Key Takeaways from Citadel Advisors’ 4Q14 Portfolio (Part 10 of 11)

(Continued from Part 9)

During 4Q14, Citadel reduced its stake in Halliburton Company (HAL). Citadel held 4,959,015 shares of Halliburton in 4Q14, down from 5,688,787 shares in 3Q14. The company accounted for 0.236% of the fund’s 4Q14 portfolio.

Halliburton provides services related to the exploration, development, and production of oil and natural gas to companies in 80 countries. The company serves the upstream oil and gas industry. Halliburton has two divisions:

1. Completion and Production
2. Drilling and Evaluation

Halliburton operates in the following geographic segments:

• North America
• Latin America
• Europe, Africa, and CIS (or Commonwealth of Independent States)
• Middle East and Asia

The company expects the North American market to be volatile for a few quarters as a result of declining oil prices. Halliburton also anticipated headwinds in all of its international regions.

You can gain exposure to Halliburton by investing in the Energy Select Sector SPDR Fund (XLE) and the iShares Dow Jones US Energy ETF (IYE). Halliburton accounts for 2.77% of XLE and 2.15% of IYE.

In November, Halliburton agreed to acquire its major competitor, Baker Hughes (BHI). Halliburton expects to achieve $2 billion in annual cost synergies after completing the deal.

ValueAct Capital disclosed its activist stake in Baker Hughes, stating that the deal with Halliburton would cut overlapping costs. The hedge fund believed that the combined company would “get through the current downturn” in the oil industry.

HAL and BHI together will compete with the largest oilfield services company, Schlumberger (SLB).

Halliburton announced that it would lay off 5,000 to 6,500 employees apart from its acquisition of Baker Hughes. This decision came about due to declining oil and gas exploration and production activity amid falling oil prices. These job cuts would account for 6.55% to 8.5% of Halliburton’s total workforce.

For the fourth quarter of 2014, Halliburton reported revenue of $8.8 billion compared to $8.7 billion for the previous quarter. The Middle East and Asia segment and the Latin America segment drove this growth, which was partially offset by the flat revenue in North America, as well as the 8% decline in the Europe, Africa, and CIS segment.

Net income was up 13.6% on a YoY (or year-over-year) basis to $901 million, or $1.06 per share. Adjusted net income was $1 billion or $1.19 per share.

The company took $129 million of restructuring charges in anticipation of an activity decline in 2015.

Halliburton’s revenue was up 12% from 2013 to $32.9 billion. According to the company, “Increased stimulation activity in the United States land market and Macondo-related items” drove this growth. The North America segment reported a record revenue increase of 16%.

In 2014, Halliburton returned 33% of operations cash flow to its shareholders. On February 13, the company declared a quarterly dividend of $0.18 per share, which was in line with its previous dividends.

In the next part of the series, we’ll discuss Citadel’s position change in Archer Daniels Midland Company.

Continue to Part 11

Browse this series on Market Realist:

• Part 1 - Highlights of Citadel Advisors’ 4Q14 Portfolio
• Part 2 - Citadel Advisors Adds a New Position in ConAgra Foods
• Part 3 - Citadel Advisors Starts a New Position in Altera Corporation