Friday, May 23, 2008

Halliburton Gets Ready To Head Deeper

David Lee Smith: Halliburton Gets Ready to Head Deeper

With crude prices headed for goodness knows where, and operators wading into progressively deeper water in search of new discoveries, Houston-based Halliburton (NYSE: HAL) jumped into the quest for Expro International Group, an oilfield services company based in Reading, U.K.

Halliburton, the second-largest factor in the services sector behind Schlumberger (NYSE: SLB), has apparently offered $3.4 billion for Expro, which produces equipment that permits the testing of wells drilled in waters exceeding 1,000 meters deep. It trumps an earlier offer by a unit of Goldman Sachs (NYSE: GS), along with private equity firm Candover Partners, and Dutch investor AlpInvest Partners.

At this point, it's impossible to know whether the trio will attempt to top Halliburton's offer. Either way, however, my betting is that, given the determination of Halliburton's CEO Dave Lesar to expand and diversify his company and its capabilities, Halliburton will ultimately emerge victorious in its quest for Expro.

While not long ago, offshore drilling to just a few hundred feet was the norm for exploration and production companies, new discoveries are occurring in depths to several thousand feet more and more frequently. Further, deepwater drillers Transocean (NYSE: RIG) and Diamond Offshore (NYSE: DO) have ridden the trend to relative stardom within the offshore drilling group.

Given these trends, the addition of Expro would be an important arrow in Halliburton's capabilities quiver. Lesar has made a number of other moves in the past couple of years that I believe have benefited the company materially. I suggest that you carefully watch Halliburton and its progress toward acquiring Expro. What better combination than a well-managed company that just happens to be operating in what is a front-and-center sector?


Anaconda said...


"For a price, Ugarte, for a price." So is the retort of Humphrey Bogart's Rick to Ugarte's excuse for his line of work.

The supply breakthrough is the cat out of the bag. This breakthrough is not due to abiotic oil theory -- it's due to the reality of Earth's geology -- it just so happens that abiotic oil theory is the most accurate description of Earth's geology.

It's the best available science.

This has set off a mad scramble for capital assets able to reach these mind numbingly deep deposits of crude oil. Halliburton, the marqee name in the American oilfield services industry, wants in on the action. And why not? Nobody wants to get left at the dock, except possibly the oil majors, see (OIM) post, Dahlman Analyst Sees Higher Rig Rates, May 12, 2008, Comment #1, Oil Majors Caught with their Pants Down, 5/12/08.

This is an exciting time to be in the oil business, with prices high, and pent up demand present in the market, it's hard to see how new supplies are going to out run demand.

That there is visible, new sources of crude oil in the market place, is a powerful tonic for what ails you.

All kind of deals are being cut, the market is fluid, and when a market is fluid is when smart operators can move up the food chain.

Halliburton is already at the top of the food chain, but things are happening so fast, even they could fall off the top if they don't react fast enough. The oil industry is a greasy pole, and a fresh coat of oil has just been squirted on the pole.

Yet, with all this talk of the big boys, there is still room for an Indiana Jones, to squeek in there for a piece of the action. You got to go get it, and that takes getting out into the field.

Are there bad actors?

Where there Germans up to no good in Casablanca?

But this is competition, and open competition is good for the market and good for the players.

There is an open field opportunity that hasn't existed in the oilpatch in decades. Who can get their product to the market first, to take advantage of the high prices? It's a race to find the treasure.

So Casablanca meets Indiana Jones.

Humphrey Bogart meets Harrison Ford.

Watch out for the chairs, there just might be a bar fight over one of the girls up in the review.

Halliburton is a big dog, the big dogs are running.

Renault: "And what in heaven's name brought you to Casablanca?"

Rick: "My health. I came to Casablanca for the waters."

Renault: "Waters? What waters? We're in the desert."

Rick: "I was misinformed."

No you are not misinformed -- there is lots of oil -- the real stroy is the mad scramble to get it.

Abiotic oil theory is like a ticket to Lisbon. What's in Lisbon? The clipper to America!

And sitting next to you on that clipper might just be Indiana Jones, bullwhip in hand, on his own quest to beat the pack searching for a golden elixer.

Good Hunting!

Anaconda said...

The market is tight right now. New supplies are on the market's horizon, not necessarily in the market right now. Apologies.