Halliburton Co. (NYSE: HAL) and Schlumberger, Ltd. (NYSE: SLB) are both in the oil and gas equipment services industry. As such, there are a number of similarities between the companies. They provide similar oilfield services, have large market capitalizations and earn billions in annual revenues. Still, there are key differences between the companies including their respective sizes, amount of revenues, short interest, dividend yields and geographical exposure. Another key consideration is Halliburton announced a proposed merger with Baker Hughes Incorporated in November of 2014 in a deal estimated at $34.6 billion.
Size of Companies
Schlumberger is the larger company of the two with a market cap of $95.4 billion compared to $32 billion for Halliburton. Schlumberger has around 1.265 billion shares outstanding versus 854.75 million shares for Schlumberger. Schlumberger also has a larger total equity of $37.85 billion compared with $16.27 billion for Halliburton.
Differences in Revenues
Schlumberger has larger revenues than Halliburton. It had net revenues of $48.58 billion in 2014, while Halliburton had revenues of $32.87 billion during this same time. Schlumberger realized net income of $5.44 billion versus $3.5 billion for Halliburton during 2014. Schlumberger has greater revenue earning potential.
Outstanding Shares and Short Interest
Halliburton has a substantially higher short interest than Schlumberger as of 2015. It has 854 million shares outstanding with a short float of 6.46%. Schlumberger has a larger amount of shares outstanding at 1.27 billion but only has a short float of 1.16%.
The market has a less positive view of Halliburton’s prospects versus Schlumberger due to the higher short interest. However, short sellers can be wrong, and a higher short interest is not necessarily predictive of future performance. Halliburton also has a higher short ratio of 3.96 versus 1.61 for Schlumberger.
Schlumberger pays a higher annual dividend yield of 2.65% as of 2015. This compares to a dividend yield of 1.89% for Halliburton. This is not a big difference in yields. However, the yields can add up over time for longer-term investors. The dividend yield also fluctuates with the stock price. Differences in the yield change with these movements. Further, companies can cut or raise dividends based on quarterly performance. Dividends are not guaranteed and are subject to change at any time.
Although both companies have worldwide operations, Schlumberger has a larger international exposure. This difference in geographical diversity could protect against a downturn in a specific region. The company is headquartered in France. Schlumberger had international revenues of $32 billion in 2014. Halliburton does not realize as large of a percentage of revenue from its international operations. This can be important as commodity prices may be low in certain geographical regions. As an example, natural gas prices in North America have been low due to large supply from fracking operations while they have stayed steady in Europe. Schlumberger, therefore, has less exposure to these differences in commodity prices.
Proposed Baker Hughes Merger
The proposed merger between Halliburton and Baker Hughes would create a much different-looking company if approved. A merged company could realize substantial cost savings in the face of low oil prices. Halliburton also stands to gain from a strong technology portfolio from Baker Hughes.
As of August 2015, the Department of Justice (DOJ) is reviewing the deal for possible antitrust concerns. Halliburton said it plans on selling assets that generate around $7.5 billion in annual revenue to address these concerns. If the deal does not pass antitrust review, Halliburton must pay Baker Hughes $3.5 billion as a breakup fee. Halliburton’s stock is volatile as the market awaits a decision from the DOJ.