01—Abstract
Summary
Summary of the 10-K filed February 17, 2011. Cited figures are marked; the original filing is the authoritative source.
Halliburton Company's 2010 annual report (filed February 17, 2011) shows a strong rebound year.
Total revenue rose to $17.97 billiona from $14.68 billion in 2009, and operating income rose to $3.01 billion from $1.99 billion. Net income attributable to the company was $1.84 billion, or $2.01 per diluted share. Growth was driven mainly by higher North American drilling activity, with North America revenue up 56%, and by pricing improvements in North America.
Revenue outside North America was flat, and operating income there declined on competitive pricing and an unfavorable activity mix. The filing's dominant risk is the Macondo well incident involving the Deepwater Horizon rig. The company has been named in more than 330 complaints and at least 28 personal injury lawsuits, and it has not accrued any amounts because it does not believe a loss is probable.
It states it cannot estimate the full impact. The company also cites indemnification from BP Exploration, which BP has reserved its rights on, and a $600 millionb general liability insurance program. Other items include the KBR-related Barracuda-Caratinga arbitration, where Petrobras seeks $220 million plus interest, and the TSKJ/FCPA matters, including a $33 million payment to Nigeria's Federal Government plus $2 million in fees.
Liquidity remained solid at year-end, with cash and equivalents of $1.40 billionc, $653 million in marketable securities, an undrawn $1.2 billion revolving credit facility, and long-term debt of $3.82 billion. Operating cash flow was $2.21 billion and capital expenditures were $2.07 billion. The company expects 2011 capital spending of approximately $3.0 billion and quarterly dividends of about $80 million.
02—Key points
Key Highlights
- Revenue of $17.97 billion in 2010, up from $14.68 billion in 2009, with the Completion and Production segment up 35% and the Drilling and Evaluation segment up 10%.
- Operating income of $3.01 billion, up 51% from $1.99 billion in 2009, driven by North American pricing and demand.
- Net income attributable to the company of $1.84 billion, or $2.01 per diluted share, compared with $1.27 per diluted share in 2009.
- Macondo well incident: more than 330 complaints and at least 28 personal injury lawsuits named against the company, with no amount accrued because a loss is not considered probable.
- Cash and equivalents of $1.40 billion, $653 million in marketable securities, and an undrawn $1.2 billion revolving credit facility at year-end.
- Long-term debt of $3.82 billion, with credit ratings of A2 (Moody's) and A (S&P).
- 2011 capital spending expected at approximately $3.0 billion, with 2010 capital expenditures of $2.07 billion.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2010, Halliburton kept $0.10.
- Revenue$17.97B100.0%
- Cost of revenue−$3.51B19.5%
- Gross profit$14.46B80.5%
- Operating costs−$11.46B63.7%
- Operating income$3.01B16.7%
- Interest, other & tax−$1.17B6.5%
- Net income$1.83B10.2%
Where FY2010 revenue went
$17.97B- Other operating costs: $11.09B, 62% of revenue
- Cost of revenue: $3.51B, 20% of revenue
- Net income: $1.83B, 10% of revenue
- R&D: $366.0M, 2.0% of revenue
- Interest, other & tax: $1.17B, 6.5% of revenue
Kept 10% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2010filed February 17, 2011Financial Statements
FY2010 against FY2009
| Line item | FY2010FY2009 | Change |
|---|---|---|
| Revenue | $17.97B$14.68B | +22.5% |
| Cost of Revenue | $3.51B$3.25B | +7.8% |
| Gross Profit | $14.46B$11.42B | +26.7% |
| R&D Expenses | $366.00M$325.00M | +12.6% |
| Operating Expenses | $14.96B$12.68B | +18.0% |
| Operating Income | $3.01B$1.99B | +50.9% |
| Net Income | $1.83B$1.15B | +60.3% |
| EPS (Basic) | $2.02$1.27 | +59.1% |
| EPS (Diluted) | $2.01$1.27 | +58.3% |
| Shares Outstanding (Basic) | 908.00M900.00M | +0.9% |
| Shares Outstanding (Diluted) | 911.00M902.00M | +1.0% |
05—Questions
Frequently Asked Questions
What drove Halliburton's improved 2010 results?
Revenue rose 22% to $17.97 billion, mainly from higher rig count and demand in North America. North America revenue rose 56%, with an approximate 45% increase in average North America rig count, and pricing improved in North America. Operating income rose 51% to $3.01 billion.
How significant is the Macondo well exposure?
The company has been named in more than 330 complaints and at least 28 personal injury lawsuits. It has not accrued any amounts because it does not believe a loss is probable, and it states it is unable to estimate the full impact. It expects BP Exploration to indemnify it under their contract, though BP has reserved its rights, and it carries a $600 million general liability insurance program.
Is Halliburton's balance sheet under pressure?
The filing describes liquidity as sufficient. Year-end cash and equivalents were $1.40 billion, with $653 million in marketable securities and a $1.2 billion undrawn revolving credit facility. Long-term debt was $3.82 billion, and the company states it has no financial covenants or material adverse change provisions in its bank agreements.
What is the outlook for 2011?
The company expects capital spending of approximately $3.0 billion in 2011, primarily for production enhancement, drilling services, wireline and perforating, completion tools, and cementing. It believes North America revenues and margins are likely sustainable through 2011, but it expects Gulf of Mexico recovery to remain uncertain through the first half, and perhaps the full year, of 2011.
What are the company's shareholder returns?
The company paid $0.09 per share in quarterly dividends in each quarter of 2010, totaling $0.36 per share, and $327 million in dividends. It expects quarterly dividends of approximately $80 million during 2011, subject to Board approval. About $1.7 billion remained available under its share repurchase authorization.
06—Continue