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June 18, 2009 1:37 pm

Halliburton: Large acquisition just a matter of time

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This article is provided to FT.com readers by mergermarket—a news service focused on providing actionable, origination intelligence to M&A professionals. www.mergermarket.com
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A large acquisition by Halliburton (NYSE:HAL) is just a matter of time, industry sources told mergermarket.

With USD 2.9bn in the bank, the Houston-based business is cash-heavy and primed to snap up bargains in the struggling oilfield services industry, two bankers and two analysts agreed. Potential targets include Expro and NATCO, as well as subsidiaries of larger companies such as TETRA Technologies, Oil States International, Cathedral Energy Services and Ensign Energy Services.

Halliburton could also make another run at Expro, the UK-based well flow management business it tried to acquire last year, CFO Mark McCollum told this news service on the sidelines of an RBC Energy Conference this week. Halliburton lost Expro to private equity suitor Umbrellastream to the tune of GBP 1.8bn.

“There are a lot of opportunities like that,” McCollum added, noting the company’s M&A pipeline is always full. However, industry sources pointed out that Expro is still one of the largest well testing businesses in the industry and would therefore be a perfect fit with Halliburton.

Should Halliburton acquire a large well testing company other than Expro, it will likely look at the well testing subsidiaries of TETRA Technologies, Oil States International, Cathedral Energy Services and Ensign Energy Services, said an industry executive. Given current financial weakness in the subsector, Halliburton might find willing sellers, he speculated.

NATCO Group, which recently received a USD 780m offer from Cameron International, also could appeal to Halliburton for its testing capabilities, said one of the analysts. However, its shares are trading high, with NATCO’s market cap around USD 734m at the close of trading Wednesday, indicating that the market does not believe another bidder will top Cameron’s premium.

Halliburton will continue to buy its partners, its CFO said, adding that geography is not as much a concern as technology when acquiring. Artificial lift, directional drilling and well testing are Halliburton’s three main areas of interest and it is particularly keen on complementary technologies.

Performance drilling, as well as formation evaluation, reservoir stimulation or software analysis could be other areas of interest to the company, a second banker added. It also could expand in West Africa and Russia; Russia in particular has a number of service companies that could bring it a local footprint.

Halliburton considers all its vendors and customers to be partners, making it difficult to speculate on what it might buy, said the first banker. Two of its listed, Houston-based competitors, Cameron International and Weatherford International, have recently announced large acquisitions, and while Halliburton has allocated funds for acquisitions, it hasn’t made any in 2009 yet.

It has worked with law firms Baker Botts, Mayer Brown and K&L Gates on past deals.

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