendations
Strategic recommendations
Reducing customers' bargaining power

Protecting from regulations in the shale oil segment

Complete the acquisition of Baker Hughes
Reducing customers' bargaining power

Actions:
Secure on long term contracts
Focus on unconventional fields such as deep-water exploration

Risks:
Lose share in other fields
Increase exposure to oil price fluctuations

Protecting from regulations in the shale oil segment

Actions:
Lobbying coalition: show fracking's safety, and its contribution in reducing oil imports

Risks:
Waste resources
Brand can be damaged by great media exposure

Complete the acquisition of Baker Hughes

Actions:
Using the approach outlined by J.H. Dyer, P.Kale, H. Singh, Halliburton should complete the deal
Reciprocal synergies, hard and redundant resources, high competition
Selling assets to reduce antitrust concerns

Risks:
High market uncertainty
Regulatory concerns
Culture clash

Halliburton Company
Founded in 1919
Oilfield Services Sector



Today:

presence in 80 countries
more than 65000 employees
two main divisions: drilling and evaluation; completion and production

Competitors
Schlumberger
Baker Hughes
Saipem
National Oilwell Varco
Full transcript