01—Abstract
Summary
Summary of the 10-K filed February 7, 2017. Cited figures are marked; the original filing is the authoritative source.
Halliburton Company's 2016 annual report reflects the sharpest industry downturn the company describes in its history.
Revenue fell to $15.9 billiona in 2016 from $23.6 billion in 2015, a 33% decline, and the company reported an operating loss of $6.8 billion, compared with an operating loss of $165 million in 2015. Results were driven by global activity and pricing reductions and by $3.4 billion of impairments and other charges, along with $4.1 billion of Baker Hughes related costs, which include a $3.5 billion merger termination fee paid after the April 30, 2016 mutual termination of the Baker Hughes merger agreement. Cash and equivalents declined to $4.0 billion at December 31, 2016 from $10.1 billion a year earlier, and cash flows from operating activities were negative $1.7 billion for 2016.
Management points to a working capital improvement of a net $1.2 billionb, a $513 million series of U.S. tax refunds, and a $3.0 billion undrawn revolving credit facility as sources of liquidity. Capital expenditures were cut to $798 million, and the company plans to increase spending to approximately $1.0 billion in 2017. Long-term debt was $12.4 billion, and both Standard & Poor's and Moody's downgraded the company's long-term ratings during 2016.
Management says North America returned to operating profitability in the fourth quarter of 2016 after operating losses in the first three quarters, and that the North America rig count rose 23%c from the third quarter. Management expects international revenue and margins to remain under pressure through 2017, with an inflection expected in the latter part of 2017. Key risks disclosed include the outcome of the Macondo well incident settlement, which remains subject to court approval, ongoing exposure to Venezuela receivables and operations, and continued investigations by the DOJ and SEC into certain Angola and Iraq matters.
02—Key points
Key Highlights
- Revenue of $15.9 billion in 2016, down 33% from $23.6 billion in 2015; Completion and Production revenue was $8.9 billion and Drilling and Evaluation revenue was $7.0 billion.
- Operating loss of $6.8 billion in 2016 versus an operating loss of $165 million in 2015, including $3.4 billion of impairments and other charges and $4.1 billion of Baker Hughes related costs.
- Net loss attributable to company of $5.8 billion, or $6.69 per diluted share, compared with a net loss of $671 million, or $0.79 per share, in 2015.
- Baker Hughes merger terminated April 30, 2016; the company paid a $3.5 billion termination fee and mandatorily redeemed $2.5 billion of senior notes.
- Cash and equivalents of $4.0 billion at year-end 2016 versus $10.1 billion at year-end 2015; operating cash flow was negative $1.7 billion for 2016.
- Capital expenditures reduced to $798 million in 2016 and planned at approximately $1.0 billion for 2017; quarterly dividend held at $0.18 per share.
- Headcount reduced by approximately 14,000 in 2016 to about 50,000 employees at December 31, 2016, and the company reported a $3.5 billion revolving credit facility availability of $3.0 billion as of year-end.
03—One dollar
Follow one dollar
For each $1.00 of revenue in FY2016, Halliburton lost $0.36.
- Revenue$15.89B100.0%
- Cost of revenue−$3.77B23.7%
- Gross profit$12.12B76.3%
- Operating costs−$18.89B118.9%
- Operating income−$6.77B42.6%
- Interest, other & tax$1.01B6.3%
- Net income−$5.76B36.3%
04—Financials
Financial Highlights
Figures from 10-KFY2016filed February 7, 2017Financial Statements
FY2016 against FY2015
| Line item | FY2016FY2015 | Change |
|---|---|---|
| Revenue | $15.89B$23.63B | −32.8% |
| Cost of Revenue | $3.77B$5.10B | −26.1% |
| Gross Profit | $12.12B$18.53B | −34.6% |
| R&D Expenses | $329.00M$487.00M | −32.4% |
| Operating Expenses | $22.66B$23.80B | −4.8% |
| Operating Income | -$6.77B-$165.00M | −4003.0% |
| Net Income | -$5.76B-$671.00M | −758.9% |
| EPS (Basic) | $-6.69$-0.79 | −746.8% |
| EPS (Diluted) | $-6.69$-0.79 | −746.8% |
| Shares Outstanding (Basic) | 861.00M853.00M | +0.9% |
| Shares Outstanding (Diluted) | 861.00M853.00M | +0.9% |
05—Questions
Frequently Asked Questions
Why did Halliburton report such a large loss in 2016?
The company attributes the loss to widespread pricing pressure and activity reductions globally, $3.4 billion of impairments and other charges, and $4.1 billion of Baker Hughes related costs, which include the $3.5 billion termination fee paid after the merger was terminated on April 30, 2016.
How is Halliburton managing its liquidity?
The company cites $4.0 billion of cash and equivalents, $92 million of fixed income investments, and $3.0 billion of available committed bank credit under its revolving credit facility. It also reports a net $1.2 billion improvement in working capital in 2016 and $513 million of U.S. tax refunds received in the second half of the year.
What is the outlook for North America and international markets?
Management says North America returned to operating profitability in the fourth quarter of 2016 and expects the rig count to keep improving in the first half of 2017. For international markets, it expects revenue and margins to remain under pressure during 2017, with an inflection anticipated in the latter part of 2017.
What are the main legal and financial exposures disclosed?
The filing discloses a total Macondo-related loss contingency liability of $413 million at December 31, 2016, of which $369 million is expected to be paid in the first quarter of 2017, subject to court approval of the MDL Settlement. It also discloses ongoing DOJ and SEC investigations related to Angola and Iraq, and a $54 million charge for an agreement in principle to settle a securities class action.
06—Continue