As Iraq seethes with danger, big war contractor Halliburton ( HAL) is attracting swarms of defenders -- on Wall Street. Recent weeks have highlighted the huge risksfacing civilians in the U.S.-led rebuilding push.Every day seems to bring terrorist attacks resultingin casualties or frightening near-misses. Thirty Halliburton workers die. Another seven go missing.The company expresses sadness, even anger. But the wareffort marches on, and the company -- which delivers mail,prepares meals and launders uniforms for U.S. soldiers-- must continue to do its part. For the big Houston-based oil services outfit,that means training new recruits to join a burgeoning Iraq unit. For investors, it means focusing on Halliburton's opportunities to boost profits -- and recognizing that the most tragic losses never really drop to the bottom line. Indeed, even as Iraqi expenses mount and safetythreats grow, one expert sees little threat toHalliburton's financial well-being. David Edwards ofHeron Capital Management believes that others --including U.S. taxpayers -- will end up eating thesoaring costs instead. "They'll go back to the Pentagon and say: 'Pay usmore money. We're clearly in danger over here,'" saysEdwards, who owns stock in Halliburton and other oilservice names. "A lot of the terrorism has relativelylittle economic impact on the companies." Although flat at $29.76 Wednesday -- anddown 9% from last month's 52-week high -- Halliburtonshares have climbed some 42% over the past year.
Halliburton hasn't disclosed just how much it paysits Iraq-based employees to compensate them for thehuge risks they face. But the Associated Pressthis week said the company has offered workers $80,000tax-free -- and up to 50% more with overtime pay -- tospend a year in the country. And the costs hardly end there. Yet another newsagency, London-based Reuters, recently saidthat more than half of all expenses for companiesoperating in Iraq stem from protecting and insuringtheir workers there. Indeed, Reuters went on tosay, life insurance premiums for particularlyhigh-risk workers nearly doubled just last week,reaching $16,000 annually for a $200,000 policy.
He says Halliburton contracted out the Kuwait fueldelivery project to the only bidder that qualifiedand, by shifting some of that business away from thefirm into more affordable Turkey, actually savedtaxpayers $164 million. He also viewed Halliburton'sdecision to bill for meals ordered -- rather thanthose actually delivered -- as perfectly justified. "We consider it worth noting that estimating therequired number of meals is no simple task," wroteRussell, who has an outperform rating on Halliburton'sstock. "We would further guess that the soldiersinvolved would much rather KBR overestimate thenumber of meals that will need to be served upon anygiven day, rather than underestimate." Russell also says Halliburton's early work in Iraqwas performed under a pre-existing contract thatshould have never been rebid. Moreover, he says that Halliburton has since lost at least one contract to a more expensive bidder despite any old ties to Cheney. He even explains away the expensive towels. "It was thought that the use of labeled towelswould stop, or at least deter, the stealing of towelsby locals from its facilities in the Middle East," hewrote. But "we are not certain if the use of themonogrammed towels did, in fact, deter stealing."
SIG Susquehanna analyst, Kevin Wood, takes a similarstand on the company. He says the "sensationalheadlines
have little substance." He believes thatinvestors should buy the stock on dips. He also saysthey'll be getting KBR, a huge source of revenue,absolutely free. That's because for all its headlines -- and its multibillion-dollar contracts -- KBR is viewed as rather insignificant in the eyes of many investors. To begin, it is one of two Halliburton unitspressured for years by asbestos liabilities. Secondly,it relies on huge volumes of Iraqi work that isdiscounted by long-term investors as temporary innature.
"During the training process, we spend most of ourtime giving recruits all the reasons they should notaccept this job," Hall says. But "we continue toprocess several hundred personnel per week to deployto the region." Edwards is looking far beyond the risks faced bycompanies like Halliburton. For months, the financialadviser has spent two hours daily reading news reports-- including many from foreign sources -- about thewar in Iraq. And even he is stunned by the recent hikein danger. He now fears that soaring oil prices and risingsecurity costs could take a toll on America overall. "Two weeks ago, Iraq looked like it had calmeddown. Then all of the sudden, it explodes," he says."What if Iraq were to spin out of control? What wouldthat mean for the economy?"