HAL

Halliburton Company 10-K Summary (Fiscal Year Ended Dec 31, 1999)

Business Context and Reporting Period

This Form 10-K covers the fiscal year ended December 31, 1999. Halliburton Company operates as a diversified energy services and engineering construction firm organized into three segments: Energy Services Group, Engineering and Construction Group, and Dresser Equipment Group. The company serves the oil and gas industry globally, with approximately 68% of revenues derived from international activities. The reporting period reflects the integration of the 1998 Dresser Industries merger and a significant downturn in global oil and gas activity.

Key Financial Metrics

Material Changes vs. Prior Period

• Revenue Decline: Total revenues decreased 14% to $14.9 billion, driven by a 22% drop in the Energy Services Group and a 9% drop in the Dresser Equipment Group. The decline was attributed to lower worldwide rotary rig counts and customer consolidation.
• Operating Income Volatility: Operating income increased to $650 million from $397 million in 1998. However, excluding special credits of $47 million in 1999 and net special charges of $980 million in 1998, underlying operating income decreased 56% from 1998 due to pricing pressures and reduced activity.
• Special Items: The 1999 results included a $47 million credit reversing previously estimated restructuring costs. Conversely, 1998 included $980 million in special charges related to the Dresser merger and industry downturn.
• Extraordinary Gains: Net income was boosted by a $159 million after-tax extraordinary gain from the sale of the company's 49% interest in Ingersoll-Dresser Pump.

Guidance, Outlook, and Risks

Outlook: Management expects natural gas development activity in North America to remain robust. However, international oil drilling activity is expected to remain sluggish until the second half of 2000, pending sustained higher oil prices and customer confidence. The company anticipates completing 50% of its $10.2 billion backlog in 2000.

Restructuring: The company is executing a program to exit approximately 500 properties and reduce headcount. An estimated $69 million in cash outlays related to 1998 special charges remains for 2000. Management estimates annual cost reductions of $500 million from these initiatives.

Risks and Contingencies:

• Market Risk: Significant exposure to oil and gas price fluctuations and geopolitical instability in operating regions (e.g., Nigeria, Russia, Algeria).
• Legal: Ongoing asbestos litigation with approximately 107,650 open claims; net liability accrued is $25 million. A dispute with Global Industrial Technologies regarding asbestos liability is pending arbitration.
• Environmental: Potential liability as a responsible party at the Tri-State Mining District "Superfund" site; accrued environmental liabilities are $30 million.

Investor Verification Checklist

• Backlog Quality: Verify the stability of the $10.2 billion backlog, noting that 50% is expected to be completed in 2000 and that contracts are subject to modification or termination.
• Joint Venture Sales: Confirm the timing and final accounting of the Dresser-Rand sale (completed Feb 2000) and the expected $215 million after-tax gain.
• Restructuring Costs: Monitor the $69 million remaining cash outlay for 1998 special charges and the realization of the projected $500 million annual cost savings.
• Asbestos Liability: Review the outcome of the arbitration with Global Industrial Technologies and the adequacy of the $25 million net asbestos reserve.
• Oil Price Sensitivity: Assess the correlation between sustained oil prices and the projected recovery of international drilling activity in the second half of 2000.