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Halliburton 4Q, Full Year 2021 Results; Expects 25% YOY Growth in North America

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   |    Tuesday,January 25,2022

Halliburton reported its Q4 and full year 2021 results.

Halliburton's results by region and conference call highlights are directly below.

Results by Region

Conference Call Highlights:

• International and North America revenue grew 11% and 10% respectively due to strong year-end sales and activity increases across all regions.

• In North America, Halliburton achieved 36% incrementals year-on-year as U.S. land activity rebounded, and we maximized the value of our business.

• "I think when we think about progression in 2022, I expect to see 30% incrementals in our frac business in North America in 2022 in first quarter."

- North America strategy going into 2022: Expects 25% YOY Growth

• "We expect a busy 2022 in North America. Given a strong commodity price environment, we anticipate North America customer spending to grow more than 25% year-on-year. We believe the highest increase will come from private operators. Public E&Ps will continue to prioritize returns while delivering production into a supportive market."
  

• "Second, in the structurally smaller North American market, our strategy is to maximize cash flow, and it dictates how we approach our North America business. Strong cash flow starts with strong margins, and Halliburton’s margins are the best in class. We completed the most aggressive set of structural cost reductions in our history. We also made significant changes to our processes that drive higher contribution margin, for example, how we perform equipment maintenance and provide engineering support. These changes give us meaningful operating leverage as North American activity accelerates."

- North America and International Growth Beyond 2022: "Could you talk about how you see both, North America and the international markets and the cadence of the increases in activity, growth and how you and the broader industry, but you particularly, are expecting things to unfold here as we go through ‘22 and into ‘23 and beyond?"

• "Look, I really like the macro setup, and I have said that before. And what we really see is the fragility, as I described it, of supply and the returning demand. And so, I think, there are factors that the underinvestment internationally means that has to be recovered over a longer period of time. And I think a lot of the return expectations of this industry in North America are still in place and such that is a bit of a cap on production growth. But nevertheless, the activity, that just means a longer upcycle in my view. And I feel really good about the cadence, meaning it continues to move up this year, next year and beyond. And the way that sets up for us is we got -- we have an opportunity to take advantage of the operating leverage that’s already in our business. The pricing environment will be good throughout that period as equipment gets tighter everywhere and our technology is more valuable to customers in this kind of environment. And yes, activity, I believe, does ramp, and it’s going to be the kind of short-cycle barrels that drive the most activity for us because this is urgently trying to return barrels to market under those sort of constraints, very good for us. And so, as we look out to 2023, I’ll just start there, look out to 2023, I don’t see 2023 as an endpoint by any means. I think the road goes on well beyond that. But I can tell you what we’ve talked about for 2023 is biased higher."

Overview

Halliburton reported net income of $824 million, or $0.92 per diluted share, for the fourth quarter of 2021. This compares to net income for the third quarter of 2021 of $236 million, or $0.26 per diluted share. Adjusted net income for the fourth quarter of 2021, excluding tax adjustments, was $320 million, or $0.36 per diluted share. This compares to adjusted net income for the third quarter of 2021, excluding special items, of $248 million, or $0.28 per diluted share. Halliburton's total revenue for the fourth quarter of 2021 was $4.3 billion compared to revenue of $3.9 billion in the third quarter of 2021. Reported operating income was $550 million in the fourth quarter of 2021 compared to reported operating income of $446 million in the third quarter of 2021. Reported operating income of $550 million in the fourth quarter of 2021 increased 20% compared to adjusted operating income of $458 million in the third quarter of 2021, excluding special items.

Total revenue for the full year of 2021 was $15.3 billion, an increase of $850 million, or 6% from 2020. Reported operating income for 2021 was $1.8 billion, compared to reported operating loss of $2.4 billion and adjusted operating income of $1.4 billion for 2020, excluding impairments and other charges.

CEO Jeff Miller commented: “I am pleased with our solid execution in the fourth quarter and for the full year. Both operating divisions experienced revenue growth in the international and North America markets. Our Completion and Production division delivered solid mid-teens margins, and our Drilling and Evaluation division margins surprised to the upside.

“Today’s announcements of the dividend increase and debt retirement demonstrate my confidence in our business, customers, employees, and value proposition.

“I am excited about the accelerating multi-year upcycle. I expect the macro industry environment to remain supportive and the international and North America markets to continue their simultaneous growth.

“Halliburton uniquely benefits from this constructive environment. Our value proposition works, we have the right strategies for both international and North America markets, we are leaders in digital and automation, and we drive capital efficiency while advancing a sustainable energy future. I fully expect that Halliburton will accelerate cash flow generation, strengthen our balance sheet, and increase cash returns to shareholders in this upcycle,” concluded Miller.

Operating Segments

Completion and Production

Completion and Production revenue in the fourth quarter of 2021 was $2.4 billion, an increase of $220 million, or 10%, when compared to the third quarter of 2021, while operating income was $347 million, an increase of $25 million, or 8%. These results were driven by higher completion tool sales globally, as well as increased pressure pumping services in North America land and the Middle East/Asia region. These improvements were partially offset by reduced stimulation activity in Latin America, Canada, and the Gulf of Mexico, lower pipeline services in Europe/Africa/CIS and Asia, reduced well intervention services in Brazil, and decreased artificial lift activity in North America land.

Drilling and Evaluation

Drilling and Evaluation revenue in the fourth quarter of 2021 was $1.9 billion, an increase of $197 million, or 11%, when compared to the third quarter of 2021, while operating income was $269 million, an increase of $83 million, or 45%. These results were due to increased drilling-related services globally, wireline sales in Guyana, improved project management activity in Ecuador and India, increased wireline activity in the Middle East/Asia region, and higher software sales in Latin America and Middle East/Asia. Partially offsetting these increases were decreased project management activity and testing services in Mexico, as well as lower drilling-related activity in Russia.

Geographic Regions

North America

North America revenue in the fourth quarter of 2021 was $1.8 billion, a 10% increase when compared to the third quarter of 2021. This increase was primarily driven by higher pressure pumping activity and drilling-related services in North America land, in addition to higher completion tool sales and fluid services in the Gulf of Mexico. These increases were partially offset by reduced stimulation activity in Canada and the Gulf of Mexico, coupled with reduced artificial lift activity in North America land.

International

International revenue in the fourth quarter of 2021 was $2.5 billion, an 11% increase when compared to the third quarter of 2021. This improvement was primarily driven by higher completion tool sales and software sales in all regions, increased activity across multiple product service lines in Norway, Brazil, and Egypt, increased well construction services and wireline activity in the Middle East/Asia region, improved project management activity in Ecuador and India, as well as increased drilling-related services in Mexico. Partially offsetting these increases were reduced activity in Russia, Mexico, and Vietnam.

Latin America revenue in the fourth quarter of 2021 was $669 million, a 7% increase sequentially. This improvement was driven by improved project management activity in Ecuador, increased drilling-related services in Mexico, increased activity across multiple product service lines in Brazil, wireline sales in Guyana, and higher activity across multiple product service lines in Colombia. These increases were partially offset by reduced project management activity, stimulation activity, and testing services in Mexico.

Europe/Africa/CIS revenue in the fourth quarter of 2021 was $730 million, an 8% increase sequentially. Higher software and completion tool sales across the region, improved activity across multiple product service lines in Norway and Egypt, and increased well control activity in Nigeria were partially offset by reduced activity in multiple product service lines in Russia, reduced pipeline services and well construction activity in the United Kingdom, and decreased stimulation activity in the Congo.

Middle East/Asia revenue in the fourth quarter of 2021 was $1.1 billion, a 16% increase sequentially, resulting from higher completion tool sales and wireline activity across the region, improved well construction services in Saudi Arabia and Oman, higher software sales in Kuwait and China, improved project management activity in India, and increased stimulation activity throughout Asia. These increases were partially offset by reduced pipeline services in Asia, along with lower activity across multiple product service lines in Vietnam.

Other Financial Items

• Halliburton recognized a $409 million tax benefit, which included a gain of approximately $500 million due to the partial release of a valuation allowance on our deferred tax assets. This reversal is based on improved market conditions and reflects the Company’s expectation to utilize these deferred tax assets.

• Halliburton’s board of directors has declared a 2022 first quarter dividend of twelve cents ($0.12) a share on the Company’s common stock payable on March 23, 2022, to shareholders of record at the close of business on March 2, 2022.

Selective Technology & Highlights

• Halliburton and VoltaGrid LLC announced a multi-year contract with Aethon Energy to deploy an advanced, all-electric fracturing solution in the Haynesville Shale. The solution combines Halliburton’s all-electric fracturing spread, featuring the Zeus™ 5,000 horsepower electric pumping unit, with VoltaGrid’s power generation system to offer increased reliability and real-time emissions tracking.

• Halliburton announced the successful deployment of Landmark’s Digital Well Program^® as a core component of BP’s Well Design Optimizer project. The Well Design Optimizer streamlines and automates the well planning process to empower users to optimize well designs for placement and production. The solution uses Landmark’s Digital Well Program^®, a DecisionSpace^® 365 cloud application, which combines planning and design processes on a single and open platform to transform how wells are constructed and delivered.

• Halliburton released DS365.ai cloud service to help customers accelerate their digital transformation with intelligent automation. DS365.ai delivers industry specific artificial intelligence (AI) and machine learning (ML) models to enhance productivity, operational efficiency, and increase asset value. DS365.ai runs on the OSDU™ Data Platform and uses the interoperable and scalable architecture of iEnergy^® Cloud. This allows citizen scientists, data engineers, and data scientists to design, develop, and deploy AI models at scale. Users can rapidly train pre-built ML models, or create and deploy solutions to enhance subsurface, drilling, and production workflows. Users can consume these models as standalone microservices, or in DS365.ai applications such as Assisted Lithology Interpretation, Seismic Engine, and Real-Time Well Engineering.

• Halliburton announced it signed an agreement with Teck Resources Limited to grant Teck access to Neftex^® Predictions to support their global mineral exploration efforts. Teck is one of Canada’s leading mining companies and is committed to responsible mining and mineral development with major business units focused on copper, zinc, and steelmaking coal as well as investments in energy assets with operations in Canada, the United States, Chile, and Peru. Neftex^® Predictions from Halliburton Landmark provides geoscience context, knowledge, and insight and delivers the most comprehensive, integrated geological framework for subsurface evaluation and risk assessment. The integrated infrastructure for subsurface prediction delivers a complete understanding of key geological features that guide mineral exploration.

• Cairn Oil & Gas, India’s largest private oil and gas exploration and production company, signed a Memorandum of Understanding (MoU) with Halliburton. Under the MoU, Halliburton will work with Cairn to increase its recoverable reserves from offshore assets to 300 mmboe – a 10-fold increase from the present cumulative total of 30 mmboe. This announcement follows Cairn’s commitment of doubling its capacity, contributing 50% to India’s domestic crude production, and assisting the country in its goal to achieve energy autonomy.

• Halliburton released iCruise X™ Intelligent Rotary Steerable System, the next generation of the drilling platform targeted to longer, harsher applications to deliver precise well placement and reduced well time. Halliburton built the tool around a robust mechanical design to deliver some of the highest specifications in the industry. The iCruise X is equipped with an advanced steering head fit for greater durability in operations with variable fluid conditions and in fluids with high solids content. It delivers in high temperature environments and provides more power for steering. Halliburton designed the iCruise X steering section with the latest metallurgy and design techniques. The collar includes new connections to better resist torsional oscillation and cyclical bending at higher doglegs. The extra force available for steering delivers geologically complex wells and curves faster and provides a stiffer assembly for straight well sections.

• Halliburton announced it has been named to the Dow Jones Sustainability Index (DJSI) North America, which highlights the top 10% most sustainable companies per industry. The DJSI measures the performance of best-in-class companies selected using environmental, social and governance (ESG) criteria. Halliburton ranked in the 90th percentile among its peers in the Dow Jones Corporate Sustainability Assessment and received high scores in code of business conduct, policy influence, risk & crisis management, corporate citizenship & philanthropy, and human capital development categories.

• Halliburton Labs announced it selected a new group of companies to participate in its collaborative environment where entrepreneurs, academics, and investors come together to advance cleaner, affordable energy. By joining Halliburton Labs, Helix Power, Icarus RT, SolvCor, and Strayos will gain access to industrial capabilities, technical expertise, and mentorship to scale their respective businesses.

• The 26th annual Halliburton Charity Golf Tournament raised $2.6 million for over 75 U.S. nonprofit organizations, once again making it one of the largest non-PGA golf tournament fundraisers. The tournament has raised more than $25 million for charities since it started in 1993.