Halliburton, Trinidad Drilling in JV - Analyst Blog
A wholly owned subsidiary of leading oilfield service
), has formed a joint venture (JV) with Calgary-headquartered
Trinidad Drilling Ltd. The venture - called Trinidad Drilling
International - will provide and operate drilling rigs for
Halliburton's international integrated projects.
While the initial focus is on South Arabia and Mexico, the JV looks to exploit other markets in the future. The JV is entitled to the first look right for supplying drilling rigs to Halliburton's managed onshore projects as well as Trinidad Drilling's onshore drilling opportunities outside Canada and the U.S.
Trinidad Drilling is expected to supply four rigs (three upgrades from the company's U.S. fleet and one newbuild), stipulated to work in the Kingdom of Saudi Arabia for a period of three years, with a provision for one-year extension.
The capital expenditure for the project is estimated at $120 million. Upgrading and construction of the rigs would be done at Trinidad's in-house facilities and are expected to be operational by mid 2014. Halliburton and Trinidad Drilling hold a 40% and 60% stake respectively in the joint venture, with future contributions from both the parties in the same proportion.
Trinidad Drilling's high-performance drilling services will help Halliburton to position itself better for further integrated project acquisitions. On the other hand, Trinidad Drilling will get exposure to overseas markets through Halliburton's international operating capabilities and its infrastructure.
The project expects to open doors to a new level of drilling integration with manufacturing efficiency of Trinidad Drilling and advanced technology of Halliburton. With integrated projects in more than 20 countries, the Houston, Texas-based oilfield services company expects numbers to grow further on the back of more operators implementing this model in their drilling activities.
The JV does not have any fixed term, however, both parties have the flexibility to walk out after five years, or earlier under certain conditions.
Halliburton currently holds a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months.
Meanwhile, one can look at other stocks in the energy sector that are expected to outperform in the near term. These include Zacks Ranked #1 (Strong Buy) stocks of Magellan Midstream Partners LP ( MMP ), Seacor Holdings Inc. ( CKH ) and Dril-Quip, Inc. ( DRQ ).
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DRIL-QUIP INC (DRQ): Free Stock Analysis Report
HALLIBURTON CO (HAL): Free Stock Analysis Report
MAGELLAN MDSTRM (MMP): Free Stock Analysis Report
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