Halliburton Company (HAL) - Q1 2026 10-Q Summary
Business Context and Reporting Period
This report covers the quarterly period ended March 31, 2026. Halliburton is a global provider of products and services to the energy industry, operating through two primary segments: Completion and Production and Drilling and Evaluation. The company operates in over 70 countries with headquarters in Houston, Texas. As of April 17, 2026, there were approximately 835.4 million shares of common stock outstanding.
Key Financial Metrics
| Metric (in millions, except per share) | Q1 2026 | Q1 2025 |
|---|---|---|
| Total Revenue | $5,402 | $5,417 |
| Operating Income | $679 | $431 |
| Net Income Attributable to Company | $461 | $204 |
| Diluted EPS | $0.55 | $0.24 |
| Operating Cash Flow | $273 | $377 |
| Cash and Equivalents (End of Period) | $2,003 | $1,804 |
| Long-Term Debt | $7,070 | $7,158 |
| Capital Expenditures | $192 | $302 |
Margins: Operating margin for Q1 2026 was approximately 12.6% ($679M / $5,402M), compared to 8.0% in Q1 2025. The effective tax rate for Q1 2026 was 18.5%, significantly lower than the 33.7% rate in Q1 2025 due to the release of a $32 million valuation allowance.
Material Changes vs. Prior Period
- Profitability Surge: Net income attributable to the company more than doubled to $461 million from $204 million year-over-year. This improvement was driven by the absence of the $356 million in impairments and other charges recorded in Q1 2025 (related to severance, asset impairments, and environmental costs).
- Revenue Stability: Total revenue remained relatively flat at $5.4 billion, down slightly by $15 million (0.3%).
- Segment Performance:
- Completion and Production: Revenue decreased 3% to $3.0 billion, and operating income fell 17% to $439 million, primarily due to lower stimulation activity in North America and reduced pressure pumping in the Middle East.
- Drilling and Evaluation: Revenue increased 4% to $2.4 billion, while operating income remained flat at $351 million. Growth was driven by higher project management activity in Latin America and drilling services in Europe.
- Geographic Shifts: North America revenue declined 4%, while Latin America revenue surged 22% and Europe/Africa/CIS revenue grew 11%. Middle East/Asia revenue dropped 13% due to geopolitical conflicts.
- Shareholder Returns: The company repurchased 2.8 million shares for $100 million and paid $142 million in dividends.
Guidance, Outlook, and Risks
- Capital Expenditures: Management expects 2026 capital spending to be approximately $1.1 billion.
- Shareholder Returns: The company aims to return at least 50% of annual free cash flow to shareholders via dividends and buybacks. Approximately $1.9 billion remains authorized for share repurchases.
- Outlook: International activity is expected to grow in the mid-to-high single digits for 2026, led by Latin America and offshore markets. North America shows early signs of recovery with depleted drilled-but-uncompleted well inventories supporting activity.
- Risks and Contingencies:
- Geopolitical Conflict: Ongoing conflict in the Middle East impacted activity, reducing diluted EPS by an estimated $0.02 to $0.03.
- Tax Dispute: The IRS issued a Notice of Proposed Adjustment (NOPA) regarding a $3.5 billion termination fee paid in 2016. If the IRS prevails, it could result in approximately $640 million in cash taxes due. Halliburton plans to contest this vigorously.
- Customer Credit Risk: Receivables from a primary customer in Mexico account for 7% of total receivables. While payment delays have occurred, the company does not expect material write-offs and has utilized credit default swaps for protection.
- SAP S4 Migration: The company incurred $42 million in expenses for its SAP S4 upgrade in Q1 2026, with an estimated cost of $45 million per quarter expected through completion in Q4 2026.
Investor Verification Checklist
- IRS Tax Dispute Status: Verify the current status of the administrative appeal regarding the 2016 termination fee and the potential $640 million tax liability.
- Middle East Exposure: Assess the duration and severity of operational disruptions in the Middle East and their impact on the Drilling and Evaluation segment.
- North America Activity: Monitor rig counts and stimulation activity levels in the US Land and Gulf of America to validate the "early signs of recovery" narrative.
- Working Capital Trends: Review the $252 million negative impact of working capital on operating cash flow, specifically the increase in receivables ($293 million usage).
- SAP S4 Costs: Track quarterly expenses related to the SAP S4 migration to ensure they align with the $45 million per quarter estimate.