10-K: Halliburton's 2024 Performance: International Growth Offsets North America Decline, Invests in Sustainable Energy Future

Halliburton's 2024 revenue remained flat, with international growth compensating for a decrease in North America, while the company advanced its digital capabilities and shareholder returns.

Summary

• Halliburton's 2024 total revenue was $22.9 billion, remaining flat compared to 2023.
• International revenue increased by 6%, while North America revenue decreased by 8%.
• Completion and Production operating margins were 20%, and Drilling and Evaluation operating margins were 16%.
• The company repurchased $100 million of debt and returned $1.6 billion to shareholders through buybacks and dividends.
• Capital expenditures remained at 6% of revenue, aligning with the target range of 5%-6%.
• Halliburton expanded Halliburton Labs to 38 participant and alumni organizations.
• The company aims to return over 50% of annual free cash flow to shareholders in 2025.
• Halliburton is migrating to SAP S4, with the total project investment estimated to increase between $20 million and $30 million above the initial $250 million forecast.
• The company expects to spend approximately $100 million on the SAP S4 project in 2025.

Sentiment

Score: 7

Explanation: The sentiment is moderately positive. While revenue was flat, international growth and shareholder returns are positive indicators. The cybersecurity incident and increased SAP S4 project costs are negative factors, but the company's overall strategy and future outlook are promising.

Positives

• International revenue increased by 6% in 2024.
• The company returned $1.6 billion to shareholders through buybacks and dividends.
• Capital expenditures were maintained at 6% of revenue.
• Halliburton Labs expanded to 38 participant and alumni organizations, supporting sustainable energy initiatives.
• The company aims to return over 50% of annual free cash flow to shareholders in 2025.
• Halliburton's total recordable incident rates were 0.24 and 0.25 (incidents per 200,000 hours worked) for the years ended December 31, 2024 and December 31, 2023, respectively.

Negatives

• North America revenue decreased by 8% in 2024.
• Total company operating income decreased from $4.1 billion in 2023 to $3.8 billion in 2024.
• The company incurred $35 million in expenses related to a cybersecurity incident.
• The total project investment for the SAP S4 migration is estimated to increase between $20 million and $30 million above the initial $250 million forecast.

Risks

• Fluctuations in oil and natural gas prices can affect customer activity and demand for Halliburton's services.
• Reductions in customer capital spending could reduce demand for Halliburton's services and products.
• Liabilities arising from products and services could have a material adverse effect on the business.
• Severe weather could materially and adversely affect the business.
• Failure to protect proprietary information and intellectual property could affect the competitive position.
• Constraints in the supply of raw materials and electric power could have a material adverse effect on the business.
• The company is subject to cyberattacks that could have a material adverse effect on the business.
• Operations are subject to political and economic instability and risk of government actions.
• The adoption of any future federal, state, or local laws or implementing regulations imposing reporting obligations on, or limiting or banning, the hydraulic fracturing process could make it more difficult to complete natural gas and oil wells and could have a material adverse effect on our business, consolidated results of operations, and consolidated financial condition.

Future Outlook

Halliburton anticipates a rise in global oil and natural gas demand and expects increased investment in existing and new sources of oil and natural gas production. Internationally, the company expects flat revenues in 2025 as compared to 2024, with growth in most markets offset by activity reduction in Mexico. North America revenue is expected to decrease in 2025 low to midsingle digits from 2024 levels.

Management Comments

• The International Energy Agency anticipates both oil and natural gas demand to continue growing through 2030 underscoring the continued importance of both resources in the global energy mix.
• We believe that despite these changes, increased investment in existing and new sources of oil and natural gas production is needed to address the increased demand.
• We expect natural gas demand should increase over time by the burgeoning number of data centers, the rise of artificial intelligence, and the electrification of transportation and other sectors of the economy.

Industry Context

The announcement reflects the ongoing trends in the energy industry, including the shift towards international markets, the focus on capital discipline, and the increasing importance of sustainable energy solutions. The company's focus on digital technologies and automation aligns with the industry's broader efforts to improve efficiency and reduce costs.

Comparison to Industry Standards

• Halliburton's capital expenditure target of 5%-6% of revenue is in line with industry standards for maintaining capital discipline.
• Schlumberger and Baker Hughes, two of Halliburton's main competitors, also focus on international growth and digital transformation.
• The company's commitment to returning over 50% of free cash flow to shareholders is a competitive move to attract investors.
• Halliburton's expansion of Halliburton Labs mirrors similar initiatives by other energy companies to invest in and support clean tech startups.

Legal Proceedings

• The company is subject to various legal and investigation matters arising in the ordinary course of business.
• The company received a Notice of Proposed Adjustment (NOPA) from the IRS covering its 2016 US tax return, proposing an adjustment to reclassify approximately 95% of the $3.5 billion termination fee paid to Baker Hughes in 2016 from an ordinary expense deduction to a capital loss.

Stakeholder Impact

• Shareholders will benefit from the company's commitment to returning over 50% of annual free cash flow through dividends and share repurchases.
• Employees will be affected by the company's efforts to attract and retain talent through a safe and inclusive work environment and competitive benefits.
• Customers will benefit from the company's focus on delivering technology and services that improve efficiency, increase recovery, and maximize production.
• The company's sustainability initiatives will impact the environment and communities where it operates.

Next Steps

• Increase international growth in directional drilling, unconventionals, well intervention, and artificial lift businesses.
• Maximize value in North America by utilizing the Zeus electric fracturing platform and iCruise rotary steerable systems.
• Continue to drive differentiation and efficiencies through the deployment of digital and automation technologies.
• Maintain capital expenditures at approximately 6% of revenue.
• Return over 50% of annual free cash flow to shareholders through dividends and share repurchases.
• Continue to develop technologies and solutions to help lower customers' and Halliburton's emissions intensity, participate in carbon capture, utilization, and storage, and geothermal projects globally, and support Halliburton Labs early-stage company participants.

Key Dates

Keywords

Halliburton, revenue, oilfield services, capital expenditures, shareholder returns, international growth, North America, sustainability, energy mix transition, hydraulic fracturing, drilling, production, operating income, cybersecurity, SAP S4