Halliburton Announces First Quarter Results
72 Cents Earnings Per Share
Results Include 14 Cents Per Share Gain on Sale of Subsea 7, Inc.
HOUSTON, April 21 /PRNewswire-FirstCall/ -- Halliburton (NYSE: HAL) announced today that first quarter of 2005 income from continuing operations was $367 million or $0.72 per diluted share. Income from continuing operations was $76 million or $0.17 per diluted share in the first quarter of 2004.
Net income for the quarter was $365 million or $0.72 per diluted share and included a loss from discontinued operations, net of tax, of $2 million.
Consolidated revenue was $4.9 billion in the first quarter of 2005, down 11% from the first quarter of 2004. This decrease was largely attributable to lower activity on government services projects in the Middle East and the winding down of lump-sum offshore engineering, procurement, installation, and commissioning contracts. This was partially offset by a 20% revenue increase in the Energy Services Group (ESG).
Consolidated operating income was $586 million in the first quarter of 2005 compared to $175 million in the first quarter of 2004. Impacting first quarter of 2005 operating income was a previously announced $110 million gain on the sale of a 50% interest in Subsea 7, Inc. Results from the first quarter of 2004 included a $97 million loss on the Barracuda-Caratinga project and a $13 million gain related to the Anglo-Dutch lawsuit.
"We are pleased with our first quarter performance, both for ESG and KBR," said Dave Lesar, chairman, president, and chief executive officer of Halliburton. "ESG's record performance benefited from increased oilfield activity and price increases we implemented during 2004. KBR's restructuring efforts have resulted in a more efficient operation, which is evidenced by the profitable results we have posted this quarter. In addition, KBR continues to make progress on resolving issues with our customer related to our work in Iraq, resulting in a settlement of the Dining Facilities matters."
2005 First Quarter Segment Results
Energy Services Group
ESG posted first quarter of 2005 revenue of $2.2 billion, a $368 million or 20% increase over the first quarter of 2004, and operating income of $513 million, up $299 million or 140% from the same period in the prior year.
Production Optimization operating income for the first quarter of 2005 was $291 million, an increase of $209 million over the first quarter of 2004. First quarter of 2005 results included a gain of $110 million on the sale of the company's equity interest in the Subsea 7, Inc. joint venture. Excluding the Subsea 7, Inc. gain, Production Optimization quarterly operating income increased 121% year-over-year. Production enhancement services operating income increased 76% in the first quarter of 2005, primarily on increased demand for well stimulation services, especially in natural gas applications in the United States, higher equipment utilization, and improved pricing in North America. Completion tools operating income increased 93% in the first quarter of 2005 compared to the first quarter of 2004. Improvements were made in each of the four geographical regions as a result of increased well completion, sand control, and reservoir performance activities. First quarter of 2004 results included an operating loss of $17 million for Subsea 7, Inc.
Fluid Systems operating income for the first quarter of 2005 was $113 million, a $53 million or 88% increase over the first quarter of 2004. Cementing services operating income increased 60% due to higher drilling activity worldwide and improved pricing and asset utilization in North America. Baroid Fluids Services operating income increased 230% on higher margins in Africa and Asia Pacific and increases in both price and volume in the Gulf of Mexico. Baroid Fluids Services results from the Gulf of Mexico also benefited from cost efficiencies realized from the restructuring efforts initiated last year.
Drilling and Formation Evaluation operating income of $80 million was up $37 million or 86% over the prior year first quarter. Sperry Drilling Services operating income increased 71%, benefiting from increased U.S. activity, improved pricing, deepwater contracts in Brazil that utilize GeoPilot(R) and GeoTap(R) technologies, and $9 million in lower depreciation expense due to the extension of the useful life of drilling tools beginning in the second quarter of 2004. Logging services operating income increased 65% due to improved activity and pricing in North America. In addition, logging services operating income improved in the Middle East/Asia region. Drill bits operating income improved 300% primarily due to strong fixed cutter bit sales in North America.
Digital and Consulting Solutions operating income was flat compared to the prior year period. Operating income for Landmark Graphics increased 33% in the first quarter of 2005 compared to the first quarter of 2004 mainly driven by sales of the company's real-time drilling applications as well as increased revenue from data bank projects.
KBR
KBR revenue for the first quarter of 2005 was $2.8 billion, a 26% decrease compared to the first quarter of 2004. Operating income for the first quarter of 2005 was $105 million compared to an operating loss of $15 million in the first quarter of 2004.
Government and Infrastructure (G&I) operating income for the first quarter of 2005 was $53 million compared to $62 million in the first quarter of 2004, a 15% decrease. Most of this decrease was attributable to the completion of the RIO contract. Operating income in the first quarter of 2005 was positively affected by a settlement with KBR's customer for its Iraq-related work under the LogCAP III contract.
Energy and Chemicals (E&C) operating income totaled $52 million in the first quarter of 2005 compared to a $77 million loss in the first quarter of 2004, which included a $97 million loss on the Barracuda-Caratinga project. The first quarter of 2005 results were positively impacted by stronger results on many projects, including offshore engineering and management projects in the Caspian and Angola and offshore production services projects in the United Kingdom.
KBR's backlog at March 31, 2005 was $9.4 billion, up approximately $1.0 billion from December 31, 2004, primarily due to a recent LNG award. Of the total backlog, $4.8 billion is for G&I projects, and $4.6 billion is for E&C projects.
Halliburton's Iraq-related work contributed approximately $1.5 billion in revenue in the first quarter of 2005 and $38 million of operating income, or a 2.6% margin.
Technology and Significant Achievements
Halliburton had a number of advances in technology and new contract awards.
Energy Services Group new technologies:
* Halliburton's Sperry Drilling Services continues to lead the industry
with its GeoTap(R) while-drilling formation pressure tester, an
integral part of its Stellar(R) formation evaluation suite. The
GeoTap formation pressure tester allows drilling engineers, reservoir
engineers, and petrophysicists to acquire fast and accurate pressure
measurements to make timely decisions. The 6 3/4-inch GeoTap logging-
while-drilling sensor was the first commercially available pad/probe
while-drilling formation pressure tester for 8 1/2-inch to 10 5/8-inch
hole sizes. In addition, the 8-inch GeoTap sensor has now
successfully performed pressure tests in 12 1/4-inch hole sizes in
Norway, the Gulf of Mexico, the Caspian, and offshore Brazil.
* Halliburton's Sperry Drilling Services successfully completed its
field trials of its third-generation Geo-Pilot(R) 5200 Series system
and is now providing commercial services to its customers. With the
addition of the 5200 Series system to the FullDrift(R) drilling suite,
Sperry offers a slim hole point-the-bit rotary steerable solution
capable of significantly extending horizontal production sections and
reaching small targets from existing structures.
* Halliburton's Digital and Consulting Solutions group has acquired the
smartSECTION(R) geologic software business from A2D Technologies, a
TGS-NOPEC Company. SmartSECTION software provides the industry's
leading raster image cross-section application and pioneered the use
of depth-calibrated well log images for a faster, more affordable
approach to high volume well log correlation and geologic
interpretation.
* Halliburton's Landmark Graphics achieved global certification for the
third consecutive year under the prestigious Support Center Practices
(SCP) program that establishes the service quality benchmark for all
information technology service support centers and help desks. SCP
certification is an internationally recognized standard that defines
best practices for delivering world-class technology support.
KBR new contract awards:
* KBR and joint venture partners Snamprogetti of Italy and JGC of Japan
have been awarded a $1.7 billion engineering, procurement, and
construction (EPC) contract for the Chevron Nigeria Ltd./Nigeria
National Petroleum Corporation gas to liquids (GTL) facility. The
facility is located approximately 100 kilometers southeast of Lagos in
Escravos, Nigeria. This award marks KBR's first GTL EPC contract.
The Escravos GTL facility will provide environmental benefits by
converting natural gas to ultra clean GTL diesel. The facility will
produce 34,000 barrels per day of GTL diesel, naphtha, and liquefied
petroleum gas for export.
* KBR, along with joint venture partners JGC of Japan and PT
Pertafenikki Engineering of Indonesia, has been awarded a $1.8 billion
engineering, procurement, and construction contract for the Tangguh
LNG Project of BP and partners in Indonesia. The scope of the project
includes the construction of a two-train LNG processing plant and
associated support facilities. Each train will have a capacity of 3.8
million tonnes per annum (MTPA). The project is expected to begin
producing LNG in 2008.
* KBR has been appointed by the United Kingdom Ministry of Defence (MoD)
to be the preferred Physical Integrator for the Future Aircraft
Carrier Programme, under which two new aircraft carriers are to be
delivered to the MoD with target in-service dates of 2012 and 2015.
As preferred Physical Integrator, KBR will be responsible for
developing and proposing the optimum build strategy for approval by
the alliance participants, creating and maintaining the program master
schedule, providing support to the MoD and negotiating the alliance
contracts.
* KBR is one of four contractors awarded a United States Navy Multiple
Award Construction Contract (MACC) by the Southern Division Naval
Facilities Engineering Command to repair northwest Florida Navy
facilities damaged by Hurricane Ivan. KBR was also selected as the
contractor for the initial task order on this project. Under the
MACC, KBR and the three other contractors will compete for each task
order on an individual basis, with the anticipated value of each task
order ranging from $3 million to $15 million. The initial task order
awarded to KBR is valued at approximately $3 million and covers work
that will be carried out at the Naval Air Station in Pensacola,
Florida.
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 KBR. The company's World Wide Web site can be accessed at http://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 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 audits and investigations of the company by domestic and foreign government agencies and legislative bodies and potential adverse proceedings and findings by such agencies, a delay in the receipt of additional agreed payments from insurers arising from asbestos and silica claims, the risks of judgments against the company and its subsidiaries in litigation and proceedings, including shareholder lawsuits, securities laws inquiries, contract disputes, patent infringements and environmental matters, legislation, 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, 2004 for a more complete discussion of such risk factors.
HALLIBURTON COMPANY
Condensed Consolidated Statements of Operations
(Millions of dollars and shares except per share data)
(Unaudited)
Three Months Three Months
Ended Ended
March 31 December 31
2005 2004 2004
Revenue:
Production Optimization $ 900 $ 708 $ 912
Fluid Systems 631 535 617
Drilling and Formation Evaluation 489 444 465
Digital and Consulting Solutions 164 129 176
Total Energy Services Group 2,184 1,816 2,170
Government and Infrastructure 2,091 2,868 2,295
Energy and Chemicals 663 835 736
Total KBR 2,754 3,703 3,031
Total revenue $4,938 $5,519 $5,201
Operating income (loss):
Production Optimization $ 291 $ 82 $ 208
Fluid Systems 113 60 98
Drilling and Formation Evaluation 80 43 61
Digital and Consulting Solutions 29 29 ---
Total Energy Services Group 513 214 367
Government and Infrastructure 53 62 9
Energy and Chemicals 52 (77) (9)
Total KBR 105 (15) ---
General corporate (32) (24) (21)
Total operating income 586 175 346
Interest expense (52) (56) (69)
Interest income 12 10 14
Foreign currency, net --- (3) 6
Other, net (2) 5 ---
Income from continuing operations
before income taxes
and minority interest 544 131 297
Provision for income taxes (169) (49) (110)
Minority interest in net income
of subsidiaries (8) (6) (6)
Income from continuing operations 367 76 181
Loss from discontinued operations,
net (2) (141) (384)
Net income (loss) $ 365 $ (65) $ (203)
Basic income (loss) per share:
Income from continuing operations $ 0.73 $ 0.17 $ 0.41
Loss from discontinued operations,
net --- (0.32) (0.88)
Net income (loss) $ 0.73 $(0.15) $(0.47)
Diluted income (loss) per share:
Income from continuing operations $ 0.72 $ 0.17 $ 0.40
Loss from discontinued operations,
net --- (0.32) (0.86)
Net income (loss) $ 0.72 $(0.15) $(0.46)
Basic weighted average common
shares outstanding 501 436 439
Diluted weighted average common
shares outstanding 510 440 444
See Footnote Table 1 for a list of significant items included in operating
income.
HALLIBURTON COMPANY
Condensed Consolidated Balance Sheets
(Millions of dollars)
(Unaudited)
March 31, December 31,
2005 2004
Assets
Current assets:
Cash and marketable securities $ 1,812 $ 2,808
Receivables, net 4,778 4,685
Insurance for asbestos- and
silica-related liabilities 96 1,066
Inventories, net 880 791
Other current assets 642 680
Total current assets 8,208 10,030
Property, plant, and equipment, net 2,556 2,553
Insurance for asbestos- and
silica-related liabilities 297 350
Other assets 2,745 2,931
Total assets $13,806 $15,864
Liabilities and Shareholders' Equity
Current liabilities:
Asbestos- and silica-related liabilities $ --- $ 2,408
Accounts payable 2,357 2,339
Current maturities of long-term debt 862 347
Other current liabilities 1,960 2,038
Total current liabilities 5,179 7,132
Long-term debt 3,109 3,593
Asbestos- and silica-related liabilities --- 37
Other liabilities 1,066 1,062
Total liabilities 9,354 11,824
Minority interest in consolidated subsidiaries 114 108
Shareholders' equity 4,338 3,932
Total liabilities and shareholders' equity $13,806 $15,864
HALLIBURTON COMPANY
Selected Cash Flow Information
(Millions of dollars)
(Unaudited)
Three Months Ended Three Months Ended
March 31 December 31
2005 2004 2004
Capital expenditures:
Energy Services Group $131 $103 $142
KBR 11 27 11
Total capital expenditures $142 $130 $153
Depreciation, depletion,
and amortization:
Energy Services Group $110 $119 $121
KBR 15 13 14
Total depreciation, depletion,
and amortization $125 $132 $135
HALLIBURTON COMPANY
Revenue and Operating Income Comparison
By Geographic Region - Energy Services Group Only
(Millions of dollars)
(Unaudited)
Three Months Ended Three Months Ended
March 31 December 31
2005 2004 2004
Revenue:
North America $1,059 $ 814 $ 980
Latin America 314 229 301
Europe/Africa 410 372 454
Middle East/Asia 401 401 435
Total revenue $2,184 $1,816 $2,170
Operating income:
North America $ 353 $ 118 $ 224
Latin America 46 30 12
Europe/Africa 67 19 62
Middle East/Asia 47 47 69
Total operating income $ 513 $ 214 $ 367
See Footnote Table 2 for a list of significant items included in operating
income.
FOOTNOTE TABLE 1
HALLIBURTON COMPANY
Items included in Operating Income by Operating Segment
(Millions of dollars except per share data)
(Unaudited)
Three Months Three Months Three Months
Ended Ended Ended
March 31, 2005 March 31, 2004 December 31, 2004
After After After
Tax Tax Tax
Operating per Operating per Operating per
Income Share Income Share Income Share
Production Optimization:
Subsea 7, Inc. gain
on sale (A) $110 $0.14 $--- $--- $--- $---
Surface well testing
gain on sale --- --- --- --- 14 0.02
Digital and Consulting
Solutions:
Integrated solutions
projects in Mexico (8) (0.01) --- --- (33) (0.05)
Intellectual property
settlement --- --- --- --- (11) (0.01)
Anglo-Dutch lawsuit --- --- 13 0.02 --- ---
Government and
Infrastructure:
Restructuring charge (1) --- --- --- (8) (0.01)
Energy and Chemicals:
Restructuring charge (1) --- --- --- (14) (0.02)
Barracuda-Caratinga
project loss --- --- (97) (0.14) --- ---
(A) The three months ended March 31, 2004 included a $17 million equity
loss, and the three months ended December 31, 2004 included
$9 million in equity income contributed from Subsea 7, Inc.
FOOTNOTE TABLE 2
HALLIBURTON COMPANY
Items included in Operating Income
By Geographic Region - Energy Services Group Only
(Millions of dollars except per share data)
(Unaudited)
Three Months Three Months Three Months
Ended Ended Ended
March 31, 2005 March 31, 2004 December 31, 2004
After After After
Tax Tax Tax
Operating per Operating per Operating per
Income Share Income Share Income Share
North America:
Subsea 7, Inc. gain
on sale $107 $0.14 $--- $--- $--- $---
Surface well testing
gain on sale --- --- --- --- 3 ---
Anglo-Dutch lawsuit --- --- 13 0.02 --- ---
Latin America:
Integrated solutions
projects in Mexico (8) (0.01) --- --- (33) (0.05)
Europe/Africa:
Subsea 7, Inc. gain
on sale 3 --- --- --- --- ---
Surface well testing
gain on sale --- --- --- --- 4 0.01
Intellectual property
settlement --- --- --- --- (11) (0.01)
Middle East/Asia:
Surface well testing
gain on sale --- --- --- --- 7 0.01
FOOTNOTE TABLE 3
HALLIBURTON COMPANY
Reconciliation of As Reported Segment Results to Adjusted Segment Results
Energy Services Group Only
(Millions of dollars except operating margin percentage)
(Unaudited)
Drilling and Digital and Total Energy
Production Fluid Formation Consulting Services
Optimization Systems Evaluation Solutions Group
Three Months Ended
March 31, 2005
Revenue $900 $631 $489 $164 $2,184
As reported
operating
income $291 $113 $80 $29 $513
Subsea 7, Inc.
gain on
sale (A) (110) --- --- --- (110)
Adjusted
operating
income $181 $113 $80 $29 $403
As reported
operating
margin (B) 32.3% 17.9% 16.4% 17.7% 23.5%
Adjusted
operating
margin (B) 20.1% 17.9% 16.4% 17.7% 18.5%
Three Months Ended
December 31, 2004
Revenue $912 $617 $465 $176 $2,170
As reported
operating
income $208 $98 $61 $--- $367
Surface well
testing gain
on sale (A) (14) --- --- --- (14)
Adjusted operating
income $194 $98 $61 $--- $353
As reported
operating
margin (B) 22.8% 15.9% 13.1% NM 16.9%
Adjusted
operating
margin (B) 21.3% 15.9% 13.1% NM 16.3%
Three Months Ended
March 31, 2004
As reported
operating
income (C) $82 $60 $43 $29 $214
NM - Not Meaningful
(A) The Company is reporting strong operating income from the Energy
Services Group, particularly the Production Optimization segment.
Management believes it is important to point out to investors that a
portion of operating income and operating margin growth is
attributable to the gain on the sale of the equity interest in the
Subsea 7, Inc. joint venture in the first quarter of 2005 and the
gain on the sale of surface well testing operations in the fourth
quarter of 2004, because investors have indicated to management their
desire to understand the current drivers and future trends of the
operating margins. The adjustment removes the effect of the gain on
the sale of the 50% interest in Subsea 7, Inc. and the gain on the
sale of surface well testing operations.
(B) As reported operating margin is calculated as: "As reported operating
income" divided by "Revenue." Adjusted operating margin is
calculated as: "Adjusted operating income" divided by "Revenue."
(C) No reconciling items were noted for this quarter.
SOURCE Halliburton
-0- 04/21/2005
/CONTACT: Evelyn Angelle, Vice President, Investor Relations,
+1-713-759-2688, or Wendy Hall, Director, Communications, +1-713-759-2605,
both of Halliburton/
/Web site: http://www.halliburton.com /
(HAL)
CO: Halliburton
ST: Texas
IN: OIL
SU: ERN
AW-CD
-- DATH035 --
9233 04/21/2005 17:17 EDT http://www.prnewswire.com