Halliburton
1. Business Description / Executive Summary
Halliburton is the second largest upstream oil service provider in the world. Founded in 1919 by Erle P. Halliburton the company has grown into an international operation with 60,000 employees located in over 80 countries worldwide. Halliburton had revenues of over $18 billion in the 2010 fiscal year, 49% of that comes from domestic business and 51% is international. Halliburton divides its specializations into two divisions, the first, Drilling & Evaluation responsible for 45% of the revenue and the second, Completion & Production which makes up the remaining 55% portion of revenue. Between September and November this year the company’s stock reached a high of 43.02 (September 01) and a low of 28.68 (October 03).
A key element to Halliburton’s success is the innovative and dynamic solutions the company develops to problems it faces. Halliburton is an industry which continues to grow and expand even during tough economic times. Halliburton is a stable company which has gone above and beyond its goals domestically and worldwide and will only continue to grow stronger in the future as alternative energy sources takeover energy needs.
2. Entrepreneurship
Halliburton’s founder, Erle Palmer Halliburton, was born September 22, 1892 on a small farm near Henning, Tennessee. He did not have an education beyond an elementary equivalent and came from a poor working class farming family. Halliburton’s father died when he was very young and he developed a strong work ethic at a very young age as he worked two jobs to support his family. Halliburton joined the military in 1910 and after his honorable discharge in 1915, he went to work for Perkins Oil Well Cementing in the California oil fields. Halliburton was never satisfied with his work at the company and his suggestions for improvement lead to his eventual firing. Erle and his wife then moved to Texas where he introduced oil-well cementing to the drillers in that district. The company he established in 1920, Halliburton Oil Well Cementing Company, quickly gained a reputation for his company among drillers in the Oklahoma and Texas region.
The Halliburton Oil Well Cementing Company went on to succeed under the careful and nurturing leadership of its founder Erle, who found great success in just his first endeavor in entrepreneurialism. Halliburton’s success was due to his determination to make his business succeed and his work ethic which he learned at a work ethic which he learned at a young age through losing his father. Another major part of his success came from his wife’s supportive and tireless efforts to help in any way possible, even selling her wedding rings to drum up funds for the company.
As the business grew, Erle Halliburton continued to grow with it and always sought to improve it in any way possible, never content with where his business was at. In the early 1930’s, Halliburton opened its first research facility and began to test cement mixes and continued to be on the forefront of innovation in the industry by performing its first offshore cementing job using a barge in the Creole Field in the Gulf Of New Mexico. Halliburton made steps to becoming a global company in 1926 when he sold five cementing units to an English company in Burma, which began the companies eastern hemisphere operations. That same year Erle Halliburton sent his brothers to Alberta, Canada where they opened for business. By 1951, Halliburton had launched offices in Germany and Argentina, and set up a subsidiary in England. In 1986 Halliburton was privileged to be the first American company to provide an oilfield service job on mainland China. “Today, Halliburton offers the world's broadest array of products, services and integrated solutions for oil and gas exploration, development and production and employs nearly 60,000 people in 80 countries.” Halliburton was one of the original and most successful entrepreneurs in The United States of America, and the fact the company he founded nearly 100 years ago is still around and successful today speaks volumes about his dedication to his company and his passion for excellence in everything he did.
3. Customers/Competitors
Halliburton has two branches within the company, at one end is the Drilling and Evaluation and at the other Completion and Production. By separating the company into two divisions, Halliburton has improved its ability to provide quality services to its customers. Halliburton provides upstream oil and gas services, “from locating hydrocarbons and managing geological data, to drilling and formation evaluation, well construction and completion, and optimizing production throughout the life of the field.” The major contracts that are received by Halliburton come from the government and oil companies seeking to exploit the resources present on their land. Halliburton is a multi-line company having many of its own brands to operate in the field including; Baroid, Boots & Coots, Easywell, Landmark, Pinnacle, Sperry Drilling, WellDynamics. Halliburton has many repeat customers who have contracts for development of oil sites which they entrust to Halliburton to carry out for them, and since Halliburton has such superior service it retains most of its old cliental.
Halliburton is in a very competitive field and draws its main competition from companies such as Baker Hughes Incorporated, Schlumberger Limited, and Technip. Although it has an assortment of competition Halliburton has no shortage of work due to the high demand in the upstream oil production market. While not the largest in its field, it is still comparatively more profitable and growing larger with each passing year. Compared to its closest competitor Schlumberger Limited who has 108,000 employees and 37.63 billion in revenue, Halliburton posts impressive numbers of 60,000 employees and 22.62 billion in revenue (Halliburton Competitors). The competition has a lot to do with the high demand in the field of oil, but is also related to price and quality, as the oil companies seek to achieve maximum profits without sacrificing the quality of the work. Halliburton is one of the leading researchers in many new technologies for upstream oil production and through this manages to stay competitive in the global market place, even in tough economic times like today. The company reacts well to its competition by continuing to look forward into the future by expanding and exploring new developments in the field of oil to maintain its competitive edge.
Halliburton has a wide variety of products and services to offer its customers in the field of upstream oil production. It has a large portion of its customer base in oil rich Middle Eastern Countries such as Saudi Arabia. The major competition for Halliburton comes from Baker Hughes Incorporated and Schlumberger Limited; however Halliburton remains more profitable year over year. Compared to Baker Hughes Incorporated who posted a Quarterly Revenue Growth of 27%, Halliburton showed Quarterly Revenue Growth of 40.4% over the same period (Halliburton Competitors). Halliburton is great at handling customers while at the same time they work to improve themselves to gain an edge on the competition. Subsequently Halliburton is one of the best upstream oil production firms in the world today, and continues to grow stronger and more advanced with each passing year.
4. Information Technology
Halliburton was one of the first in its field to make use of the internet (Corporate Profile Halliburton). The company mainly uses its internet to search for employees and to give investors an inside view into the company to encourage them to buy stock in their company. The company has a future using the internet for communications throughout company organizations and employees. Halliburton will continue to expand its website to better serve the potential investor or potential employee. The industry of upstream oil services does not lend itself to being an internet dependent industry and therefore the internet is not an essential piece of the company’s success. Halliburton worked from the beginning to create a website that was user friendly and could help them to generate an interest in their business, both for investors and possible employee candidates. The company has continued this development to its current version of the site which came online earlier this year. The site currently handles around 60,000 people per day which is far higher than that of its greatest competitor Schlumberger which only sees around 20,000 hits per day (Halliburton Site Info). The reason that Halliburton has become a more viewed site than those of its competitors is due to its layout and the ability to search for a job on the website. Using the internet Halliburton has been able to save money in looking for employees and seen an increase in the number of people who wish to work for their company.
Another of the functions of the website is to provide information to possible and current investors of the company including a complete investor’s corner with current stock prices and company news feed to keep the investor up to date on the company’s internal affairs. It has been through these features that Halliburton was able to make a successful website. The company has connected to large social media services such as Twitter, Facebook and LinkedIn. This gives the company name recognition among people on these social media sites, which it seeks to do in order to generate more investors. The other benefit is using LinkedIn to view profiles and resumes of possible candidates for jobs, preapproving and verifying them prior to interviews saving time and money.
In the future, the company could hold conferences over the internet and use it to communicate with people on the site in regions all over the world for up to the minute field updates and feedback. The company will continue to use its website as an employment tool and attempt to improve the services provided to its investors. The company views the internet and technology as vital resources and continues to research new ways to better conduct business using the internet to their advantage. The company hopes to be able to employ new technologies in drilling using computers to be more accurate in drilling and more complete in the extraction of oil.
5. Global Activities
Halliburton became a global company shortly after it was founded in 1919, far ahead of many other companies in any field. Halliburton took the initial steps toward becoming a worldwide company in 1926 when it sold five cementing units to an English company in Burma. This was the beginning of its Eastern Hemisphere operations, in the same year Erle P. Halliburton sent his brothers to open business in Alberta, Canada (Corporate Profile). The company still remains a competitor in domestic markets and has its corporate headquarters in Houston, Texas near where the company was originally founded. It remains competitive in domestic markets through its mastery of hydraulic fracturing to harvest oil in bedrock below the northeastern states.
Halliburton showed revenues of eighteen billion in 2010, 49% of which was domestic and the remaining 51% from global ventures. Of the two sections which the company is divided into, the first, completion and production accounted for 56% of revenue while the second, drilling and evaluation accounted for the remaining 44% of total revenue (Halliburton). The company was looking to gain a stronger foothold in the Middle East and has recently set up a second headquarters in Dubai in order to accomplish this goal. The products made by Halliburton are for the company’s use only and therefore not for sale domestically or internationally, however, they are used in the United States and various other locations throughout the world. Halliburton has an international presence on every continent with the exception of Antarctica. The countries which they are present in include Russia, China, Japan, India, Germany, France, Spain, Italy, England, Saudi Arabia, Algeria, Egypt, Australia, Brazil, Colombia, Venezuela, Mexico, the United States and Canada just to name a few of the 70 countries it occupies. Halliburton maintains an office in every country in which it operates, however its two main offices are in Texas and Saudi Arabia. The offices in each country serve as a control base for operations within that country, while the two corporate offices handle more sensitive issues like finance and acquiring contracts.
Halliburton to this day is incorporated in the United States; this qualifies them as a domestic corporation. The company’s main headquarters are located in Houston, Texas; keeping the company in the state in which it was founded, and another is in Dubai, United Arab Emirates. These headquarters provide both a base of operations, and in the case of Dubai a tactical advantage in the facilitation of international business. The company went global back in 1926 because the company’s founder and visionary Erle P. Halliburton sold five cementing units to an English company in Burma and saw a need to get a foothold in foreign markets by globalizing his business; this was first accomplished by the opening of the store in Canada by his brothers that same year. After that first store opened, Halliburton quickly saw the need to expand off the continent, opening in many locations in Southern America and the Middle East by 1946.
6. Ethics & Social Responsibility
Halliburton has had a shaky past in regards to ethics & social responsibility. There have been many lawsuits and environmental issues the company has dealt with over the years. The most recent accusation comes for improper cementing on the Deepwater Horizon, prior to its explosion. This accusation stems from the cementing work completed by Halliburton on the base of the oil rig; however, this issue falls on BP for their negligence in the operation. The company, however, prides itself on its community oriented programs including a prominent role in habitat for humanity.
Halliburton has a clearly outlined set of ethics which is available for viewing on a section of the website. The company is dedicated to upholding its ethical code and has even gone so far as to set up ethics helplines in ten countries where people may call in to report ethics code violations. The company also has a separate corporate ethics code for internal operations regarding employee behavior and the manner in which business should be conducted in the office as customs are different depending on the region of the world the company is operating in.
The company has had its share of ethics violations, most due to environmental violation problems; however, this is to be expected given the nature of the business of oil extraction. There was a controversy in Iraq as Halliburton was awarded a $7 billion dollar contract which no other company bid on, which caught some attention and the company eventually came under fire for the unethical procurement of military contracts. The company has also been caught unlawfully receiving special treatment for work in Iraq, Kuwait and the Balkans. Recently Halliburton has also been tied to large environmental cases, including the gulf oil spill and the oil spill in the Timor Sea. The most unethical act over the years has been the treatment of Jamie Leigh Jones, who testified she was raped by as many as seven co-workers in Iraq in 2005, and was imprisoned in a shipping container for 24 hours without food or water. The way in which the company handled this event was poor and it hurt the company’s public perception greatly in the years that followed.
The company, while having ethics issues, is heavily involved in community oriented improvement projects and other philanthropy. In 2010, the company donated more than $3.4 million to support community initiatives, supporting primarily environmental, health and education based programs. The company has a prominent role in Habitat for Humanity and is very involved in events like Earth Day. They have built schools in Egypt, providing schooling for otherwise uneducated girls in the region, and have also donated software to support education through Landmark. The company also has recently taken great interest in sustainability. The company is driven by new green technologies to provide a product with the least amount of environmental impact as possible. They are striving to make technologies which better recover remaining oil from existing wells as well as pursuing clean and renewable energy sources for the future of energy resources.
7. Human Resources
Halliburton employs 60,000 employees in over eighty countries around the world today, and this number is growing every day. There are employees at all levels within the company, from finance, marketing and law to other fields such as reservoir modeling, drilling, and cementing. Halliburton is proud to claim that it is one of the world’s most diverse companies, with employees covering all races and representing one hundred and twenty countries around the world. Halliburton does not have a high turnover rate in any of the jobs at its company, however, it does have a high transfer rate mainly due to the fact that oilfield services are always on the move and people in the field will be sent from operation to operation depending on where help is needed. The company has a great benefits system; this includes market-aligned salaries, retirement and savings plans, an employee stock-purchase plan, comprehensive health benefits, and income protection programs such as life, disability and accidental death and dismemberment insurance. The company believes that through these practices it will attract the highest quality of workers in the industry, making the expenditures on these plans worthwhile. Benefits are offered to all full time employees while part-time employees receive only a select portion of these benefits. The company is very forthcoming about which benefits it supplies to its employees on its website, however, it does not detail in what amount or which employees receive what types of benefits.
There are job descriptions available online for every job that the company has to offer; this section also lists the opportunities for employment. The descriptions are very clear and detail all of the responsibilities that are expected of someone in that position. The company is very technology forward and almost all positions within the company can be applied for online, with the exception of upper level management which you may view online, but need to apply for direct with the company. At Halliburton the human resource department is directly responsible for Talent Acquisition, Training, Benefits, Compensation, Employee Relations, Human Resource Information Systems and International Human Resources.
The human resources department also has many other responsibilities which it carries out from its headquarters in Texas. Halliburton is reliant on the internet for hiring in the majority of its entry level fields. The website gives people the benefit of selecting where they would like to work and in what field they would be interested in working. The company recruits people to their website using various marketing strategies some of which include television commercials and internet ads. The selection process occurs similar to other methods in that the candidate’s viewed to best fit the job are selected and sent through to interviewing rounds. The interviews may take place online, but more commonly take place at the headquarters in Texas. Halliburton believes that by satisfying its employees needs it will create a better work environment for everyone there, and this would not be possible without its successful Human Resource Department.
8. Operations
Halliburton is a company which provides both product and service oriented capabilities to its customers. The company has 10 Product Service Lines (PSL’s) that operate in two divisions: Drilling and Evaluation, and Completion and Production (Corporate Profile). These PSL’s include various products, such as the new remote operations which gives the company the flexibility to run its on-site operations from anywhere in the world. The company produces these products for their own uses in the harvesting of oil resources. The company provides services to its clients by intently listening to and acquiring a thorough understanding of the problem and executing a systematic solution to that problem. Halliburton, though not a true low-contact operation, is more along the lines of a low-contact operation. The reason behind its classification as a low-contact operation is the company originally meets with its customers to address the problem, but all work after is then completed independently of the client. Halliburton has the majority of its manufacturing and operational facilities in North America, with 61% bring located domestically (Investor Report). The remaining 39% of manufacturing is located internationally, with 9% in Latin America, 12% in the Middle East and Asia, and the remaining 18% located in Europe and Africa. Upon its move into the new headquarters at the North Belt Complex in Houston, Halliburton made every area of the 90 acre complex equally accessible to its handicapped employees as it is to the able bodied employees (Halliburton).
Halliburton uses many raw materials in the productions of its products, including large amounts of sand and water needed cementing rig creation. The company uses materials from worldwide sources; while some locations allow for locally sourced materials to be economically feasible, others have these materials imported to their facilities from around the world. Limiting factors which affect production faced by Halliburton include an unsteady demand for its products and the fluctuating global economy which limits the profitability to exploit oil sources which decreases the need for equipment to harvest those sources. Halliburton employs multiple techniques for production among its various products. For its liquid and fluid product line, Baroid, the company uses process manufacturing in order to get the desired material for use in oil harvesting. Another of the company’s brands, WellDynamics, is a technology which is designed specifically to remotely control and monitor specific reservoir zones without intervention. The production method used in this product line is an intermittent process. This is the most effective production for this product as there is no need for mass quantities of the product and it is constantly being updated and improved upon with newer and better versions. Halliburton remains true to its global model in its operations, however, a larger portion of the company’s manufacturing plants domestically rather than around the world. This is mainly due to a lesser need for cheap labor and a greater need for skilled workers as these products become increasingly advanced and the technology driving them becomes more specialized.
9. Marketing
Halliburton is one of the largest suppliers of upstream oil services in the world. As a result it does a lot of marketing on its products, mostly through its many subsidiaries. The people who frequently use the website services are predominantly male, accounting for 55% of the company’s traffic (Quantcast). The company’s age make-up lies mainly in the 18-49 year demographic with 64% of its traffic falling between these ages (Quantcast). The companies services are most commonly frequented by Caucasians with 72%, however, the company attracts a higher than normal portion of African Americans with 13% of its visitors coming from African descent (Alexa). The company attracts an affluent group of people to its services, almost one-fourth of which make over a $100,000 yearly salary (Quantcast). The majority of people who frequent the company’s services also have a college degree or graduate school, these people account for 63% of the firm’s product users (Alexa).
The customers of the company’s products are located globally, mostly in the 80 countries that Halliburton has prominence in, but not limited to these areas. A 49% share of the customers comes from North America, followed by Europe and Africa with 22%, then the Middle East and Asia with 17%, and Latin America making up the remaining 12% (Halliburton, 2011). Halliburton employs various marketing methods using its subsidiaries names, as it prefers a certain anonymity among the industry. Such companies as Landmark and Boots & Coots are often the face of the marketing efforts within the company.
The company employs marketing practices specific to regions, be it television ads, articles in magazines, or even billboards. However, recently Halliburton has returned to commercial making, which is broadcast around the country on television stations for all to see. The company emphasizes its efforts in the oil industry as well as its humanitarian achievements and the way in which it helps soldiers in Iraq. The return comes in large part due to a perceived negative perception of the Halliburton by many Americans, and through the commercials the company hopes to change people opinions about on the company. The recent wave of commercials is reminiscent of the “Big Red” commercials which were a common site back in the 1980’s. The companies colors of red and white are a focal point in all commercials and are emphasized in all graphics to stand out among other colors.
The marketing within the firm is mainly controlled from the headquarters in Texas, but it does target global audiences as Halliburton is very concerned with public perception and appearance domestically as well as globally. Products are marketed based on what strategy might be most effective. Marketing is different in other countries and differs greatly globally among Halliburton’s many countries of operation due to cultural differences and varying success of certain marketing techniques in particular global areas.
If I were to market Halliburton’s products I would make its subsidiaries have more prominence in the company’s advertising campaigns. The company seems disconnected between itself and its subsidiaries and I would try to bring unity back into the marketing strategy. This would show the public of all the positive contributions Halliburton makes to the world through the achievements of its subsidiaries.
10. Finance
In 2010, Halliburton produced revenue of $18.0 billion and an operating income of $3.0 billion, which reflects an operating margin of 17%. Revenue increased revenue $3.3 billion, or 22% over the 2009 fiscal year, while operating income increased $1.0 billion (Halliburton Executive Overview). The large increases in revenue are due to the customer’s higher capital spending as a result of increased drilling activity and pricing improvements in North America. Halliburton is very confident in the long-term fundamentals of its business, although near-term growth may be affected by the incident in the Gulf of Mexico.
Halliburton has maintained significant liquid assets in a time of serious economic downturn. The company ended 2010 with cash and equivalents totaling $1.4 billion and also held $663 million of short-term, United States Treasury Securities classified as marketable securities (Liquidity and Capital Resources). In 2010 Halliburton showed capital expenditures of $2.1 billion, this includes the purchase of $1.3 billion in short-term marketable securities and $523 million in the acquisition of Boots & Coots, Inc. which will enhance the current portfolio of products and services (Liquidity and Capital Resources). Overall, Halliburton is in a good financial situation as a result of its wise investment techniques and the increase in customer capital spending in the North American region.
Since the beginning of the semester, Halliburton stock has experienced a period of gains and losses. The stock began the semester hovering around the $40 mark, and even paid a dividend of 9 cents to shareholders on the 30th of August. The stock fell to around $30 per share around the beginning of October in response to uncertainties in the market regarding Greece and now Italy. The stock has since regained to nearly $39 per share as of yesterday. As compared to stocks of competing energy companies the stock of Halliburton has been average. The stock price of Halliburton and its competitors Schlumberger Limited and Baker Hughes Incorporated and have all hover around a 10% drop over the past three months (Google Finance).
Halliburton is not the most financially conservative firm; however, it has very successful investment techniques and remains stable even during this tough economic time. In the 2011 fiscal year Halliburton expects to payout $2.2 billion in contractual obligations. This includes $263 million in interest on debt, $161 million in operating leases, $1.7 billion in purchase obligations, and $50 million in Pension funding and other long-term liabilities. Other factors which affect liquidity include $1.5 billion in agreements with financial institutions and $210 million of security bonds related to Venezuela (Factors Affecting Liquidity). The company believes its $1.4 billion of cash and equivalents and $653 million in investments in marketable securities provide sufficient liquidity and flexibility given the current market environment.
Halliburton has $1.2 billion of committed bank credit invested in its revolving credit facility and there are no borrowings currently held under the revolving credit facility. Halliburton holds it excellent credit ratings of A2 and A on long-term debt and P-1 and A-1 on short-term debt according to Moody’s Investors Service and Standards & Poor’s.
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