HALLIBURTON CO

RESULTS OF OPERATIONS IN 2024 COMPARED TO 2023

Three Months Ended March 31, 2024 Compared with Three Months Ended March 31, 2023

Operating Segments

Completion and Production

Completion and Production revenue in the first quarter of 2024 was $3.4 billion, down slightly when compared to the first quarter of 2023. Operating income in the first quarter of 2024 was $688 million, an increase of $22 million, or 3%, when compared to the first quarter of 2023. These results were primarily driven by reduced pressure pumping services in U.S. land. Partially offsetting this decline were higher completion tool sales in the Western Hemisphere and Europe/Africa, improved stimulation activity in Latin America, increased cementing activity internationally, and higher artificial lift activity in North America. Operating income increased due to completion tool product sales and activity and pricing in artificial lift and cementing services.

Drilling and Evaluation

Drilling and Evaluation revenue in the first quarter of 2024 was $2.4 billion, an increase of $163 million, or 7%, when compared to the first quarter of 2023. Operating income in the first quarter of 2024 was $398 million, an increase of $29 million, or 8%, when compared to the first quarter of 2023. These results were driven by higher drilling-related services in the Middle East and North America, improved activity in multiple product service lines in Latin America, and higher fluid services in Europe. Partially offsetting these improvements were lower project management activity in the Middle East/Asia, reduced wireline activity in North America, reduced drilling services in Europe/Africa, and lower fluid services in Asia.

Geographic Regions

North America

North America revenue in the first quarter of 2024 was $2.5 billion, an 8% decrease compared to the first quarter of 2023. This decline was primarily driven by lower pressure pumping services in U.S. land along with lower wireline activity throughout the region. Partially offsetting these declines were improved completion tool sales, higher pressure pumping services, and improved drilling-related services in the Gulf of Mexico along with higher artificial lift activity in U.S. land.

Latin America

Latin America revenue in the first quarter of 2024 was $1.1 billion, a 21% increase compared to the first quarter of 2023, due to higher drilling-related services and increased software sales in Mexico, improved pressure pumping services and fluid services in Argentina, and increased activity in multiple product service lines in Brazil and Ecuador. Partially offsetting these improvements was lower fluid services in Brazil and the Caribbean.

Europe/Africa/CIS

Europe/Africa/CIS revenue in the first quarter of 2024 was $729 million, a 10% increase compared to the first quarter of 2023. This increase was primarily driven by higher completion tool sales in the region and improved fluid services in Norway and the Caspian Area. Partially offsetting these improvements was lower drilling services in the region.

Middle East/Asia

Middle East/Asia revenue in the first quarter of 2024 was $1.4 billion, a 6% increase compared to the first quarter of 2023, resulting from improved activity in multiple product service lines in Kuwait, Saudi Arabia, and Oman. Partially offsetting these improvements were decreased project management activity in India and Saudi Arabia and lower fluid services in Asia.

Other Operating Items

SAP S4 Upgrade Expense. During 2023 we began our migration to SAP S4, which we expect to complete by the end of 2025. During the first quarter of 2024, we recognized $34 million of expense on our SAP S4 migration.

Nonoperating Items

Argentina Impairment on Investment. In 2022 and 2023, we executed a series of loans to a third party and received notes that are to be repaid in US dollars upon maturity or earlier if certain conditions are met. During the three months ended March 31, 2024, we recorded a loss of $38 million due to the fair value decrease in one of the notes, resulting from the deterioration in the outlook of the debtor’s liquidity and financial projections.

Egypt Currency Impact. During the quarter ended March 31, 2024, the Egyptian pound devalued by approximately 35% relative to the US dollar. Consequently, we incurred a loss of $38 million for the three months ended March 31, 2024 due to the devaluation of the currency in Egypt.

Income Tax Provision. During the three months ended March 31, 2024, we recorded a total income tax provision of $178 million on a pre-tax income of $787 million, resulting in an effective tax rate of 22.6% for the quarter. During the three months ended March 31, 2023, we recorded a total income tax provision of $174 million on a pre-tax income of $829 million, resulting in an effective tax rate of 21.0% for the quarter.

Pillar Two. The Organization for Economic Co-operation and Development enacted model rules for a new global minimum tax framework, also known as Pillar Two, and certain governments globally have enacted, or are in the process of enacting, legislation considering these model rules. These rules did not have a material impact on our taxes for the three months ended March 31, 2024.

Internal Revenue Service Notice of Proposed Adjustment. We are subject to taxes in the United States and in numerous jurisdictions where we operate or where our subsidiaries are organized. Our tax returns are routinely subject to examination by the taxing authorities in the jurisdictions where we file tax returns. In most cases we are no longer subject to examination by tax authorities for years before 2012. The only significant operating jurisdiction that has tax filings under review or subject to examination by the tax authorities is the United States. Our United States federal income tax filings for tax years 2016 through 2023, including carry back of 2016 net operating losses to 2014, are currently under review or remain open for review by the Internal Revenue Service (the IRS).

On September 28, 2023, we received a NOPA from the IRS covering our 2016 U.S. tax return. The NOPA proposed an adjustment to reclassify approximately 95% of the $3.5 billion termination fee paid to Baker Hughes in 2016 from an ordinary expense deduction to a capital loss. The termination fee was paid to Baker Hughes under the merger agreement after antitrust regulators in multiple jurisdictions failed to approve our proposed merger. It is common commercial practice to include a termination fee in a merger agreement to compensate the target for damages incurred when the acquisition does not go forward. The IRS’s long-understood position at the time of the payment had been to treat such payments as an ordinary and necessary business expense. We strongly disagree with the proposed adjustment on both a factual and legal basis, and we plan to vigorously contest it.

We expect that resolving this dispute will take substantial time. In December 2023, we initiated the IRS administrative appeals process, which may take more than 12 months to complete. Failing a resolution through that process, the matter would ultimately be resolved by the United States federal courts.

We regularly assess the likelihood of adverse outcomes resulting from tax examinations to determine the adequacy of our tax reserves, and we believe our income tax reserves are appropriately provided for all open tax years. We cannot assure you that the matter will be determined in our favor or against us, and if the matter is ultimately determined unfavorably to us, it could have a material adverse impact on our results of operations and cash flows. Based on tax attributes currently available, we estimate that, should the IRS's position prevail through its appellate process and subsequent litigation, the proposed adjustment could result in cash taxes due of approximately $650 million (plus interest thereon in the case of amounts due for previous tax years). Our estimates are calculated under current tax law and on the bases of our assumptions regarding taxable income and loss and other tax attributes over the relevant period, which law could change and which assumptions could and likely will differ materially from actual results. In any event, no payment of any additional tax is currently required, nor do we anticipate that the proposed adjustment would materially and adversely impact our ability to meet our expected uses of cash, including future capital expenditures, working capital investments, and scheduled debt repayments, or our ability to return cash to shareholders, even if a final determination of the matter is reached that is adverse to us.