Halliburton Company — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024; comparisons are with the three months ended March 31, 2023 unless otherwise noted. Halliburton provides products and services to the energy industry through Completion and Production and Drilling and Evaluation segments.
Financial results and liquidity
| Metric | Q1 2024 | Q1 2023 | Change |
|---|---|---|---|
| Revenue | $5.804 billion | $5.677 billion | +2% |
| Operating income | $987 million | $977 million | +1% |
| Operating margin | 17.0% | 17.2% | Down 0.2 percentage points |
| Net income attributable to Halliburton | $606 million | $651 million | -7% |
| Diluted earnings per share | $0.68 | $0.72 | -6% |
| Operating cash flow | $487 million | $122 million | +$365 million |
| Capital expenditures | $330 million | $268 million | +$62 million |
Services revenue was $4.146 billion, down slightly, while product sales increased to $1.658 billion from $1.511 billion. Net income fell despite higher revenue, reflecting higher operating costs and a larger non-operating loss. The effective tax rate was 22.6%, compared with 21.0%.
Cash and equivalents were $1.891 billion at March 31, versus $2.264 billion at year-end 2023. Long-term debt was $7.637 billion; cash less long-term debt was approximately $5.746 billion. Current assets were $11.423 billion and current liabilities were $5.379 billion. Operating cash flow included a $341 million negative working-capital impact, primarily from increased receivables. Cash used in investing was $381 million and cash used in financing was $422 million, including $250 million of repurchases and $151 million of dividends.
Halliburton reported $3.5 billion of available committed revolving credit and said its cash, operating cash flows, and credit facility should provide sufficient liquidity for expected needs. The filing describes approximately $472 million of debt maturities beginning in 2025 through 2027. The quarterly dividend rate was $0.17 per share.
Material changes and operating performance
- Segments: Completion and Production revenue declined 1% to $3.373 billion, while operating income rose 3% to $688 million. Drilling and Evaluation revenue increased 7% to $2.431 billion, and operating income increased 8% to $398 million.
- Regions: North America revenue fell 8% to $2.546 billion, primarily due to lower U.S. land pressure-pumping and regional wireline activity. International revenue increased 12%; Latin America grew 21%, Europe/Africa/CIS 10%, and Middle East/Asia 6%.
- Share count and returns: Weighted-average diluted shares declined to 891 million from 907 million. Halliburton repurchased 7.0 million shares for approximately $250 million and had about $3.8 billion of repurchase authorization remaining.
Outlook, commentary, and risks
- Management remained positive on oil and natural gas markets and expected strong demand growth and strong upstream investment for the remainder of 2024. It expected North America revenue to be flat year over year and international revenue to grow at a low double-digit rate.
- 2024 capital spending was expected to be approximately 6% of revenue. Management’s capital-return framework targets returning at least 50% of annual free cash flow through dividends and repurchases.
- The SAP S4 migration is expected to finish by the end of 2025. Q1 expense was $34 million; estimated total project investment is approximately $250 million, of which $85 million had been incurred.
- Other, net included a disclosed $38 million loss from a decrease in the fair value of an Argentina investment note and a $38 million loss related to Egyptian-pound devaluation. The filing attributes an $82 million charge primarily to the Argentina investment impairment and Egypt currency devaluation.
- An IRS dispute concerns the treatment of a 2016 $3.5 billion Baker Hughes termination-fee deduction. Halliburton disputes the proposed adjustment; if the IRS position ultimately prevailed, the company estimates cash taxes of approximately $650 million plus interest could be due. No additional payment is currently required, and management does not expect a final resolution within the next 12 months.
- Risks include oil and gas price and activity volatility, geopolitical instability, supply-chain lead times and inflationary costs, and customer payment delays. A Mexican customer represented approximately 8% of receivables; Halliburton reported payment delays but did not expect material write-offs. Approximately $2.6 billion of letters of credit, bank guarantees, and surety bonds were outstanding; no triggering events requiring cash collateralization had occurred.
- Management reported no material change in previously disclosed risk factors and concluded disclosure controls were effective as of March 31, 2024.
Important facts for investors to verify
- Whether international growth and flat North America performance meet management’s 2024 outlook.
- Receivables collection and working-capital trends, particularly exposure to the Mexican customer.
- Progress and total costs of the SAP S4 migration and its effect on operating expenses.
- Developments in the IRS dispute, including potential exposure of approximately $650 million plus interest.
- Cash generation, capital spending, debt maturities, and shareholder returns relative to the stated capital-allocation framework.