Halliburton Company Rated Halliburton as Overweight With $56 Price Target

The article discusses some of the reasons why JP Morgan is positive about Halliburton Company.

The past one year has been very difficult for the providers of oil services. Their services demand has tumbled expressively following over 50% decline in prices of crude oil in the 2^nd half of last year.

The United States crude oil benchmark, WTI was up 4.54% to $60 per barrel on Saturday, although Brent oil was up 4.76% to $65.56 per barrel. In the scenario of decreasing oil prices, oil companies are unceasingly seeking to decrease their average costs in an attempt to persist the downturn.

In 2014, the second biggest oil company of the world, Haliburton Co. reached Baker Hughes for a merger. Likewise, Royal Dutch Shell lately settled its merger with BG Group Plc.

On Friday, JP Morgan revealed its future perspective for the oil industry. The research firm emphasized that while the companies were surrounded by the problems with in the industry, there are still some positive for the service companies with large market capitalization. JP Morgan indicated that large cap firms are well expanded and have the scale, flexibility and technology to survive the slump.

JP Morgan has rated the Haliburton stock as Overweight. The twelve month stock price target as assigned by the research firm stands at $56.

JP Morgan praises the Haliburton merger with Baker Hughes. During the period of declining oil prices, this will allow the company to broaden its operations and witness economies of scale. As per research firm, Baker Hughes will fill in certain Haliburton product gaps, whereas providing upgrades in remaining.

Because of the huge size of joint entity, Haliburton will be requires to do asset divestment in an attempt to get approval by regulatory body. These divestment plan, as per JP Morgan will attract small firms seeking to move up their tech curves. JP Morgan also suggests market share reshuffling in the oil service sector. If the estimates of crude oil of the company are precise, then there are chances that large equipment abrasion can occur in the industry. The equity firm expects a lot better demand and supply environment by the end of year 2017.

Around 37 analysts covered the stock of Haliburton, out of which 26 rated Buy, 9 gave Hold, and two of them assigned Sell rating g to the stock. The 12 month stock price target forecasted by the analysts is $53.72 which shows 18.3% of return potential. Clarkson RS Platou Securities analyst Turner Holm has the most bullish point of view on the stock with $70 of price target and Buy rating. Whereas Griffin Securities analyst Kevin Simpson with $40 price target and Sell rating has the most bearish view on the stock.

Involvement of Braskem in the Petrobras corruption scandal

Braskem’s name has come up in the corruption probe surrounding Petrobras. Braskem is accused of bribing Petrobras officials to secure construction contracts between 2006 to 2012

Bloomberg reported, Braskem SA –the biggest petrochemical company because of revenues is the new victim of the corruption scandal that has surrounded Petroleo Brasileiro Petrobras.

The petrochemical giant got stuck in the corruption scandal after a witness claimed that the company made under the table payments to Brazilian oil company in order to get contracts. As per the evidence given by Paul Roberto Costa –former executive of the company and confessions by Alberto Youssef who were involved in money laundering Braskem used to make a payment of $5 million between the year 2006 and 2012. These bribes were given to acquire crude oil prices derivatives like naphtha and propylene at lesser price. The evidence was made public on the website of Brazilian Supreme Court earlier in March.

Naphtha is the main element for making petrochemicals, and contains almost 50% of the whole production cost. Moreover, around 70% of naphtha demand for naphtha is provided by Petrobras.

The appeal by Mr. Youssef and Mr. Costa does not allow their lawyers to say any anything related to the bribery and corruption scandal that happened in one of the biggest energy company of the world.

Braskem rejected the claims, its $750 million worth of bonds carrying a 7% coupon rate with a time period of 5 years dropped by 9.6% and traded at $0.97 last week.

After the fragile performance of bonds, the petrochemical giant informed their bond holders via Bloomberg that the company still has around $1.8 billion worth of cash available beside other facility of credit line, which is enough to safeguard its debt commitments for nearly 2 years.

The company disclosed that its growth is linked with dollar, which is strengthening against the home currency.

The entitlement against Braskem shows the penetration level due to the scandal. The interrogation took place has knotted the rig makers, Brazilian builders and officials of government. Moreover, it has also caused 1 million protestors to come out against Dilma Rousseff’s way of handling the issue.

These kinds of claims can seriously hurt the petrochemical company’s stock price, as shareholders might prefer to sell their ownership instead of holding it due to the ongoing investigation. In such situation, shareholders overlook the sufficient financial position of the company.

While talking about the current development Petroleo Brasileiro Petrobras said, “All the payments and contracts between Braskem and Petrobras followed the legal requirements and were approved in a transparent manner in accordance with the governance rules of both companies

Why BP plc. Have been accused by the United States government?

The US government feels that recovery of the Gulf of Mexico oil spill was not as considerable as BP claims, and that the company distorted compensation and spill size data in its favor.

BP plc. was the culprit of the biggest crude oil of the history in Gulf of Mexico in 2010, due to which almost 11 workers lost their lives and it also caused considerable destruction to the nearby environment. Carl Barbier Judge at Federal District considered the UK based company to have reacted with “gross negligence”. Because of that the company spent over $42 billion to gratify claims and cleaning costs.

The oil company previously said that its response was very effective in extenuating the adverse impacts of the shattering oil spill. Although, the United States senses otherwise. According to report by Financial Times that the government of United States alleged BP for misapprehending and mismanaging data, when the company debated that the Gulf had improved a lot faster than expected.

On Monday, the Oil giant company specified that the damages caused by oil spill did not have any long term effects to the bird species and also to the marine. The company also added that majority of the oil has been soaked by microbes or vanished in the water. BP said that no decline has been recorded in the population of birds in the year 2011.

While responding the company’s claim, NRDA criticized the company for jumping to the extensive undeveloped and unsuitable conclusion of the matter and said that BP’s assumptions are imprecise regarding the aftershocks of the disaster.

Financial Times reported: “BP Plc. misinterprets and misapplied data while ignoring published literature that doesn’t support its claims.” The NRDA mentioned that the oil spill’s negative impacts will take a lot of years to diminish. However, BP has paid $1.3 billion to NRDA for the environmental damage and it is still carrying out studies to find out the actual aftermath of the event.

After the research will be completed, an authorized process could start that will force the company to take satisfactory measures caused by the situation. Financial Times quoted the company claim related to the situation that the researches usually shows one side of the matter and overlooked the retrieval that has been done by the company.

The oil Spill took place 5 years ago, however there are still some disputes left the company and Government. Federal court earlier this year projected that almost 3.2 million barrels oil was spill rejecting the US government claim of 4.2 million barrels. The government is looking forward to challenge the decision.

As per the estimation the London oil giant can face a penalty of $13.7 billion depending on the size of the spill calculated by Judge Barbier.

BP Plc. Trying Its Utmost To Get 2010 Oil Spill Penalty Reduced

BP Plc. was penalized by Carl Barber's United States federal judge on Oil spill of almost 3.19 million barrels in Mexico.  According to Reuters, the company has appealed against the judge decision few days back after Carl Barbier discard the company's request of reducing the high civil fine. According to the Federal Clean Water Act, BP is required to pay a maximum fine of $13.7 billion.
BP Plc. was accused of the largest oil spill that took place in 2010 in Gulf of Mexico. The oil spill killed eleven workers and caused considerable damage to the environment. US Federal judge Carl Barbier believed the company showed gross negligence and along with federal government decided to penalize the company of $4,300 per barrel. However, the company debated that a maximum penalty of $3000 should be enforced and it also denied the judge accusation of company showing gross negligence. Judge Barbier is yet to announce the final penalty amount imposed on BP.
As per the estimation by Federal government, the company spilled nearly $4.2 million barrels oil which makes it around $18 billion penalty amount. Judge Barbier contended that the estimation of federal government is not correct, as 3.19 million barrels of oil were spilled. However, BP claims that only 2.45 million barrels were spilled.
BP has been surrounded by different problems. With crude oil prices declined by 50% from last six months making exploration process more complicated for the company. BP stake in Russian Rosneft Oil Company has been negatively affected following by the sanctions imposed on Russia by West. BP has already announced its labor cut and capital spending to deal with the low price situation, if the penalty of $13.7 billion is enforced on the company than it is expected to face some serious liquidity issues.
One of the issues which the company has brought up at various occasions is related to the work and amount it has spent to deal with the effect of the Oil spill. BP has spent almost $42 billion to pay fines, cleaning cost and to pay the victims.
The investigation has completed its two phase and it seems like BP will do its best to make the penalty reduced in any way. Since the Oil spill takes place in 2010, company stocks have declined by more than 24%.
On market close on Tuesday February 24th, company stock was up by 0.90% and was trading at 41.59.