- NEW YORK (Reuters) - When
it comes to making money from a war in Iraq, few can match the firepower
of the company once headed by Vice President Dick Cheney.
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- Houston-based Halliburton Co. HAL.N can build roads and
bridges and camps for American forces. It can transport personnel and provide
other logistics. It can fight any fires Iraqi leader Saddam Hussein might
set. And after the war, assuming a U.S. victory, it can help restore Iraq's
infrastructure and oil production.
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- While questions remain over how much the work will boost
the company's stock price, Halliburton's KBR engineering and construction
division "is basically the 'corps of engineers' to the U.S. military,"
said Jim Wicklund, an analyst at Banc of America Securities. "It is
expected that the occupying army's infrastructure could in large part be
supplied by KBR."
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- At the same time, the company's oilfield services business,
which is second only to Schlumberger Ltd. SLB.N , is likely to supply most
of the heavy equipment to fight fires that Iraqi forces could set to oil
wells and oil fields, as they did in Kuwait during the 1991 Persian Gulf
War.
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- And should the U.S. emerge victorious, Halliburton --
which develops oil fields and drills for oil all over the world -- has
the connections and businesses to play a major role in rebuilding Iraq
and ramping the nation's oil production capacity back up to pre-1991 Persian
Gulf War levels.
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- "They have the businesses. They have the government
relationship already well-established, and, as we all know, Cheney was
the CEO, so it makes logical sense," said Denis Walsh, an equity analyst
who covers the energy sector for State Street Research and Management.
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- NO COMMENT ON CONTRACTS
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- A Halliburton spokeswoman declined to speculate on "what
may or may not happen with regards to Iraq."
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- She referred all queries to the U.S. Department of Defense
(DOD) and the U.S. Agency for International Development, which both said
that contracts for fighting fires and rebuilding Iraq's infrastructure
have yet to be awarded. Neither agency would disclose whether Halliburton
had submitted any bids.
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- Other companies that could bid for firefighting contracts
include Boots & Coots International Well Control Inc. WEL.A , Canada's
Safety Boss Inc., RPC Inc.'s RES.N Cudd Pressure Control and Superior Energy
Services Inc.'s SPN.N Wild Well Control Inc.
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- Reports earlier this month said that Halliburton won
a contract to oversee firefighting in Iraq's oilfields but that has not
been confirmed by either the company or the DOD.
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- "It is our information that a contract framework
has already been signed," said Wicklund, who rates Halliburton a "buy"
and does not own any of its shares.
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- This wouldn't be the first time Halliburton has played
an important role in a U.S. war. Years before Cheney's stint at the helm,
a predecessor company built the Corpus Christi Naval Air Station and several
warships during World War II. It also helped build the Phan Rang Air Base
in Vietnam in 1965.
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- More recently, after the Persian Gulf War, Halliburton
helped put out oil well fires and repaired damaged buildings in Kuwait.
It also provided food, laundry, transportation and other services to U.S.
peacekeeping forces in Bosnia, Croatia and Hungary during the Balkans conflict
in the 1990s.
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- Estimates of how much Halliburton and other companies
could reap from the infrastructure and restoration work vary, but analyst
Michael Urban of Deutsche Bank said it could be as much as a total of $3
billion.
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- DON'T QUIT YOUR DAY JOB
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- How much Halliburton would get is difficult to gauge,
though any contracts it wins would certainly generate revenue, cash flow
and earnings.
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- The potential contracts come at a time when Halliburton
is contending with its liability for asbestos-related personal injury lawsuits,
though the company made progress last December with a $4 billion settlement
deal.
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- "The stock price would reflect that they have had
investor concern over the ultimate (asbestos) liability," said Pierre
Conner, an analyst with Hibernia Southcoast Capital who rates Halliburton
a "buy" and does not own any of its shares.
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- The contracts also may not do much for the company's
stock price, since the firefighting business is not a recurring one and
the profit margins of the construction business are not typically high.
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- "While both would be positives to Halliburton, they
aren't in our opinion overriding reasons to buy the stock," Wicklund
said.
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- "I would think if you got any jump in the stock,
it would be short-lived and somewhat muted by history. It's like winning
a $3 lottery ticket. It beats not winning, but you can't quit your day
job."
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- Halliburton shares were up 54 cents or about 2.6 percent
to $20.36 in afternoon trading on the New York Stock Exchange on Wednesday.
The stock is up 11.7 percent this year through Tuesday's close, outperforming
Schlumberger, which is down 6.2 percent, as well as the Philadelphia Stock
Exchange Oil Service Index .OSX , which is down less than 1 percent, both
in same period.
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