Item 2.02. Results of Operations and Financial Condition
On January 21, 2020, registrant issued a press release entitled “Halliburton Announces Fourth Quarter 2019 Results."
The text of the Press Release is as follows:
HALLIBURTON ANNOUNCES FOURTH QUARTER 2019 RESULTS
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Reported net loss of $1.88 per diluted share
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Adjusted net income of $0.32 per diluted share, excluding impairments and other charges
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HOUSTON - January 21, 2020 - Halliburton Company (NYSE:HAL) announced today a net loss of $1.7 billion, or $1.88 per diluted share, for the fourth quarter of 2019. This compares to net income for the third quarter of 2019 of $295 million, or $0.34 per diluted share. Adjusted net income for the fourth quarter of 2019, excluding impairments and other charges, was $285 million, or $0.32 per diluted share. Halliburton's total revenue in the fourth quarter of 2019 was $5.2 billion, a 6% decrease from revenue of $5.6 billion in the third quarter of 2019. Reported operating loss was $1.7 billion during the fourth quarter of 2019, compared to operating income of $536 million in the third quarter of 2019. Adjusted operating income for the fourth quarter of 2019, excluding impairments and other charges, was $546 million, a 2% increase sequentially.
Total revenue for the full year of 2019 was $22.4 billion, a decrease of $1.6 billion, or 7%, from 2018. Reported operating loss for 2019 was $448 million, compared to a reported operating income of $2.5 billion for 2018. Excluding impairments and other charges, adjusted operating income for 2019 was $2.1 billion, compared to adjusted operating income of $2.7 billion for 2018.
“I am pleased with how Halliburton executed for the fourth quarter and the full year. We optimized our performance in North America as the market softened, and our international business grew for the second year in a row,” commented Jeff Miller, Chairman, President and CEO.
“We delivered over $900 million of free cash flow for the full year 2019, demonstrating our ability to generate consistent free cash flow throughout different business environments.
“International revenue increased 10% sequentially in the fourth quarter of 2019. It also grew 10% on a full year basis, outpacing the international rig count. For the full year, revenue increased in all international regions and in both our divisions.
“In 2020, we expect our international growth to continue. Increased activity, disciplined capital allocation, pricing improvements, and our ability to compete for a larger share of high-margin services should lead to improvement in our international margins in 2020.
“Our North America revenue decreased 21% sequentially in the fourth quarter and 18% for the full year as a result of reduced customer activity and pricing, and our decision to focus on returns over growth. We took swift actions in the fourth quarter making structural changes to adjust to the current market environment.
“While we expect customer spending in North America to be down again this year, we will continue executing our playbook, implementing our service delivery improvement strategy, and focusing on maximizing our returns.
“2020 opens a new decade and a new century for Halliburton. We will continue to focus on delivering margin expansion, industry-leading returns and strong free cash flow,” concluded Miller.
Operating Segments
Completion and Production
Completion and Production revenue in the fourth quarter of 2019 was $3.1 billion, a decrease of $448 million, or 13%, when compared to the third quarter of 2019, while operating income was $387 million, a decrease of $59 million, or 13%. These results were primarily due to reduced activity and pricing in multiple product service lines in North America land, primarily associated with stimulation services, coupled with reduced stimulation services in Latin America and well intervention services in the Middle East. These declines were partially offset by increased pressure pumping activity in the Eastern Hemisphere, coupled with increased year-end completion tool sales globally.
Drilling and Evaluation
Drilling and Evaluation revenue in the fourth quarter of 2019 was $2.1 billion, an increase of $89 million, or 4%, when compared to the third quarter of 2019, while operating income was $224 million, an increase of $74 million, or 49%. These results were primarily driven by increased activity in all product service lines in Middle East/Asia, coupled with increased drilling activity in Europe/Africa/CIS and year-end software sales globally. These improvements were partially offset by reduced activity in multiple product service lines in North America and reduced testing activity in Latin America.
Geographic Regions
North America
North America revenue in the fourth quarter of 2019 was $2.3 billion, a 21% decrease when compared to the third quarter of 2019. This decline was mainly due to reduced activity and pricing in North America land, primarily associated with pressure pumping and well construction. This decline was partially offset by increased year-end completion tool sales in the Gulf of Mexico.
International
International revenue in the fourth quarter of 2019 was $2.9 billion, a 10% increase when compared to the third quarter of 2019, primarily driven by increased activity in multiple product service lines in Middle East/Asia and increased well construction activity in the North Sea. These improvements were partially offset by a decline in activity in Argentina.
Latin America revenue in the fourth quarter of 2019 was $598 million, a 2% decrease sequentially, resulting primarily from reduced activity in multiple product service lines in Argentina, coupled with decreased testing activity across the region. These results were partially offset by increased activity for all product service lines in Colombia, increased project management activity and cloud infrastructure installations in Mexico, and increased year-end completion tool sales across the region.
Europe/Africa/CIS revenue in the fourth quarter of 2019 was $883 million, a 6% increase sequentially, resulting primarily from increased well construction activity in the North Sea, coupled with increased activity in multiple product service lines in Algeria. These improvements were partially offset by reduced pipeline services across the region.
Middle East/Asia revenue in the fourth quarter of 2019 was $1.4 billion, a 19% increase sequentially, largely resulting from increased activity in multiple product service lines in the Middle East, India and China, increased pressure pumping activity in Australasia, and increased year-end completion tool sales across the region. These results were partially offset by reduced well intervention services in the Middle East.
Other Financial Items
Halliburton recognized $2.2 billion, pre-tax, of impairments and other charges during the fourth quarter of 2019 to further adjust its cost structure to market conditions. These charges consisted primarily of non-cash asset impairments, mostly associated with pressure pumping and legacy drilling equipment, as well as severance and other costs.
Selective Technology & Highlights
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Halliburton received four major awards at the 2019 World Oil Awards gala in Houston. Halliburton's winning entries included Best Drilling Technology Award - Unique 3D Inversion Capability from EarthStarTM Ultra-Deep Resistivity Service; Best Exploration Technology Award - T1T2 IFMI for Unconventionals with Halliburton XMR™ Service; Best Well Intervention Technology Award - SPECTRUM® 360; and Best HSE/Sustainable Development (Onshore) Award - Halliburton Tuned® Prime™ Cement Spacer.
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PTTEP, a national petroleum exploration and production company in Thailand, selected Halliburton Landmark for joint development of new well design workflow to automate drilling and completion engineering processes across the well lifecycle.
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Halliburton announced a multi-year agreement with Repsol to provide a cloud-based master data management solution for E&P activities. The software as a service enables users to load, ingest, manage and access log, well and other E&P data across different locations for greater efficiency and productivity throughout Repsol's asset portfolio.
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Halliburton released PixStarTM High-Resolution Ultrasonic Imaging Service, a new logging-while-drilling technology that provides real-time images of the borehole to help operators identify fractures, improve wellbore stability, and optimize completion design.
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Halliburton introduced the Xtreme Single-Trip Multizone (XSTMZTM) system for completing wells in deepwater and ultra-deepwater conditions up to 15,000 psi. Based on Halliburton's successful 10,000-psi rated Enhanced Single-Trip Multizone (ESTMZTM) system, the increased pressure rating of the XSTMZ system allows operators to isolate and frac pack multiple zones at higher pump rates with larger proppant volumes. It also supports the ability to create zonal compartments for better stimulation of long pay zones that have high-pressure differentials between them.
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The 25th annual Halliburton Charity Golf Tournament raised $4.5 million for over 100 nonprofit organizations in Houston and across the U.S., once again making it one of the largest non-PGA golf tournament fundraisers in the U.S. This amount includes a $1.5 million matching contribution from Halliburton in recognition of the Company's 100th anniversary. The tournament has raised more than $23 million over the past 25 years, and 2019 represented the highest annual amount since the tournament first teed off.
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About Halliburton
Founded in 1919, Halliburton is one of the world's largest providers of products and services to the energy industry. With approximately 55,000 employees, representing 140 nationalities in more than 80 countries, the company helps its customers maximize value throughout the lifecycle of the reservoir - from locating hydrocarbons and managing geological data, to drilling and formation evaluation, well construction and completion, and optimizing production throughout the life of the asset. Visit the company’s website at www.halliburton.com. Connect with Halliburton on Facebook, Twitter, LinkedIn, Instagram and YouTube.
NOTE: The statements in this press release that are not historical statements, including statements regarding future financial performance, are forward-looking statements within the meaning of the federal securities laws. These statements are subject to numerous risks and uncertainties, many of which are beyond the company's control, which could cause actual results to differ materially from the results expressed or implied by the statements. These risks and uncertainties include, but are not limited to: the continuation or suspension of our stock repurchase program, the amount, the timing and the trading prices of Halliburton common stock, and the availability and alternative uses of cash; changes in the demand for or price of oil and/or natural gas; potential catastrophic events related to our operations, and related indemnification and insurance matters; protection of intellectual property rights and against cyber-attacks; compliance with environmental laws; changes in government regulations and regulatory requirements, particularly those related to oil and natural gas exploration, radioactive sources, explosives, chemicals, hydraulic fracturing services, and climate-related initiatives; compliance with laws related to income taxes and assumptions regarding the generation of future taxable income; risks of international operations, including risks relating to unsettled political conditions, war, the effects of terrorism, foreign exchange rates and controls, international trade and regulatory controls and sanctions, and doing business with national oil companies; weather-related issues, including the effects of hurricanes and tropical storms; changes in capital spending by customers; delays or failures by customers to make payments owed to us; execution of long-term, fixed-price contracts; structural changes and infrastructure issues in the oil and natural gas industry; maintaining a highly skilled workforce; availability and cost of raw materials; agreement with respect to and completion of potential dispositions, acquisitions and integration and success of acquired businesses and operations of joint ventures. Halliburton's Form 10-K for the year ended December 31, 2018, Form 10-Q for the quarter ended September 30, 2019, recent Current Reports on Form 8-K and other Securities and Exchange Commission filings discuss some of the important risk factors identified that may affect Halliburton's business, results of operations, and financial condition. Halliburton undertakes no obligation to revise or update publicly any forward-looking statements for any reason.