Summary
- Halliburton has rallied 29% since October.
- We think the recovery has just begun and are increasing our position strategically on dips.
- Halliburton will benefit from increased demand from an improving economy in 2021 and investors with a moderate risk profile should consider them near current levels.
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Introduction
Halliburton (HAL) has been making new highs along with all other oil and gas firms this month Recent trends and data suggest that a bottom was made in Q-3, and the company is set to experience increased revenues and margins in Q-4.
I have written extensively on HAL in past articles and this one should be regarded as an update to the ones linked here and here.
We think HAL is attractive at current levels for investors with a moderate risk tolerance. The company is one of the mainstay companies of the oil and gas E&P infrastructure and has the cash reserves and liquidity to go the distance. Simply put, the industry can’t do the work of bringing on new production without them. The catalyst for growth is a rebound in fracking as DUC’s are put into service, and to an extent increased drilling as rigs go back to work domestically and especially internationally as it now accounts for the majority of revenue. What's clear is the industry collectively has “heaved” a sigh since May and essentially ratified the $40 WTI level as being viable.
The company also is making a modest transition to facilitate “green energy” development and the government subsidies that underpin the green movement will provide an ever-increasing market and substantial margins going forward.
We called the bottom
Halliburton has rallied ~29% from the Mid-October lows when this article was originally published in the Daily Drilling Report Marketplace service, giving members a nice return on capital invested in just a month. It was a bold call at the time. Only Quad-7 joined me with a bullish call on Big Red among a torrent of "Neutrality," and one bearish with a sell call.
