HALLIBURTON CO

RESULTS OF OPERATIONS IN 2024 COMPARED TO 2023

Operating Segments

Completion and Production

Completion and Production revenue was $13.3 billion in 2024, a decrease of $438 million, or 3%, compared to 2023. Operating income was $2.7 billion in 2024, a 4% decrease from $2.8 billion in 2023. These results were driven by lower pressure pumping services in U.S. land. Partially offsetting these declines were increased activity across multiple product service lines in Mexico and the Middle East, improved artificial lift activity in U.S. land, and higher cementing activity in Brazil and Norway.

Drilling and Evaluation

Drilling and Evaluation revenue was $9.7 billion in 2024, an increase of $364 million, or 4%, from 2023. Operating income was $1.6 billion in 2024, an increase of $65 million, or 4%, compared to 2023. These results were driven by increased drilling activity in the Western Hemisphere, higher drilling-related services in Qatar and the United Arab Emirates, as well as improved activity across multiple product service lines in Kuwait and the North Sea. Partially offsetting these improvements were declined wireline activity in North America, decreased fluid services in Brazil, and lower activity across multiple product service lines in Asia Pacific.

Geographic Regions

North America

North America revenue was $9.6 billion in 2024, an 8% decrease compared to 2023, resulting from lower pressure pumping services in U.S. land, reduced wireline activity, and decreased fluid services in the region. These declines were partially offset by higher drilling activity in the region and improved artificial lift activity in U.S. land.

Latin America

Latin America revenue was $4.2 billion in 2024, a 6% increase compared to 2023, resulting from higher activity across multiple product service lines in Argentina, Mexico, and Ecuador. Partially offsetting these improvements were lower activity across multiple product service lines in Colombia and lower completion tool sales in Brazil.

Europe/Africa/CIS

Europe/Africa/CIS revenue was $3.0 billion in 2024, a 5% increase compared to 2023, resulting from higher activity across multiple product service lines in the North Sea and increased activity across multiple product service lines in Italy. Partially offsetting these improvements were declines in activity across multiple product service lines in West Africa.

Middle East/Asia

Middle East/Asia revenue was $6.1 billion in 2024, an 8% increase compared to 2023, resulting from higher activity across multiple product service lines in Kuwait and Saudi Arabia, higher well construction activity in the United Arab Emirates, and increased activity across multiple product service lines in Australia. Partially offsetting these improvements were lower activity across multiple product service lines in Asia Pacific and Iraq.

Other Operating Items

Impairments and other charges. During 2024, we took a pre-tax charge of $116 million primarily related to severance costs, an impairment of assets held for sale, expenses related to a cybersecurity incident, a gain on a fair value adjustment of an equity investment, and other items. See Notes to Consolidated Financial Statements, Note 2 for further discussion on these charges.

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.

Nonoperating Items

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.

Argentina Currency Impact. Argentina devalued its peso by more than 50% during December 2023. Consequently, we incurred a loss of $131 million for the year ended December 31, 2023 due to the devaluation of the currency in Argentina.

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. In 2024, we recorded a loss of $38 million due to the fair value decrease in one of the notes in March 2024, resulting from the deterioration in the outlook of the debtor’s liquidity and financial projections. This is included in “Other, net” on the consolidated statements of operations.

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 $34 million during the year ended December 31, 2024 due to the devaluation of the currency in Egypt. This is included in “Other, net” on the consolidated statements of operations.

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.

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.

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 2013. 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 Notice of Proposed Adjustment (NOPA) from the IRS covering our 2016 US 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 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.

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.