01—Abstract
Summary
Summary of the 10-K filed February 13, 2019. Cited figures are marked; the original filing is the authoritative source.
Halliburton Company's 2018 Form 10-K reports a strong year of recovery in its core business.
Total revenue rose to $24.0 billiona in 2018 from $20.6 billion in 2017, a 16% increase, with the Completion and Production segment up 22% to $16.0 billion and the Drilling and Evaluation segment up 6% to $8.0 billion. Total operating income was $2.5 billion, an 80% increase from $1.4 billion, though 2018 results include a $265 million write-down of the company's remaining Venezuela investment. Net income attributable to the company was $1.66 billion, or $1.89 per diluted share, compared with a net loss of $463 million in 2017.
North America revenue grew 25%, while international revenue grew 6% and was the first annual growth since 2014. Management cautions that North America completion demand and pricing weakened in the fourth quarter of 2018 due to offtake capacity limits and customer budget constraints, and that the late-2018 oil price drop has made 2019 customer budgets more limited than previously expected. Management plans to cut 2019 capital expenditures by 20% to approximately $1.6 billionb from $2.0 billion in 2018.
Operating cash flow was $3.2 billionc, cash and equivalents ended the year at $2.0 billion, and $3.0 billion remained available under the revolving credit facility. The company returned over $1 billion to shareholders through dividends and share repurchases, and approximately $5.3 billion remained authorized for buybacks at year-end.
The filing also highlights ongoing risks, including oil and gas price volatility, customer capital spending dependence, political and sanctions exposure (notably Russia and Venezuela, where a general license runs until July 27, 2019), cybersecurity incidents, and regulation of hydraulic fracturing. Total debt was $10.5 billiond at year-end, and credit ratings were stable, with S&P at A- and Moody's at Baa1.
02—Key points
Key Highlights
- Revenue rose 16% to $24.0 billion in 2018, with Completion and Production up 22% and Drilling and Evaluation up 6%.
- Operating income increased 80% to $2.5 billion, primarily from pressure pumping and artificial lift activity in North America.
- Net income attributable to the company was $1.66 billion ($1.89 per share), versus a net loss of $463 million in 2017.
- Operating cash flow was $3.2 billion, and capital expenditures were $2.0 billion; 2019 capex is planned at about $1.6 billion, a 20% reduction.
- Shareholder returns totaled over $1 billion in 2018 through dividends ($630 million) and share repurchases (about $400 million); $5.3 billion remained authorized.
- A $265 million charge wrote down the company's entire remaining Venezuela investment in the first quarter of 2018.
- Total debt was $10.5 billion, with $2.0 billion of cash and $3.0 billion of available revolver capacity; S&P rates the company A- and Moody's Baa1, both stable.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2018filed February 13, 2019Financial Statements
FY2018 against FY2017
| Line item | FY2018FY2017 | Change |
|---|---|---|
| Revenue | $24.00B$20.62B | +16.4% |
| R&D Expenses | $390.00M$360.00M | +8.3% |
| Operating Expenses | $21.53B$19.25B | +11.9% |
| Operating Income | $2.47B$1.37B | +79.5% |
| Net Income | $1.66B-$463.00M | +457.9% |
| EPS (Basic) | $1.89— | — |
| EPS (Diluted) | $1.89$-0.53 | +456.6% |
| Shares Outstanding (Basic) | 875.00M870.00M | +0.6% |
| Shares Outstanding (Diluted) | 877.00M870.00M | +0.8% |
05—Questions
Frequently Asked Questions
How did Halliburton perform in 2018 compared with 2017?
Revenue increased 16% to $23,995 million from $20,620 million, and operating income rose 80% to $2,467 million from $1,374 million. Net income attributable to the company was $1,656 million, compared with a net loss of $463 million in 2017.
What drove the growth in 2018?
Growth was driven primarily by pressure pumping services, drilling activity and artificial lift in North America, along with drilling activity in the Eastern Hemisphere. North America revenue rose 25%, and international revenue grew 6%, the first annual international growth since 2014.
What challenges does the company face heading into 2019?
Management reported that North American completion demand and pricing weakened in the fourth quarter of 2018 because of offtake capacity limitations and customer budget constraints. The late-2018 drop in oil prices led to more limited 2019 customer budgets, and management expects pricing pressure to continue in the first quarter of 2019.
What are management's capital allocation plans?
Capital expenditures are expected to decline about 20% to approximately $1.6 billion in 2019, focused on differentiated technologies such as a new directional drilling platform and the expansion of the production business. The company plans to continue paying its $0.18 quarterly dividend, use excess cash for strategic investments and debt reduction, and return cash to shareholders, with $5.3 billion remaining under its repurchase authorization.
What are the main risks to the business?
Key risks include volatile oil and natural gas prices, which affect customer capital spending; political instability and sanctions, including Russia and Venezuela, where operations continue under a general license expiring July 27, 2019; cybersecurity threats; and the possibility of additional regulation of hydraulic fracturing.
06—Continue