3Q14 Halliburton exit
Soros Fund Management exited its position in Halliburton (HAL) in the quarter ended on September 30, 2014. The position accounted for 1.21% of the fund’s 2Q14 portfolio.
Overview of Halliburton
Halliburton provides services related to the exploration, development, and production of oil and natural gas. It provides its services to companies around the world and has two major divisions:
- Completion and Production Segment: Delivers cementing, stimulation, well intervention, pressure control services, well control and prevention services, pipeline and process services, specialty chemicals, artificial lift, and completion products and services. The segment consists of Production Enhancement, Cementing, Completion Tools, Boots & Coots, Multi-Chem, and Artificial Lift.
- Drilling and Evaluation Segment: Provides field and reservoir modeling, drilling, evaluation, and precise wellbore placement solutions that enable customers to model, measure, drill, and optimize their well construction activities.
Halliburton acquires Baker Hughes
Halliburton shares fell recently on the announcement of its deal to acquire its major peer Baker Hughes in a stock and cash transaction. The transaction is valued at $78.62 per Baker Hughes share, representing an equity value of $34.6 billion and an enterprise value of $38.0 billion. These two companies along with Schlumberger Limited are known as the “big three” oilfield services companies.
Market Realist analyzed this acquisition in detail here. News reports noted that the takeover might have been driven by the fall in oil prices. Reports added that the deal could see antitrust concerns and regulatory scrutiny.
Higher 3Q14 Halliburton profits, dividend increase
For 3Q14, Halliburton posted $8.7 billion total revenues for 3Q14, up 16.4%, from $7.47 billion recorded in 3Q13. The company said that increased activity in North America drove the revenue increase, as well as intensified activity in all regions for fluids, cementing, logging, and well intervention control services. Halliburton stated its revenue outside of North America comprised approximately 46% of consolidated revenue and “represents its ongoing strategy to grow its international business and balance its geographic mix.”
Net income for 3Q14 jumped 70.4% to $1.20 billion, compared to $706 million a year ago. Net income margin improved to 13.8% in 3Q14, from 9.4% in 3Q13. Earnings per diluted share (or EPS) was $1.41 in 3Q14 versus $0.79 recorded in the corresponding quarter last year.
You can review the 3Q14 earnings in detail here.
Halliburton also announced a 20% dividend increase to $0.18 a share. In July 2014, its board increased the share buyback authorization by approximately $4.8 billion. It repurchased an additional $300 million in stock during the third quarter.
$1.1 billion Macondo well settlement
In September 2014, Halliburton reached an agreement, subject to court approval, to settle a substantial portion of the claims against the company in the Deepwater Horizon incident. The company agreed to pay $1.1 billion over its involvement in the biggest offshore oil spill in US history.
Halliburton said in a statement, “The United States District Court for the Eastern District of Louisiana ruled that Halliburton was negligent in its conduct related to the April 20, 2010, Macondo well incident in the Gulf of Mexico. The court allocated 3% of the fault to Halliburton, with the remaining fault allocated to other parties involved.”
Soros positions traded in 3Q14
During 3Q14, Soros Fund Management added positions in Alibaba Group Holding (BABA), Yahoo! (YHOO), Travelport Worldwide (TVPT), and Netflix, Inc. (NFLX). Top positions that saw an increase were Dow Chemical Company (DOW), Level 3 Communications Inc (LVLT), and Phillips 66 (PSX). Soros sold its stakes in CONSOL Energy Inc (CNX) and Halliburton (HAL), and it significantly reduced its position in Herbalife (HLF).
The final part of this series will highlight the fund’s position change in Herbalife.