Halliburton Company — Q2 2021 Form 10-Q
Reporting period: Three and six months ended June 30, 2021. Halliburton provides products and services to the energy industry through Completion and Production and Drilling and Evaluation segments. Amounts below are in millions of dollars, except per-share data and percentages.
Financial performance and liquidity
| Metric | Q2 2021 | Q2 2020 | First half 2021 | First half 2020 |
|---|---|---|---|---|
| Revenue | $3,707 | $3,196 | $7,158 | $8,233 |
| Operating income (loss) | $434 | $(1,911) | $804 | $(2,482) |
| Net income (loss) attributable to Halliburton | $227 | $(1,676) | $397 | $(2,693) |
| Diluted earnings (loss) per share | $0.26 | $(1.91) | $0.45 | $(3.07) |
- Q2 operating margin was approximately 11.7% (operating income divided by revenue); first-half operating margin was approximately 11.2%. The comparable 2020 periods included impairment and other charges of $2,147 and $3,220, respectively.
- Q2 segment revenue and operating income: Completion and Production $2,048 and $317; Drilling and Evaluation $1,659 and $175.
- First-half operating cash flow was $612, capital expenditures were $295, and free cash flow—calculated here as operating cash flow less capital expenditures—was $317. Dividends paid were $80.
- At June 30, cash and equivalents were $2,658; current assets were $9,927 and current liabilities $4,334. Total debt carrying value was $9,639, comprising $515 current maturities and $9,124 long-term debt. Cash less debt was approximately $(6,981).
- Available committed revolving credit was $3.5 billion. Management described liquidity as sufficient for expected needs. The company had approximately $1.9 billion in letters of credit, bank guarantees, and surety bonds outstanding.
Material changes versus comparable periods
- Q2 revenue rose 16% year over year, with North America up 50%; Latin America rose 54%. Europe/Africa/CIS declined 2%, and Middle East/Asia declined 17%.
- Both segments improved Q2 revenue and operating income. Management cited higher activity and pricing, utilization, and operating leverage, especially in North America land and Latin America.
- First-half revenue remained 13% below 2020, although operating results returned to income. First-half revenue declined in North America (15%), Europe/Africa/CIS (14%), and Middle East/Asia (23%); Latin America grew 24%.
- Cash increased to $2,658 from $2,563 at year-end 2020. The company repaid $185 of 8.75% senior debentures at maturity in February. First-half operating cash flow was $612 versus $823 in 2020; capital spending fell 17%.
Outlook, commentary, and risks
- Management expected global oil demand to continue increasing in the second half of 2021 and into 2022, while warning that COVID-19 cases, variants, and possible renewed restrictions could weaken demand. North America activity was expected to increase, with drilling potentially outpacing completions as operators build inventory for 2022.
- Full-year 2021 capital spending was expected to be approximately 5%–6% of revenue. The quarterly dividend was $0.045 per share, or approximately $40 million.
- On July 1, 2021, after quarter-end, Halliburton announced redemption at par of its $500 million 3.25% senior notes on August 15, to be funded with cash on hand. Management stated approximately $2.1 billion of debt would come due through 2026, including this redemption.
- Key exposures include volatile oil and gas prices and customer spending, pandemic-related disruptions, geopolitical and foreign-exchange conditions, and delayed or missed customer payments. A primary customer in Mexico represented about 10% of receivables; payment delays had occurred, though amounts were not in dispute and no material historical write-offs were reported.
- Management said ordinary-course legal matters were not expected to materially adversely affect consolidated results or financial position. No material changes to previously disclosed risk factors were reported; disclosure controls were considered effective.
Important facts for investors to verify
- Whether the Q2 recovery in North America and Latin America continues and offsets weaker activity in Middle East/Asia and other international markets.
- How much of the year-over-year improvement reflects the absence of 2020 impairments versus underlying revenue, utilization, and margin trends.
- Progress in collecting receivables, particularly from the Mexican customer, and any changes in credit-loss allowances or payment delays.
- Actual 2021 capital spending against the 5%–6% of revenue outlook, and the effect of the $500 million post-quarter debt redemption on cash and debt.
- Developments in oil demand, COVID-19 restrictions, customer budgets, and the $1.9 billion of guarantee arrangements, including any collateral triggers.