Oil price concerns
In this series, we’ve discussed Halliburton’s (HAL) growth prospects. Now, we’ll look into some of the concerns that may affect Halliburton.
The recent slump in oil prices started to affect the oil servicing industry. Since June last year, WTI’s (West Texas Intermediate) crude oil price declined by nearly 60%—mainly due to supply glut and demand concerns.
Halliburton anticipates that some of its integrated oil company customers may reduce their technology budget in a cost-cutting effort to improve profitability. This will have a negative affect on Halliburton.
Baker Hughes (BHI), National Oilwell Varco (NOV), and Schlumberger (SLB) are some of the other companies in the industry. They could also lose revenue and profits if energy producers curtail production and rig activities. All of these companies are part of the VanEck Vectors Oil Services ETF (OIH).
Read Why Baker Hughes’ investors should watch energy prices to learn more.
Russian sanctions may strike a blow
The recent sanctions against Russia by the US and the European Union, or EU, could seriously affect energy companies engaged in this region. Rig servicing companies will be prohibited from tendering projects that fall under the sanctioned restrictions.
Halliburton expects that its Russia business will continue to face headwinds in 2015. However, the company doesn’t expect that its revenue will be in line with the 2014 level.
Did all of the elements lead to better returns for Halliburton’s shareholders? We’ll discuss this in the next part of the series.