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Merger of Halliburton / Baker-Hughes (Essay Sample)


Aron SegalExtra credit assignmentSelect an article from current news reports (current is defined as having come to print during the courseof the current quarter). Write a three-to-four page, typed, double-spaced paper responding to thefollowing prompt. Evaluate the article as if you are an investor or creditor of the company: what is your opinion ofthe company’s situation, what about the situation is of concern to you, and what ethicalresponsibilities does the company have towards you?A minimal amount of restatement of the article is necessary, but this should not exceed ½ of one page.While an abstract is not expected, your paper should follow the standard format of stating a thesis,providing support for that thesis and drawing a conclusion from the support.Your completed assignment will be worth up to 5 points and will be graded using the based on thecontent, editing, and organization. The assignment must be completed and submitted to turnitin.comno later than the date listed on the course schedule in order to receive credit. Late papers will not beaccepted.

Report: Merger of Halliburton / Baker-Hughes
Recently, there has a slump in oil prices, with prices now below $ 80 per barrel, and there have been questions on whether oil companies will maintain their profitability if the prices fall below $ 70. The fall in prices has been associated with a supply glut in the American market, but relieance on fracking and oil shale wells may not be sustainable as they are more expensive to operate than conventional wells. It is projected that there is a likelihood that there will be energy consolidation, with bigger companies buying smaller ones and diversifying there areas of operations in oil and gas industry. This report focuses on the merger of Halliburton and Baker-Hughes, and highlights on ethical responsibilities towards investors.
Summary of article
Reports that Halliburton (HAL) would finally take over Baker-Hughes (BHI), were met with surprise, despite indications that energy consolidation was gaining more attention in the oil and gas industry. In the article, Phillips points out, that the deal was completed earlier than expected, and more probably because of fears about the impending fall in oil prices. Earlier reports showed that Halliburton even consider a hostile take over and possibly replace the entire board of BHI. For the companies there was concern that a further fall in oil prices would make oil drilling untenable to the extent that each company would lose out if they competed in a market situation where low oil process prevailed. In any case, the supposed merger would make the company the largest oil drilling company.
Company situation
Uncertainty in the oil sector has made investors anxious about future prospects of the industry. However, the merger of HAL, would be beneficial in the long-term as the company is likely to use the economies of scale. Nonetheless, there is a need to closely monitor oil prices as they affect the company’s growth prospects. As an investor, the company’s dividend policy seems attractive even with a fall in prices. The company mainly provides equipment and services to oil drilling companies. Hence, the merger will be beneficial, but the prospects of oil drilling companies will have a direct impact on the company’s operations in 2015.
Since all indications that the company will grow over time, the potent...
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