The Los Angeles Times
Sunday 11 March 2007
Halliburton Co., the energy services giant and controversial defense contractor, said Sunday it is opening a new corporate headquarters in Dubai in the Middle East.
The change from Houston to the United Arab Emirates by the world's second largest oil-field services provider was announced by Chief Executive Dave Lesar at an energy conference in neighboring Bahrain.
"The Eastern Hemisphere is a market that is more heavily weighted toward oil exploration and production opportunities, and growing our business here will bring more balance to Halliburton's overall portfolio," Lesar said in a statement.
The announcement comes amid a major overhaul at Halliburton, which is spinning off its defense-contracting subsidiary, KBR, into a separate company.
Halliburton has been dogged by criticism that it overbilled taxpayers in a multibillion contract to feed and house U.S. soldiers in Iraq. Last month, federal investigators alleged Halliburton was responsible for $2.7 billion of the $10 billion in contractor waste and overcharging in Iraq. The company has denied any wrongdoing.
The company's business dealings in Nigeria also are being investigated by the Justice Department and the Securities and Exchange Commissions. The company has said it is cooperating in the investigations.
The planned move surprised longtime critic Rep. Henry A. Waxman, D-Calif., chairman of the House Committee on Oversight and Government Reform. He called for congressional hearings on the move, saying, "I want to understand the ramifications for U.S. taxpayers and national security."
Democrats have been fiercely critical of the company, which was formerly headed by Vice President Dick Cheney but who has not been accused by investigators of any wrongdoing.
Halliburton provided few details on its pending move but said it was part of plan to expand its business in the Middle East and other growing markets outside North America.
The company said it would keep a corporate office in Houston and would remain legally registered in the U.S. Nonetheless, Lesar and other executives will be based out of Dubai, the company said.
A Halliburton spokeswoman declined to respond to questions about the move, including how many of its nearly 12,000 employees in Houston would be affected or when the shift would occur.
Halliburton would be one of the best known U.S. corporations to move to Dubai, the Western-friendly boomtown that is rapidly emerging as a corporate headquarters of the Middle East.
The announcement comes as the company prepares later this month to spin off its military contracting unit, Kellogg Brown & Root, which has been the focus of heavy criticism from lawmakers for what they have described as lucrative no-bid contracts in Iraq.
One Washington corporate lobbyist said: "I think it ensures that there will be some interesting oversight hearings," since Democrats have been unhappy with Halliburton's no-bid contracts and what they believe is its poor performance.
The lobbyist, who requested anonymity so he would not jeopardize relationships with his clients, said the move raises several questions, among them how much did Halliburton receive in incentives to move to Dubai and what does it do to the company's tax structure.
"If there's a huge tax shift, then it's taking money from U.S. taxpayers while they're taking no-bid contracts," the lobbyist said.
He said he doubted such a move would reduce Halliburton's legal liability in the United States, which he said would continue as long as the company has any properties in the United States.
Analysts, however, said business considerations rather than politics likely drove the decision to move.
As higher gas prices show, the energy sector has struggled to keep pace with demand for oil, especially in India and China. And many of the new projects to increase production are in the oil-producing countries of the Middle East.
More than 38 percent of Halliburton's oil-field services revenue in 2006 came from sources in the Eastern Hemisphere, where the company has 16,000 of its 45,000 employees.
Dubai could also be especially attractive to Halliburton because of its favorable tax and business climate, analysts said.
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Times staff writer Paul Richter contributed to this report in Washington.
Halliburton to Move Headquarters, CEO to Dubai
By Mohammed Abbas and Anna Driver
Reuters
Monday 12 March 2007
Manama/Houston - U.S. oil services firm Halliburton Co.
Texas-based Halliburton, which was led by Vice President Dick Cheney from 1995-2000, did not specify what, if any, tax implications the move might entail. It plans to list on a Middle East bourse once it moves to Dubai - a booming commercial center in the Gulf. The company said it was making the moves to position itself better to gain contracts in the oil-rich Middle East.
"This is an insult to the U.S. soldiers and taxpayers who paid the tab for their no-bid contracts and endured their overcharges for all these years," said judiciary committee chairman Sen. Patrick Leahy, a Vermont Democrat.
Rep. Henry Waxman, chairman of the House Oversight and Government Reform Committee, might hold a hearing on the implications, an aide to Waxman said.
Halliburton has drawn scrutiny from auditors, congressional Democrats and the Justice Department for the quality and pricing of its KBR Inc.
"My office will be in Dubai, and I will run our entire worldwide operations from that office," Chief Executive David Lesar said at an energy conference in Bahrain on Sunday. "Dubai is a great business center."
Halliburton, which has long been involved in the Middle East, generated more than 38 percent of its $13 billion in oil-services revenue in the eastern hemisphere last year.
Middle East Growth
"The company as a whole has continued to diversify internationally, and the Middle East is a point that they have targeted," said William Sanchez, a U.S.-based analyst at Howard Weil Inc.
"They are being opportunistic in putting the CEO in the middle of the action."
Sanchez said he believed Halliburton's move to Dubai was not tax related. Instead he viewed it as a strategic play.
Alan Laws, an analyst at Merrill Lynch, said the move would likely help Halliburton's position in negotiating large contracts.
Halliburton said it would maintain its legal registration in the United States and was not leaving Houston, where it was currently based.
But Lesar told reporters: "At this point in time we clearly see there are greater opportunities in the eastern hemisphere than the western hemisphere."
KBR, the engineering and military-services contractor unit that Halliburton is in the process of splitting off, is the Pentagon's largest contractor in Iraq.
KBR has so far b'oked more than $20 billion in revenues from its work in Iraq and has been the target of several investigations into the company's billing practices. It has also faced complaints from some U.S. lawmakers about the company's close ties to the Bush administration.
Oil and gas service companies have raised prices for their services over the past two years as the sector strains to bring enough capacity on line to meet rapidly rising oil demand.
Many new supply projects are in the oil-producing countries of the Middle East, while Asia accounts for most of the rising demand.
In contrast, a slide in natural gas prices in the United States has prompted investor concerns that oil and gas companies might cut back spending in North America.
Lesar also said he expected the price of oil to stay above $40 a barrel, providing good conditions for future investment in the oil and gas industry.
Halliburton's shares closed up 29 cents at $32.02 on Friday. The stock has gained 7 percent in the past month but has slipped 3 percent in the last 52 weeks.
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Additional reporting by Megan Davies in Houston and Joanne Allen in Washington.
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