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Halliburton’s Strategies: Can It Outperform the Industry?

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Halliburton’s returns and key drivers

OFS (0ilfield equipment and services) companies like Halliburton (HAL) are impacted by rig counts and energy prices. In the past year, the West Texas Intermediate crude oil price has fallen ~9%.

In the past year, Halliburton’s one-year returns were 12.3% net of dividends. This was better than the VanEck Vectors Oil Services ETF (OIH). OIH produced a -6.6% return during the same period. The Energy Select Sector SPDR ETF (XLE) produced a 10.3% return. Halliburton significantly outperformed the US rig count, which fell 40% in the past year. Halliburton even outperformed the SPDR S&P 500 ETF (SPY). SPY generated an 11.4% return during the same period.

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Analyzing Halliburton’s strategies and its performance

Low pricing in North America and lower activity in some of Halliburton’s international operations, primarily Latin America, can drag the company’s performance. Halliburton incurred losses at the operating level, as expressed by negative earnings before interest, tax, depreciation, and amortization  and negative cash flow from operations in 2Q16. Read Has Halliburton Found Its Footing after the Baker Hughes Breakup? for a complete analysis of Halliburton’s performance and its balance sheet.

On the other hand, steady upstream activities in the Middle East and the expected recovery in North America, once the rig count stabilizes, could drive Halliburton in 2016. The fact that Halliburton provides technology, integrated project management, and information solutions throughout the world helped it manage the industry downturn better than many other OFS companies. Despite challenges, Halliburton can be expected to perform steadily in the medium to long term.

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