Halliburton, Schlumberger likely to win big in Iran deal
Jul 16, 2015, 2:53pm CDT Updated Jul 17, 2015, 9:26am CDT
While Houston’s energy industry is wrapped up in forecasts and predictions of what a less-sanctioned Iran would mean for oil prices, two Houston giants could be waiting in hopeful anticipation that Iran’s export of crude oil will ramp up in the wake of its government’s deal with the U.S. — Houston-based Halliburton (NYSE: HAL) and Schlumberger Ltd. (NYSE: SLB).
“They are the quiet beneficiaries,” said Randall Grace, lead energy analyst at Houston-based Chilton Capital Management.
The White House announced the deal on July 14, an historic accord that would effectively limit Iran’s nuclear capabilities, and in exchange for Iran’s meeting certain conditions, the U.S. would potentially lift sanctions.
Lifting sanctions means Iran would be able to ramp up its crude oil exports, which incentivizes its national oil company to increase production.
The problem for the National Iranian Oil Co. is that it is far behind the capabilities of our very own Halliburton and Schlumberger, both of which have a well-established presence in the region, said Grace.
Halliburton opened a corporate headquarters in Dubai in 2007. Schlumberger’s commitment to Iran is so strong that one of its wholly owned subsidiaries forked over $232.7 million in penalties to the U.S. Department of Justice in March, the culmination of a six-year investigation into the subsidiary’s facilitation of trade with Iran and Sudan, violating sanctions set forth by the International Emergency Economic Powers Act.
“Schlumberger is the Western company with substantial expertise in Iran, operating for several decades until sanctions forced their departure in 2013,” said Grace.
And let’s not forget the incentives. Iranian revenue was $418 million for Schlumberger in 2012, with operating margins north of 50 percent, more than double the corporate average of about 20 percent. The profitability potentials are huge, said Grace.
So now with new policies in place, Halliburton and Schlumberger could take on the National Iranian Oil Co.’s vast oilfield service needs.
However, part of Schlumberger’s guilty plea to the DOJ included a probation that will keep it away from Iran for three years unless amended or renegotiated, said Grace.
Schlumberger and Halliburton did not immediately return requests for comment.