Halliburton Company (HAL) Q2 2025 Earnings Call July 22, 2025 09:00 AM ET Company ParticipantsDavid Coleman - Senior Director - IRJeff Miller - Chairman, President and CEOEric Carre - EVP & CFONeil Mehta - Head - Equity ResearchJ. David Anderson - Managing DirectorMarc Bianchi - Managing DirectorScott Gruber - Director - Oilfield Services & Equipment ResearchStephen Gengaro - Managing DirectorConference Call ParticipantsArun Jayaram - Research AnalystRoger Read - Senior Energy AnalystSaurabh Pant - Director ...

Financial Data and Key Metrics Changes - The reported net income per diluted share for Q2 2025 was $0.55, with total company revenue of $5.5 billion, reflecting a 2% increase compared to Q1 2025 [19] - Operating income was $727 million, with an operating margin of 13% [19] - Cash flow from operations was $896 million, and free cash flow was $582 million [19] Business Line Data and Key Metrics Changes - In the Completion and Production division, Q2 revenue was $3.2 billion, a 2% increase from Q1 2025, but operating income decreased by 3% to $513 million [20] - The Drilling and Evaluation division reported Q2 revenue of $2.3 billion, also a 2% increase from Q1 2025, but operating income decreased by 11% to $312 million [21] Market Data and Key Metrics Changes - International revenue for Q2 was $3.3 billion, showing a 2% sequential growth, with notable increases in Latin America and Europe Africa, while Saudi Arabia experienced a reduction in activity [8][22] - North America revenue remained flat at $2.3 billion compared to Q1 2025, with seasonal improvements offset by lower service pricing and reduced artificial lift activity [13][14] Company Strategy and Development Direction - The company plans to align its business with current market conditions by reducing costs and reallocating underperforming assets [27] - Key growth engines identified include unconventionals, drilling, production services, and artificial lift, with a focus on technology and operational excellence [9][27] Management's Comments on Operating Environment and Future Outlook - Management noted that the oilfield services market is expected to be softer than previously anticipated due to reduced activity and lower discretionary spending in international markets [5] - The company remains confident in its strategic execution and believes it is well-positioned to deliver industry-leading returns despite near-term challenges [6][18] Other Important Information - Capital expenditures for Q2 were $354 million, with expectations for full-year capital expenditures to be about 6% of revenue [25] - The company anticipates a negative impact from tariffs of approximately $35 million in Q3 2025 [26] Q&A Session Summary Question: About C and P margins and guidance for Q3 - Management explained that softer margins were due to reduced activity in Saudi Arabia and pricing headwinds in U.S. Land, with expectations for a 1% to 3% revenue decline in Q3 [30][31][32] Question: Customer conversations regarding North American frac business - Management indicated that customers are cautious and focused on technology and service quality, with expectations for activity to pick up in early 2026 [34][35] Question: Current state of E&Ps and pricing dynamics - Management discussed the importance of supply and demand fundamentals, noting that they will not work at uneconomic levels and will strategically stack fleets as necessary [40][45] Question: Unconventional market opportunities - Management highlighted growth potential in Argentina and Saudi Arabia, with expectations for continued double-digit growth in international frac business [48][50] Question: Cost structure and margin protection - Management emphasized the need to variabilize costs and maintain efficiency, targeting a reduction in costs as activity slows down [76][78] Question: Impact of tariffs on artificial lift market - Management confirmed that tariffs are affecting the U.S. land artificial lift market, while international demand is driven by technology in conventional wells [104][105] Question: Outlook for Mexico and Kuwait - Management expressed optimism for growth in Kuwait, while noting that issues in Mexico remain unsettled, leading to a cautious outlook [107][108]

Financial Data and Key Metrics Changes - Total company revenue for Q1 2025 was $5.4 billion, a decrease of 7% compared to Q1 2024 [28] - Adjusted operating margin was 14.5% [28] - Cash flow from operations was $377 million, and free cash flow was $124 million [7][35] - Reported net income per diluted share was $0.24, while adjusted net income per diluted share was $0.60 [27] Business Line Data and Key Metrics Changes - Completion and Production (C&P) division revenue was $3.1 billion, down 8% year-over-year, with operating income of $531 million, a decrease of 23% [29] - Drilling and Evaluation (D&E) division revenue was $2.3 billion, down 6% year-over-year, with operating income of $352 million, a decrease of 12% [30] - International revenue was $3.2 billion, a decrease of 2% year-over-year, while North America revenue was $2.2 billion, a decrease of 12% year-over-year [6][32] Market Data and Key Metrics Changes - Europe Africa revenue increased by 6% year-over-year to $775 million, driven by improved activity in Norway and Namibia [31] - Middle East Asia revenue also increased by 6% year-over-year to $1.5 billion, attributed to higher activity in Kuwait and Saudi Arabia [32] - Latin America revenue decreased by 19% year-over-year to $896 million, primarily due to lower activity in Mexico [32] Company Strategy and Development Direction - The company emphasizes technology, collaboration, and service quality as core to its competitive advantage [10][14] - Halliburton aims to maximize value in North America while driving growth engines internationally, particularly in unconventional, artificial lift, intervention, and directional drilling [15][19] - The company is focused on maintaining a strong position in the offshore market, leveraging advanced technologies for integrated projects [128][130] Management's Comments on Operating Environment and Future Outlook - Management noted increased uncertainty in the market due to trade dynamics and OPEC production, but remains confident in the fundamental role of oil and gas in global economic growth [8][11] - The outlook for international revenue is expected to be flat to slightly down, with strong tender activity and contract awards providing visibility [12][39] - Management anticipates solid free cash flow generation in 2025, with plans to return at least $1.6 billion to shareholders through buybacks and dividends [25] Other Important Information - The company recognized a pre-tax charge of $356 million related to severance costs and asset impairments [28] - Capital expenditures for Q1 were $302 million, with expectations of approximately 6% of revenue for the full year [35] Q&A Session Summary Question: North American activity outlook amidst commodity price volatility - Management indicated that customers are currently evaluating their activity scenarios, with a focus on production impacts from any potential declines in activity [45][48] Question: Trajectory of operations in Mexico - Management expressed that recovery in Mexico is uncertain, with expectations of a tough environment for the foreseeable future [51][52] Question: Growth prospects in Saudi Arabia - Management expects growth in Saudi Arabia, particularly in the Jafurah area, and highlighted opportunities in unconventional and artificial lift markets [57][58] Question: Margin progression expectations - Management provided guidance for Q2 margins, indicating specific impacts from tariffs and mobilization costs, with expectations for improvement in the second half of the year [60][66] Question: Impact of tariffs on business - Management noted a $0.02 to $0.03 impact per share from tariffs, with ongoing efforts to mitigate these effects through a diversified supply chain [94][96] Question: International spending outlook - Management highlighted solid growth in Norway and Brazil, with expectations for increased activity in Europe and Africa in the second half of the year [75][102]