Halliburton Co. (HAL, Financial) rewarded shareholders with huge returns in 2016 and the stock was up over 85% from its 52-week low. Throughout the past two years, feeble oil prices have been mirrored in oil companies’ stock prices. The oil price per barrel peaked in 2012, but has continued to move downward since then and currently sits at $52.86 per barrel. In 2016, the oil price averaged at $40.68 per barrel.
Despite low oil prices, the company managed to perform exceptionally well during the previous year. Halliburton is one of the world’s biggest oil field service companies, deeply entrenching itself into most of the world’s largest oil companies in order to attract a large customer base.
Recently, Halliburton shared its fourth-quarter results. The company reported earnings per share of four cents, beating the analyst estimates by two cents. On the other hand, the company failed to beat revenue estimates. Revenue came in at $4.02 billion, missing the estimates by $70 million.
That figure represents a drop of approximately 21%, which suggests the company is headed in the right direction as its revenue is improving with each passing quarter. The company also revealed it has produced substantial cash flow from operating activities throughout the second half of 2016.
Moreover, the company finalized its structural cost initiatives that permitted it to reduce more than $1 billion in expenditures. In North America, the company generated reasonable profit after losing money in the prior three quarters. The company also endured to gain market share as it performed better than its chief rivals in North America and Latin America.
Moving ahead, the company identified its three largest markets for imminent growth as mature fields, unconventionals and deepwater assets. While oil prices are predicted to hover in the range of $50 to $55 per barrel, oil companies are less likely to discover new fields.
Instead, oil companies are engrossed in surging extraction from mature fields, which requires powerful technology. As a result, Halliburton is in a good position to benefit even if oil prices remain low.
Summing up
Halliburton stock surged more than 55% in 2016. It does not look like the company’s uptrend will reverse anytime soon. Moreover, the company is well positioned financially to nurture its business after a prolific restructuring period in 2015 and 2016.
Although Halliburton has faced some problems over the past few years, such as paying a $3.5 billion cancelling fee to Baker Hughes, the company still has a lot of potential to grow its business.
As an outcome, investors should continue to hold the stock because the company is in a great position to benefit when oil prices recover.
Disclosure: No position in the stocks mentioned in this article.
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