Here is a metaphor for the war on terror, the philosophy of this author, and a suggested way forward:
Cancer of the Earth
A Philosophy and a Way Forward
By Jeff Beatty
There is a cancer which has infested the Earth since the beginning of human history. The cancer ebbs and flows, and from time to time, man is forced to treat the cancer back into remission, before it fully metastasizes. The disease progresses through three distinct phases wherever it begins to grow. These phases are: religious belief, oppression, and violence. The pathology of this sociological cancer can be summarized in one sentence: Willingness to kill over differences in religious beliefs.
All cancer begins in a healthy cell. When the genetic code of a healthy cell becomes corrupt, the cell essentially ‘forgets’ how to divide properly; the result is a flawed copy of the original cell. In the case of human history, the healthy cell is a personal belief in religion. The student who studies religion intently will find dozens of commonalities throughout the different religions. So many, in fact, that it is nearly impossible to conclude that these vastly different theologies did not share some common origin; that of the true Creator, perhaps. The atheist student might also arrive at the same conclusion of common origin; that of the original storyteller, perhaps. But the existence of personal religious belief is not, as many atheists claim, the cause of the Earth’s disease; it is merely the healthy cell of origin. The first cancerous transformation is caused by fear and cloaked by good intentions.
When a religious belief is passed down from parent to child, it is routinely done with much greater forcefulness than the parent realizes. Because each religion seeks a monopoly, that is; seeks to declare itself the only true religion, children are often taught to either believe the religion of their teachers or else risk eternal damnation. The paradoxical result of widespread religious indoctrination is this: no matter what a child believes, she is already condemned by the keepers of some other faith. This is the beginning of religious oppression. People begin with good intentions and set out to indoctrinate the child so she might be spared from hell. But when the child rebels, the adults convene; and they decide to adopt laws, whether in the schools, whether in the churches, or whether in public life, seeking to guide the child toward changing her behavior, so she conforms to the religion. As this mutated cell spreads, entire societies change and become ultimately oppressed by the belief structure. The belief becomes intertwined with the government, and the oppression strengthens. This is when nation states become dangerous, and the cancer begins its second mutation.
When a government declares any one religion to be its ‘national religion’ and writes laws to impose that specific religion on its citizenry; this is a warning sign to all free people. It is a clearly diagnosable symptom of cancer which is too often ignored. It is a sign that war is coming and blood will be spilled. Once this cancer begins to spread, history has proven beyond any shadow of a doubt; violence is the final outcome. Just as the parent seeks, with good intentions, to indoctrinate the child; so does the nation-state, with conviction, seek to convert other nations to the ‘true’ religion. Violence erupts and twin towers fall. At this point, the cancer has indeed metastasized, and treatment is the only option. There is absolutely no choice, either defeat the cancerous growth or eventually be overcome by it.
The way forward is certainly not easy. The founding fathers of the United States took the first great stride toward a final cure when they wisely separated the powers of government from matters of religion. They knew that a government which imposes religious belief on its people is doomed to fail. But now Americans find themselves, once again, on the receiving end of the cancerous attack. We will not be defeated. In order to achieve victory and eradicate the Earth’s disease, however; we must use our position of military superiority to destroy any people who are willing to kill for their religious beliefs. In a feel good society, full of secular progressives, this is a difficult proposition to sell. The feel good liberals like to consider themselves ‘anti-war’ and consistently reject the need for any war. According to them, America is hated because America deserves it. This is blatantly unpatriotic. When George W. Bush enacted a pre-emptive strategy for dealing with radical ideologies, he took another great stride toward a cure. The world has not responded well to the subsequent projection of U.S. military prowess, and that fact disgusts the feel good liberals. Again, since the world did not respond well, liberal politicians falsely conclude that the President is solely to blame. As they continually throw the President ‘under the bus’ there is no doubt in my mind they are acting in a disgustingly unpatriotic way. In fact, their actions are treasonous, and the Democrat party bears this shame forever.
The way forward is exceedingly difficult, as we stand ever more divided in the struggle against radical violence. This division among U.S. citizens has been fueled and fostered by the purposefully destructive rhetoric of the Democratic politicians and their willing liberal accomplices in the main-stream media. If the United States of America can not pound the cancer back into remission, who will?
The way forward is painful; the United States must not withdraw from our pre-emptive mission in Iraq. She must engage more targets pre-emptively, which has now been made a daunting task by the Democratic Party, due to the divisions and doubts they have created among Americans. She must, despite global unpopularity, exercise her moral authority to seek out more targets. This is not the time to be scaling down; it is the time to be expanding the mission! Meanwhile, the liberal left will continue screaming out to the world, on a daily basis: “Do not trust Americans because we suck!” Their attitude is the very definition of ‘unpatriotic’. The definition of treason fits nicely too: betrayal of trust or faith, treachery; violation of the allegiance owed to ones country; giving aid and comfort to the enemy. It certainly does aid and comfort the enemy every time Speaker Pelosi talks about the Presidents’ failed war policy. Every time she opens her mouth, some Iranian warlord is smiling.
The all volunteer force of America’s best and brightest young people, also known as the United States military, is the true cornerstone of our freedom. They fight for integrity and honor. They fight for the American way of life. They fight for our freedom from religious persecution. They selflessly fight for the freedom of strangers in strange lands. If they are not allowed to fight now, they will be forced to fight later. The way forward is to fight, with all our might, which requires us to stand united. I am holding on to hope that there might be some way to reunite this nation on the subject of the war. I am fearful that the only way this unity will come is to give the treasonous Democrats what they want and wait for another catastrophic attack within the United States. The unity is necessary to eventually win. Remember the public outcry for the “Shock and Awe” campaign? That is the unity of which I speak. What happened to “Shock and Awe?” American unity is the only way forward.
God Bless you all!
September 18, 2007
Analysis of Karl Marx--and Communism
Fatal Flaws of Communism
The Communist Manifesto was written in 1848 by Karl Marx. It was written in collaboration with Friedrich Engels (Berlin 120). The essay was a defense for the communist form of government, although Marx had never governed anyone prior to sketching this philosophy. He described a predictable evil which corrupts human nature and controls the human condition. The human condition is something Karl Marx dramatically oversimplified. He ridiculously insisted that all the inhabitants of Earth, past and present, fall into one of two broad categories: the bourgeoisie and the proletarians. Some other ways to describe these categories: those that have and those that do not have; the owners and the workers; the ruling middle class and the rebels. The eloquent power of The Communist Manifesto sprouted from Marx’s own pessimistic view of the human condition. The philosophy of Karl Marx was fatally flawed because he misunderstood the concepts of love, faith, and happiness. As a result, Karl Marx wrote a manifesto of bitterness and disillusionment. Because he did not possess all the things he thought he should possess, he concluded that everyone else must give up their personal property rights.
In his book Main Currents of Marxism, Leszek Kolakowski succinctly described the upbringing and background of Karl Marx. Kolakowski wrote that Marx grew up in Prussia as the child of Jewish parents. His grandfathers were rabbis, and his father was a protestant lawyer. Protestantism in Prussia was “a necessary condition of professional and cultural emancipation.” In 1835, Marx became a law student at Bonn University. The following year, he transferred to Berlin University and remained a law student. Berlin University is where Marx was introduced to a Hegelianism, a philosophy which made reason the ultimate authority (80). Marx would later reject all the philosophies of his Protestant father, and did so in such a radical way that he was exiled from Prussia. Marx loved to study philosophy and history. In April of 1841, Karl Marx was awarded a doctor’s degree by Jena University (Kalakowski 83).By the time he wrote The Communist Manifesto, Karl Marx was highly educated and deeply philosophical. It is amazing how Marx was so highly intelligent and educated but somehow fundamentally misunderstood the importance of love, faith, and happiness.
His explanation for Communism completely ignored the power and influence of love, which had existed throughout every previous society. He assigned love an insignificant weight as a sociological factor in the inevitable progression of politics. Love was not a reasonable thing to Marx, who relied entirely on intellectual reason to explain everything. The text of The Communist Manifesto demonstrated how Karl Marx picked a scenario, and he knew it would be criticized as a radical example, but he still used it as a representation of overall societal family structure: “Abolition of the family! Even the most radical flare up at this infamous proposal of the communists. On what foundation is the present family, the bourgeois family, based? On Capital, on private gain” (Marx 371). When Marx mentioned abolition of the family in the context that it was a precept of communism, and then declared that the foundations of upper class families were based entirely on capital and private gain, he effectively denounced love. Take his comments about wives as an example:
"Our bourgeois, not content with having the wives and daughters of their proletarians at their disposal, not to speak of common prostitutes, take the greatest pleasure in seducing each others’ wives. Bourgeois marriage is in reality a system of wives in common, and thus, at the most, what the communists might possibly be reproached with, is that they desire to introduce, in substitution for a hypocritically concealed, an openly legalized community of women. (Marx 372) "
Karl Marx suggested that the majority of middle class people were marital infidels. He described an immoral situation that certainly existed, and still exists, because people will not always behave morally; but he should not have based his opinions about love entirely on the existence of immoral behavior. He did not demonstrate any respect for love, and he based his philosophy partly on dysfunctional marriages, as if they were a valid representation for all bourgeoisie marriages. Marx did not acknowledge this fundamental concept of society; he did not recognize that love is the binding gel of families everywhere.
There is no true family without love. Love was factored out in the Communist equation. When considering the existence of love, most people, regardless of geographical location, think of their immediate families. They think of their spouses, sons and daughters, and parents. They also think of cousins and friends. Love is a tangible thing to the vast majority of human beings. Outside the immediate family, many people fall in love with new acquaintances. People have been known to fall in love with complete strangers. Some people even go so far as to actually love their pet animals. Love is a driving force in all civilizations. This is an undeniable fact: love exerts influence over all of human history, past and present. But the function of love is curiously absent from the manifesto written by Karl Marx, at least the true and healthy function of love. In a letter to Friedrich Engels, Marx declared: “Blessed is he that hath no family” (Wheen 7). Marx’s use of the Biblical structure was no accident. He often wrote in Biblical form to intentionally mock religion. He not only misunderstood the influence of love on society, he lashed out against the institutions of religious faith.
Karl Marx was openly hostile toward religion. According to Marx, “Communism abolishes eternal truths, it abolishes all religion and all morality, instead of constituting them on a new basis; it therefore acts in contradiction to all past historical experience” (373). Marx arrogantly believed that the accumulation of all past history and human experience was worthless, and the opinion of a thirty-year old genius should supersede past experience. By writing his philosophy from an atheistic perspective and with so much self-righteous attitude, Marx should have known that the philosophy would be constantly rejected by millions of people. Religious beliefs have been an important factor in nearly every human culture since the dawn of civilization, and Marx was repulsed by that historical fact. According to Edward Reiss, Karl Marx was “…too quick to announce the death of religion, to declare that, for the masses, religious notions ‘have now long been dissolved by circumstance’” (135). Also, Marx thought that “religion itself involved a basic perpetual error” (Reiss 134). Communism offered no solution to the believer in God. It offered no avenue for praise.
Wars have been fought over religious differences, and it was faith that compelled men to sacrifice their own lives to glorify a certain God. When Marx discarded religion and treated the subject as irrelevant, he missed an essential factor in the construction of all governments. How will this government treat people of various faiths? This is a question Marx not only did not ask, but refused to examine: “The charges against Communism made from a religious, a philosophical, and generally, from an ideological standpoint, are not deserving of serious examination” (Marx 372). It is a subject that demands, at the very least, a government strategy. The strategy must be respectable in the eyes of different believers, or it is likely to fail; just as Communism has repeatedly failed wherever it is was tried. The founding fathers of the United States had a strategy, which was separation of church and state. People of faith usually will not tolerate religious oppression for very long. Without an avenue for praise they will struggle to be happy and eventually revolt.
Since Karl Marx was not content as an exiled political journalist, should governments assume that no other similar man can live life with contentment? Marx was only thirty years old when he wrote his version of the Communist philosophy. His writings were seemingly fueled by a laborers’ disgruntled disgust. Communism, as depicted by Karl Marx, declared that life has been governed primarily by a repetitive cycle of discontentment for both the bourgeoisie and the proletarians. Marx believed that political power was, and is always, the focus of the two discontent classes (Marx 358). Communism must be adopted in order for everyone to end the cycle of ignorance. Is Communism designed to obtain mass contentment? Karl Marx did not describe the final state of contentment, or the intended resulting state of his philosophy. He did not adequately describe the goal of Communism. According to Edward Reiss, “Marx shows misery as a widespread social malaise, whose cause is the way we organize (or fail to organize) society” (22). As a solution for the malaise, Marx believed we should surrender all personal property rights and allow governments to control the use of all resources—including human beings. This too, is a fatal flaw in the Communist philosophy.
Since free men and women typically enjoy their liberty, it is logical to conclude that freedom contributes to their happiness. Some people who have very limited material possessions are perfectly content because they possess each quality that Marx overlooked. They possess love of family and country. They possess faith in God and thankfulness. Their happiness is not derived from a stockpile of material possessions, or from an accumulation of political power. It makes no sense to propose, as a way to eradicate misery, the stripping away of human liberty. I believe Karl Marx envisioned a world having equal amounts of discontent and despair for all people. His philosophy was certainly no panacea!
An analysis of Karl Marx’s life prior to his authoring of The Communist Manifesto is key to understanding his misguided defense of Communism. In his magnanimity, Karl Marx found himself living poorly. Despite his intellectual prowess, he found himself alienated. He was alienated, exiled, and rejected by all but a few of the most radical and like-minded people. He even became an outsider to his immediate family (Wheen 8). When he died in March of 1883, there were only eleven mourners at the funeral (Wheen 1). When he was alive, he was too smart for his own well being. Thus, he embraced communism, and explained how communism could have prevented jealousy and bitterness from developing in his own life, or any other similar life. Marx embraced communism because it made him feel better about his own short-comings. It was easier to lash out at the world by portraying societies as foolish, rather than to accept his life at face value. Such was the promise of Communism; to force all men to live in an equal state of despair and discontentment, without love, without faith. The fatal flaws in Communist philosophy have been proven by the historical evidence. No nation state can survive very long without embracing love for one another, seeking faith in deity, and striving to achieve happiness in their lives. Communism, this great theory of universal misery, will always be doomed to fail so long as human compassion still exists!
The Communist Manifesto was written in 1848 by Karl Marx. It was written in collaboration with Friedrich Engels (Berlin 120). The essay was a defense for the communist form of government, although Marx had never governed anyone prior to sketching this philosophy. He described a predictable evil which corrupts human nature and controls the human condition. The human condition is something Karl Marx dramatically oversimplified. He ridiculously insisted that all the inhabitants of Earth, past and present, fall into one of two broad categories: the bourgeoisie and the proletarians. Some other ways to describe these categories: those that have and those that do not have; the owners and the workers; the ruling middle class and the rebels. The eloquent power of The Communist Manifesto sprouted from Marx’s own pessimistic view of the human condition. The philosophy of Karl Marx was fatally flawed because he misunderstood the concepts of love, faith, and happiness. As a result, Karl Marx wrote a manifesto of bitterness and disillusionment. Because he did not possess all the things he thought he should possess, he concluded that everyone else must give up their personal property rights.
In his book Main Currents of Marxism, Leszek Kolakowski succinctly described the upbringing and background of Karl Marx. Kolakowski wrote that Marx grew up in Prussia as the child of Jewish parents. His grandfathers were rabbis, and his father was a protestant lawyer. Protestantism in Prussia was “a necessary condition of professional and cultural emancipation.” In 1835, Marx became a law student at Bonn University. The following year, he transferred to Berlin University and remained a law student. Berlin University is where Marx was introduced to a Hegelianism, a philosophy which made reason the ultimate authority (80). Marx would later reject all the philosophies of his Protestant father, and did so in such a radical way that he was exiled from Prussia. Marx loved to study philosophy and history. In April of 1841, Karl Marx was awarded a doctor’s degree by Jena University (Kalakowski 83).By the time he wrote The Communist Manifesto, Karl Marx was highly educated and deeply philosophical. It is amazing how Marx was so highly intelligent and educated but somehow fundamentally misunderstood the importance of love, faith, and happiness.
His explanation for Communism completely ignored the power and influence of love, which had existed throughout every previous society. He assigned love an insignificant weight as a sociological factor in the inevitable progression of politics. Love was not a reasonable thing to Marx, who relied entirely on intellectual reason to explain everything. The text of The Communist Manifesto demonstrated how Karl Marx picked a scenario, and he knew it would be criticized as a radical example, but he still used it as a representation of overall societal family structure: “Abolition of the family! Even the most radical flare up at this infamous proposal of the communists. On what foundation is the present family, the bourgeois family, based? On Capital, on private gain” (Marx 371). When Marx mentioned abolition of the family in the context that it was a precept of communism, and then declared that the foundations of upper class families were based entirely on capital and private gain, he effectively denounced love. Take his comments about wives as an example:
"Our bourgeois, not content with having the wives and daughters of their proletarians at their disposal, not to speak of common prostitutes, take the greatest pleasure in seducing each others’ wives. Bourgeois marriage is in reality a system of wives in common, and thus, at the most, what the communists might possibly be reproached with, is that they desire to introduce, in substitution for a hypocritically concealed, an openly legalized community of women. (Marx 372) "
Karl Marx suggested that the majority of middle class people were marital infidels. He described an immoral situation that certainly existed, and still exists, because people will not always behave morally; but he should not have based his opinions about love entirely on the existence of immoral behavior. He did not demonstrate any respect for love, and he based his philosophy partly on dysfunctional marriages, as if they were a valid representation for all bourgeoisie marriages. Marx did not acknowledge this fundamental concept of society; he did not recognize that love is the binding gel of families everywhere.
There is no true family without love. Love was factored out in the Communist equation. When considering the existence of love, most people, regardless of geographical location, think of their immediate families. They think of their spouses, sons and daughters, and parents. They also think of cousins and friends. Love is a tangible thing to the vast majority of human beings. Outside the immediate family, many people fall in love with new acquaintances. People have been known to fall in love with complete strangers. Some people even go so far as to actually love their pet animals. Love is a driving force in all civilizations. This is an undeniable fact: love exerts influence over all of human history, past and present. But the function of love is curiously absent from the manifesto written by Karl Marx, at least the true and healthy function of love. In a letter to Friedrich Engels, Marx declared: “Blessed is he that hath no family” (Wheen 7). Marx’s use of the Biblical structure was no accident. He often wrote in Biblical form to intentionally mock religion. He not only misunderstood the influence of love on society, he lashed out against the institutions of religious faith.
Karl Marx was openly hostile toward religion. According to Marx, “Communism abolishes eternal truths, it abolishes all religion and all morality, instead of constituting them on a new basis; it therefore acts in contradiction to all past historical experience” (373). Marx arrogantly believed that the accumulation of all past history and human experience was worthless, and the opinion of a thirty-year old genius should supersede past experience. By writing his philosophy from an atheistic perspective and with so much self-righteous attitude, Marx should have known that the philosophy would be constantly rejected by millions of people. Religious beliefs have been an important factor in nearly every human culture since the dawn of civilization, and Marx was repulsed by that historical fact. According to Edward Reiss, Karl Marx was “…too quick to announce the death of religion, to declare that, for the masses, religious notions ‘have now long been dissolved by circumstance’” (135). Also, Marx thought that “religion itself involved a basic perpetual error” (Reiss 134). Communism offered no solution to the believer in God. It offered no avenue for praise.
Wars have been fought over religious differences, and it was faith that compelled men to sacrifice their own lives to glorify a certain God. When Marx discarded religion and treated the subject as irrelevant, he missed an essential factor in the construction of all governments. How will this government treat people of various faiths? This is a question Marx not only did not ask, but refused to examine: “The charges against Communism made from a religious, a philosophical, and generally, from an ideological standpoint, are not deserving of serious examination” (Marx 372). It is a subject that demands, at the very least, a government strategy. The strategy must be respectable in the eyes of different believers, or it is likely to fail; just as Communism has repeatedly failed wherever it is was tried. The founding fathers of the United States had a strategy, which was separation of church and state. People of faith usually will not tolerate religious oppression for very long. Without an avenue for praise they will struggle to be happy and eventually revolt.
Since Karl Marx was not content as an exiled political journalist, should governments assume that no other similar man can live life with contentment? Marx was only thirty years old when he wrote his version of the Communist philosophy. His writings were seemingly fueled by a laborers’ disgruntled disgust. Communism, as depicted by Karl Marx, declared that life has been governed primarily by a repetitive cycle of discontentment for both the bourgeoisie and the proletarians. Marx believed that political power was, and is always, the focus of the two discontent classes (Marx 358). Communism must be adopted in order for everyone to end the cycle of ignorance. Is Communism designed to obtain mass contentment? Karl Marx did not describe the final state of contentment, or the intended resulting state of his philosophy. He did not adequately describe the goal of Communism. According to Edward Reiss, “Marx shows misery as a widespread social malaise, whose cause is the way we organize (or fail to organize) society” (22). As a solution for the malaise, Marx believed we should surrender all personal property rights and allow governments to control the use of all resources—including human beings. This too, is a fatal flaw in the Communist philosophy.
Since free men and women typically enjoy their liberty, it is logical to conclude that freedom contributes to their happiness. Some people who have very limited material possessions are perfectly content because they possess each quality that Marx overlooked. They possess love of family and country. They possess faith in God and thankfulness. Their happiness is not derived from a stockpile of material possessions, or from an accumulation of political power. It makes no sense to propose, as a way to eradicate misery, the stripping away of human liberty. I believe Karl Marx envisioned a world having equal amounts of discontent and despair for all people. His philosophy was certainly no panacea!
An analysis of Karl Marx’s life prior to his authoring of The Communist Manifesto is key to understanding his misguided defense of Communism. In his magnanimity, Karl Marx found himself living poorly. Despite his intellectual prowess, he found himself alienated. He was alienated, exiled, and rejected by all but a few of the most radical and like-minded people. He even became an outsider to his immediate family (Wheen 8). When he died in March of 1883, there were only eleven mourners at the funeral (Wheen 1). When he was alive, he was too smart for his own well being. Thus, he embraced communism, and explained how communism could have prevented jealousy and bitterness from developing in his own life, or any other similar life. Marx embraced communism because it made him feel better about his own short-comings. It was easier to lash out at the world by portraying societies as foolish, rather than to accept his life at face value. Such was the promise of Communism; to force all men to live in an equal state of despair and discontentment, without love, without faith. The fatal flaws in Communist philosophy have been proven by the historical evidence. No nation state can survive very long without embracing love for one another, seeking faith in deity, and striving to achieve happiness in their lives. Communism, this great theory of universal misery, will always be doomed to fail so long as human compassion still exists!
Halliburton Report
An analysis of Halliburton, by Jeff Beatty
Historical Overview:
The Halliburton Company was founded by Erle Halliburton who began his oil career in 1916 working for Perkins Oil Well Cementing Company. In 1919, Erle started his Better Method Well Cementing Company. Erle Halliburton developed a method which encased steel well pipes in cement. This method was initially considered useless, but later proved to have several benefits. Encasing the well pipe in cement prevents oil from entering the water table as it is pumped up. It also reduces the chance of explosions while providing strength to the well structure. In 1920, the company was incorporated in Oklahoma and renamed Halliburton Oil Well Cementing. The company patented its products and services, which forced many companies to hire Halliburton Oil Well Cementing if they wanted to encase their well pipes (Hoovers).
Erle Halliburton died in 1957, but the company grew through numerous acquisitions throughout the 1950’s, 60’s, and 70’s. In 1962 Halliburton purchased Brown & Root, a large oil development company, and an expert in offshore platform construction. Brown & Root had also built many of the oil wells in Iraq prior to 1962, wells which are today maintained by Halliburton KBR. In 1973 there was an Arab oil embargo which resulted in huge opportunities for Halliburton due to the need for global oil exploration. Drilling costs also surged because oil, driven by technology and demand, was sought out at ever increasing depths. With plenty of demand and plenty of practice, Halliburton quickly became a leader in well drilling and stimulation (Hoovers).
In the 1990’s Halliburton began massive global expansion. In 1991 they entered Russia and in 1993 they started working in China. In 1994 the Brown and Root segment was awarded a contract for a pipeline stretching from Qatar to Pakistan. In 1995 Dick Cheney was named CEO. This occurred immediately before Brown & Root began providing services to the Department of Defense. Because oil field development involves lengthy projects, a contractor such as Halliburton must carry extensive logistics support capabilities. They must be able to provide clothing, housing, food, and medical facilities for hundreds or even thousands of employees at the site of a major project. Many times oil is found in places which are not convenient for human survival, which is why Halliburton and other similar companies became proficient at creating a long-term, sustainable work-site. The US Department of Defense recognized the ability of a civilian contractor such as Halliburton to provide efficient logistics support, and in 1995 Halliburton was employed to provide engineering and logistics support for US Army peacekeeping troops in the Balkans (Hoovers).
Business Philosophy:
One of Halliburton’s mission statements is “Give back to the community that has given to you.” One example provided in the 2003 annual report is Halliburton de Mexico, which was incorporated in 1956 as a Mexican company. Today, this company employs 1200 people, 95 percent of which are Mexicans. In 2003, this Mexican workforce was the number one contributor per capita to Mexico’s United Way. Over 70% of the workers contributed (Halliburton).
Halliburton projects in remote locations often last for decades, and they have a habit of building communities around such operations. In Bonny Island, Nigeria, they have a natural gas plant Nigeria LNG and must sustain its operations. In order to accomplish this, Halliburton invests in craft schools where they train young Nigerians in crafts and computer skills. They also build and repair roads in order to streamline operations with the positive consequence of improving living conditions for foreign civilians. In a country like Nigeria, piping of clean water is not a given, so Halliburton builds water infrastructure necessary for their plant—and share it with the community. The business model basically exports technology, building materials, and infrastructure but does not largely export labor. In other words, they build the facility then train the community to operate the facility. This model creates jobs and vastly strengthens foreign economies. Halliburton considers itself a citizen of the world—not necessarily the United States (Halliburton).
Sector and Industry:
Halliburton Co. is listed in the basic materials sector which encompasses a wide range of commodity related manufacturing or processing industries. Included in this sector are companies that manufacture construction materials, chemicals, minerals and mining companies, and steel producers. Their primary industry is Oil and Gas Equipment and Services. One of the most formidable competitors to Halliburton is Schlumberger LTD. Other competitors include Technip and Baker-Hughes INTL.
Asbestos Liability:
In 1998 with Dick Cheney as CEO, Halliburton acquired Dresser Industries. The deal was billed by Cheney as a “win-win” merger but ended up strapping the company to the rapidly growing costs of legal claims filed by people who were injured or at risk due to asbestos in products made by Dresser. Skeptics question whether Halliburton under Mr. Cheney was aggressive enough in investigating the asbestos liability of Dresser. Many also believe it was impossible to predict the staggering costs of settling these asbestos claims (Gerth). In order to protect its core assets from the large asbestos liability, Halliburton restructured into two independent subsidiaries in 2002. The company was divided into two subsidiaries: the energy services group, which is the core of Halliburton today; and the engineering and construction operations group known as KBR, primarily composed of the Brown & Root segment. By 2004, the company had settled nearly all of the 300,000 asbestos-related lawsuits by paying about $4 billion in cash and in stock (Hoover).
Government Contracts:
The company has also been the subject of intense political scrutiny since the Bush/Cheney administration took office in 2001. Many left wing pundits frequently highlight Mr. Cheney’s former role as CEO as “more than coincidence” as it relates to Halliburton winning contracts to support troops in Iraq and Afghanistan. Evidence does not support the veracity of these claims. Because of the intense political scrutiny, Halliburton has been the focus of countless investigations. The US Army, for example, had secretly awarded a no bid contract to Halliburton subsidiary KBR to rebuild oil infrastructure throughout Iraq shortly after the US-led invasion. Due to the political firestorm fanned primarily by conspiracy theorists, the Army eventually opened the contract for competitive bids, and split the contract into one for northern Iraq and one for southern Iraq. The northern Iraq contract, worth up to $800 million, was awarded to a joint venture of California based Parsons Corp. and the Australian firm Worley Group Ltd. The southern contract (also subject to bidding) was awarded to Halliburton KBR, and was worth $1.2 billion in 2004. How did Halliburton win the southern bid? It is important to remember that Brown & Root originally built most of the oil infrastructure in Iraq, and therefore who better to rebuild it? Halliburton had absorbed Brown & Root and was therefore the original manufacturer of the infrastructure to be repaired. Further strengthening Halliburton’s position was their aptitude for creating sustainable bases of operations and handling of logistics (Glain).
All profits earned in Iraq have also been targeted for scrutiny, while it remains the responsibility of a corporation to profit.
In a letter addressed to Joseph E. Schmitz, the Defense Department's inspector general, Democratic representatives Henry A. Waxman of California and John D. Dingell of Michigan, along with Connecticut Senator Joseph I. Lieberman, said they were informed by members of Schmitz's staff that an audit into Kellogg Brown & Root's Iraq operations had been referred to a criminal investigation unit of the inspector general's office. The move comes after the Defense Department's auditing agency requested that Schmitz open an investigation into evidence KBR had overcharged by an estimated $ 61 million for fuel deliveries to Iraq from Kuwait. The letter revealed the latest twist in an ongoing probe by ranking Democrats, led by Waxman, into the most lucrative single contract issued to rebuild postwar Iraq. Halliburton, of which Cheney was once chairman, was secretly awarded the no-bid contract to redevelop Iraq's battered oil sector by the Army Corp of Engineers in March; Halliburton's mandate was supposed to last only a few months, but it has since garnered the company more than $ 2 billion in new business. At issue is whether KBR violated procurement standards in hiring Altanmia Commercial Marketing Co., a Kuwaiti general trader, to deliver gasoline to energy-strapped Iraq. In a Jan. 15 letter to National Security Adviser Condoleezza Rice, Waxman said Altanmia won the KBR subcontract a day after the bidding process opened, and a week before the bidding was scheduled to close. Altanmia had no experience transporting fuel before it was awarded the contract, according to the letter, and charged 60 percent more per gallon of delivered gasoline than prevailing spot prices. From April 11 to Sept. 19, according to public documents, KBR charged the US government $1.17 per gallon of gasoline delivered from Kuwait to Iraq at a time when the average spot price was 71 cents. It charged an additional $ 1.21 per gallon in transport fees, far more than what Iraq's State Oil Marketing Organization charged for the same service. KBR also added a commission of 26 cents per gallon. In addition, the Waxman letter cited allegations of financial ties between Altanmia and a brother of Kuwait's oil minister. "My staff has received multiple allegations that Talal Fahad Al Sabah is acting as a consultant for the company or as a hidden partner by proxy," Waxman wrote.
Waxman also alleged the Army Corps of Engineers preempted the Defense Department audit of KBR. Four days after the Pentagon announced the probe, the Army Corps declared Altanmia's prices were "fair and reasonable" and waived any requirements for KBR to provide cost and pricing data from Altanmia. An Army Corps official said the waiver was necessary because Kuwaiti law prohibits fuel exporters from releasing certified pricing details -- an assertion Waxman said was refuted in a telephone interview his staff had with the former general manager of Kuwait Petroleum Co. Pentagon auditors referred the Altanmia contract to the inspector general's office in response to the Army Corps waiver, Waxman said (Glain).
KBR Spin-off:
In 2003, Halliburton announced plans to divest certain non-essential divisions and shift the company focus back to its main operating objective, to become the largest oil field developer in the world. This decision was implemented by selling of its mono pumping business, its Wellstream business, and its interests in Bredero-Shaw (A European marine contractor) (Hoovers). Under the disguise of refocusing the business toward oil drilling and production, it appears Halliburton was more than happy to distance itself from the KBR division (formally Brown & Root) and the political baggage of governmental contracts. KBR is now a separate and publicly traded entity.
" Oil-field-services giant Halliburton Co. expects a gain approaching $1 billion this quarter stemming from its separation from KBR. Earlier this month, Halliburton ended its 44-year relationship with KBR, an engineering, construction and military contracting business. And after taking back 85 million shares of Halliburton common stock in exchange for issuing 136 million shares of new KBR stock, the company was able to record a net gain of $995 million, according to a company filing. "This quarter marks the start of a new chapter in Halliburton's history, as we completed the separation of KBR," Halliburton Chief Executive Officer Dave Lesar said Thursday in a prepared statement. "We are now completely focused on the global growth opportunities in our energy services business (Ivanovich)."
Executive Summary:
Halliburton Co. has increased net sales by eighty percent from $12.572 billion in 2002 to $22.576 billion in 2006. This represents an average annual sales growth of 20 percent. Despite consistently strong annual sales performances, the company operated at a net loss in 2002, 2003, and 2004. This lengthy period of net loss is largely attributed to Halliburton’s realization of massive asbestos liabilities, as well as significant corporate restructuring.
Chart 1 Average sales growth of Halliburton about 20% per year since 2002
With the asbestos claims settled in 2004, and the restructuring completed by a complete spin off of KBR in 2006, Halliburton appears to have made a comeback in terms of profitability. Net Income for 2005 and 2006 was steady at $2.35 billion dollars per year. The profit margins finally reached positive territory in 2005 and 2006 with 11.7% and 10.4% respectively. Their five year average for profit margin is less than one percent due to the net loss sustained in 2002 through 2004. The Halliburton philosophy toward paying dividends is noteworthy. Dividends of fifty cents per share were paid in both 2003 and 2004 even though the company reported net losses in those years. There was a two for one stock split in 2004 thereby doubling the number of outstanding shares, which explains why the cash dividend was decreased to twenty-five cents on a per share basis while the company is actually paying more dividends to shareholders.
The liquidity ratios of Halliburton reflect a company which is easily able to pay off its short term obligations. The lowest current ratio in the five year analysis was 1.2 in 2002. The 2006 current ratio was 2.37, and the five year average was 1.76. Today’s current ratios indicate Halliburton has basically two dollars in assets for every dollar of liability. Subtraction of inventory value does not make the acid test results any less appealing. The five year average acid test ratio was 1.57 and the trend is upward. It is somewhat impressive that the company was able to manage the $4 billion asbestos payoff and return to profitability within two years.
Halliburton has improved its debt utilization ratios. The times interest earned ratio has rapidly improved from 5.2 in 2003 to 19.9 in 2006. While at a low of 5.2, Halliburton was maneuvering to counter unplanned outbound cash flow resulting from asbestos settlements.
Future Plans and Outlook:
In 2007 current CEO David Lesar announced plans to relocate Halliburton’s world headquarters to Dubai, UAE.
Unlike some others in the sector, Halliburton saw a drop-off in operating income in the first quarter compared with the last three months of 2006. Houston-based Baker Hughes, in contrast, reported a 14 percent increase in operating income over that time frame. Halliburton's spin-off of KBR was a distraction during the first quarter, said Bill Mann, senior analyst with the Alexandria, Va.-based Motley Fool. "I think Halliburton gets a little bit of a hall pass for this quarter," Mann said. "If they're truly wanting to focus on their drilling results, they better produce drilling results." Halliburton's performance has been hampered by a lackluster drilling market in North America, particularly in Canada, where the company has been reducing personnel and relocating equipment. "We continue to face some challenges in the North America market," Lesar said Thursday during a conference call with industry analysts. "I believe we'll deal with whatever the market gives us."Market conditions softened in North America after natural gas prices plunged last year. As a result, the utilization rate for drilling rigs in western Canada was only 54 percent during the first quarter, down from nearly 80 percent a year ago. Gas prices have since rebounded, giving Lesar confidence drilling activity in the U.S. will be stronger during the second half of the year.Revenue in each of Halliburton's international divisions grew during the first quarter compared with last year, but declined against the fourth quarter of 2006. In the Middle East, however, Halliburton's revenue grew 20 percent year-over-year and 8 percent from the fourth quarter, company officials said."We view the Middle East as an important growth area," Lesar said. To help foster relations with the national oil companies in the Middle East, Lesar has announced plans to move to Dubai, United Arab Emirates. Halliburton spokeswoman Cathy Mann said in an e-mail that Lesar is "in the process of relocating (Ivanovich)."
David Lesar explains the headquarters move as necessary to “help foster relations” in Middle Eastern areas where revenue is growing the most. In North America, growth is weak. The move was determined by the board of directors to be favorable for improving shareholders equity. It is purely a business move.
Investment Considerations:
With the ever increasing demand for energy, and the world’s habit for harnessing the energy from oil and natural gas, it seems wise to consider investing in a company who serves the production side of energy. Halliburton certainly seems like a stable investment, having weathered the storms of massive acquired liability as well as investor fallout from tenuous political situations. Still, investing in Halliburton is risky. If the Middle East were to further destabilize it could have serious consequences for Halliburton investors especially since the company is shifting the bulk of its operations to the Middle East. For many reasons it does not seem lucrative for these big oil developers to operate in the western hemisphere. The United States has not built a new refinery in decades, choosing instead to expand existing facilities. Exploration is costly because of strict environmental laws, meanwhile Hugo Chavez can drill virtually anywhere he so desires. Halliburton’s competitors also operate in the same environment, and all of these oil developing companies seem to have global allegiance rather than American allegiance. For aggressive investing, Technip looks like the better buy. The EPS for Technip is slighter higher (2.64 versus 2.23) and the P/E ratio for Technip is drastically better (25.4 versus 15.24). Technip has the smallest net income but has plenty of potential for aggressive growth.
For less aggressive investing, Schlumberger LTD (19.3%) and Baker Hughes INTL (26.8%) both have better ratios for net income as a percentage of revenue versus Halliburton at 10.4%. In the final analysis I believe the best overall investment in this industry is Schlumberger LTD (SLB). Halliburton is my second choice.
Historical Overview:
The Halliburton Company was founded by Erle Halliburton who began his oil career in 1916 working for Perkins Oil Well Cementing Company. In 1919, Erle started his Better Method Well Cementing Company. Erle Halliburton developed a method which encased steel well pipes in cement. This method was initially considered useless, but later proved to have several benefits. Encasing the well pipe in cement prevents oil from entering the water table as it is pumped up. It also reduces the chance of explosions while providing strength to the well structure. In 1920, the company was incorporated in Oklahoma and renamed Halliburton Oil Well Cementing. The company patented its products and services, which forced many companies to hire Halliburton Oil Well Cementing if they wanted to encase their well pipes (Hoovers).
Erle Halliburton died in 1957, but the company grew through numerous acquisitions throughout the 1950’s, 60’s, and 70’s. In 1962 Halliburton purchased Brown & Root, a large oil development company, and an expert in offshore platform construction. Brown & Root had also built many of the oil wells in Iraq prior to 1962, wells which are today maintained by Halliburton KBR. In 1973 there was an Arab oil embargo which resulted in huge opportunities for Halliburton due to the need for global oil exploration. Drilling costs also surged because oil, driven by technology and demand, was sought out at ever increasing depths. With plenty of demand and plenty of practice, Halliburton quickly became a leader in well drilling and stimulation (Hoovers).
In the 1990’s Halliburton began massive global expansion. In 1991 they entered Russia and in 1993 they started working in China. In 1994 the Brown and Root segment was awarded a contract for a pipeline stretching from Qatar to Pakistan. In 1995 Dick Cheney was named CEO. This occurred immediately before Brown & Root began providing services to the Department of Defense. Because oil field development involves lengthy projects, a contractor such as Halliburton must carry extensive logistics support capabilities. They must be able to provide clothing, housing, food, and medical facilities for hundreds or even thousands of employees at the site of a major project. Many times oil is found in places which are not convenient for human survival, which is why Halliburton and other similar companies became proficient at creating a long-term, sustainable work-site. The US Department of Defense recognized the ability of a civilian contractor such as Halliburton to provide efficient logistics support, and in 1995 Halliburton was employed to provide engineering and logistics support for US Army peacekeeping troops in the Balkans (Hoovers).
Business Philosophy:
One of Halliburton’s mission statements is “Give back to the community that has given to you.” One example provided in the 2003 annual report is Halliburton de Mexico, which was incorporated in 1956 as a Mexican company. Today, this company employs 1200 people, 95 percent of which are Mexicans. In 2003, this Mexican workforce was the number one contributor per capita to Mexico’s United Way. Over 70% of the workers contributed (Halliburton).
Halliburton projects in remote locations often last for decades, and they have a habit of building communities around such operations. In Bonny Island, Nigeria, they have a natural gas plant Nigeria LNG and must sustain its operations. In order to accomplish this, Halliburton invests in craft schools where they train young Nigerians in crafts and computer skills. They also build and repair roads in order to streamline operations with the positive consequence of improving living conditions for foreign civilians. In a country like Nigeria, piping of clean water is not a given, so Halliburton builds water infrastructure necessary for their plant—and share it with the community. The business model basically exports technology, building materials, and infrastructure but does not largely export labor. In other words, they build the facility then train the community to operate the facility. This model creates jobs and vastly strengthens foreign economies. Halliburton considers itself a citizen of the world—not necessarily the United States (Halliburton).
Sector and Industry:
Halliburton Co. is listed in the basic materials sector which encompasses a wide range of commodity related manufacturing or processing industries. Included in this sector are companies that manufacture construction materials, chemicals, minerals and mining companies, and steel producers. Their primary industry is Oil and Gas Equipment and Services. One of the most formidable competitors to Halliburton is Schlumberger LTD. Other competitors include Technip and Baker-Hughes INTL.
Asbestos Liability:
In 1998 with Dick Cheney as CEO, Halliburton acquired Dresser Industries. The deal was billed by Cheney as a “win-win” merger but ended up strapping the company to the rapidly growing costs of legal claims filed by people who were injured or at risk due to asbestos in products made by Dresser. Skeptics question whether Halliburton under Mr. Cheney was aggressive enough in investigating the asbestos liability of Dresser. Many also believe it was impossible to predict the staggering costs of settling these asbestos claims (Gerth). In order to protect its core assets from the large asbestos liability, Halliburton restructured into two independent subsidiaries in 2002. The company was divided into two subsidiaries: the energy services group, which is the core of Halliburton today; and the engineering and construction operations group known as KBR, primarily composed of the Brown & Root segment. By 2004, the company had settled nearly all of the 300,000 asbestos-related lawsuits by paying about $4 billion in cash and in stock (Hoover).
Government Contracts:
The company has also been the subject of intense political scrutiny since the Bush/Cheney administration took office in 2001. Many left wing pundits frequently highlight Mr. Cheney’s former role as CEO as “more than coincidence” as it relates to Halliburton winning contracts to support troops in Iraq and Afghanistan. Evidence does not support the veracity of these claims. Because of the intense political scrutiny, Halliburton has been the focus of countless investigations. The US Army, for example, had secretly awarded a no bid contract to Halliburton subsidiary KBR to rebuild oil infrastructure throughout Iraq shortly after the US-led invasion. Due to the political firestorm fanned primarily by conspiracy theorists, the Army eventually opened the contract for competitive bids, and split the contract into one for northern Iraq and one for southern Iraq. The northern Iraq contract, worth up to $800 million, was awarded to a joint venture of California based Parsons Corp. and the Australian firm Worley Group Ltd. The southern contract (also subject to bidding) was awarded to Halliburton KBR, and was worth $1.2 billion in 2004. How did Halliburton win the southern bid? It is important to remember that Brown & Root originally built most of the oil infrastructure in Iraq, and therefore who better to rebuild it? Halliburton had absorbed Brown & Root and was therefore the original manufacturer of the infrastructure to be repaired. Further strengthening Halliburton’s position was their aptitude for creating sustainable bases of operations and handling of logistics (Glain).
All profits earned in Iraq have also been targeted for scrutiny, while it remains the responsibility of a corporation to profit.
In a letter addressed to Joseph E. Schmitz, the Defense Department's inspector general, Democratic representatives Henry A. Waxman of California and John D. Dingell of Michigan, along with Connecticut Senator Joseph I. Lieberman, said they were informed by members of Schmitz's staff that an audit into Kellogg Brown & Root's Iraq operations had been referred to a criminal investigation unit of the inspector general's office. The move comes after the Defense Department's auditing agency requested that Schmitz open an investigation into evidence KBR had overcharged by an estimated $ 61 million for fuel deliveries to Iraq from Kuwait. The letter revealed the latest twist in an ongoing probe by ranking Democrats, led by Waxman, into the most lucrative single contract issued to rebuild postwar Iraq. Halliburton, of which Cheney was once chairman, was secretly awarded the no-bid contract to redevelop Iraq's battered oil sector by the Army Corp of Engineers in March; Halliburton's mandate was supposed to last only a few months, but it has since garnered the company more than $ 2 billion in new business. At issue is whether KBR violated procurement standards in hiring Altanmia Commercial Marketing Co., a Kuwaiti general trader, to deliver gasoline to energy-strapped Iraq. In a Jan. 15 letter to National Security Adviser Condoleezza Rice, Waxman said Altanmia won the KBR subcontract a day after the bidding process opened, and a week before the bidding was scheduled to close. Altanmia had no experience transporting fuel before it was awarded the contract, according to the letter, and charged 60 percent more per gallon of delivered gasoline than prevailing spot prices. From April 11 to Sept. 19, according to public documents, KBR charged the US government $1.17 per gallon of gasoline delivered from Kuwait to Iraq at a time when the average spot price was 71 cents. It charged an additional $ 1.21 per gallon in transport fees, far more than what Iraq's State Oil Marketing Organization charged for the same service. KBR also added a commission of 26 cents per gallon. In addition, the Waxman letter cited allegations of financial ties between Altanmia and a brother of Kuwait's oil minister. "My staff has received multiple allegations that Talal Fahad Al Sabah is acting as a consultant for the company or as a hidden partner by proxy," Waxman wrote.
Waxman also alleged the Army Corps of Engineers preempted the Defense Department audit of KBR. Four days after the Pentagon announced the probe, the Army Corps declared Altanmia's prices were "fair and reasonable" and waived any requirements for KBR to provide cost and pricing data from Altanmia. An Army Corps official said the waiver was necessary because Kuwaiti law prohibits fuel exporters from releasing certified pricing details -- an assertion Waxman said was refuted in a telephone interview his staff had with the former general manager of Kuwait Petroleum Co. Pentagon auditors referred the Altanmia contract to the inspector general's office in response to the Army Corps waiver, Waxman said (Glain).
KBR Spin-off:
In 2003, Halliburton announced plans to divest certain non-essential divisions and shift the company focus back to its main operating objective, to become the largest oil field developer in the world. This decision was implemented by selling of its mono pumping business, its Wellstream business, and its interests in Bredero-Shaw (A European marine contractor) (Hoovers). Under the disguise of refocusing the business toward oil drilling and production, it appears Halliburton was more than happy to distance itself from the KBR division (formally Brown & Root) and the political baggage of governmental contracts. KBR is now a separate and publicly traded entity.
" Oil-field-services giant Halliburton Co. expects a gain approaching $1 billion this quarter stemming from its separation from KBR. Earlier this month, Halliburton ended its 44-year relationship with KBR, an engineering, construction and military contracting business. And after taking back 85 million shares of Halliburton common stock in exchange for issuing 136 million shares of new KBR stock, the company was able to record a net gain of $995 million, according to a company filing. "This quarter marks the start of a new chapter in Halliburton's history, as we completed the separation of KBR," Halliburton Chief Executive Officer Dave Lesar said Thursday in a prepared statement. "We are now completely focused on the global growth opportunities in our energy services business (Ivanovich)."
Executive Summary:
Halliburton Co. has increased net sales by eighty percent from $12.572 billion in 2002 to $22.576 billion in 2006. This represents an average annual sales growth of 20 percent. Despite consistently strong annual sales performances, the company operated at a net loss in 2002, 2003, and 2004. This lengthy period of net loss is largely attributed to Halliburton’s realization of massive asbestos liabilities, as well as significant corporate restructuring.
Chart 1 Average sales growth of Halliburton about 20% per year since 2002
With the asbestos claims settled in 2004, and the restructuring completed by a complete spin off of KBR in 2006, Halliburton appears to have made a comeback in terms of profitability. Net Income for 2005 and 2006 was steady at $2.35 billion dollars per year. The profit margins finally reached positive territory in 2005 and 2006 with 11.7% and 10.4% respectively. Their five year average for profit margin is less than one percent due to the net loss sustained in 2002 through 2004. The Halliburton philosophy toward paying dividends is noteworthy. Dividends of fifty cents per share were paid in both 2003 and 2004 even though the company reported net losses in those years. There was a two for one stock split in 2004 thereby doubling the number of outstanding shares, which explains why the cash dividend was decreased to twenty-five cents on a per share basis while the company is actually paying more dividends to shareholders.
The liquidity ratios of Halliburton reflect a company which is easily able to pay off its short term obligations. The lowest current ratio in the five year analysis was 1.2 in 2002. The 2006 current ratio was 2.37, and the five year average was 1.76. Today’s current ratios indicate Halliburton has basically two dollars in assets for every dollar of liability. Subtraction of inventory value does not make the acid test results any less appealing. The five year average acid test ratio was 1.57 and the trend is upward. It is somewhat impressive that the company was able to manage the $4 billion asbestos payoff and return to profitability within two years.
Halliburton has improved its debt utilization ratios. The times interest earned ratio has rapidly improved from 5.2 in 2003 to 19.9 in 2006. While at a low of 5.2, Halliburton was maneuvering to counter unplanned outbound cash flow resulting from asbestos settlements.
Future Plans and Outlook:
In 2007 current CEO David Lesar announced plans to relocate Halliburton’s world headquarters to Dubai, UAE.
Unlike some others in the sector, Halliburton saw a drop-off in operating income in the first quarter compared with the last three months of 2006. Houston-based Baker Hughes, in contrast, reported a 14 percent increase in operating income over that time frame. Halliburton's spin-off of KBR was a distraction during the first quarter, said Bill Mann, senior analyst with the Alexandria, Va.-based Motley Fool. "I think Halliburton gets a little bit of a hall pass for this quarter," Mann said. "If they're truly wanting to focus on their drilling results, they better produce drilling results." Halliburton's performance has been hampered by a lackluster drilling market in North America, particularly in Canada, where the company has been reducing personnel and relocating equipment. "We continue to face some challenges in the North America market," Lesar said Thursday during a conference call with industry analysts. "I believe we'll deal with whatever the market gives us."Market conditions softened in North America after natural gas prices plunged last year. As a result, the utilization rate for drilling rigs in western Canada was only 54 percent during the first quarter, down from nearly 80 percent a year ago. Gas prices have since rebounded, giving Lesar confidence drilling activity in the U.S. will be stronger during the second half of the year.Revenue in each of Halliburton's international divisions grew during the first quarter compared with last year, but declined against the fourth quarter of 2006. In the Middle East, however, Halliburton's revenue grew 20 percent year-over-year and 8 percent from the fourth quarter, company officials said."We view the Middle East as an important growth area," Lesar said. To help foster relations with the national oil companies in the Middle East, Lesar has announced plans to move to Dubai, United Arab Emirates. Halliburton spokeswoman Cathy Mann said in an e-mail that Lesar is "in the process of relocating (Ivanovich)."
David Lesar explains the headquarters move as necessary to “help foster relations” in Middle Eastern areas where revenue is growing the most. In North America, growth is weak. The move was determined by the board of directors to be favorable for improving shareholders equity. It is purely a business move.
Investment Considerations:
With the ever increasing demand for energy, and the world’s habit for harnessing the energy from oil and natural gas, it seems wise to consider investing in a company who serves the production side of energy. Halliburton certainly seems like a stable investment, having weathered the storms of massive acquired liability as well as investor fallout from tenuous political situations. Still, investing in Halliburton is risky. If the Middle East were to further destabilize it could have serious consequences for Halliburton investors especially since the company is shifting the bulk of its operations to the Middle East. For many reasons it does not seem lucrative for these big oil developers to operate in the western hemisphere. The United States has not built a new refinery in decades, choosing instead to expand existing facilities. Exploration is costly because of strict environmental laws, meanwhile Hugo Chavez can drill virtually anywhere he so desires. Halliburton’s competitors also operate in the same environment, and all of these oil developing companies seem to have global allegiance rather than American allegiance. For aggressive investing, Technip looks like the better buy. The EPS for Technip is slighter higher (2.64 versus 2.23) and the P/E ratio for Technip is drastically better (25.4 versus 15.24). Technip has the smallest net income but has plenty of potential for aggressive growth.
For less aggressive investing, Schlumberger LTD (19.3%) and Baker Hughes INTL (26.8%) both have better ratios for net income as a percentage of revenue versus Halliburton at 10.4%. In the final analysis I believe the best overall investment in this industry is Schlumberger LTD (SLB). Halliburton is my second choice.
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