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Morningstar | Halliburton Has Long Been the U.S. Shale Leader, but Competitive Threats Looming

Over the past several decades, Halliburton has been rivaled only by Schlumberger in its ability to deliver high-quality oilfield services while creating large volumes of shareholder value. The company’s status as the number-one wellbore engineering company is nearly a century old, and in the past two decades, Halliburton has built up a drilling and evaluation business second only to traditional leader Schlumberger. Perhaps nothing is more central to understanding Halliburton than the company’s strategic bet on U.S. shale, now nearly 20 years old. No oilfield services company has invested more capital, human resources, or managerial efforts in addressing the needs of U.S. shale than Halliburton. Almost half of Halliburton’s peak 2014 revenue came from U.S. shale, and the company has been dominant in key service lines like pressure pumping and completion equipment. But Halliburton’s U.S. shale focus presents a paradox. On one hand, the company has long reaped rich harvests from its focus on U.S. shale, and these rewards have very much remained in place as U.S. shale activity has rebounded from the 2015-16 downturn.On the other hand, the intense competitiveness of U.S. shale means that Halliburton’s U.S. shale profitability is likely to wither over time, as reflected in our negative moat trend assessment for the company. The same spirit of bottom-up innovation, which is lowering costs and thus boosting U.S. shale’s share of incremental oil and gas supply, will gradually serve to undermine Halliburton’s competitive advantages in key U.S. shale businesses, in our view.