Halliburton Announces Third Quarter Results; $0.42 Per Diluted Share Income From Continuing Operations
HOUSTON, Texas, Oct. 26 /PRNewswire-FirstCall/ -- Halliburton (NYSE: HAL) announced today that third quarter 2004 income from continuing operations was $186 million, or $0.42 per diluted share.
Net loss for the quarter was $44 million, or $0.09 per diluted share, and included a net loss from discontinued operations primarily for the proposed asbestos and silica settlement of $230 million, or $0.51 per diluted share. The net loss from discontinued operations resulted primarily from the third quarter revaluation, due to the increase in Halliburton's stock price, of the 59.5 million shares of Halliburton common stock to be contributed to trusts for the benefit of asbestos and silica claimants.
Revenues were $4.8 billion in the third quarter 2004, up 16% from the third quarter 2003. This increase was largely attributable to higher activity on government services projects in the Middle East in the Engineering and Construction Group (known as KBR) and record quarterly revenues in the Energy Services Group (ESG).
The consolidated pretax operating income was $342 million in the third quarter 2004 compared to $204 million in the third quarter 2003. Impacting third quarter 2004 operating income was a $40 million gain related to the sale of ESG's Surface Well Testing operation and $18 million of charges related to the restructuring of KBR. Third quarter 2003 results included a $77 million charge related to the Anglo-Dutch litigation.
"ESG had record quarterly revenue, operating income, and operating margins," said Dave Lesar, chairman, president and chief executive officer of Halliburton. "We continue to see revenue growth and profit improvement in the energy services business. The rig count continues to increase, while our uplift in pricing, coupled with our focus on cost control, are providing stronger margins.
"Also, I am pleased with the progress of KBR's recent actions. KBR has sailed the Barracuda and Belanak FPSO vessels, restructured its organization to take costs out of the business, and resolved issues with customers on a number of projects. These efforts should position KBR for profitability in future years."
2004 Third Quarter Segment Results
Energy Services Group
ESG posted third quarter 2004 revenues of $2.1 billion, a $303 million or 17% increase over the third quarter 2003, and operating income of $414 million, up $244 million or 144% from the same period in the prior year.
Production Optimization operating income for the third quarter 2004 was $222 million, a $104 million or 88% increase over third quarter 2003. The third quarter 2004 operating income included a $40 million gain on the sale of Surface Well Testing. Production enhancement services improved operating income $54 million largely from increased land rig activity, higher equipment utilization, and improved pricing in the United States. Operating income from completions and reservoir optimization product sales and services was the same as the prior year period. The third quarter 2004 included $12 million in equity income from the Subsea 7 joint venture compared with $5 million in equity income in the third quarter 2003.
Fluids operating income for the third quarter 2004 was $113 million, a $58 million or 106% increase over the third quarter 2003. The increase in operating income was primarily attributable to a $29 million increase in cementing services due to higher land drilling activity and improved pricing in North America. Drilling fluids increased $27 million on a 19% increase in revenues and the benefits of cost reduction initiatives in the Gulf of Mexico.
Drilling and Formation Evaluation operating income of $62 million was up $17 million or 38% over the prior year third quarter partially due to a change in accounting estimate to extend the useful life of directional drilling and logging-while-drilling tools. Drill bits operating income increased $3 million on a 8% increase in revenue, with a significant improvement in operating margins. Logging services operating income increased $3 million year-over-year on higher United States land rig counts and improvement in pricing.
Landmark and Other Energy Services third quarter 2004 operating income was $17 million, compared to a $48 million operating loss for the prior year period. Third quarter 2003 results included a $77 million charge related to the Anglo-Dutch litigation. Landmark Graphics achieved 3% growth in revenues over the prior year period due primarily to increased software sales in Mexico.
KBR
KBR revenues for the third quarter 2004 were $2.7 billion, a 15% increase over the third quarter 2003. The increase was due to government contract activities, primarily in the Middle East.
KBR operating loss for the third quarter 2004 was $50 million, compared to operating income of $49 million in the third quarter 2003. The third quarter 2004 operating loss included $70 million of project losses on a gas processing plant in Algeria, the Belanak FPSO project, and a toll road project in the United Kingdom; $18 million of charges related to the restructuring of KBR; and lower results on government services projects due to the winding down of the RIO project and higher indirect costs related to the installation of KBR's new SAP general accounting system.
KBR backlog at September 30, 2004 was $9.3 billion, up nearly $500 million from June 30, 2004, primarily due to a new LNG train award in Nigeria and new operation and maintenance projects. Approximately 23% of the backlog was for fixed-fee contracts.
Halliburton's Iraq-related work contributed approximately $1.4 billion in revenues in the third quarter 2004 and $4 million of operating income before corporate costs and taxes.
Technology and Significant Achievements
Halliburton had a number of advances in technology and new contract awards.
Energy Services Group new technologies and contracts:
* Halliburton has been awarded three major contracts by Petroleum
Development Oman estimated to be between $400 and $500 million over
five years to provide cementing services, stimulation services,
directional drilling services, logging-while-drilling services, and
mudlogging services in Oman. Each contract includes an optional
extension for two years.
* Halliburton has been awarded a three-year, $32 million, data
management contract by PetroChina Company Limited. As part of the
contract, Landmark Graphics will implement a fully integrated, multi-
tiered information management system that will support the full data
life cycle of PetroChina's oil and gas data.
* ChevronTexaco expanded its relationship with Halliburton for drilling
operations in North America and selected Halliburton as the vendor of
choice for ChevronTexaco's WellDECC (Well Design & Execution
Collaboration Center). This state-of-the-art technology will allow
real-time strategy for well planning, design, and monitoring.
* Halliburton's Baroid Product Service Line, in alliance with National
Oilwell, announced the launch of their first major project in Mexico
under the new Baroid/National Oilwell Alliance to provide solids
control and waste management services and equipment at the rig site.
Further, the team was recently awarded a solids control and waste
management service and equipment contract in Bangladesh while similar
operations are already underway in the United States, Venezuela, and
Brazil.
* Halliburton has developed new technologies -- DeepReach(SM) coiled
tubing service and DeepQuest(SM) stimulation service -- designed to
assist operators with recovering harder-to-access reserves in deep
water. In some cases, these technologies will help operators perform
treatments on ultra deep wells that could not be performed prior to
the development of these technologies.
KBR new contract awards:
* Nigeria LNG Limited (NLNG) has awarded the engineering, procurement,
and construction contract for the NLNGSix project at its existing
liquefied natural gas facility to a joint venture team, which includes
KBR. The partners of the equal joint venture team, known as TSKJ,
include Technip, Snamprogetti, KBR, and JGC Corporation. This is the
fourth project that TSKJ has contracted with NLNG.
* KBR has been awarded a basic design engineering package for a new
360,000 ton/year ethylene plant capacity expansion, which will be
added to an existing 240,000 ton/year unit for a total capacity of
600,000 ton/year by the Lanzhou Petrochemical Company, which operates
under the auspices of PetroChina. The facility will be located in
Lanzhou City, Gansu Province of the People's Republic of China and
will utilize KBR's proprietary SCORE(TM) (Selective Cracking Optimum
REcovery) technology.
* KBR has been selected to continue providing private sector
construction and related services to the United States Navy and other
Department of Defense agencies and missions worldwide under the
competitively-awarded CONCAP (construction capabilities) contract from
the Naval Facilities Engineering Command, Atlantic Division.
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 and potential adverse proceedings and findings by such agencies, 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/A for the year ended December 31, 2003 and Form 10-Q for the quarter ended June 30, 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
September 30 June 30
2004 2003 2004
Revenue
Production Optimization $886 $726 $797
Fluids 618 510 554
Drilling and Formation Evaluation 450 433 423
Landmark and Other Energy Services 154 136 130
Total Energy Services Group 2,108 1,805 1,904
Engineering and Construction Group 2,682 2,343 3,052
Total revenue $4,790 $4,148 $4,956
Operating income (loss)
Production Optimization $222 $118 $121
Fluids 113 55 77
Drilling and Formation Evaluation 62 45 59
Landmark and Other Energy Services 17 (48) 14
Total Energy Services Group 414 170 271
Engineering and Construction Group (50) 49 (277)
General corporate (22) (15) (20)
Total operating income (loss) 342 204 (26)
Interest expense (51) (33) (53)
Interest income 13 7 7
Foreign currency, net 1 (17) (7)
Other, net (2) --- (1)
Income (loss) from continuing
operations before income taxes and
minority interest 303 161 (80)
(Provision) benefit for income taxes (111) (63) 29
Minority interest in net income
of subsidiaries (6) (6) (7)
Income (loss) from continuing
operations 186 92 (58)
Loss from discontinued operations,
net (230) (34) (609)
Net income (loss) $(44) $58 $(667)
Basic income (loss) per share:
Income (loss) from continuing
operations $0.43 $0.21 $(0.13)
Loss from discontinued operations,
net (0.54) (0.08) (1.39)
Net income (loss) $(0.11) $0.13 $(1.52)
Diluted income (loss) per share:
Income (loss) from continuing
operations $0.42 $0.21 $(0.13)
Loss from discontinued operations,
net (0.51) (0.08) (1.39)
Net income (loss) $(0.09) $0.13 $(1.52)
Basic weighted average common
shares outstanding 438 435 437
Diluted weighted average common
shares outstanding 442 437 437
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)
Nine Months Ended
September 30
2004 2003
Revenue
Production Optimization $2,391 $2,045
Fluids 1,707 1,508
Drilling and Formation Evaluation 1,317 1,226
Landmark and Other Energy Services 413 417
Total Energy Services Group 5,828 5,196
Engineering and Construction Group 9,437 5,611
Total revenue $15,265 $10,807
Operating income (loss)
Production Optimization $425 $298
Fluids 250 178
Drilling and Formation Evaluation 164 160
Landmark and Other Energy Services 60 (51)
Total Energy Services Group 899 585
Engineering and Construction Group (342) (118)
General corporate (66) (50)
Total operating income 491 417
Interest expense (160) (85)
Interest income 30 22
Foreign currency, net (9) (4)
Other, net 2 2
Income from continuing operations before
income taxes, minority interest and change
in accounting principle 354 352
Provision for income taxes (131) (142)
Minority interest in net income of subsidiaries (19) (17)
Income from continuing operations before change
in accounting principle 204 193
Loss from discontinued operations, net (980) (58)
Cumulative effect of change in accounting
principle, net --- (8)
Net income (loss) $(776) $127
Basic income (loss) per share:
Income from continuing operations before change
in accounting principle $0.47 $0.44
Loss from discontinued operations, net (2.25) (0.13)
Cumulative effect of change in accounting
principle, net --- (0.02)
Net income (loss) $(1.78) $0.29
Diluted income (loss) per share:
Income from continuing operations before change
in accounting principle $0.46 $0.44
Loss from discontinued operations, net (2.22) (0.13)
Cumulative effect of change in accounting
principle, net --- (0.02)
Net income (loss) $(1.76) $0.29
Basic weighted average common shares outstanding 437 434
Diluted weighted average common shares outstanding 441 436
See Footnote Table 1 for a list of significant items included in operating
income.
HALLIBURTON COMPANY
Condensed Consolidated Balance Sheets (A)
(Millions of dollars)
(Unaudited)
September 30 June 30
2004 2003 2004
Assets
Current assets:
Cash and equivalents $2,996 $1,222 $2,230
Total receivables, net 5,419 4,000 5,776
Inventories, net 741 731 741
Other current assets 667 666 784
Total current assets 9,823 6,619 9,531
Property, plant, and equipment, net 2,540 2,504 2,564
Insurance for asbestos- and silica-
related liabilities (B) 488 2,061 468
Other assets 3,107 2,592 2,956
Total assets $15,958 $13,776 $15,519
Liabilities and Shareholders' Equity
Current liabilities:
Asbestos- and silica-related
liabilities $2,415 $--- $2,399
Accounts payable 2,362 979 2,087
Current maturities of long-term debt 50 21 50
Other current liabilities 2,228 2,094 2,297
Total current liabilities 7,055 3,094 6,833
Long-term debt 3,894 2,368 3,900
Asbestos- and silica-related
liabilities 2,029 3,387 1,754
Other liabilities 1,188 1,260 1,180
Total liabilities 14,166 10,109 13,667
Minority interest in consolidated
subsidiaries 113 90 116
Shareholders' equity 1,679 3,577 1,736
Total liabilities and shareholders'
equity $15,958 $13,776 $15,519
(A) These Condensed Consolidated Balance Sheets do not include a
breakout of prepetition liabilities. This information will be
provided in our third quarter 2004 Form 10-Q.
(B) The decrease in "Insurance for asbestos- and silica-related
liabilities" reflects the reclassification of $500 million from
noncurrent to current in the first quarter of 2004; reclassification
of $379 million from noncurrent to current in the second quarter of
2004; and a $680 million write-down in the second quarter of 2004
resulting from settlement agreements with insurance carriers.
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
2004 2003 2004
Revenue:
North America $969 $791 $846
Latin America 295 244 257
Europe/Africa 442 356 397
Middle East/Asia 402 414 404
Total revenue $2,108 $1,805 $1,904
Operating income:
North America $228 $31 $152
Latin America 52 51 36
Europe/Africa 79 28 26
Middle East/Asia 55 60 57
Total operating income $414 $170 $271
Nine Months Ended
September 30
2004 2003
Revenue:
North America $2,629 $2,298
Latin America 781 652
Europe/Africa 1,211 1,092
Middle East/Asia ` 1,207 1,154
Total revenue $5,828 $5,196
Operating income:
North America $498 $206
Latin America 118 117
Europe/Africa 124 111
Middle East/Asia 159 151
Total operating income $899 $585
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
September 30 September 30 June 30
2004 2003 2004
Operating After Operating After Operating After
Income Tax per Income Tax per Income Tax per
Share Share Share
Production
Optimization:
Surface Well
Testing gain
on sale $40 $0.06 $--- $--- $--- $---
Landmark and
Other Energy
Services:
Anglo-Dutch
lawsuit --- --- (77) (0.11) --- ---
Engineering and
Construction
Group:
Asbestos and
silica
liability --- --- (1) --- --- ---
Restructuring
charge (18) (0.03) --- --- --- ---
Barracuda-
Caratinga
project loss --- --- --- --- (310) (0.46)
Nine Months Ended Nine Months Ended
September 30 September 30
2004 2003
Operating After Tax Operating After Tax
Income per Share Income per Share
Production Optimization:
HMS gain on sale $--- $--- $24 $0.03
Surface Well Testing
gain on sale 40 0.06 --- ---
Drilling and Formation
Evaluation:
Mono Pumps gain on sale --- --- 36 0.05
Landmark and Other Energy
Services:
Anglo-Dutch lawsuit 13 0.02 (77) (0.11)
Wellstream loss on sale --- --- (15) (0.03)
Engineering and Construction
Group:
Asbestos and silica
liability --- --- (3) ---
Restructuring charge (18) (0.03) --- ---
Barracuda-Caratinga
project loss (407) (0.60) (228) (0.32)
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
September 30 September 30 June 30
2004 2003 2004
Operating After Operating After Operating After
Income Tax per Income Tax per Income Tax per
Share Share Share
North America:
Anglo-Dutch
lawsuit $--- $--- $(77) $(0.11) $--- $---
Surface Well
Testing gain
on sale 19 0.03 --- --- --- ---
Latin America:
Surface Well
Testing gain
on sale 7 0.01 --- --- --- ---
Europe/Africa:
Surface Well
Testing gain
on sale 14 0.02 --- --- --- ---
Nine Months Ended Nine Months Ended
September 30 September 30
2004 2003
Operating After Tax Operating After Tax
Income per Share Income per Share
North America:
Anglo-Dutch lawsuit $13 $0.02 $(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
Surface Well Testing gain
on sale 19 0.03 --- ---
Latin America:
Surface Well Testing gain
on sale 7 0.01 --- ---
Europe/Africa:
Mono Pumps gain on sale --- --- 12 0.02
Wellstream loss on sale --- --- (4) (0.01)
Surface Well Testing gain
on sale 14 0.02 --- ---
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 Landmark Total
and and Other Energy
Production Formation Energy Services
Optimization Fluids Evaluation Services Group
Three Months Ended
September 30, 2004
Revenue $886 $618 $450 $154 $2,108
As reported
operating
income $222 $113 $62 $17 $414
Surface Well
Testing gain
on sale (A) (40) --- --- --- (40)
Adjusted
operating
income $182 $113 $62 $17 $374
As reported
operating
margin (B) 25.1% 18.3% 13.8% 11.0% 19.6%
Adjusted
operating
margin (B) 20.5% 18.3% 13.8% 11.0% 17.7%
Three Months Ended
June 30, 2004
Revenue $797 $554 $423 $130 $1,904
As reported
operating
income $121 $77 $59 $14 $271
As reported
operating
margin (B) 15.2% 13.9% 13.9% 10.8% 14.2%
Footnotes for Table 3:
(A) The Company is reporting record third quarter revenues and 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 margins growth is attributable to the gain on
sale of the Surface Well Testing operation in the third quarter of
2004 because investors have indicated to management their desire to
understand the current drivers and future trends of our operating
margins. The adjustment removes the effect of the gain on sale of
the Surface Well Testing operation.
(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.
SOURCE Halliburton
-0- 10/26/2004
/CONTACT: Paul Koeller, Vice President, Investor Relations,
+1-713-759-2688, or Wendy Hall, Director, Public Relations, +1-713-759-2605,
both of Halliburton/
/Web site: http://www.halliburton.com /
(HAL)
CO: Halliburton
ST: Texas
IN: OIL
SU: ERN
AH-AP
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