Showing posts with label Hal. Show all posts
Showing posts with label Hal. Show all posts

Wednesday, January 29, 2014

Is it Buy Time for Halliburton? Wait for it.....wait for it....

Today we are going to be analyzing the stock of Halliburton Company (NYSE:HAL). On January 27th, a new red monthly Trade Triangle appeared, the first in 12 months for the stock. This indicates a significant technical development and changes the outlook and direction of Halliburton.

Today's in depth analysis is not to say the stock is going to collapse and go out of business, but rather we are noting a confluence of certain technical indicators that do not paint a positive picture for this stock.

There is an old adage in trading and it says "they slide faster than they glide." Translated that means stocks go down a lot faster than they go up.

What Does This Company Do?

Halliburton Company provides a range of services and products for the exploration, development, and production of oil and natural gas to oil and gas companies worldwide.



Chart Legend & Technical Picture (Black Numbers)

1. Classic long term trend line
2. Neckline of a Head and Shoulders Top
3. Head and Shoulders Top
4. Break below the 14 month trend line and Head and Shoulders Neckline
5. Fibonacci retracement levels
6. RSI divergence with price action below 50.

All of the Trade Triangles are red and negative.

To summarize, I expect the current downtrend in Halliburton Company (NYSE:HAL) to continue unless I see otherwise with the Trade Triangle technology.

If we are correct in our analysis, we could potentially see Halliburton move down to the following Fibonacci retracement levels:

38.2% @ $46.13
50% @ $43.00
61.8% @ $39.86

The 61.8% Fibonacci level of $39.86 nicely matches the Head and Shoulders target zone of $40.00. These two measurements confirm one another and make a strong case for this stock trading down to the $40 level in the next few months.


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Friday, January 24, 2014

Get Positioned Now for the Next Great Natural Gas Switch

The Energy Report: Ron, welcome. You are making a presentation at the Money Show conference in Orlando in late January. What is the gist of your presentation?

Ron Muhlenkamp: The gist of my presentation is that natural gas has become an energy game changer in the U.S. We are cutting the cost of energy in half. This has already happened for homeowners like me who heat their homes with natural gas. We think the next up to benefit is probably the transportation sector.

TER: What is behind this game change?
"Natural gas has become an energy game changer in the U.S."
RM: The combination of horizontal drilling and fracking has made an awful lot of gas available cheaply. There's a whole lot of gas that's now available at $5/thousand cubic feet ($5/Mcf) or less. I live in Western Pennsylvania, and 30 years ago, Ray Mansfield was in the oil and gas drilling business, having retired from the Steelers. He said, Ron, we know where all the gas is in Pennsylvania; it's just a matter of price. If the price runs up, we will drill more. If the price runs down, we will drill less. Any way you slice it, we are just sitting on an awful lot of it.

Two years ago, we had a warm winter, and the price of gas actually got down to $2/Mcf. You saw an awful lot of electric utilities switch from coal to gas. Literally in a year, what had been 50% of electricity produced by coal went to 35%. The difference was made up with natural gas.

In transportation, the infrastructure to make the switch to natural gas has not been in place. We didn't have the filling stations or the trucks. Now, the trucks are just becoming available. You can buy pickup trucks from Ford Motor Co. (F:NYSE) and General Motors Co. (GM:NYSE) that run on natural gas. Furthermore, Clean Energy Fuels Corp. (CLNE:NASDAQ) has established natural gas filling stations coast to coast, every 250 miles on five different interstate highways.

Westport Innovations Inc. (WPRT:NASDAQ) has been producing 9 liter (9L) natural gas engines. Waste Management (WM:NYSE) uses 9L engines on garbage trucks and expects 8590% of its new trucks to be natural gas fueled. Westport has just come out with 12L engines, which are used for over-the-road trucks. I don't expect those engines to get adopted as fast as the utility industry made the switch to natural gas, but there has been a fairly rapid adoption in the waste management industry. I think we're on the cusp of a major trend.

TER: That fuel switching in the power industry has been going on since 2008. Is it still progressing at the same rate or is it picking up?
"The big switch is over in utilities. But we've barely begun the transition with transportation fuel."
RM: It's pretty much leveled off. In fact, there's probably a little bit less gas used than when gas was below $3/Mcf. The latest numbers I've seen show that we're running about 37% coal and about 3334% gas. Going forward, I think coal use will continue to decline, and natural gas use will continue to rise. The big switch is over in utilities, and it will be gradual from here. But we've barely begun the transition with transportation fuel.

TER: So the game has changed for the power industry, and the transportation industry is next. What other changes do you foresee in the future?

RM: We will continue to use more natural gas and less crude. Right now, for equal amounts of power, crude oil is priced at about three times the natural gas price in the U.S. That is too wide a spread to ignore, economically.

The Natural Gas - Crude Oil Spread
natural gas crude oil spread
source: Bloomberg

Incidentally, in Europe, natural gas is still at $12/Mcf. It's on a par with crude. Most European chemical plants use a crude oil base to make chemicals. U.S. plants use a natural gas base. Natural gas becomes ethane, then ethylene, then polyethylene and then plastic. So producers of plastics or the feedstocks for plastic in the U.S. now have an advantage they didn't have before.
"The natural gas price advantage will be with us in North America for quite a long time. It's huge."
In Japan, the natural gas price jumped from $12 to $16/Mcf just after the tsunami wiped out the Fukushima nuclear power plant. To ship gas from the U.S. to Japan, the cost of compression, liquefying and decompression is about $6/Mcf. Executives at U.S.-based companies like Dow Chemical Co.

(DOW:NYSE) are saying they don't want the U.S. to export gas because that would drive the price up. But domestic gas consumers already have that $6/Mcf advantage. Meanwhile, in Williston, N.D., the natural gas price is effectively zero. Producers still flare it because they don't have the pipelines to take it out of the area. So this price advantage will be with us in North America for quite a long time. It's huge. That's why we call it a game changer.

price of energy

TER: So how can investors take advantage of these changes?

RM: Well, any number of ways. We hold some fracking services companies, like Halliburton Co. (HAL:NYSE). We own a couple of drillers, including Rex Energy Corp. (REXX:NASDAQ). And we invest in the people who build natural gas export facilities, such as Fluor Corp. (FLR:NYSE), KBR Inc. (KBR:NYSE) and Chicago Bridge Iron Co. N.V. (CBI:NYSE).

I already mentioned companies building natural gas-fired engines, including Westport, which makes a kit to modify a common diesel engine. And because natural gas will require new, larger fuel tanks, investing in companies that build natural gas tanks is another way to play it. One of the disadvantages of natural gas versus gasoline or diesel is compressed natural gas takes about three to four times the volume to get the same range. Liquefied natural gas (LNG) takes about two times the volume.

Of course, compressed natural gas is stored in pressure tanks, so it takes a pressure tank of larger size. Fuel tank conversions have been almost as expensive as the engine conversions. 3M Co. (MMM:NYSE) has gotten in that business, as has General Electric Co. (GE:NYSE). There's another outfit called Chart Industries Inc. (GTLS:NGS; GTLS:BSX), which has already run a good bit.
"We want a foot in each of these camps because we're not quite sure who the ultimate winners will turn out to be, but we know what the product lines will have to be."
We want a foot in each of these camps because we're not quite sure who the ultimate winners will turn out to be, but we know what the product lines will have to be. Don't forget about the companies that own the LNG export facilitiesCheniere Energy Inc.'s (LNG:NYSE.MKT) facility should be up and running in probably 2015, but, again, that stock has run up a good bit, too.

Pipelines will benefit from the switch. One of the biggest pipelines in the country is Kinder Morgan Energy Partners L.P.'s (KMP:NYSE) Rockies Express Pipeline, which stretches from Northern Colorado to Eastern Ohio and ships gas east. Kinder Morgan recently filed to reverse the flow on part of the line. Right now, in Western Pennsylvania, we have a glut of gas. A few months ago, they reversed the flow of the pipeline from the Gulf Coast that used to come up to Western Pennsylvania. There's a whole lot going on.

TER: After some serious oil train derailments in recent months, pressure is building now to increase pipeline capacity, but there is also pressure on producers to reduce flaring, which is happening on a huge scale in the Bakken Shale. How will the economics and the operations of Bakken producers be affected if they can't flare and pipeline capacity is not increased?

RM: The Bakken is primarily an oilfield; the gas is a byproduct. We hear a lot about the Keystone XL Pipeline, which is meant to carry oil from the Bakken south. I can't speak specifically, but if you're going to lay an oil pipeline from the Bakken, you should lay a gas pipeline alongside it. You can ship oil by rail, but it's not economic to ship gas by rail. One way or another, the oil will be shipped.

TER: Bill Powers, the independent analyst and author of "Cold, Hungry and in the Dark: Exploding the Natural Gas Supply Myth," says gas prices are going to rise steadily to as much as $6/million British thermal units ($6/MMBtu) because U.S. gas production has peaked and now is now flat or declining. Do you agree with that?

RM: Our production of gas has not peaked and is not declining. We are using fewer rigs drilling for gas, but each well, particularly if you drill horizontally instead of just vertically, is producing so much more gas. Production is not declining and isn't likely to for at least a decade. At current rates, we can drill in Pennsylvania for another 50 years. Yes, you drill the best wells first but also, over time, you get a little bit better at timing this stuff. I'd be very surprised if the price in the next decade gets over $5/Mcf for any extended period of time because there's an awful lot of gas that's very profitable at that price. I'm willing to make that bet with Bill Powers. But even $6/Mcf gas would equate to $55/bbl crude, which is still a huge spread and wouldn't negate my general argument.

TER: What's your forecast for gas prices in 2014?

RM: My forecast is $4/Mcf, give or take $1. We just had a big cold snap on the East Coast. What used to happen is any time you had a cold winter, the price of gas jumped. For instance, in 2005, when crude was selling about $50/barrel ($50/bbl), gas began the year at about $7/Mcf, which was on par with crude, but in the wintertime, it doubled and ran up to $14/Mcf. The recent cold snap took gas all the way up to ~$4.20/Mcf. Gas is going to be in that range for a long time.

TER: Your advice to investors in natural gas is to get exposure to exploration and production companies, service companies and even LNG plant constructors. What about the LNG plant owners, the pipelines and the railroads?

RM: The pipelines will do well. They've already been bid up. The railroads will benefit from oil and gas, but they're getting hurt because coal tonnage is way down, CSX Corp. (CSX:NYSE) just reported. So for the railroads, it's going to be a wash. They'll haul less coal and more oil. The railroads won't haul gas. How much oil they haul is an open question. We're about to tighten restrictions on how tank cars are built.

TER: What did well in the Muhlenkamp Fund last year?

RM: The fund was up 34.4%. We did very well in biotech stocks. We did very well in financial stocks. We also did well in some energy stocks. Airlines did well for us. Incidentally, airlines benefit big time from cheaper energy, as you know. So it's fairly diverse.

TER: How are you adjusting your portfolio this year?

RM: Not too much has changed. We're no longer finding many good companies that are cheap. So we're monitoring and adjusting a little bit around the edges. We do think banks have further to go. We think the economy will grow somewhere between 2.53% this year. We've owned no bonds for the past couple of years, but with the Treasuries now, the interest rates on the longer end are high enough so that savers can get a little bit of return.

TER: I was surprised to see a really sharp drop in November for Fuel Systems Solutions Inc. (FSYS:NYSE). Why did that happen?

RM: Fuel Systems makes conversion kits for cars to burn compressed natural gas. In places like Pakistan, 40% of the cars run on natural gas; this is not new technology. A number of its customers decided to make these kits in-house. Fuel Systems is a small position of ours, but, yes, it got hit in Q4/13 when it announced that a number of its customers decided to produce their own kits. One of the nice things about this is there's no new technology involved. We've been using natural gas as a power source for generations. What has changed is the amount that's available reliably at a cheap price.

TER: There was another sharp drop in Clean Energy Fuels in October. What happened there?
RM: Clean Energy, so far, doesn't make a profit because it has been shelling out all the money to build all these filling stations. It's just taking a little longer than people expected. The stock is compelling at these levels. A number of these companies ran. Westport doubled, and we took some profits. It's now back down, and we should do a Buy rerating. There is volatility in this stuff, but the economics are undeniable. We still managed a 34.4% gain this year, which isn't bad.
"Royal Dutch Shell Plc is building natural gas fueling stations in concert with another truck stop operator."
Clean Energy has signed a joint venture with Pilot Flying J to build natural gas fueling stations at Flying J truck stops coast to coast. Royal Dutch Shell Plc (RDS.A:NYSE; RDS.B:NYSE) is doing a similar thing in concert with another truck stop operator. For instance, the Port of Long Beach, Calif., passed a rule several years ago that the trucks on the port need to burn natural gas. The Port of Hamburg, Germany, has contracted to put a natural gas-fired power unit on a barge so that when cruise ships come into the harbor, instead of running their own power off their diesel engines and generators, they'll use this barge to supply power to the cruise ship because natural gas exhaust is cleaner than diesel exhaust.

TER: A couple of other companies had surprising drops Rex Energy and Westport Innovations. Rex rose all year until October or November, when it suddenly dropped. Westport also dropped suddenly. You had a wild ride in your portfolio, didn't you?

RM: We bought Rex at $13/share, and it went to $22 or $23, and it's now $19. I can live with that. The dips give you a chance to load up again. That volatility is why we have a diversified portfolio. That's why you don't just bet on three stocks.

As an investor, most of the time what you're looking for is to find a difference between perception and reality. Today, we have two realities: One is the price of crude oil, and the other is the price of natural gas. So it's literally an arbitrage if you can buy energy either at the equivalent of $100/bbl or at a third of that.

Four dollar gas is equivalent in energy content to about $35/bbl crude. So I can buy my energy either at $100/bbl or $35/bbl. Economics says that spread is too wide. It won't necessarily close, but it sure as heck will narrow a good bit. For instance, I own no conventional oil companies. I think the price of oil will be coming down.

TER: So what companies in your portfolio look most promising?

RM: If you really want to get me excited, we can talk about natural gas, which we've been talking about. We could talk about biotechnology, which is exciting but I don't understand it as well. We can talk about U.S. manufacturing, but that's basically based on cheaper energy. I just bought more Rex. At these prices, I'm buying Westport. I just bought Chicago Bridge. I just bought KBR.

TER: What is your main motivation in buying these companies? Is it just the stock price or is there something about the management of the company or the technology?
"I want to buy Pontiacs and Buicks when they go on sale. I don't want a Yugo at any price. I would like to buy Cadillacs, but they don't go on sale very often."
RM: We're in the investment business. What we rely on is good companies, and we look to buy them when they're selling cheaply. Our first measure of how well a company is run is we start with return on shareholder equity. So we like companies that are at least above average in return on shareholder equity. I cannot yet say that about Clean Energy, but we do think Clean Energy is at the forefront of something that's needed for this transition. We're always looking for good companies. Then the question is whether you can buy them at a decent price.

My phrase is: I want to buy Pontiacs and Buicks when they go on sale. I don't want a Yugo at any price. I would like to buy Cadillacs, but they don't go on sale very often. But if I can get Buicks when they're on sale, I'll make good money for my clientele. We think that the companies we have are at least Buicks. If we can get them at Chevy prices, that's when we buy them. I will not pay an unlimited amount for any company.

I've never seen a company that was so good it didn't matter what you paid for the stock. To us, value is a good company at a cheap price. Some people bottom fish. They look to see when they can steal companies, and there are times when you can make money that way. But at that point it's not often a very good business, and there aren't too many well run companies at bargain basement prices. So it's very unusual for us to buy a weak company or a weak industry.

TER: Ron, this has been a good conversation. I appreciate your time, and good luck with your Money Show presentation.

RM: Thanks; it'll be fun.

Ron Muhlenkamp is the founder and portfolio manager of Muhlenkamp Co. Inc., 


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Saturday, January 11, 2014

Sterne Agee Selects its Four Favorite Oil Services Stocks

Sterne Agee believes non conventional and deepwater drilling will rise steadily during the next few years, and it encourages investors to have exposure to both trends via the highest quality names and in companies with specific catalysts.

The firm thinks WTI crude prices will remain in a fairly stable $85-$95 range over the next two years, rig growth will rise slightly in 2014 and accelerate in 2015, and deepwater drilling visibility will remain strong for several years.

The firm's favorites are Halliburton (HAL), Schlumberger (SLB) and Oceaneering (OII), with Tetra Technologies (TTI) the top pick among sector small caps.


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Wednesday, December 25, 2013

Merrill Lynch Offers Energy Themes to Watch in 2014

Energy stocks have underperformed this year, but Merrill Lynch analysts are reasonably positive on the sector for 2014, pointing to some key themes:

With the price of gas likely to remain in a narrow range next year, the firm says investors should buy high quality, large resource based stocks such as COG and RRC.

The net asset value race is over, and the coming year is about execution, Merrill Lynch says, seeing PXD and WLL as winners here.

Following 2013's wave of activism, the firm sees gains in HES and OXY.

Favorable outlooks for E&P budgets could lift oilfield services stocks focused on North America, such as HAL and SLB.

The Merrill Lynch team sees crude production rising to the highest level since 1989, and pinpoints TSO and VLO as the refiners to benefit the most in 2014 because they're "crude advantaged" and have stock specific catalysts for next year.

Finally, the firm suggests Investors with significant gains in CVX may want to take those and buy XOM for 2014.

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Monday, July 22, 2013

Halliburton Announces Second Quarter Income and Earnings HAL

Halliburton (NYSE:HAL) announced today that income from continuing operations for the second quarter of 2013 was $677 million, or $0.73 per diluted share. This compares to income from continuing operations for the first quarter of 2013 of $624 million, or $0.67 per diluted share, excluding a $637 million charge, after-tax, or $0.68 per diluted share, to increase a reserve related to the Macondo litigation.

Halliburton's total revenue in the second quarter of 2013 was a company record of $7.3 billion, compared to $7.0 billion in the first quarter of 2013. Operating income was $1.0 billion in the second quarter of 2013, compared to operating income of $902 million in the first quarter of 2013, adjusted for the Macondo charge. For the first quarter of 2013, reported loss from continuing operations was $13 million, or $0.01 per diluted share, and reported operating loss was $98 million.

“I am pleased with our second quarter results, as total company revenue of $7.3 billion was a record quarter for Halliburton,” commented Dave Lesar, chairman, president and chief executive officer.

“Looking at our product lines, Baroid, Cementing, Completion Tools, Multi-Chem, and Testing set quarterly revenue records, while Baroid, Testing, and Artificial Lift all set quarterly operating income records.

“Relative to our primary competitors, we have delivered leading year-over-year international revenue growth for five consecutive quarters. Eastern Hemisphere operations grew revenue 11% sequentially, resulting from record revenues in both of our regions, and operating income was up 23%.

“Middle East / Asia, our fastest growing market, improved revenue 12% and operating income 17% sequentially. This across the board growth was led by higher stimulation, wireline, and fluids activity in Malaysia, and improved sales in China.

Read the entire Halliburton earnings report


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Monday, April 22, 2013

Halliburton Announces 1st Quarter Earnings

Halliburton (NYSE:HAL) announced today that income from continuing operations for the first quarter of 2013 was $624 million, or $0.67 per diluted share, excluding a $637 million charge, after tax, or $0.68 per diluted share, to increase a reserve related to the Macondo litigation. Income from continuing operations for the first quarter of 2012 was $826 million, or $0.89 per diluted share, excluding a $191 million charge, after tax, or $0.20 per diluted share, for a reserve related to the Macondo litigation.

Reported loss from continuing operations for the first quarter of 2013 was $13 million, or $0.01 per diluted share. Reported income from continuing operations for the first quarter of 2012 was $635 million, or $0.69 per diluted share.

Halliburton's total revenue in the first quarter of 2013 was $7.0 billion, compared to $6.9 billion in the first quarter of 2012. Operating income, adjusted for the Macondo charge, was $902 million in the first quarter of 2013, compared to $1.3 billion in the first quarter of 2012. Reported operating loss was $98 million for the first quarter of 2013, compared to reported operating income of $1.0 billion in the first quarter of 2012.....Read the entire earnings report.


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Monday, July 23, 2012

Halliburton Announces Second Quarter 2012 Earnings [HAL]

Halliburton (NYSE:HAL) announced today that income from continuing operations for the second quarter of 2012 was $745 million, or $0.80 per diluted share. This compares to income from continuing operations for the first quarter of 2012 of $635 million, or $0.69 per diluted share. First quarter reported results included $300 million ($191 million, after tax, or $0.20 per diluted share) for an estimated loss contingency related to the Macondo well incident.

Halliburton’s consolidated revenue in the second quarter of 2012 was $7.2 billion, compared to $6.9 billion in the first quarter of 2012. Consolidated operating income was $1.2 billion in the second quarter of 2012, compared to $1.0 billion in the first quarter of 2012. All international regions experienced double digit percentage revenue and operating income growth from the first quarter of 2012. North America margins were negatively impacted, however, by rising costs and pricing pressure in production enhancement services.

“I am pleased with our second quarter results, which set a new revenue record for the total company and all three of our international regions,” commented Dave Lesar, chairman, president and chief executive officer.

"We continue to be successful in executing our strategy of market share growth while maintaining a focus on industry leading returns. From a global perspective, we achieved record revenues in eight of our product service lines, with four of them. Cementing, Completion Tools, Multi Chem, and Testing and Subsea, generating record operating income as well.

“Consolidated revenue for the second quarter was up over 5% sequentially. The international rig count was up 3% during the quarter, compared to a 15% increase for our international revenues. North America rig count decreased 17%, while our North America revenues were essentially flat compared to the first quarter. Key strategic market share gains in international operations, continued capacity additions, and strong utilization contributed to this outperformance.

Read the entire Halliburton earnings report

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Thursday, April 19, 2012

Halliburton 1st Quarter Earnings Soar by a Whopping 23%

Halliburton (HAL) announced today that income from continuing operations for the first quarter of 2012 was $826 million, or $0.89 per diluted share, excluding $300 million ($191 million, after-tax, or $0.20 per diluted share), for an estimated loss contingency related to the Macondo well incident. Income from continuing operations for the first quarter of 2011 was $558 million, or $0.61 per diluted share, excluding a charge of $46 million, aftertax, or $0.05 per diluted share, related primarily to reserving certain assets as a result of political sanctions in Libya.

Reported income from continuing operations for the first quarter of 2012 was $635 million, or $0.69 per diluted share, compared to $512 million, or $0.56 per diluted share, for the first quarter of 2011. Reported net income attributable to company for the first quarter of 2012 was $627 million, or $0.68 per diluted share, compared to $511 million, or $0.56 per diluted share for the first quarter of 2011.....Read the entire First Quarter Earnings Announcement.

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Friday, October 16, 2009

Halliburton Profit Drops Less Than Analysts Estimated


Halliburton Co.’s third-quarter profit dropped less than analysts estimated on projects the world’s second largest oilfield services provider is working on outside of North America. Net income fell to $262 million, or 29 cents a share, from $672 million, or 74 cents, in the third quarter of 2008, Houston based Halliburton said today in a statement. Excluding costs for job cuts, profit was 31 cents a share, 5 cents higher than the average of 24 analyst estimates compiled by Bloomberg.

Oil futures in New York averaged $68.24 a barrel in the third quarter, 42 percent lower than a year earlier. Crude climbed from $59.79 in the second quarter. Operating profit from a region that includes Africa, Europe and the former Soviet Union fell 2 percent, and income declined 16 percent in the Middle East and Asia. The drop in North America was 93 percent. “I thought that the numbers in the Middle East and Europe came in stronger than I expected, both in terms of revenues and margins,” said Mark Brown, a senior analyst at Pritchard Capital in New York who has a “buy” rating on Halliburton shares and owns none. “I thought that was a good sign for Halliburton”.....Read the entire article
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