HALLIBURTON CO

Previous wording

Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) should be read in conjunction with the condensed consolidated financial statements included in “Item 1. Financial Statements” contained herein.

Current wording

Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the condensed consolidated financial statements included in “Item 1. Financial Statements” contained herein.

Previous wording

Oil prices strengthened in the first quarter of 2024 as strong demand and OPEC+ production cuts tightened the oil market. While easing inflationary pressures have reduced macroeconomic uncertainty, geopolitical unrest in the Middle East and the Russia-Ukraine conflict continue to be major sources of volatility for the oil and natural gas markets.

Current wording

Oil prices strengthened in the second quarter of 2024 as increased demand and OPEC+ production cuts tightened the oil market. While easing inflationary pressure has reduced macroeconomic uncertainty, risks associated with trade tensions and geopolitical unrest in the Middle East and the Russia-Ukraine conflict continue to be major sources of volatility for the oil and natural gas markets.

Previous wording

The following graph illustrates our revenue and operating margins for each operating segment for the first quarter of 2023 and 2024.

Current wording

The following graph illustrates our revenue and operating margins for each operating segment for the second quarter of 2023 and 2024.

Previous wording

Our North America revenue decreased 8% in the first quarter of 2024, as compared to the first quarter of 2023, 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 and increased drilling services in U.S. land.

Current wording

Our North America revenue decreased 8% in the second quarter of 2024, as compared to the second quarter of 2023. This decline was primarily driven by decreased pressure pumping services and lower artificial lift activity in U.S. land. Partially offsetting these declines were increased completion tool sales in the Gulf of Mexico and higher drilling services in U.S. land.

Previous wording

Internationally, revenue increased 12% in the first quarter of 2024, as compared to the first quarter of 2023, largely driven by improved activity in multiple product service lines in Latin America, increased drilling services in the Middle East, higher fluid services in Europe and the Middle East, and improved cementing services in all regions. Partially offsetting these improvements were lower project management activity in the Middle East/Asia and reduced fluid services in Asia. The international average rig count increased 5% in the first quarter of 2024 as compared to the first quarter of 2023.

Current wording

Internationally, revenue increased 8% in the second quarter of 2024, as compared to the second quarter of 2023, largely driven by improved pressure pumping services and increased well intervention services in the regions and higher drilling services in the Middle East. Partially offsetting these improvements were decreased fluid services and lower wireline activity in Middle East/Asia and lower drilling-related services in Africa.

Previous wording

In 2021, we announced our target to achieve a 40% reduction in our Scope 1 and 2 emissions by 2035 from the 2018 baseline. At the same time, we support our customers in their emissions reduction efforts by continuously developing and deploying goods and services that are accretive to their goals as well as ours. As the energy mix transition unfolds, we seek to apply our expertise and resources in growth sectors adjacent to our traditional oilfield services space, including carbon capture, utilization, and storage, hydrogen, and geothermal. Finally, we will continue to focus on accelerating the success of clean tech start-ups via Halliburton Labs, which also allows us to participate in the energy mix transition at relatively low risk by investing our expertise, resources, and team without a significant outlay of capital while we learn where we can strategically engage new markets. As of March 31, 2024, Halliburton Labs had 32 participating companies and alumni.

Current wording

In 2021, we announced our target to achieve a 40% reduction in our Scope 1 and 2 emissions by 2035 from the 2018 baseline. At the same time, we support our customers in their emissions reduction efforts by continuously developing and deploying goods and services that are accretive to their goals as well as ours. As the energy mix transition unfolds, we seek to apply our expertise and resources in growth sectors adjacent to our traditional oilfield services space, including carbon capture, utilization, and storage, hydrogen, and geothermal. Finally, we will continue to focus on accelerating the success of clean tech start-ups via Halliburton Labs, which also allows us to participate in the energy mix transition at relatively low risk by investing our expertise, resources, and team without a significant outlay of capital while we learn where we can strategically engage new markets. As of June 30, 2024, Halliburton Labs had 33 participating companies and alumni.

Previous wording

As of March 31, 2024, we had $1.9 billion of cash and equivalents, compared to $2.3 billion of cash and equivalents at December 31, 2023.

Current wording

As of June 30, 2024, we had $2.1 billion of cash and equivalents, compared to $2.3 billion of cash and equivalents at December 31, 2023.

Previous wording

Significant sources and uses of cash during the first three months of 2024

Current wording

Significant sources and uses of cash during the first six months of 2024

Previous wording

•Cash flows from operating activities were $487 million. Working capital, which consists of receivables, inventories, and accounts payable, had a negative impact of $341 million, primarily due to increased receivables.

Current wording

•Cash flows from operating activities were $1.6 billion. Working capital, which consists of receivables, inventories, and accounts payable, had a negative impact of $365 million, primarily due to increased receivables.

Previous wording

•We repurchased 7.0 million shares of our common stock for $250 million.

Current wording

•We repurchased 13.9 million shares of our common stock for $500 million.

Previous wording

•We paid $151 million of dividends to our shareholders.

Current wording

•We paid $302 million of dividends to our shareholders.

Previous wording

We may utilize share repurchases as part of our capital return framework. Our Board of Directors has authorized a program to repurchase our common stock from time to time. We repurchased 7.0 million shares of common stock during the first quarter of 2024 under this program. Approximately $3.8 billion remained authorized for repurchases as of March 31, 2024 and may be used for open market and other share purchases.

Current wording

We may utilize share repurchases as part of our capital return framework. Our Board of Directors has authorized a program to repurchase our common stock from time to time. We repurchased 6.9 million shares of common stock during the second quarter of 2024 under this program. Approximately $3.6 billion remained authorized for repurchases as of June 30, 2024 and may be used for open market and other share purchases.

Previous wording

During 2023, we began our migration to SAP S4, which we expect to complete by the end of 2025. During the three months ended March 31, 2024, we incurred $34 million in expense on our SAP S4 migration. The total project investment is estimated to cost approximately $250 million, of which we have incurred $85 million to date. We believe the new system will provide important efficiency benefits, cost savings, enhanced visibility to our operations, and advanced analytics that will benefit us and our customers.

Current wording

During 2023, we began our migration to SAP S4, which we expect to complete by the end of 2025. During the six months ended June 30, 2024, we incurred $63 million in expense on our SAP S4 migration. The total project investment is estimated to cost approximately $250 million, of which we have incurred $114 million to date. We believe the new system will provide important efficiency benefits, cost savings, enhanced visibility to our operations, and advanced analytics that will benefit us and our customers.

Previous wording

Financial position in current market. As of March 31, 2024, we had $1.9 billion of cash and equivalents and $3.5 billion of available committed bank credit under a revolving credit facility with an expiration date of April 27, 2027. We believe we have a manageable debt maturity profile, with approximately $472 million coming due beginning in 2025 through 2027. Furthermore, we have no financial covenants or material adverse change provisions in our bank agreements, and our debt maturities extend over a long period of time. We believe our cash on hand, cash flows generated from operations, and our available credit facility will provide sufficient liquidity to address the challenges and opportunities of the current market and our expected global cash needs, including capital expenditures, working capital investments, shareholder returns, if any, and debt repurchases, if any, and scheduled interest and principal payments.

Current wording

Financial position in current market. As of June 30, 2024, we had $2.1 billion of cash and equivalents and $3.5 billion of available committed bank credit under a revolving credit facility with an expiration date of April 27, 2027. We believe we have a manageable debt maturity profile, with approximately $472 million coming due beginning in 2025 through 2027. Furthermore, we have no financial covenants or material adverse change provisions in our bank agreements, and our debt maturities extend over a long period of time. We believe our cash on hand, cash flows generated from operations, and our available credit facility will provide sufficient liquidity to address the challenges and opportunities of the current market and our expected global cash needs, including capital expenditures, working capital investments, shareholder returns, if any, debt repurchases, if any, and scheduled interest and principal payments.

Previous wording

During the fourth quarter of 2023, we entered into a credit default swap (“CDS”) with a third-party financial institution. The notional amount of the CDS, which was $279 million at the end of March 2024, will reduce on a monthly basis over its remaining 23-month term.

Current wording

During the fourth quarter of 2023, we entered into a CDS with a third-party financial institution. The CDS is related to a borrowing provided by the financial institution to one of our primary customers in Mexico, and a portion of the proceeds were utilized by this customer to pay certain of our outstanding receivables. The notional amount of the CDS, which was $248 million at the end of June 2024, will continue to reduce on a monthly basis over its remaining 20-month term.

Previous wording

Credit ratings. Our credit ratings with Standard & Poor’s (S&P) remain BBB+ for our long-term debt and A-2 for our short-term debt, with an upgrade to positive outlook from stable outlook during the fourth quarter of 2023. Our credit ratings with Moody's Investors Service (Moody's) remain A3 for our long-term debt and P-2 for our short-term debt, with a stable outlook.

Current wording

Credit ratings. Our credit ratings with Standard & Poor’s (S&P) remain BBB+ for our long-term debt and A-2 for our short-term debt, with a positive outlook. Our credit ratings with Moody's Investors Service (Moody's) remain A3 for our long-term debt and P-2 for our short-term debt, with a stable outlook.

Previous wording

Receivables from our primary customer in Mexico accounted for approximately 8% of our total receivables as of March 31, 2024. While we have experienced payment delays from our primary customer in Mexico, the amounts are not in dispute and we have not historically had, and we do not expect, any material write-offs due to collectability of receivables from this customer.

Current wording

Receivables from our primary customer in Mexico accounted for approximately 11% of our total receivables as of June 30, 2024. While we have experienced payment delays from our primary customer in Mexico, the amounts are not in dispute and we have not historically had, and we do not expect any material write-offs due to collectability of receivables from this customer.

Previous wording

We operate in more than 70 countries throughout the world to provide a comprehensive range of services and products to the energy industry. Our revenue is generated from the sale of services and products to major, national, and independent oil and natural gas companies worldwide. The industry we serve is highly competitive with many substantial competitors in each segment of our business. During the first three months ended of 2024, based on the location of the services provided and products sold, 42% of our consolidated revenue was from the United States, compared to 47% of our consolidated revenue from the United States in the first three months of 2023. No other country accounted for more than 10% of our revenue for those periods.

Current wording

We operate in more than 70 countries throughout the world to provide a comprehensive range of services and products to the energy industry. Our revenue is generated from the sale of services and products to major, national, and independent oil and natural gas companies worldwide. The industry we serve is highly competitive with many substantial competitors in each segment of our business. During the first six months of 2024, based on the location of the services provided and products sold, 41% of our consolidated revenue was from the United States, compared to 46% of our consolidated revenue from the United States in the first six months of 2023. No other country accounted for more than 10% of our revenue for those periods.

Previous wording

As we look into the rest of 2024, we remain positive on the oil and natural gas markets, and continue to see strength across our portfolio. We expect strong oil and natural gas demand growth for the rest of 2024 as concerns about a potential economic slowdown ease. We believe long term demand growth will be driven by economic expansion, energy security concerns, and population growth. Oil and natural gas continues to demonstrate its critical role in the global economy in meeting this long term demand, and necessitates sustained capital investment in existing and new sources of production. To meet this growing demand, production will be needed from conventional, unconventional, deep-water, shallow-water, and short and long-cycle projects. Capital discipline by major oil and natural gas producers continues to underpin a more durable and less volatile upstream spending cycle versus prior cycles.

Current wording

As we consider the balance of 2024, we remain positive on the oil and natural gas markets and continue to see strength across our portfolio. We expect strong oil and natural gas demand growth for the rest of 2024 as concerns about a potential economic slowdown ease. We believe long-term demand growth will be driven by economic expansion, energy security concerns, and population growth. Oil and natural gas continue to demonstrate their critical roles in the global economy in meeting this long term demand, and necessitate sustained capital investment in existing and new sources of production. To meet this growing demand, production will be needed from conventional, unconventional, deep-water, shallow-water, and short and long-cycle projects. Capital discipline by major oil and natural gas producers continues to underpin a more durable and less volatile upstream spending cycle versus prior cycles.

Previous wording

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.

Current wording

Drilling and Evaluation revenue in the second quarter of 2024 was $2.4 billion, an increase of $110 million, or 5%, when compared to the second quarter of 2023. Operating income in the second quarter of 2024 was $403 million, an increase of $27 million, or 7%, when compared to the second quarter of 2023. These results were primarily driven by increased drilling services in U.S. land and the Middle East and improved testing services in Latin America and the Middle East. Partially offsetting these improvements were lower drilling-related services in Africa.

Previous wording

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.

Current wording

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

Previous wording

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.

Current wording

Latin America revenue in the second quarter of 2024 was $1.1 billion, a 10% increase compared to the second quarter of 2023. This increase was primarily driven by higher stimulation activity and improved wireline services in Argentina and Mexico, increased testing services in Mexico and the Caribbean, and improved project management activity in Ecuador. Partially offsetting these improvements were lower well construction activity, decreased software sales, and lower project management activity in Mexico, along with lower completion tool sales in Brazil.

Previous wording

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.

Current wording

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 second quarter of 2024, we recognized $29 million of expense on our SAP S4 migration. During the second quarter of 2023, we recognized $13 million of expense on our SAP S4 migration.

Previous wording

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.

Current wording

Income Tax Provision. During the three months ended June 30, 2024, we recorded a total income tax provision of $207 million on a pre-tax income of $920 million, resulting in an effective tax rate of 22.5% for the quarter. During the three months ended June 30, 2023, we recorded a total income tax provision of $167 million on a pre-tax income of $783 million, resulting in an effective tax rate of 21.3% for the quarter.

Previous wording

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).

Current wording

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 IRS.

Previous wording

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.

Current wording

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 twelve months to complete. Failing a resolution through that process, the matter would ultimately be resolved by the United States federal courts.

Previous wording

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.

Current wording

Completion and Production revenue in the first six months of 2024 was $6.8 billion, a decrease of $111 million, or 2%, compared to the first six months of 2023. Operating income for the segment in the first six months of 2024 was $1.4 billion, an increase of $38 million, or 3%, compared to the first six months of 2023. The decrease in revenue was largely driven by lower pressure pumping services in U.S. land. Partially offsetting this decline were higher completion tool sales and improved artificial lift activity globally, improved cementing services internationally, and higher stimulation activity in Latin America. Operating income for the segment increased due to pressure pumping and completion tools activity growth internationally, completion tools activity growth in the Gulf of Mexico, and artificial lift activity and pricing improvements in U.S. land.

Previous wording

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.

Current wording

Middle East/Asia revenue in the first six months of 2024 was $2.9 billion, a 6% increase compared to the first six months of 2023, resulting primarily from increased project management activity and improved well construction activity in Kuwait, improved drilling services, higher completion tool sales, and increased cementing services in Saudi Arabia, higher well construction activity in United Arab Emirates, and improved drilling services in Qatar. Partially offsetting these improvements were lower project management activity and decreased fluid services in Saudi Arabia and Asia.

Previous wording

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.

Current wording

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 U.S. dollars upon maturity or earlier if certain conditions are met. During the six months ended June 30, 2024, we recorded a loss of $38 million in March of 2024 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.

Previous wording

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.

Current wording

Egypt Currency Impact. In the first quarter of 2024, the Egyptian pound devalued by approximately 35% relative to the U.S. dollar. Consequently, we incurred a loss of $38 million in the six months ended June 30, 2024, due to the devaluation of the currency in Egypt.

Previous wording

The Private Securities Litigation Reform Act of 1995 provides safe harbor provisions for forward-looking information. Forward-looking information is based on projections and estimates, not historical information. Some statements in this Form 10-Q are forward-looking and use words like “may,” “may not,” “believe,” “do not believe,” “plan,” “estimate,” “intend,” “expect,” “do not expect,” “anticipate,” “do not anticipate,” “should,” “likely,” and other expressions. We may also provide oral or written forward-looking information in our statements and other materials we release to the public. Forward-looking information involves risk and uncertainties and reflects our best judgment based on current information. Our results of operations can be affected by inaccurate assumptions we make or by known or unknown risks and uncertainties. In addition, other factors may affect the accuracy of our forward-looking information. As a result, no forward-looking information can be guaranteed. Actual events and the results of our operations may vary materially.

Current wording

The Private Securities Litigation Reform Act of 1995 provides safe harbor provisions for forward-looking information. Forward-looking information is based on projections and estimates, not historical information. Some statements in this Form 10-Q are forward-looking and use words like “may,” “may not,” “believe,” “do not believe,” “plan,” “estimate,” “intend,” “expect,” “do not expect,” “anticipate,” “do not anticipate,” “should,” “likely,” and other expressions. We may also provide oral or written forward-looking information in our statements and other materials we release to the public. Forward-looking information involves risks and uncertainties and reflects our best judgment based on current information. Our results of operations can be affected by inaccurate assumptions we make or by known or unknown risks and uncertainties. In addition, other factors may affect the accuracy of our forward-looking information. As a result, no forward-looking information can be guaranteed. Actual events and the results of our operations may vary materially.