End of War Could Mean Big Business for Halliburton

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Should the U.S. emerge victorious from the unfolding war in Iraq, Halliburton (HAL) -- the company once headed by Vice President Dick Cheney -- has the connections and engineering might to play a major role in rebuilding Iraq and ramping the nation's oil production capacity back up to pre-1991 Persian Gulf War levels.

"They have the businesses. They have the government relationship already well-established, and, as we all know, Cheney was the CEO, so it makes logical sense," said Denis Walsh, an equity analyst who covers the energy sector for State Street Research and Management.

Houston-based Halliburton, which develops oil fields and drills for oil all over the world, can build roads and bridges and camps for American forces. It can transport personnel and provide other logistics. It can fight any fires Iraqi leader Saddam Hussein might set. And after the war, assuming a U.S. victory, it can help restore Iraq's infrastructure and oil production, experts say.

While questions remain over how much the work will boost the company's stock price, Halliburton's KBR engineering and construction division "is basically the 'corps of engineers' to the U.S. military," said Jim Wicklund, an analyst at Banc of America Securities. "It is expected that the occupying army's infrastructure could in large part be supplied by KBR."

The company's oilfield services business, which is second only to Schlumberger Ltd. (SLB), is likely to supply most of the heavy equipment to fight fires that Iraqi forces could set to oil wells and oil fields, as they did in Kuwait during the 1991 Persian Gulf War.

The U.S. Department of Defense and the U.S. Agency for International Development both said that contracts for fighting fires and rebuilding Iraq's infrastructure have yet to be awarded. Neither agency would disclose whether Halliburton had submitted any bids.

Other companies that could bid for contracts include Boots & Coots International Well Control Inc. (WEL), Canada's Safety Boss Inc., RPC Inc.'s (RES) Cudd Pressure Control and Superior Energy Services Inc.'s (SPN ) Wild Well Control Inc.

A Halliburton spokeswoman declined to speculate on "what may or may not happen with regards to Iraq."

Reports earlier this month said that Halliburton won a contract to oversee firefighting in Iraq's oilfields but that has not been confirmed by either the company or the DOD.

"It is our information that a contract framework has already been signed," said Wicklund, who rates Halliburton a "buy" and does not own any of its shares.

This wouldn't be the first time Halliburton has played an important role in a U.S. war. Years before Cheney's stint at the helm, a predecessor company built the Corpus Christi Naval Air Station and several warships during World War II. It also helped build the Phan Rang Air Base in Vietnam in 1965.

More recently, after the Persian Gulf War, Halliburton helped put out oil well fires and repaired damaged buildings in Kuwait. It also provided food, laundry, transportation and other services to U.S. peacekeeping forces in Bosnia, Croatia and Hungary during the Balkans conflict in the 1990s.

Estimates of how much Halliburton and other companies could reap from the infrastructure and restoration work vary, but analyst Michael Urban of Deutsche Bank said it could be as much as a total of $3 billion.

How much Halliburton would get is difficult to gauge, though any contracts it wins would certainly generate revenue, cash flow and earnings.

The potential contracts come at a time when Halliburton is contending with its liability for asbestos-related personal injury lawsuits, though the company made progress last December with a $4 billion settlement deal.

"The stock price would reflect that they have had investor concern over the ultimate (asbestos) liability," said Pierre Conner, an analyst with Hibernia Southcoast Capital who rates Halliburton a "buy" and does not own any of its shares.

The contracts also may not do much for the company's stock price, since the firefighting business is not a recurring one and the profit margins of the construction business are not typically high.

"While both would be positives to Halliburton, they aren't in our opinion overriding reasons to buy the stock," Wicklund said.

"I would think if you got any jump in the stock, it would be short-lived and somewhat muted by history. It's like winning a $3 lottery ticket. It beats not winning, but you can't quit your day job."

Reuters contributed to this report.