hal-202209300000045012December 31908,046,7772022Q3false00000450122022-01-012022-09-3000000450122022-10-19xbrli:shares0000045012us-gaap:ServiceMember2022-07-012022-09-30iso4217:USD0000045012us-gaap:ServiceMember2021-07-012021-09-300000045012us-gaap:ServiceMember2022-01-012022-09-300000045012us-gaap:ServiceMember2021-01-012021-09-300000045012us-gaap:ProductMember2022-07-012022-09-300000045012us-gaap:ProductMember2021-07-012021-09-300000045012us-gaap:ProductMember2022-01-012022-09-300000045012us-gaap:ProductMember2021-01-012021-09-3000000450122022-07-012022-09-3000000450122021-07-012021-09-3000000450122021-01-012021-09-30iso4217:USDxbrli:shares00000450122022-09-3000000450122021-12-3100000450122020-12-3100000450122021-09-300000045012hal:RussiaUkraineMember2021-07-012021-09-300000045012hal:RussiaUkraineMember2022-01-012022-09-300000045012hal:RussiaUkraineMember2021-01-012021-09-300000045012hal:StructuredRealEstateTransactionMember2021-07-012021-09-300000045012hal:StructuredRealEstateTransactionMember2022-01-012022-09-300000045012hal:StructuredRealEstateTransactionMember2021-01-012021-09-3000000450122022-04-012022-06-300000045012hal:CompletionAndProductionMember2022-04-012022-06-300000045012hal:DrillingAndEvaluationMember2022-04-012022-06-300000045012us-gaap:CorporateAndOtherMember2022-04-012022-06-3000000450122022-01-012022-03-310000045012country:UA2022-01-012022-03-31hal:Division0000045012hal:CompletionAndProductionMember2022-07-012022-09-300000045012hal:CompletionAndProductionMember2021-07-012021-09-300000045012hal:CompletionAndProductionMember2022-01-012022-09-300000045012hal:CompletionAndProductionMember2021-01-012021-09-300000045012hal:DrillingAndEvaluationMember2022-07-012022-09-300000045012hal:DrillingAndEvaluationMember2021-07-012021-09-300000045012hal:DrillingAndEvaluationMember2022-01-012022-09-300000045012hal:DrillingAndEvaluationMember2021-01-012021-09-300000045012hal:CompletionAndProductionMemberus-gaap:OperatingSegmentsMember2022-07-012022-09-300000045012hal:CompletionAndProductionMemberus-gaap:OperatingSegmentsMember2021-07-012021-09-300000045012hal:CompletionAndProductionMemberus-gaap:OperatingSegmentsMember2022-01-012022-09-300000045012hal:CompletionAndProductionMemberus-gaap:OperatingSegmentsMember2021-01-012021-09-300000045012hal:DrillingAndEvaluationMemberus-gaap:OperatingSegmentsMember2022-07-012022-09-300000045012hal:DrillingAndEvaluationMemberus-gaap:OperatingSegmentsMember2021-07-012021-09-300000045012hal:DrillingAndEvaluationMemberus-gaap:OperatingSegmentsMember2022-01-012022-09-300000045012hal:DrillingAndEvaluationMemberus-gaap:OperatingSegmentsMember2021-01-012021-09-300000045012us-gaap:OperatingSegmentsMember2022-07-012022-09-300000045012us-gaap:OperatingSegmentsMember2021-07-012021-09-300000045012us-gaap:OperatingSegmentsMember2022-01-012022-09-300000045012us-gaap:OperatingSegmentsMember2021-01-012021-09-300000045012us-gaap:CorporateAndOtherMember2022-07-012022-09-300000045012us-gaap:CorporateAndOtherMember2021-07-012021-09-300000045012us-gaap:CorporateAndOtherMember2022-01-012022-09-300000045012us-gaap:CorporateAndOtherMember2021-01-012021-09-300000045012srt:MinimumMember2022-01-012022-09-300000045012srt:MaximumMember2022-01-012022-09-300000045012country:USus-gaap:SalesRevenueNetMemberus-gaap:GeographicConcentrationRiskMember2022-01-012022-09-30xbrli:pure0000045012country:USus-gaap:SalesRevenueNetMemberus-gaap:GeographicConcentrationRiskMember2021-01-012021-09-300000045012srt:NorthAmericaMember2022-07-012022-09-300000045012srt:NorthAmericaMember2021-07-012021-09-300000045012srt:NorthAmericaMember2022-01-012022-09-300000045012srt:NorthAmericaMember2021-01-012021-09-300000045012srt:LatinAmericaMember2022-07-012022-09-300000045012srt:LatinAmericaMember2021-07-012021-09-300000045012srt:LatinAmericaMember2022-01-012022-09-300000045012srt:LatinAmericaMember2021-01-012021-09-300000045012hal:EuropeAfricaCISMember2022-07-012022-09-300000045012hal:EuropeAfricaCISMember2021-07-012021-09-300000045012hal:EuropeAfricaCISMember2022-01-012022-09-300000045012hal:EuropeAfricaCISMember2021-01-012021-09-300000045012hal:MiddleEastAsiaMember2022-07-012022-09-300000045012hal:MiddleEastAsiaMember2021-07-012021-09-300000045012hal:MiddleEastAsiaMember2022-01-012022-09-300000045012hal:MiddleEastAsiaMember2021-01-012021-09-300000045012country:USus-gaap:AccountsReceivableMemberus-gaap:GeographicConcentrationRiskMember2022-01-012022-09-300000045012country:MXus-gaap:AccountsReceivableMemberus-gaap:GeographicConcentrationRiskMember2022-01-012022-09-300000045012country:USus-gaap:AccountsReceivableMemberus-gaap:GeographicConcentrationRiskMember2021-01-012021-12-310000045012country:MXus-gaap:AccountsReceivableMemberus-gaap:GeographicConcentrationRiskMember2021-01-012021-12-310000045012country:MXus-gaap:CustomerConcentrationRiskMemberus-gaap:AccountsReceivableMember2021-01-012021-09-300000045012country:MXus-gaap:CustomerConcentrationRiskMemberus-gaap:AccountsReceivableMember2022-01-012022-03-31hal:Customers0000045012hal:SeniorNotesdueNovember2025Member2022-01-012022-09-300000045012hal:SeniorNotesdueNovember2025Member2022-09-300000045012hal:OutstandingBalanceOfSeniorNotesDueAugust2023Member2022-09-3000000450122022-04-2700000450122019-03-310000045012hal:SeniorNotesDueAugust2023Member2022-01-012022-09-300000045012us-gaap:CommonStockMember2021-12-310000045012us-gaap:AdditionalPaidInCapitalMember2021-12-310000045012us-gaap:TreasuryStockMember2021-12-310000045012us-gaap:RetainedEarningsMember2021-12-310000045012us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-12-310000045012us-gaap:NoncontrollingInterestMember2021-12-310000045012us-gaap:CommonStockMember2022-01-012022-03-310000045012us-gaap:AdditionalPaidInCapitalMember2022-01-012022-03-310000045012us-gaap:TreasuryStockMember2022-01-012022-03-310000045012us-gaap:RetainedEarningsMember2022-01-012022-03-310000045012us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-01-012022-03-310000045012us-gaap:NoncontrollingInterestMember2022-01-012022-03-310000045012us-gaap:CommonStockMember2022-03-310000045012us-gaap:AdditionalPaidInCapitalMember2022-03-310000045012us-gaap:TreasuryStockMember2022-03-310000045012us-gaap:RetainedEarningsMember2022-03-310000045012us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-03-310000045012us-gaap:NoncontrollingInterestMember2022-03-3100000450122022-03-310000045012us-gaap:CommonStockMember2022-04-012022-06-300000045012us-gaap:AdditionalPaidInCapitalMember2022-04-012022-06-300000045012us-gaap:TreasuryStockMember2022-04-012022-06-300000045012us-gaap:RetainedEarningsMember2022-04-012022-06-300000045012us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-04-012022-06-300000045012us-gaap:NoncontrollingInterestMember2022-04-012022-06-300000045012us-gaap:CommonStockMember2022-06-300000045012us-gaap:AdditionalPaidInCapitalMember2022-06-300000045012us-gaap:TreasuryStockMember2022-06-300000045012us-gaap:RetainedEarningsMember2022-06-300000045012us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-06-300000045012us-gaap:NoncontrollingInterestMember2022-06-3000000450122022-06-300000045012us-gaap:CommonStockMember2022-07-012022-09-300000045012us-gaap:AdditionalPaidInCapitalMember2022-07-012022-09-300000045012us-gaap:TreasuryStockMember2022-07-012022-09-300000045012us-gaap:RetainedEarningsMember2022-07-012022-09-300000045012us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-07-012022-09-300000045012us-gaap:NoncontrollingInterestMember2022-07-012022-09-300000045012us-gaap:CommonStockMember2022-09-300000045012us-gaap:AdditionalPaidInCapitalMember2022-09-300000045012us-gaap:TreasuryStockMember2022-09-300000045012us-gaap:RetainedEarningsMember2022-09-300000045012us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-09-300000045012us-gaap:NoncontrollingInterestMember2022-09-300000045012us-gaap:CommonStockMember2020-12-310000045012us-gaap:AdditionalPaidInCapitalMember2020-12-310000045012us-gaap:TreasuryStockMember2020-12-310000045012us-gaap:RetainedEarningsMember2020-12-310000045012us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-12-310000045012us-gaap:NoncontrollingInterestMember2020-12-310000045012us-gaap:CommonStockMember2021-01-012021-03-310000045012us-gaap:AdditionalPaidInCapitalMember2021-01-012021-03-310000045012us-gaap:TreasuryStockMember2021-01-012021-03-310000045012us-gaap:RetainedEarningsMember2021-01-012021-03-310000045012us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-01-012021-03-310000045012us-gaap:NoncontrollingInterestMember2021-01-012021-03-3100000450122021-01-012021-03-310000045012us-gaap:CommonStockMember2021-03-310000045012us-gaap:AdditionalPaidInCapitalMember2021-03-310000045012us-gaap:TreasuryStockMember2021-03-310000045012us-gaap:RetainedEarningsMember2021-03-310000045012us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-03-310000045012us-gaap:NoncontrollingInterestMember2021-03-3100000450122021-03-310000045012us-gaap:CommonStockMember2021-04-012021-06-300000045012us-gaap:AdditionalPaidInCapitalMember2021-04-012021-06-300000045012us-gaap:TreasuryStockMember2021-04-012021-06-300000045012us-gaap:RetainedEarningsMember2021-04-012021-06-300000045012us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-04-012021-06-300000045012us-gaap:NoncontrollingInterestMember2021-04-012021-06-3000000450122021-04-012021-06-300000045012us-gaap:CommonStockMember2021-06-300000045012us-gaap:AdditionalPaidInCapitalMember2021-06-300000045012us-gaap:TreasuryStockMember2021-06-300000045012us-gaap:RetainedEarningsMember2021-06-300000045012us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-06-300000045012us-gaap:NoncontrollingInterestMember2021-06-3000000450122021-06-300000045012us-gaap:CommonStockMember2021-07-012021-09-300000045012us-gaap:AdditionalPaidInCapitalMember2021-07-012021-09-300000045012us-gaap:TreasuryStockMember2021-07-012021-09-300000045012us-gaap:RetainedEarningsMember2021-07-012021-09-300000045012us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-07-012021-09-300000045012us-gaap:NoncontrollingInterestMember2021-07-012021-09-300000045012us-gaap:CommonStockMember2021-09-300000045012us-gaap:AdditionalPaidInCapitalMember2021-09-300000045012us-gaap:TreasuryStockMember2021-09-300000045012us-gaap:RetainedEarningsMember2021-09-300000045012us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-09-300000045012us-gaap:NoncontrollingInterestMember2021-09-300000045012us-gaap:FinancialGuaranteeMember2022-09-300000045012us-gaap:EmployeeStockOptionMember2022-07-012022-09-300000045012us-gaap:EmployeeStockOptionMember2021-07-012021-09-300000045012us-gaap:EmployeeStockOptionMember2022-01-012022-09-300000045012us-gaap:EmployeeStockOptionMember2021-01-012021-09-300000045012us-gaap:FairValueInputsLevel1Memberus-gaap:EstimateOfFairValueFairValueDisclosureMember2022-09-300000045012us-gaap:EstimateOfFairValueFairValueDisclosureMemberus-gaap:FairValueInputsLevel2Member2022-09-300000045012us-gaap:EstimateOfFairValueFairValueDisclosureMember2022-09-300000045012us-gaap:CarryingReportedAmountFairValueDisclosureMember2022-09-300000045012us-gaap:FairValueInputsLevel1Memberus-gaap:EstimateOfFairValueFairValueDisclosureMember2021-12-310000045012us-gaap:EstimateOfFairValueFairValueDisclosureMemberus-gaap:FairValueInputsLevel2Member2021-12-310000045012us-gaap:EstimateOfFairValueFairValueDisclosureMember2021-12-310000045012us-gaap:CarryingReportedAmountFairValueDisclosureMember2021-12-310000045012us-gaap:EstimateOfFairValueFairValueDisclosureMemberus-gaap:FairValueInputsLevel3Member2022-09-300000045012us-gaap:EstimateOfFairValueFairValueDisclosureMemberus-gaap:FairValueInputsLevel3Member2021-12-31
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, 2022
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
(Exact name of registrant as specified in its charter)
| | | | | |
Delaware | 75-2677995 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
| | | | | | | | | | | |
3000 North Sam Houston Parkway East, | Houston, | Texas | 77032 |
(Address of principal executive offices) | (Zip Code) |
(281) 871-2699
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| | | | | | | | |
Title of each class | Trading Symbol | Name of each exchange on which registered |
Common Stock, par value $2.50 per share | HAL | New 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. ☒ Yes ☐ No
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). ☒ Yes ☐ No
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 Filer | ☒ | Accelerated Filer | ☐ |
| Non-accelerated Filer | ☐ | Smaller Reporting Company | ☐ |
| | | Emerging Growth 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. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
☐ Yes ☒ No
As of October 19, 2022, there were 908,046,777 shares of Halliburton Company common stock, $2.50 par value per share, outstanding.
HALLIBURTON COMPANY
Index
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 data | 2022 | 2021 | 2022 | 2021 |
Revenue: | | | | |
Services | $ | 3,923 | | $ | 2,802 | | $ | 10,682 | | $ | 7,948 | |
Product sales | 1,434 | | 1,058 | | 4,033 | | 3,070 | |
Total revenue | 5,357 | | 3,860 | | 14,715 | | 11,018 | |
Operating costs and expenses: | | | | |
Cost of services | 3,251 | | 2,467 | | 9,084 | | 7,088 | |
Cost of sales | 1,201 | | 889 | | 3,356 | | 2,523 | |
Impairments and other charges | — | | 12 | | 366 | | 12 | |
General and administrative | 59 | | 46 | | 178 | | 145 | |
Total operating costs and expenses | 4,511 | | 3,414 | | 12,984 | | 9,768 | |
Operating income | 846 | | 446 | | 1,731 | | 1,250 | |
Interest expense, net of interest income of $31, $15, $74, and $39 | (93) | | (116) | | (301) | | (361) | |
Loss on early extinguishment of debt | — | | — | | (42) | | — | |
Other, net | (48) | | (14) | | (120) | | (55) | |
Income before income taxes | 705 | | 316 | | 1,268 | | 834 | |
Income tax provision | (156) | | (76) | | (338) | | (193) | |
| | | | | |
| | | | | |
Net income | $ | 549 | | $ | 240 | | $ | 930 | | $ | 641 | |
Net income attributable to noncontrolling interest | (5) | | (4) | | (14) | | (8) | |
Net income attributable to company | $ | 544 | | $ | 236 | | $ | 916 | | $ | 633 | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
Basic and diluted net income per share | $ | 0.60 | | $ | 0.26 | | $ | 1.01 | | $ | 0.71 | |
| | | | | |
Basic weighted average common shares outstanding | 908 | | 894 | | 904 | | 891 | |
Diluted weighted average common shares outstanding | 910 | | 894 | | 907 | | 891 | |
| See notes to condensed consolidated financial statements. | | | | |
HAL Q3 2022 FORM 10-Q | 1
HALLIBURTON COMPANY
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
| | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30 | Nine Months Ended September 30 |
Millions of dollars | 2022 | 2021 | 2022 | 2021 |
Net income | $ | 549 | | $ | 240 | | $ | 930 | | $ | 641 | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
Other comprehensive income (loss), net of income taxes | (2) | | — | | 2 | | 2 | |
Comprehensive income | $ | 547 | | $ | 240 | | $ | 932 | | $ | 643 | |
Comprehensive income attributable to noncontrolling interest | (6) | | (4) | | (15) | | (8) | |
Comprehensive income attributable to company shareholders | $ | 541 | | $ | 236 | | $ | 917 | | $ | 635 | |
| See notes to condensed consolidated financial statements. | | | | |
HAL Q3 2022 FORM 10-Q | 2
HALLIBURTON COMPANY
Condensed Consolidated Balance Sheets
(Unaudited)
| | | | | | | | | | | |
Millions of dollars and shares except per share data | September 30, 2022 | December 31, 2021 |
Assets |
Current assets: | | |
Cash and equivalents | $ | 1,977 | | $ | 3,044 | |
Receivables (net of allowances for credit losses of $741 and $754) | 4,614 | | 3,666 | |
Inventories | 2,842 | | 2,361 | |
| | | |
| | | |
Other current assets | 978 | | 872 | |
Total current assets | 10,411 | | 9,943 | |
Property, plant, and equipment (net of accumulated depreciation of $11,503 and $11,442) | 4,203 | | 4,326 | |
Goodwill | 2,828 | | 2,843 | |
Deferred income taxes | 2,653 | | 2,695 | |
Operating lease right-of-use assets | 927 | | 934 | |
Other assets | 1,541 | | 1,580 | |
Total assets | $ | 22,563 | | $ | 22,321 | |
Liabilities and Shareholders’ Equity |
Current liabilities: | | |
Accounts payable | $ | 3,064 | | $ | 2,353 | |
Accrued employee compensation and benefits | 538 | | 493 | |
Taxes other than income | 293 | | 292 | |
Income tax payable | 242 | | 261 | |
Current portion of operating lease liabilities | 224 | | 240 | |
| | |
Other current liabilities | 607 | | 667 | |
Total current liabilities | 4,968 | | 4,306 | |
Long-term debt | 7,927 | | 9,127 | |
Operating lease liabilities | 803 | | 845 | |
Employee compensation and benefits | 473 | | 492 | |
Other liabilities | 747 | | 823 | |
Total liabilities | 14,918 | | 15,593 | |
Shareholders’ equity: | | |
Common stock, par value $2.50 per share (authorized 2,000 shares, issued 1,066 and 1,066 shares) | 2,664 | | 2,665 | |
Paid-in capital in excess of par value | 32 | | 32 | |
Accumulated other comprehensive loss | (181) | | (183) | |
Retained earnings | 10,024 | | 9,710 | |
Treasury stock, at cost (158 and 170 shares) | (4,918) | | (5,511) | |
Company shareholders’ equity | 7,621 | | 6,713 | |
Noncontrolling interest in consolidated subsidiaries | 24 | | 15 | |
Total shareholders’ equity | 7,645 | | 6,728 | |
Total liabilities and shareholders’ equity | $ | 22,563 | | $ | 22,321 | |
| See notes to condensed consolidated financial statements. | | |
HAL Q3 2022 FORM 10-Q | 3
HALLIBURTON COMPANY
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| | | | | | | | | | | | | |
| | Nine Months Ended September 30 | | |
Millions of dollars | 2022 | 2021 | | |
Cash flows from operating activities: | | | | |
Net income | $ | 930 | | $ | 641 | | | |
Adjustments to reconcile net income to cash flows from operating activities: | | | | |
Depreciation, depletion, and amortization | 704 | | 673 | | | |
Impairments and other charges | 366 | | 12 | | | |
| | | | |
| | | | |
| | | | | |
Changes in assets and liabilities: | | | | |
Receivables | (1,153) | | (364) | | | |
Inventories | (561) | | (3) | | | |
Accounts payable | 807 | | 448 | | | |
Other operating activities | (14) | | (178) | | | |
Total cash flows provided by operating activities | 1,079 | | 1,229 | | | |
Cash flows from investing activities: | | | | |
Capital expenditures | (661) | | (483) | | | |
| | | | |
Proceeds from sales of property, plant, and equipment | 157 | | 145 | | | |
| | | | |
Proceeds from a structured real estate transaction | — | | 87 | | | |
Other investing activities | (74) | | (57) | | | |
Total cash flows used in investing activities | (578) | | (308) | | | |
Cash flows from financing activities: | | | | |
Payments on long-term borrowings | (1,242) | | (696) | | | |
Dividends to shareholders | (327) | | (121) | | | |
| | | | |
| | | | |
Other financing activities | 114 | | 7 | | | |
Total cash flows used in financing activities | (1,455) | | (810) | | | |
Effect of exchange rate changes on cash | (113) | | (42) | | | |
Increase/(decrease) in cash and equivalents | (1,067) | | 69 | | | |
Cash and equivalents at beginning of period | 3,044 | | 2,563 | | | |
Cash and equivalents at end of period | $ | 1,977 | | $ | 2,632 | | | |
Supplemental disclosure of cash flow information: | | | | |
Cash payments during the period for: | | | | |
Interest | $ | 384 | | $ | 402 | | | |
Income taxes | $ | 276 | | $ | 157 | | | |
| See notes to condensed consolidated financial statements. | | | | |
HAL Q3 2022 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 2021 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, 2022 and the results of our operations for the three and nine months ended September 30, 2022 and 2021, and our cash flows for the nine months ended September 30, 2022 and 2021. 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, 2022 may not be indicative of results for the full year.
Note 2. Impairments and Other Charges
The following table presents various pre-tax charges we recorded during the three months ended September 30, 2021 and the nine months ended September 30, 2022 and 2021, respectively, which are reflected within "Impairments and other charges" on our condensed consolidated statements of operations.
| | | | | | | | | | | | |
| | Three Months Ended September 30 | Nine Months Ended September 30 |
Millions of dollars | | 2021 | 2022 | 2021 |
Catch-up depreciation | | $ | 36 | | $ | — | | $ | 36 | |
Severance costs | | 15 | | — | | 15 | |
Receivables | | — | | 202 | | — | |
Property, plant, and equipment, net | | — | | 100 | | — | |
Inventory | | — | | 70 | | — | |
Gain on real estate transaction | | (74) | | — | | (74) | |
Other | | 35 | | (6) | | 35 | |
Total impairments and other charges | | $ | 12 | | $ | 366 | | $ | 12 | |
During the third quarter of 2022, we completed the sale of our Russia operations to a Russia-based management team made up of former Halliburton employees. As a result, we no longer conduct operations in Russia. The Russia-based management team now owns and operates our former business and assets in Russia under the name BurService LLC, which is independent from Halliburton. There were no impairments and other charges recorded during the three months ended September 30, 2022 related to the Russian divestiture or otherwise.
HAL Q3 2022 FORM 10-Q | 5
| | | | | |
| Part I. Item 1 | Notes to Condensed Consolidated Financial Statements |
During the second quarter of 2022, due to Russia's invasion of Ukraine and resulting sanctions imposed on Russia, we made the decision to sell our Russian operations. We executed a non-binding letter of intent with the Russia based management team in May of 2022 for the divestiture of the Russian operations. The net assets to be sold (i.e., the disposal group) met the held for sale criteria and, as a result, in the second quarter of 2022 we wrote down the disposal group to fair value less costs to sell, resulting in a pre-tax charge of $344 million. The resulting value of the disposal group held for sale was $1. Of this pre-tax charge, approximately $131 million was attributable to our Completion and Production segment, approximately $178 million was attributable to our Drilling and Evaluation segment, and $35 million was selling costs and was attributable to Corporate and other.
During the first quarter of 2022, we recorded a pre-tax charge of $22 million primarily related to the write down of all our assets in Ukraine as part of our decision to cease our operations in Ukraine. Included in this charge is a $16 million allowance for credit loss as we do not expect to collect our receivables in Ukraine.
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.
The following table presents information on our business segments.
| | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30 | Nine Months Ended September 30 |
Millions of dollars | 2022 | 2021 | 2022 | 2021 |
Revenue: | | | | |
Completion and Production | $ | 3,136 | | $ | 2,136 | | $ | 8,400 | | $ | 6,054 | |
Drilling and Evaluation | 2,221 | | 1,724 | | 6,315 | | 4,964 | |
Total revenue | $ | 5,357 | | $ | 3,860 | | $ | 14,715 | | $ | 11,018 | |
Operating income: | | | | |
Completion and Production | $ | 583 | | $ | 322 | | $ | 1,378 | | $ | 891 | |
Drilling and Evaluation | 325 | | 186 | | 905 | | 532 | |
Total operations | 908 | | 508 | | 2,283 | | 1,423 | |
Corporate and other (a) | (62) | | (50) | | (186) | | (161) | |
Impairments and other charges (b) | — | | (12) | | (366) | | (12) | |
Total operating income | $ | 846 | | $ | 446 | | $ | 1,731 | | $ | 1,250 | |
Interest expense, net of interest income | (93) | | (116) | | (301) | | (361) | |
Loss on early extinguishment of debt (c) | — | | — | | (42) | | — | |
Other, net | (48) | | (14) | | (120) | | (55) | |
Income before income taxes | $ | 705 | | $ | 316 | | $ | 1,268 | | $ | 834 | |
| | | | | |
(a) | Includes certain expenses not attributable to a business segment, such as costs related to support functions and corporate executives, and also includes amortization expense associated with intangible assets recorded as a result of acquisitions. |
(b) | For the nine months ended September 30, 2022, the amount includes a $136 million charge attributable to Completions and Production, a $195 million charge attributable to Drilling and Evaluation, and a $35 million charge attributable to Corporate and other. For the three and nine months ended September 30, 2021, the amounts include a $42 million charge attributable to Completions and Production, a $9 million charge attributable to Drilling and Evaluation, and a $39 million net gain attributable to Corporate and other. |
(c) | For the nine months ended September 30, 2022, amount consists of a $42 million loss on the early redemption of senior notes. |
HAL Q3 2022 FORM 10-Q | 6
| | | | | |
| Part I. Item 1 | Notes to Condensed Consolidated Financial Statements |
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 historical payment experience with, and the financial condition of, our customers. 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, 45% and 40% of our consolidated revenue was from the United States for the nine months ended September 30, 2022 and 2021, respectively. No other country accounted for more than 10% of our revenue.
The following table presents information on our disaggregated revenue.
| | | | | | | | | | | | | | |
| Three Months Ended September 30 | Nine Months Ended September 30 |
Millions of dollars | 2022 | 2021 | 2022 | 2021 |
Revenue by segment: | | | | |
Completion and Production | $ | 3,136 | | $ | 2,136 | | $ | 8,400 | | $ | 6,054 | |
Drilling and Evaluation | 2,221 | | 1,724 | | 6,315 | | 4,964 | |
Total revenue | $ | 5,357 | | $ | 3,860 | | $ | 14,715 | | $ | 11,018 | |
Revenue by geographic region: | | | | |
North America | $ | 2,635 | | $ | 1,615 | | $ | 6,986 | | $ | 4,588 | |
Latin America | 841 | | 624 | | 2,252 | | 1,693 | |
Europe/Africa/CIS | 639 | | 676 | | 2,034 | | 1,989 | |
Middle East/Asia | 1,242 | | 945 | | 3,443 | | 2,748 | |
Total revenue | $ | 5,357 | | $ | 3,860 | | $ | 14,715 | | $ | 11,018 | |
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.
HAL Q3 2022 FORM 10-Q | 7
| | | | | |
| Part I. Item 1 | Notes to Condensed Consolidated Financial Statements |
Receivables
As of September 30, 2022, 38% of our net trade receivables were from customers in the United States and 11% were from customers in Mexico. As of December 31, 2021, 34% of our net trade receivables were from customers in the United States and 11% were from customers in Mexico. Receivables from our primary customer in Mexico accounted for approximately 9% and 10% of our total receivables as of September 30, 2022 and December 31, 2021, respectively. While we have experienced payment delays in Mexico, these amounts are not in dispute and we have not historically had, and we do not expect, any material write-offs due to collectability of receivables from this customer. No other country or single customer accounted for more than 10% of our net trade receivables at those dates.
Although the market environment has been improving, we continue to have risk of delayed customer payments and payment defaults associated with customer liquidity issues. 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 ratings, and production profile, as well as political and economic factors in countries of operations and other customer-specific factors.
Note 5. Inventories
Inventories consisted of the following:
| | | | | | | | |
Millions of dollars | September 30, 2022 | December 31, 2021 |
Finished products and parts | $ | 1,764 | | $ | 1,380 | |
Raw materials and supplies | 954 | | 890 | |
Work in process | 124 | | 91 | |
Total inventories | $ | 2,842 | | $ | 2,361 | |
Note 6. Debt
In February of 2022, we redeemed $600 million aggregate principal amount of our $1.0 billion 3.8% senior notes due in November 2025. The early redemption of the notes resulted in a loss of $42 million, consisting of premiums and unamortized expenses. The loss is included in "Loss on early extinguishment of debt" in our condensed consolidated statements of operations for the nine months ended September 30, 2022. We used cash on hand to fund the aggregate redemption price of the notes, which included the principal amount, the make-whole premium, and accrued interest, in the amount of $641 million. The remaining $400 million aggregate principal amount of the notes remains outstanding.
On April 27, 2022, we entered into a new $3.5 billion five-year revolving credit facility which replaced our $3.5 billion revolving credit facility established in March of 2019. The revolving credit facility is for general working capital purposes and expires on April 27, 2027. The full amount of the revolving credit facility was available as of September 30, 2022.
In September of 2022, we redeemed the entire $600 million outstanding principal amount of our 3.5% senior notes due in August of 2023 at par. We used cash on hand to fund the redemption amount of $603 million, which included the principal amount and accrued interest.
Note 7. Income Taxes
During the three months ended September 30, 2022, we recorded a total income tax provision of $156 million on a pre-tax income of $705 million, resulting in an effective tax rate of 22.2% for the quarter.
During the nine months ended September 30, 2022, we recorded a total income tax provision of $338 million on a pre-tax income of $1.3 billion, resulting in an effective tax rate of 26.6%. The effective tax rate was higher than the nine months ended September 30, 2021 primarily due to the impact of the decision to sell our Russian operations and a corresponding increase in the valuation allowance on foreign tax credits.
HAL Q3 2022 FORM 10-Q | 8
| | | | | |
| 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, 2022 and September 30, 2021, respectively:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Millions of dollars | Common Stock | Paid-in Capital in Excess of Par Value | Treasury Stock | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Noncontrolling Interest in Consolidated Subsidiaries | Total |
Balance at December 31, 2021 | $ | 2,665 | | $ | 32 | | $ | (5,511) | | $ | 9,710 | | $ | (183) | | $ | 15 | | $ | 6,728 | |
Comprehensive income (loss): | | | | | | | |
Net income | — | | — | | — | | 263 | | — | | 1 | | 264 | |
Other comprehensive income | — | | — | | — | | — | | 5 | | — | | 5 | |
Cash dividends ($0.12 per share) | — | | — | | — | | (108) | | — | | — | | (108) | |
| | | | | | | | |
Stock plans (a) | — | | (32) | | 261 | | (85) | | — | | — | | 144 | |
| | | | | | | |
Balance at March 31, 2022 | $ | 2,665 | | $ | — | | $ | (5,250) | | $ | 9,780 | | $ | (178) | | $ | 16 | | $ | 7,033 | |
Comprehensive income (loss): | | | | | | | |
Net income | — | | — | | — | | 109 | | — | | 8 | | 117 | |
Other comprehensive loss | — | | — | | — | | — | | (1) | | — | | (1) | |
Cash dividends ($0.12 per share) | — | | — | | — | | (109) | | — | | — | | (109) | |
Stock plans (a) | — | | — | | 277 | | (163) | | — | | — | | 114 | |
Other | — | | — | | — | | — | | — | | (6) | | (6) | |
Balance at June 30, 2022 | $ | 2,665 | | $ | — | | $ | (4,973) | | $ | 9,617 | | $ | (179) | | $ | 18 | | $ | 7,148 | |
Comprehensive income (loss): | | | | | | | |
Net income | — | | — | | — | | 544 | | — | | 5 | | 549 | |
Other comprehensive loss | — | | — | | — | | — | | (2) | | — | | (2) | |
Cash dividends ($0.12 per share) | — | | — | | — | | (110) | | — | | — | | (110) | |
| | | | | | | |
Stock plans (a) | (1) | | 32 | | 55 | | (27) | | — | | — | | 59 | |
Other | — | | — | | — | | — | | — | | 1 | | 1 | |
Balance at September 30, 2022 | $ | 2,664 | | $ | 32 | | $ | (4,918) | | $ | 10,024 | | $ | (181) | | $ | 24 | | $ | 7,645 | |
| | | | | | | | |
(a) | In the first, second, and third quarters of 2022, we issued common stock from treasury shares for stock options exercised, restricted stock grants, and our employee stock purchase plan. As a result, additional paid in capital was reduced to zero, which resulted in a reduction of retained earnings by $85 million, $163 million, and $27 million, respectively. Additional issuances from treasury shares could similarly impact additional paid in capital and retained earnings. |
| |
HAL Q3 2022 FORM 10-Q | 9
| | | | | |
| Part I. Item 1 | Notes to Condensed Consolidated Financial Statements |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
Millions of dollars | | Common Stock | Paid-in Capital in Excess of Par Value | Treasury Stock | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Noncontrolling Interest in Consolidated Subsidiaries | Total |
Balance at December 31, 2020 | | $ | 2,666 | | $ | — | | $ | (6,021) | | $ | 8,691 | | $ | (362) | | $ | 9 | | $ | 4,983 | |
Comprehensive income (loss): | | | | | | | | |
Net income | | — | | — | | — | | 170 | | — | | 1 | | 171 | |
| | | | | | | | |
Cash dividends ($0.045 per share) | | — | | — | | — | | (40) | | — | | — | | (40) | |
| | | | | | | | |
Stock plans (a) | | — | | 34 | | 144 | | (112) | | — | | — | | 66 | |
Other | | — | | — | | — | | — | | — | | (1) | | (1) | |
Balance at March 31, 2021 | | $ | 2,666 | | $ | 34 | | $ | (5,877) | | $ | 8,709 | | $ | (362) | | $ | 9 | | $ | 5,179 | |
Comprehensive income (loss): | | | | | | | | |
Net income | | — | | — | | — | | 227 | | — | | 3 | | 230 | |
Other comprehensive income | | — | | — | | — | | — | | 2 | | — | | 2 | |
Cash dividends ($0.045 per share) | | — | | — | | — | | (40) | | — | | — | | (40) | |
| | | | | | | | | |
Stock plans | | — | | (8) | | 69 | | — | | — | | — | | 61 | |
Other | | — | | — | | — | | — | | — | | (3) | | (3) | |
Balance at June 30, 2021 | | $ | 2,666 | | $ | 26 | | $ | (5,808) | | $ | 8,896 | | $ | (360) | | $ | 9 | | $ | 5,429 | |
Comprehensive income (loss): | | | | | | | | |
Net income | | — | | — | | — | | 236 | | — | | 4 | | 240 | |
| | | | | | | | |
Cash dividends ($0.045 per share) | | — | | — | | — | | (41) | | — | | — | | (41) | |
| | | | | | | | | |
Stock plans (a) | | — | | (2) | | 232 | | (164) | | — | | — | | 66 | |
Other | | — | | — | | — | | — | | — | | (1) | | (1) | |
Balance at September 30, 2021 | | $ | 2,666 | | $ | 24 | | $ | (5,576) | | $ | 8,927 | | $ | (360) | | $ | 12 | | $ | 5,693 | |
| | | | | | | | | |
(a) | In the first and third quarters of 2021, we issued common stock from treasury shares for stock options exercised, restricted stock grants, and our employee stock purchase plan. As a result, additional paid in capital was reduced to zero, which resulted in a reduction of retained earnings by $112 million and $164 million, respectively. Additional issuances from treasury shares could similarly impact additional paid in capital and retained earnings. |
Our Board of Directors has authorized a program to repurchase our common stock from time to time. There were no repurchases made under the program during the three and nine months ended September 30, 2022. Approximately $5.1 billion remained authorized for repurchases as of September 30, 2022. From the inception of this program in February of 2006 through September 30, 2022, we repurchased approximately 224 million shares of our common stock for a total cost of approximately $9.0 billion.
Accumulated other comprehensive loss consisted of the following:
| | | | | | | | | | | |
Millions of dollars | September 30, 2022 | December 31, 2021 |
Cumulative translation adjustments | $ | (87) | | $ | (85) | |
Defined benefit and other postretirement liability adjustments | (49) | | (47) | |
| | | |
Other | (45) | | (51) | |
Total accumulated other comprehensive loss | $ | (181) | | $ | (183) | |
| | | |
| |
Note 9. Commitments and Contingencies
The Company is subject to various legal or governmental proceedings, claims or investigations, including personal injury, property damage, environmental, intellectual property, commercial, tax, and other matters arising in the ordinary course of business, the resolution of which, in the opinion of management, will not have a material adverse effect on our consolidated results of operations or consolidated financial position. There is inherent risk in any legal or governmental proceeding, claim or investigation, and no assurance can be given as to the outcome of these proceedings.
HAL Q3 2022 FORM 10-Q | 10
| | | | | |
| Part I. Item 1 | Notes to Condensed Consolidated Financial Statements |
Guarantee arrangements
In the normal course of business, we have in place agreements with financial institutions under which approximately $2.0 billion of letters of credit, bank guarantees, or surety bonds were outstanding as of September 30, 2022. Some of the outstanding letters of credit have triggering events that would entitle a bank to require cash collateralization. None of these off-balance sheet arrangements either has, or is likely to have, a material effect on our condensed consolidated financial statements.
Note 10. Income per Share
Basic income or loss per share is based on the weighted average number of common shares outstanding during the period. Diluted income per share includes additional common shares that would have been outstanding if potential common shares with a dilutive effect had been issued. Antidilutive securities represent potentially dilutive securities which are excluded from the computation of diluted income or loss per share as their impact was antidilutive.
A reconciliation of the number of shares used for the basic and diluted income per share computations is as follows:
| | | | | | | | | | | | | | |
| Three Months Ended September 30 | Nine Months Ended September 30 |
Millions of shares | 2022 | 2021 | 2022 | 2021 |
Basic weighted average common shares outstanding | 908 | | 894 | | 904 | | 891 | |
Dilutive effect of awards granted under our stock incentive plans | 2 | | — | | 3 | | — | |
Diluted weighted average common shares outstanding | 910 | | 894 | | 907 | | 891 | |
| | | | |
Antidilutive shares: | | | | |
Options with exercise price greater than the average market price | 15 | | 21 | | 15 | | 22 | |
| | | | |
Total antidilutive shares | 15 | | 21 | | 15 | | 22 | |
Note 11. Fair Value of Financial Instruments
The carrying amount of cash and equivalents, receivables, and accounts payable, as reflected in the condensed consolidated balance sheets, approximates fair value due to the short maturities of these instruments.
The carrying amount and fair value of our total debt, including short-term borrowings and current maturities of long-term debt, is as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| September 30, 2022 | | December 31, 2021 |
Millions of dollars | Level 1 | Level 2 | Total fair value | Carrying value | | Level 1 | Level 2 | Total fair value | Carrying value |
Total debt | $ | 6,585 | | $ | 507 | | $ | 7,092 | | $ | 7,927 | | | $ | 10,518 | | $ | 527 | | $ | 11,045 | | $ | 9,138 | |
In the first nine months of 2022, the fair value of our debt decreased as a result of the early redemption of senior notes and higher debt yields. The carrying value of our debt decreased as a result of the early redemption of senior notes. See Note 6 for further information.
Our debt categorized within level 1 on the fair value hierarchy is calculated using quoted prices in active markets for identical liabilities with transactions occurring on the last two days of period-end. Our debt categorized within level 2 on the fair value hierarchy is calculated using significant observable inputs for similar liabilities where estimated values are determined from observable data points on our other bonds and on other similarly rated corporate debt or from observable data points of transactions occurring prior to two days from period-end and adjusting for changes in market conditions. Differences between the periods presented in our level 1 and level 2 classification of our long-term debt relate to the timing of when third party market transactions on our debt are executed. We have no debt categorized within level 3 on the fair value hierarchy.
HAL Q3 2022 FORM 10-Q | 11
| | | | | | | | |
| | Part I. Item 2 | Executive Overview |
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) should be read in conjunction with the condensed consolidated financial statements included in "Item 1. Financial Statements" contained herein.
EXECUTIVE OVERVIEW
Organization
We are one of the world's largest providers of products and services to the energy industry. We help our customers maximize value 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 throughout the life of the asset. Activity levels within our operations are significantly impacted by spending on upstream exploration, development, and production programs by major, national, and independent oil and natural gas companies. We report our results under two segments, the Completion and Production segment and the Drilling and Evaluation segment.
•Completion and Production delivers cementing, stimulation, intervention, pressure control, artificial lift, and completion products and services. The segment consists of Production Enhancement, Cementing, Completion Tools, Production Solutions, Artificial Lift, and Pipeline and Process Services.
•Drilling and Evaluation provides field and reservoir modeling, drilling, fluids and specialty chemicals, evaluation and precise wellbore placement solutions that enable customers to model, measure, drill, and optimize their well construction activities. The segment consists of Baroid, Sperry Drilling, Wireline and Perforating, Drill Bits and Services, Landmark Software and Services, Testing and Subsea, and Project Management.
The business operations of our segments are organized around four primary geographic regions: North America, Latin America, Europe/Africa/CIS, and Middle East/Asia. We have manufacturing operations in various locations, the most significant of which are in the United States, Malaysia, Singapore, and the United Kingdom. With more than 40,000 employees, we operate in more than 70 countries around the world, and our corporate headquarters is in Houston, Texas.
Our value proposition is to collaborate and engineer solutions to maximize asset value for our customers. We work to achieve strong cash flows and returns for our shareholders by delivering technology and services that improve efficiency, increase recovery, and maximize production for our customers. Our strategic priorities are to:
-deliver profitable growth in our international business;
-maximize value and cash flows in our North America business;
-accelerate the deployment and integration of digitalization and automation technologies that create differentiation, both internally and for our customers;
-drive increased capital efficiencies in all parts of our business; and
-actively participate in advancing a sustainable energy future.
The following charts depict revenue split between our two operating segments and our four primary geographic regions for the quarter ended September 30, 2022.
HAL Q3 2022 FORM 10-Q | 12
| | | | | | | | |
| | Part I. Item 2 | Executive Overview |
Market conditions, COVID-19 pandemic, and Russia/Ukraine Conflict
Since early 2020, world-wide oil supply and demand imbalances and related volatility of oil and natural gas prices have resulted in dramatic fluctuations in global markets including oil and gas markets. These imbalances and volatility continue to be impacted by efforts to contain the COVID-19 pandemic, including current lockdowns and threats of future lockdowns in certain countries, inflationary pressures and efforts to combat it, threats of recession, changes to OPEC+ production levels, supply chain shortages, and geopolitical conflicts including Russia’s invasion of and continued war with Ukraine. West Texas Intermediate (WTI) averaged approximately $93 per barrel during the third quarter of 2022. The U.S. land average rig count continues to be below pre-pandemic levels, but improved 7% in the third quarter of 2022 compared to the second quarter of 2022. The Brent crude oil price averaged over $101 per barrel during the third quarter of 2022 and the international average rig count improved 5% as compared to the second quarter of 2022. Globally, we are being impacted by supply chain shortages as the post-pandemic recovery stressed both the supply of raw materials and transportation logistics. We monitor market trends and work to mitigate cost impacts through economies of scale in global procurement, technology modifications, and efficient sourcing practices. Also, while we have been impacted by inflationary cost increases, primarily related to frac sand, chemicals, cement, and logistics costs, we generally try to pass much of those increases on to our customers and we believe we have effective solutions that work to minimize the operational impact.
As a result of Russia's invasion of Ukraine, governments in the European Union, the United States, the United Kingdom, Switzerland, and other countries enacted new sanctions against Russia and Russian interests. In order to comply with these sanctions, we ceased pursuing future business in Russia and began to wind down our remaining operations in Russia in March of 2022. During the second quarter of 2022, we made the decision to sell our Russian operations. We executed a non-binding letter of intent with our Russia based management team in May of 2022 for the divestiture of the Russian operations. The net assets to be sold (i.e., the disposal group) met the held for sale criteria as of June 30, 2022 and as a result, we wrote down the disposal group to fair value less costs to sell, resulting in a pre-tax charge of $344 million during the second quarter of 2022. The divestiture was completed in the third quarter of 2022. See Note 2 to our condensed consolidated financial statements for additional information.
Financial results
The following graph illustrates our revenue and operating margins for each operating segment for the third quarter of 2021 and 2022.