01—Abstract
Summary
Summary of the 10-K filed February 11, 2013. Cited figures are marked; the original filing is the authoritative source.
Halliburton Company's 2012 Form 10-K reports revenue of $28.5 billiona and operating income of $4.2 billion, with operating income down $578 million from 2011 as higher guar gum costs, North America pricing pressure, and a $300 million pre-tax loss contingency for the Macondo well incident weighed on results.
Revenue rose $3.7 billionb, or 15%, on higher drilling activity in North American oil and liquids-rich basins and broad international growth. The company ended 2012 with $2.5 billion in cash and equivalents, $398 million in fixed income securities, and an undrawn $2.0 billion revolving credit facility, and it expects 2013 capital spending of approximately $3.0 billion, with less directed toward North America. The central risk for investors is litigation and investigation exposure from the Macondo well incident.
The company is named in more than 400 complaints, faces a DOJ criminal investigation and BSEE incidents of noncompliance, and says it cannot fully estimate the impact. Management also flagged pricing pressure in North American hydraulic fracturing, the Venezuelan receivables exposure ($491 millionc, about 9% of gross trade receivables), and a $219 million payment in January 2013 under the Barracuda-Caratinga guarantee. Management believes 2013 capital expenditures, working capital and dividends can be funded from operating cash flow.
The company reported that it paid $333 milliond in dividends in 2012 at $0.36 per share and retained about $1.7 billion of authorization under its share repurchase program, with no repurchases under the program in 2012. Long-term debt was $4.82 billion at year-end, and credit ratings were A2 from Moody's and A from Standard & Poor's.
02—Key points
Key Highlights
- Revenue of $28.5 billion in 2012, up $3.7 billion (15%) from 2011, with Completion and Production at $17.4 billion and Drilling and Evaluation at $11.1 billion.
- Operating income of $4.2 billion, down $578 million (12%) from 2011, reflecting guar gum cost increases, North America pricing pressure, and a $300 million pre-tax Macondo loss contingency.
- Macondo well incident remains the dominant risk: more than 400 complaints, a DOJ criminal investigation, BSEE incidents of noncompliance, and a Limitation Action trial beginning February 25, 2013; the company says it cannot fully estimate the impact.
- Net income attributable to company of $2.6 billion, or $2.84 diluted earnings per share, compared with $2.8 billion and $3.08 in 2011.
- Cash and equivalents of $2.5 billion plus $398 million in fixed income securities; $2.0 billion revolving credit facility fully available at year-end.
- Venezuela exposure: $491 million of trade receivables (about 9% of gross trade receivables) with delayed payments, and a February 2013 currency devaluation expected to cause a roughly $30 million foreign currency loss in Q1 2013.
- 2013 capital spending expected at approximately $3.0 billion, with less directed toward North America; quarterly dividends of $0.09 per share remain subject to Board approval.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2012, Halliburton kept $0.09.
- Revenue$28.50B100.0%
- Cost of revenue−$5.32B18.7%
- Gross profit$23.18B81.3%
- Operating costs−$19.02B66.7%
- Operating income$4.16B14.6%
- Interest, other & tax−$1.52B5.3%
- Net income$2.63B9.2%
Where FY2012 revenue went
$28.50B- Other operating costs: $18.56B, 65% of revenue
- Cost of revenue: $5.32B, 19% of revenue
- Net income: $2.63B, 9.2% of revenue
- R&D: $460.0M, 1.6% of revenue
- Interest, other & tax: $1.52B, 5.3% of revenue
Kept 9.2% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2012filed February 11, 2013Financial Statements
FY2012 against FY2011
| Line item | FY2012FY2011 | Change |
|---|---|---|
| Revenue | $28.50B$24.83B | +14.8% |
| Cost of Revenue | $5.32B$4.38B | +21.5% |
| Gross Profit | $23.18B$20.45B | +13.4% |
| R&D Expenses | $460.00M$401.00M | +14.7% |
| Operating Expenses | $24.34B$20.09B | +21.2% |
| Operating Income | $4.16B$4.74B | −12.2% |
| Net Income | $2.63B$2.84B | −7.2% |
| EPS (Basic) | $2.85$3.09 | −7.8% |
| EPS (Diluted) | $2.84$3.08 | −7.8% |
| Shares Outstanding (Basic) | 926.00M918.00M | +0.9% |
| Shares Outstanding (Diluted) | 928.00M922.00M | +0.7% |
05—Questions
Frequently Asked Questions
What drove the decline in operating income in 2012?
Operating income fell $578 million, or 12%, to $4.2 billion. The filing attributes the decline mainly to higher costs, particularly of guar gum, pricing pressure for production enhancement services in North America, and a $300 million pre-tax loss contingency for the Macondo well incident recorded in Corporate and other expenses.
How large is the Macondo-related exposure and what is the company's current accrual?
The company recorded a $300 million liability in the first quarter of 2012 for a probable loss contingency tied to the MDL. It says additional reasonably possible loss contingencies exist that it cannot estimate, and that it cannot predict the outcome of the many lawsuits and investigations. It also notes BP has recognized more than $40 billion in pre-tax charges related to the incident.
What is the company's liquidity position and how will it fund 2013 plans?
At December 31, 2012, the company had $2.5 billion of cash and equivalents, $398 million of fixed income securities, and the full $2.0 billion revolving credit facility available. Management believes 2013 capital expenditures, working capital investments and dividends can be fully funded through cash from operations, and it notes no financial covenants or material adverse change provisions in its bank agreements.
How much revenue comes from the United States and how exposed is the company to Venezuela?
In 2012, 53% of consolidated revenue came from the United States, and no other country exceeded 10%. Total net investment in Venezuela was about $328 million, and outstanding trade receivables there were $491 million, with the company continuing to see payment delays from its primary Venezuelan customer.
What capital return activity occurred in 2012?
The company paid $333 million in dividends at $0.36 per share for the year and made no repurchases under its share repurchase program in 2012. About $1.7 billion remained authorized for future repurchases, and the company expects to pay quarterly dividends of approximately $83 million in 2013, subject to Board approval.
06—Continue