01—Abstract
Summary
Summary of the 10-K filed February 9, 2018. Cited figures are marked; the original filing is the authoritative source.
Halliburton Company's 2017 Form 10-K reports a sharp recovery in results.
Total revenue was $20.6 billiona in 2017, up from $15.9 billion in 2016, with Completion and Production revenue of $13.1 billion (up 47%) and Drilling and Evaluation revenue of $7.5 billion (up 8%). Operating income was $1.4 billion, compared with an operating loss of $6.8 billion in 2016, which had included a $3.5 billion termination fee and $3.4 billion of impairments and other charges. The company still posted a net loss of $468 million, or $0.53 per share, because of a $1.1 billion income tax provision that includes $770 million tied to U.S. tax reform.
Growth was driven mainly by North American pressure pumping and completion activity, with North America revenue rising 71% to $11.6 billionb. The filing highlights several risks. Halliburton recorded $647 million of charges in 2017 related to its primary customer in Venezuela, covering a fair value adjustment on a promissory note and a full reserve against other receivables.
Its net investment in Venezuela was approximately $202 millionc at year-end, and the Venezuelan government's January 29, 2018 elimination of the DIPRO exchange rate could lead to further write-downs. The company also faces ongoing exposure to international sanctions and currency controls. Liquidity remained substantial, with $2.3 billion of cash and equivalents and $3.0 billion available under its revolving credit facility.
Operating cash flow was $2.5 billiond, which included a $478 million U.S. tax refund. Long-term debt fell to $10.4 billion from $12.2 billion after $1.6 billion of long-term borrowings were paid down.
Capital expenditures rose to $1.4 billion, and the company paid $626 million in dividends. Management expects 2018 capital spending of approximately $1.7 billion and says it is evaluating uses of cash, including debt retirement, acquisitions, and shareholder returns.
02—Key points
Key Highlights
- Revenue rose to $20.6 billion in 2017 from $15.9 billion in 2016, a 30% increase, led by Completion and Production revenue of $13.1 billion (up 47%).
- Operating income was $1.4 billion in 2017, compared with an operating loss of $6.8 billion in 2016.
- Net loss was $468 million ($0.53 per share), including a $1.1 billion income tax provision that contains $770 million of estimated U.S. tax reform effects.
- Charges of $647 million related to the primary Venezuelan customer were recorded in 2017; the net investment in Venezuela was approximately $202 million at December 31, 2017.
- Liquidity included $2.3 billion of cash and equivalents and $3.0 billion available under the revolving credit facility; operating cash flow was $2.5 billion.
- Long-term debt decreased to $10.4 billion from $12.2 billion after $1.6 billion of long-term borrowings were paid during 2017.
- Management expects 2018 capital expenditures of approximately $1.7 billion and plans to keep the quarterly dividend at $0.18 per share; about $5.7 billion remains authorized for share repurchases.
03—One dollar
Follow one dollar
For each $1.00 of revenue in FY2017, Halliburton lost $0.02.
- Revenue$20.62B100.0%
- Cost of revenue−$4.14B20.1%
- Gross profit$16.48B79.9%
- Operating costs−$15.10B73.2%
- Operating income$1.37B6.7%
- Interest, other & tax−$1.84B8.9%
- Net income−$463.0M2.2%
Where FY2017 revenue went
$20.62B- Other operating costs: $14.74B, 72% of revenue
- Cost of revenue: $4.14B, 20% of revenue
- Operating income: $1.37B, 6.7% of revenue
- R&D: $360.0M, 1.7% of revenue
Kept 6.7% as operating income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2017filed February 9, 2018Financial Statements
FY2017 against FY2016
| Line item | FY2017FY2016 | Change |
|---|---|---|
| Revenue | $20.62B$15.89B | +29.8% |
| Cost of Revenue | $4.14B$3.77B | +9.9% |
| Gross Profit | $16.48B$12.12B | +36.0% |
| R&D Expenses | $360.00M$329.00M | +9.4% |
| Operating Expenses | $19.25B$22.66B | −15.1% |
| Operating Income | $1.37B-$6.77B | +120.3% |
| Net Income | -$463.00M-$5.76B | +92.0% |
| EPS (Diluted) | $-0.53$-6.69 | +92.1% |
| Shares Outstanding (Basic) | 870.00M861.00M | +1.0% |
| Shares Outstanding (Diluted) | 870.00M861.00M | +1.0% |
05—Questions
Frequently Asked Questions
What drove the improvement in Halliburton's 2017 results?
Higher activity and pricing in the United States land market, mainly for stimulation (pressure pumping), well completion, and drilling services in North America. North America revenue rose 71% to $11.6 billion, and the company returned to operating profitability in North America after an operating loss in 2016.
Why was Halliburton still in a net loss in 2017 despite operating income?
The company recorded a total income tax provision of $1.1 billion on pre-tax income of $682 million, which produced an effective tax rate of 165.8%. This included $770 million of tax expense tied to the U.S. tax reform enacted in December 2017, and $647 million of Venezuela receivables charges for which no tax benefit was recognized.
What is Halliburton's exposure to Venezuela?
Halliburton recognized $647 million of charges in 2017 on receivables from its primary Venezuelan customer, including a fair value adjustment on a promissory note and a full reserve on other receivables. The net investment in Venezuela was approximately $202 million at December 31, 2017, and the company said further write-downs are possible after the January 29, 2018 elimination of the DIPRO exchange rate.
How strong is Halliburton's balance sheet and liquidity position?
The company had $2.3 billion of cash and equivalents, $106 million of fixed income investments, and $3.0 billion available under its revolving credit facility at year-end 2017. Long-term debt was $10.4 billion, and the company stated it has no financial covenants or material adverse change provisions in its bank agreements.
What are management's plans for capital and cash in 2018?
Capital spending for 2018 is expected to be approximately $1.7 billion, focused on the pressure pumping fleet, new Sperry drilling tools, and Artificial Lift and Multi-Chem. The company plans to repay $400 million of 2.0% senior notes maturing in August 2018 with cash on hand, intends to maintain the $0.18 quarterly dividend, and is evaluating debt retirement, acquisitions, organic growth, and shareholder returns.
06—Continue