Halliburton Company (HAL) — 2021 Form 10-K
Business context and reporting period. Halliburton provides products and services to the global energy industry through Completion and Production (C&P) and Drilling and Evaluation (D&E). This annual report covers the fiscal year ended December 31, 2021; figures below are full-year, not standalone fourth-quarter results. Amounts are in U.S. dollars.
Key financial results
| Metric | 2021 | 2020 |
|---|---|---|
| Revenue | $15.295 billion | $14.445 billion |
| Operating income (loss) | $1.800 billion | $(2.436) billion |
| Net income (loss) attributable to Halliburton | $1.457 billion | $(2.945) billion |
| Diluted earnings (loss) per share | $1.63 | $(3.34) |
| Cash provided by operating activities | $1.911 billion | $1.881 billion |
| Capital expenditures | $799 million | $728 million |
| Cash and equivalents at year-end | $3.044 billion | $2.563 billion |
| Total debt carrying value | $9.138 billion | $9.827 billion |
Operating cash flow less capital expenditures was approximately $1.112 billion in 2021 (calculated from reported figures). Year-end current assets were $9.943 billion and current liabilities were $4.306 billion. Halliburton also had $3.5 billion of available committed revolving credit.
Segment revenue and operating income were $8.410 billion and $1.238 billion for C&P, and $6.885 billion and $801 million for D&E. These imply operating margins of approximately 14.7% and 11.6%, respectively, consistent with management’s rounded figures of 15% and 12%.
Material changes versus 2020
- Revenue rose 6%, mainly on increased North American land activity and pricing and stronger Latin American activity. North America revenue increased 11%; Latin America increased 42%. Europe/Africa/CIS declined 3% and Middle East/Asia declined 9%.
- Reported operating results moved from a $2.436 billion loss to $1.800 billion of income. The comparison is substantially affected by $3.799 billion of impairments and other charges in 2020, versus $12 million net charges in 2021.
- Operating cash flow was broadly stable at $1.911 billion, while cash and equivalents increased by $481 million. Capital expenditures rose to $799 million.
- Debt carrying value declined by $689 million. Halliburton repaid $185 million of debentures at maturity and redeemed $500 million of notes in 2021.
- The 2021 tax benefit of $216 million included a significant valuation-allowance release associated primarily with foreign tax credits. The reported effective tax rate was negative 17.2%.
Outlook, commentary, and risks
- Management expected supportive commodity prices and forecast 2022 customer spending growth of 14%–16% internationally and more than 25% in North America. These are management expectations, not guarantees.
- Planned 2022 capital spending was approximately $1.0 billion, within the company’s 5%–6% of revenue target. Management said it did not intend to incur additional debt in 2022.
- In January 2022, Halliburton announced a first-quarter dividend of $0.12 per share and a planned $600 million redemption of 3.8% notes, funded with cash on hand. Approximately $5.1 billion remained authorized under the share repurchase program; no program repurchases occurred in 2021.
- Key risks include oil and gas price volatility and customer spending decisions; pandemic-related disruption; geopolitical and sanctions exposure; supply-chain, raw-material, and labor constraints; environmental, climate, and hydraulic-fracturing regulation; legal and operational liabilities; cybersecurity; and customer payment delays.
- The allowance for credit losses was $754 million, primarily reflecting a full reserve against receivables from Halliburton’s primary Venezuelan customer. A Mexican customer represented approximately 10% of total receivables; management reported payment delays but did not expect material write-offs.
- Unrecognized tax benefits were $352 million, excluding interest and penalties; management estimated $266 million may require cash payment, with approximately $198 million not expected to settle within 12 months. Management said accrued legal and investigation matters were not material, while noting outcomes remain uncertain.
- An unusual 2021 transaction involved a sale-leaseback of U.S. real estate: Halliburton received $87 million in gross proceeds, recognized a $74 million gain, and added $276 million of operating lease right-of-use assets and lease liabilities. The company also discontinued the proposed sale of its Pipeline and Process Services business.
- Halliburton announced a target to reduce Scope 1 and 2 emissions 40% by 2035 from a 2018 baseline. The outlook remains exposed to changes in energy-transition policy and customer demand.
Most important facts for investors to verify
- Whether the projected 2022 spending growth and pricing gains materialized, particularly in North America and international markets.
- How much of 2021 earnings and deferred-tax-asset value depends on future taxable income and the assumptions underlying the valuation-allowance release.
- Collections and credit quality, including the large Venezuelan reserve and the concentration of receivables with the Mexican customer.
- Debt repayment plans, liquidity needs, and the long-term lease commitments associated with the real-estate transaction.
- Potential impacts from commodity-price changes, pandemic developments, geopolitical events, regulation, and litigation or environmental contingencies.