Halliburton Company — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021. Halliburton provides products and services to the energy industry through Completion and Production and Drilling and Evaluation segments, operating in more than 70 countries.
Financial results
| Metric | Q1 2021 | Q1 2020 |
|---|---|---|
| Revenue | $3.451 billion | $5.037 billion |
| Operating income (loss) | $370 million | $(571) million |
| Net income (loss) attributable to Halliburton | $170 million | $(1.017) billion |
| Diluted earnings (loss) per share | $0.19 | $(1.16) |
| Cash flow from operations | $203 million | $225 million |
| Capital expenditures | $104 million | $213 million |
Revenue fell 31% year over year. Operating income was $370 million, versus an operating loss that included $1.073 billion of impairments and other charges in Q1 2020. The 2021 income tax provision was $52 million on $223 million of pretax income, a 23.5% effective tax rate.
Segment revenue and operating income were $1.870 billion and $252 million for Completion and Production, and $1.581 billion and $171 million for Drilling and Evaluation. Segment operating income declined 27% and 21%, respectively, versus Q1 2020.
Balance sheet and liquidity
- Cash and equivalents were $2.446 billion at March 31, 2021, down from $2.563 billion at December 31, 2020.
- Long-term debt was $9.127 billion and current maturities were $515 million; total debt carrying value was $9.642 billion. Total liabilities were $15.396 billion and shareholders’ equity was $5.179 billion.
- Operating cash flow of $203 million and investing cash outflow of $62 million were offset by financing cash outflow of $223 million and $35 million of unfavorable exchange-rate effects, resulting in a $117 million cash decrease.
- Halliburton reported $3.5 billion of available committed revolving credit. It repaid $185 million of 8.75% debentures at maturity in February and expected to repay $500 million of 3.25% notes due November 2021.
Changes and business conditions
North America revenue declined 43% to $1.404 billion; international revenue declined 21%. Latin America revenue increased 4%, while Europe/Africa/CIS fell 24% and Middle East/Asia fell 29%. Lower activity and pricing—especially North American land pressure pumping and drilling-related work—were key drivers. Management said cost-reduction initiatives improved operating margins in both segments despite lower activity.
Management described improving oil demand and prices, but ongoing uncertainty from COVID-19, vaccination and reopening progress, and customer spending discipline. Average Q1 WTI was $57.79 per barrel versus $45.76 a year earlier; worldwide average rig count was 1,236 versus 2,055.
Outlook, risks and notable items
- Management expected international activity to gain momentum through 2021 and anticipated steady North American activity, with potential margin improvement from utilization, technology and pricing. These are expectations, not guarantees.
- Full-year 2021 capital expenditures were forecast at approximately $750 million, flat with 2020. The quarterly dividend was $0.045 per share; management said it would review dividends with liquidity and debt reduction priorities in mind.
- Management cited delayed customer payments and defaults associated with customer liquidity issues and bankruptcies as risks to liquidity and results. Other exposures include volatile energy prices and activity, pandemic effects, and geopolitical and country risks.
- Approximately $1.9 billion of letters of credit, bank guarantees and surety bonds were outstanding; certain letters of credit could require cash collateralization upon triggering events. Management said none had occurred and did not expect these arrangements to have a material effect.
- Routine legal and governmental proceedings were not expected by management to have a material adverse effect, though outcomes are uncertain. The filing reported no material change to previously disclosed risk factors.
- Halliburton announced a target to reduce Scope 1 and 2 emissions 40% by 2035 from a 2018 baseline. A Saudi specialty chemicals plant was expected to support cost savings and growth in 2022 and beyond.
Important facts for investors to verify
- Progress in revenue and operating margins as customer activity recovers, particularly in North America and internationally.
- Cash generation, receivables collection, and ability to repay the $500 million notes due in November 2021 while funding capital spending and dividends.
- Whether the $750 million full-year capital expenditure outlook and stated market-recovery expectations remain current.
- Effects of pandemic uncertainty, customer defaults, and the $1.9 billion in guarantee arrangements on liquidity and results.