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Halliburton Case Competition - Mays Business School Texas A&M University
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Case Competition Presentation
- 1. HALLIBURTON CASE COMPETITION Team BGC (Black Gold Consulting) Chetan Shelke Monal Shakya Poonam Tare Saurabh Bhalla
- 2. EXECUTIVE SUMMARY Global Oil and Gas market outlook based on oil prices Company background research Oil and gas sector scenario Economic factors and Local resources OPEC production cuts Geopolitical factors Administrative changes Suggested strategies w.r.t. M/S Halliburton
- 4. Commonly known as the first oil shock. Price of oil rose from $3 to $12 per barrel. Occurred in response to US support for Israel during Yom Kippur War. Arab Oil Embargo (1973) Overthrow of Pahlavi dynasty (supported by US). Created a situation of which resulted in oil prices Commonly known as first gulf war. This war happened due to Iraq's desire to replace Iran as dominant Persian gulf state. Led to undermining OPEC's cohesiveness and market control. Over the course of the twentieth century, preserving the security not just of Saudi Arabia but of the entire Persian Gulf region and the flow of Middle Eastern oil were among the United States’ chief political-economic concerns. As Iraq invaded Kuwait, oil prices plunged by $10.56. This lead to a situation in which there was over-supply of oil in global market. Saudis decided that they ere done being a 'patsy'. If other oil producers were not going to bear the cost of production , neither will they. oil cost dropped to below $10 per barrel. GEO-POLITICAL FACTORS Iran-Iraq War (1981) US intervention in gulf Iraq invades Kuwait (1990-1991) Saudis violate OPEC deal (1986) Iranian Revolution(1979)
- 5. Owns 80% of oil and natural gas market Plays an important role in oil global price decisions Adoption of enhanced techniques and intensive explorations O P E C
- 6. LOCAL RESOURCES Physical factors like location of reserves, properties of oil affect pricing Production/extraction costs Research and development costs
- 7. ECONOMIC GROWTH Oil prices are impacted by national economic growth Increase in non-OECD demand Converse is also true Importance of dollar currency
- 8. OIL PRICE FLUCTUATIONS (Yearly) Source: Energy Information Administration, Thomson Reuters
- 9. U.S. GOVERNMENTAL POLICY CHANGES
- 10. ENERGY POLICY1
- 11. AMERICA FIRST ENERGY PLAN Shale gas exploration Offshore drilling expansion Federal land leasing Keystone pipeline
- 12. Past - 12 fold increase over last decade Proved resources - 200 trillion cubic feet Unproved Recoverable resources - 623 trillion cubic feet Trend - 5trillion cubic feet per year in 2010 to 13.6 trillion cubic feet per year in 2035 SHALE OIL & GAS is the new emerging trend…
- 13. America’s First Offshore Energy Policy 86 billion barrels of oil & 420 trillion cubic feet of natural gas Lifting Obama’s administrative offshore drilling Federal Land Leasi $ 50 trillion in untapped oil and natural gas reserves on federal lan Low energy prices, increase royalty payments, bolster econom Executive order for rapid completion of pipeline development Keystone XL and Dakota Pipeline
- 15. ENERGY DEREGULATION Minimize EPA Regulations Minimize Clear Power Plan(CCP) Regulations Withdrawal from Paris Agreement ‘Social Cost’ of carbon
- 16. 3 TAX REFORM
- 17. COMPREHENSIVE TAX REFORMS Reduction in corporate tax Proposal for stronger dollar value Repatriation of foreign earnings Intangible drilling and development costs Percentage depletion
- 19. ECONOMIC PLANS FOR INTEREST RATES BAT - Border Adjustment Tax Trade war - Impose tariffs on countries Infrastructure building boom - Public - Private Possible Implications May spur inflation, now running at a modest 1.6%
- 20. MORE FACTORS Immigration restrictions Iran nuclear sanctions Weather conditions and natural disasters Cyber attacks
- 21. What are we doing good?
- 23. STRATEGIES – FUTURE MAP Develop commercially competitive services Invest in shale oil and gas - research and technology Build loyal customer base to reap long term benefits Effective risk management strategies Repatriation of business process to American mainland
- 24. • Questions and Answers
Editor's Notes
- America First Energy plan: boost domestic energy and shun foreign fuels Shale rock--supports exploration-- projected growth in the US Open up Offshore drilling KeyStone XL and Dakota Access controversies EO --removed the ban on coal leases on federal lands-- competing natural gas availability
- http://www.washingtonexaminer.com/how-trumps-deregulation-agenda-is-shaping-energy-policy/article/2614402 https://seekingalpha.com/article/4076503-halliburton-best-choice-profit-2017minus-18-oil-price-upswing?page=2#
- Details can be found in the article below: http://oilprice.com/Energy/Energy-General/Why-The-Trump-Administration-Is-A-Huge-Wildcard-For-The-Oil-Industry.html Iraq, Libya : may affect operations
- The average international rig count for 2016 decreased by 18% compared to 2015, as the international markets remain stressed as they near the bottom of the cycle. Depressed crude oil prices have caused many of our customers to reduce their budgets and defer several new projects; however, we have continued to work with our customers to improve project economics through technology and improved operating efficiency. what you are doing good The average international rig count for 2016 decreased by 18% compared to 2015, as the international markets remain stressed as they near the bottom of the cycle. Depressed crude oil prices have caused many of our customers to reduce their budgets and defer several new projects; however, we have continued to work with our customers to improve project economics through technology and improved operating efficiency. what you are doing good
- Invest in shale oil and gas research and technology Due to falling oil prices, Halliburton shares is down by 36.31%. Both international and national oil companies are negotiating aggressively for 10 to 30 percent discounts from oil-field service providers. Research and development costs: Research and development costs were $329 million in 2016, $487 million in 2015 and $601 million in 2014 . R&D costss We maintain an active research and development program. The program improves products, processes and engineering standards and practices that serve the changing needs of our customers, such as those related to high pressure and high temperature environments, and also develops new products and processes. Our expenditures for research and development activities were $329 million in 2016, $487 million in 2015 and $601 million in 2014. We sponsored over 95% of these expenditures in each year. We are exposed to market risk from changes in foreign currency exchange rates and interest rates. We selectively manage these exposures through the use of derivative instruments, including forward foreign exchange contracts, foreign exchange options and interest rate swaps. The objective of our risk management strategy is to minimize the volatility from fluctuations in foreign currency and interest rates. We do not use derivative instruments for trading purposes. The counterparties to our forward contracts, options and interest rate swaps are global commercial and investment banks. risk amnageent strategy