HALLIBURTON CO

Previous wording

Since early 2020, world-wide oil and natural gas supply and demand imbalances and related volatility of oil and natural gas prices (including as a result of the COVID-19 pandemic) have resulted in dramatic fluctuations in oil and natural gas markets. The volatility continued in 2023 as markets were impacted by central bank rate hikes, macroeconomic uncertainty, non-OPEC supply growth, and renewed geopolitical unrest in the Middle East. In the U.S., oil and natural gas production in 2023 remained elevated, despite a generally declining rig count, as a result of the industry's focus on efficiencies, higher service intensity, and high-quality acreage. Lower commodity pricing and U.S. land rig counts generally contributed to softness in the market for energy products and services in North America, particularly in natural gas basins during the second half of 2023. Conversely, the international rig count showed steady growth in 2023 largely driven by national oil companies (NOCs) in the Middle East/Asia and Africa.

Current wording

Since early 2021, world-wide oil and natural gas supply and demand imbalances and related volatility of oil and natural gas prices (including as a result of the COVID-19 pandemic) have resulted in dramatic fluctuations in oil and natural gas markets. The volatility continued in 2024 as markets were impacted by macroeconomic uncertainty, non-OPEC supply growth, lack of demand recovery in China, geopolitical unrest in the Middle East and the Russia-Ukraine conflict. In the U.S., oil and natural gas production in 2024 remained elevated, despite a generally declining rig count, as a result of the industry's focus on efficiencies and higher service intensity. Lower commodity pricing and U.S. land rig counts generally contributed to softness in the market for energy products and services in North America. The international rig count was relatively flat in 2024, as gains in Africa and the Middle East were offset by reductions in Latin America.

Previous wording

Globally, we continue to be impacted by increased supply chain lead times for the supply of select raw materials. We monitor market trends and work to mitigate cost impacts through economies of scale in global procurement, technology modifications, and efficient sourcing practices. Also, while we have been impacted by inflationary cost increases, primarily related to chemicals, cement, and logistics costs, we generally try to pass much of those increases on to our customers and we believe we have effective solutions to minimize their operational impact.

Current wording

Globally, we continue to be impacted by extended supply chain lead times for the supply of select raw materials. We monitor market trends and work to mitigate cost impacts through economies of scale in global procurement, technology modifications, and efficient sourcing practices. Also, while we have been impacted by inflationary cost increases, primarily related to chemicals, cement, and logistics costs, we generally try to pass much of those increases on to our customers and we believe we have effective solutions to minimize their operational impact.

Previous wording

During 2023, we generated total company revenue of $23.0 billion, a 13% increase from the $20.3 billion of revenue generated in 2022, with our Completion and Production (C&P) segment revenue increasing by 18% and our Drilling and Evaluation (D&E) segment revenue increasing by 7%. We reported total company operating income of approximately $4.1 billion in 2023, compared to operating income of $2.7 billion in 2022. These increases were driven by increased demand for our products and services in all four of our geographic regions.

Current wording

During 2024, we generated total company revenue of $22.9 billion, flat when compared to the $23.0 billion of revenue generated in 2023, with our Completion and Production (C&P) segment revenue decreasing by 3% and our Drilling and Evaluation (D&E) segment revenue increasing by 4%. Total company operating income was $3.8 billion in 2024, compared to $4.1 billion in 2023.

Previous wording

In the first quarter of 2021, we announced our target to achieve a 40% reduction in our Scope 1 and 2 emissions by 2035 from the 2018 baseline. During 2023, we continued to execute on priorities we set up to help us progress toward our 2035 emissions reduction target. As our customers have begun to invest more in emissions reduction, we have developed or are developing solutions intended to reduce our own carbon footprint while advancing our customers’ decarbonization efforts. As the energy mix transition unfolds, we seek to apply our expertise and products and services across different parts of the energy value chain. We have also applied our experience and resources in 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. As of December 31, 2023, Halliburton Labs had 32 participating companies and alumni. Halliburton Labs 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.

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. During 2024, we continued to execute on our priorities to drive down our emissions intensity. 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, 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 December 31, 2024, Halliburton Labs had 38 participants and alumni organizations.

Previous wording

Additionally, we published our 2022 Annual and Sustainability Report (ASR) in April of 2023, which details our strategy and progress on sustainability issues, as well as our efforts on increased environmental reporting transparency, including conducting a climate-risk scenario analysis. Information on our website, including the ASR, is not incorporated by reference into this Annual Report on Form 10-K.

Current wording

Additionally, we published our 2023 Annual and Sustainability Report (ASR) in April of 2024, which detailed our strategy and progress on sustainability issues, as well as our efforts on increased environmental reporting transparency, including conducting a climate-risk scenario analysis, and expect to publish our 2024 ASR in April of 2025. Information on our website, including the ASR, is not incorporated by reference into this Annual Report on Form 10-K.

Previous wording

We had $2.3 billion of cash and equivalents as of December 31, 2023 and December 31, 2022, respectively.

Current wording

We had $2.6 billion and $2.3 billion of cash and equivalents as of December 31, 2024 and December 31, 2023, respectively.

Previous wording

•Cash flows from operating activities were $3.5 billion. Working capital, which consists of receivables, inventories, and accounts payable, collectively had a negative impact of$511 million, primarily due to increased receivables and inventory.

Current wording

•Cash flows from operating activities were $3.9 billion. Working capital, which consists of receivables, inventories, and accounts payable, collectively had a negative impact of$103 million, primarily due to increased receivables.

Previous wording

•We repurchased 22.7 million shares of our common stock for $800 million.

Current wording

•We repurchased 30.5 million shares of our common stock for $1.0 billion.

Previous wording

•We paid $576 million of dividends to our shareholders.

Current wording

•We paid $600 million of dividends to our shareholders.

Previous wording

•We repurchased $300 million aggregate principal amounts of various series of our outstanding debt.

Current wording

•We repurchased $100 million aggregate principal amounts of various series of our outstanding debt.

Previous wording

We manufacture most of our own equipment, which provides us with some flexibility to increase or decrease our capital expenditures based on market conditions. We currently expect capital spending for 2024 to be approximately 6% of revenue. We believe this level of spend will allow us to invest in our key strategic technologies, including the construction and deployment of our Zeus electric fracturing systems in North America, our iStar Intelligent Drilling and Logging Platform, and our iCruise Intelligent Rotary Steerable System. We will continue to maintain capital discipline and monitor the rapidly changing market dynamics, and we may adjust our capital spend accordingly.

Current wording

We manufacture most of our own equipment, which provides us with some flexibility to increase or decrease our capital expenditures based on market conditions. We currently expect capital spending for 2025 to be approximately 6% of revenue. We believe this level of spend will allow us to invest in our key strategic technologies and businesses, including the construction and deployment of our Zeus electric fracturing systems in North America and the international growth of our artificial lift, well intervention, unconventionals, and drilling technologies. We will continue to maintain capital discipline and monitor the rapidly changing market dynamics, and we may adjust our capital spend accordingly.

Previous wording

In 2024, we expect to pay approximately $518 million for contractual purchase obligations (with another $211 million due through 2026), $397 million of interest on debt, and $391 million under our leasing arrangements. Payments for interest on our debt arrangements are expected to remain relatively flat for the foreseeable future. See Note 6 and Note 10 to the consolidated financial statements for additional information on expected future payments under our leasing arrangements and debt maturities.

Current wording

In 2025, we expect to pay approximately $645 million for contractual purchase obligations (with another $143 million due through 2027), $392 million of interest on debt, and $395 million under our leasing arrangements. Payments for interest on our debt are expected to remain relatively flat for the foreseeable future. See Notes to Consolidated Financial Statements, Note 6 and Note 10 for additional information on expected future payments under our leasing arrangements and debt maturities.

Previous wording

We are not able to reasonably estimate the timing of cash outflows associated with our uncertain tax positions, in part because we are unable to predict the timing of potential tax settlements with applicable taxing authorities. As of December 31, 2023, we had $268 million of gross unrecognized tax benefits, excluding penalties and interest, of which we estimate $235 million may require us to make a cash payment. We estimate that approximately $158 million of the cash payment will not be settled within the next 12 months.

Current wording

We are not able to reasonably estimate the timing of cash outflows associated with our uncertain tax positions, in part because we are unable to predict the timing of potential tax settlements with applicable taxing authorities. As of December 31, 2024, we had $196 million of gross unrecognized tax benefits, excluding penalties and interest, of which we estimate $176 million may require us to make a cash payment. We estimate that approximately $112 million of the cash payment will not be settled within the next 12 months.

Previous wording

While we maintain focus on liquidity and debt reduction, we are also focused on providing cash returns to our shareholders. In January of 2023, our Board approved a capital return framework with a goal of returning at least 50% of our annual free cash flow to shareholders through dividends and share repurchases. We returned $1.4 billion of capital to shareholders in 2023 through buybacks and dividends. During 2023, our quarterly dividend rate was $0.16 per common share, or approximately $144 million in the aggregate. In January 2024, we announced that our Board of Directors declared a dividend of $0.17 per common share for the first quarter of 2024, or approximately $152 million in the aggregate.

Current wording

While we maintain focus on liquidity and debt reduction, we are also focused on providing cash returns to our shareholders. In 2023, our Board approved a capital return framework with a goal of returning at least 50% of our annual free cash flow to shareholders through dividends and share repurchases. We returned $1.6 billion of capital to shareholders in 2024 through buybacks and dividends. During 2024, our quarterly dividend rate was $0.17 per common share, or approximately $150 million in the aggregate.

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 22.7 million shares of common stock during the year ended December 31, 2023. Approximately $4.1 billion remained authorized for repurchases under our program as of December 31, 2023 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 30.5 million shares of common stock during the year ended December 31, 2024. Approximately $3.0 billion remained authorized for repurchases under our program as of December 31, 2024 and may be used for open market and other share purchases.

Previous wording

During the second quarter of 2023, we began our migration to SAP S4 which we expect to complete by the end of 2025. The migration is estimated to cost approximately $250 million, of which we have incurred $51 million through December 31, 2023. For 2024, we expect to spend approximately $120 million. We believe the new system will enhance visibility to our operations and provide important efficiency benefits, cost savings, and advanced analytics that will benefit us and our customers.

Current wording

During 2023, we began our migration to SAP S4 which we now expect to complete in the first half of 2026. We now estimate the total project investment to increase between $20 million and $30 million above our initial $250 million forecast, of which we have incurred $124 million through December 31, 2024. For 2025, we expect to spend approximately $100 million on this project. 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 December 31, 2023, we had $2.3 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 provide sufficient liquidity to addressthe challenges and opportunities of the current market andour expected global cash needs for 2024, 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 December 31, 2024, we had $2.6 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 $471 million coming due beginning in 2025 through 2027, with the majority coming due in 2025. 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 provide sufficient liquidity to addressthe challenges and opportunities of the current market andour expected global cash needs for 2025, including capital expenditures, working capital investments, shareholder returns, if any, and debt repurchases, if any, and scheduled interest and principal payments.

Previous wording

Guarantee agreements. In the normal course of business, we have agreements with financial institutions under which approximately $2.6 billion letters of credit, bank guarantees, or surety bonds were outstanding as of December 31, 2023. Some of the outstanding letters of credit have triggering events that would entitle a bank to require cash collateralization, however, none of these triggering events have occurred. As of December 31, 2023, we had no material off-balance sheet liabilities and were not required to make any material cash distributions to our unconsolidated subsidiaries.

Current wording

Guarantee agreements. In the normal course of business, we have agreements with financial institutions under which approximately $2.8 billion letters of credit, bank guarantees, or surety bonds were outstanding as of December 31, 2024. Some of the outstanding letters of credit have triggering events that would entitle a bank to require cash collateralization, however, none of these triggering events have occurred. As of December 31, 2024, we had no material off-balance sheet liabilities and were not required to make any material cash distributions to our unconsolidated subsidiaries.

Previous wording

Credit ratings. Our credit ratings with Standard & Poor’s (S&P) remained BBB+ for our long-term debt and A-2 for our short-term debt, with an upgrade to positive outlook from stable outlook in November 2023. During the third quarter of 2023, our long-term debt rating with Moody's Investors Service (Moody's) was upgraded to A3 from Baa1 and the short-term debt rating remained P-2, with a stable outlook. As of the end of the year our long-term debt rating with Moody's remained A3 and short-term debt rating remained P-2, with a stable outlook.

Current wording

Credit ratings. Our credit ratings with Standard & Poor’s (S&P) remained 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 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 6% of our total receivables as of December 31, 2023. While we have experienced payment delays from our primary customer in Mexico, these amounts are not in dispute and we have not historically had, and we do not expect to have, any material write-offs due to collectability of receivables from this customer.

Current wording

Receivables from our primary customer in Mexico accounted for approximately 8% of our total receivables as of December 31, 2024. While we have experienced payment delays from our primary customer in Mexico, these amounts are not in dispute and we have not historically had, and we do not expect to have, 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. In 2023, 2022, and 2021, based on the location of services provided and products sold, 44%, 45%, and 40%, respectively, of our consolidated revenue was from the United States. No other country accounted for more than 10% of our revenue.

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. In 2024, 2023, and 2022, based on the location of services provided and products sold, 40%, 44%, and 45%, respectively, of our consolidated revenue was from the United States. No other country accounted for more than 10% of our revenue.

Previous wording

Some of the more significant determinants of current and future spending levels of our customers are oil and natural gas prices and our customers' expectations about future prices, global oil supply and demand, completions intensity, the world economy, the availability of capital, government regulation, and global stability, which together drive worldwide drilling and completions activity. Lower oil and natural gas prices usually translate into lower exploration and production budgets and lower rig count, while the opposite is usually true for higher oil and natural gas prices. Our financial performance is therefore significantly affected by oil and natural gas prices and worldwide rig activity, which are summarized in the tables below.

Current wording

Some of the more significant determinants of current and future spending levels of our customers are oil and natural gas prices, our customers’ expectations about future prices, global oil supply and demand, the impact on natural gas supply and demand in North America of electrification and data centers power requirements, completions intensity, the world economy, the availability of capital, government regulation, and global stability, which together drive worldwide drilling and completions activity. We expect that many of our customers in North America will continue their strategy of operating within their cash flows and generating returns rather than prioritizing production growth. Lower oil and natural gas prices usually translate into lower exploration and production budgets and lower rig count, while the opposite is usually true for higher oil and natural gas prices. Our financial performance is therefore significantly affected by oil and natural gas prices and worldwide rig activity, which are summarized in the tables below.

Previous wording

We believe that oil demand growth will be driven by resilient global economic growth and increases in transportation activity. In addition, we think oil supply dynamics have fundamentally changed due to, among other things, investor return requirements, and regulatory initiatives adverse to oil and natural gas exploration and production and that promote alternative energy, any of which could limit supply growth. We believe that despite the changes in oil supply dynamics, increased investment in existing and new sources of production is the only solution to increase supply and that production will be needed from conventional and unconventional, deep-water and shallow-water, and short and long-cycle projects. We expect that increased production requirements will in turn create demand for our products and services.

Current wording

Looking ahead to 2025 and beyond, we anticipate a rise in global oil and natural gas demand. The International Energy Agency anticipates both oil and natural gas demand to continue growing through 2030 underscoring the continued importance of both resources in the global energy mix. In addition, we believe oil supply dynamics have fundamentally changed due to investor return requirements, regulatory initiatives adverse to oil and gas exploration and production, and initiatives that favor alternative energy. We believe that despite these changes, increased investment in existing and new sources of oil and natural gas production is needed to address the increased demand. This will necessitate production from conventional and unconventional, deep-water and shallow-water, and short and long-cycle projects. We expect that increased oil and natural gas production requirements will in turn create demand for our products and services. Furthermore, easing inflationary pressures in Organization for Economic Co-operation (OECD) countries may lead to central bank rate cuts that could sustain economic growth. Additionally, we expect a growing global economy combined with rising living standards in developing nations will increase energy consumption. We expect natural gas demand should increase over time by the burgeoning number of data centers, the rise of artificial intelligence, and the electrification of transportation and other sectors of the economy.

Previous wording

SAP S4 Upgrade Expense. As previously mentioned, in the second quarter of 2023 we began our migration to SAP S4, which we expect to complete by the end of 2025. In 2023, we recognized $51 million of expense on our SAP S4 migration.

Current wording

SAP S4 Upgrade Expense. As previously mentioned, during 2023 we began our migration to SAP S4, which we expect to complete in the first half of 2026. In 2024 and 2023, we recognized $124 million and $51 million of expense on our SAP S4 migration, respectively.

Previous wording

Argentina Blue Chip Swap. The Central Bank of Argentina maintains currency controls that limit our ability to access U.S. dollars in Argentina and remit cash from our Argentine operations. The execution of certain trades known as Blue Chip Swaps, effectively results in a parallel U.S. dollar exchange rate. This parallel rate, which cannot be used as the basis to remeasure our net monetary assets in U.S. dollars under U.S. GAAP, was 20% higher than Argentina's official exchange rate at December 31, 2023. For the year ended December 31, 2023, we entered into Blue Chip Swap transactions, which resulted in a $110 million pre-tax loss on investment.

Current wording

Argentina Blue Chip Swap. The Central Bank of Argentina maintains currency controls that limit our ability to access U.S. dollars in Argentina and remit cash from our Argentine operations. The execution of certain trades known as Blue Chip Swaps, effectively results in a parallel U.S. dollar exchange rate. For the years ended December 31, 2024 and December 31, 2023, we entered into Blue Chip Swap transactions, which resulted in $8 million and $110 million pre-tax losses on investment, respectively.

Previous wording

Income tax provision. During the year ended December 31, 2023, we recorded a total income tax provision of $701 million on pre-tax income of $3.4 billion, resulting in an effective tax rate of 20.8%. The effective tax rate for 2023 was primarily impacted by our geographic mix of earnings, tax adjustments related to the reassessment of prior year tax accruals, and changes of valuation allowance on some of our deferred tax assets. During 2022, we recorded a total income tax provision of $515 million on pre-tax income of $2.1 billion, resulting in an effective tax rate of 24.4%. See Note 12 to the consolidated financial statements for significant drivers of these tax provisions.

Current wording

Income tax provision. During the year ended December 31, 2024, we recorded a total income tax provision of $718 million on pre-tax income of $3.2 billion, resulting in an effective tax rate of 22.2%. The effective tax rate for 2024 was primarily impacted by our geographic mix of earnings, tax adjustments related to the reassessment of prior year tax accruals, and changes of valuation allowance on some of our deferred tax assets. During 2023, we recorded a total income tax provision of $701 million on pre-tax income of $3.4 billion, resulting in an effective tax rate of 20.8%. See Notes to Consolidated Financial Statements, Note 12 for significant drivers of these tax provisions.

Previous wording

Pillar Two. The OECD recently 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. We have considered the possible implication of the legislation passed or in consideration of being passed, and we do not believe these rules will have a material impact on our taxes in the near future.

Current wording

Pillar Two. The OECD 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 year ended December 31, 2024.

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 2023, we initiated the IRS administrative appeals process, which is ongoing. Failing a resolution through that process, the matter would ultimately be resolved by the United States federal courts.

Previous wording

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.

Current wording

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 $640 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.

Previous wording

We have operations in more than 70 countries. Consequently, we are subject to the jurisdiction of a significant number of taxing authorities. The income earned in these various jurisdictions is taxed on differing bases, including net income actually earned, net income deemed earned, and revenue-based tax withholding. Our tax filings are routinely examined in the normal course of business by tax authorities. The final determination of our income tax liabilities involves the interpretation of local tax laws, tax treaties and related authorities in each jurisdiction, as well as the significant use of estimates and assumptions regarding the scope of future operations and results achieved, the timing and nature of income earned and expenditures incurred. The final determination of tax audits or changes in the operating environment, including changes in tax law and currency/repatriation controls, could impact the determination of our income tax liabilities for a tax year and have an adverse effect on our financial statements. For example, we received a NOPA from the IRS on September 28, 2023. See "Managements's Discussion and Analysis of Financial Condition and Results of Operations - Nonoperating Items, Internal Revenue Service Notice of Proposed Adjustment" and Note 12 to the consolidated financial statements for further information.

Current wording

We have operations in more than 70 countries. Consequently, we are subject to the jurisdiction of a significant number of taxing authorities. The income earned in these various jurisdictions is taxed on differing bases, including net income actually earned, net income deemed earned, and revenue-based tax withholding. Our tax filings are routinely examined in the normal course of business by tax authorities. The final determination of our income tax liabilities involves the interpretation of local tax laws, tax treaties and related authorities in each jurisdiction, as well as the significant use of estimates and assumptions regarding the scope of future operations and results achieved, the timing and nature of income earned and expenditures incurred. The final determination of tax audits or changes in the operating environment, including changes in tax law and currency/repatriation controls, could impact the determination of our income tax liabilities for a tax year and have an adverse effect on our financial statements. For example, we received a NOPA from the IRS on September 28, 2023. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations– Nonoperating Items, Internal Revenue Service Notice of Proposed Adjustment” and Notes to Consolidated Financial Statements, Note 12 for further information.

Previous wording

As discussed in Note 11 of our consolidated financial statements, we are subject to various legal and investigation matters arising in the ordinary course of business. As of December 31, 2023, we have accrued an estimate of the probable and estimable costs for the resolution of some of our legal and investigation matters, which is not material to our consolidated financial statements. For other matters for which the liability is not probable and reasonably estimable, we have not accrued any amounts. Attorneys in our legal department monitor and manage all claims filed against us and review all pending investigations. Generally, the estimate of probable costs related to these matters is developed in consultation with internal and outside legal counsel representing us. Our estimates are based upon an analysis of potential results, assuming a combination of litigation and settlement strategies. The accuracy of these estimates is impacted by, among other things, the complexity of the issues and the amount of due diligence we have been able to perform. We attempt to resolve these matters through settlements, mediation, and arbitration proceedings when possible. If the actual settlement costs, final judgments, or fines, after appeals, differ from our estimates, there may be a material adverse effect on our future financial results. We have in the past recorded significant adjustments to our initial estimates of these types of contingencies.

Current wording

As discussed in Notes to Consolidated Financial Statements, Note 11, we are subject to various legal and investigation matters arising in the ordinary course of business. As of December 31, 2024, we have accrued an estimate of the probable and estimable costs for the resolution of some of our legal and investigation matters, which is not material to our consolidated financial statements. For other matters for which the liability is not probable and reasonably estimable, we have not accrued any amounts. Attorneys in our legal department monitor and manage all claims filed against us and review all pending investigations. Generally, the estimate of probable costs related to these matters is developed in consultation with internal and outside legal counsel representing us. Our estimates are based upon an analysis of potential results, assuming a combination of litigation and settlement strategies. The accuracy of these estimates is impacted by, among other things, the complexity of the issues and the amount of due diligence we have been able to perform. We attempt to resolve these matters through settlements, mediation, and arbitration proceedings when possible. If the actual settlement costs, final judgments, or fines, after appeals, differ from our estimates, there may be a material adverse effect on our future financial results. We have in the past recorded significant adjustments to our initial estimates of these types of contingencies.

Previous wording

When conducting an impairment test on long-lived assets, other than goodwill, we first group individual assets based on the lowest level for which identifiable cash flows are largely independent of the cash flows from other assets. This requires some judgment. We then compare estimated future undiscounted cash flows expected to result from the use and eventual disposition of the asset group to its carrying amount. If the undiscounted cash flows are less than the asset group’s carrying amount, we then determine the asset group's fair value by using a discounted cash flow analysis. This analysis is based on estimates such as management’s short-term and long-term forecast of operating performance, including revenue growth rates and expected profitability margins, estimates of the remaining useful life and service potential of the assets within the asset group, and a discount rate based on our weighted average cost of capital. An impairment loss is measured and recorded as the amount by which the asset group's carrying amount exceeds its fair value. See Note 2 to the consolidated financial statements for further discussion of impairments and other charges.

Current wording

When conducting an impairment test on long-lived assets, other than goodwill, we first group individual assets based on the lowest level for which identifiable cash flows are largely independent of the cash flows from other assets. This requires some judgment. We then compare estimated future undiscounted cash flows expected to result from the use and eventual disposition of the asset group to its carrying amount. If the undiscounted cash flows are less than the asset group’s carrying amount, we then determine the asset group’s fair value by using a discounted cash flow analysis. This analysis is based on estimates such as management’s short-term and long-term forecast of operating performance, including revenue growth rates and expected profitability margins, estimates of the remaining useful life and service potential of the assets within the asset group, and a discount rate based on our weighted average cost of capital. An impairment loss is measured and recorded as the amount by which the asset group’s carrying amount exceeds its fair value. See Notes to Consolidated Financial Statements, Note 2 for further discussion of impairments and other charges.

Previous wording

The impairment assessments discussed above incorporate inherent uncertainties, including projected commodity pricing, supply and demand for our services, and future market conditions, which are difficult to predict in volatile economic environments and could result in impairment charges in future periods if actual results materially differ from the estimated assumptions utilized in our forecasts. If market conditions deteriorate, including crude oil prices significantly declining and remaining at low levels for a sustained period of time, we could be required to record additional impairments of the carrying value of our long-lived assets in the future which could have a material adverse impact on our operating results. See Note 1 to the consolidated financial statements for our accounting policies related to long-lived assets.

Current wording

The impairment assessments discussed above incorporate inherent uncertainties, including projected commodity pricing, supply and demand for our services, and future market conditions, which are difficult to predict in volatile economic environments and could result in impairment charges in future periods if actual results materially differ from the estimated assumptions utilized in our forecasts. If market conditions deteriorate, including crude oil prices significantly declining and remaining at low levels for a sustained period of time, we could be required to record additional impairments of the carrying value of our long-lived assets in the future which could have a material adverse impact on our operating results. See Notes to Consolidated Financial Statements, Note 1 for our accounting policies related to long-lived assets.

Previous wording

At December 31, 2023, our allowance for credit losses totaled $742 million, or 13.9% of notes and accounts receivable before the allowance. At December 31, 2022, our allowance for credit losses totaled $731 million, or 14.7% of notes and accounts receivable before the allowance. The allowance for credit losses in both years is primarily comprised of accounts receivable from our primary customer in Venezuela. A hypothetical 100 basis point change in our estimate of the collectability of our notes and accounts receivable balance as of December 31, 2023 would have resulted in a $54 million adjustment to 2023 total operating costs and expenses. See Note 5 to the consolidated financial statements for further information.

Current wording

At December 31, 2024, our allowance for credit losses totaled $754 million or 13.9% of notes and accounts receivable before the allowance. At December 31, 2023, our allowance for credit losses totaled $742 million, or 13.9% of notes and accounts receivable before the allowance. The allowance for credit losses in both years is primarily comprised of accounts receivable from our primary customer in Venezuela. A hypothetical 100 basis point change in our estimate of the collectability of our notes and accounts receivable balance as of December 31, 2024 would have resulted in a $54 million adjustment to 2024 total operating costs and expenses. See Notes to Consolidated Financial Statements, Note 5 for further information.

Previous wording

We are exposed to market risk from changes in foreign currency exchange rates and interest rates. We selectively manage these exposures through the use of derivative instruments, including forward foreign exchange contracts, foreign exchange options, and interest rate swaps. The objective of our risk management strategy is to minimize the volatility from fluctuations in foreign currency and interest rates. We do not use derivative instruments for trading purposes. The counterparties to our forward contracts, options, and interest rate swaps are global commercial and investment banks.

Current wording

We are exposed to market risks primarily associated with changes in foreign currency exchange rates. We selectively manage these exposures through the use of derivative instruments, including forward foreign exchange contracts and foreign exchange options. The objective of our risk management strategy is to minimize the volatility from fluctuations in foreign currency. We do not use derivative instruments for trading purposes. The counterparties to our forward contracts and options are global commercial and investment banks.

Previous wording

We use a sensitivity analysis model to measure the impact of potential adverse movements in foreign currency exchange rates and interest rates. With respect to foreign exchange sensitivity, after consideration of the impact from our forward foreign exchange contracts and options, a hypothetical 10% adverse change in the value of all our foreign currency positions relative to the United States dollar as of December 31, 2023 would result in a $85 million, pre-tax loss for our net monetary assets denominated in currencies other than United States dollars. As of December 31, 2023, we did not have any interest rate swaps outstanding and our outstanding debt has fixed interest rates.

Current wording

We use a sensitivity analysis model to measure the impact of potential adverse movements in foreign currency exchange rates. With respect to foreign exchange sensitivity, after consideration of the impact from our forward foreign exchange contracts and options, a hypothetical 10% adverse change in the value of all our foreign currency positions relative to the U.S. dollar as of December 31, 2024 would result in a $85 million, pre-tax loss for our net monetary assets denominated in currencies other than U.S. dollars.

Previous wording

There are certain limitations inherent in the sensitivity analysis presented, primarily due to the assumption that exchange rates and interest rates change instantaneously in an equally adverse fashion. In addition, the analyses are unable to reflect the complex market reactions that normally would arise from the market shifts modeled. While this is our best estimate of the impact of the various scenarios, these estimates should not be viewed as forecasts.

Current wording

There are certain limitations inherent in the sensitivity analysis presented, primarily due to the assumption that exchange rates change instantaneously in an equally adverse fashion. In addition, the analysis is unable to reflect the complex market reactions that normally would arise from the market shifts modeled. While this is our best estimate of the impact of the various scenarios, this estimate should not be viewed a forecast.

Previous wording

For further information regarding foreign currency exchange risk, interest rate risk, and credit risk, see Note 16 to the consolidated financial statements.

Current wording

For further information regarding foreign currency exchange risk and other risks related to interest rates and credit risk, see Notes to Consolidated Financial Statements, Note 16.

Previous wording

We are subject to numerous environmental, legal, and regulatory requirements related to our operations worldwide. For information related to environmental matters, see Note 11 to the consolidated financial statements and "Part I, Item 1(a). “Risk Factors.”

Current wording

We are subject to numerous environmental, legal, and regulatory requirements related to our operations worldwide. For information related to environmental matters, see Notes to Consolidated Financial Statements, Note 11 and Part I, Item 1(a), “Risk Factors.”