David Hay — Portfolio Update: One "HAL" of an Opportunity

The headline — "THE BIGGEST OIL DEAL IN HISTORY!"

• "Last Friday, Donald Trump's typically bombastic declaration of 'THE BIGGEST OIL DEAL IN HISTORY!' naturally generated intense media interest. He went on to say: 'This Historic Transaction MORE THAN DOUBLES American Oil Reserves, greatly increases our Oil Supply, and will substantially lower Gas Prices for all Americans, long into the future.'"
• The subject, for anyone who missed it "by watching another Seattle Mariners blow-out loss," is "the country with the world's largest oil reserves: Venezuela."
• The official number is quoted and then left to fend for itself: "Secretary of State Marco Rubio elaborated that this deal would bring in $100 billion of private investment."

Obstacle one — the timeline

• "Realists should, as the word implies, realize the fruits of this supposed transaction won't manifest overnight. More likely, it will take a decade or so before they are ready for harvest."
• The practical consequence, stated at the end of the section rather than assumed at the start: "because of the chronologically distant nature of any restart of Venezuela's dilapidated oil and gas infrastructure, meaningful production gains are unlikely to have any practical impact on current oil prices."

Obstacle two — the constitution (with the loophole named)

• "In the here and now, there are considerable obstacles, including the not inconsequential detail that selling Venezuela's oil reserves to a foreign entity violates its constitution."
• The qualifier is supplied in the same breath, which is what keeps the point analytic rather than rhetorical: "(It does not, however, ban entering into joint ventures and production-sharing arrangements.)" — i.e. some structure is possible, just not the one the headline implies.

Obstacle three — the counterparty's own history

• "Overseas oil companies have a bitter aftertaste from decades of having their assets in Venezuela appropriated and/or nationalized. Years of convoluted litigation ensued."
• The decisive detail is not the judgement but the collection: "even when companies like Exxon won judgement via international courts, Venezuela's destitute financial condition made collection nearly impossible."
• Conclusion — a behavioural forecast about the very people the deal depends on: "in other words, they may not hurry back, despite the mammoth upside."

The motive — a mid-term oil-price suppression campaign

• "A cynic could view this as the latest move by the Trump administration to depress oil prices in the run-up to the mid-term elections."
• It is placed in a pattern rather than treated as a one-off: "this would be consistent with their steady stream of social media posts declaring the Strait of Hormuz open, or soon to be (many of which were front-run by not-so-mysterious insiders)."
• Note what this does to the trade: if the announcements are messaging rather than supply, then each one is a price event without a physical event — which is the setup for buying the dip in the affected securities rather than selling it.

What survives the debunking — the service companies

• "On the other hand, a big winner from this deal, if it actually happens in some form, might be U.S. oil service companies. There are two that are the subject of this week's portfolio update: Halliburton (HAL) and Schlumberger (SLB)."
• The order is deliberate: "we'll look at HAL first since it has been a recent highlight and it's also been stuck in the drilling mud."

HAL's chart problem — and the May call that didn't work

• "Its share price has struggled to achieve a new multi-year high. It has repeatedly topped out around $43. We opined back in May that this time might be different."
• "But, alas, a sharp slide in oil prices, and a guarded outlook in conjunction with its second quarter earnings release, knocked it back into the low-30s in late July."
• The current state is described without embellishment: "since then, it has been working its way higher, including in a soft tape today" — relative strength on a down day, offered as a small tell rather than a thesis.

HAL's valuation — and the ratio that disagrees

• "HAL has rarely traded as inexpensively as it is now on a P/E basis."
• The disconfirming measure is volunteered: "admittedly, using the Price/Sales ratio, it looks cheap, but not as decidedly."
• And the gap between the two is then explained — margins, not price: "it is certainly fair to say that oil service industry conditions remain far from boom times. Therefore, neither revenues nor profits are maxed out; in fact, we'd argue they are far from peak levels."

The real job — the Middle East rebuild, then Venezuela

• "Besides the need for vast sums to be invested in resuscitating Venezuela's oil industry, regardless of who eventually finances that effort, there is the more pressing issue of repairing the Middle East's war-ravaged production facilities."
• The point buried in "regardless of who eventually finances that effort": the service company is indifferent to whose capital does the work — it is paid either way, which is what makes it a cleaner expression than the producer.

"The greatest oil-supply shock in history"

• "Moreover, this newsletter continues to be totally convinced that oil supplies have, indeed, been enormously depleted after the steady string of attacks on said facilities, plus the loss of around half of the normal shipments through the Strait of Hormuz."
• The impatience is on the record: "(It continues to amaze us how many deny this virtually inescapable reality.)"
• The conversion of that view into the pick: "the bottom line is that this has been the greatest oil-supply shock in history. Consequently, those companies, like HAL, that have the unique set of capabilities to rebuild global oil stocks should have a number of robust operating years ahead of them."

SLB — the most international of the group

• "While originally founded in France in the 1920s, its headquarters are now in Houston. Whatever the location of its corporate command center, it may be the most international of all global oil service companies."
• "Perhaps that's the reason it has performed considerably better than HAL this year, possibly because investors feel it can better capitalize on the Mid-East rebuild. (SLB is up a roaring 52% in 2025 versus a still very respectable 30% for HAL; take that, S&P 500!)"
• The second business is noted with the memorable line attached: "it also has a thriving digital division, with some asserting it is increasingly a software company in drag."

SLB's technical setup — a three-year ceiling in play

• "SLB's share price has broken above shorter-term resistance and may be in the process of taking out the ceiling going back almost three years."
• "It's also not far from making a new five-year high. If so, that would be a highly bullish development in our book."
• Note the tension the post leaves unresolved on purpose: the name being trimmed is the one with the better chart — the trim is a relative-value decision, not a bearish one.

SLB's valuation — cheap against itself, not against HAL

• "SLB's not nearly as inexpensive as is HAL. Yet, relative to its own history, it is underpriced, particularly on a P/E basis."
• The historical anchor is a multiple relationship rather than a level: "for many years, SLB traded at a significant premium to the S&P 500. Presently, it's at a slight discount."

The fourteen-year swing-trading record, published in full

• "You can also see from the above price chart for SLB, it has experienced a considerable amount of volatility in recent years. Fortunately, this newsletter has played those swings quite well (and we hope many of you have followed our lead with this name)."
• The buys: "August of 2022, we expressed our fondness for the oil service group in general, and SLB, in particular, when it was at $36"; "April of 2025, SLB was all the way back down to $32 1/2 where we pointed out it was as cheap as it had ever been at a sub-10 P/E… the risk/reward appeared 'highly favorable'"; "reinforced that positive appraisal in December of last year when it was $37."
• The sells: "October of that year, when it was ~$50, we advised some profit-taking"; "in July of 2023, we again advised some gain-harvesting with the oil service stocks and SLB. We did so once more in early September, 2023, at even higher prices."
• The round trip since: "by January of this year, it was back up to $50 and, as of mid-May, it was $57. From there, it sold off hard, sliding quickly to $45, before its latest run-up to nearly $60."

The switch — trim SLB, redeploy into HAL

• "At this point, harvesting some of the latest appreciation might make sense, and an obvious redeployment candidate is HAL."
• The limit on the trim is explicit, and the upside case for the trimmed name is left intact: "however, we wouldn't, by any means, suggest exiting SLB in full. Breaking above $60 could, and should, happen, likely leading to additional gains."
• The whole decision reduces to a relative call, not a directional one: "at this point, though, we suspect there's more near-term upside with HAL."

The shared destination — earnings and the multiple, together

• "In our view, both it and HAL are poised to experience that happy combination of rising earnings and expanding P/E ratios."
• That is the double count made explicit: the E rises off a trough ("far from peak levels") and the multiple applied to it expands as the rebuild cycle is recognised — the two effects multiplying rather than adding.

The tables — what changed this week

• Published as images at the end of the issue (transcribed in the article text). HAL is new on the Buys list, rated SB, dated 08/31/2026 at $36.79 with no cost basis yet — the position being initiated with this post.
• SLB is highlighted on Holds/Trims at H/T — $59.47 against the 09/23/2024 lot at $42.00 (+41.60%) — reversing the Jul-20 promotion to the Buy List and matching the prose instruction to harvest some of the gain.
• Other highlighted rows: CRH (SB on the 01/29/2024 lot), EOG (SB — the June 17 endorsement now table-confirmed), GNRC (B, lot 08/28/2026 @ $186.18 — the Aug-28 POW! pick's first table appearance, marked $185.53), DVN (H, lot 01/20/2026 @ $36.29 — resolving it as a Holds/Trims name, not a Buy), EL (H, lot 05/22/2026 @ $86.82) and GDXJ (H/T, lot 04/10/2025 @ $60.43).