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Here's the transparency all the liberals wanted.
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Halliburton Co. is making a big push to expand in the Middle East, with Chief Executive Officer Dave Lesar spending a substantial part of his time running the company from Dubai in the United Arab Emirates.
From his Dubai office, he said, Mr. Lesar will be concentrating on building the Houston oil-services company's business with national oil companies in the Eastern Hemisphere, including Asia, Africa and the Middle East. The company said it will keep its legal registration in the U.S.
"Growing our business here will bring more balance to Halliburton's overall portfolio," Mr. Lesar said in a statement yesterday.
Halliburton's decision is another sign of shifting alignments in the global oil order. Houston remains the center of the global Western oil trade, yet Dubai has grown in recent years as a rival — a hub for trade, investment and oil-patch deals, especially for national oil firms expanding beyond their home turf.
Being in the Middle East puts Dubai close to the world's richest oil reservoirs, and it has proved itself more open and friendly to Westerners than some of its neighbors. Halliburton needs to make up ground lost in recent years to Western rivals and increasingly ambitious Chinese oil-field service companies. Halliburton operates in 70 countries, with about 45,000 workers.
The company, and its red-clad workers, is the dominant oil-field service company in North America, generating 60% of its operating income, or $2.03 billion, last year in the region. But North America is a mature oil-field province, and most of the industry's growth is occurring elsewhere. Halliburton reported a 40% decline in fourth-quarter net income, with a drop in North American revenue heightening concerns about a slowdown in drilling.
Meanwhile, Halliburton's competitors are more dominant outside of North America. Many of the world's best new oil and natural-gas production opportunities are in oil-rich regions of the Middle East and Africa, while much of the growth in demand is coming from Asia.
Schlumberger Ltd., the largest oil-field service firm by revenue, earned two-thirds of its net income from continuing operations last year, or $3 billion, outside of North America.
Halliburton has faced numerous distractions in recent years that have taken its attention away from its core oil-field-services business. It paid a steep price to extricate itself from enormous damages in asbestos litigation and avoid bankruptcy for the entire firm. Then, a logistics contract for the U.S. military ballooned unexpectedly, taxing the company's ability to keep pace with demands of the Iraq war.
Halliburton recently took steps to complete its spinoff of KBR Inc., its logistics and engineering division, in order to focus on its dominant oil-field business.
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March 11 — Halliburton, the big energy services company, said on Sunday that it would open a corporate headquarters in the United Arab Emirates city of Dubai and move its chairman and chief executive, David J. Lesar, there.
The company will maintain its existing corporate office here as well as its legal incorporation in the United States, meaning that it will still be subject to domestic laws and regulations.
Although the announcement of the new Dubai arrangement took many by surprise, Halliburton said that the move was part of a strategy announced in mid-2006 to concentrate its efforts in the Middle East and surrounding areas, where state-owned oil companies represent a growing source of business.
Halliburton, which was led by Vice President Dick Cheney from 1995 to 2000, is currently in the process of spinning off KBR, its military contracting unit, to focus on its business of drilling wells and maintaining fields for oil companies. The company did not say what implications the Dubai development might have for its military contracts. Lea Anne McBride, a spokeswoman for Mr. Cheney, referred questions about the company’s plans to Halliburton.
The Dubai announcement, which Halliburton made at a regional energy conference in Bahrain, comes at a time when the company is being investigated by the Justice Department and the Securities and Exchange Commission over allegations of improper dealings in Iraq, Kuwait and Nigeria. Halliburton has also agreed to pay billions of dollars in settlements in asbestos litigation.
Halliburton would not elaborate on Sunday on what the shift of its top executive might mean for some of the issues it faces. The move seemed to raise questions about whether Halliburton might gain tax advantages or other benefits.
A Halliburton spokeswoman, Melissa Norcross, referred inquiries to the company’s press release, saying in an e-mail message, “The C.E.O.’s job is global by nature. He will continue to remain attentive to our shareholders, clients and employees around the world.”
Ms. Norcross added, “As companies usually refer to the C.E.O.’s office as the corporate headquarters, that’s what we are doing. Basing the C.E.O. in Dubai to focus on our Eastern Hemisphere growth makes good business sense, as it is the center of our Eastern Hemisphere operations and a global business hub. We will maintain our company’s legal registration in the United States and we are not leaving Houston.”
The mayor of Houston, Bill White, was notified by telephone shortly before Halliburton made the announcement, according to a spokesman, Frank Michel.
“We don’t expect it will have a big impact on employment here,” Mr. Michel said. “We point out that Houston continues to be the center for the international oil and gas business.”
“Having a corporate headquarters is different than it used to be,” Mr. Michel added. “Executives spend a lot more time on airplanes, and we understand that.” He noted that Schlumberger, one of Halliburton’s top competitors, maintains offices in both Paris and Houston.
On the face of it, the decision to move Mr. Lesar abroad appears to point mainly to how the epicenters of the energy business are moving from the mature fields of North America to the younger fields of the Middle East and Africa. It also underscores the arrival of Dubai as a center for energy deal-making and commerce, a role once solidly filled by Houston.
“My office will be in Dubai, and I will run our entire worldwide operations from that office,” said Mr. Lesar, who holds the titles of chairman, chief executive and president, at a conference in Manama, Bahrain’s capital. “The Eastern Hemisphere is a market that is more heavily weighted toward oil exploration and production opportunities. Growing our business here will bring more balance to Halliburton’s overall portfolio.”
Halliburton is incorporated in Delaware and its stock is traded on the New York Stock Exchange. Reuters reported that Mr. Lesar said Halliburton would like to list its shares on an exchange in the Middle East, which it could do while maintaining its listing in New York.
Halliburton reported a record $2.3 billion in profit last year and continues to be the dominant oil-field service company in North America, where it generates 60 percent of its operating income.
Over the last several years, an increasing amount of Halliburton’s business has shifted to places like Kuwait, Russia, Libya, Australia, Vietnam, and west and central Africa. And, mirroring trends in the energy business, its customer base is shifting from traditional Western oil companies to national oil companies in developing countries.
Some analysts who follow Halliburton said they did not think the relocation of Mr. Lesar reflected anything more than changes in the energy business.
“They are moving to the center of the Eurasian-African hemisphere and that’s where the bulk of the work is going to be in the future,” said Barbara Struck, an analyst with Energy Intelligence Group, a research firm.
She said she doubted the company was trying to evade laws in the United States. Halliburton has suffered several years of negative headlines, many having to do with its administration of a $16 billion deal to support American military operations in Iraq. Halliburton’s KBR subsidiary has been the subject of a number of investigations for mishandling billions of dollars of housing, food and fuel contracts for American troops and government officials operating in Iraq. Halliburton began spinning off KBR last year.
During Mr. Cheney’s tenure as chief executive, Halliburton bought a company that saddled it with asbestos claims. The company has agreed to pay nearly $5 billion in settlements.
Despite its recent problems, Halliburton posted record revenue, net income and margins last year.
Perhaps the biggest winner could be Dubai itself, one of seven emirates in the United Arab Emirates confederation, which has sought to establish itself as a regional commercial center on par with Singapore and Hong Kong. Most multinational companies, including Halliburton, have made Dubai a regional hub for their Middle Eastern business over the last decade.
Hassan M. Fattah contributed reporting from Dubai, United Arab Emirates, and Rachel Mosteller from Houston.
source: 12mar2007
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