01—Abstract
Summary
Summary of the 10-Q filed November 7, 2024. Cited figures are marked; the original filing is the authoritative source.
Halliburton Company's Form 10-Q for the quarter ended September 30, 2024 reports third-quarter revenue of $5.70 billiona, down 2% from $5.80 billion in the prior-year quarter, and operating income of $871 million, down 16% from $1.04 billion.
Results include $116 millionb of net impairments and other charges, including $63 million of severance, a $49 million impairment on assets held for sale tied to a decision to market part of the chemical business, $35 million of costs from a cybersecurity incident, and a $43 million gain on an equity investment. Net income attributable to the company was $571 million, or $0.65 per diluted share, versus $716 million, or $0.79, a year earlier. For the nine months, revenue was $17.33 billion, essentially flat, and operating income was $2.89 billion, down 4%.
North America revenue fell 9% in the quarter, while Middle East/Asia rose 9% and international revenue rose 4%. Cash flow from operations for the nine months was $2.41 billionc, against capital expenditures of $1.02 billion. The company repurchased $696 million of stock and paid $452 million in dividends.
Cash and equivalents stood at $2.18 billiond at quarter-end, and the company had $3.5 billion of available committed bank credit. Management states that the company expects returns to shareholders to be in line with its framework of returning at least 50% of annual free cash flow, and that 2024 capital spending will be about 6% of revenue. The filing also highlights a pending IRS dispute over the classification of a $3.5 billion termination fee paid to Baker Hughes in 2016.
The IRS proposed reclassifying roughly 95% of that deduction, and the company estimates cash taxes of approximately $650 million (plus interest) if the IRS position prevails. The company states no payment is currently required. Management also expects North American revenue to decline in 2024 and international revenue to grow mid to high single digits.
02—Key points
Key Highlights
- Q3 2024 revenue of $5.70 billion, down 2% year over year; operating income of $871 million, down 16%, including $116 million of impairments and other charges.
- Net income attributable to the company of $571 million ($0.65 per diluted share), compared with $716 million ($0.79) in Q3 2023.
- North America revenue fell 9% in the quarter, while Middle East/Asia revenue rose 9%; the company expects North American revenue to decline in 2024 and international revenue to grow mid to high single digits.
- Nine-month operating cash flow of $2.41 billion; capital expenditures of $1.02 billion; $696 million spent on share repurchases and $452 million on dividends.
- Cash and equivalents of $2.18 billion at September 30, 2024, plus $3.5 billion of available committed bank credit under a revolving facility expiring April 27, 2027.
- Potential IRS exposure of about $650 million in cash taxes, plus interest, if the IRS prevails on its proposed adjustment to the 2016 Baker Hughes termination fee deduction; the company states no payment is currently required.
- A cybersecurity incident disclosed in August and September 2024 led to $35 million of expenses in the quarter; the company believes the incident has not had and is not reasonably likely to have a material impact.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2024filed November 7, 2024Financial Statements
Q3 FY2024 against Q3 FY2023
| Line item | Q3 FY2024Q3 FY2023 | Change |
|---|---|---|
| Revenue | $5.70B$5.80B | −1.8% |
| Operating Expenses | $4.83B$4.77B | +1.2% |
| Operating Income | $871.00M$1.04B | −16.0% |
| Net Income | $580.00M$724.00M | −19.9% |
| EPS (Basic) | $0.65$800000.00 | −100.0% |
| EPS (Diluted) | $0.65$790000.00 | −100.0% |
| Shares Outstanding (Basic) | 881.00M898.00M | −1.9% |
| Shares Outstanding (Diluted) | 881.00M902.00M | −2.3% |
05—Questions
Frequently Asked Questions
Why did operating income decline in the third quarter of 2024?
Operating income fell to $871 million from $1.04 billion, a 16% decline. The filing attributes the drop to $116 million of impairments and other charges, which included $63 million of severance, a $49 million impairment on assets held for sale, and $35 million of cybersecurity-related expenses, partly offset by a $43 million equity investment gain. Completion and Production operating income fell 10%, while Drilling and Evaluation rose 7%.
What is the status of the IRS dispute over the Baker Hughes termination fee?
The IRS issued a Notice of Proposed Adjustment in September 2023 to reclassify about 95% of the $3.5 billion termination fee paid to Baker Hughes in 2016 from an ordinary deduction to a capital loss. The company initiated administrative appeals in December 2023, disagrees with the adjustment, and expects resolution to take substantial time. If the IRS position prevails, the company estimates cash taxes of about $650 million plus interest.
What does the company plan to do with its cash and shareholder returns?
The company states it will maintain capital discipline, keep 2024 capital spending at about 6% of revenue, and expects shareholder returns in line with its framework of returning at least 50% of annual free cash flow through dividends and buybacks. The quarterly dividend is $0.17 per share, or about $150 million. Approximately $3.4 billion remained authorized under the repurchase program at September 30, 2024.
What is the outlook for the business?
Management expects North American revenue to decline in 2024 compared with 2023 because of lower rig counts and activity in U.S. service lines. It expects international business to deliver mid to high single digit revenue growth for the full year 2024. The company also cites ongoing supply chain lead-time constraints and efforts to pass inflationary cost increases to customers.
What happened with the cybersecurity incident and what are its implications?
On August 21, 2024, the company became aware that an unauthorized third party accessed certain systems and exfiltrated information. The incident disrupted access to some business applications. The company incurred $35 million of expenses in the third quarter and expects to incur further expenses. Management believes the incident has not had and is not reasonably likely to have a material impact on financial condition or results, but the company notes it continues to face potential litigation and regulatory risks.
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