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Halliburton Announces Third Quarter Results

$0.21 Per Diluted Share Income From Continuing Operations, Including $0.11 Charge for the Anglo-Dutch Litigation

HOUSTON, Oct. 29 /PRNewswire-FirstCall/ -- Halliburton (NYSE: HAL) announced today that third quarter 2003 income from continuing operations was $92 million or $0.21 per diluted share. Net income was $58 million or $0.13 per diluted share, which includes a net loss from discontinued operations of $0.08 per diluted share.

Revenues were $4.1 billion in the third quarter of 2003, up 39% from the third quarter of 2002. This increase is largely attributable to additional activity in Engineering and Construction Group (known as KBR) government services projects, including work in the Middle East.

Operating income was $204 million in the third quarter of 2003 compared to $191 million in the third quarter of 2002. Impacting third quarter 2003 operating income was a $77 million charge related to the Anglo-Dutch litigation described below. Third quarter 2002 results included an $18 million loss related to the sale of Bredero-Shaw and $11 million in restructuring charges.

"Both KBR and the Energy Services Group ("ESG") posted solid year-over- year operating results for the 2003 third quarter," said Dave Lesar, chairman, president and chief executive officer of Halliburton. "While overall oilfield activity has gradually increased over the past year, there was significant improvement in international markets such as Mexico, Brazil, the Middle East, Norway and China. My expectations for the fourth quarter are for little change in the level of oilfield activity. I believe our fourth quarter 2003 earnings from continuing operations will be at least $0.30 per share, excluding any impact from the proposed asbestos settlement."

Anglo-Dutch Litigation

On October 24, 2003, a Harris County, Texas civil court jury returned a verdict against a Halliburton subsidiary company for breaching confidentiality agreements entered into in 1996 and 1997. The jury verdict against Halliburton plus attorneys fees amount to $77 million. The plaintiffs in the case, Anglo-Dutch Petroleum International, Inc. and Anglo-Dutch (Tenge), L.L.C., alleged that Ramco Energy Plc and Halliburton were liable for damages sustained when entities unrelated to Halliburton succeeded in acquiring certain interests in the Tenge oil and gas field in Kazakhstan. Halliburton intends to file post-trial motions to seek a reduction or elimination of the award. If the verdict becomes a judgment, Halliburton intends to appeal the case. A charge of $77 million related to this case was accrued in the third quarter of 2003.

2003 Third Quarter Segment Results

Energy Services Group

ESG posted third quarter 2003 revenues of $1.8 billion, a $128 million increase over the third quarter of 2002, and operating income of $170 million, down $30 million after the $77 million Anglo-Dutch charge for the same period.

Drilling and Formation Evaluation revenue for the third quarter of 2003 was $433 million, a 6% increase over the third quarter of 2002. Operating income for the segment of $45 million represented a 29% increase over the third quarter of 2002. The sale of Mono Pumps in the first quarter of 2003 negatively impacted third quarter 2003 revenue and operating income comparisons by $19 million and $2 million, respectively. Logging revenues and higher rig counts in all geographic regions except Europe / Africa accounted for the operating income improvement, despite expenses incurred for consolidation of drill bit facilities in the quarter.

Fluids revenue for the third quarter of 2003 was $510 million, a 14% increase over the third quarter of 2002. The Fluids segment revenue increase was driven by a 17% increase in cementing revenue. Cementing revenue increased 15% in the United States due to the higher land rig count and 75% in Mexico due to increased drilling activity.

Fluids operating income for the third quarter of 2003 was $55 million, a 2% increase from the third quarter of 2002. Cementing operating income increased 35% over the 2002 third quarter, offset by a decrease in drilling fluids operating income due to softer pricing in the deep water Gulf of Mexico and Europe and a $3 million inventory adjustment in Nigeria.

Production Optimization revenue for the third quarter 2003 was $730 million, an 11% increase over the third quarter of 2002. Onshore North America revenue improvement was partially offset by lower revenue in the Gulf of Mexico. Internationally, revenues were up 19% as compared to the third quarter 2002 with increases from all regions. The sale of Halliburton Measurement Systems ("HMS") in the second quarter of 2003 had a $9 million negative impact on the third quarter of 2003 revenues as compared to the third quarter of 2002.

Production Optimization operating income for the third quarter of 2003 was $122 million, an 18% increase over the third quarter of 2002. International activity drove the majority of the operating income improvement, primarily from improved margins in Mexico, Brazil and Angola. In North America, incremental margins on increased revenues in Canada were partially offset by pricing weakness in the United States.

Landmark and Other Energy Services revenue for the third quarter of 2003 was $132 million, a decrease of $33 million from the third quarter of 2002. The reduction of revenue was attributable to the sale of Wellstream in the first quarter of 2003 and a winding down of a North Sea project.

Landmark and Other Energy Services third quarter 2003 operating loss was $52 million, compared to an $8 million profit in the third quarter of 2002. Segment results included the Anglo-Dutch litigation expense in the third quarter of 2003, and the third quarter 2002 results included $5 million in restructuring charges and an $18 million loss on the sale of Bredero-Shaw. Landmark Graphics revenues were down 4%, but operating income was up 22% as compared to the third quarter of 2002.

KBR

KBR revenue for the third quarter of 2003 was $2.3 billion, an 80% increase over the third quarter of 2002. The improvement was primarily due to increases in government services activity and, to a lesser extent, progress on liquefied natural gas (LNG) and gas projects in Nigeria and Algeria, and hydrocarbon plants in North America and Europe. The increase in revenue was partially offset by lower revenues on projects in western Africa, Brazil and Asia Pacific, maintenance contracts in the United States and the United Kingdom, and the United States Government contract in the Balkans.

KBR operating income for the third quarter of 2003 was $49 million, a $37 million increase over the third quarter of 2002 due to increases from government services activity in the Middle East and the DML shipyard in the United Kingdom. Additionally, LNG and gas projects in Nigeria and Algeria boosted third quarter 2003 segment operating income due to improved project efficiency and progress. Partially offsetting the increased operating income were project losses in Europe, the Middle East and offshore Asia Pacific, and lower income on oil projects in western Africa nearing completion.

Total company revenue and operating income from Iraq-related work in the third quarter were $900 million and $34 million, respectively. Iraq-related work contributed $0.05 per diluted share of earnings after tax.

General corporate expense of $15 million in the third quarter of 2003 improved $6 million over the third quarter of 2002 in part due to restructuring charges in the third quarter 2002.

Backlog

KBR backlog at September 30, 2003 was $9.8 billion, down $127 million from June 30, 2003. Approximately 31% of the backlog is for fixed fee contracts, compared to 37% at June 30, 2003. Of the fixed fee contract backlog, 40% of the total relates to onshore contracts, 26% relates to government services and 20% relates to offshore. Firm orders were $8.5 billion at the end of the quarter. The remainder of the backlog primarily relates to government awards not yet funded, with the Los Alamos National Laboratory and Balkans contract representing the majority of the balance.

Discontinued Operations

The third quarter net loss from discontinued operations was $34 million after tax, or $0.08 per diluted share, reflecting a reserve for uncollectible insurance receivables purchased from Harbison-Walker for potential insolvency of insurance carriers, professional fees associated with the due diligence, printing and distribution cost of the disclosure statement, and other aspects of the proposed settlement for asbestos and silica liabilities.

Technology and Significant Achievements

Halliburton had a number of advances in technology and new contract awards including:

     --  Sperry-Sun announced the global commercialization of its GeoTap(TM)
         LWD formation pressure tester.  The LWD sensor provides operators
         with wireline-quality, reservoir pore pressure data for drilling and
         formation evaluation applications to help operators maximize
         reservoir deliverability.

     --  KBR is one of eight companies that have been formed into an
         innovative partnership to improve Scotland's fresh water and waste
         water infrastructure under Scottish Water's $3 billion capital
         investment program.  The partnership will deliver Scottish Water's
         capital investment program through 2006 upgrading Scotland's networks
         and facilities to improve the quality of drinking water and the
         aquatic environment.

     --  KBR was selected by the United Kingdom Ministry of Defence for
         CONLOG, a seven year enabling contract under which KBR will deliver
         logistic support services to British forces worldwide.

     --  Landmark announced a Portable Real-time Operations Center(SM) (RTOC)
         solution.  The Portable RTOC is a cost effective IT solution that can
         be deployed and redeployed in multiple facilities to meet the broad
         and changing needs of E&P operating companies of any size.

     --  KBR was awarded a four year plus two 24-month extension options
         contract with an ExxonMobil subsidiary for operations and maintenance
         of offshore production facilities in the North Sea.

     --  ESG was awarded a contract for a well stimulation vessel to provide
         sand control, fracturing, acidizing, and pumping services and
         products for the Campos Basin development offshore Brazil.

     --  Baroid and National Oilwell signed a global distribution agreement
         allowing both companies to increase participation in the expanding
         solids control and drilling waste management market.  The addition of
         National Oilwell equipment to the Baroid product line allows Baroid
         to offer a complete range of services to meet our customer needs.

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 associated with the consummation or non-consummation of the proposed settlement, 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 and Form 10-Q for the quarter ended June 30, 2003 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
                                         September 30            June 30
                                     2003            2002          2003

    Revenues
    Energy Services Group            $1,805          $1,677        $1,780
    Engineering and Construction
     Group                            2,343           1,305         1,819
      Total revenues                 $4,148          $2,982        $3,599
    Operating income (loss)
    Energy Services Group              $170            $200          $235
    Engineering and Construction
     Group                               49              12          (148)
    General corporate                   (15)            (21)          (16)
      Total operating income           $204            $191           $71
    Interest expense                    (33)            (29)          (25)
    Interest income                       7               8             7
    Foreign currency, net               (17)              1            19
    Other nonoperating, net             ---             ---             2
    Income from continuing
     operations before income taxes
     and minority interest              161             171            74
    Provision for income taxes          (63)            (72)          (29)
    Minority interest in net income
     of subsidiaries                     (6)             (5)           (3)
    Income from continuing operations    92              94            42
    Loss from discontinued
     operations, net                    (34)            ---           (16)
    Net income                          $58             $94           $26
    Basic income (loss) per share:
    Income from continuing
     operations                       $0.21           $0.22         $0.09
    Loss from discontinued
     operations                       (0.08)            ---         (0.03)
    Net income                        $0.13           $0.22         $0.06
    Diluted income (loss) per share:
    Income from continuing
     operations                       $0.21           $0.22         $0.09
    Loss from discontinued
     operations                       (0.08)            ---         (0.03)
    Net income                        $0.13           $0.22         $0.06
    Basic weighted average common
     shares outstanding                 435             432           434
    Diluted weighted average
     common shares outstanding          437             434           436

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)

                                                       Nine Months Ended
                                                          September 30
                                                      2003           2002

    Revenues
    Energy Services Group                             $5,196         $5,122
    Engineering and Construction Group                 5,611          4,102
      Total revenues                                 $10,807         $9,224
    Operating income (loss)
    Energy Services Group                               $585           $439
    Engineering and Construction Group                  (118)          (496)
    General corporate                                    (50)           (34)
      Total operating income (loss)                     $417           $(91)
    Interest expense                                     (85)           (91)
    Interest income                                       22             24
    Foreign currency, net                                 (4)           (12)
    Other nonoperating, net                                2              2
    Income (loss) from continuing operations before
     income taxes, minority interest and change in
     accounting principle                                352           (168)
    Provision for income taxes                          (142)           (31)
    Minority interest in net income of subsidiaries      (17)           (15)
    Income (loss) from continuing operations
     before change in accounting principle               193           (214)
    Loss from discontinued operations, net               (58)          (168)
    Cumulative effect of change in accounting
     principle, net                                       (8)           ---
    Net income (loss)                                   $127          $(382)
    Basic income (loss) per share:
    Income from continuing operations before
     change in accounting principle                    $0.44         $(0.49)
    Loss from discontinued operations                  (0.13)         (0.39)
                                                        0.31          (0.88)
    Change in accounting principle                     (0.02)           ---
    Net income (loss)                                  $0.29         $(0.88)
    Diluted income (loss) per share:
    Income from continuing operations before
     change in accounting principle                    $0.44         $(0.49)
    Loss from discontinued operations                  (0.13)         (0.39)
                                                        0.31          (0.88)
    Change in accounting principle                     (0.02)           ---
    Net income (loss)                                  $0.29         $(0.88)
    Basic weighted average common shares
     outstanding                                         434            432
    Diluted weighted average common shares
     outstanding                                         436            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)

                                 September 30    December 31     June 30
                                     2003            2002          2003

                     Assets

    Current assets:
    Cash and equivalents             $1,222          $1,107        $1,859
    Total receivables, net            4,000           3,257         3,666
    Inventories                         731             734           747
    Other current assets                559             462           503
    Total current assets              6,512           5,560         6,775

    Property, plant and
     equipment, net                   2,504           2,629         2,498
    Insurance for asbestos and
     silica related liabilities       2,061           2,059         2,059
    Other assets                      2,699           2,596         2,690
    Total assets                    $13,776         $12,844       $14,022

       Liabilities and Shareholders'
        Equity

    Current liabilities:
    Short-term notes payable            $23             $49           $16
    Current maturities of
     long-term debt                      21             295           166
    Accounts payable                    979           1,077         1,056
    Other current liabilities         2,048           1,851         2,079
    Total current liabilities         3,071           3,272         3,317

    Long-term debt                    2,368           1,181         2,374
    Asbestos and silica related
     liabilities                      3,387           3,425         3,396
    Other liabilities                 1,283           1,337         1,293
    Minority interest in
     consolidated subsidiaries           90              71            83
    Total liabilities                10,199           9,286        10,463
    Total shareholders' equity        3,577           3,558         3,559
    Total liabilities and
     shareholders' equity           $13,776         $12,844       $14,022


                                   TABLE 1

                             HALLIBURTON COMPANY
        Revenue and Operating Income Comparison By Operating Segments
                            (Millions of dollars)
                                 (Unaudited)

                                      Three Months Ended   Three Months Ended
                                          September 30            June 30
                                      2003            2002          2003

    Revenues
    Drilling and Formation
     Evaluation                        $433            $408          $414
    Fluids                              510             449           518
    Production Optimization             730             655           693
    Landmark and Other Energy
     Services                           132             165           155
      Total Energy Services Group     1,805           1,677         1,780
    Engineering and Construction
     Group                            2,343           1,305         1,819
      Total revenues                 $4,148          $2,982        $3,599

    Operating Income (loss)
    Drilling and Formation
     Evaluation                         $45             $35           $49
    Fluids                               55              54            68
    Production Optimization             122             103           113
    Landmark and Other Energy
     Services                           (52)              8             5
      Total Energy Services Group       170             200           235
    Engineering and Construction
     Group                               49              12          (148)
    General corporate                   (15)            (21)          (16)
      Total operating income           $204            $191           $71


                                                       Nine Months Ended
                                                          September 30
                                                       2003           2002

    Revenues
    Drilling and Formation Evaluation                 $1,226         $1,220
    Fluids                                             1,508          1,352
    Production Optimization                            2,052          1,901
    Landmark and Other Energy Services                   410            649
      Total Energy Services Group                      5,196          5,122
    Engineering and Construction Group                 5,611          4,102
      Total revenues                                 $10,807         $9,224

    Operating Income (loss)
    Drilling and Formation Evaluation                   $160           $115
    Fluids                                               178            154
    Production Optimization                              305            292
    Landmark and Other Energy Services                   (58)          (122)
      Total Energy Services Group                        585            439
    Engineering and Construction Group                  (118)          (496)
    General corporate                                    (50)           (34)
      Total operating income (loss)                     $417           $(91)

See Footnote Table 1 for a list of significant items included in operating income.

                                   TABLE 2

                             HALLIBURTON COMPANY
                   Revenue and Operating Income Comparison
              By Geographic Region - Energy Services Group Only
                            (Millions of dollars)
                                 (Unaudited)

                                     Three Months Ended     Three Months Ended
                                         September 30            June 30
                                     2003            2002          2003

    Revenues
    North America                      $791            $771          $762
    Latin America                       244             209           226
    Europe / Africa                     356             350           394
    Middle East / Asia                  414             347           398
      Total revenues                 $1,805          $1,677        $1,780

    Operating Income
    North America                       $31            $133           $91
    Latin America                        51              28            43
    Europe / Africa                      28               9            51
    Middle East / Asia                   60              30            50
      Total operating income           $170            $200          $235


                                                      Nine Months Ended
                                                         September 30
                                                      2003           2002

    Revenues
    North America                                     $2,298         $2,299
    Latin America                                        652            628
    Europe / Africa                                    1,092          1,197
    Middle East / Asia                                 1,154            998
      Total revenues                                  $5,196         $5,122

    Operating Income
    North America                                       $206           $124
    Latin America                                        117             84
    Europe / Africa                                      111            139
    Middle East / Asia                                   151             92
      Total operating income                            $585           $439

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 Ended  Three Months Ended  Three Months Ended
                      September 30       September 30           June 30
                          2003                2002                2003
                   Operating After Tax Operating After Tax Operating After Tax
                     Income  per Share   Income  per Share   Income  per Share

    Production
     Optimization:
      HMS gain
       on sale        $---      $---       $---     $---       $24   $0.03
    Landmark and
     Other Energy
     Services:
      Anglo-Dutch
       lawsuit         (77)    (0.11)       ---      ---       ---     ---
      Restructuring
       charge          ---       ---         (5)   (0.01)      ---     ---
      Bredero-Shaw
       loss on sale    ---       ---        (18)   (0.04)      ---     ---
    Engineering and
     Construction
     Group:
      Asbestos and
       silica
       liability        (1)      ---        ---      ---       ---     ---
      Restructuring
       charge          ---       ---         (2)     ---       ---     ---
      Barracuda-
       Caratinga
       project loss    ---       ---        ---      ---      (173)  (0.24)
    General corporate:
      Restructuring
       charge          ---       ---         (4)   (0.01)      ---     ---


                              Nine Months Ended        Nine Months Ended
                                September 30              September 30
                                    2003                      2002
                           Operating    After Tax    Operating    After 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     ---          ---          (47)       (0.07)
      Bredero-Shaw impairment  ---          ---          (61)       (0.14)
      Bredero-Shaw loss
       on sale                 ---          ---          (18)       (0.04)
    Engineering and
     Construction Group:
      Asbestos and silica
       liability                (3)         ---         (330)       (0.62)
      Barracuda-Caratinga
       project loss           (228)       (0.32)        (119)       (0.17)
      Highlands receivable
       write-off               ---          ---          (80)       (0.11)
      Restructuring charge     ---          ---          (16)       (0.02)
    General corporate:
      Insurance company
       demutualization         ---          ---           28         0.04
      Restructuring charge     ---          ---          (15)       (0.02)


                               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 Ended  Three Months Ended   Three Months Ended
                   September 30        September 30           June 30
                       2003                2002                 2003
                Operating After Tax Operating After Tax  Operating After Tax
                  Income  per Share   Income  per Share    Income  per Share

    North America:
      Anglo-Dutch
       lawsuit      $(77)   $(0.11)     $---     $---        $---     $---
      HMS gain on
       sale          ---       ---       ---      ---          24     0.03
      Restructuring
       charge        ---       ---        (4)   (0.01)        ---      ---
      Bredero-Shaw
       loss on sale  ---       ---       (18)   (0.04)        ---      ---
    Europe / Africa:
      Restructuring
       charge        ---       ---        (1)     ---         ---      ---


                             Nine Months Ended           Nine Months Ended
                                September 30               September 30
                                    2003                       2002
                            Operating   After Tax     Operating     After 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      ---          ---           (38)       (0.05)
      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      ---          ---            (3)         ---
    Middle East / Asia:
      Restructuring charge      ---          ---            (3)         ---

SOURCE Halliburton