Halliburton Company (NYSE:HAL) and Suncor Energy Inc. (USA) (NYSE:SU) are two companies that I have been generally bullish about for some time now. While the former has been irrationally beaten down by uncertainty in North American margins, the latter has been irrationally beaten down by supply pressures in Canada’s oil sands. While they operate in two very different slices of the energy sector, their similarity lies in how they have both been subject to larger headwinds that their competitors have not been exposed to. Below, I provide my take on the two producers.
Halliburton Company (NYSE:HAL)
Halliburton is one of the largest oilfield service companies in the world. It has a huge global presence and more than 72,000 employees. Halliburton recently announced the results of fourth quarter earning from continuing operations of $589 million, which is equivalent to $0.63 per share. In the third quarter, however, earnings from continuing operations amounted to $608 million, or $0.65 per share–so there was a slight decline. But results were still above expectations and resulted in a positive market response. Total revenue for the 2012 fiscal year amounted to $28.5 billion, which was a 15%–or $3.7 billion–increase compared with 2011’s earnings. Record revenue in the fourth quarter amounted to $7.3 billion, which was a 3% increase.
The company owes its momentum to product diversification, which enabled business to navigate volatility in any one segment. As I have long predicted, the company was also big gainer from developing unconventional wells in China and Australia. This international diversification is also seen as a strong hedge against domestic pressure pumping uncertainty. At the same time, Halliburton is also reaping gains from deep water technology, which is seen to be important for the company’s growth in the years ahead. In this quarter, there was news that the company entered into a contract to provide service to TNK-BP oil fields in Russia. This is an important opportunity for the company to demonstrate its capabilities and increase its chances of winning future contracts in this country.
Suncor Energy Inc. (USA) (NYSE:SU)
Suncor is also a leading oil & gas company. The Canadian company mainly concentrates on oil sands. By 2011, the company had 13,026 employees and revenue worth $39.3 billion. In the same year, net income was $4.3 billion while total assets amounted to $74.8 billion. The most significant acquisition that Suncor has ever undertaken is that of Petro-Canada, which involved $21 billion.
Suncor is well positioned to benefit from the expanding Canadian oil sands. There are also plans to extend the pipeline that serves Canada from the current capacity of 150,000 to 400,000. Suncor is currently the one company that has the biggest oil sands reserves in Canada. The company has a robust balance sheet and remains very disciplined on capital allocation. Dividends have increased by 21% each year for the last five years.