Under normal circumstances, initiating long positions in a company nearing its 52 week highs is not recommended. But if the company presents solid growth prospects in a ripe industry, then undertaking the risk becomes somewhat justified. One such company is Halliburton Company (NYSE:HAL), whose shares have appreciated by nearly 55% over the last year and recently touched their 52 week highs. But despite that, analysts at Barclays estimate that there could be another 35% upside.
To begin with, the oilfield services industry is largely dominated by Schlumberger Limited. (NYSE:SLB), Halliburton and Baker Hughes Incorporated (NYSE:BHI). Out of these three companies, Schlumberger is the most diversified, generating around 30% of its total revenues from North America. Meanwhile Baker Hughes Incorporated (NYSE:BHI) and Halliburton Company (NYSE:HAL) are more dependent on the North American market, which accounts to 43% and 56% of their total revenues, respectively.
Thanks to the shale gas production bonanza, gas exploration activities in the continent had slowed down significantly. In fact the number of operational rigs in North America plunged to 13-year-lows last year, as oil and gas companies scrambled to break even. This was a huge blow for Baker Hughes Incorporated (NYSE:BHI) and Halliburton Company (NYSE:HAL), as they aren’t as geographically diversified as Schlumberger Limited. (NYSE:SLB).
But with the rising gas prices and depleting rigs, gas exploration in North America is gradually picking up. The management of Halliburton estimates that the North American rig count could increase by 130-170 rigs by the end of 2013. Since Halliburton is mostly leveraged towards North America, it stands out as one of the prime beneficiaries from the rebounding rig count in the region.
It’s a well-known fact that hydrocarbon land reserves are depleting rapidly. However, oil fields beneath the ocean floor (subsea) contain huge oil and gas reserves. To explore subsea properties, specialized equipment is required that can operate in high temperatures while being submerged in sea water. And in these extreme conditions, companies must ensure that there is no leakage or spillage of toxic hydrocarbons.
Its due to this reason that very few companies offer subsea equipment and services. However, Halliburton Company (NYSE:HAL) provides a wide range of control and monitoring systems for subsea operations.
To catch up with it, Baker Hughes has launched Centrilift XP technology, which allows submersible pumps to operate in extreme conditions. The company also recently introduced its FATHOM certified chemicals, which treat waste water under on the ocean floor itself.
Meanwhile Schlumberger Limited. (NYSE:SLB) and Cameron International came together last year to form OneSubsea. Cameron International designs and manufactures subsea equipment, which will leverage Schlumberger’s global presence with its subsea expertise. But the bottom line remains that their product development will take time, which puts Halliburton Company (NYSE:HAL) in a sweet spot.
More Growth Prospects
Although Halliburton’s international segment is quite mature, its revenue share of 56% suggests that it has to work a lot towards geographical diversity. And to do this, Halliburton Company (NYSE:HAL) has been aggressively expanding abroad over the last year. On a quarterly basis, its international revenues spiked by 21% YoY, while Baker Hughes and Sclumberger posted a 6% and 30% YoY increase, respectively.