Halliburton Announces First Quarter Results
$0.14 Per Share Income From Continuing Operations; $0.12 Per Share Pro Forma Income From Continuing Operations; Results Include an $0.08 Charge on the Barracuda-Caratinga Project
HOUSTON, April 29 /PRNewswire-FirstCall/ -- Halliburton (NYSE: HAL) announced today that first quarter 2003 income from continuing operations was $59 million or $0.14 per diluted share. There were several items impacting continuing operations for the quarter on an after tax basis: a $34 million charge on the Barracuda-Caratinga project, a $22 million gain related to the sale of Mono Pumps, a $12 million loss related to the sale of Wellstream and a $2 million charge associated with the engineering and construction portion of the proposed global settlement for asbestos.
The after tax charge of $34 million, or $0.08 per diluted share, on Barracuda-Caratinga was due to higher cost trends and some actual and committed costs exceeding estimated costs. In addition, schedule delays added to the costs of the project during the quarter. The Company is currently in negotiations with Petrobras, and although it is too early to predict the outcome, these negotiations, if successfully concluded, could result in a number of positive developments including schedule relief and improved project liquidity.
The Company believes that the effects of the net gain on the sale of Mono Pumps and Wellstream and the charges related to the proposed global settlement should be excluded for purposes of understanding ongoing operations. Therefore, excluding these items (but including the $0.08 charge per diluted share on the Barracuda-Caratinga project), pro forma 2003 first quarter income from continuing operations was $51 million or $0.12 per diluted share. Tables are attached reconciling as reported amounts to pro forma amounts used in this press release with descriptions of the reasons why the Company believes the pro forma amounts are useful to investors.
Net income for the first quarter 2003 was $43 million or $0.10 per diluted share, which includes a net loss from discontinued operations of $0.02 per diluted share and a net loss of $0.02 per diluted share for a change in accounting principle.
Revenues were $3.1 billion in the 2003 first quarter, up two percent year- over-year. This increase is largely attributable to increased activity in certain Engineering and Construction Group projects, partially offset by lower activity in the Energy Services Group. Operating income was $142 million compared to $123 million in the 2002 first quarter. Pro forma operating income was $123 million for the 2003 first quarter, up almost 84 percent when compared to the 2002 first quarter. The charge for a patent infringement judgment in the first quarter of 2002 of $98 million was the major driver for the year-over-year change.
"In an environment where activity was down in Venezuela and the Middle East, Halliburton Energy Services' results compare favorably to the prior year quarter as well as the fourth quarter of 2002. Although I am disappointed by the additional charges on Barracuda-Caratinga, I believe that progress on this project is being made in our negotiations," said Dave Lesar, Chairman, President and Chief Executive Officer of Halliburton. "We expect to see additional improvements in our results in the second quarter as the recovery continues, and I am optimistic that activity levels will increase during the second half of the year, providing for accelerated earnings growth during that period."
2003 First Quarter Segment Results
The Energy Services Group posted first quarter revenues of $1.6 billion, a $78 million decrease year-over-year due to the sale of Mono Pumps and the contribution of Halliburton Subsea assets to an unconsolidated joint venture. These declines were partially offset by revenue growth in Halliburton Energy Services.
Operating income for the Energy Services Group's first quarter was $180 million, up seven percent year-over-year. Energy Services Group pro forma operating income was $159 million, up over 160 percent year-over-year. The increase in pro forma operating income reflects a significant increase in Halliburton Energy Services operating income and margin compared to the prior year as well as the charge for the patent infringement judgment in the first quarter of 2002.
The Engineering and Construction Group's first quarter revenues were approximately $1.5 billion, up 10 percent year-over-year. Revenue decreases of six percent in both Operations & Maintenance and Offshore were more than offset by substantial increases in Government Services and Onshore operations. The increase in Government Services revenues was attributable to initial activity related to Iraq. Onshore operations revenues were up due to increased activity in several large projects.
The operating loss for the Engineering and Construction Group in the first quarter of 2003 was $19 million, and the pro forma operating loss which excludes asbestos expenses was $17 million, down $39 million from the first quarter of 2002. This decline is attributable to a $55 million charge ($34 million after tax) on the Barracuda-Caratinga contract, which was partially offset by increased results in Government Services.
General corporate costs in the first quarter 2003 were $19 million, compared to a gain of $12 million in the first quarter of 2002. Last year's first quarter corporate expenses were offset by a $28 million gain related to the demutualization of an insurance provider.
Backlog
Backlog for the Engineering and Construction Group as of March 31, 2003, was $9.5 billion, up $100 million, or one percent, from March 31, 2002. Approximately 41 percent of the backlog is for fixed fee contracts and about half of the total backlog will be performed in the next 12 months. Of the fixed fee contract backlog, 39 percent of the total relates to Onshore contracts and 25 percent relates to Offshore with most of the remaining balance relating to Government Services.
Firm orders were $7.5 billion at the end of the quarter. The remainder of the backlog primarily relates to government awards not yet funded, with the Balkans support contract in future years representing the majority of the balance.
Discontinued Operations and Cumulative Effect of Accounting Change
The first quarter net loss from discontinued operations was $8 million after tax, or $0.02 per diluted share. This loss reflects professional fees associated with due diligence and other aspects of the proposed global settlement for asbestos liabilities related to previously disposed businesses. The net loss from a change in accounting principle of $8 million after tax, or $0.02 per diluted share, is related to the Company's January 1, 2003 adoption of Financial Accounting Standards Board Statement No. 143, Asset Retirement Obligations.
Technology and Significant Achievements
Halliburton had a number of advances in technology and new contract awards including:
-- The Energy Services Group was awarded a $400 million contract by BP
to provide products and services for their drilling and completion
activities in the Gulf of Mexico and lower 48 states subsequent to
the end of the quarter. This award represents a 50 percent market
share increase with BP, with the most significant gains occurring in
logging and stimulation.
-- Halliburton's Energy Services Group entered into an agreement with
Shell International Exploration and Production for the supply of its
PoroFlex(R) line of expandable screen products for global Shell
consumption. Including options, the contract duration is over three
years. Based on information provided, the Company estimates that
the total competitive contract value is in excess of $166 million
over the full contract duration.
-- The Energy Services Group was awarded a $67 million contract from
Shell Malaysia E&P to supply Enventure Global Technology Solid
Expandable Tubular Equipment and Services for their Malaysian
operations. The contract spans a two-year period, with an option to
extend another year.
-- Baroid has developed BAROLIFT(TM), a product that allows operators
to clean downhole during drilling operations by increasing the
carrying capacity of drilling fluids without increasing viscosity.
As part of Baroid's Lift While You Drill(TM) technologies, the
product is a specially treated synthetic fiber developed from 100
percent virgin materials that are capable of performing well in any
type of drilling fluid. Its interlocking fibers keep drill cuttings
in suspension, optimizing downhole tool performance and improving
the rate of penetration. It is compatible with water, oil, and
synthetic-based fluids. It is non-toxic and unaffected by sub-
freezing temperatures as with some liquid polymers.
-- The Engineering and Construction Group was awarded a contract from
the United Kingdom Department of Health for the provision of program
management services for their $3.6 billion National IT Program. The
program is aimed at restructuring and modernizing the National
Health Service's information technology. Subsequent to quarter end,
KBR added $100 million to backlog related to this contract.
-- An Engineering and Construction Group joint venture was selected as
the winning bidder for a $1.4 billion contract with BP for the
Tangguh project to provide design, procurement, construction and
commissioning services for a LNG plant in Papua, subsequent to the
end of the quarter.
-- Road Management Services consortium, in which KBR is a 25 percent
shareholder, was awarded a $400 million contract by the Highways
Agency to upgrade to motorway standard, operate and maintain a
33-mile stretch of road in the United Kingdom. The Road Management
Services consortium comprises KBR, AMEC, Alfred McAlpine and
Dragados.
-- Landmark Graphics Corporation signed an agreement with the Ministry
of Energy and Mineral Resources of the Republic of Kazakhstan. The
agreement calls for the design, development and implementation of a
National Data Bank operation for exploration and production data
using Landmark's PetroBank(TM) technology, the most advanced
networked multi-client data management system in the exploration and
production industry.
-- Magic Earth signed an agreement with Anglo-Suisse Inc., a privately
held Houston-based independent oil company, to utilize Magic Earth's
GeoProbe(TM), the industry's leading volume visualization and
interpretation software. In its Houston visualization center, Magic
Earth will evaluate nearly 500 producing blocks located in the Gulf
of Mexico shelf and 1,800 open-exploration blocks of ASI's license
to Petroleum Geo-Services 3D seismic data.
Halliburton, founded in 1919, is one of the world's largest providers of products and services to the petroleum and energy industries. The Company serves its customers with a broad range of products and services through its Energy Services Group and Engineering and Construction Group business segments. The Company's World Wide Web site can be accessed at www.halliburton.com .
NOTE: The statements in this press release that are not historical
statements, including statements regarding future financial performance, are
forward-looking statements within the meaning of the federal securities laws.
These statements are subject to numerous risks and uncertainties, many of
which are beyond the Company's control, which could cause actual results of
operations to differ materially from the results expressed or implied by the
statements. These risks and uncertainties include, but are not limited to:
legal risks, including the risks of judgments against the Company's
subsidiaries and predecessors in asbestos litigation pending and currently on
appeal, the inability of insurers for asbestos exposures to pay claims; future
asbestos claims defense and settlement costs, other litigation and
proceedings, including shareholder lawsuits, securities laws inquiries,
contract disputes, patent infringements and environmental matters, changes in
government regulations and adverse reaction to scrutiny involving the Company;
political risks, including the risks of unsettled political conditions, war
and the effects of terrorism, foreign operations and foreign exchange rates
and controls; liquidity risks, including the risks of potential reductions in
debt ratings, access to credit, availability and costs of financing and
ability to raise capital; weather-related risks; customer risks, including the
risks of changes in capital spending and claims negotiations; industry risks,
including the risks of changes that affect the demand for or price of oil
and/or gas, structural changes in the industries in which the Company
operates, risks of fixed-fee projects and risks of complex business
arrangements; systems risks, including the risks of successful development and
installation of financial systems; and personnel and
merger/reorganization/disposition risks, including the risks of increased
competition for employees, successful integration of acquired businesses,
effective restructuring efforts and successful completion of planned
dispositions. Please see Halliburton's Form 10-K for the year ended
December 31, 2002.
HALLIBURTON COMPANY
Consolidated Statements of Operations
(Unaudited)
Three Months Three Months
Ended Ended
March 31 Dec. 31
2003 2002 2002
(millions of dollars and shares
except per share data)
Revenues
Energy Services Group $1,611 $1,689 $1,714
Engineering and Construction Group 1,449 1,318 1,634
Total revenues $3,060 $3,007 $3,348
Operating income (loss)
Energy Services Group $ 180 $ 169 $ 199
Engineering and Construction Group (19) (58) (189)
General corporate (19) 12 (31)
Total operating income (loss) 142 123 (21)
Interest expense (27) (32) (22)
Interest income 8 4 8
Foreign currency losses, net (6) (8) (13)
Other nonoperating, net --- 4 (12)
Income (loss) from continuing operations
before income taxes, minority interest,
and change in accounting principle 117 91 (60)
Provision for income taxes (50) (36) (49)
Minority interest in net income of
subsidiaries (8) (5) (23)
Income (loss) from continuing operations
before change in accounting principle 59 50 (132)
Loss from discontinued operations (8) (28) (484)
Cumulative effect of change in accounting
principle, net (8) --- ---
Net income (loss) $43 $22 $(616)
Basic income (loss) per share:
Continuing operations before change
in accounting principle $0.14 $0.12 $(0.30)
Loss from discontinued operations (0.02) (0.07) (1.12)
0.12 0.05 (1.42)
Change in accounting principle (0.02) --- ---
Net income (loss) $0.10 $0.05 $(1.42)
Diluted income (loss) per share:
Continuing operations before change in
accounting principle $0.14 $0.12 $(0.30)
Loss from discontinued operations (0.02) (0.07) (1.12)
0.12 0.05 (1.42)
Change in accounting principle (0.02) --- ---
Net income (loss) $0.10 $0.05 $(1.42)
Basic weighted average common
shares outstanding 434 432 433
Diluted weighted average common
shares outstanding 436 433 433
TABLE 1
HALLIBURTON COMPANY
Reconciliation of As Reported Results to Pro Forma Results
(millions of dollars except per share data)
(Unaudited)
Earnings/
Minority (Loss)
Interest Income/ Per
In (Loss) Share
Other Net From From
Operating Income/ (Provision) Income Contin- Contin-
Income/ (Expense)- Benefit Of uing uing
(Loss), (Including For Subsid- Oper- Oper-
Pretax Interest) Taxes iaries ations ations
Three Months Ended
March 31, 2003:-
Pro forma results
(excluding
items below): $123 $(27) $(37) $(8) $51 $0.12
Sale of Mono Pump (A) 36 2 (16) --- 22 0.05
Sale of Wellstream (A) (15) --- 3 --- (12) (0.03)
Asbestos and
silica (B) (2) --- --- --- (2) ---
As reported $142 $(25) $(50) $(8) $59 $0.14
Three Months Ended
December 31, 2002:-
Pro forma results
(excluding
items below): (D) $212 $(33) $(70) $(23) $86 $0.21
Sale of equity
investment received
as part of business
asset sale (A) --- (9) 3 --- (6) (0.02)
Demutualization of an
insurance provider (C) 1 3 (2) --- 2 ---
Asbestos and silica
charge (B) (234) --- 20 --- (214) (0.49)
As reported $(21) $(39) $(49) $(23) $(132) $(0.30)
Three Months Ended
March 31, 2002:-
Pro forma results
(excluding
items below): (D) $67 $(35) $(13) $(5) $14 $0.03
Sale of EMC (A) 108 3 (43) --- 68 0.16
Highlands receivable
write-off (B) (80) --- 31 --- (49) (0.11)
Demutualization of
an insurance
provider (C) 28 --- (11) --- 17 0.04
As reported $123 $(32) $(36) $(5) $50 $0.12
See Footnote for Table 1 on next page.
TABLE 2
HALLIBURTON COMPANY
Reconciliation of As Reported Segment Results to Pro Forma Results
(millions of dollars except per share data)
(Unaudited)
Engineering
Energy and Operating
Services Construction General Income,
Group Group Corporate Pretax
Three months ended
March 31, 2003:-
Pro forma results
(excluding
items below): $159 $(17) $(19) $123
Sale of Mono Pump (A) 36 --- --- 36
Sale of Wellstream (A) (15) --- --- (15)
Asbestos and silica (B) --- (2) --- (2)
As reported $180 $(19) $(19) $142
Three Months Ended
December 31, 2002:-
Pro forma results
(excluding
items below): (D) $199 $45 $(32) $212
Asbestos and silica
charge (B) --- (234) --- (234)
Demutualization of an
insurance
provider (C) --- --- 1 1
As reported $199 $(189) $(31) $(21)
Three Months Ended
March 31, 2002:-
Pro forma results
(excluding
items below): (D) $61 $22 $(16) $67
Sale of EMC (A) 108 --- --- 108
Highlands receivable
write-off (B) --- (80) --- (80)
Demutualization of an
insurance
provider (C) --- --- 28 28
As reported $169 $(58) $12 $123
Footnotes for Tables 1-2
(A) As each gain or loss on the sale of business assets represents a
unique transaction, management believes the effect of these
transactions should be removed from continuing operations analyses to
provide a better understanding of the Company's ongoing operations.
(B) Due to the material nature of the Company's asbestos and silica
exposure and the Company's efforts to eliminate this exposure through
the proposed global settlement, management believes that removing the
effects of asbestos and silica charges provides an investor with
management's view of the Company's ongoing operations.
(C) As the demutualization of an insurance provider represented a unique
transaction, management believes the effect of this transaction
should be removed from continuing operations analyses to provide a
better understanding of the Company's ongoing operations.
(D) Consistent with new SEC rules, the Company is no longer excluding the
loss on the patent infringement lawsuit of $98 million pretax,
$62 million after tax in the first quarter 2002; restructuring
charges of $11 million pretax, $7 million after tax in the first
quarter 2002; and $29 million pretax, $17 million after tax for the
fourth quarter 2002; and income from the Barracuda-Caratinga project
of $2 million pretax, $1 million after tax for the fourth quarter
2002; as pro forma items. As such, all such pro forma results for
2002 have been restated as shown in Tables 1-2.
SOURCE Halliburton