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Halliburton, Baker Hughes to Jointly Sell About $10B Assets - Analyst Blog

Zacks Equity Research

Oilfield service behemoth Halliburton Company HAL along with its smaller rival Baker Hughes Incorporated BHI will start looking for potential buyers of almost $10 billion worth assets next month, going by Bloomberg. Following the report, Halliburton moved higher on the NYSE by 3.1%.

The divestiture is a prerequisite for getting approval from the U.S. Department of Justice for the planned $35 billion merger between Halliburton and Baker Hughes. Both companies are required to eliminate at least four groups of overlapping lines of business comprising directional drilling operations and drill bits of Halliburton along with the cementing business of Baker Hughes.  

Almost all the oilfield services players including Halliburton − the second largest oilfield service provider in the world − are being affected by the free fall in crude prices for more than seven months. This is because their business is positively correlated with the price of oil. In fact, West Texas Intermediate (WTI) crude fell almost 60% since last June.  

Hence, after completion − expected by the latter half of this year − the combined company is expected to be in a better position to dominate the oilfield services industry and weather the plummeting crude prices.

Houston, TX-based Halliburton offers a variety of equipment, maintenance, and engineering and construction services to the energy, industrial, and government sectors. But with the oil price not expected to recover this year, we don’t see Halliburton earning significantly in the coming months.

As a result, Halliburton carries a Zacks Rank #5 (Strong Sell), implying that the stock will significantly underperform the broader U.S. equity market over the next one to three months.

Meanwhile, a couple of better-ranked players in the energy sector are Western Refining, Inc. WNR and Western Gas Equity Partners LP WGP. Both players sport a Zacks Rank #1 (Strong Buy).


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BAKER-HUGHES (BHI): Free Stock Analysis Report
 
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