Halliburton Company (HAL), BP plc (ADR) (BP), Transocean LTD (RIG): Oil Lovers Should Not Miss These Companies

Page 1 of 2

The oil and gas exploration and production (E&P) sector is estimated to generate $4.5 trillion in 2013, compared to $4.2 trillion in 2008. It has grown by 1.4% annually since 2008. Revenue in the sector is further anticipated to increase by 3% in 2013.

It’s worth noting that oil and gas E&P companies earned extremely large earnings due to surging oil prices during 2010 and 2011. However, things have changed since then, with oil prices seeing a downtrend. In order to maintain the same level of revenue, these companies have changed focus toward increasing production and exploration activities. Let’s find out what strategies these companies have designed to boosts their revenue growth.

Americas fueling revenue prospects

Halliburton Company (NYSE:HAL)

Halliburton Company (NYSE:HAL) achieves 56% of its revenue from the North American market. In 2012, Halliburton’s working rig count in this area was 2,283. The company intends to increase the area’s rig count by 100 to 150 through the end of the year. The reason for the incremental investment is the increasing significance of exploration and production to cater to demand for oil and natural gas.

The IEA forecasts that 50% of oil production that will be required in 2020 has yet to be explored or developed. The demand for natural gas is also expected to increase by 1.4% to 1.6% per annum through 2035.

On the other side, Halliburton Company (NYSE:HAL) is focusing on exploring unconventional resources, like hydrocarbon. These unconventional resources are difficult to extract, as they are capital intensive and require modern technology that very few companies own. Halliburton is one of the companies that possesses the necessary technology and sees this as a $15 billion opportunity.

The company has come up with a technology called ”Single-Trip Multiple Zone System,” which helps in saving operational weeks of rig time. In turn, this improves the economics of the ultra-deep wells. This technology helped the company save 18 rig days per well. Henceforth, Halliburton Company (NYSE:HAL)’s revenue per rig in the North American region is expected to reach $8 billion in 2014, up from $7 billion in 2012.

In Latin America, Halliburton has been awarded with two high-tech directional drilling and testing contracts by Petroleo Brasileiro Petrobras SA (NYSE:PBR). These are four-year contracts with extensions for another four years, which include drilling activities and integrated tests and services in the Brazilian offshore market. The company estimates the potential from these contracts to be valued at more than $2 billion. Therefore, the revenue in this market is expected to grow by about 25% from approximately $3.7 billion in 2012 to $4.6 billion in 2015.

Divestment followed by expansion –  perfect strategy

BP plc (ADR) (NYSE:BP) plans to expand and develop the Rumaila oilfield in Iraq. It has increased its capital expenditure by 30% to $2.8 billion from previous estimates of $2.2 billion in 2012. The company plans to drill 300 wells for the next five years, including 150 new wells in the second half of 2013. This will boosts its output at nearly 1.3 million barrels per day (bpd) for the coming three years, with an increment of 100,000 bpd every year. BP plc (ADR) (NYSE:BP) also plans to construct production capacity of 300,000 bpd. The company aims at achieving output of 6 million bpd by 2017, up from the present 1.4 million bpd.

BP plc (ADR) (NYSE:BP) had 60% stake in one of the oil interests of Brazil, the Polvo oil field. Since 2007, the average daily yield from this field has been 13,000 bpd. Recently, it has divested its stake to HRT Oil and Gas for $135 million. This cash transaction will take place in the second half of 2013, after the sale of the Polvo oil field.

The reason for this divestment is that the company wants to focus on long-term growth projects. BP plc (ADR) (NYSE:BP) plans to be a major investor in exploration and production units by spending approximately 75% of its capital expenditure in upstream activities to increase production and reserves of crude oil in the coming 10 years. It plans to boost its cash flow by 50% to $30 billion in 2014 in order to spend its estimated capital expenditure of $24 billion by 2014.

Page 1 of 2