Natural gas has been one of the more interesting markets over the last few years, where prices have been absolutely crushed after falling from an all-time high above $14 in the summer of 2008 to a recent long-term low below $2. That bearish movement has left a lot of people scratching their heads, but really, it's just a simple matter of supply.
Unlike crude, the United States has absolutely massive deposits of natural gas and shale rock formations that contain natural gas. And over the last few years drillers and exploration companies have had their foot on the pedal, extracting record amounts of gas and flooding the market with inventory. So with inventories on the rise and demand looking a bit soft on the slow economy and warm weather, prices simple collapsed, causing a lot of pain for anyone who been buying on the way down.
That same downward trend that has gripped gas has also been on display in energy and natural gas stocks, with many leading names trading at multi-year lows and historically cheap valuations. But even though the short-term trend has been fairly bearish, longer term, if our civil and public infrastructure continues to grow to support this clean and abundant source of energy, energy stocks that have suffered on lower natural gas prices should be well positioned to benefit.
One of those companies is Halliburton (HAL), an energy services provider and drilling services specialist with a market cap of $27 billion. Halliburton is one of the more prominent names in the drilling and energy services space, with a strong domestic and international presence. Even though earnings and estimates have held up pretty well, shares of HAL are down big over the last few months, falling from over $39 in late February to a recent low below $30.
Q2 Results
In spite of that weakness on the chart, HAL's Q2 results from mid April actually looked pretty solid. Revenue for the period was up 30% from last year to $6.9 billion. Earnings also came in strong at 89 cents, 3.5% ahead of expectations, where the company has an average earnings surprise of 5% over the last four quarters. As you can see, a 30% increase in revenue and solid earnings surprise are hardly credentials of a company on the ropes, much less a share price that is down over 30% in less than a few months. That weak share price belies a number of reasons why HAL is such a well-respected name in energy and well positioned to take advantage of a boom in natural gas consumption.
Strengths
HAL has a very strong combination of domestic and international business. In its most recent quarter, in spite of lower gas prices, North American revenue was up an impressive 40%. Providing quality reviews, articles and writings on crude oil, energy and gas online.
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