Halliburton(US:HAL) Seeking Alphaยท2024-09-08 16:03Core Viewpoint - Halliburton is navigating a complex energy environment with both positive and negative developments, including a significant contract with Petrobras and a recent cyberattack that may not materially impact its financials [2][16]. Group 1: Petrobras Contract - Halliburton secured a multi-year contract with Petrobras for offshore well intervention and plug and abandonment services, starting in Q2 2025, covering about two-thirds of Petrobras' related work [3]. - The contract aligns with Petrobras' aggressive capital expenditure plans, which are expected to peak at $17.1 billion in 2025, indicating potential for substantial earnings growth for Halliburton [4]. - Halliburton's revenue from Latin America was $1.1 billion in Q2 2024, accounting for 18.8% of total revenue, highlighting the importance of this region for the company [3][4]. Group 2: Cyberattack Incident - Halliburton experienced a cyberattack on August 21, 2024, which disrupted business operations but the company stated it is unlikely to have a material impact on financial results [5][7]. - The attack led to limited access to business applications and data breaches, raising concerns about potential litigation and customer behavior changes [5]. - Following the attack, Halliburton's stock declined by 7.9%, slightly worse than the broader oil and gas services ETF decline of 7.2% [7]. Group 3: Q2 Earnings Performance - Halliburton reported Q2 2024 earnings of $0.80 per share and revenue of $5.83 billion, missing sales estimates by $120 million and showing only a 0.6% year-over-year increase [8]. - North American operations faced an 8.0% year-over-year revenue decline, while international revenue grew by 8.1% year-over-year, indicating a shift in performance dynamics [8][10]. - The company maintained earnings growth through international segment expansion, with international revenues now accounting for 57.5% of total revenue [10]. Group 4: Energy Market Conditions - Energy market conditions are currently challenging, with Brent and WTI spot prices falling by 7.2% and 7.5% respectively, marking the lowest levels in nearly three years [12]. - Global rig counts have been declining, particularly in North America, while international rig counts have shown growth, suggesting a shift in operational focus for oil and gas services firms [14]. - Despite the decline in rig counts, the EIA projects an increase in oil and gas production in 2024 and 2025, which may influence market dynamics positively [15]. Group 5: Investment Outlook - The Petrobras contract is viewed as a significant positive for Halliburton, while the cyberattack is seen as a manageable risk that is unlikely to deter investor sentiment [16]. - Halliburton's diversified customer base and international growth position it well to weather the current low energy price environment [16]. - The stock is currently down 30.1% over the past year but trades at a forward P/E ratio of 9.0x, below the sector median, suggesting potential for recovery [16].