Halliburton Company (HAL) is a renowned oilfield services provider with a rich history spanning over a century. Founded in 1919, the company has evolved from its humble beginnings to become a global leader in the energy industry, offering a comprehensive range of products and services to major, national, and independent oil and natural gas companies worldwide.
Company History and Growth
Halliburton's story began when two young engineers, Erle P. Halliburton and Clarence Avery, established the New Method Oil Well Cementing Company in Duncan, Oklahoma. Their innovative approach to well cementing quickly gained recognition, and the company's reputation for quality and reliability grew rapidly. In the decades that followed, Halliburton expanded its offerings, diversifying into various oilfield services and technologies that have become essential to the industry.
Halliburton's growth trajectory has been marked by significant milestones and strategic decisions. The company opened its first international office in Mexico in 1924, signaling the beginning of its global expansion. In the 1940s and 1950s, Halliburton played a crucial role in developing offshore drilling technology, further solidifying its position as an industry innovator. The acquisition of Baroid Corporation in 1962 strengthened Halliburton's presence in the drilling fluids market, demonstrating the company's commitment to diversifying its service offerings.
Overcoming Challenges
The 1980s and 1990s presented significant challenges for Halliburton, including the international debt crisis, a collapse in oil prices, and legal issues related to asbestos liabilities. However, the company demonstrated its resilience by streamlining operations, divesting non-core businesses, and actively addressing the legal challenges it faced. These strategic moves allowed Halliburton to weather the storm and maintain its position as a major player in the oilfield services industry.
Strategic Growth and Acquisitions
In the 2000s, Halliburton continued its growth trajectory through strategic acquisitions and a renewed focus on technological advancements. The company acquired Dresser Industries in 1998, further expanding its service portfolio. Although a proposed merger with Baker Hughes in 2016 ultimately failed, it demonstrated Halliburton's ambition to strengthen its market position. The company has since shifted its focus towards developing more technologically advanced services and solutions, aiming to help its customers maximize the value of their oil and gas assets in an increasingly competitive market.
Current Operations
Today, Halliburton operates in more than 70 countries, with approximately 49,000 employees dedicated to delivering innovative solutions that maximize asset value for its customers. The company's business is organized into two primary segments: Completion and Production, and Drilling and Evaluation.
The Completion and Production segment focuses on cementing, stimulation, specialty chemicals, intervention, pressure control, artificial lift, and completion products and services. This segment offers a range of services and products to enable the completion and production of oil and gas wells. Key offerings include cementing services for wellbore integrity and zonal isolation, pressure pumping services and chemical treatments to enhance oil and gas production, specialty chemicals for oilfield and industrial applications, intervention services to enhance well productivity and improve life cycle management, artificial lift technologies to optimize production throughout the life of the well, and completion tools for well completions, including liner hangers, sand control, and subsea.
The Drilling and Evaluation segment provides field and reservoir modeling, drilling, fluids, evaluation, and precise wellbore placement solutions. This segment offers products and services to enable customers to model, measure, drill, and optimize their well construction activities. Key offerings include Baroid drilling fluid systems and performance additives, drill bits and drilling optimization services, integrated project management solutions, Landmark exploration, drilling, and production software and consulting services, Sperry Drilling directional drilling and measurement services, integrated well testing and subsea production solutions, and wireline formation evaluation and perforating services.
Financials and Liquidity
Halliburton's financial performance has been strong in recent years. For the fiscal year 2023, the company reported annual revenue of $23.02 billion, annual net income of $2.64 billion, annual operating cash flow of $3.46 billion, and annual free cash flow of $2.08 billion.
In the second quarter of 2024, Halliburton reported total revenue of $5.83 billion, a 1% increase compared to $5.80 billion in the same period of the prior year. The company's net income for the quarter was $709 million, with operating cash flow of $1.08 billion and free cash flow of $793 million. The company's revenue remained flat sequentially, but saw increased operating income due to international activity growth for pressure pumping services and completion tool sales.
The Completion and Production segment generated revenue of $3.40 billion in Q2 2024, a 2% decrease year-over-year. Operating income for this segment was $723 million, a 2% increase compared to the same period in 2023. The segment's performance was impacted by lower pressure pumping services in U.S. land, partially offset by improved completion tool sales in the Eastern Hemisphere.
The Drilling and Evaluation segment reported revenue of $2.43 billion in Q2 2024, a 5% increase year-over-year. Operating income for this segment was $403 million, a 7% increase compared to the same period in 2023. The segment's performance was driven by increased drilling services in U.S. land and the Middle East, as well as improved testing services in Latin America and the Middle East.
Halliburton's overall operating margin for Q2 2024 was 18%.
Geographic Diversification
Geographically, Halliburton's revenue was diversified, with 41% coming from North America, 19% from Latin America, 13% from Europe/Africa/CIS, and 26% from the Middle East/Asia region. The company's international business continued to demonstrate strength, with revenue growing 8% year-over-year, driven by increased activity across multiple product service lines. International revenue for Q2 2024 was $3.4 billion, while North America revenue was $2.5 billion, down 8% year-over-year.
Based on the location of services provided and products sold, 41% of Halliburton's consolidated revenue was from the United States in the first half of 2024, compared to 46% in the first half of 2023. No other country accounted for more than 10% of revenue.
Liquidity and Capital Structure
Halliburton's balance sheet remains robust, with a current ratio of 2.13, a quick ratio of 1.54, and a cash ratio of 0.38 as of June 30, 2024, indicating a strong liquidity position. The company's debt-to-equity ratio stood at 0.79, and it held cash and cash equivalents of $2.14 billion. Additionally, Halliburton has access to a $3.5 billion committed bank credit facility, expiring in April 2027, further strengthening its financial flexibility.
Future Outlook and Guidance
Looking ahead, Halliburton expects its international business to deliver approximately 10% revenue growth for the full year 2024. In North America, the company anticipates a 6% to 8% decline in revenue compared to 2023, primarily due to lower activity levels. However, Halliburton remains confident in its strategy to maximize value in the North American market, leveraging its differentiated technologies and focus on returns over market share.
For the third quarter of 2024, Halliburton expects its Completion and Production division to see sequential revenue decline by 1% to 3%, with margins decreasing by 75 to 125 basis points. The Drilling and Evaluation division is expected to see sequential revenue increase by 2% to 4%, with margins increasing by 25 to 75 basis points.
For the full year 2024, Halliburton anticipates capital expenditures to be approximately 6% of revenue and expects free cash flow to be at least 10% higher than in 2023.
Strategic Priorities and Innovation
Halliburton's strategic priorities include allocating capital to the highest return international growth opportunities, maximizing value in North America by utilizing premium technologies and focusing on returns over market share, and continuing to drive differentiation and efficiencies through digital and automation technologies. The company aims to maintain capital expenditures at approximately 6% of revenue while focusing on technological advancements and cost reduction.
Halliburton is also committed to returning over 50% of annual free cash flow to shareholders through dividends and share repurchases. In Q2 2024, the company repurchased $250 million of common stock.
The company's commitment to innovation is a key part of its strategy. Halliburton has made significant investments in technologies such as its iCruise rotary steerable system, which has seen strong market adoption, and its ZEUS electric fracturing platform, which continues to drive efficiencies and lower emissions for customers. Additionally, Halliburton's Landmark software business has been a standout performer, with customers highlighting the value of its integrated offerings and cloud-based solutions.
Halliburton is also focused on developing solutions to lower the carbon intensity of customers' businesses and participate in energy transition initiatives.
Conclusion
Despite the challenges faced by the industry, Halliburton has demonstrated resilience and a focus on profitability. The company's strong liquidity position, diversified geographic footprint, and continued investment in technology and innovation position it well to navigate the dynamic market environment and capitalize on future growth opportunities. With its strategic focus on international growth, maximizing value in North America, and driving technological advancements, Halliburton remains a key player in the global energy services industry.