- Reported net loss of $1.16 per diluted share
- Adjusted net income of $0.31 per diluted share, excluding
special items
Halliburton Company (NYSE: HAL) announced today a net loss of
$1.0 billion, or $1.16 per diluted share, for the first quarter of
2020. This compares to net income for the first quarter of 2019 of
$152 million, or $0.17 per diluted share. Adjusted net income for
the first quarter of 2020, excluding impairments and other charges
and a loss on the early extinguishment of debt, was $270 million,
or $0.31 per diluted share. This compares to adjusted net income
for the first quarter of 2019, excluding impairments and other
charges, of $201 million, or $0.23 per diluted share. Halliburton's
total revenue in the first quarter of 2020 was $5.0 billion, a 12%
decrease from revenue of $5.7 billion in the first quarter of 2019.
Reported operating loss was $571 million in the first quarter of
2020 compared to reported operating income of $365 million in the
first quarter of 2019. Excluding impairments and other charges,
adjusted operating income was $502 million in the first quarter of
2020, an 18% increase from adjusted operating income of $426
million in the first quarter of 2019.
“As the world is battling the COVID-19 pandemic, I thank our
employees for their dedication and focus during these difficult
times. The health and safety of our employees and their families is
extremely important to me. We are monitoring the situation closely
and following our own guidelines, as well as those from the Centers
for Disease Control and Prevention (CDC), the World Health
Organization (WHO) and state and local governments. On our
customers’ work sites and within our facilities, Halliburton people
are getting the job done, while taking the appropriate steps to
protect themselves and others,” commented Jeff Miller, Chairman,
President and CEO.
“Halliburton executed well in the first quarter. Total company
revenue for the first quarter was $5.0 billion, a 12% decrease year
over year, and adjusted operating income of $502 million increased
18% year on year. Both our divisions delivered strong margin
performance in the first quarter. Our first quarter results
demonstrate that the Halliburton team is well prepared to adjust
and deliver under any market conditions.
“Our industry is facing the dual shock of a massive drop in
global oil demand coupled with a resulting oversupply.
Consequently, we expect activity in North America land to sharply
decline during the second quarter and remain depressed through
year-end, impacting all basins. Internationally, we believe the
activity changes will not be uniform across all markets. OPEC+
production decisions and the duration of pandemic-related demand
and activity disruptions will ultimately determine the extent of
international spending declines this year.
“We have been through downturns before. We know what to do and
will execute based on that experience. We are taking swift actions
to reduce overhead and other costs by approximately $1 billion,
lower capital expenditures to $800 million, and improve working
capital. We will take further actions as necessary to adjust to
evolving market conditions.
“We believe the actions we take will not only temper the impact
of the activity declines on our financial performance, but also
ensure that we are in a strong position, financially and
structurally, to take advantage of the market’s eventual recovery,”
concluded Miller.
Operating Segments
Completion and Production
Completion and Production revenue in the first quarter of 2020
was $3.0 billion, a decrease of $700 million, or 19%, when compared
to the first quarter of 2019, while operating income was $345
million, a decrease of $23 million, or 6%. These results were
primarily due to lower pressure pumping activity and pricing and
reduced completion tool sales in North America, partially offset by
increased cementing activity and completion tool sales in the
Eastern Hemisphere.
Drilling and Evaluation
Drilling and Evaluation revenue in the first quarter of 2020 was
$2.1 billion, which was flat from the first quarter of 2019, while
operating income was $217 million, an increase of $94 million, or
76%. Higher activity for drilling-related services in the North Sea
and Asia more than offset reduced activity and pricing for multiple
product service lines in North America land and lower fluids
activity in Latin America.
Geographic Regions
North America
North America revenue in the first quarter of 2020 was $2.5
billion, a 25% decrease when compared to the first quarter of 2019.
This decline was mainly due to reduced activity and pricing in
North America land, primarily associated with pressure pumping,
well construction, and completion tool sales. This decline was
partially offset by increased artificial lift activity and
specialty chemicals sales in North America land, and stimulation
activity in the Gulf of Mexico.
International
International revenue in the first quarter of 2020 was $2.6
billion, a 5% increase when compared to the first quarter of 2019,
primarily driven by increased well construction activity in the
North Sea and Russia, coupled with higher activity across multiple
product lines in the United Arab Emirates, Mexico, Indonesia and
Malaysia. These improvements were partially offset by a decline in
stimulation and fluids activity in Latin America and lower activity
in Ghana.
Latin America revenue in the first quarter of 2020 was $516
million, a 12% decrease year over year, resulting primarily from
reduced fluids activity and stimulation services across the region,
particularly in Argentina, coupled with decreased activity in
multiple product service lines in Brazil, Ecuador and Colombia.
These declines were partially offset by increased activity across
multiple product service lines in Mexico and Guyana.
Europe/Africa/CIS revenue in the first quarter of 2020 was $831
million, an 11% increase year over year, resulting primarily from
increased drilling-related activity in the North Sea, improved well
construction activity in Russia, and increased completions activity
in Algeria, partially offset by reduced activity in multiple
product service lines in Ghana.
Middle East/Asia revenue in the first quarter of 2020 was $1.2
billion, a 9% increase year over year, largely resulting from
increased activity in the majority of product service lines in the
United Arab Emirates, Indonesia, and Malaysia, partially offset by
lower project management activity in India.
Other Financial Items
Halliburton recognized $1.1 billion of pre-tax impairments and
other charges to further adjust its cost structure to current
market conditions. These charges consisted primarily of non-cash
asset impairments, mostly associated with pressure pumping
equipment, as well as severance and other costs. In addition, based
on the current market environment and its expected impact to
Halliburton’s business outlook, the Company recognized a non-cash
tax expense of approximately $310 million as a result of an
adjustment to its deferred tax assets.
During the first quarter of 2020, Halliburton executed two
transactions to reduce total debt by $500 million and extend
certain maturities out to 2030. The Company issued $1.0 billion
aggregate principal amount of 2.92% senior notes due March 2030.
Using these proceeds and cash on hand, Halliburton redeemed $1.5
billion of debt, which consisted of $500 million of 3.50% senior
notes due August 2023 and $1.0 billion of 3.80% senior notes due
November 2025. This early debt redemption resulted in a $168
million loss on extinguishment, which included a redemption
premium, unamortized discounts and costs on the retired notes, and
other redemption fees. This first quarter charge was included in
"Loss on early extinguishment of debt" on the Company’s condensed
consolidated statement of operations for the three months ended
March 31, 2020.
Selective Technology &
Highlights
- Halliburton was awarded seven contracts for drilling and
completion services for the next phase of field development of the
INPEX-operated Ichthys Project in the Browse Basin offshore
northern Australia. The well development campaign is expected to
continue for an estimated 3-year term.
- Halliburton announced SPIDRliveTM Self-Powered Intelligent Data
Retriever, an unconventional well testing and fracture interaction
monitoring technology that acquires real-time well data without the
need for intervention to reduce costs and improve fracture
understanding for greater recovery.
- Pertamina, the largest Indonesian oil and gas company, deployed
all of their petro-technical applications on the iEnergy® cloud, a
hybrid cloud offering from Landmark, a Halliburton business line,
which manages operators' E&P applications. The iEnergy® cloud
helps reduce corporate infrastructure costs and improve the
effectiveness and efficiency of integrating, managing and
supporting well data across the company's units and subsidiaries.
The multiyear contract will deploy capabilities including
artificial intelligence, machine learning and data analytics to
solve upstream challenges and support Pertamina's digital
transformation initiatives.
- Halliburton Landmark presented a multimillion-dollar
educational software grant to King Abdulaziz University in Saudi
Arabia to train and prepare the next generation of Saudi oil and
gas engineers and geoscientists. The three-year license provides
students and faculty with access to Landmark's DecisionSpace®
enterprise software platform including seismic processing,
geophysics and geosciences, drilling and production and data
management.
- Halliburton released NitroForceTM, a new drilling motor that
provides increased power and performance to complete longer
laterals faster and with greater control. The motor delivers high
reliability helping operators reduce potential motor failure and
increase drilling speed to save well time and costs.
COVID-19 Pandemic and Market Conditions
Update
The COVID-19 pandemic and related economic repercussions have
created significant volatility, uncertainty, and turmoil in the oil
and gas industry. Oil demand has significantly deteriorated as a
result of the virus outbreak and corresponding preventative
measures taken around the world to mitigate the spread of the
virus. In the midst of the ongoing COVID-19 pandemic, the
Organization of Petroleum Exporting Countries and other oil
producing nations (OPEC+) were unable to reach an agreement on
production levels for crude oil, at which point Saudi Arabia and
Russia initiated efforts to aggressively increase production. The
convergence of these events created the unprecedented dual impact
of a global oil demand decline coupled with the risk of a
substantial increase in supply. While OPEC+ agreed in April to cut
production, downward pressure on commodity prices has remained and
could continue for the foreseeable future.
These events have negatively affected and are expected to
continue to negatively affect Halliburton’s business. Demand for
the Company’s products and services is declining as its customers
revise their capital budgets downwards and adjust their operations
in response to lower oil prices. In addition, Halliburton is facing
logistical challenges, including border closures, travel
restrictions and an inability to commute to certain facilities and
job sites, as the Company provides services and products to its
customers. The Company is also experiencing inefficiencies
surrounding stay-at-home orders and remote work arrangements.
Given the dynamic nature of these events, Halliburton cannot
reasonably estimate the period of time that the COVID-19 pandemic
and related market conditions will persist, the extent of the
impact they will have on the Company’s business, liquidity,
consolidated results of operations and consolidated financial
condition, or the pace of any subsequent recovery. The financial
results for the first quarter of 2020 reflect some of the reduced
activity experienced towards the latter part of the quarter in
various locations around the world. For the remainder of 2020, the
Company expects a further decline in revenue and profitability,
particularly in North America.
About Halliburton
Founded in 1919, Halliburton is one of the world's largest
providers of products and services to the energy industry. With
approximately 50,000 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.
Forward-looking
Statements
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
severity and duration of the COVID-19 pandemic, related economic
repercussions and the resulting negative impact on demand for oil
and gas; the current significant surplus in the supply of oil and
the ability of the OPEC+ countries to agree on and comply with
supply limitations; the duration and magnitude of the unprecedented
disruption in the oil and gas industry currently resulting from the
impact of the foregoing factors, which is negatively impacting our
business; operational challenges relating to the COVID-19 pandemic
and efforts to mitigate the spread of the virus, including
logistical challenges, protecting the health and well-being of our
employees, remote work arrangements, performance of contracts and
supply chain disruptions; 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 and the resulting impact on our liquidity; 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, 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.
HALLIBURTON COMPANY
Condensed Consolidated Statements
of Operations
(Millions of dollars and shares
except per share data)
(Unaudited)
Three Months Ended
March 31
December 31
2020
2019
2019
Revenue:
Completion and Production
$
2,962
$
3,662
$
3,058
Drilling and Evaluation
2,075
2,075
2,133
Total revenue
$
5,037
$
5,737
$
5,191
Operating income (loss):
Completion and Production
$
345
$
368
$
387
Drilling and Evaluation
217
123
224
Corporate and other
(60
)
(65
)
(65
)
Impairments and other charges (a)
(1,073
)
(61
)
(2,198
)
Total operating income (loss)
(571
)
365
(1,652
)
Interest expense, net
(134
)
(143
)
(141
)
Loss on early extinguishment of debt
(b)
(168
)
—
—
Other, net
(23
)
(30
)
(44
)
Income (loss) before income
taxes
(896
)
192
(1,837
)
Income tax (provision) benefit (c)
(119
)
(40
)
183
Net income (loss)
$
(1,015
)
$
152
$
(1,654
)
Net (income) loss attributable to
noncontrolling interest
(2
)
—
1
Net income (loss) attributable to
company
$
(1,017
)
$
152
$
(1,653
)
Basic and diluted net income (loss) per
share
$
(1.16
)
$
0.17
$
(1.88
)
Basic and diluted weighted average common
shares outstanding
878
873
878
(a) For further details of impairments and
other charges for all periods presented, see Footnote Table 1.
(b) During the three months ended March
31, 2020, Halliburton recognized a $168 million loss on
extinguishment of debt related to the early redemption of $1.5
billion aggregate principal amount of senior notes.
(c) During the three months ended March
31, 2020, based on current market conditions and the expected
impact on the Company's business outlook, Halliburton recognized a
$310 million tax expense associated with a valuation allowance on
its deferred tax assets.
See Footnote Table 1 for Reconciliation of
As Reported Operating Income (Loss) to Adjusted Operating
Income.
See Footnote Table 2 for Reconciliation of
As Reported Net Income (Loss) to Adjusted Net Income.
HALLIBURTON COMPANY
Condensed Consolidated Balance
Sheets
(Millions of dollars)
(Unaudited)
March 31
December 31
2020
2019
Assets
Current assets:
Cash and equivalents
$
1,385
$
2,268
Receivables, net
4,850
4,577
Inventories
3,220
3,139
Other current assets
1,200
1,228
Total current assets
10,655
11,212
Property, plant and equipment, net
6,223
7,310
Goodwill
2,812
2,812
Deferred income taxes
1,595
1,683
Operating lease right-of-use assets
897
931
Other assets
1,440
1,429
Total assets
$
23,622
$
25,377
Liabilities and Shareholders’
Equity
Current liabilities:
Accounts payable
$
2,640
$
2,432
Accrued employee compensation and
benefits
547
604
Current portion of operating lease
liabilities
222
208
Current maturities of long-term debt
193
11
Other current liabilities
1,451
1,623
Total current liabilities
5,053
4,878
Long-term debt
9,633
10,316
Operating lease liabilities
803
825
Employee compensation and benefits
477
525
Other liabilities
813
808
Total liabilities
16,779
17,352
Company shareholders’ equity
6,830
8,012
Noncontrolling interest in consolidated
subsidiaries
13
13
Total shareholders’ equity
6,843
8,025
Total liabilities and shareholders’
equity
$
23,622
$
25,377
HALLIBURTON COMPANY
Condensed Consolidated Statements
of Cash Flows
(Millions of dollars)
(Unaudited)
Three Months Ended
March 31
2020
2019
Cash flows from operating
activities:
Net income (loss)
$
(1,015
)
$
152
Adjustments to reconcile net income (loss)
to cash flows from operating activities:
Impairments and other charges
1,073
61
Depreciation, depletion and
amortization
348
416
Working capital (a)
(200
)
(515
)
Other operating activities
19
(158
)
Total cash flows provided by (used in)
operating activities
225
(44
)
Cash flows from investing
activities:
Capital expenditures
(213
)
(437
)
Proceeds from sales of property, plant and
equipment
69
43
Other investing activities
(21
)
(17
)
Total cash flows provided by (used in)
investing activities
(165
)
(411
)
Cash flows from financing
activities:
Payments on long-term borrowings
(1,651
)
(3
)
Proceeds from issuance of long-term debt,
net
994
(5
)
Dividends to shareholders
(158
)
(157
)
Stock repurchase program
(100
)
—
Other financing activities
12
10
Total cash flows provided by (used in)
financing activities
(903
)
(155
)
Effect of exchange rate changes on
cash
(40
)
(18
)
Decrease in cash and equivalents
(883
)
(628
)
Cash and equivalents at beginning of
period
2,268
2,008
Cash and equivalents at end of
period
$
1,385
$
1,380
(a) Working capital includes receivables,
inventories and accounts payable.
See Footnote Table 3 for Reconciliation of
Cash Flows from Operating Activities to Free Cash Flow.
HALLIBURTON COMPANY
Revenue and Operating Income
(Loss) Comparison
By Operating Segment and
Geographic Region
(Millions of dollars)
(Unaudited)
Three Months Ended
March 31
December 31
Revenue
2020
2019
2019
By operating segment:
Completion and Production
$
2,962
$
3,662
$
3,058
Drilling and Evaluation
2,075
2,075
2,133
Total revenue
$
5,037
$
5,737
$
5,191
By geographic region:
North America
$
2,460
$
3,275
$
2,333
Latin America
516
587
598
Europe/Africa/CIS
831
748
883
Middle East/Asia
1,230
1,127
1,377
Total revenue
$
5,037
$
5,737
$
5,191
Operating Income
(Loss)
By operating segment:
Completion and Production
$
345
$
368
$
387
Drilling and Evaluation
217
123
224
Total
562
491
611
Corporate and other
(60
)
(65
)
(65
)
Impairments and other charges
(1,073
)
(61
)
(2,198
)
Total operating income (loss)
$
(571
)
$
365
$
(1,652
)
See Footnote Table 1 for Reconciliation of
As Reported Operating Income (Loss) to Adjusted Operating
Income.
FOOTNOTE TABLE 1
HALLIBURTON COMPANY
Reconciliation of As Reported
Operating Income (Loss) to Adjusted Operating Income
(Millions of dollars)
(Unaudited)
Three Months Ended
March 31, 2020
March 31, 2019
December 31, 2019
As reported operating income (loss)
$
(571
)
$
365
$
(1,652
)
Impairments and other charges:
Long-lived asset impairments
1,016
42
1,473
Severance
32
19
95
Inventory costs and write-downs
—
—
424
Joint ventures
—
—
134
Other
25
—
72
Total impairments and other charges
(a)
1,073
61
2,198
Adjusted operating income (b)
$
502
$
426
$
546
(a)
During the three months ended March 31,
2020, Halliburton recognized a pre-tax charge of $1.1 billion
related to long-lived assets, primarily associated with pressure
pumping equipment, as well as severance costs and other
charges.
(b)
Management believes that operating income
(loss) adjusted for impairments and other charges for the three
months ended March 31, 2020, March 31, 2019, and December 31, 2019
is useful to investors to assess and understand operating
performance, especially when comparing those results with previous
and subsequent periods or forecasting performance for future
periods, primarily because management views the excluded items to
be outside of the company's normal operating results. Management
analyzes operating income without the impact of these items as an
indicator of performance, to identify underlying trends in the
business, and to establish operational goals. The adjustments
remove the effect of these items. Adjusted operating income is
calculated as: “As reported operating income (loss)” plus "Total
impairments and other charges" for the respective periods.
FOOTNOTE TABLE 2
HALLIBURTON COMPANY
Reconciliation of As Reported Net
Income (Loss) to Adjusted Net Income
(Millions of dollars and shares
except per share data)
(Unaudited)
Three Months Ended
March 31, 2020
March 31, 2019
As reported net income (loss) attributable
to company
$
(1,017
)
$
152
Adjustments:
Impairments and other charges
1,073
61
Loss on early extinguishment of debt
168
—
Total adjustments, before taxes
1,241
61
Tax provision (benefit) (a)
46
(12
)
Total adjustments, net of taxes (b)
1,287
49
Adjusted net income attributable to
company (b)
$
270
$
201
As reported diluted weighted average
common shares outstanding (c)
878
873
Adjusted diluted weighted average common
shares outstanding (c)
881
873
As reported net income (loss) per diluted
share (d)
$
(1.16
)
$
0.17
Adjusted net income per diluted share
(d)
$
0.31
$
0.23
(a)
During the three months ended March 31,
2020, Halliburton recognized a $310 million tax expense associated
with a valuation allowance on its deferred tax assets based on
current market conditions and the expected impact on the Company's
business outlook. Additionally, the tax benefit in the table above
includes the tax effect of the loss on early extinguishment of debt
during the three months ended March 31, 2020 and the tax effect on
impairments and other charges during the respective periods.
(b)
Management believes that net income (loss)
adjusted for the loss on early extinguishment of debt and
impairments and other charges is useful to investors to assess and
understand operating performance, especially when comparing those
results with previous and subsequent periods or forecasting
performance for future periods, primarily because management views
the excluded items to be outside of the company's normal operating
results. Management analyzes net income without the impact of these
items as an indicator of performance to identify underlying trends
in the business and to establish operational goals. Total
adjustments remove the effect of these items. Adjusted net income
attributable to company is calculated as: “As reported net income
(loss) attributable to company” plus "Total adjustments, net of
taxes" for the three months ended March 31, 2020 and March 31,
2019.
(c)
As reported diluted weighted average
common shares outstanding for the three months ended March 31, 2020
excludes three million shares associated with stock-based
compensation plans as the impact is antidilutive since
Halliburton's reported income attributable to company was in a loss
position during the period. When adjusting income attributable to
company in the period for the adjustments discussed above, these
shares become dilutive.
(d)
As reported net income (loss) per diluted
share is calculated as: "As reported net income (loss) attributable
to company" divided by "As reported diluted weighted average common
shares outstanding." Adjusted net income per diluted share is
calculated as: "Adjusted net income attributable to company"
divided by "Adjusted diluted weighted average common shares
outstanding."
FOOTNOTE TABLE 3
HALLIBURTON COMPANY
Reconciliation of Cash Flows from
Operating Activities to Free Cash Flow
(Millions of dollars)
(Unaudited)
Three Months Ended
March 31, 2020
March 31, 2019
Total cash flows provided by (used in)
operating activities
$
225
$
(44
)
Capital expenditures
(213
)
(437
)
Free cash flow (a)
$
12
$
(481
)
(a)
Management believes that free cash flow,
which is defined as “Total cash flows provided by (used in)
operating activities” less “Capital expenditures,” is useful to
investors to assess and understand liquidity, especially when
comparing results with previous and subsequent periods. Management
views free cash flow as a key measure of liquidity in the company's
business.
Conference Call Details
Halliburton Company (NYSE: HAL) will host a conference call on
Monday, April 20, 2020, to discuss its first quarter 2020 financial
results. The call will begin at 8:00 AM Central Time (9:00 AM
Eastern Time).
Please visit the website to listen to the call via live webcast.
You may also participate in the call by dialing (844) 358-9181
within North America or +1 (478) 219-0188 outside of North America.
A passcode is not required. Attendees should log in to the webcast
or dial in approximately 15 minutes prior to the start of the
call.
A replay of the conference call will be available on
Halliburton’s website until April 27, 2020. Also, a replay may be
accessed by telephone at (855) 859-2056 within North America or +1
(404) 537-3406 outside of North America, using the passcode
1944089.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200420005120/en/
For Investors: Abu Zeya Halliburton, Investor Relations
Investors@Halliburton.com 281-871-2688
For Media: Emily Mir Halliburton, Public Relations
PR@Halliburton.com 281-871-2601
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