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    HAL
    Earnings call· Mar 2025(Q1 FY25)

    HALLIBURTON Q1 FY25 earnings call HAL

    Apr 22, 2025 Source

    Executive summary

    Halliburton Q1 FY25 — Strong International Contract Wins and ZEUS IQ Technology Adoption

    Halliburton navigated a volatile Q1 FY25 with a focus on strategic execution, securing significant international contracts and advancing its ZEUS IQ technology in North America. Despite a 7% year-over-year revenue decline and a $356 million pretax charge, the company generated solid free cash flow and returned $250 million to shareholders. Management expressed confidence in its strategy to drive international growth and maximize value in North America, even as market uncertainty persists.

    Highlights

    5

    • Generated $377 million of cash flow from operations and $124 million of free cash flow in Q1 FY25.

    • Repurchased approximately $250 million of common stock in Q1 FY25.

    • International revenue of $3.2 billion, with mid-single-digit growth excluding Mexico.

    • Won significant integrated offshore contracts with Shell and another major in Suriname, extending through 2026 and beyond.

    • Successfully completed the world's first closed-loop, autonomous fracturing operation with ZEUS IQ technology.

    Concerns

    5

    • Total company revenue decreased 7% year-over-year to $5.4 billion in Q1 FY25.

    • North America revenue decreased 12% year-over-year to $2.2 billion in Q1 FY25 due to lower stimulation activity.

    • Latin America revenue decreased 19% year-over-year to $896 million, primarily due to lower activity in Mexico, which saw a 70-75% decline.

    • Recognized a pretax charge of $356 million in Q1 FY25 related to severance costs, asset impairment, and environmental reserves.

    • Anticipates a $0.02 to $0.03 per share impact in Q2 FY25 from tariffs, with a full-year estimate to be provided later.

    Guidance & targets

    14
    CategoryTargetConfidence
    International revenue growth
    Flat to slightly down
    high materiality
    Medium
    Total shareholder returns
    At least $1.6 billion
    high materiality
    High
    Corporate and other expense
    About flat
    medium materiality
    High
    SAP S4 migration expense
    About flat
    low materiality
    High
    Net interest expense
    Increase about $5 million
    low materiality
    High
    Other net expense
    Increase about $5 million
    low materiality
    High
    Normalized effective tax rate
    Approximately 23%
    medium materiality
    High
    Capital expenditures as % of revenue
    About 6%
    high materiality
    High
    Completion and Production division revenue growth
    Increase 1% to 3%
    medium materiality
    High
    Completion and Production division operating margin
    Approximately flat
    medium materiality
    High
    Drilling and Evaluation division revenue growth
    Flat to down 2%
    medium materiality
    High
    Drilling and Evaluation division operating margin
    Decline 125 to 175 basis points
    medium materiality
    High
    International Artificial Lift product line growth
    Strong double-digit growth
    medium materiality
    High
    Drilling and Evaluation division operating margin
    In the same ZIP code as 2024 levels
    high materiality
    Medium

    Segment performance

    8
    SegmentRevenueYoYQoQMargin
    Total Company
    Total company revenue for Q1 2025 was $5.4 billion, a decrease of 7% when compared to Q1 2024. Adjusted operating income was $787 million and adjusted operating margin was 14.5%.
    		$5.4 billion-7%—14.5% adjusted operating margin
    Completion and Production division
    Revenue in Q1 was $3.1 billion, a decrease of 8% when compared to Q1 2024. Operating income was $531 million, a decrease of 23% when compared to Q1 2024, and operating income margin was 17%. Primarily driven by decreased pressure pumping activity and lower completion tool sales in the Western Hemisphere.
    		$3.1 billion-8%—$531 million operating income, 17% operating income margin
    Drilling and Evaluation division
    Revenue in Q1 was $2.3 billion, a decrease of 6% when compared to Q1 2024. Operating income was $352 million, a decrease of 12% when compared to Q1 2024, and operating income margin was 15%. Primarily driven by decreased activity in Mexico and Saudi Arabia.
    		$2.3 billion-6%—$352 million operating income, 15% operating income margin
    International
    Our Q1 international revenue decreased 2% year-over-year. Excluding Mexico, international revenues grew by mid-single digits.
    Mid-single-digit growth excluding Mexico
    		$3.2 billion-2%——
    North America
    North America revenue was $2.2 billion, 12% lower than the first quarter of 2024. Our first quarter revenue increased 1% sequentially. This decrease was primarily driven by lower stimulation activity in US Land and decreased completion tool sales in the Gulf of America.
    		$2.2 billion-12%1% sequential increase—
    Europe/Africa
    Europe/Africa revenue in Q1 was $775 million, an increase of 6% year-over-year. This increase was primarily driven by improved activity across multiple product service lines in Norway and higher well construction activity in Namibia.
    		$775 million6%——
    Middle East/Asia
    Middle East/Asia revenue in Q1 was $1.5 billion, an increase of 6% year-over-year. This improvement was due to higher activity across multiple product service lines in Kuwait and improved Completion and Production performance in Saudi Arabia.
    		$1.5 billion6%——
    Latin America
    Latin America revenue for Q1 was $896 million, a 19% decrease year-over-year, primarily due to lower activity across multiple product service lines in Mexico. Mexico might have been down 70%, 75% year-over-year.
    Mexico activity decrease: 70-75% YoY
    		$896 million-19%——

    Operational metrics

    19
    Reported net income per diluted share
    $0.24
    Q1 FY25

    Our Q1 reported net income per diluted share was $0.24.

    Adjusted net income per diluted share
    $0.60
    Q1 FY25

    Adjusted net income per diluted share was $0.60.

    Adjusted operating income
    $787 million
    Q1 FY25

    Adjusted operating income was $787 million

    Adjusted operating margin
    14.5%
    Q1 FY25

    adjusted operating margin was 14.5%.

    Common stock repurchased
    $250 million
    Q1 FY25

    repurchased approximately $250 million of our common stock.

    Pretax charge
    $356 million
    Q1 FY25

    During the quarter, we recognized a pretax charge of $356 million as a result of severance costs, impairment of assets held for sale and real estate and other items primarily related to legacy environmental reserves.

    Corporate and other expense
    $66 million
    Q1 FY25

    In Q1, our corporate and other expense was $66 million.

    SAP S4 migration expense
    $30 million
    Q1 FY25

    In Q1, we spent $30 million or about $0.03 per diluted share on SAP S4 migration, which is included in our results.

    Net interest expense
    $86 million
    Q1 FY25

    Net interest expense for the quarter was $86 million.

    Other net expense
    $39 million
    Q1 FY25

    Other net expense for Q1 was $39 million.

    Normalized effective tax rate
    22.1%
    Q1 FY25

    Our normalized effective tax rate for Q1 was 22.1%.

    Capital expenditures
    $302 million
    Q1 FY25

    Capital expenditures for Q1 were $302 million.

    Tariff impact on EPS
    $0.02 to $0.03
    Q2 FY25

    While the situation is fluid, our initial estimates are for an impact of about $0.02 to $0.03 per share in the second quarter, which is included in our guidance.

    D&E profit impact from tariffs
    $10 million
    Q2 FY25

    We have about $10 million in tariffs (part of $40M profit drop in D&E Q2 over Q1).

    D&E profit impact from mobilization costs
    $20 millionincremental over Q1
    Q2 FY25

    $20 million in mobilization, and that is incremental mobilization costs over Q1 as we get geared up for growth in the second half of the year in quite a few of the regions.

    D&E profit impact from mix issue (software sales)
    $10 million
    Q2 FY25

    And then we have $10 million, that's a mix issue with our software business coming down in Q1, our drilling business coming back up a bit, but the delta of that is about $10 million.

    ZEUS frac fleet under term contracts
    More than 40%
    Q1 FY25

    Our ZEUS fleets, which represent more than 40% of our overall frac fleet, operate under term contracts.

    ZEUS frac fleet under term contracts target
    50%
    null

    with 40% and our target 50% being under contract

    Severance charge
    Over $100 millionvs $60 million in Q3 FY24
    Q1 FY25

    over $100 million in the first quarter, you had a $60 million or so severance charge in the third quarter. ... Overall, I would say that it is included in the guidance that we're giving. So that's how it will materialize itself. And then you can think about the overall severance impact to have a payback of less than 1 year.

    Industry KPIs

    3
    MetricValueDetails
    FCF CAPEX leverage$124 millionUSD
    M a integration progress—
    Orders bookings by segment—

    Deals & partnerships

    4
    Optime SubseaAcquisition of technology to transform deepwater interventions.

    In intervention, we closed the acquisition of Optime Subsea, a technology we expect will transform deepwater interventions.

    VoltaGridIncreased ownership in a power business.$345 million

    The second number, the $345 million relates to an increase in ownership in VoltaGrid... we like the power business. We have a front-row seat through our exposure in the VoltaGrid investment, but we also see many other exciting opportunities for us in that space.

    ShellSignificant scopes of work for development and intervention.extending through 2026 and beyond

    Shell awarded Halliburton significant scopes of work this quarter, including development and intervention work for Gato do Mato in Brazil and exploration work in Suriname and West Africa.

    Another majorAdditional integrated offshore exploration work.

    Halliburton also won additional integrated offshore exploration work with another major in Suriname.

    Risks & headwinds

    4
    Increased market uncertaintyNear-term

    more risk embedded in our outlook today than 3 months ago

    Mitigation: Halliburton's consistent focus on technology, collaboration, and service quality execution.

    Lower activity in Mexicotough for a while

    Latin America revenue down 19% YoY; Mexico activity down 70-75% YoY.

    Mitigation: Expectation that Mexico will find its footing due to the importance of oil and gas to its economy and meaningful decline rates.

    North America activity reductionsFY25

    12% lower than the first quarter of 2024 for North America revenue.

    Mitigation: Halliburton's strategy to maximize value, ZEUS fleets under term contracts, differentiated technology, and focus on returns over share.

    Tariff impactQ2 FY25, full year estimate to be provided next quarter.

    $0.02 to $0.03 per share in the second quarter

    Mitigation: Diversified supply chain, various levers to pull, but more clarity on tariff structure needed.

    What to watch in Q2 FY25

    5

    International revenue growth

    FY25
    Current-2% YoY (mid-single-digit growth ex-Mexico)
    TargetFlat to slightly down YoY

    Why it matters

    Indicates the impact of global macroeconomic factors and OPEC production on international spending, which is a key growth driver for Halliburton.

    As a result, I expect our year-over-year international revenue to be flat to slightly down.

    Q&A highlights

    6

    How will U.S. rig and completion counts evolve in the current commodity price environment, and what oil price would significantly alter customer behavior?

    Customers are currently digesting market information and the duration of commodity prices. While activity might slow, the market is not building new equipment, and significant declines would impact production, acting as a governor. North American operators are generally biased towards working through challenges rather than drastic cuts.

    “Look, I think that customers right now are working through that. I mean what the -- a lot has happened in 3 weeks. It's been a busy 3 weeks from a commodity price standpoint and also tariffs and what that might mean.”

    asked by Neil Mehta · answered by Jeffrey Miller

    2 min read5 chapters

    Detailed Narrative

    01

    Macro Environment and Strategic Focus

    Halliburton acknowledges increased market uncertainty🌐 due to trade environment, economic concerns, and OPEC production, which have weighed on commodity prices. Despite this, the company asserts that oil and gas remain fundamental to global economic growth, with consumption at record highs and ongoing investment needed due to decline curves. Halliburton's strategy emphasizes technology, collaboration, and service quality to create value for customers and ensure long-term success.

    02

    International Market Performance and Outlook

    International revenue was $3.2 billion in Q1 FY25, a 2% year-over-year decrease primarily due to lower activity in Mexico. Excluding Mexico, international revenues grew mid-single digits. The company secured significant integrated offshore contracts with Shell (Gato do Mato, Brazil; Suriname, West Africa) and another major in Suriname, extending visibility through 2026 and beyond. Growth engines like unconventionals (ZEUS equipment to Middle East), artificial lift (new offshore work in Ghana), intervention (Optime Subsea acquisition), and directional drilling (closed-loop automated drilling in Norway and Middle East) are expected to drive future growth.

    03

    North America Strategy and Technology Leadership

    North America revenue increased 1% sequentially but decreased 12% year-over-year to $2.2 billion due to lower stimulation activity in US Land and reduced completion tool sales in the Gulf of America. Halliburton's strategy focuses on maximizing value through returns, not market share, by retiring or reallocating equipment rather than operating at uneconomic levels. The company's ZEUS fleets, representing over 40% of its frac fleet, operate under term contracts. A significant milestone was achieved with the world's first closed-loop, autonomous fracturing operation using ZEUS IQ, which utilizes real-time reservoir feedback to direct pump activity without human intervention, aiming to improve productivity and production per lateral foot.

    04

    Financial Performance and Charges

    Q1 FY25 reported net income per diluted share was $0.24, with adjusted net income per diluted share at $0.60. Total company revenue was $5.4 billion, a 7% decrease year-over-year. Adjusted operating income was $787 million, with an adjusted operating margin of 14.5%. The company recognized a pretax charge of $356 million related to severance costs, impairment of assets held for sale, real estate, and legacy environmental reserves, with cost rationalization efforts expected to support future margins.

    05

    Cash Flow and Capital Allocation

    Halliburton generated $377 million in cash flow from operations and $124 million in free cash flow in Q1 FY25. The company repurchased approximately $250 million of common stock and is on pace to return at least $1.6 billion to shareholders in FY25 through buybacks and dividends. Capital expenditures for FY25 are expected to be about 6% of revenue. The company also increased its ownership in VoltaGrid, viewing the power business as an area of opportunity for growth, approached prudently.

    AI-generated summary of the company’s earnings call. Not investment advice.