March 11, 2007 9:12

Uh, maybe Halliburton is moving to the Persian Gulf because that's where the oil is

The announcement by Halliburton that it is moving its headquarters to Dubai (actually, the company says it is opening "a headquarters" there, but it's where the CEO will be so it sounds like the headquarters to me) is sure to be greeted by all sorts of theorizing about the company trying to escape U.S. regulators and Congressional investigators. In fact, it already is being greeted that way by my friends over on Swampland.

Maybe they're right. But the Halliburton income statement tells a different story. The company's KBR (for Kellogg, Brown & Root) unit, which does all that government contracting that gets Halliburton in the headlines, had operating earnings of $239 million last year. The Energy Services Group: $3.38 billion.

As Peter Elkind described in a big Fortune article a couple of years ago, KBR is a barely profitable albatross for Halliburton. It may get a lot of no-bid contracts, but it still can't figure out how to make money off them.

Meanwhile, the Energy Services Group, which mainly helps people get oil out of the ground, is not surprisingly doing very well these days. And with the bulk of the world's oil in the neighborhood of Dubai, it makes a certain amount of business sense for the company's CEO to spend most of his time there. So I'm not saying all those other explanations you'll be hearing for Halliburton's move aren't true, just that there's a pretty straightforward one available, too.

Update: Halliburton is actually in the midst of getting rid of KBR. There's currently an offer out to existing Halliburton shareholders to trade in some or all of their Halliburton shares for KBR shares. That expires March 29, and if there aren't enough takers, Halliburton "will distribute to its stockholders by means of a special dividend, on a pro rata basis, any remaining shares of KBR common stock." After that, the company that's moving its HQ to Dubai won't have anything to do with KBR's military-support operations in Iraq and elsewhere. Got that?