Halliburton Company (HAL) — 2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023. The filing is an annual report; it does not provide a separate, complete fourth-quarter income statement in the supplied text.
Business context
Halliburton provides products and services to the global energy industry through Completion and Production (C&P) and Drilling and Evaluation (D&E). It operates in more than 70 countries. The United States represented 44% of 2023 revenue; no other country represented more than 10%.
Financial results and liquidity
| Metric | 2023 | 2022 |
|---|---|---|
| Revenue | $23.018 billion | $20.297 billion |
| Operating income | $4.083 billion | $2.707 billion |
| Net income attributable to Halliburton | $2.638 billion | $1.572 billion |
| Diluted earnings per share | $2.92 | $1.73 |
| Cash from operating activities | $3.458 billion | $2.242 billion |
| Capital expenditures | $1.379 billion | $1.011 billion |
- Revenue grew 13%; operating income increased 51%. C&P revenue rose 18% and operating income 39%; D&E revenue rose 7% and operating income 19%.
- Year-end cash and equivalents were $2.264 billion, compared with $2.346 billion a year earlier. Current assets were $11.543 billion and current liabilities $5.608 billion.
- Long-term debt was $7.636 billion, down from $7.928 billion. The $3.5 billion revolving credit facility was fully available; management reported no financial covenants in its bank agreements. Debt maturities include $382 million in 2025 and $90 million in 2027.
- Operating margins finished the year at approximately 21% for C&P and 17% for D&E, according to management. Capital spending was about 6% of revenue.
- Shareholder returns totaled $1.376 billion: $800 million of share repurchases and $576 million of dividends. Halliburton also repurchased $300 million principal amount of debt.
Changes, outlook, and management commentary
- Growth was supported by higher activity and pricing, including international revenue growth of 17% and North America growth of 9%. Latin America revenue increased 25%; Middle East/Asia increased 18%.
- International activity strengthened, while North American activity was softer in some areas amid lower commodity prices and a declining U.S. land rig count. Management attributed North American revenue growth to service intensity, pressure pumping, artificial lift, and completion tools.
- 2022 included $366 million of impairment and other charges, primarily related to Halliburton’s exit from Russia. There were no such charges in 2023. The 2023 results included $51 million of SAP S/4 migration expense.
- Argentina-related items reduced 2023 results: a $110 million pre-tax loss on Blue Chip Swap transactions and a $131 million currency devaluation loss.
- For 2024, management expects capital spending of approximately 6% of revenue and stable U.S. exploration and production activity, with international activity expected to grow. It expects growth opportunities in Middle East/Asia, onshore and offshore markets, and carbon capture services. The company said it did not intend to incur additional debt in 2024.
- Management’s capital return framework targets returning at least 50% of annual free cash flow through dividends and repurchases; 2023 returns were $1.4 billion. The Board declared a first-quarter 2024 dividend of $0.17 per share.
- The SAP S/4 migration is expected to finish by the end of 2025, at an estimated total cost of approximately $250 million; $51 million had been incurred by year-end 2023 and approximately $120 million was expected in 2024.
Risks, contingencies, and unusual matters
- Results remain sensitive to oil and natural gas prices, customer capital spending, rig activity, geopolitical events, and regulatory or climate-related changes affecting hydrocarbon development.
- Supply-chain constraints, inflation in chemicals, cement and logistics, labor availability, and access to adequate electric power for Zeus electric fracturing systems could pressure costs, margins, or execution.
- The IRS proposed reclassifying approximately 95% of Halliburton’s $3.5 billion 2016 Baker Hughes termination-fee deduction as a capital loss. Halliburton disputes the proposal and is pursuing administrative appeals. If the IRS ultimately prevails, the company estimates cash taxes of approximately $650 million plus interest; no additional payment is currently required, and resolution is not expected within 12 months.
- Receivables from the company’s primary Mexican customer were approximately 6% of total receivables at year-end; Halliburton reported payment delays but said the amounts were not disputed. The $742 million allowance for credit losses was primarily a full reserve against receivables from its primary customer in Venezuela.
- Halliburton had approximately $2.6 billion of letters of credit, bank guarantees, or surety bonds outstanding. It reported that no triggering event requiring cash collateralization had occurred and that it had no material off-balance-sheet liabilities.
- International pension plans were underfunded by $123 million at year-end, compared with $4 million in 2022. Management identified deferred-tax-asset realizability, legal matters, long-lived asset valuations, and credit-loss allowances as critical accounting estimates.
- The company reported occasional past cybersecurity incidents and attempted breaches, but no material adverse effect or unauthorized access to material data. The financial-statement audit opinion was unqualified, and management and the auditor reported effective internal control over financial reporting.
Investor facts to verify
- Whether 2024 international growth and stable North American activity materialize, and how commodity prices and customer spending affect service demand.
- Progress on margin and capital-efficiency goals, including the 6%-of-revenue capital-spending plan and deployment of Zeus, iStar, and iCruise technologies.
- Cash conversion, working-capital requirements, shareholder returns, and the stated intention not to add debt in 2024.
- Developments in the IRS termination-fee dispute, including potential tax and interest exposure.
- Collection performance for Mexican receivables and the adequacy of the Venezuela-related credit-loss reserve.
- Execution costs and timing for the SAP S/4 migration, and any material changes in legal, environmental, geopolitical, currency, or cybersecurity exposures.