01—Abstract
Summary
Summary of the 10-K filed February 11, 2020. Cited figures are marked; the original filing is the authoritative source.
Halliburton Company's 2019 Form 10-K reports a challenging year driven by North America.
Revenue was $22.4 billiona, down 7% from $24.0 billion in 2018, as Completion and Production revenue fell 12% to $14.0 billion while Drilling and Evaluation rose 4% to $8.4 billion. The company reported an operating loss of $448 million, driven by $2.5 billion of impairments and other charges, compared with operating income of $2.5 billion in 2018. Net loss attributable to the company was $1.13 billion, or $1.29 per share.
North America revenue fell 18% to $11.9 billionb as customers shifted to capital discipline, while international revenue grew 10%. The company is reducing 2020 capital expenditures by 20% to approximately $1.2 billion. Liquidity remained solid, with $2.3 billion of cash and equivalents and $3.5 billion of available committed bank credit under a revolving facility expiring in 2024.
Total debt was $10.3 billionc, and the company stated it has no financial covenants or material adverse change provisions in its bank agreements. Operating cash flow was $2.4 billion, and the company paid $630 million in dividends at $0.72 per share, with intent to maintain the rate in 2020. Management expects further North American spending declines in 2020 and a third consecutive year of international spending growth.
Credit ratings were noted as A- (S&P, negative outlook) and Baa1 (Moody's, stable outlook). The filing also highlights a cost-reduction program in North America, including fleet rationalization, personnel reductions and real estate consolidation, and a decision to market the Pipeline & Process Services business for sale. Venezuela remains a risk, as the OFAC general license expires April 22, 2020, and the company expects to cease operations there absent an extension.
02—Key points
Key Highlights
- Revenue of $22.4 billion in 2019, down 7% from $24.0 billion in 2018; North America revenue declined 18% while Latin America (+14%), Europe/Africa/CIS (+12%) and Middle East/Asia (+7%) grew.
- Operating loss of $448 million, driven by $2.5 billion of impairments and other charges, versus operating income of $2.5 billion in 2018.
- Net loss attributable to the company of $1.13 billion, or $1.29 per share, compared with net income of $1.66 billion, or $1.89 per share, in 2018.
- 2020 capital expenditures planned at approximately $1.2 billion, a reduction of approximately 20% from 2019, with about 60% allocated to Completion and Production.
- Cash and equivalents of $2.3 billion and $3.5 billion of available committed bank credit under a revolving facility expiring in 2024; total debt of $10.3 billion.
- Quarterly dividend of $0.18 per share, with intent to continue the current rate during 2020; $5.2 billion remained authorized for share repurchases at year-end 2019.
- Venezuela general license expires April 22, 2020; the company expects to cease operations there unless OFAC extends it, and does not expect a material adverse effect given prior write-downs.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2019filed February 11, 2020Financial Statements
FY2019 against FY2018
| Line item | FY2019FY2018 | Change |
|---|---|---|
| Revenue | $22.41B$24.00B | −6.6% |
| R&D Expenses | $404.00M$390.00M | +3.6% |
| Operating Expenses | $22.86B$21.53B | +6.2% |
| Operating Income | -$448.00M$2.47B | −118.2% |
| Net Income | -$1.13B$1.66B | −168.1% |
| EPS (Basic) | $-1.29$1.89 | −168.3% |
| EPS (Diluted) | $-1.29$1.89 | −168.3% |
| Shares Outstanding (Basic) | 875.00M875.00M | 0.0% |
| Shares Outstanding (Diluted) | 875.00M877.00M | −0.2% |
05—Questions
Frequently Asked Questions
Why did Halliburton report an operating loss in 2019?
The company recorded $2.5 billion of impairments and other charges, primarily for pressure pumping and drilling equipment, severance and costs from adjusting its cost structure. These charges, combined with lower stimulation activity and pricing in North America land, produced an operating loss of $448 million.
How is the North America market affecting Halliburton's outlook?
Management said North American customers shifted from growth to capital discipline. The company expects customer spending in U.S. land to decline by approximately 10% in 2020 from 2019 levels, and it plans to maintain returns-focused fleet capacity while growing non-hydraulic fracturing businesses such as Wireline and Perforating, Artificial Lift and Specialty Chemicals.
Is Halliburton's liquidity sufficient to fund operations and dividends?
Management stated that cash on hand, operating cash flows and the available credit facility provide sufficient liquidity for 2020, including capital expenditures, working capital, dividends and contingent liabilities. The company had no financial covenants or material adverse change provisions in its bank agreements.
What is the outlook for international business?
The company expects a third consecutive year of customer spending growth internationally, with international revenue having risen 10% in 2019. Management cites improving pricing in certain regions, increased activity in mature fields and shallow water, and a growing pipeline of offshore projects.
What are the main risks related to Venezuela and sanctions?
Venezuela accounts for much of the allowance for bad debts, which totaled $776 million at year-end 2019. If the OFAC general license is not extended beyond April 22, 2020, the company will cease operations there, and it is unlikely to remove remaining assets, which may be expropriated.
06—Continue