DBRS Comments on Halliburton Company

DBRS commented today that Expro International Group PLC (Expro) announced that it has received a proposal from Halliburton Company (Halliburton or the Company) indicating that Halliburton is prepared to make an offer to acquire Expro in an all-cash transaction of 1,525 pence per share, valuing Expro at approximately $3.8 billion including assumed debt, subject to certain pre-conditions. Halliburton has previously confirmed publicly that it was considering making an offer and, while DBRS does not typically comment on potential transactions until announced by the rated entity, DBRS is issuing this comment due to the significant public disclosures by both Halliburton and Expro. DBRS notes that Expro management and the Independent Directors of Expro had already agreed to recommend to shareholders acceptance of an all-cash offer from Umbrellastream Limited, which has subsequently increased its offer for Expro to 1,550 pence per share.

DBRS rates Halliburton’s Senior Unsecured Notes at A (low) with a Positive trend and Commercial Paper at R-1 (low), with a Stable trend. In the event that Halliburton makes a formal offer that is accepted by Expro, DBRS does not currently anticipate that the transaction would impact Halliburton’s ratings or rating trends based on our present expectations and the information that is currently available. Should a formal offer be made, DBRS will analyze the details and compare such with our present expectations. Key factors would include the following:

(1) The Company’s willingness to submit significantly higher counter offers for Expro, given the increased offer by Umbrellastream, and Halliburton’s ability to close the transaction.

(2) Any changes to Halliburton’s target capital structure including plans for the Company’s $1.2 billion in 3.125% Convertible Senior Notes (Convertible Notes) that can be redeemed by the Company on or after July 15, 2008.

(3) Planned use of free cash flow subsequent to a transaction.

(4) In line with the June 2007 rating action, DBRS would also consider the aggressiveness of the Company’s ongoing capital expenditures in light of the potential acquisition, the Company’s significant share repurchase program as well as the winding down of its exposure under its ongoing obligations to KBR, Inc.

The current Positive trend reflects DBRS’s opinion that while Halliburton would likely add a significant level of debt relative to its current capital structure to finance the transaction, the Company would also be expected to restore its credit profile to a position commensurate with an “A” range rating within a reasonable period of time. DBRS also anticipates that Halliburton would put in place adequate liquidity to finance the transaction and to redeem the Convertible Notes before maturity if the Company so chooses.

Halliburton ended the first quarter of 2008 with $2.0 billion of cash on its balance sheet and no cash borrowings on its $1.2 billion credit facility. The Company will also likely generate at least $1.5 billion of free cash flow in 2008 (calculated as cash flow from operations before working capital changes less capital expenditures) given the strong operating conditions across all of the Company’s oilfield services operations and its capital budget of $1.7 billion to $1.8 billion. DBRS expects that Halliburton will maintain its financial strength if it is successful in acquiring Expro, including returning the balance sheet to a net debt-to-capital position of approximately 25% or lower while maintaining a good liquidity position. DBRS notes that the Company’s debt-to-capital was only 10.1 per cent at March 31, 2008 and that debt-to-cash flow was 0.25 times for the latest 12-month period.

The addition of Expro’s expertise in well flow management and its pipeline of leading edge technologies complements Halliburton’s position as the world’s second largest provider of oil field services with significant market share and good product diversification in its two core business segments, its own suite of technically advanced products that provide reasonable margins even in weak markets, and good geographic diversification.

The ratings of Halliburton were upgraded on June 22, 2007 with the trend changed to Positive on the Senior Unsecured Notes due to positive changes made at Halliburton over the prior two years, including improved credit metrics resulting from good overall industry conditions and improved operating focus, its overall business mix and risk profile following the divestiture of KBR. The upgrade also reflected the Company’s ability to continue to generate cash flow significantly in excess of capital expenditures, dividends and share repurchases.

Note:
All amounts are in U.S. dollars unless otherwise noted.