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Halliburton Q2 2020 Results; Revenue by Segment; North America Down 57% from Q1

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Halliburton Company reported its Q2 2020 results.

Quarterly Revenue by Area

• North America revenue in the second quarter of 2020 was $1.0 billion, a 57% decrease when compared to the first quarter of 2020.

• International revenue in the second quarter of 2020 was $2.1 billion, a 17% decrease when compared to the first quarter of 2020.

• Latin America revenue in the second quarter of 2020 was $346 million, a 33% decrease sequentially.

• Europe/Africa/CIS revenue in the second quarter of 2020 was $691 million, a 17% decrease sequentially.

• Middle East/Asia revenue in the second quarter of 2020 was $1.1 billion, a 10% decrease sequentially.

Financials & Commentary

The company reported a net loss of $1.7 billion, or $1.91 per diluted share, for the second quarter of 2020. This compares to a net loss for the first quarter of 2020 of $1.0 billion, or $1.16 per diluted share. Adjusted net income for the second quarter of 2020, excluding impairments and other charges, was $46 million, or $0.05 per diluted share. This compares to adjusted net income for the first quarter of 2020, excluding impairments and other charges and a loss on the early extinguishment of debt, of $270 million, or $0.31 per diluted share. Halliburton's total revenue in the second quarter of 2020 was $3.2 billion, a 37% decrease from revenue of $5.0 billion in the first quarter of 2020. Reported operating loss was $1.9 billion in the second quarter of 2020 compared to reported operating loss of $571 million in the first quarter of 2020. Excluding impairments and other charges, adjusted operating income was $236 million in the second quarter of 2020, a 53% decrease from adjusted operating income of $502 million in the first quarter of 2020.

Jeff Miller, Chairman, President and CEO, said: “Halliburton’s second quarter performance in a tough market shows we can execute quickly and aggressively to deliver solid financial results and free cash flow despite a severe drop in global activity. Our results demonstrate a significant and sustainable reset to the power of our business to generate positive earnings and free cash flow.

“Total company revenue was $3.2 billion and adjusted operating income was $236 million. Despite the market headwinds, the margin performance of our Completion and Production and Drilling and Evaluation divisions and the $456 million of positive free cash flow generated this quarter show the speed and effectiveness of our aggressive cost actions.

“We have an excellent international business, an efficient North America service delivery improvement strategy, a disciplined capital allocation approach, and a committed and competitive team. Our continued deployment of leading digital technologies will drive efficiency and cost reductions for our customers and Halliburton.

“Halliburton is charting a fundamentally different course. The strategic actions we are taking will further boost our earnings power and ability to generate free cash flow as we power into and win the eventual recovery,” concluded Miller.

Operating Segments

Completion and Production

Completion and Production revenue in the second quarter of 2020 was $1.7 billion, a decrease of $1.3 billion, or 44%, when compared to the first quarter of 2020, while operating income was $159 million, a decrease of $186 million, or 54%. These declines were driven by a decrease in pressure pumping activity globally, primarily in U.S. land and Latin America, coupled with lower artificial lift activity in U.S. land. This was partially offset by improved completion tool sales internationally.

Drilling and Evaluation

Drilling and Evaluation revenue in the second quarter of 2020 was $1.5 billion, a decrease of $551 million, or 27%, when compared to the first quarter of 2020, while operating income was $127 million, a decrease of $90 million, or 41%. This decline was primarily due to a global reduction in drilling-related services and lower software sales internationally.

Geographic Regions

North America

North America revenue in the second quarter of 2020 was $1.0 billion, a 57% decrease when compared to the first quarter of 2020. This decline was driven by reduced activity in U.S. land, primarily associated with pressure pumping, well construction, artificial lift, and wireline activity, coupled with reduced activity across multiple product service lines in the Gulf of Mexico.

International

International revenue in the second quarter of 2020 was $2.1 billion, a 17% decrease when compared to the first quarter of 2020, primarily driven by reduced pressure pumping and drilling-related activity across all regions, partially offset by improved completion tool sales.

Latin America revenue in the second quarter of 2020 was $346 million, a 33% decrease sequentially, resulting primarily from decreased activity across multiple product service lines in Argentina, Colombia and Brazil, and lower software sales in Mexico.

Europe/Africa/CIS revenue in the second quarter of 2020 was $691 million, a 17% decrease sequentially, resulting primarily from reduced well construction and pressure pumping activity, and lower software sales across the region. These reductions were partially offset by increased fluids activity and completion tool sales in Norway and improved cementing activity and completion tool sales in Russia.

Middle East/Asia revenue in the second quarter of 2020 was $1.1 billion, a 10% decrease sequentially, largely resulting from reduced activity across the majority of product service lines in the Middle East, Malaysia and India, partially offset by improved drilling activity and completion tool sales in China and Kuwait.

Other Financial Items

Halliburton recognized $2.1 billion of pre-tax impairments and other charges to further adjust its cost structure to current market conditions. These charges consisted primarily of non-cash asset impairments, mainly associated with pressure pumping equipment and real estate, as well as inventory write-offs, severance, and other costs.

Selective Technology & Highlights

• Halliburton and TechnipFMC introduced Odassea™, the world’s first distributed acoustic sensing solution for subsea wells. The technology platform enables operators to execute intervention-less seismic imaging and reservoir diagnostics to reduce total cost of ownership while improving reservoir knowledge. Halliburton provides the fiber optic sensing technology, completions and analysis for reservoir diagnostics. TechnipFMC provides the optical connectivity from the topside to the completions. The Odassea platform strengthens digital capabilities in subsea reservoir monitoring and production optimization.

• Halliburton, Microsoft and Accenture announced a five-year strategic agreement to advance Halliburton’s digital capabilities in Microsoft Azure. Under the agreement, Halliburton will complete the move to cloud-based digital platforms and strengthen our customer offerings by enhancing real-time platforms for expanded remote operations; improving analytics capability utilizing machine learning and artificial intelligence; and accelerating the deployment of new technology and applications for overall system reliability and security.

• Halliburton launched DynaTrac™ Real-Time Wireless Depth Correlation System, a new technology that reduces uncertainty and saves rig time by enabling operators to accurately position packers, perforating guns and the bottom-hole assembly without running wireline or moving the work string.

• Halliburton introduced SPECTRUM® e-IP, the industry’s first electrically operated inflatable packer. It provides precision and reliability for the placement of selective treatments, such as acidizing, water shut off, sand consolidation, and remedial integrity. This is especially relevant in the current market conditions, to increase the well performance in existing assets. The platform is digitally enabled to provide data acquisition, interpretation, and real-time control.