We're initiating a position in Halliburton Company (HAL), buying 500 shares at roughly $37.67, representing 0.5% of the portfolio. With the U.S. expected to announce a ban on Russian

oil as soon as Tuesday, the number one question we are asking ourselves is how will energy markets offset this loss of supply? There is likely no immediate fix as spare capacity around the

world is quite limited and it can take six months for new investments to lead to actual production. What this suggests is that investment in global drilling activity, especially in the U.S.,

needs to increase to replace these barrels over the long run. So instead of buying another exploration & production (E & P) company — like Club name Devon Energy (DVN) — that's

barrel. On the fourth quarter earnings call, Halliburton CEO Jeffrey Miller said, "I believe 2022 will be a strong year for our industry and especially for Halliburton. While global

energy demand and economic growth demonstrated resilience, global energy supply has shown its fragility. The impact of several years of underinvestment in new production is now apparent, and

the structural requirement to invest around the wellbore is crystal clear." Halliburton is the largest oilfield services provider in North America and has the most revenue exposure to

North America among the big three large cap oilfield services companies. Forty percent of HAL's revenues comes from North America, compared to 25% for Baker Hughes and 20% for

Schlumberger . Domestic exposure is important to us right now and want little to do with Russia due to the sanctions on Russian crude. Analysts at Barclays recently estimated that

Halliburton may have less than 3% to 4% revenue exposure to Russia, compared to an estimated 5% to 8% for Schlumberger. North America customer spending in 2022 is expected to grow more than

25% year over year, according to management, mostly from increased investment in private operators as the public E & Ps continue to express discipline and the prioritization of cash

returns to shareholders. However, we think the possibility of upside to these numbers is possible with crude significantly elevated Tuesday. But like the U.S. based E & P companies,

Halliburton is focusing on maximizing cash flow too. Management recently completed what they called "the most aggressive set of structural cost reductions" in company history, and

made changes to their process that drive higher contribution margin. The key point to of this is that Halliburton will have meaningful operating leverage as North American activity

accelerates. And more and more customers are choosing Halliburton in the low-emissions equipment segment because they provide more environmentally friendly solution. In International

markets, management's big strategy is to deliver profitable growth by prioritizing the allocation of capital to the highest return opportunities in the market. We should also note that

digitization and automation has become increasingly important to oilfield services companies, and Halliburton understands this. The benefits are twofold: Digitization creates higher margin

opportunities through the use of software, smarter tools and ancillary products, and also cost savings. Meanwhile, automation helps reduce health and safety concerns, accelerates service

delivery improvements, and decreases the environmental footprint of the total operation. Focus on capital efficiency is strengthening cash flow generation, leading to improving balance sheet

and increasing cash returns. Halliburton currently targets capital expenditures at 5% to 6% of revenue This is down from 11.4% in 2009-2014 and 7.2% in 2015-2019. As a sign of confidence in

the future, Halliburton recently increased its quarterly dividend to $0.12 per share from $0.045. Management also recently redeemed $600 million of its $1 billion of debt maturing in 2025.

While there may be little here in terms of dividend yield and share repurchases are still on hold, we are encouraged by the confident message Halliburton sent to the markets by showing they

can increase cash returns and reduce debt at the same time. We know we are not early to the Halliburton story with the stock up more than 50% this year, but even in an uncertain economic

environment this is a company who we feel quite certain that the earnings estimates will prove to be too low. But at the same time, we understand the run HAL has been on over the past few

weeks and that's why we are starting off with a smaller than usually position size. We are initiating Halliburton with a 1 rating (meaning, we would be buyers at the current price) and 

an initial price target of $40, representing a modest 17x estimated 2023 earnings, which again we think are too low. (Jim Cramer's Charitable Trust is long HAL and DVN . See here for a

full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade

alert before buying or selling a stock in his charitable trust's portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing

the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS

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