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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended September 30, 2020

OR
Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the transition period from _____ to _____
Commission File Number 001-03492

HALLIBURTON COMPANY

(a Delaware corporation)
75-2677995

3000 North Sam Houston Parkway East
Houston, Texas 77032
(Address of Principal Executive Offices)

Telephone Number – Area Code (281) 871-2699

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common Stock, par value $2.50 per shareHALNew York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
YesNo

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
YesNo

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
 Large Accelerated FilerAccelerated Filer
 Non-accelerated FilerEmerging Growth Company
Smaller Reporting Company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
YesNo

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
YesNo

As of October 16, 2020, there were 884,007,207 shares of Halliburton Company common stock, $2.50 par value per share, outstanding.



HALLIBURTON COMPANY

Index

  Page No.
   
 
 
 
 
 
   
   
   
   
 



PART I. FINANCIAL INFORMATION
Item 1. Financial Statements

HALLIBURTON COMPANY
Condensed Consolidated Statements of Operations
(Unaudited)
Three Months Ended
September 30
Nine Months Ended
September 30
Millions of dollars and shares except per share data2020201920202019
Revenue:    
Services$2,068 $4,207 $7,940 $13,118 
Product sales907 1,343 3,268 4,099 
Total revenue2,975 5,550 11,208 17,217 
Operating costs and expenses:    
Cost of services1,904 3,860 7,394 12,220 
Cost of sales755 1,101 2,663 3,317 
Impairments and other charges133  3,353 308 
General and administrative41 53 138 168 
Total operating costs and expenses2,833 5,014 13,548 16,013 
Operating income (loss)142 536 (2,340)1,204 
Interest expense, net of interest income of $11, $6, $28 and $18
(122)(141)(380)(428)
Loss on early extinguishment of debt  (168) 
Other, net(21)(23)(92)(61)
Income (loss) before income taxes(1)372 (2,980)715 
Income tax benefit (provision)(18)(76)265 (190)
Net income (loss)$(19)$296 $(2,715)$525 
Net (income) loss attributable to noncontrolling interest2 (1)5 (3)
Net income (loss) attributable to company$(17)$295 $(2,710)$522 
Basic and diluted net income (loss) per share$(0.02)$0.34 $(3.08)$0.60 
Basic weighted average common shares outstanding882 876 879 874 
Diluted weighted average common shares outstanding882 876 879 875 
     See notes to condensed consolidated financial statements.
HAL Q3 2020 FORM 10-Q | 1

HALLIBURTON COMPANY
Condensed Consolidated Statements of Comprehensive Income (Loss)
(Unaudited)

Three Months Ended
September 30
Nine Months Ended
September 30
Millions of dollars2020201920202019
Net income (loss)$(19)$296 $(2,715)$525 
Other comprehensive income, net of income taxes2  22 2 
Comprehensive income (loss)$(17)$296 $(2,693)$527 
Comprehensive (income) loss attributable to noncontrolling interest1 (1)4 (3)
Comprehensive income (loss) attributable to company shareholders$(16)$295 $(2,689)$524 
     See notes to condensed consolidated financial statements.

HAL Q3 2020 FORM 10-Q | 2

HALLIBURTON COMPANY
Condensed Consolidated Balance Sheets
(Unaudited)

Millions of dollars and shares except per share dataSeptember 30,
2020
December 31,
2019
Assets
Current assets:  
Cash and equivalents$2,115 $2,268 
Receivables (net of allowances for credit losses of $818 and $776)
3,145 4,577 
Inventories2,580 3,139 
Other current assets1,183 1,228 
Total current assets9,023 11,212 
Property, plant and equipment (net of accumulated depreciation of $11,240 and $12,630)
5,033 7,310 
Goodwill2,804 2,812 
Deferred income taxes2,056 1,683 
Operating lease right-of-use assets761 931 
Other assets1,197 1,429 
Total assets$20,874 $25,377 
Liabilities and Shareholders’ Equity
Current liabilities:  
Accounts payable$1,548 $2,432 
Accrued employee compensation and benefits503 604 
Current portion of operating lease liabilities240 208 
Current maturities of long-term debt195 11 
Other current liabilities1,437 1,623 
Total current liabilities3,923 4,878 
Long-term debt9,632 10,316 
Operating lease liabilities754 825 
Employee compensation and benefits530 525 
Other liabilities832 808 
Total liabilities15,671 17,352 
Shareholders’ equity:  
Common stock, par value $2.50 per share (authorized 2,000 shares,
issued 1,066 and 1,068 shares)
2,666 2,669 
Paid-in capital in excess of par value23 143 
Accumulated other comprehensive loss(340)(362)
Retained earnings8,987 11,989 
Treasury stock, at cost (183 and 190 shares)
(6,136)(6,427)
Company shareholders’ equity5,200 8,012 
Noncontrolling interest in consolidated subsidiaries3 13 
Total shareholders’ equity5,203 8,025 
Total liabilities and shareholders’ equity$20,874 $25,377 
     See notes to condensed consolidated financial statements.

HAL Q3 2020 FORM 10-Q | 3

HALLIBURTON COMPANY
Condensed Consolidated Statements of Cash Flows
(Unaudited)

Nine Months Ended
September 30
Millions of dollars20202019
Cash flows from operating activities:  
Net income (loss)$(2,715)$525 
Adjustments to reconcile net income (loss) to cash flows from operating activities:  
Impairments and other charges3,353 308 
Depreciation, depletion and amortization829 1,253 
Accrued employee benefits(494)(73)
Deferred income tax benefit(380)(77)
Changes in assets and liabilities:  
Receivables1,294 7 
Accounts payable(933)(283)
Inventories115 (380)
Other operating activities174 (2)
Total cash flows provided by (used in) operating activities1,243 1,278 
Cash flows from investing activities:  
Capital expenditures(510)(1,190)
Proceeds from sales of property, plant and equipment199 143 
Other investing activities(33)(83)
Total cash flows provided by (used in) investing activities(344)(1,130)
Cash flows from financing activities:  
Payments on long-term borrowings(1,653)(11)
Proceeds from issuance of long-term debt, net994  
Dividends to shareholders(238)(472)
Stock repurchase program(100)(100)
Other financing activities25 33 
Total cash flows provided by (used in) financing activities(972)(550)
Effect of exchange rate changes on cash(80)(35)
Decrease in cash and equivalents(153)(437)
Cash and equivalents at beginning of period2,268 2,008 
Cash and equivalents at end of period$2,115 $1,571 
Supplemental disclosure of cash flow information:  
Cash payments during the period for:  
Interest$396 $394 
Income taxes$256 $288 
     See notes to condensed consolidated financial statements.

HAL Q3 2020 FORM 10-Q | 4

Part I. Item 1 | Notes to Condensed Consolidated Financial Statements
HALLIBURTON COMPANY
Notes to Condensed Consolidated Financial Statements
(Unaudited)

Note 1. Basis of Presentation

The accompanying unaudited condensed consolidated financial statements were prepared using generally accepted accounting principles for interim financial information and the instructions to Form 10-Q and Regulation S-X. Accordingly, these financial statements do not include all information or notes required by generally accepted accounting principles for annual financial statements and should be read together with our 2019 Annual Report on Form 10-K.

Our accounting policies are in accordance with United States generally accepted accounting principles. The preparation of financial statements in conformity with these accounting principles requires us to make estimates and assumptions that affect:
the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements; and
the reported amounts of revenue and expenses during the reporting period.

Ultimate results could differ from our estimates.

In our opinion, the condensed consolidated financial statements included herein contain all adjustments necessary to present fairly our financial position as of September 30, 2020 and the results of our operations for the three and nine months ended September 30, 2020 and 2019, and our cash flows for the nine months ended September 30, 2020 and 2019. Such adjustments are of a normal recurring nature. In addition, certain reclassifications of prior period balances have been made to conform to the current period presentation.

The results of our operations for the three and nine months ended September 30, 2020 may not be indicative of results for the full year.

HAL Q3 2020 FORM 10-Q | 5

Part I. Item 1 | Notes to Condensed Consolidated Financial Statements
Note 2. Impairments and Other Charges
    
The oil and gas industry has experienced unprecedented disruption during 2020 as a result of a combination of factors, including the substantial decline in global demand for oil caused by the COVID-19 pandemic and subsequent mitigation efforts. This disruption created a substantial surplus of oil and a decline in oil prices. West Texas Intermediate (WTI) oil spot prices decreased during the first quarter of 2020 from a high of $63 per barrel in early January of 2020 to approximately $21 per barrel by the end of the first quarter of 2020. Although oil prices have recovered modestly, WTI oil spot prices averaged approximately $41 per barrel during the third quarter of 2020, which is approximately 28% less than the average price per barrel during 2019. As a result, oil and gas activity has declined significantly during 2020, with the global rig count sinking to the lowest level since 1973. The U.S. average rig count continued to decline in the third quarter of 2020, dropping 35% compared to the second quarter of 2020, while the international rig count dropped 12% over the same period. In the first and second quarters of 2020, we determined these events constituted a triggering event that required us to review the recoverability of our long-lived assets and perform an interim goodwill impairment assessment as of March 31, 2020 and May 1, 2020. Our review resulted in the recording of impairments and other charges in the first half of 2020. As a result of our goodwill impairment assessments, we determined that the fair value of each reporting unit exceeded its net book value and, therefore, no goodwill impairments were deemed necessary.

The factors described above continued to impact our business in the third quarter of 2020 and affected our overall outlook globally. As a result, we recognized additional severance and other charges during the three months ended September 30, 2020, to further adjust our cost structure to reflect current market conditions; however, we determined there were no events that would indicate the carrying amount of long-lived assets may not be recoverable. The following table presents various pre-tax charges we recorded during the three months ended September 30, 2020 and nine months ended September 30, 2020 and 2019, which are reflected within "Impairments and other charges" on our condensed consolidated statements of operations. There were no impairments and other charges recorded during the three months ended September 30, 2019.

Three Months Ended
September 30
Nine Months Ended
September 30
Millions of dollars202020202019
Severance costs$83 $356 $77 
Long-lived asset impairments31 2,299 150 
Inventory costs and write-downs11 505 33 
Other8 193 48 
Total impairments and other charges$133 $3,353 $308 

Of the $133 million of severance and other charges recorded during the three months ended September 30, 2020, approximately $90 million was attributable to our Completion and Production segment and approximately $40 million was attributable to our Drilling and Evaluation segment.

Given the dynamic nature of the COVID-19 pandemic and related market conditions, we cannot reasonably estimate the period that these events will persist or the full extent of the impact they will have on our business. If market conditions continue to deteriorate, including crude oil prices further declining or remaining at low levels for a sustained period, we may record further asset impairments, which may include an impairment of the carrying value of our goodwill.

Note 3. Business Segment Information

We operate under two divisions, which form the basis for the two operating segments we report: the Completion and Production segment and the Drilling and Evaluation segment. Our equity in earnings and losses of unconsolidated affiliates that are accounted for using the equity method of accounting are included within cost of services and cost of sales on our statements of operations, which is part of operating income of the applicable segment.

HAL Q3 2020 FORM 10-Q | 6

Part I. Item 1 | Notes to Condensed Consolidated Financial Statements
The following table presents information on our business segments.
 Three Months Ended
September 30
Nine Months Ended
September 30
Millions of dollars2020201920202019
Revenue:  
Completion and Production$1,574 $3,506 $6,029 $10,973 
Drilling and Evaluation1,401 2,044 5,179 6,244 
Total revenue$2,975 $5,550 $11,208 $17,217 
Operating income (loss):
Completion and Production$212 $446 $713 $1,284 
Drilling and Evaluation105 150 452 418 
Total operations317 596 1,165 1,702 
Corporate and other (a)(42)(60)(152)(190)
Impairments and other charges (b)(133) (3,353)(308)
Total operating income (loss)$142 $536 $(2,340)$1,204 
Interest expense, net of interest income(122)(141)(380)(428)
Loss on early extinguishment of debt (c)  (168) 
Other, net(21)(23)(92)(61)
Income (loss) before income taxes$(1)$372 $(2,980)$715 
(a) Includes certain expenses not attributable to a business segment, such as costs related to support functions and corporate executives, and includes amortization expense associated with intangible assets recorded as a result of acquisitions.
(b) For the three months ended September 30, 2020, amount includes approximately $90 million attributable to Completion and Production, $40 million attributable to Drilling and Evaluation, and $3 million attributable to Corporate and other. For the nine months ended September 30, 2020, amount includes $2.1 billion attributable to Completion and Production, $1.2 billion attributable to Drilling and Evaluation, and $44 million attributable to Corporate and other. For the nine months ended September 30, 2019, amount includes $127 million attributable to Completion and Production, $153 million attributable to Drilling and Evaluation, and $28 million attributable to Corporate and other. See Note 2 for further discussion on these impairments and other charges. There were no impairments and other charges recorded during the three months ended September 30, 2019.
(c) For the nine months ended September 30, 2020, amount includes a $168 million loss on extinguishment of debt related to the early repurchase of senior notes. See Note 6 for further discussion on this charge.

Note 4. Revenue

Revenue is recognized based on the transfer of control or our customers' ability to benefit from our services and products in an amount that reflects the consideration we expect to receive in exchange for those services and products. Most of our service and product contracts are short-term in nature. In recognizing revenue for our services and products, we determine the transaction price of purchase orders or contracts with our customers, which may consist of fixed and variable consideration. We also assess our customers' ability and intention to pay, which is based on a variety of factors, including our customers' historical payment experience and financial condition. Payment terms and conditions vary by contract type, although terms generally include a requirement of payment within 20 to 60 days. Other judgments involved in recognizing revenue include an assessment of progress towards completion of performance obligations for certain long-term contracts, which involve estimating total costs to determine our progress towards contract completion and calculating the corresponding amount of revenue to recognize.

Disaggregation of revenue
We disaggregate revenue from contracts with customers into types of services or products, consistent with our two reportable segments, in addition to geographical area. Based on the location of services provided and products sold, 38% and 53% of our consolidated revenue was from the United States for the nine months ended September 30, 2020 and 2019, respectively. No other country accounted for more than 10% of our revenue.

HAL Q3 2020 FORM 10-Q | 7

Part I. Item 1 | Notes to Condensed Consolidated Financial Statements
The following table presents information on our disaggregated revenue.

Millions of dollarsThree Months Ended
September 30
Nine Months Ended
September 30
Revenue by segment:2020201920202019
Completion and Production$1,574 $3,506 $6,029 $10,973 
Drilling and Evaluation1,401 2,044 5,179 6,244 
Total revenue$2,975 $5,550 $11,208 $17,217 
Revenue by geographic region:
North America$984 $2,949 $4,493 $9,551 
Latin America380 608 1,242 1,766 
Europe/Africa/CIS649 831 2,171 2,402 
Middle East/Asia962 1,162 3,302 3,498 
Total revenue$2,975 $5,550 $11,208 $17,217 

Contract balances
We perform our obligations under contracts with our customers by transferring services and products in exchange for consideration. The timing of our performance often differs from the timing of our customer’s payment, which results in the recognition of receivables and deferred revenue. Deferred revenue represents advance consideration received from customers for contracts where revenue is recognized on future performance of service. Deferred revenue, as well as revenue recognized during the period relating to amounts included as deferred revenue at the beginning of the period, was not material to our condensed consolidated financial statements.

Transaction price allocated to remaining performance obligations
Remaining performance obligations represent firm contracts for which work has not been performed and future revenue recognition is expected. We have elected the practical expedient permitting the exclusion of disclosing remaining performance obligations for contracts that have an original expected duration of one year or less. We have some long-term contracts related to software and integrated project management services such as lump sum turnkey contracts. For software contracts, revenue is generally recognized over time throughout the license period when the software is considered to be a right to access our intellectual property. For lump sum turnkey projects, we recognize revenue over time using an input method, which requires us to exercise judgment. Revenue allocated to remaining performance obligations for these long-term contracts is not material.

Receivables
As of September 30, 2020, 26% of our net trade receivables were from customers in the United States. As of December 31, 2019, 36% of our net trade receivables were from customers in the United States. No other country or single customer accounted for more than 10% of our trade receivables at those dates. As a result of the current market environment, we have an increased risk of delayed customer payments and payment defaults associated with customer liquidity issues and bankruptcies. We routinely monitor the financial stability of our customers and employ an extensive process to evaluate the collectability of outstanding receivables. This process, which involves a high degree of judgment utilizing significant assumptions, includes analysis of our customers’ historical time to pay, financial condition and various financial metrics, debt structure, credit agency ratings, and production profile, as well as political and economic factors in countries of operations and other customer-specific factors.

HAL Q3 2020 FORM 10-Q | 8

Part I. Item 1 | Notes to Condensed Consolidated Financial Statements
Note 5. Inventories

Inventories consisted of the following:
Millions of dollarsSeptember 30,
2020
December 31,
2019
Finished products and parts$1,452 $1,865 
Raw materials and supplies1,061 1,147 
Work in process67 127 
Total$2,580 $3,139 

During the nine months ended September 30, 2020, we recorded $505 million of impairment charges related to inventory. These charges primarily consisted of the disposal of excess inventory, including drilling fluids and other chemicals, and write-downs in which some of our inventory cost exceeded its market value.

Note 6. Debt

On March 3, 2020, we issued $1.0 billion aggregate principal amount of 2.92% senior notes due March 2030. Subsequently, on March 5, 2020, we completed a tender offer to purchase $1.5 billion aggregate principal amount of senior notes using proceeds from the debt issuance and cash on hand. The tender offer consisted of $500 million of 3.50% senior notes due August 2023 and $1.0 billion of 3.80% senior notes due November 2025. This early debt repurchase resulted in a $168 million loss on extinguishment, which included a tender premium, unamortized discounts and costs on the retired notes, and other tender fees. These costs were included in "Loss on early extinguishment of debt" on our condensed consolidated statements of operations for the nine months ended September 30, 2020.

The $1.0 billion senior notes issued in March rank equally with our existing and future senior unsecured indebtedness, have semiannual interest payments, and have no sinking fund requirements. We may redeem some or all notes at any time at the applicable redemption prices, plus accrued and unpaid interest.

Note 7. Income Taxes

During the three months ended September 30, 2020, we recorded a total income tax provision of $18 million on a pre-tax loss of $1.0 million, resulting in an unusually high negative effective tax rate for the quarter. Our effective tax rate during the three months ended September 30, 2020 was impacted by the geographic mix of our earnings in conjunction with the immaterial loss this quarter. During the three months ended September 30, 2019, we recorded a total income tax provision of $76 million on pre-tax income of $372 million, resulting in an effective tax rate of 20.4%. Our effective tax rate during the three months ended September 30, 2019 was impacted by certain discrete tax benefits and the geographic mix of our earnings.

During the nine months ended September 30, 2020, we recorded a total income tax benefit of $265 million on a pre-tax loss of $3.0 billion, resulting in an effective tax rate of 8.9%. The effective tax rate for this period was primarily impacted by our first quarter of 2020 results, which included the impacts of the COVID-19 pandemic and OPEC+ disagreements which created an unprecedented disruption in the oil and gas industry. After evaluating the negative impact that these events were expected to have on our business outlook, we determined that it was more likely than not that certain foreign tax credits would not be realized. Accordingly, we recognized a valuation allowance on our deferred tax assets in the amount of $310 million during the first quarter of 2020. Additionally, we recorded $3.4 billion of impairments and other charges and a $168 million loss on extinguishment of debt during the nine months ended September 30, 2020, resulting in a $696 million tax benefit recognized during the period. Our effective tax rate during the nine months ended September 30, 2020 was also impacted by the geographic mix of our earnings. During the nine months ended September 30, 2019, we recorded a total income tax provision of $190 million on pre-tax income of $715 million, resulting in an effective tax rate of 26.6%. Our effective tax rate during this period was significantly impacted by the impairments and other charges recorded, as we did not recognize a corresponding financial statement tax benefit for the majority of these charges. Additionally, our effective tax rate was impacted by the geographic mix of our earnings.

See Note 2 for further information on these adverse market conditions and impairments and other charges recognized during the three and nine months ended September 30, 2020.

HAL Q3 2020 FORM 10-Q | 9

Part I. Item 1 | Notes to Condensed Consolidated Financial Statements
Note 8. Shareholders’ Equity

The following tables summarize our shareholders’ equity activity for the three and nine months ended September 30, 2020 and September 30, 2019, respectively:
Millions of dollarsCommon StockPaid-in Capital in Excess of Par ValueTreasury StockRetained EarningsAccumulated Other Comprehensive Income (Loss)Noncontrolling Interest in Consolidated SubsidiariesTotal
Balance at December 31, 2019$2,669 $143 $(6,427)$11,989 $(362)$13 $8,025 
Comprehensive income (loss):
Net income (loss)   (1,017) 2 (1,015)
Other comprehensive income    11  11 
Cash dividends ($0.18 per share)
   (158)  (158)
Stock repurchase program  (100)   (100)
Stock plans (33)115    82 
Other     (2)(2)
Balance at March 31, 2020$2,669 $110 $(6,412)$10,814 $(351)$13 $6,843 
Comprehensive income (loss):
Net loss   (1,676) (5)(1,681)
Other comprehensive income    9  9 
Cash dividends ($0.045 per share)
   (40)  (40)
Stock plans(3)15 54    66 
Other     (1)(1)
Balance at June 30, 2020$2,666 $125 $(6,358)$9,098 $(342)$7 $5,196 
Comprehensive income (loss):
Net loss   (17) (2)(19)
Other comprehensive income    2  2 
Cash dividends ($0.045 per share)
   (40)  (40)
Stock plans (102)222    120 
Other   (54) (2)(56)
Balance at September 30, 2020$2,666 $23 $(6,136)$8,987 $(340)$3 $5,203 

HAL Q3 2020 FORM 10-Q | 10

Part I. Item 1 | Notes to Condensed Consolidated Financial Statements
Millions of dollarsCommon StockPaid-in Capital in Excess of Par ValueTreasury StockRetained EarningsAccumulated Other Comprehensive Income (Loss)Noncontrolling Interest in Consolidated SubsidiariesTotal
Balance at December 31, 2018$2,671 $211 $(6,744)$13,739 $(355)$22 $9,544 
Comprehensive income (loss):
Net income   152   152 
Other comprehensive income    1  1 
Cash dividends ($0.18 per share)
   (157)  (157)
Stock plans 13 74    87 
Other     (2)(2)
Balance at March 31, 2019$2,671 $224 $(6,670)$13,734 $(354)$20 $9,625 
Comprehensive income (loss):
Net income   75  2 77 
Other comprehensive income    1  1 
Cash dividends ($0.18 per share)
   (157)  (157)
Stock repurchase program  (100)   (100)
Stock plans(1)(166)250    83 
Other    1 (6)(