Halliburton Announces Fourth Quarter Results
$0.34 Per Diluted Share Income From Continuing Operations
HOUSTON, Jan. 29 /PRNewswire-FirstCall/ -- Halliburton (NYSE: HAL) announced today that fourth quarter 2003 income from continuing operations was $146 million, or $0.34 per diluted share. The net loss for the quarter was $947 million, or $2.17 per diluted share, and included a net loss from discontinued operations for the proposed asbestos and silica settlement of $1.1 billion, or $2.51 per diluted share.
Revenues were $5.5 billion in the fourth quarter 2003, up 63% from the fourth quarter 2002. This increase was largely attributable to additional activity on government services projects in the Middle East in the Engineering and Construction Group (known as KBR).
Operating income was $303 million in the fourth quarter 2003 compared to a $21 million loss in the fourth quarter 2002. Fourth quarter 2002 results included a $234 million loss related to the proposed asbestos and silica settlement and $29 million in restructuring charges.
"I am pleased with the overall improvements in our financial performance as both KBR and the Energy Services Group ("ESG") delivered solid operating results for the 2003 fourth quarter," said Dave Lesar, chairman, president and chief executive officer of Halliburton. "The fourth quarter was also strategically significant as we took a major step toward resolving our asbestos and silica liability, and we continued to perform well for our customers in Iraq. In ESG, we benefited from increased oilfield activity in the United States and Canada, and from improved competitive position in international markets such as Norway, Mexico, the Middle East, and Algeria. Looking ahead to 2004, customer spending is expected to accelerate over the course of the year, although our first quarter results are expected to be affected by normal seasonal softness."
Proposed Asbestos and Silica Settlement
In December 2003, as part of the previously announced plan to resolve its asbestos and silica liabilities through a prepackaged bankruptcy, the company's DII Industries, Kellogg Brown & Root, Inc. and other affected subsidiaries filed Chapter 11 proceedings in bankruptcy court in Pittsburgh, Pennsylvania. As a result of the Chapter 11 proceedings, the company adjusted its asbestos and silica liability to reflect the full amount of the proposed settlement, which together with related expenses resulted in a before and after-tax charge of $1.1 billion in the fourth quarter 2003. The tax effect on this charge was minimal, as a valuation allowance was established for the net operating loss carryforward created by the charge.
2003 Fourth Quarter Segment Results
Energy Services Group
ESG posted fourth quarter 2003 revenues of $1.8 billion, an $85 million increase over the fourth quarter 2002, and operating income of $241 million, up $42 million for the same period in the prior year.
Drilling and Formation Evaluation revenues for the fourth quarter 2003 were $417 million, essentially flat from the fourth quarter 2002. The first quarter 2003 sale of Mono Pumps negatively impacted revenue comparisons between the fourth quarter of 2003 and the fourth quarter of 2002 by $20 million. Latin America revenues increased $9 million due to new contracts for logging services in Mexico and the introduction of the company's rotary steerables in Brazil. Revenues in the North America and Middle East/Asia regions increased modestly. However, the Mono Pumps sale, a 6% decrease in rig count, and the completion of certain logging contracts in West Africa contributed to a $13 million decline in revenues for the Europe/Africa region. Operating income of $17 million represented a 62% decrease compared to the fourth quarter 2002. This primarily reflects a decline in offshore activity by key customers. Also, the fourth quarter of 2003 included $8 million of expenses related to the consolidation of two drill bit manufacturing facilities in the Woodlands, Texas announced last quarter and severance cost for the drill bit and directional drilling businesses in the United States and Western Europe, consistent with reduced activity in these markets.
Fluids revenues for the fourth quarter 2003 were $531 million, a 15% increase over the fourth quarter 2002. The increase was driven by a $22 million increase in United States cementing services due to higher land rig count, a $15 million increase in drilling fluids revenues on new contract awards in Mexico, and an $11 million increase in drilling fluids revenues attributed to the start-up of a majority-owned drilling fluids joint venture in Algeria. Revenues were up in each geographic region. Fluids operating income for the fourth quarter 2003 was $73 million, a $25 million increase from the fourth quarter of 2002. The majority of the increase in operating income was attributable to the increase in revenues, as well as Nigeria charges incurred in the fourth quarter of 2002 which adversely impacted operating income in that period.
Production Optimization revenues for the fourth quarter 2003 were $714 million, a 9% increase over the fourth quarter 2002. North America revenues improved 14% over fourth quarter 2002 on increased rig activity. Internationally, revenues were up in the Latin America and Middle East/Asia regions, while down 5% in the Europe/Africa region. The sale of Halliburton Measurement Systems in the second quarter 2003 negatively impacted revenue comparisons by $9 million. Production Optimization operating income for the fourth quarter 2003 was $116 million, a 26% increase over the fourth quarter 2002. Improved international activity levels, as well as a more favorable sales mix in completion products and sand control services, drove the majority of the increase in operating income. The improvement in operating income from production enhancement services and completion products and services more than offset the $11 million in equity losses from the Subsea 7 joint venture.
Landmark and Other Energy Services revenues for the fourth quarter 2003 were $137 million, a decrease of $48 million from the fourth quarter 2002. The reduction of revenues was attributable to the sale of Wellstream in the first quarter 2003 and lower customer information technology spending. Landmark and Other Energy Services fourth quarter 2003 operating income was $35 million, compared to $14 million in the fourth quarter 2002. Fourth quarter 2002 segment operating income included $17 million in restructuring charges. Although Landmark Graphics revenues and operating income were down 7% and 4%, respectively, as compared to the fourth quarter 2002, for the year 2003, Landmark Graphics recorded their highest level of operating income, an 18% improvement over 2002 and the highest operating margins since the company acquired it.
KBR
KBR revenues for the fourth quarter 2003 were $3.7 billion, more than double its revenues in the fourth quarter 2002. The improvement was mostly due to increased government related activities in the Middle East, and to a lesser extent, revenues from oil and gas projects in Algeria, a hydrocarbon plant in Belgium, and increased activities in the Devonport Management Limited (DML) shipyard. Partially offsetting the increases were lower revenues from the Barracuda-Caratinga project in Brazil, an offshore project in Indonesia, an oil project in Western Africa nearing completion, and lower activities on operations and maintenance projects. KBR operating income for the fourth quarter 2003 was $82 million, compared to a $189 million loss in the fourth quarter 2002. Included in the fourth quarter 2002 loss was a $234 million charge related to the proposed asbestos and silica settlement. Fourth quarter 2003 operating results included increased operating income on government services operations in the Middle East and an $18 million benefit from better than expected insurance loss experience.
Total company revenue and operating income from Iraq-related work in the fourth quarter 2003 were $2.2 billion and $44 million, respectively. Iraq- related work contributed $0.06 per diluted share of earnings after tax.
Backlog
KBR backlog at December 31, 2003 was $9.7 billion, down $100 million from September 30, 2003. Approximately 26% of the backlog was for fixed fee contracts, compared to 31% at September 30, 2003. Of the fixed fee contract backlog, 40% of the total related to onshore contracts, 29% related to government services contracts and 18% related to offshore contracts. Firm orders were $8.6 billion at the end of the quarter. The remainder of the backlog primarily related to government awards not yet funded. In addition, subsequent to year-end, KBR was awarded two new contracts: CENTCOM, with a contract value up to $1.5 billion, and RIO continuation, with a contract value up to $1.2 billion, which were not included in the year-end backlog.
Technology and Significant Achievements
Halliburton had a number of advances in technology and new contract awards.
KBR new contract awards:
-- KBR was awarded the contract to continue its operations for the
Restore Iraqi Oil program in the southern section of Iraq by the
United States Army Corps of Engineers. The contract has a value of
up to $1.2 billion over two years, with three one-year optional
extensions. The contract will cover a full range of services,
including extinguishing oil well fires; environmental assessments
and cleanup at oil sites; oil infrastructure condition assessments;
engineering design and construction necessary to restore the
infrastructure to a safe operating condition; oilfield, pipeline
and refinery maintenance; procurement and importation of fuel
products; distribution of fuel products within Iraq; technical
assistance in marketing and sales/export; and technical assistance
and consulting services to the Iraqi oil companies.
-- KBR was awarded a contract for up to $1.5 billion over five years
by the United States Army Corps of Engineers to support United
States military operations, other federal agencies and friendly
governments anywhere in the United States Central Command's area of
operations, a 25-country region extending from the Horn of Africa
to Central Asia.
-- KBR was awarded a five-year integrated support contract by
ChevronTexaco to supply operations, maintenance and engineering
support on the Alba, Captain and Erskine production facilities in
the North Sea.
Energy Services Group new technologies and contracts:
-- Halliburton was awarded a five-year contract, valued at
$25 million, from the Department of Petroleum Resources in Nigeria.
The contract calls for the design, development and operation of a
National Data Repository using Landmark Graphics' PetroBank
technology, among the most advanced multi-client data management
systems in the E&P industry. This represents the seventh National
Data Repository, with others in Pakistan, Kazakhstan, UK, Brazil,
Norway and Indonesia.
-- Halliburton added four technologies to its suite of production
optimization services: Reservoir Performance Monitoring (RPM);
DepthStar(TM) tubing retrievable safety valve; WaterWeb(SM)
technology; and SilverStim(TM) LT fracturing fluid system. RPM
provides high-reliability, permanent downhole monitoring solutions
focused on optimizing production, maximizing reserves and
maintaining completions integrity. The DepthStar valve is a
revolutionary concept in the realm of surface controlled subsurface
safety valves which function completely independent of well
pressure. WaterWeb service is based on relative permeability
modifier technology and is the result of an ongoing research and
development program to help operators control the production of
unwanted water. SilverStim LT fracturing service results in a step
change in how fracturing fluids are used and applied in the field.
-- Halliburton recently performed a record-breaking deepwater well
test operation for Statoil at the Ellida structure in the Norwegian
Sea. The test, performed from the dynamically positioned drill
ship, West Navigator, at a water depth of more than 1,200 meters,
is the first well test performed at such a water depth off the
Norwegian coast.
-- Halliburton successfully implemented a customized, Linux-based data
and applications hosting system for Unocal's Deepwater Group in
Jakarta, Indonesia. Landmark Graphics implemented the system in
July 2003 and will provide management, maintenance and on-site
application support over a three-year period.
-- Halliburton developed a high-performance alternative to synthetic-
based drilling fluids with its new PerformaDril(TM) water-based
fluid system. The PerformaDril water-based system was used to
drill highly reactive smectite and mixed layer clays on a North Sea
well in the Kristin field. Where zero discharge regulations apply
to the use of synthetic-based fluids, the excellent inhibition and
drilling performance demonstrated by the system provide another
option for achieving wellbore stability.
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 and Engineering and Construction Groups. 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 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 being unable to complete the proposed settlement of
asbestos and silica liabilities, the risks of having material subsidiaries in
Chapter 11 proceedings, the risks of audits and investigations of the company
by domestic and foreign government agencies and legislative bodies, 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 or a delay in the payment of such claims,
future asbestos claims defense and settlement costs, the risks of judgments
against the company and its subsidiaries in other 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, 2002, as amended by Form 10-K/A filed on January 15, 2004, Form
10-Q for the quarter ended September 30, 2003 and Forms 8-K filed on
October 28, 2003 and January 23, 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
December 31 Sept. 30
2003 2002 2003
Revenues
Drilling and Formation Evaluation $ 417 $ 413 $ 433
Fluids 531 463 510
Production Optimization 714 653 730
Landmark and Other Energy Services 137 185 132
Total Energy Services Group 1,799 1,714 1,805
Engineering and Construction Group 3,665 1,634 2,343
Total revenues $5,464 $3,348 $4,148
Operating income (loss)
Drilling and Formation Evaluation $ 17 $ 45 $ 45
Fluids 73 48 55
Production Optimization 116 92 122
Landmark and Other Energy Services 35 14 (52)
Total Energy Services Group 241 199 170
Engineering and Construction Group 82 (189) 49
General corporate (20) (31) (15)
Total operating income (loss) $ 303 $ (21) $ 204
Interest expense (54) (22) (33)
Interest income 8 8 7
Foreign currency, net 4 (13) (17)
Other nonoperating, net (1) (12) ---
Income (loss) from continuing operations
before income taxes and minority interest 260 (60) 161
Provision for income taxes (92) (49) (63)
Minority interest in net income
of subsidiaries (22) (23) (6)
Income (loss) from continuing operations 146 (132) 92
Loss from discontinued operations, net (1,093) (484) (34)
Net income (loss) $ (947) $ (616) $ 58
Basic income (loss) per share:
Income (loss) from continuing operations $ 0.34 $(0.30) $ 0.21
Loss from discontinued operations, net (2.52) (1.12) (0.08)
Net income (loss) $(2.18) $(1.42) $ 0.13
Diluted income (loss) per share:
Income (loss) from continuing operations $ 0.34 $(0.30) $ 0.21
Loss from discontinued operations, net (2.51) (1.12) (0.08)
Net income (loss) $(2.17) $(1.42) $ 0.13
Basic weighted average common
shares outstanding 435 433 435
Diluted weighted average common
shares outstanding 438 433 437
See Footnote Table 1 for a list of significant items included in
operating income.
HALLIBURTON COMPANY
Condensed Consolidated Statements of Operations
(Millions of dollars and shares except per share data)
(Unaudited)
Twelve Months Ended
December 31
2003 2002
Revenues
Drilling and Formation Evaluation $1,643 $1,633
Fluids 2,039 1,815
Production Optimization 2,766 2,554
Landmark and Other Energy Services 547 834
Total Energy Services Group 6,995 6,836
Engineering and Construction Group 9,276 5,736
Total revenues $16,271 $12,572
Operating income (loss)
Drilling and Formation Evaluation $177 $160
Fluids 251 202
Production Optimization 421 384
Landmark and Other Energy Services (23) (108)
Total Energy Services Group 826 638
Engineering and Construction Group (36) (685)
General corporate (70) (65)
Total operating income (loss) $720 $(112)
Interest expense (139) (113)
Interest income 30 32
Foreign currency, net --- (25)
Other nonoperating, net 1 (10)
Income (loss) from continuing operations
before income taxes, minority interest and
change in accounting principle 612 (228)
Provision for income taxes (234) (80)
Minority interest in net income of subsidiaries (39) (38)
Income (loss) from continuing operations
before change in accounting principle 339 (346)
Loss from discontinued operations, net (1,151) (652)
Cumulative effect of change in accounting
principle, net (8) ---
Net loss $(820) $(998)
Basic income (loss) per share:
Income (loss) from continuing operations
before change in accounting principle $0.78 $(0.80)
Loss from discontinued operations, net (2.65) (1.51)
Change in accounting principle, net (0.02) ---
Net loss $(1.89) $(2.31)
Diluted income (loss) per share:
Income (loss) from continuing operations
before change in accounting principle $0.78 $(0.80)
Loss from discontinued operations, net (2.64) (1.51)
Change in accounting principle, net (0.02) ---
Net loss $(1.88) $(2.31)
Basic weighted average common shares
outstanding 434 432
Diluted weighted average common shares
outstanding 437 432
See Footnote Table 1 for a list of significant items included in
operating income.
HALLIBURTON COMPANY
Condensed Consolidated Balance Sheets
(Millions of dollars)
(Unaudited)
Dec. 31 Dec. 31 Sept. 30
2003 2002 2003
Assets
Current assets:
Cash and equivalents $1,815 $1,107 $1,222
Total receivables, net 4,765 3,257 4,000
Inventories 695 734 731
Other current assets 644 462 666
Total current assets 7,919 5,560 6,619
Property, plant and equipment, net 2,526 2,629 2,504
Insurance for asbestos and silica
related liabilities 2,045 2,059 2,061
Other assets 2,981 2,596 2,592
Total assets $15,471 $12,844 $13,776
Liabilities and Shareholders' Equity
Current liabilities:
Short-term notes payable $18 $49 $23
Current maturities of long-term debt 22 295 21
Accounts payable 1,776 1,077 979
Current asbestos and silica
related liabilities 2,463 --- ---
Other current liabilities 2,213 1,851 2,071
Total current liabilities 6,492 3,272 3,094
Long-term debt 3,415 1,181 2,368
Asbestos and silica related liabilities 1,637 3,425 3,387
Other liabilities 1,280 1,337 1,260
Minority interest in consolidated
subsidiaries 100 71 90
Total liabilities 12,924 9,286 10,199
Total shareholders' equity 2,547 3,558 3,577
Total liabilities and shareholders'
equity $15,471 $12,844 $13,776
Note: These Condensed Consolidated Balance Sheets do not include a
breakout of prepetition liabilities.
This information will be provided in our 2003 annual report on
Form 10-K.
TABLE 1
HALLIBURTON COMPANY
Revenue and Operating Income Comparison
By Geographic Region - Energy Services Group Only
(Millions of dollars)
(Unaudited)
Three Months Three Months
Ended Ended
December 31 September 30
2003 2002 2003
Revenues
North America $ 787 $ 732 $ 791
Latin America 255 218 244
Europe / Africa 350 381 356
Middle East / Asia 407 383 414
Total revenues $1,799 $1,714 $1,805
Operating Income
North America $ 100 $ 75 $ 31
Latin America 48 24 51
Europe / Africa 36 39 28
Middle East / Asia 57 61 60
Total operating income $ 241 $ 199 $ 170
Twelve Months Ended
December 31
2003 2002
Revenues
North America $3,085 $3,031
Latin America 907 846
Europe / Africa 1,442 1,578
Middle East / Asia 1,561 1,381
Total revenues $6,995 $6,836
Operating Income
North America $ 306 $ 199
Latin America 165 108
Europe / Africa 147 178
Middle East / Asia 208 153
Total operating income $ 826 $ 638
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
December 31 December 31 September 30
2003 2002 2003
After After After
Operating Tax Operating Tax Operating Tax
Income per Share Income per Share Income per Share
Landmark and Other
Energy Services:
Anglo-Dutch lawsuit $--- $--- $--- $--- $(77) $(0.11)
Restructuring charge --- --- (17) (0.02) --- ---
Engineering and
Construction Group:
Asbestos and silica
liability (2) --- (234) (0.49) (1) ---
Restructuring charge --- --- (2) --- --- ---
Barracuda-Caratinga
project loss (10) (0.01) 2 --- --- ---
General corporate:
Restructuring charge --- --- (10) (0.01) --- ---
Insurance company
demutualization --- --- 1 --- --- ---
Twelve Months Twelve Months
Ended Ended
December 31 December 31
2003 2002
After After
Operating Tax Operating Tax
Income per Share Income per Share
Drilling and Formation Evaluation:
Mono Pumps gain on sale $36 $0.05 $--- $---
Production Optimization:
HMS gain on sale 24 0.03 --- ---
Landmark and Other Energy Services:
Anglo-Dutch lawsuit (77) (0.11) --- ---
Wellstream loss on sale (15) (0.03) --- ---
EMC gain on sale --- --- 108 0.15
Patent infringement lawsuit
accrual --- --- (98) (0.14)
Restructuring charge --- --- (64) (0.09)
Bredero-Shaw impairment --- --- (61) (0.14)
Bredero-Shaw loss on sale --- --- (18) (0.04)
Engineering and Construction Group:
Asbestos and silica liability (5) (0.01) (564) (1.11)
Barracuda-Caratinga project loss (238) (0.33) (117) (0.17)
Highlands receivable write-off --- --- (80) (0.11)
Restructuring charge --- --- (18) (0.02)
General corporate:
Insurance company demutualization --- --- 29 0.04
Restructuring charge --- --- (25) (0.04)
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
December 31 December 31 September 30
2003 2002 2003
After After After
Operating Tax Operating Tax Operating Tax
Income per Share Income per Share Income per Share
North America:
Anglo-Dutch lawsuit $--- $--- $--- $--- $(77) $(0.11)
Restructuring charge --- --- (13) (0.02) --- ---
Europe / Africa:
Restructuring charge --- --- (4) (0.01) --- ---
Twelve Months Ended Twelve Months Ended
December 31 December 31
2003 2002
After After
Operating Tax Operating Tax
Income per Share Income per Share
North America:
Anglo-Dutch lawsuit $(77) $(0.11) $--- $---
Mono Pumps gain on sale 24 0.03 --- ---
Wellstream loss on sale (11) (0.02) --- ---
HMS gain on sale 24 0.03 --- ---
Patent infringement lawsuit
accrual --- --- (98) (0.14)
Restructuring charge --- --- (51) (0.07)
Bredero-Shaw impairment --- --- (61) (0.14)
Bredero-Shaw loss on sale --- --- (18) (0.04)
Latin America:
Restructuring charge --- --- (3) ---
Europe / Africa:
Mono Pumps gain on sale 12 0.02 --- ---
Wellstream loss on sale (4) (0.01) --- ---
EMC gain on sale --- --- 108 0.15
Restructuring charge --- --- (7) (0.01)
Middle East / Asia:
Restructuring charge --- --- (3) ---
SOURCE Halliburton