Halliburton Company — Q1 2022 Form 10-Q
Business context and reporting period
Halliburton provides products and services to the energy industry through Completion and Production and Drilling and Evaluation. This unaudited filing covers the three months ended March 31, 2022; comparisons are with Q1 2021 unless otherwise stated. The company reported operations in more than 70 countries.
Financial performance and liquidity
| Metric | Q1 2022 | Q1 2021 |
|---|---|---|
| Revenue | $4.284 billion | $3.451 billion |
| Operating income | $511 million | $370 million |
| Net income attributable to Halliburton | $263 million | $170 million |
| Diluted earnings per share | $0.29 | $0.19 |
| Cash from operating activities | $(50) million | $203 million |
| Capital expenditures | $189 million | $104 million |
Operating margin was approximately 11.9% of revenue, versus 10.7% a year earlier. Net margin attributable to the company was approximately 6.1%, versus 4.9%. Cash and equivalents were $2.154 billion at March 31, down from $3.044 billion at year-end 2021. Current assets were $9.717 billion and current liabilities $4.444 billion. Long-term debt was $8.530 billion; total debt carrying value was $8.534 billion. Management reported $3.5 billion available under its committed revolving credit facility.
Operating cash use included a $386 million negative working-capital impact from receivables, inventories, and payables. Financing cash use was $668 million, including $640 million of long-term borrowing payments and $108 million of dividends. The quarterly dividend was $0.12 per share.
Changes versus the prior comparable period
- Revenue increased 24%. Completion and Production revenue rose 26% to $2.353 billion; Drilling and Evaluation revenue rose 22% to $1.931 billion.
- North America revenue increased 37%; international revenue increased 15%. All four reported geographic regions grew year over year.
- Operating income rose 38%. Drilling and Evaluation operating income increased 72% to $294 million; Completion and Production increased 17% to $296 million.
- Operating cash flow declined from $203 million provided to $50 million used, reflecting working-capital outflows. Capital expenditures increased to $189 million from $104 million.
- Halliburton redeemed $600 million principal amount of 3.8% notes due 2025, paying $641 million including premium and accrued interest; it recorded a $42 million early-extinguishment loss.
Outlook, commentary, risks, and unusual items
- Management expected 2022 customer spending to rise 14%–16% internationally and more than 35% in North America, with international activity gaining momentum in Q2 and accelerating in the second half. It expected North American net pricing improvement across product service lines.
- Full-year 2022 capital spending was expected to be approximately $1 billion. Management expected the Q2 dividend to remain approximately $0.12 per share, while emphasizing liquidity, debt reduction, and potential reinvestment priorities.
- Management cited higher oil prices and improving activity, but noted uncertainty from COVID-19, supply and demand shifts, inflation (particularly frac sand and logistics), and customers’ capital-spending decisions.
- Russia’s invasion of Ukraine led Halliburton to cease pursuing future Russian business and begin winding down remaining operations in March. Certain contracts were to be wound down by May 15, 2022. Russian assets had a net book value of approximately $340 million at quarter-end; no impairment had been recorded, but further sanctions or conflict could lead to charges. The company recorded a $22 million pre-tax charge, primarily writing down Ukraine assets, including a $16 million receivables allowance, and ceased operations in Ukraine.
- Customer payment delays and defaults remain a risk. A primary customer in Mexico represented approximately 11% of receivables at quarter-end; the company reported delays but did not expect material write-offs from that customer. Legal and governmental matters were described as not expected by management to materially adversely affect results or financial position, though outcomes are uncertain.
- Approximately $1.9 billion of letters of credit, bank guarantees, and surety bonds were outstanding; some letters of credit could trigger cash collateral requirements, but none had occurred. No repurchases were made under the public share-repurchase program in Q1; employee tax-withholding transactions accounted for 286,094 shares purchased.
Important facts for investors to verify
- Whether working-capital demands continue to constrain operating cash flow despite revenue and earnings growth.
- Whether North American and international spending, pricing, and activity meet management’s 2022 expectations.
- Potential additional impairments, severance costs, litigation, or operational effects from the Russia and Ukraine wind-downs and sanctions.
- Customer receivables collectability, especially the Mexico exposure, and the availability of committed credit if liquidity needs rise.
- Whether planned capital spending and dividends remain consistent with the company’s debt-reduction and liquidity priorities.