Halliburton Announces Second Quarter Earnings of $0.68 Per Diluted Share from Continuing Operations
Earnings from continuing operations of $0.68 were negatively impacted by charges including a $30 million patent settlement and a $5 million Expro-related expense, partially offset by $25 million of gains on investment sales
HOUSTON--(BUSINESS WIRE)--July 22, 2008--Halliburton (NYSE:HAL) announced today that income from continuing operations for the second quarter of 2008 was $623 million, or $0.68 per diluted share. This compares to income from continuing operations for the second quarter of 2007 of $595 million, or $0.63 per diluted share. Second quarter 2008 results were negatively impacted by a $30 million charge related to a patent settlement and $5 million of acquisition-related expense for the Expro bid, offset by $25 million in gains related to the sale of two investments in the United States. The net impact of these items was $10 million. Second quarter 2007 results were favorably impacted by a $49 million gain related to the sale of an investment.
Halliburton's consolidated revenue in the second quarter of 2008 was a record $4.5 billion, up 20% from the second quarter of 2007. All product service lines contributed to this increase, driven by both increased international activity and strengthening demand in the United States.
Consolidated operating income was $949 million in the second quarter of 2008 compared to $893 million in the second quarter of 2007. Both segments and all geographic regions contributed to the increase.
"I am very pleased with our results for the second quarter as we continue to show healthy expansion of our business on a worldwide basis," said Dave Lesar, chairman, president, and chief executive officer.
"Revenue outside of North America grew 26% year-over-year, exceeding our 20% growth target. Eastern Hemisphere revenue increased by 23% year-over-year as operations in Norway, Saudi Arabia, Angola, and Oman led the way. Latin America continued its exceptional growth, with our four biggest markets of Mexico, Brazil, Colombia, and Venezuela all experiencing year-over-year revenue increases between 30% and 56%.
"Sequentially, revenue growth in Latin America and in the Eastern Hemisphere was an outstanding 17% and 15% respectively. Sequential operating income increased 20% in both areas, excluding the first quarter impairment charges related to an oil and gas property.
"Eastern Hemisphere margins expanded to 21% even with our continued heavy investments in people, facilities, and equipment to support the next phase of our growth. Margins were additionally impacted this quarter by the ramp-up of costs for our Manifa offshore award where drilling is expected to start next year and reach a total of ten rigs. We still believe that Eastern Hemisphere margins can continue to expand.
"North America revenue grew 7% sequentially, despite the seasonal slowdown experienced in Canada during spring break-up.
"For the United States, revenue grew 14% year-over-year and 12% sequentially through the expansion of our well construction businesses along with strengthening pressure pumping activity. United States operating income grew 5% sequentially, as higher activity offset the impact of the pricing pressures on our fracturing business and cost inflation related to fuel and materials on all of our businesses.
"Second quarter average pricing declines in our United States fracturing business were in the 1% to 2% range we discussed in the first quarter. Pricing had largely stabilized by the end of the second quarter, and we expect prices to remain firm or improve going forward. Currently, wireline logging, directional drilling/LWD, and drill bits have the most pricing leverage in this market.
"As unconventional and horizontal activity continues to expand, we have seen many of our recent technology introductions become drivers for growth and increase our ability to address our customers' most challenging reservoirs.
"Increasing energy prices, above levels previously envisioned, coupled with expanding drilling and completion budgets for our North American customers, bodes well for future activity. This strengthens last quarter's expectation that the next leg up in this extended cycle is near, and we anticipate the strategies we have employed will allow us to continue performing at a high level."
In the second quarter of 2007, Halliburton completed the separation of KBR, Inc. and recorded to discontinued operations a gain of $933 million, net of tax and the estimated fair value of indemnities and guarantees provided to KBR, Inc. In the second quarter of 2008, Halliburton recorded additional charges to discontinued operations totaling $117 million net of tax, or $0.13 per diluted share, related to changes in the estimated fair value of the indemnities and guarantees provided to KBR, Inc.
Net income in the second quarter of 2008 was $507 million, or $0.55 per diluted share. This compares to net income of $1.5 billion, or $1.62 per diluted share, in the second quarter of 2007.
2008 Second Quarter Results
Completion and Production (C&P) operating income in the second quarter of 2008 was $561 million, an increase of $6 million or 1% from the second quarter of 2007. Europe/Africa/CIS C&P operating income increased 39% with the most significant impact coming from increased activity in Africa. Middle East/Asia C&P operating income increased 19%, primarily due to increased activity related to the Khurais project in Saudi Arabia. North America C&P operating income decreased 13%, due to pricing declines and cost increases in the United States for production enhancement, partially offset by improved completion tools sales and services. Latin America C&P operating income increased 22% from higher vessel utilization and increased activity.
Drilling and Evaluation (D&E) operating income in the second quarter of 2008 was $480 million, an increase of $132 million or 38% over the prior year second quarter. Europe/Africa/CIS D&E operating income increased 6%, benefiting from higher activity and improved performance of Baroid Fluid Services and wireline services across the region. Middle East/Asia D&E operating income increased 27% over the second quarter of 2007, primarily due to higher drilling and multilateral activity. Baroid Fluid Services also experienced strong results in the region. North America D&E operating income increased 72%, with improvement in all product service lines benefiting from increased drilling activity in the United States and improved performance of Baroid Fluid Services. This region's second quarter 2008 results also reflect the sale of two investments discussed previously. Latin America D&E operating income increased 49% with additional deployments of equipment resulting in increased Sperry Drilling Services and wireline services activity. Landmark also contributed to the improved results.
Approximately $2.0 billion remains available under the company's share repurchase program. Since the inception of the program, Halliburton has purchased 89 million shares for a total cost of approximately $3.0 billion.
Technology and Significant Achievements
Halliburton made a number of advances in technology and growth.
- Halliburton acquired the 49% equity interest in WellDynamics
B.V. of Shell Technology Ventures Fund 1 B.V. Halliburton now
owns 100% of WellDynamics, the world's leading provider of
intelligent well completion technology. WellDynamics'
SmartWell(R) technology has been successfully deployed in over
300 wells worldwide.
- Landmark launched R5000, a synchronous software release
including upgrades to the DecisionSpace(R) environment, with
more than 70 products spanning all disciplines within the
exploration and production lifecycle. The launch offers oil
and gas operators new levels of integration, the potential to
customize workflows, and the opportunity to make more informed
field development decisions. Also with R5000, Landmark is
offering a comprehensive Software Development Kit program to
provide a springboard for customers and partners to construct
their own workflows and technology solutions.
- Landmark released a new version of its AssetObserver(TM)
web-based operating environment, built on the IncuityEMI(TM)
platform. AssetObserver allows production experts to access
and integrate data from a range of sources and monitor
complete workflows and assets in real time. This version of
AssetObserver software addresses a critical need for
comprehensive data access and holistic asset analysis in field
production.
- Landmark acquired all intellectual property, assets, and
existing business of Knowledge Systems, Inc. The addition of
the company to Halliburton's suite of technologies and
services provides an end-to-end well design and delivery
solution that ensures wells are placed optimally and
economically, while minimizing non-productive time during the
drilling process.
- Halliburton developed four complementary fracture stimulation
technologies that help reduce operators' production cost per
barrel of oil equivalent and reduce the use of fresh water in
oilfield operations. These innovations are OmegaFrac(TM)
fluid, MonoProp(TM) proppant, the ADP(TM) (advanced dry
polymer) blender, and the Mimic(TM) fluid measuring device.
- Halliburton was awarded a contract in Abu Dhabi to provide a
range of completion equipment for onshore oil and gas wells.
The three-year contract includes the provision of production
packers, subsurface safety valves, and subsurface flow
controls.
- Halliburton won three Hart's E&P meritorious engineering
achievement awards for Baroid Fluid Services' INTEGRADE(R)
diesel-based fluid system, Sperry Drilling Services' InSite
ADR(TM) Azimuthal Deep Resistivity sensor, and Easywell's
Swellpacker(TM) cable system. The Hart's Meritorious Award for
Engineering Achievement, established in 1971, honors the
world's best new tools and techniques for finding, drilling,
and producing oil and gas wells.
- Halliburton acquired all the intellectual property and assets of Protech Centerform, the world's only provider of casing centralization that uses a carbon fiber and ceramic composite compound applied directly to the casing, allowing for an enhanced cementing solution that can be engineered to any wellbore configuration.
Founded in 1919, Halliburton is one of the world's largest providers of products and services to the energy industry. With more than 50,000 employees in approximately 70 countries, the company serves the upstream oil and gas industry throughout the lifecycle of the reservoir - from locating hydrocarbons and managing geological data, to drilling and formation evaluation, well construction and completion, and optimizing production through the life of the field. Visit the company's World Wide Web site 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: consequences of audits and investigations by domestic and foreign government agencies and legislative bodies and related publicity; potential adverse proceedings by such agencies; protection of intellectual property rights; compliance with environmental laws; changes in government regulations and regulatory requirements, particularly those related to radioactive sources, explosives, and chemicals; compliance with laws related to income taxes and assumptions regarding the generation of future taxable income; unsettled political conditions, war, and the effects of terrorism, foreign operations, and foreign exchange rates and controls; weather-related issues including the effects of hurricanes and tropical storms; changes in capital spending by customers; changes in the demand for or price of oil and/or natural gas; impairment of oil and gas properties; structural changes in the oil and natural gas industry; increased competition for employees; availability of raw materials; and integration of acquired businesses and operations of joint ventures. Halliburton's Form 10-K for the year ended December 31, 2007, Form 10-Q for the period ended March 31, 2008, recent Current Reports on Form 8-K, and other Securities and Exchange Commission filings discuss some of the important risk factors identified that may affect the business, results of operations, and financial condition. Halliburton undertakes no obligation to revise or update publicly any forward-looking statements for any reason.
HALLIBURTON COMPANY
Condensed Consolidated Statements of Operations
(Millions of dollars and shares except per share data)
(Unaudited)
Three Months Ended
-------------------------------
June 30 March 31
-------------------------------
2008 2007 2008
----------------------------------------------------------------------
Revenue:
Completion and Production $2,437 $2,066 $ 2,191
Drilling and Evaluation 2,050 1,669 1,838
----------------------------------------------------------------------
Total revenue $4,487 $3,735 $ 4,029
----------------------------------------------------------------------
Operating income (loss):
Completion and Production $ 561 $ 555 $ 529
Drilling and Evaluation 480 348 384
Corporate and other (92) (10) (66)
----------------------------------------------------------------------
Total operating income 949 893 847
----------------------------------------------------------------------
Interest expense (39) (41) (38)
Interest income 9 36 20
Other, net (2) (2) (1)
----------------------------------------------------------------------
Income from continuing operations
before income taxes and minority
interest 917 886 828
Provision for income taxes (288) (284) (238)
Minority interest in net income of
subsidiaries (6) (7) (7)
----------------------------------------------------------------------
Income from continuing operations 623 595 583
Income (loss) from discontinued
operations, net (116)(a) 935(b) 1
----------------------------------------------------------------------
Net income $ 507 $1,530 $ 584
----------------------------------------------------------------------
Basic income per share:
Income from continuing operations $ 0.72 $ 0.66 $ 0.67
Income (loss) from discontinued
operations, net (0.14)(a) 1.03(b) -
----------------------------------------------------------------------
Net income $ 0.58 $ 1.69 $ 0.67
----------------------------------------------------------------------
Diluted income per share:
Income from continuing operations $ 0.68 $ 0.63 $ 0.64
Income (loss) from discontinued
operations, net (0.13)(a) 0.99(b) -
----------------------------------------------------------------------
Net income $ 0.55 $ 1.62 $ 0.64
----------------------------------------------------------------------
Basic weighted average common shares
outstanding 869 905 873
Diluted weighted average common shares
outstanding 914 942 911
----------------------------------------------------------------------
(a) Income from discontinued operations, net, in the second quarter of
2008 included additional charges totaling $117 million, net of
tax, related to changes in the estimated fair values of the
indemnities and guarantees provided to KBR, Inc. upon separation.
(b) Income from discontinued operations, net, in the second quarter of
2007 included a $933 million net gain on the separation of KBR,
Inc., which included the estimated fair value of indemnities and
guarantees provided to KBR, Inc.
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)
Six Months Ended June 30
----------------------------
2008 2007
----------------------------------------------------------------------
Revenue:
Completion and Production $ 4,628 $ 3,910
Drilling and Evaluation 3,888 3,247
----------------------------------------------------------------------
Total revenue $ 8,516 $ 7,157
----------------------------------------------------------------------
Operating income (loss):
Completion and Production $ 1,090 $ 1,032
Drilling and Evaluation 864 710
Corporate and other (158) (61)
----------------------------------------------------------------------
Total operating income 1,796 1,681
----------------------------------------------------------------------
Interest expense (77) (79)
Interest income 29 74
Other, net (3) (5)
----------------------------------------------------------------------
Income from continuing operations before
income taxes and minority interest 1,745 1,671
Provision for income taxes (526) (543)
Minority interest in net income of
subsidiaries (13) (4)
----------------------------------------------------------------------
Income from continuing operations 1,206 1,124
Income (loss) from discontinued
operations, net (115)(a) 958(b)
----------------------------------------------------------------------
Net income $ 1,091 $ 2,082
----------------------------------------------------------------------
Basic income per share:
Income from continuing operations $ 1.38 $ 1.18
Income (loss) from discontinued
operations, net (0.13)(a) 1.01(b)
----------------------------------------------------------------------
Net income $ 1.25 $ 2.19
----------------------------------------------------------------------
Diluted income per share:
Income from continuing operations $ 1.32 $ 1.14
Income (loss) from discontinued
operations, net (0.12)(a) 0.98(b)
----------------------------------------------------------------------
Net income $ 1.20 $ 2.12
----------------------------------------------------------------------
Basic weighted average common shares
outstanding 871 949
Diluted weighted average common shares
outstanding 912 983
----------------------------------------------------------------------
(a) Income from discontinued operations, net, in six months ended June
30, 2008 included additional charges totaling $117 million, net
of tax, related to changes in the estimated fair values of the
indemnities and guarantees provided to KBR, Inc. upon separation.
(b) Income from discontinued operations, net, in six months ended June
30, 2007 included a $933 million net gain on the separation of
KBR, Inc., which included the estimated fair value of indemnities
and guarantees provided to KBR, Inc. and Halliburton's 81% share
of KBR, Inc.'s $28 million in net income in the first quarter of
2007.
See Footnote Table 1 for a list of significant items included in
operating income.
HALLIBURTON COMPANY
Condensed Consolidated Balance Sheets
(Millions of dollars)
(Unaudited)
June 30, December 31,
2008 2007
----------------------------------------------------------------------
Assets
Current assets:
Cash and investments in marketable
securities $ 1,880 $ 2,235
Receivables, net 3,581 3,093
Inventories, net 1,736 1,459
Other current assets 748 786
----------------------------------------------------------------------
Total current assets 7,945 7,573
Property, plant, and equipment, net 4,146 3,630
Other assets 1,957 1,932
----------------------------------------------------------------------
Total assets $ 14,048 $ 13,135
----------------------------------------------------------------------
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 954 $ 768
Accrued employee compensation and
benefits 540 575
Other current liabilities 1,112 1,068
----------------------------------------------------------------------
Total current liabilities 2,606 2,411
Long-term debt 2,565 2,627
Other liabilities 1,192 1,137
----------------------------------------------------------------------
Total liabilities 6,363 6,175
Minority interest in consolidated
subsidiaries 100 94
----------------------------------------------------------------------
Shareholders' equity 7,585 6,866
----------------------------------------------------------------------
Total liabilities and shareholders'
equity $ 14,048 $ 13,135
----------------------------------------------------------------------
HALLIBURTON COMPANY
Selected Cash Flow Information
(Millions of dollars)
(Unaudited)
Three Months Ended Six Months Ended
June 30 June 30
---------------------------------------
2008 2007 2008 2007
----------------------------------------------------------------------
Capital expenditures $ 445 $ 379 $ 837 $ 682
----------------------------------------------------------------------
----------------------------------------------------------------------
Depreciation, depletion, and
amortization $ 178 $ 140 $ 342 $ 271
----------------------------------------------------------------------
HALLIBURTON COMPANY
Revenue and Operating Income Comparison
By Segment and Geographic Region
(Millions of dollars)
(Unaudited)
Three Months Ended
-----------------------------------
June 30 March 31
-----------------------------------
Revenue by geographic region: 2008 2007 2008
----------------------------------------------------------------------
Completion and Production:
North America $ 1,270 $ 1,160 $ 1,169
Latin America 258 192 243
Europe/Africa/CIS 545 443 433
Middle East/Asia 364 271 346
----------------------------------------------------------------------
Total 2,437 2,066 2,191
----------------------------------------------------------------------
Drilling and Evaluation:
North America 720 586 693
Latin America 339 256 266
Europe/Africa/CIS 571 483 525
Middle East/Asia 420 344 354
----------------------------------------------------------------------
Total 2,050 1,669 1,838
----------------------------------------------------------------------
Total revenue by region:
North America 1,990 1,746 1,862
Latin America 597 448 509
Europe/Africa/CIS 1,116 926 958
Middle East/Asia 784 615 700
----------------------------------------------------------------------
Operating income by geographic
region (excluding Corporate and
other):
----------------------------------------------------------------------
Completion and Production:
North America $ 312 $ 360 $ 317
Latin America 61 50 66
Europe/Africa/CIS 107 77 72
Middle East/Asia 81 68 74
----------------------------------------------------------------------
Total 561 555 529
----------------------------------------------------------------------
Drilling and Evaluation:
North America 194 113 174
Latin America 67 45 41
Europe/Africa/CIS 110 104 103
Middle East/Asia 109 86 66
----------------------------------------------------------------------
Total 480 348 384
----------------------------------------------------------------------
Total operating income by region:
North America 506 473 491
Latin America 128 95 107
Europe/Africa/CIS 217 181 175
Middle East/Asia 190 154 140
----------------------------------------------------------------------
See Footnote Table 1 and Footnote Table 2 for a list of significant
items included in operating income.
HALLIBURTON COMPANY
Revenue and Operating Income Comparison
By Segment and Geographic Region
(Millions of dollars)
(Unaudited)
Six Months Ended June 30
-------------------------
Revenue by geographic region: 2008 2007
----------------------------------------------------------------------
Completion and Production:
North America $ 2,439 $ 2,222
Latin America 501 358
Europe/Africa/CIS 978 820
Middle East/Asia 710 510
----------------------------------------------------------------------
Total 4,628 3,910
----------------------------------------------------------------------
Drilling and Evaluation:
North America 1,413 1,196
Latin America 605 494
Europe/Africa/CIS 1,096 889
Middle East/Asia 774 668
----------------------------------------------------------------------
Total 3,888 3,247
----------------------------------------------------------------------
Total revenue by region:
North America 3,852 3,418
Latin America 1,106 852
Europe/Africa/CIS 2,074 1,709
Middle East/Asia 1,484 1,178
----------------------------------------------------------------------
Operating income by geographic region
(excluding Corporate and other):
----------------------------------------------------------------------
Completion and Production:
North America $ 629 $ 682
Latin America 127 88
Europe/Africa/CIS 179 148
Middle East/Asia 155 114
----------------------------------------------------------------------
Total 1,090 1,032
----------------------------------------------------------------------
Drilling and Evaluation:
North America 368 280
Latin America 108 81
Europe/Africa/CIS 213 182
Middle East/Asia 175 167
----------------------------------------------------------------------
Total 864 710
----------------------------------------------------------------------
Total operating income by region:
North America 997 962
Latin America 235 169
Europe/Africa/CIS 392 330
Middle East/Asia 330 281
----------------------------------------------------------------------
See Footnote Table 1 and Footnote Table 2 for a list of significant
items included in operating income.
FOOTNOTE TABLE 1
HALLIBURTON COMPANY
Items Included in Operating Income
(Millions of dollars except per share data)
(Unaudited)
Three Months Three Months Three Months
Ended Ended Ended
June 30, 2008 June 30, 2007 March 31, 2008
----------------- ---------------- -----------------
After After After
Tax Tax Tax
Operating per Operating per Operating per
Income Share Income Share Income Share
----------------- ---------------- -----------------
Completion and
Production:
Gain on sale of
investment $ - $ - $ - $ - $ 35 $ 0.02
Drilling and
Evaluation:
Impairment of
oil and gas
property - - - - (23) (0.02)
Gain on sale of
investments 25 0.02 - - - -
Corporate and
other:
Gain on sale of
investment - - 49 0.03 - -
Patent
settlement (30) (0.02) - - - -
----------------------------------------------------------------------
Six Months Ended Six Months Ended
June 30, 2008 June 30, 2007
------------------------ ------------------------
Operating After Tax Operating After Tax
Income per Share Income per Share
------------------------ ------------------------
Completion and
Production:
Gain on sale of
investment $ 35 $ 0.02 $ - $ -
Drilling and
Evaluation:
Impairment of oil
and gas property (23) (0.02) - -
Gain on sale of
investments 25 0.02 - -
Corporate and other:
Gain on sale of
investment - - 49 0.03
Patent settlement (30) (0.02) - -
----------------------------------------------------------------------
FOOTNOTE TABLE 2
HALLIBURTON COMPANY
Items Included in Operating Income by Geographic Region
(Millions of dollars except per share data)
(Unaudited)
Three Months Three Months Three Months
Ended Ended Ended
June 30, 2008 June 30, 2007 March 31, 2008
----------------- ---------------- -----------------
After After After
Tax Tax Tax
Operating per Operating per Operating per
Income Share Income Share Income Share
----------------- ---------------- -----------------
North America:
Gain on sale of
investments $ 25 $ 0.02 $ - $ - $ 35 $ 0.02
Middle East/Asia:
Impairment of
oil and gas
property - - - - (23) (0.02)
Corporate and
other:
Gain on sale of
investment - - 49 0.03 - -
Patent
settlement (30) (0.02) - - - -
----------------------------------------------------------------------
Six Months Ended Six Months Ended
June 30, 2008 June 30, 2007
----------------------- -----------------------
Operating After Tax Operating After Tax
Income per Share Income per Share
----------------------- -----------------------
North America:
Gain on sale of
investments $ 60 $ 0.04 $ - $ -
Middle East/Asia:
Impairment of oil
and gas property (23) (0.02) - -
Corporate and other:
Gain on sale of
investment - - 49 0.03
Patent settlement (30) (0.02) - -
----------------------------------------------------------------------
FOOTNOTE TABLE 3
HALLIBURTON COMPANY
Reconciliation of As Reported Results to Adjusted Results
(Millions of dollars)
(Unaudited)
Three Months Ended
---------------------------------
Eastern Hemisphere June 30, 2008 March 31, 2008
----------------------------------------------------------------------
As reported operating income $ 407 $ 315
Effect of impairment of oil and
gas property (a) - 23
----------------------------------------------------------------------
Adjusted operating income 407 338
----------------------------------------------------------------------
As reported sequential % change in
operating income 29%
Adjusted sequential % change in
operating income 20%
----------------------------------------------------------------------
(a) Management believes it is important to point out to investors that
included in operating income in the first quarter of 2008 is an
impairment charge related to an oil and gas property, because
investors have indicated to management their desire to understand
the current drivers and future trends. The adjustment removes the
effect of the impairment of the oil and gas property.
CONTACT: Halliburton, Houston
Vice President, Investor Relations
Christian Garcia, 713-759-2688
or
Director, Communications
Cathy Mann, 713-759-2605
SOURCE: Halliburton