Halliburton: The Making Of A Global Company From A Borrowed Pump And Wagon

By | February 4, 10

Halliburton Company Success Story

The Making Of A Global Company From A Borrowed Pump And Wagon
… Now One Of The Largest Oil Services Businesses In The World With Operations In Over 100 Countries

The beginning of Halliburton is no doubt an unmistakable proof of how courage, determination, and absolute belief in one’s self and ideas can lead to business success.

Erle Palmer Halliburton had been with the Navy, where he learnt and gained some experience in engineering and hydraulics before getting a job with the Perkins Oil Well Cementing Company in 1916. But before the year ended, he was fired! The company’s management couldn’t tolerate his continual suggestions for change in operational methods any longer.

To give vent to his ideas of how better an oil well cementing service could operate, he decided to start his own business. Without any money to begin with, and unyielding to allowing it to stop him, Halliburton borrowed a pump and a wagon which he collateralized with his wife’s wedding ring.

He then moved to Burkburnett, Texas, to seek the patronage of the oil industry for his well cementing method. But no one gave him any attention. Instead of giving up, Halliburton moved once more to Oklahoma, and after a while he got his first client, and then another. Not too long his business was booming.

To be more organized to cope with the rising demand for his service, Halliburton in 1920 formed the Halliburton Oil Well Cementing Company as a partnership business between him and his wife, Vida. And by 1921, Halliburton’s service was ordered by a number of oil companies in Louisiana, Arkansas, and other areas rich in oil.

The rising demand for his business was generated by his resolute insistent on providing quality and reliable service. Halliburton also invented and patented new equipment and processes for each project the company carried out, and this over the years made it indispensable where oil well cementing was concerned, as you will either hire Halliburton for the job or rent their equipment.

One of the company’s inventions, the Jet Mixer revolutionized the oil industry. It was a mechanized mixer that replaced hand-mixing of the minimum 250 bags of cement and water slurry required for each well. This machine removed the occurrence of wasted slurry that usually solidified before it could be poured, as a result of the fact that it could regulate the proportions of cement and water mixed.

By 1924, the Halliburton couple decided to expand their business. And to raise the needed capital, they converted their partnership into a corporation and offered other oil companies a large chunk of their business – the Halliburtons held 52 percent of the stock, while the Gulf, Magnolia, Texas, Sun, Pure, Humble, and Atlantic oil companies held a combined share of 48 percent.

The Halliburton Company invested hugely on research and development. In ten years of its existence, it has improved its processes and equipment up to the point when it could make a mixture of with 2,500 sacks of cement and inject into a well in 48 minutes.

More demand for Halliburton’s service continued in the 1930s with increase in automobile production and use of domestic oil heating, which increased fuel consumption and benefited the oil industry. To keep pace with demand, the company expanded. It established four new branches that allowed it to send 75 cementing and well-testing crews to sites in seven states in 1932, and introduced bulk cementing in place of hand-moving of heavy cement sacks.

In 1940 Halliburton bought over the founder’s former employer, Perkins Cementing Company, and stretched its operations to the West Coast and the Rocky Mountain region. Also in the course of the year, Halliburton opened a branch in Venezuela, taking its earnings to $13.5 million a year later.

As the 1940s drew to a close, Halliburton had firmly established itself as a formidable player in the oil services industry, with enormous competitive advantage in its ability to develop processes and specialized equipment that brought effectiveness and efficiency in the industry, thereby reducing cost.

In the 1950s, Halliburton diversified its business into other areas, including the rental and sale of specialized equipment such as formation testing tools, well completion operation equipment, wall cleaners, depth measuring equipment, and production packers. It also offered services such as electronic logging and sidewall wellcoring, and the transporting of cement and fracturing sands to drilling sites.

In addition to almost 200 operating centers in the United States, and 32 service locations in Canada and subsidiaries in Venezuela and Peru, Halliburton’s operations also reached Mexico, Saudi Arabia, Sumatra, Italy, Germany, Australia, and Cuba in the 1950s.

Again, Halliburton’s huge investment in research and development paid off handsomely as the company created a number of innovations in the industry, including new composition for cementing deep wells, and a method for making the fracturing sand radioactive. As a result of these innovations, the company’s sales figure climbed to $152.4 million at the close of 1955.

Erle Halliburton died in 1957 leaving behind a fortune of close to $100 million – he was cited by the New York Times asone of the richest people in the United States then.

In other to remain competitive, enter new markets, and to lead the industry, Halliburton embarked on acquisition drive. By 1965, it had 16 autonomous units that were coordinated into three main businesses: oil services and sales; engineering division that focused on international construction projects; and the specialty sales and services division that supported general industry.

Each of these three divisions was subdivided into smaller subdivisions, with the subdivisions further divided into several hundred profit centers administered by field managers, who kept headquarters in touch every month using a monthly report system that monitored specific financial goals.

The 1980s saw increased well drilling as a result of the removal of oil price control. This meant more demand for well cementing and stimulation. To gain from this demand, industry giants such as Dresser Industries, and Schlumberger Limited began diversifying into the cementing and stimulation industry, giving Halliburton some tough competition.

To fend off competitors from eating through its market share, Halliburton ensured its prices were kept at competitive levels, and employed its incontestable strength in drilling muds and well logging. By 1980, Halliburton’s revenue reached $8.3 billion.

The 1980s also saw Halliburton continuing to invest heavily in research and development, including the development of horizontal drilling techniques. By the close of the decade it had over 40 research and development projects it was engaged in.

After taken over the helm of affairs of Halliburton as CEO in the later part of 1995, former U.S. Secretary of Defense Dick Cheney launched what can be said to be the most ambitious acquisition program in the company history. The company acquired Landmark Graphics Corp., OGC International Plc, NUMAR Corporation, and the biggest of them all, the merger with Dresser Industries Inc. in February 1998.

These acquisitions made Halliburton more competitive as expressed by Cheney in a Forbes’ 1999 article: “What we got was a significant improvement in our product lines,” which was viewed as crucial to remaining competitive in the somewhat turbulent oil industry.”

However, in the early 2000, the company’s earnings was hit hard by a combination of factors: dwindling economy, falling oil price, and reduction in North American gas production. Halliburton reported a loss of $984 million in 2002 away from a net profit of $809 million it made the previous year.

To curb the negative run, the company’s new CEO, David Lesar began a cut saving measure, part of which was selling off non-core businesses. The company was restructured into two main groups: Halliburton Energy Services Group and KBR (the engineering and construction group). The plan was to build each of the two groups into independently run companies.

Halliburton has continued to wax stronger and dominating in the industry, and today offers the world’s broadest array of products, services and integrated solutions for oil and gas exploration, development and production.

Read Halliburton Company Business Strategies here.


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