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Halliburton's Summit Buyout Boosts Artificial Lift Potential

Leading oilfield service firm Halliburton Company HAL recently acquired Tulsa, OK-based Summit ESP.

Summit Buyout Terms

Summit ESP is the manufacturer of electric submersible pump systems that indirectly help boost the production of oil and natural gas by maintaining pressure of aging wells. During May, the company completed the installation of its 8,000th electric submersible pump. This marks an increment of 1,000 installations since late 2016. Another famous maker of electric submersible pump is Baker Hughes that recently merged with the oil and gas business unit of General Electric Company GE.

It is to be noted that Halliburton has not disclosed the financial terms of the transaction.

Benefits

We expect Halliburton to gain from this acquisition given that devices manufactured by Summit ESP are in high demand and are being utilized by upstream energy players for extending the life of shale wells.

Investors should know that the deal has made Halliburton more competent in the North American oilfield services market by significantly enhancing the artificial lift potential. In other words, following the accord, Halliburton will be able to maximize the value of properties for customers and is now in a better position to compete with leading oilfield service providers like Schlumberger Limited SLB and Weatherford International plc WFT.

We can say that this development will help Halliburton earn significant cashflow for stockholders. 

About Halliburton

Houston, TX-based Halliburton is one of the largest oilfield service providers in the world, offering a variety of equipment, maintenance, and engineering and construction services to the energy, industrial, and government sectors. We appreciate the company’s cost-cutting initiatives (like reduced headcount, consolidating facilities) in the wake of weak oil prices over a length of time.

However, the stock, belonging to the Zacks categorized Oil & Gas-Field Services industry, lost more than 20% on a year-to-date basis. Also, Halliburton’s cash reserves deteriorated from $4 billion at the end of 2016 to $2.1 billion by Mar 31.

Zacks Rank

Halliburton currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.        

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